Keeping inflation at bay is a problem that governments face today, and the Gustavo Petro administration is no exception. In the past week The Ministry of Finance announced a series of measures that the Government is promoting to face inflationary pressuresbut experts consider that these would have different impacts.
(Follow these tips for a good credit score.)
Although some are more immediate, other effects are not so clear, or may even be contrary between the short and long term.
Among the most direct actions that the Executive is taking is de-indexing a series of products from the minimum wage in sectors such as agriculture, education, public services, transportation or housing, since higher inflation and increases in the minimum wage lead to increases in different goods and services because they are linked to these variables.
“Tying by legal mandate a large number of prices or activities to changes in the minimum wage, as is the case in Colombia, contributes to perpetuating rising inflation expectations and makes it difficult to reduce them. Inflation becomes inertial to some extent,” said Jorge Armando Rodríguez, professor at the School of Economics of the U. Nacional. For the academic, the announced deindexation measures can be, in general, positive, “although it is convenient to examine case by case.”
(How to calculate the Christmas bonus that must be paid this year-end).
Currently there are 204 items indexed to the minimum, and the Minister of Finance, José Antonio Ocampo, assured last week that the government will proceed with the review of the categories. Some of these are defined by decree and others by law. “We will do both, we are going to issue a decree eliminating the indexing of the minimum wage for a large number of products and services and at the same time there will be a project to de-index those established by law,” said the head of the portfolio.
Immediate effect?
The package announced by the Treasury also includes sectoral measures such as the temporary reduction of tariffs or the purchase of agricultural inputs, the regulation of energy tariffs, gradual increases in gasoline prices to avoid greater fiscal pressures and an additional subsidy of $500,000 for mothers who are heads of household.
Rodríguez was emphatic that “you don’t have to wait for them to work magically, given that the inflationary phenomenon originates, for example, in the supply limitations of energy and agricultural products, but they can help to solve the problem”.
Munir Jalil, chief economist of BTG Pactual for the Andean Region, assured that these measures “never have a short-term effect”, and that many may be a continuation of measures that began in the previous government, because if they stop working the prices would rise. prices, such as tariffs.
On the other hand, for Julio César Romero, chief economist for Corficolombiana, since the Government is presenting a broad package of actions, quantifying their effect on the CPI becomes complex. “These measures are going to marginally alleviate the pressures, the government has shown that it wants to do something to counteract inflation, in addition to macroeconomic policy,” he assured.
The economist indicated that most of the measures, in theory, begin to have effects “soon”, or in the short term, such as energy or subsidies, “which would increase from December, and in the 2023 budget a more program is expected. ambitious even”, or like the prices of fuels that have already begun to raise their prices.
But he also assured that “the Government is in a difficult situation, because every decision it makes will have an adverse effect, but what it has to look at is that the positive effect outweighs the negative one.”
The impact
Although the effects of the package of measures are not entirely clearexperts have various positions on how the price impact will feeland therefore, in the pockets of homes, in particular, by two measures.
“You have to differentiate between fighting inflation and compensating some population for the effect of inflation,” said Romero. According to the expert, social policy through transfers to vulnerable populations does help to soften the impact on pockets, but it is not a measure to mitigate inflation, even, the Corficolombiana economist assured, it can generate more upward pressure via consumption .
Jalil also referred to the rise in gasoline prices. “It is more of a medium and long-term situation, raising gasoline has a direct short-term impact on inflation, but if it is not managed, the fiscal deficit due to fuels is not controlled and in the future this will be associated with high inflation. It all depends”.
The exchange rate, another headache
Another situation that complicates the inflationary situation has to do with the depreciation of the peso and the additional costs that inflation generates over imported goods.
According to the Treasury, the high depreciation of the local currency has affected the price levels of some goods and services, and therefore, “the Government will continue to strengthen unified messages around those policies that may affect the flow of foreign currency to the economy Colombian in the near future, helping to mitigate additional upward pressures on the exchange rate,” said the Treasury.
In this regard, Jalil assured that “the exchange rate is very difficult to manage, but what it is necessary is to show a judicious government, that in some way can give priority to oil and coal exploitation, and that is fiscally responsible. But the rest of the things are really external. What the government can do from within is give a good image”.
Laura Lucia Becerra Elejalde
BRIEFCASE
