Gustavo Volmar

Postponed investments

In emergency situations created by unexpected events occurring outside the scope of action of the authorities of a country, the most appropriate reaction is to try to compensate for the effects that directly affect the level of employment, price inflation and quality of life. of the population. In this way, it seeks to preserve regular sources of income and maintain exchange and monetary stability.

In such circumstances of unforeseen constraints, the way forward frequently leads to the need to postpone investment projects to sustain or increase the amount and diversity of current expenditures. This strategy is implemented even by the private business sector, where the primary objective becomes operational continuity and the availability of cash flow and liquid resources, in order to deal with contingencies that may arise, stop or delay the development of the investment plans that had been formulated. But where this strategy manifests itself with greater intensity is in the public sector, transferring the application of available funds from investment programs closely linked to plays of economic infrastructure, to lines related to subsidies and other types of social expenses.

Given the external nature of these unexpected events, it is usual for the affected countries to be unaware of the probable duration of their effects. This was the case with the pandemic and with the economic consequences of the conflict in Ukraine. If the duration is short, the preference for current expenditures at the expense of investment would end without harming economic growth. But if the situation continues indefinitely, the collateral consequences of the strategy will become more evident, will have an impact on said growth and will provoke complaints from the social segments that would have benefited the most from the plays postponed or suspended.

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

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