The Golden years are over … waking up on 2016 New Year’s Day, the Colombian government is desperate in raising taxes, and Colombians realized that the government is cheating on them!
We all know that Latin American governments are depending on commodity prices, like oil, coal, gold … http://knowledge.wharton.upenn.edu/article/latin-america-in-2016-will-weak-exports-and-brazils-instability-dampen-growth/ and global prices went drastically down for commodities products recently.
During 2015 we all watched this happen in devaluating the Colombian Pesos, which is good for exporters, foreign investors, but not for the Colombian government, and less for the average Colombian, who is thinking about the new opportunity of traveling to Europe, because there is no more VISA required; and of course because consumer prices are rising step by step and daily life (eating, sleeping, …) is getting more and more expensive, for everyone, while minimum wages are increasing very slow.
But this is not the end! While Colombians during 2015 didn’t pay much attention what is happening with their Pesos, because the economy still accelerates 4.something% in the 3rd quarter of 2015; because people are buying and buying … http://www.focus-economics.com/countries/colombia. The government did! And they prepared to approve in the congress by December a mayor tax reform going to be effective this week!
Now after getting back to normal life everyone realized, having a Colombian average wage close to the minimum wage, in 2016, the money would last until the mid of the month and will be spent mostly to fill the fridge …. and the government’s budget gaps. As a consequence people will protest and go on the street (24th of January) to blame the government, because they cheated on them.
Did they? Is it the government’s fault? ….. Yes, and No; “NO”, because volatility of commodity prices (globally) brings “fat” and “slim” years, that’s something global and not directly influenced by the government; but depending on commodities only is very dangerous, so “YES”.
But after reduced incomes, the government needs money NOW and the only way to get it seems to be taxes, even without studying macroeconomic it seems to be quite easy to understand that:
– Losses from commodity incomes
+ increased taxes for the average Colombian (48 billion)
+ selling government owned companies
= budget 2016
But it is not all bad. There are opportunities. And as always in times of economic depression, the consequences are individual. If you currently work in company exporting goods, like coffee, flowers, toilet paper, palm oil, beauty products, … you might be lucky, exporting goods is getting more lucrative. If you depend on a minimum wage you might struggle to get your food on the table, or if you earn 1.8million pesos (USD 600) per month you have to declare income taxes by now (~ + 3 million Colombians: http://www.elespectador.com/noticias/economia/entrarian-declarar-renta-3-millones-de-personas-articulo-609395)!
So start exporting (but NOT crude petroleum, coal briquettes, or goldbarrels)!
And change this picture to get more diversified in quality products!
Imported products are expensive now!
Consequently, 2016 will not be easy for Colombia and Colombians, the country has big plans, and that costs money, and someone has to pay the bill at the end; by raising taxes, the government can only stuff the immediate budget gaps for 2016 (by overall charging 48 million people small pieces to cover the big whole), in the long run it must change its strategy how to earn money in diversifying away from commodities, bringing social justice and labor opportunities to people to be able to pay raised taxes before raising them and boost export by supporting small and middle sized companies to create jobs, until now they failed doing that!
For now, a fair share to distribute government costs are required and must be claimed by ordinary people, by going on the street, who else would do that?