By María Alejandra Medina Cartagena, and Valeria Cortés Bernal,
EL ESPECTADOR, May 8, 2021
(Translated by Eunice Gibson, CSN Volunteer Translator)
A number of experts analyze the petitions by the promoters of the National Strike. There is consensus on points like basic income, but not on how it would be paid for, or the sources of the funds.
The National Strike Committee, which combines the principal social and labor union organizations that have called the national strike, has insisted on the necessity of discussing an emergency list that they presented in the middle of 2020 and that is made up of a number of economic and social measures.
EL ESPECTADOR consulted with experts that have different visions on the desirability and viability of the economic proposals in the light of the country’s fiscal situation and the crisis caused by the progression of Covid-19.
One of the banner items on the list is an emergency basic income of at least one minimum wage for “thirty million people now in poverty, vulnerable, and affected by the crisis”. This income would last for six months.
According to Francisco Maltés, President of the Central Federation of Workers (CUT in Spanish), part of the Strike Committee, that amount was determined on the basis that, according to the National Administrative Department of Statistics (DANE), the average Colombian Family consists of 3.2 persons, and for them to survive, one person needs at least 330,000 pesos (roughly USD $ 90) per month. “That multiplied by three gives one minimum wage,” says Maltés.
However, there are those who point out principally that the financing is problematic. María del Pilar López, Professor of Economics at the University of the Andes, believes that “the virtues of a guaranteed basic income are very valid. We need to see how supporting homes in that situation of poverty would improve redistribution and that, mainly, it would improve the power for these people to negotiate their salaries.” Nevertheless, as is stated in the petition, López calculates that the cost would be around 7 percentage points of the gross domestic product ($7.5 billion pesos monthly), (roughly USD $2 million). “That is almost three times as much as they were trying to collect with the tax reform bill that was withdrawn. That’s extremely problematic,” states the Professor.
Keeping in mind that it would be a monthly payment, it would add up to a total of 42 to 45 billion pesos (roughly USD $11.3 million to $12.1 million). “That is nearly all of the whole budget of the health system for one year, and it equals 11 years of Income Support that the government was proposing in the tax reform bill that was withdrawn. The intention is good, but it’s short term and the money isn’t there,” says Roberto Angulo, founding partner of the firm Inclusion SAS.
According to Angulo, there would have to be a more precise calculation of what the cost of that basic income would be for a country like Colombia to be able to do it, differentiating the amount according to the level of poverty, and making it complementary with the social programs that include income transfers that already exist, such as Families and Young People In Action.
“The intention to have a basic income is a valid one and I share it, but this proposal exceeds the budget restriction of a country like Colombia and is inefficient besides. It isn’t built on baseline conditions, or lessons learned, and the transference platform that we have,” he adds.
On the other hand, as López points out, there could be “problems with the motivations or the incentives to work.” In that respect, Maltés, of CUT, emphasizes that the objective is that in the current situation, “people could comply with confinement orders and thus preserve their lives (. . . ) Once sources of employment are generated and the pandemic passes, this approach to basic income could be revised.”
For his part, Ricardo Bonilla, retired Professor at the National University, stressed that “the intermediate proposal that was introduced by a group of congressional representatives is the most down-to-earth and fundable.”
He was referring to the bill that some opposition and independent Members introduced last March. It establishes, for example, that “a home with one person would be assigned an amount determined by the monetary poverty line at the individual level, an amount that would increase the legal minimum wage in effect by 4.40 % for every additional person living in the home, up to homes with five or more persons.”
Bonilla emphasizes the importance of a basic income, among other things, because he believes that the main reason for the crisis was the shock in demand, which made it necessary to create conditions for homes to be able to purchase. “We have to support the businesses, yes, but we have to create purchasing power.”
For his part, Maltés told EL ESPECTADOR that at the end of the six months of basic income that they are requesting, “we would have to evaluate whether the confinement has been effective or not, whether it has contributed to stimulating the economy. And if it has, and has generated new decent jobs, we would have to review the whole subject.”
Women and Education
The emergency petition also requests the guarantee of free admission to public institutions of higher education and subsidies for the continuation of studies in private institutions of higher education.
On the free admission, Mauricio Santamaría, Director of the National Association of Financial Institutions (Anif in Spanish), believes that “the merits of the policy are good; assuring access to higher education is a good way to assure equality. It’s a very important factor in social mobility, but the central point is, who will provide that subsidy? Those who have middle and high incomes don’t need to receive free admission; that is a poor use of public resources. Charging less depending on ability to pay is a proposal that has merit if it’s done right.”
Luis Carlos Reyes, Director of the Fiscal Observatory at Javeriana University, stated: “It seems valid to me to support the educational system. It will be interesting if there is also a focus on education that is not in universities. It’s really important that there be a way that children can get back to school.” However, that contrasts with other elements of the petition: the “no return to in-person classes in the educational system while there are no guarantees of safety.”
On social networks, just like López and Santamaría, a possible contradiction has been noted between the fact that while the Committee is asking not to go back to the classroom, because of safety concerns, they have still participated in massive demonstrations in recent days.
With respect to that, Maltés explains that “not rotating is because the educational institutions have really bad ventilation conditions and there are closed spaces; in the great majority there are not enough bathrooms or sinks. And the protest is outdoors, where the particles are easily diluted and are not concentrated as they would be in a closed classroom.”
One of the petitions that those that have analyzed it have insisted on the most, is the matter of the effect of in-person classes on labor rights for women. This is because of care and accompaniment that virtual education requires, as well as unpaid domestic tasks that have fallen disproportionately on women, consuming their time that cannot be used for paid employment.
On whether the Committee has considered this, Maltés responded: “In the emergency petition we called for an end to the violence against women in their homes ,and also that there be no gender-based employment discrimination. In the pandemic, they have suffered more discrimination, have suffered discharges because of their role as caregivers; we request that there not be any discrimination and that there be government protection from domestic violence.
Defense of National Production
The third point in the petition is centered on the defense of national agricultural, industrial, artisanal, and campesino production. It mentions, among other proposals, the forgiveness of farm credit debt, creation of subsidies for small and medium producers, and a program of public purchase of agricultural production.
“I think it’s one thing to protect the level of well-being of Colombians, but protectionism is something else. There is a long debate to settle that and I don’t know if the emergency is the right time to do that,” is Reyes’ opinion.
On the idea of forgiving the debts, Santamaría of Anif, warns that it might not have much impact on the well-being of the population. “Forgiving loans is not pardoning them; someone will have to pay them. Perhaps it would be good to extend terms or use other mechanisms of direct subsidy that already exist,” he suggested.
Sources of Funds
Now, as to how to finance the petitions, the Strike Committee proposed several alternatives. Maltés, of CUT, first stressed that “the sources of financing should be loans from the Bank of the Republic, or issuing money. The second would be monetizing part of the international reserves that are nearly $60 million in US dollars, and the third could be what Andi had proposed: returning the 12 billion pesos (roughly USD $3,250,000)given as a gift in the last tax reform.”
Luis Carlos Reyes and María del Pilar López seem to agree that some of the proposed measures won’t work to finance necessities in the long term. Regarding issuing money, Reyes says “it’s a last resort that shouldn’t be the first option.”
For López, “spending reserves or issuing money send a clear signal of macroeconomic instability to the credit market, because it implies that collections aren’t enough, and that we therefore have to cover up an expense, and that keeps increasing the debt. Tomorrow we won’t just have that expense, but we will also be paying the debt that we incurred, and that is continuing. The implication that at some point we might stop paying becomes much higher.”
López also points out that the risk of inflation in the medium and long term will end up “as always, hurting the poorest homes disproportionately.”
Santamaría, for his part, explains that “the monetary authorities have issued money last year. All of the measures that have come from the Bank of the Republic have been pure issuance of money. The first impact that has is that it makes all of the bonds that the government has issued triple in cost. The debt we already have will become more expensive and we won’t be able to renegotiate it easily. The government needs to talk with all of the TES holders to see if they will renegotiate.”
Bonilla also emphasized the measures taken by the Bank, but called them an indirect loan: “The Bank is lending indirectly. It won’t lend directly, but it will lend indirectly? Indirectly means that the Bank is indeed increasing the monetary supply, but does it in order to furnish funds indirectly. It’s an expansion of public debt, in TES, that ends up paying the government itself. The debate turns out to be the debate on economic orthodoxy, not direct loans to the government, because it could go crazy and not be paid, but the indirect loan will definitely be paid off.
In its petition the Committee also speaks of a temporary moratorium and renegotiation of external debt. Reyes states that that is not only not necessary at this time, but it also would bring adverse consequences; Santamaría puts it in the following terms: “It’s something that we have not done in our 200 years of history. Argentina did it in 2001, and ever since then it has not been able to get out of the crisis.” And he added that, “The government already negotiated the payment on the debt that it was able to negotiate, the World Bank provided facilities. They have already done whatever they could do.”
However, Bonilla pointed out that practically all of the countries are affected, so neither does he believe that an eventual loss of foreign investment will be a problem exclusive to Colombia. “This is not the time to pay debts; whatever is intended for that will have to be spent on the recovery of the economy.”
Regarding the tax situation, it’s worth remembering that the proposal by Andi includes measures like suspending the ICA discount on the income tax, establish two years of the property tax for natural persons, and hasten the disposal of government assets, among other things.
For Reyes, “the suspension of tax exemptions for the big businesses and finance capital is one feasible way to gain more financing, but I don’t know if it would be enough to finance things like an emergency basic income of one current legal minimum wage.”
In the midst of everything, it looks as if there is consensus that if we are to have enough income to be sustainable, there will have to be tax reform; however, spokespeople for the Strike Committee have said that none should be introduced at this time. For Bonilla, a reform “has to be introduced at any time but only when it’s structural and corrects the gaps that exist now. The bill that was withdrawn would have made the basic income equalized with sales tax charges on income (. . .) but in the area of dividends, assets, everything was on natural persons. But what if the money is held by a body corporate? That has not been resolved.”
Besides those discussed above, the Strike Committee has offered other petitions, such as the withdrawal of the proposal for health reform, no renewal of glyphosate aspersion, and the repeal of Decree 1174. Both the government and the Committee have expressed their “disposition” for dialog or discussion. However, up to the closure of this edition, a time and agenda for such a meeting has not been confirmed.
 TES: Colombian bonds.
 ICA: Colombian Agriculture Institute