When we talk about subsidies, we talk about support that the State grants to relieve expenses in basic services, housing, transport or education. In Colombia, for example, these grants range from programs such as families in action to aid to cover the passage of the Transmilenio.
(Read more: ‘responsibility’ and ‘resilience’: good eyes in front of interest rate and unemployment)
In principle, many of these aid are aimed at serving as support for people to acquire a good or a service that in the absence of them would be difficult to do. However, in practice, not all subsidies are well implemented, there are good intentions behind.
The question is: why?
According to David Perez-Reyna, professor at the Faculty of Economics at the University of the Andes, An example of this is the behavior that has had the price of diesel gallon and its implications in public finances.
“Today in Colombia the price of diesel is below the price that prevails in the rest of the world. This implies that, for each diesel gallon, the state subsidizes a part. The result of this is that more diesel is consumed than it could be consumed, and not necessarily the lower income families are the ones that benefit the most”, The expert explains.
(Read more: Banco de la República left monetary policy interest rates at 9.25%)
Subsidies
Istock
(More news: La Pensionional: What is happening with Colombian pensions?)
Now, we must bear in mind that when a state decides to subsidize an activity, It incurs costs. This not only because you must have the resources to grant that support, but when allocating them there stop using them in other potentially more beneficial activities.
To the above, it is added that once a subsidy begins to be given, it is difficult to stop giving it, Because eliminating it implies harming people.
In that order of ideas, “A well -designed subsidy should be one that helps an activity to be done that in the absence of the subsidy would be carried out in less quantity of what would be good for society”Perez-Reyna stands out.
(Read more: Billion dance and the Minhacienda Debt Management Strategy)
Portfolio
