Some Reflections on Inflation and Monetary Transfers.

In the month of october, according to the official source of information, inflation rose 0.72% compared to september, mainly due to the increase in food and beverages of 1.21%, followed by transport 1.09%. Within food, potatoes stand out with 14.09% as the main increase. Other foods that rose in the month were rice 2.41% and fresh fruit 2.26%.

The annual variation of inflation as of october rose to 12.22% compared to 11.44% in september and food is the main explanation for this behavior, reaching an annual variation of 27.02%, which is affected to a greater extent by levels of income to the poor and vulnerable. Indeed, according to the official source, the annual inflation of the poor reached 14.1% and that of the vulnerable 13.92%, while for the middle class 12.4% and for the high income 10.57%. This inequality in the impact of inflation is explained by the fact that in the year within food, the ones that have risen the most in price are rice 42.05%, milk 35.49% and meat 23.69%, which hits the low income population the hardest. than the others.

Monetary transfers and subsidies according to international organizations, the UN (recently at the climate change meeting in Egypt they were mentioned with regard to the extraordinary income of oil due to the prices of the year) and the OECD should compensate in countries like Colombia for poverty and inequality, which is according to the official source for the year 2.021 39.3% of the country's population (20 million people) and 0.52 in the Gini coefficient. In addition, they must also address the impoverishment of those sectors of the population that have been hardest hit by inflation in the present year, which will increase the percentage of poverty and inequality mentioned above.

As of next year, some transfers are planned that should be higher than the current ones, such as those in the case of solidarity income or the elderly subsidy. But the new resources only enter from the year 2024 when the taxation of natural and legal persons contained in the recently approved Tax Reform becomes effective, which is already for conciliation between the two legislative chambers of the country and which will govern from the year 2.023. Meanwhile, it is necessary to look for resources that can be made available among the different items of the 2.023 National Budget.

Returning to the issue of poverty and inequality, in april of next year the poverty data for this year 2.022 will be known and according to analysts and experts the figure is going to increase due to inflation that affects low incomes more, as previously stated. This impact of inflation will slow down next year (2.023) when the inflation expected by analysts and experts is falling during the year until it reaches estimated levels of 7% or 8% by the end of that year. In this way the pressure exerted on poverty will decrease. It is also projected that with additional Budget resources in that year, monetary transfers and subsidies to the poorest of the population will increase, all or which will allow that at the end of the year there will be less monetary poverty than that obtained in the year 2.022.

For a year later , in 2.024 the taxation collected will be that for the taxable year of 2.023 and the tax reform must contain the new approved resources for the social programs of monetary transfers that can be expanded and continued lower with greater momentum the percentage of the population in monetary poverty and also the inequality measured by the Gini coefficient. The goal to be achieved in the medium term should be the one corresponding to the developed countries of the world that have between 15% and 25% of the population in poverty and inequality between 0.20 and 0.40 in the Gini coefficient with an average of 0.35.

Additionally, the country in parallel must implement public policies so that with a greater commitment from the private sector there is an increase in formal jobs and thus lower unemployment, which is currently at 10.7% (as of september), but was higher than the previous month 10.6% and first drop to one digit as the country has experienced in previous years and then drive the figure to 8% or 7% which corresponds to the average for Latin America and later to 5% or 4% as some countries developed have, the United States is at 3.5%. For this, a labor reform is required that makes hiring more flexible and that reduces some parafiscal payrolls.

Also in terms of pension next year, together with the labor reform, a retirement reform is required to correct the high subsidies that are currently granted to higher pensions with resources that come out of the National Budget. High pensions or higher than 4 minimum wages according to some analysts should be self sustaining and belong to private retirement savings accounts made in the years of work.

The health reform is also pending since it will correct the part of financial insufficiency of some health entities, EPS and the inappropriate management of public resources and the debt with hospitals. Patient care should be the priority and with a preventive rather than curative perspective.

All the reforms mentioned above, starting with the tax reform that has a greater direct incidence, will contribute to lowering monetary poverty and inequality. In the developed countries of Europe and North America, the calculation of inequality drops to the levels mentioned above but after taxes have been applied. With the tax reform as it was designed and approved, it is expected that it will have a positive impact on the Gini coefficient and the drop in this register expected by the economic authorities according to the statement of reasons for the aforementioned reform is from 0.52 to 0.49. Note that, as expected, several reforms such as the one recently approved may be necessary to reach the aforementioned medium term target levels of 0.35 in the Gini coefficient.

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Today (tuesday 8) as for the world markets, the stock market grow due to the positive change of the investors on the result of the election day in the United States.

The price of oil falls slightly due to new fears of a global recession and due to anti-covid measures implemented in China. The WTI and the BRENT reach 90.9 and 97.2 dollars per barrel respectively.

In Colombia, the Stock Market remains at the closing levels of last friday and the peso that opened the day with a devaluation trend, corrects at mid morning and registers 5.021 per dollar, below the TRM for today 5.061.