Written by Aurelio Suárez Montoya, Originally published in La Tarde, Pereira, Colombia,
8 July 2008
Translated by Micheal Ó Tuathail for La Chiva
Once the emotion caused by recent news related to public order has calmed, the country ought to pay attention to the economic crisis already on the way. Uribe worryingly referred to the theme in a meeting with the media, and for good reason: recent indicators, including those provided by the DANE [the Colombian government’s statistics bureau], on the recently changing rhythm of economic growth, employment and inflation are not looking good. Beyond the announcements of press bulletins, the analysis of the information compared to the last trimester of 2007 makes one think that a major national economic fall is on the way, caused not only by the global crisis but amplified on its own.
A country’s Gross Domestic Product (GDP) is the value of the goods and services produced through the use of the factors of production and resources it bears. Sustained growth shows that the economy responds more and more to the effective demands – which also grow – of its population and the international economy, thus creating a circle of prosperity. In capitalism, there are as many cycles of robustness as there are declines. In the case of the latter, GDP declines, and the factors of production – such as the productive capacity of industries, labour, the generation and use of electricity, land, among others things – are exploited less. Then comes the recession. Data from most recent months seem to indicate that the recession is getting close.
The use of industry’s productive capacity (machines, equipment, etc.) fell by 4.2% between the first trimester of 2008 and the last of 2007. The general demand for electricity, the source of energy for manufacturing as well as homes, also fell, by 0.8%; as did the manufacture of automobiles, furniture, textiles, and wood products. Total industrial production fell by 1.3% between the two trimesters. Agriculture, taking into account the coffee sector, was the only sector that grew, by 0.8%. However, if we exclude the coffee sector, it fell by 2%. Moreover, the construction industry, which has a determining effect on the economy, presents a lower number of new projects and areas approved for construction. Immobile transactions of buying and selling fell by 10%. The decrease in trade – which saw a sales lapse of 0.9%, not unlike the services sector – is explained as part of a general trend. Financial firms are reporting a 25% increase in past due payments.
As a consequence, unemployment is also affected. In May 2008, in the three metropolitan areas, where labour demand is most concentrated, unemployment was 11.8%. In April, it was 11.5%; and one year ago, it was 11.4%. The decreasing tendency of unemployment now seems to be in reverse, and this is seen without taking into account the recent layoffs in the automotive industry and those of confection, flowers, and bananas. These last few industries, net exporters, tend to collapse if what they receive per dollar exported – a fruit of the revaluation of the peso, which has surged by 15% over the year – persists and is accentuated; thus they cannot even cover the increase in costs caused by extremely high inflation.
And, speaking of inflation, this is not the common type of inflation, caused by excesses of demand or money in the hands of consumers responded to by a corresponding supply of goods. It's far more serious. What we are seeing now is a form of inflation caused by costs occurring in external markets for primary products, combustibles and food that are transmitted to the internal market. In some cases, it has grown larger without so much as a shiver in the monetary policy of the Banco de la República [Colombia’s Central Bank]. In June, when inflation was already 2 points higher than expected for 2008 – half the minimum salary for 365 days was “swallowed,” and the margins of companies in the countryside and in the cities are either minimal or negative – they have been playing down the amount of savings and accumulation.
The economy cannot be manipulated. A government that favours the massive influx of devalued dollars to capture lucrative public companies and strategic natural resources for cheap and that is spending what has been earned in that bazaar and much more, worsening the “imported” inflation, becomes part of the problem and not the solution, thereby negating its primary responsibility. The official remedy, Security + Confidence = Investment + Employment, has been exhausted and has not sustained the vanities have been passengers on the tide of great results. The supposed merits of that economic policy have been ephemeral. The reality is different: Deceleration + Unemployment + Inflation, an opportunity to throw out neoliberalism, the primary cause of that reality.
8 July 2008
Translated by Micheal Ó Tuathail for La Chiva
Once the emotion caused by recent news related to public order has calmed, the country ought to pay attention to the economic crisis already on the way. Uribe worryingly referred to the theme in a meeting with the media, and for good reason: recent indicators, including those provided by the DANE [the Colombian government’s statistics bureau], on the recently changing rhythm of economic growth, employment and inflation are not looking good. Beyond the announcements of press bulletins, the analysis of the information compared to the last trimester of 2007 makes one think that a major national economic fall is on the way, caused not only by the global crisis but amplified on its own.
A country’s Gross Domestic Product (GDP) is the value of the goods and services produced through the use of the factors of production and resources it bears. Sustained growth shows that the economy responds more and more to the effective demands – which also grow – of its population and the international economy, thus creating a circle of prosperity. In capitalism, there are as many cycles of robustness as there are declines. In the case of the latter, GDP declines, and the factors of production – such as the productive capacity of industries, labour, the generation and use of electricity, land, among others things – are exploited less. Then comes the recession. Data from most recent months seem to indicate that the recession is getting close.
The use of industry’s productive capacity (machines, equipment, etc.) fell by 4.2% between the first trimester of 2008 and the last of 2007. The general demand for electricity, the source of energy for manufacturing as well as homes, also fell, by 0.8%; as did the manufacture of automobiles, furniture, textiles, and wood products. Total industrial production fell by 1.3% between the two trimesters. Agriculture, taking into account the coffee sector, was the only sector that grew, by 0.8%. However, if we exclude the coffee sector, it fell by 2%. Moreover, the construction industry, which has a determining effect on the economy, presents a lower number of new projects and areas approved for construction. Immobile transactions of buying and selling fell by 10%. The decrease in trade – which saw a sales lapse of 0.9%, not unlike the services sector – is explained as part of a general trend. Financial firms are reporting a 25% increase in past due payments.
As a consequence, unemployment is also affected. In May 2008, in the three metropolitan areas, where labour demand is most concentrated, unemployment was 11.8%. In April, it was 11.5%; and one year ago, it was 11.4%. The decreasing tendency of unemployment now seems to be in reverse, and this is seen without taking into account the recent layoffs in the automotive industry and those of confection, flowers, and bananas. These last few industries, net exporters, tend to collapse if what they receive per dollar exported – a fruit of the revaluation of the peso, which has surged by 15% over the year – persists and is accentuated; thus they cannot even cover the increase in costs caused by extremely high inflation.
And, speaking of inflation, this is not the common type of inflation, caused by excesses of demand or money in the hands of consumers responded to by a corresponding supply of goods. It's far more serious. What we are seeing now is a form of inflation caused by costs occurring in external markets for primary products, combustibles and food that are transmitted to the internal market. In some cases, it has grown larger without so much as a shiver in the monetary policy of the Banco de la República [Colombia’s Central Bank]. In June, when inflation was already 2 points higher than expected for 2008 – half the minimum salary for 365 days was “swallowed,” and the margins of companies in the countryside and in the cities are either minimal or negative – they have been playing down the amount of savings and accumulation.
The economy cannot be manipulated. A government that favours the massive influx of devalued dollars to capture lucrative public companies and strategic natural resources for cheap and that is spending what has been earned in that bazaar and much more, worsening the “imported” inflation, becomes part of the problem and not the solution, thereby negating its primary responsibility. The official remedy, Security + Confidence = Investment + Employment, has been exhausted and has not sustained the vanities have been passengers on the tide of great results. The supposed merits of that economic policy have been ephemeral. The reality is different: Deceleration + Unemployment + Inflation, an opportunity to throw out neoliberalism, the primary cause of that reality.
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