The president, Gustavo Petro, is right, subsidizing gasoline goes once morest social equity and has cost the State to stop providing better education, a decent criminal policy or a citizen security system that guarantees the life and property of Colombians.
However, no government has dared to dismantle this subsidy because they fear the reaction of society, which has not been able to explain that the price of gasoline does not determine the production chain of the economy, nor the direction of the inflation.
It must be remembered that before 1999 the price of gasoline was fixed every first of January. In other words, the government unintentionally decreed the annual inflation rate. In other words, it gave the incentive for everyone to raise prices to the same level. This formed the belief that the rise in gasoline unleashes runaway inflation. If this is true, Switzerland, Denmark, Sweden and Finland, which have the most expensive gasoline in the world, would have inflation problems. However, these countries have low inflation rates.
In addition, inflation is a fiscal phenomenon that arises because the government, when it has more expenses than income, must resort to financing sources that end up unleashing the general rise in prices.
Two examples are Bolivia and Venezuela. In Bolivia, between 1982 and 1985, hyperinflation was unleashed, reaching 11,749% per year. This happened because gasoline prices were so low that they did not allow the government to have enough income. Therefore, they resorted to printing money to fund their expenses. What led the Bolivian government to hire the economist Jeffrey Sachs as head of a mission to stabilize public finances. The policy applied by this famous economist was to raise the price of gasoline in order to obtain public resources and not have to resort to printing money (Decree 21060 “the gasoline blow”). Thus, Bolivia in a single day managed to control hyperinflation.
The second case of hyperinflation is Venezuela, where US$0.084 per gallon of gasoline is paid. This prevents the government from financing its huge public spending, which leads its Central Bank to print money in order to support the bureaucracy and its social welfare system. In this way, the Venezuelan government has woven the economic tragedy of this society.
Meanwhile, in Colombia the price of gasoline is US$2.11, one of the lowest in the world. In other words, the Colombian State has been giving away $9,000 per gallon to each vehicle driver, who are not exactly the most disadvantaged people in society. That annual amount of money would have been used to finance low-income housing, build roads, improve Icetex or better equip the Police to provide security to frightened citizens.
If President Gustavo Petro manages to liberalize gasoline prices, he will obtain the greatest economic achievement of a Colombian head of state; because he would obtain resources from Ecopetrol to close the fiscal deficit, control inflation and promote greater social welfare. Not to finance the tanking of gasoline for the owners of the cars.
