Without reforms, history is doomed to repeat itself

Faced with one of the greatest crises in history, many are the economists and politicians who talk about implementing reforms. Reforms that, in the same way, sounded in previous crises and are still not applied.

If this pandemic should have taught us something, it is that, in the same way that today we have a way of life in which well-being is the main characteristic, tomorrow, for various reasons, that well-being that preceded us could disappear and never return. . A kind of black swan, as the mathematician Nassim Taleb commented, has devastated the planet, showing that what could only be explained in a science fiction film, can also be given in real life. And, as they say, here is an example that reality, on many occasions, surpasses fiction.

Looking back at the situation, many are the analysts who, now, believe they find the explanation to all this in conspiracies that, like Bill Gates’ talk about pandemics, seem to make sense – like any conspiracy – and could have warned about a pandemic that was approaching our planet earth. However, unfortunately for many, this pandemic, no matter how hard we try, we must know that it was impossible to predict; Especially when, due to its nature, not only are we no longer capable of that, but also, we are not capable, either, of controlling the situation in its presence.

However, despite the fact that we have not been able to predict it, no one has said that we have not had time to prepare for a crisis of such magnitude, as well as to take the appropriate measures to be able to cushion the impact and come out of it gracefully. And no, to prepare you do not need to predict the pandemic, nor do you need to prevent the next crises. Preparation is elementary, and just as we do to develop ourselves in the future, professionally speaking, we must do it to prevent a crisis like this from wiping out our entire present, as it is doing today.

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Along these lines, many economists often wonder how we have been able to get here, living in a stage in history in which we have more resources than ever, both material and human. However, in the same way, they do not wonder how, despite having recorded years of growth, there have been countries that continue to perpetuate debt levels that exceed 100% of their respective levels of gross domestic product (GDP) on their balance sheets. Thus, it is also very striking that these types of statements are made, when there are economies that we call emerging economies, and that today present levels of economic informality to the point of having a labor market in which the 50% of the employed population is in a situation of informality.

And it is that, on many occasions, we talk about reforms that, as if it were a toast to the sun, remain in simple gossip. However, when a crisis like this devastates everything in its path, these gossip resonate in the subconscious of the same managers who once spoke them, believing that they would fall into oblivion.

What if we start with economic informality?

If one stops to observe the data offered by certain countries, as we said at the beginning, we can see how the situation shown by many before the pandemic was already terrifying. For this reason, it is even striking the fact that its politicians speak of recovering the levels prior to the pandemic shown today, when these levels were already harmful to the country’s own management long before COVID was an epidemic local.

Latin America is an example of this. Their lower capacity to provide resources to their respective economies was one of the main obstacles faced by Latin American countries in the face of the crisis derived from COVID. However, in the same way that we talk about this lack of resources and that lower capacity, we must explain why this lack of resources is due, as well as this lower capacity, taking into account the reforms that, despite being necessary for the economy , are still not applied in the different economies that the region has.

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In macroeconomic terms, we must know that Latin America has a fairly large informal sector, even exceeding 40% of the GDP of the entire continent. With data from the Americas Society Council of Americas, most countries present an informality percentage close to or greater than 50%. And it is that Latin America has economies that, taking into account its economic informality, come to touch 65% of GDP in the informal economy. A situation that, despite the harshness of the data offered, has already been perpetuated as if it were terminal cancer.

In terms of employment, for example, the pandemic left a bleak scene across the planet. The forced stoppage of economic activity ended all economic activity in the different countries. A situation in which many economies, throughout the planet, began to apply mechanisms to protect the income of citizens unable to develop their profession. Something that, for many Latin American countries, not even with resources, is possible.

In this sense, based on the employment data shown by Latin American countries, and according to the International Workers’ Organization (ILO), in Latin America and the Caribbean there are at least 140 million people working in informal conditions, which represents about 50% of workers. All this, bearing in mind that, as stated by the organization, we are talking about a situation in which economic growth, no matter how dynamic the economy is, is not proving to be the solution. And it is that, only for Mexico, and being the first economy of Hispanic America, informal employment during the pandemic has represented 51% of the workers employed in the country.

As we can see, even with the resources to face the pandemic, Mexico would have been able, like many other Latin American economies, to face the pandemic and protect its workers. All this, simply due to the fact that, according to the indicators, not even 50% of them are officially recognized as workers.

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In this context, even in terms of resources, the reforms that would have brought that preparation to which we allude in the article would have helped to combat the pandemic. Well, taking into account the indicators, the lack of resources is nothing more than the consequence of a lack of reforms that goes unnoticed, and that also prevents the countries of the region from developing properly. In this sense, in reference to the case of Mexico, being one of the most important economies in the region, it has a tax collection that, as a percentage of GDP, stands at 16%. A lack of resources motivated by that economic informality that prevents the collection of taxes, and that leads the Mexican economy to occupy one of the worst positions in the ranking prepared by the OECD.

However, in summary, crises continue to occur, while agencies, after an analysis of the situation, once again manifest in their conclusions the same problems that, in previous years, led us to situations similar to the one we are going through today. And we must know that, along with Latin America, other economies, such as Spain, present similar situations and that they should be corrected with major structural reforms; however, the conflict of interest produces situations that lead to scenarios such as the current one. Therefore, the question now is not when, or how, the next crisis will be, but rather when will the reforms that the economy needs so much and that, despite these crises that we mentioned, will not be applied.

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