Health care heads for Never Never Land
The government’s healthcare reform proposal has survived its first crucial test in Congress: it was finally approved by the House on December 5th. Now it will be reviewed by the Senate, where harder discussions will take place in March. Though this is a positive for the government, a formal step is still sorely absent: a Finance Ministry statement calling the plan viable under Fiscal Rule spending restrictions. The missing FinMin pronouncement is in stark contrast to the document it sent to Congress about the pension reform bill, where estimates and fiscal blessings were both handed down. According to the FinMin’s November evaluation, expenditures will exceed revenues during the first years of 2024-2033. During 2024-2027, the difference is, on average, 0.2% of GDP. There must be a lot of infighting within the government, with the president and the Health Ministry on one side, and FinMin on the other. Let us hope the sounder approach of the latter prevails.
Health reform is subject to the Lucas Critique, named after the late Nobel Prize-winning economist Robert Lucas. He argued that many government interventions alter economic reality so profoundly that knowledge of the past loses validity for predicting the future; and for predicting the effects of the intervention to be studied. What we today call health “services” or “costs” might not necessarily refer to the same facts a couple of years from now. We will enter an unknown world of deterioration in quality and quantities, and price increases impossible to predict. This is because the government wants to create the opposite of a health market. President Gustavo Petro wants to be remembered for substituting the market, and for appointing the mayor, the governor and a ministry official as the directors and administrators of the new system. So when the Finance Ministry produces healthcare cost figures to 2033, the only thing it will know is that its staff made some calculations in an Excel spreadsheet, taking into account the current healthcare costs for 51 million Colombians. Foolishness consists of not knowing what one is doing, and yet insisting on doing it. Foolishly approving a text with the name of healthcare reform does not imply that those about to approve it truly know what they are doing. Prices, amounts paid and quality of services will change so radically and unpredictably that what is said today about it is nothing more than nonsense.
The Q3 2023 current account deficit came in at $1.6 billion, down from $2.3 billion in Q2, and $3 billion in Q1. External imbalances are closing way faster than everyone expected at the beginning of 2023. Though this could probably be taken as good news, it is also to some extent another sign of the drastic economic deceleration underscoring the difficult times we’re living in. As we have said in recent months, it is about time monetary policy starts to unwind the much-required hikes that started in September 2021.
Some 29 million Latino migrants wire money to their families regularly, a crucial inflow for Latin American economies. During the COVID pandemic, remittances climbed, due to a fresh outflow of people. But there are warnings that drug cartels are using remittances to launder and transfer money. A special report by the Reuters news agency stated that the Mexican cartels are awash in drug sale cash in the United States, and that up to 10% of all remittances to Mexico may be drug-related.
Our best prediction for Petro’s governing strategy next year is that he’ll first double down on ideology and his key political bets: the so-called Total Peace; his anti-mining stance; the statization of healthcare and pensions; public competition in the financial sector; and intervention in as many prices as he can. Over time, his agenda will underperform either in Congress or the high courts. Desperation over a stalemate would then lead him to keep governing via decrees, themselves subject to Constitutional Court scrutiny. Their transitory validity could give the president and his cabinet a sense of progress, followed by rapid disappointment, as has been occurring over the last 16 months. Petro and the opposition will then start preparing for the 2026 presidential campaign, the crucial test for his tenure. But the October 2023 election results will circle over his head like crows bearing bad omens.
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