International institutions are increasingly somber about Colombia’s future as President Ivan Duque and his finance minister seem to have no response to the coronavirus crisis.
The president and Finance Minister Alberto Carrasquilla apparently appear to obey their financial patrons, Colombia’s questionable business associations and banks.
Colombia’s leading economists have been coming up with ideas to reduce the 5.5% economic contraction projected by the finance minister to only 2%, but they, as well as health experts and even the World Bank have been ignored.
Meanwhile, international organizations project an increasingly deeper economic crisis if the government rushes to reopen businesses while ignoring the global economic recession.
The discussion has focused on the costs of quarantine, but it turns out that the virus has affected the entire world economy. So even without quarantine, what the country faces is a major external shock, and recognizing that has important implications.
New York University Economist Javier Mejia
With healthcare systems in major cities on the brink of collapse, “we will soon have to return to a stricter quarantine,” the vice-President of the Colombian Medical Federation, Carolina Corcho, said on Twitter.
A possible second lockdown would only deepen the crisis and delay economic recovery, according to economic think tank Fedesarollo.
Duque vs field experts
The director of the Pan-American Health Organization, Carrissa Etienne, said last week that “we must not suspend the measures too quickly or there is a risk of a resurgence of COVID-19 that could wipe out what we have achieved in recent months.”
The World Bank, ironically after collaboration with the Colombian government, said a reopening would be possible if the spread of the infection is sustainably reduced, the healthcare system is ready for a possible new outbreak and the economic reactivation “balances safe return to work and maximum input on output and employment.”
The situation in Colombia complies with none of these conditions.
Both Congress and the United Nations’ Economic Commission for Latin America and the Caribbean (ECLAC) have urged an emergency minimum income that would allow the population to obey stay at home orders while giving the government time to ramp up the healthcare system, but to no avail.
Following the suggestion of Colombia’s business associations, Duque all but reactivated the economy last month while the spread of the infection was accelerating.
Duque versus the scholars
According to Carlos Sepulveda, the dean of Economics faculty of the Rosario University, Finance Minister Alberto Carrasquilla’s projected 5.5% contraction can be avoided if only he and Duque would stop being stupid.
If we achieve a good execution of an intelligent isolation and do not enter new periods of strict general isolation, we would surely come close to a GDP contraction of 2%, but if we are faced with total closure at some point in the next semester, the figure could be around the projections of 5.5%.
Rosario University Economics dean Carlos Sepulveda
According to the dean of the National University’s Economics faculty, Jorge Amando Rodriguez, a temporary retreat from the global economy provides the opportunity to strengthen the local economic infrastructure and rejoin the global economy as a stronger, more competitive player.
The Economics dean of Los Andes University, Marcela Esteva, urged an investment in education to elevate and diversify the labor force, and another one in healthcare to help the speed of economic recovery.
Rodriguez, Sepulveda, Esteva and the Economics dean of the Javeriana University, Rosas, all told economic newspaper La Republica that Carrasquilla’s projection assumed the government would do everything wrong.
But Duque wasn’t done.
Morgran Stanley advice “stupid”
After US Investment bank Morgan Stanley said Colombia would need a “major fiscal reform” to generate additional revenues of at least 1.5% of GDP to stand a chance of holding on to its coveted investment grade status, Duque told the Financial Times earlier this week this was “stupid” and insisted maintaining the corporate tax discount granted last year.
The OECD on Wednesday lowered Colombia’s projected GDP’s contraction to between 6.1% and 7.8%, reiterating Duque’s refusal to make a fiscal reform made no sense and he needed to come up with some better ideas.
“It’s not enough to rebuild what was already there. We have to seize the opportunity to build something better, and for that we need a multilateralism that is inclusive, that is sustainable and that ensures a strong and supportive recovery,” OECD Secretary General Angel Gurria told the president.
The OECD chief might as well have been talking to a wall.
“From the first day that we began to implement measures to contain and mitigate this pandemic, it was clear to us that a process of reactivation and recovery of productive life would follow,” Duque told the country’s destroyed hotel industry later that day like a broken record.
