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January 27, 2023
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excessive liquidity

Gustavo Volmar

When the Brazilian government decided to move the capital to another location, its motivation was to promote the development of the country’s vast interior. He wanted to put an end to the concentration of economic activities in the coastal areas and the southern portion of the territory, and create a new growth pole around a new city. Brasilia was the result of that initiative.

Now Indonesia plans to do the same. Composed of 17,500 islands of different sizes, it has 54,000 kilometers of coastline and 272 million inhabitants, more than half of whom live on just one of those islands, Java. Its capital, Jakarta, is, just as it was in Brazil, located in the southern portion of the country, and the government intends to build a new city in a more central point, two thousand kilometers away on the east coast of the island of Borneo. It would be much closer to the spice islands, part of the ancient stories about the fabulous oriental riches, and it is presumed that it would act as a dynamic factor in the economic development of regions that have lagged behind.

And, as also happened with Brasilia, there are serious concerns about the environmental consequences of exploiting areas with fragile ecological systems, susceptible to suffering practically irreversible damage to their biological diversity.

But the similarities with Brazil end there, because the main reason for the eventual transfer of the capital Indonesia it is not really the economic development of the country, although it is certainly a significant consideration, but a matter of excessive liquidity.

It happens that Jakarta with its eleven million inhabitants is sinking into the water. The fashionable villain, global warming, is raising sea levels, but it’s not the only culprit. Due to the lack of drinking water, years of indiscriminate extraction of subsoil water have caused the subsidence of the land, causing the land to go down while the sea rises.

PhD in Economics from Columbia University specialized in companies, markets, forecasts and risk.

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