Vaccine and Reforms … The urgencies and priorities in 2021
Article Latin Trade January 2021
…Vaccine and Reforms …
The urgencies and priorities in 2021
Brazilian entrepreneur, CEAL Brasil President
We are entering the year 2021 with an accelerated pandemic in almost all countries. At the same time, we have managed to start vaccinating populations. It is a race against time; while the new strains of COVID-19 exponentially increase contagion, clog health systems, and mass vaccination against the pandemic is not expeeding protection against the virus in the same way. Everything indicates that the first half of this year, we will still have a strong increase of contagion, while the vaccine starts its protective effect. Containment may take place in the second half, if nations are able to produce and vaccinate their populations at an exponential rate by the criteria of prioritizing segments of the population from highest to lowest risk first.
It is an emergency situation for all that requires priority, urgency and competence. What for everyone as logical and understandable in the socio-medical area, where the priority of life in all senses prevails, is still not understood, in the same way, in the political and economic area. We will be in social distance, home office and lockdown, for longer than we anticipated. For developed countries with populations of less than 100 million inhabitants, the prevalence of urgency and speed of vaccination may occur in the first half of the year, in order to foresee the effective and winning fight by the end of this year. For countries of continental dimensions, with populations above 100 million inhabitants, or in development, if they do not have access to the vaccine and have an effective vaccination care system, this forecast will not occur in 2021 and will pass to 2022.
Seeing the planet as one, it is useless for a country to be well while its neighbor is not. Because we will not have the mobility we want and need. So in the Americas, we may have countries that are performing well, but they still need to remain closed to others, which have not reached their levels. It is the speed of a convoy, which is measured by the lowest speed of one of its members. After helping each other, it is necessary to help the slowest one, in order to reach the destination, we want. This requires a sense of priority and urgency not only local, but global.
If in the socio-medical area, we now have this knowledge and motivation, the same is not true in economics and politics. We know that the post-pandemic economy will be another, more digitized, less globalized, with richer and greater poverty. We know that the global indebtedness of the states will be much higher in relation to their GDP. So with this knowledge, we also know that the management of states and companies cannot be the same as the phase before the pandemic. We have an outbreak between 1 to 3 years of fighting the pandemic that has led us to have more presence of the state in our economies, increasing inflation and greater social demand. The ability of states to maintain their subsidies or incentives for consumption (monetary easing, low interest rates, subsidies) is limited and there will be a need to restore the balance of public budgets.
The first reaction, less intelligent, immediate and populist that we observed, is to increase the tax burden to increase the collection. The effect of the Arthur Laffer curve is disregarded, since the increase in taxes may cause the exact opposite, that of reducing economic activity and reducing revenue. To become more popular, the burden on FAGA (Facebook, Amazon, Google and Apple) 1) is increased, or on the “sin economy” such as cigarettes, drinks, junk food, or even the taxation of large fortunes. ( Argentina). As if that were not enough, proposals to tax financial transactions come in, which are cumulative and burden the economic process as a whole.
The great economic and political opportunity of the government is at this time of global crisis to do their homework for REFORMS. There is a window of opportunity in 2021 to carry out these reforms, in the political, social and economic areas. In the political area, the reform of democracies, through party systems, closer to voters, faster in changes and transparency. Less dogmatic and radical, more solidary. In the economic area, structuring the state, more agile, less bureaucratic, closer to the citizen, encouraging the private sector to generate jobs, income, invest in education and innovation. In the tax area, reduce the weight of the state on the taxpayer’s back, and strengthen low-income populations to consumption and conscious investment, and structure the taxation system for a digital and services economy, relieving industry and the countryside. There is no lack of proposals, what is lacking in fact is the political will to meet the urgencies and give priority to changes 2).
In Latin America, the recovery forecast by the World Bank is 3.7% over 2020 3). We will have presidential elections this year in Peru, Ecuador and Chile and legislative elections in Mexico and Argentina. Opportunity to launch reforms as part of the government program in these countries may be the chance, and in other countries without elections this year, the feeling of urgency and priority may be the opportunity for many to have hope and expectation for better days.
I think we deserve this …!