The national strike has introduced a good dose of uncertainty in a year that, from the outset, already seemed hazardous. The effects of the blockades, added to a difficult macroeconomic scenario, present a panorama with economic and social challenges. Where are we going?
For January of this year, 2021 was heralded as a particularly strange time. Added to the normal uncertainties of all future times were the evolution of the pandemic and the economy, both heads of the same hydra, if you will: the future of the first is fundamentally tied to the speed of vaccination, and that of the second, factors such as a tax reform that was born dead and now wants to be reborn amid the fires of social protest, the fiscal deficit and the imminent expiration of assistance programs.
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To the mythological monster that it has become this year, we must add the national strike, which comes with its own burden of uncertainty, both due to its possible dissolution-resolution, and because of the power that it drags to promote changes in a society that has turned to the streets to ask, among other things, for better rules of the game. All wrapped in the dangerous fuel of violence (exercised by civil, state or even parastatal).
This formidable creature casts a shadow over the future that, at first, looks long and perhaps thick. But, as with any monster, its incidence and damage change as certain perspectives are adjusted: the Kraken looks less severe from Olympus, but certainly more terrifying from the coast of Argos.
At this point, nobody seems to dispute that the blockades derived from the national strike have a negative effect on the economy as a whole. How much these damages can be extended, and who to harm the most, is a reason depends a bit on the interlocutor.
For example, in an analysis published this week, Fedesarrollo assures that, only for May, unemployment had a collective impact that ranges between $ 4.8 and $ 6.1 billion, depending on the scenario that is chosen to look (between pessimistic and optimistic).
In conducting the analysis, the economic study center took into account issues such as the impact on supply, the demand for unregulated energy, and the effect of the 2016 trucking strike.
Fedesarrollo estimates that the line that most took the hit of the blockades was commerce, transportation and accommodation, followed by manufacturing industries in second place and agriculture in third. Between industry, commerce and agriculture, 80% of the total cost estimated by the analysis center would be concentrated.
And this may be a worrying fact because, according to DANE, the activities of commerce and agriculture managed last March to return to their pre-pandemic production levels, that is, to those registered in February 2020. Manufacturing, for example, had an advance of 7% for March of this year, according to the same entity.
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Secondary activities, among which are manufacturing and construction, for example, had an advance of 24.9% last March, “the first time that there is a growth in the annual variation”, according to Juan Daniel Oviedo, director of DANE , who affirms that “we also see a significant increase of 2.3% in the added value of this line compared to February, mainly due to the change in the trend in construction.”
And this is important because March was the engine that allowed the GDP for the first quarter not only to return to positive territory, but to exceed the most optimistic forecasts by over a whole point (1.1% was the final figure reported by DANE ).
These effects inevitably lead to wondering about the weight of the blockages on the recovery and the prospects for the second quarter and half of the year. “The greatest impacts, without a doubt, come to sectors that have a high dependence on the supply chain and this, in a globalized world, involves practically everyone,” says Diego Guevara, professor at the U. School of Economics. National. And he adds: “The growth of the second quarter is surely going to be affected and in the larger framework of the recovery, unemployment ends up introducing much more uncertainty, which already existed before due to the evolution of the pandemic.”
For the sector analysis firm, the unemployment left losses of $ 10 billion in its first month of operation and the collective effect on the economy would cut the growth outlook from 5.1% to 4.7% for 2021.
Fedesarrollo, on the other hand, assures that its forecast of economic growth for 2021 would be revised upwards, despite the unemployment. “The surprising growth data in the first quarter of the year, the acceleration of the vaccination process in recent weeks and the low comparison base in 2020 mean that the GDP growth rate in 2021 would be higher than the 4.8% we forecast at the beginning of the year ”, according to Luis Fernando Mejía, director of the analysis center.
On the employment side, the situation is also uncertain. For April, the most recent data presented by DANE (15.1% unemployment rate), an improvement was registered compared to the situation of a year ago, but there are still gaps with the pre-pandemic scenario.
For BBVA Research, “the April data represents a setback in terms of the recovery of employment and also the dynamism of the labor force compared to March 2021”. And it is expected that in May employment levels will continue to be low, among other reasons, due to the effects of the protests ”.
The pressure of unemployment on employment is felt, among other issues, in contract suspensions derived from the absence of supplies to produce in some industries, according to Guevara. And this could continue to erode, not only the recovery in general, but the state of labor formality in Colombia, which is already fragile to say the least.
One of the most mentioned lines in the economic recovery is public construction. For example, the Conpes for economic reactivation focuses 43% of job creation efforts (one of the pillars of the strategy) on the creation of transport infrastructure. For this reason, it is essential to look at the panorama of this sector.
A horizon with delays
The civil works construction sector was one of the first to suspend activities due to the pandemic. By March 2020, less than 5% of the projects had some degree of execution, since the activities were limited to those that could not be suspended due to the complexity of the work. However, it was also one of the first sectors to reactivate, since on April 27 work was progressively resumed throughout the country and in less than a month the industry was marching at the maximum capacity that conditions allowed.
The momentum brought by this activity, on account of the completion of the fourth generation (4G) road concessions and the Government’s policy of “Concluding and concluding for the reactivation of the regions”, which focuses on completing unfinished strategic works, helped to the fact that the first quarter of this year the construction sector registered a record growth of 17% compared to the last quarter of 2020, as the variation of the group ‘Construction of roads and railways, of public service projects and other works of civil engineering ‘was 14.4%.
But the dynamic was abruptly interrupted on May 27 due to the national strike. Some projects turned off machines that day and were unable to turn them back on. The blockades on national roads, the public order situation in the main cities and the disconnection with the port of Buenaventura, mainly, where there are 1.6 million tons of dammed merchandise, have prevented them from accessing supplies for construction, fuels for its operational vehicles and even machinery that comes from Asia for rent.
Invías had to suspend, among other projects, work on the crossing of the Central mountain range, better known for its masterpiece, the La Línea tunnel, practically a month after the protesters blocked the entrance to the corridor through Cajamarca (Tolima ) and by Calarcá (Quindío) until May 26. The National Infrastructure Agency (ANI) has received reports of several concessions that have been paralyzed, but so far it has not officially reported any delays or modifications to the schedules. Some companies, such as KMA Construcciones, have chosen to give their workers vacations so that they do not have to terminate their contract.
The problem is that the locomotive of infrastructure, as the governments themselves have insisted on calling it, does not start so easily. Every time a project slows down, say the engineers, the inertia is broken, it is necessary to start over and the start of every project is slow until all the activities that go in series are coordinated. This means that a month of suspension turns into two months of work, minimum, before reaching the point where they were.
Whats Next?
To start looking for solutions, for some experts, it is necessary to focus attention on key points in the social explosion: young people, education, employment and good communication. For Helena García, an expert in economic development and competitiveness, it is essential to open dialogue, but at the local level to meet the needs of the communities, “which later, with methodologies, timing and government support, can go from the most local to later build something nationally ”.
In addition to a tax reform that gives “the peace of mind to cover the spending needs that already existed before the strike,” in García’s words, it is necessary to resume face-to-face education. “One of the problems we were seeing in 2019 was youth unemployment. Now, unfortunately, it is estimated that the capacity for learning and retention through virtual means is lower than when it is face-to-face. These young people have a loss of human capital accumulation that will make it more difficult to find work ”.
For Camilo Herrera, founder of the Raddar firm, “you have to get people to go back to everyday life. The problem is not the silver, but that the silver moves. You have to get businesses to open ”. However, the challenge is to “move the whole dance at the same time”, that is, although it is necessary, for example, for the boys and girls to go back to school so that the women (who assume most of the care burden) can return to the labor market, it must be ensured that there are employment opportunities for them.
For longer-term solutions, Helena García points out, it is necessary to discuss a labor reform. “It is not about reducing social security, but we must be aware that to the extent that employment becomes more expensive, the solution is informal employment; that is precariousness, ”he says. He points out that the matter is even more urgent given the future of work automation. “If in that context we have those additional burdens to hire people, we will see an accelerated adoption of these technologies in the workplace.”
Another element is the efficiency of spending. Helena García mentions the pension issue: “It is not that we spend less on pensions, but that we spend it well”, referring to the subsidies that reach the highest quintile of the population. Carlos Córdoba, director of Rimisp in Colombia, points out something similar, but related to rural development. “That expense is very large, but it is very inefficient and very centralized. It is urgent to reduce transaction costs and measure investment in this sector against its specific effect on reducing rural poverty. This is an especially relevant debate in the midst of the pandemic, since the poverty results show that the aid counteracted the fall in labor income in 2020. It is essential to evaluate the sustainability of the cash transfer strategy and think about programs that aim at development productive rural ”.
Likewise, Córdoba points out “the scandalous figure of $ 29 billion” in cash that the municipalities and departments have. “Each new reform that they make to the royalty system further entangles the procedures and removes the possibility of execution. The Royalties Governing Commission should speed up the execution of these resources and prioritize social development and reactivation projects ”. It is money that, adds the director of Rimisp, can be used for entrepreneurship or job creation for rural youth and women. Finally, it does not fail to mention the implementation of the comprehensive rural reform. “Although the government shows some progress in the PDETs, it should not be forgotten that point 1 of the Agreement also included the issue of land and national sectoral plans.”
For both this reform and the next tax reform, communication is essential. Herrera affirms that adequate communication management is urgent to begin to “untangle the problem” of the current crisis. “There are people dissatisfied and there are many reasons to be. It is time to lower the tone of the conversation ”, for example, that on the part of the Government there is condolences for the people who have died in the midst of the strike. “I’m not saying that he takes the blame, but at least make visible what is happening.”
In a similar sense, García points out that it is necessary to regain confidence, because otherwise not only will the proposed reforms not be successful. Making viable, sustainable and kept promises is key to that. “In addition, there are challenges due to climate change, with more frequent natural disasters. There will be a need for solidarity between people, without neglecting the role of the State in risk management and disaster relief. But we will probably see redistributive conflicts over water, fertile lands, and, if we are in this climate, it will be really difficult to solve them ”.
