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ANTI-CORRUPTION POLICIES & SPU: SOCIAL PROTECTION UNFINANCING

Actualizado: 26 mar 2021


AFTER ONE YEAR OF LOCKDOWN, WHAT IS THE POLITICAL SOCIAL AND ECONOMIC IMPACT OF COVID IN AFRICA ASIA EUROPE AMERICA AND OCEANIA?



In terms of Economics, Latin America was not coming well in 2019 after that year's (probably and partially Narco-Baked) social and political turmoil, as shown by CIPERChile: "... those who discover new channels of response and social mobility in the drug trade".



Latin America


After South-Asia, Latin America was the region that received the worst hit of COVID19 during 2020. For 2021, it will have the average recovery among the different regions in the World, even without having the resources for that:


(Op Cit)


In Chile, as seen on TV, by the end of March, and via a national radio and television network, the President of the Republic, Sebastián Piñera, detailed the measures for increasing the fiscal response of Chile to the situation after one year of COVID Lockdown, that are grouped into 5 axes:

  1. - greater protection of family income,

  2. - strengthening of support for the middle class,

  3. - greater protection of employment,

  4. - strengthening of support for SMEs, and

  5. - strengthening of the health plan.

"The total cost of this strengthening and extension of the Social Protection Network reaches close to US $ 6,000 million, which represents 2% of our Gross Domestic Product (GDP), and requires an enormous effort on the part of the State. The original Covid Fund, established in the June 14, 2019 agreement, was $ 12 billion. This Covid Fund will be increased by US $ 6 billion, with which this Strengthened Covid Fund will reach US $ 18 billion". Sebastián Piñera.

With the increase, the fiscal effort of Chile would reach 6% of GDP, 25% of the effort in the European Union, and 40% of the fiscal effort of the United States of America, but similar to the average of SIDSs (Small Islands Developing States), twice-as-much as the average of LDCs (Least Developed Countries), and more relevant, 50% more than the average of developing economies.

We will use Latin-America as the median region in the World, and will compare the cases of Chile and Ecuador for understanding the key message of this article:


THE LAST 12 MONTHS OF LOCK-DOWN HAVE SHOWN HOW LETHAL CAN THE CORRUPTION TOLL BE, BUT ALSO HOW PROFITABLE A GOOD SOCIO-POLITICAL-ECONOMIC INSTITUTIONALITY IS.


Globally-speaking, lack of Social Protection Financing (SPF) has shown the socio-political, recessive-economic impact of inefficiency, but in special the unjust-unfair inequality-lethal effect of corruption.



LACK OF SOCIAL PROTECTION FINANCING IN 5 CONTINENTS

Corruption creates unfairness and injustice, inequality and death. This is the conclusion of research from Hexagon Group, after 52 weeks of dialogue during this year of Lock-Down with experts in Social Protection Financing around the Globe.


Social protection financing starts at home, follows via family, proves friendship, focuses on the strength of the community as a network, circulates in the market, thrives on international support, resides mentally in our informational spheres, and only when needed, falls into the hands of the State.


This way, the behaviour of the Stock Markets, that account for the Savings of the World, as the first mechanism to cope with individual protection, shows better the need and lack of fiscal savings for confronting the social protection crisis (please look at Japan in the chart and graph, above and below, respectively):


After seeing these results, it is understandable that the President of Venezuela is considering the dollarization of its economy (https://www.dw.com/es/se-encamina-venezuela-a-una-dolarizaci%C3%B3n-formal-de-la-econom%C3%ADa/a-51304881).


To have a dollarized economy helps to link to the behaviour of the Dow Jones, and the USA, that has abandoned the negative zone of the Euro zone, in particular of Italy, and the same, of the British Markets (FTSE).


Linking to China does seem also to be a good idea, as can be seen from the data obtained from Chilean Peso:



Taxes, health ministries, and the sole presence of the State have not guaranteed social protection results. Meanwhile, savings, health dialogue, and leadership-based economic cooperation have shown the best performance.


The Ecuadorian Case


Thanks to its dollarization, Ecuador has reduced poverty, eliminated inflation, and even increased competitiveness:




Countries like Ecuador, with the highest levels of SPU (Social Protection Unfinancing) in the World, have shown the World its images of ill citizens falling death in Guayaquil without a bed in a hospital, and even without a coffin or a burial niche.


Without corruption and by a state leaving the economy work alone, things would go OK:


However, USD and money, both attract bad administrations.


That was the most visible face of how lethal corruption and a dozen of leadership sins are:

  1. - decades of inefficient expenses in hospitals but not health,

  2. - erosion of the savings in the pension scheme, fiscal deficit, debt, and corruption,

  3. - lack of trade agreements with possibilities for health cooperation,

  4. - narco-social prevision,

  5. - week-after-week destruction of cooperation via insulting opposition each Saturday,

  6. - totalitarian state abuses and control of justice, parliament, and electoral powers,

  7. - sending NGOs, associations, and professional bodies to bankruptcy,

  8. - pursuing academicians and universities,

  9. - accumulating a territorial centralization of power, unfinancing local governments

  10. - institutionalizing a format of economic gaming only with economic elites,

  11. - persecution to free press and journalists, and last but not least,

  12. - absence of benevolent leadership in politics, economics, and the social arena.

These are accusations in the media, made by the nowadays Ecuadorian government of Lenin Moreno to former President Rafael Correa and its government. Correa has received a sentence to 8 years in prison (after its government, in which jokingly the actual President was its former Vice-President). It must be said that it is hilarious to have seen the former President Correa being the one who chose and impulsed the incumbent candidacy of President Moreno, who arrived in office with accusations of fraud from its rival, Guillermo Lasso.


During the last debate of the candidates for President of Ecuador, Lasso, finalist candidate again, presented a better vision of the future than Arauz, his rival 4 years later (again, against Correa). Both aspirants wanted to avoid any links to the nowadays President Moreno, and both runners accused the other party of being the incumbent of that government.


Guillermo Lasso, due to its performance in the previous elections, had a block of members of parliament that negotiated with the block that abandoned former President Correa, and both voted with the MPs that became loyal to the Executive branch of Moreno, who politically abandoned its former colleague Correa, who -looking for revenge- has impulsed Andrés Arauz (being the last, a former Minister of Culture of Correa's government, and now, the incumbent of the auto-proclaimed "socialist" former President, Rafael Correa).


When a Socialist President in office talks about the above-mentioned dozen sins, as the situation that explains the reason for the evident and globally known lack of social protection, no more evidence is needed in order to conclude that social, political, cultural, environmental, and economic corruption kills people by robbing via state, the resources of society for its social protection, that hence, is not only a governmental responsibility.


The Chilean Case


On the other hand, the 18.95 million inhabitants in Chile started its lockdown in mid-March 2020. For October, the country had already made 3.857.820 PCR tests, reaching 727 tests per 100.000 inhabitants weekly, a figure similar to the average between Croatia and Poland, in the European Union (https://www.minsal.cl/chile-lidera-latinoamerica-en-tasa-de-test-pcr-por-millon-de-habitantes/) .




The union of corrupt politicians, monopolistic entrepreneurs, and narco-social leaders around the globe has tried to take down governments in different countries, including Chile.


Fortunately, Chilean politicians, media, institutions, academia, and economic players, are working together for converting the political crisis into a good opportunity for development, the same as turning the sanitary pandemic into a great way to show the world how resistant will the Chilean model become when Public-Private-Community Partnerships for health, education, pensions, social protection, investment, and economic growth would get in place, after the Constitutional Convention that starts soon.


Conclusion


  1. If Chile defeats political turmoil via democracy, its model will become stronger and show again why the State is not the way out of poverty, but only a scheme that can help in moments of economic turmoil, as the Japanese case has shown.

  2. If Ecuador keeps its dollarization and Guillermo Lasso finally arrives into power, ending almost 15 years of corruption, as said by President Moreno and the Justice of the country, Latin America will start to see how the Chilean Model is more relevant for the new normal than the Venezuelan Model, that now is considering the Ecuadorian Dollarization Model, that is more compatible with today's and in special with the future Chilean Model.

  3. Latin America, as the middle class of the World, can show a way to abandon the stagnation in Europe (some call it Euro-Sclerosis), and will probably follow more America, now that the USA has also abandoned the links that some saw between Trump and Putin, the one that has supported Venezuela and the one that governs Russia, and has some saying in the official channels of its State that have hired Rafael Correa as one of their anchors for the region.

  4. Africa is also showing resilience, the same as Asia, and of course Oceania, which has survived thanks to its isolation. Europe will have to follow a more liberal approach sooner or later, and hence, Latin-America and America will be freer, the same, to cooperate for creating again, as happened a century ago, a roaring decade, probably together with China, and less with Russia and its allies in the whole World.

  5. Finally, impact-investments will be key for creating a "business-in-the-community" approach to development and social protection, with more decentralized functioning together with a more private capability for engaging and creating financing, production, employment, income, savings, welfare, and of course, social protection. 2021 is the year that challenges us in order to vote and work for defeating corruption.

 

ROBERTO F. SALAZAR-CORDOVA (*)

CEO, HEXAGON GROUP LATAM-UK-GLOBAL (**)

Santiago, Chile.


(*) Economist, with specialization in Finance and Development. Master of Arts in Economics, with specialization in Economic Theory and Social Policy Economics. Master of Science in Social Protection Financing, Chevening Fellow in Responsible Business.



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