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“The social cost of this crisis is not yet well perceived by the Government” is the lapidary diagnosis expressed by Roberto Zahler (former president of the Central Bank), Osvaldo Rosales (former Director General of International Economic Relations of the Ministry of Foreign Relations), and Alvaro Díaz (former Undersecretary of Economy) in a document entitled “Forum for a Fair and Sustainable Development: Balance 2020 and the challenges of 2021”, in which they propose the implementation of a Fund for Reactivation and Decent Employment to face the crisis caused for the pandemic this next year.
In the text, economists and academics start from the basis that the health crisis has not been well managed by the Government of Sebastián Piñera, which has been aggravated by the fact that “the communication policy has been erratic and contradictory” .
Among the shortcomings, they mention that “the specialists indicated from the beginning the need for a TTA strategy (testing, traceability and isolation)” and in this context they argue that “we must avoid excessive expectations with the arrival of the vaccine.”
“Hopefully, the bulk of the target population will be vaccinated in the second half of 2021. The message from the Government must be clear: we must not lower our guard and for people to believe it, the Government must not adopt contradictory measures”, they point out.
“A failed economic policy”
When analyzing the economic response of the Piñera administration, the academics are adamant that “a failed economic policy” was implemented, which resulted in “the Government being slow to react and when it rectified it, it did so by haggling resources.”
“For the quarantines to be effective, the Government should have ensured the family income. However, it did so belatedly, at a trickle, with very minor resources and protocols full of fine print that sought hyper-targeting, a criterion that is criticized today by even presidential standard-bearers of the right such as (Joaquín) Lavín and (Mario) Desbordes ” detail.
In this context, the authors warn that “support for SMEs has been very insufficient”, pointing to the weakness of instruments implemented by the Treasury such as Fogape, and finally “the cost of the crisis has been basically paid by the workers.”
In macro terms, they argue that “the weakness of fiscal policy favored an economic contraction higher than the average of the world economy.” “While the world economy would contract 4% this year, the Chilean one will do so by 6% and if the two withdrawals of pension funds were not mediated, the fall would have been close to 9%, one of the worst performances in Latin America,” they point out. .
In a direct dart to the government’s projections, they recall that “there are already too many occasions when the authority has decreed the beginning of the economic recovery. The concrete thing is that the IMACEC for October is still 11% lower than that of December 2019 and October is the eighth consecutive month of falls in economic activity ”.
And in another allusion that hits the Treasury authorities squarely, they warn that “fiscal policy is not helping to get out of the crisis. Minister Briones juggles statistics that confuse public opinion ”and point out that in the short term“ it is possible to increase public spending, via debt and the use of sovereign funds ”.
“Do not be deluded with the mirage of a reactivated economy in 2021”
When evaluating the economic outlook for 2021, the document focuses on the fact that “the level of activity in September 2019 will only resume in the first half of 2022” but warns that “the post-pandemic economic and employment situation 2021-2022 will critically depend on how we get out of the pandemic ”.
In this context, they ask to put our feet on the ground. “We must not be deluded with the mirage of a reactivated economy in 2021; Unless this growth exceeds 6%, this will not be growth itself but rather a rebound after the fall, recovery of productive capacity that had been lost ”, they point out.
One of the most sensitive issues is employment. “The drama of unemployment is a national tragedy. Effective unemployment affects almost 2.5 million people, almost ¼ of the workforce “, they warn, and in the face of what is coming they point out that” it is not enough to recover the lost jobs; you have to worry about its quality ”.
That is why they conclude that “the social cost of this crisis is not yet well perceived by the Government. At the end of 2019, half of the workers earned $ 400 thousand or less per month (450 thousand men and 352 thousand women) and half of the families received an income of $ 849 thousand pesos or less. Any elementary calculation of spending on rent, transportation, food, health and education leads to a high family debt to be able to survive. According to the INE, the fall in income this year affects 1/3 of the employed population and almost half of the informal employed. The social situation has worsened. The social impact of the pandemic affects no less than 4 million people: 2 million due to the occupational shock and a similar amount due to falling income ”.
Fund for Reactivation and Decent Employment
In this scenario, they propose the implementation of a Fund for Reactivation and Decent Employment, focused on SMEs and the regions, under the thesis that “what will drive reactivation is support for family income, in the first place , and public investment second. For this reason, it is essential to maintain expansionary monetary and fiscal policies during 2021 ”.
The proposal contains 6 measures, which includes among others “sustaining family income while the health emergency lasts, gambling because no one is left out of financing their basic food basket, through a more agile and expeditious IFE that serves affected regions and does not discriminate by communes. At the same time, it is necessary to use the solidarity fund for unemployment, expanding its resources ”.
Likewise, they propose “to support primary health centers with more human, technological and financial resources in the prevention and containment of the pandemic; ensuring the logistics and timely distribution of the vaccines ”.
In addition, they propose “effective support for SMEs with a strengthened Fogape, with long-term loans, with low interest and debt renegotiation. This must be accompanied by subsidies to micro and small enterprises ”and“ promote employment-intensive public investments ”.
Likewise, they consider that “it is essential to ensure decent employment” and “to strengthen regional and local governments”, with decentralization of policies to combat poverty and vulnerability and effective transfer of resources and powers to regional governors.
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