On Thursday, Colombia’s official statisticians released GDP quarterly data confirming the country’s dismal economic shape. Immediately after, Minister of Economy Oscar Iván Zuluaga gave a press conference insisting that Colombia is technically not in a recession. Since Colombia’s quarterly GDP (January-March 2009) did not diminish relative to the previous quarter Mr. Zuluaga
is confident that Colombia avoided the R word. At some point it even
seemed that he wanted Colombians to rejoice in the fact that the US economy contracted 5.7% on the same quarter, as if that somehow proved that the situation in Colombia was not bad.
The Minister’s argument depends on trivial minutiae, more intended to cover his own butt than to give the public accurate information. Mr. Zuluaga is right in that a recession is commonly defined as two consecutive quarters of not annualized GDP contraction.
By that rule of thumb, he is correct. But by no means is this the only
definition of recession that economists go around preaching. America’s
National Bureau of Economic Research, for instance, defines it as “a
significant decline in economic activity spread across the economy,
lasting more than a few months, normally visible in real GDP, real
income, employment, industrial production, and wholesale-retail sales”.
Also, consider that during the 2000-2001 recession in the US there were
three non consecutive quarters of GDP contraction. Had Mr. Zuluaga been Secretary of the Treasury back then, he would have probably maintained that the US was just fine.
So guess what, Mr. Zuluaga, nobody buys into your technical baloney. Unemployment has risen by almost 3% in just four months, real
wage growth and retail sales, which indicate levels of consumer
confidence, are down by 2% and 5% respectively when compared to last
year, and there is a 22.8 trillion pesos (USD 11.4 billion) fiscal deficit. But never mind, no recession over here: we are doing okay. Mr. Zuluaga’s sad attempt at putting a happy face on the crude reality is a bad joke on the thousands of Colombians who have lost money and jobs during this crisis.
Let us remember that in the good year of 2007, analysts, scholars and former Ministers told Mr. Zuluaga countless times to rein in public spending and save for a rainy day. He did not listen. Now, the government has insufficient funds to deal with the recession and
to apply corresponding countercyclical measures that would save jobs.
Now, the government will have to raise some taxes and increase internal
and external borrowing, which will hinder credit and exports via a
stronger exchange rate. Let us hope that as the American economy picks
up a little in the second part of this year, the turn for Colombia does
not take too long. Although I would not hold my breath: the Economist
Intelligence Unit forecasts that Colombia’s GDP will grow by a mediocre
2.5% in 2010.
In the meantime, Mr. Zuluaga, I have another R word for you: resign. True, no one can blame you for the debacle of the world’s economy, which is at the center
of Colombia’s sharp downturn. But that hardly exonerates you from all
responsibility. For one, you should have listened to the advice you
were given, and your past decisions now mean that Colombians will pay a
higher price and wait longer to get out of this slump. Moreover, your
fixation on the technicalities of recession science is a signal that
you do not understand the gravity of the situation or what the right
course of action is. Perhaps you want to ignore the R word in order to avoid greater pessimism in the economy. But things are what they are, pessimism has settled in, and pretending otherwise is nothing but wishful thinking.
In these times, Colombians need leadership and not denial from the man who runs the economy. And it seems that Mr. Zuluaga is not up to this task. So now that he has messed up, the President should kindly ask him to leave. And he better do it before Mr. Zuluaga is able to take credit for the eventual rebound of the economy, which will be due not to the Minister’s clumsy maneuvers but to the effort and determination of ordinary Colombians. Ridiculous.
Author Gustavo Silva is Colombian and studies
Public Policy and International Affairs at Princeton University in the
U.S. He has his personal weblog.
gringo michae
said:
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... I don't know who the America’s National Bureau of Economic Research is. Back in 200-2001 even 1991-1992 as in 2008-2009 the USA used two consecutive quarters of major GDP contraction as a recession, ie 6 months, Some have even called a recession two consecutive quaters of near zero or negative growth, one can have economic slow down without a recession t. I would disagree with the writer if Colombia has not meer the general accepted standard. I have yet to hear of a single national government that has a rainyday fund. In the USA it is mostly at the Local or State Level, which clearly this recession has shown many failed to do so, instead during the good times spent as fast as they could. So Mr Zuluaga need not resign. |
