The car industry
By: Eduardo Sarmiento
The priority of the mining and foreign investment comes from the previous administration introduced all sorts of incentives to encourage the entry capital into mining. Consequently the production of oil, coal and nickel has increased considerably in the last eight years. However, its impact on economic and social development has not been evaluated objectively. In the balance of payments is that in the past eight years, annual capital income rose from U.S. $ 1,500 million to U.S. $ 12,000 million, while capital repatriation did $ 2,500 million to U.S. $ 12,500 million . What goes on capital income is less than what comes out.
The revaluation has resulted in a strong substitution of domestic production and employment by imports. The last ten years, manufacturing employment declined and imports have quadrupled. Something similar happens with agriculture. The sector has no room to thrive in the lowering of tariffs and exchange rates, and less free trade agreements that keep the subsidies in partner countries.
Balance is lamentable. The added value growth in both sectors is below the historical average. The huge influx of capital has been accompanied by an increased current account deficit, currently amounts to 5% of GDP.
to complete, foreign investment causes a contraction of domestic savings that tends to fall in industry and agriculture. Thus, in recent years mining companies have moved in the bag to the industrial and the trend will be accentuated by the privatization of ECOPETROL, the main source of the plan, which will be allocated equally to finance oil projects and infrastructure.
The most serious is the impact on the labor market. Mining and large infrastructure projects are the sectors that contribute the least to employment. Moreover, revaluation encourages a massive displacement of imports displacing employment labor informality. Thus, the growth generated fewer jobs and labor income share of the national product decreases. Where do
from consumption? deficiency of effective demand caused by the current account deficit is corrected with increased infrastructure spending and fiscal deficits, credit expansion and asset recovery, which are basically disguised emissions. It reaffirms the inequitable structure in which the high capital gains are obtained at the expense of labor income. The model results in modest growth, widening inequalities and high financial and currency vulnerability.
The model described, with minor variations, is what has dominated the last twenty years. In the interest of free markets, the country ended up leaving out the industry, where employment opportunities, learning on the job and stable demand. There is strong evidence that only countries with a broad base of industry, agriculture and formal employment are able to grow at fairly high rates.
Published on Sunday February 27 in the print edition: http://www.elespectador.com/impreso/columna-254465-el-vagon-de-industria
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