The national economic indicators show the unfortunate landing in a new crisis. Surely during the second quarter of 2023, the GDP will have a negative variation or barely above zero percent, stripping the mirage of the positive growth of the first three months of the year driven by the financial activities of insurance and gambling.

The optical illusion concealed for a short time the growing hunger and unemployment, the high level of distrust, the collapse of national savings, the greater inability of the population to acquire durable goods such as housing, a falling per capita income, still high inflation (with forces that contain its reduction, especially in the core and energy sectors).

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This illusion also concealed debts whose payments eat up almost 40% of household disposable income and reduce cash and business investment capacity, and a revalued exchange rate that helps imports. This is going on across the country and in Bogota, how is it going?

Dragged by the national trend, the capital of Colombia is going through a downward phase of the economic cycle of which there is still no certainty when it will hit the floor. Bogota’s economy fell sharply in 2020, rebounded in 2021, and between 2022 and 2023 has fallen again. In Bogota, the high cost of living has also led people to consume less. The city went from so-called reactivation to deceleration-fall.

In 2021, 99.3% of Bogota’s economy was growing, but by 2022 the situation changed: while 33% of the economy accelerated, 67% of the economy slowed down, and by the fourth quarter of 2022, 81% of the capital’s GDP abruptly reduced its growth rate.

In the first quarter of 2022, total GDP rose 11% and in the first quarter of 2023, the rate dropped to 3%, four times less. The situation will not improve in the short term in view of the national economic scenario, in which negative behaviors are the rule, an anchor for Bogota’s economy.

Sectors such as the manufacturing industry, retail and wholesale trade, and professional activities have already lost the dynamism achieved a year ago. In relation to construction and industry, two activities that contribute 12% of the economy and employment, negative behaviors prevail.

In construction, demand for cement and imported inputs fell and the number of people employed is 40% lower than in 2019. In the industry, real production and sales, between January and February of this year, fell -1.6% and -0.7%, respectively. Throughout 2022, the industry slowed and in 2023 has entered negative territory, anticipating a reduction in industrial employment.

The high cost, the fall in growth, the lower employment dynamism, and the higher number of unemployed make evident the ravages of national stagflation. The severity of unemployment is not greater because there are people who are tired of looking for work, because of informality, and because of migration abroad in search of better opportunities.

The capital reached the podium of the departments that receive the most remittances sent from abroad. Between September 2022 and April 2023, the number of unemployed people in the capital increased by 80 thousand people, while a year ago it decreased in number. In March, real spending by Bogota residents fell by -2.82% and, if we compare the first three months of this year with the last three months of 2022, spending fell by -11.8%. And for May, household spending continued to fall, that month down -2.56% (Raddar).

About 32% of the inhabitants of the capital (DANE) eat less than three meals a day (2,528,529) when in the middle of last year this scourge was suffered by 26% of the capital’s inhabitants (2,054,425). In six months, the number of hungry people increased by 474,104 people. Food continues to be expensive, as well as gas, electricity, and public utilities (all privatized).

Between February 2022 and April 2023, the rates per cubic meter of gas increased by 33.4%, and between January 2020 and May 2023 the kilowatt hour of electricity by 37%, a situation that has generated huge profits for the multinationals Vanti and Enel, companies with average equity returns between 2015 and 2021 of 70.34% and 38.12% and accumulated profits of 2.7 and 7.7 trillion pesos, respectively.

Between 2018 and last February, the cost of the toilet (economic groups Fanalca, Pescarmona, and Torres-Barona, Hidalgo & Hidalgo, Mendoza and Caicedo -exsuperservicios-, and Sacyr of Spain) weighted for all locations increased by 77%, 3.11 times more than inflation.

Higher tariffs in domiciliary public utilities have pushed real spending of urban and rural households, where this rose between 2017 and 2021 by 17.3% and 119.8%, respectively. Gasoline prices, Transmilenio fares, and rents also increase, which decimates the purchasing power of households.

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In the labor market, informality grew again between the end of 2022 and the beginning of 2023 and the generation of employment slowed down, reflecting the general behavior of the economy of Bogota, where the hardest hit are women and the inhabitants of Usme, Ciudad Bolivar, Bosa, Rafael Uribe Uribe, San Cristobal, and Kennedy, areas where this scourge is very strong with the youth.

If unemployment does not increase more strongly, it is due to the growing informality since last October and to remittances, which lead to or maintain a group of people in economic inactivity. Formal employment is stagnating and informal employment is increasing.

In terms of business, although the number of units with active registration in the Chamber of Commerce is growing, those that have not renewed their commercial registration for more than three years have completed four years of permanent growth. Between March 2022 and March 2023, they increased by 44%, going from 95 thousand to 137 thousand. That is 9.5 times more than the increase in the total number of companies registered in the city.

There is a growing nucleus of Bogota companies unable to pay all their legal obligations, which they count among the reasons that the cost of the commercial registry in Colombia is the most expensive in Latin America, it is very regressive -hitting harder the micro and small ones than the larger ones- and every year it must be renewed for a value equal to the registration, something that does not happen in any other country in Latin America (Conpes 3956).

Bogota suffers from an economic model that limits its wealth creation capabilities and increases public and private budget restrictions. In the last two decades, for example, the capital has experienced a decline in manufacturing in a city that has not been able to consolidate its industrial apparatus.

In addition, due to free trade, more and more imported goods are being consumed, displacing domestic production and preventing the expansion of the economic base or leaving strategic economic activities for the city and the Savannah without the prospect of creation.

The effects of increased investment in public works by the Mayor’s Office, which had a positive impact in 2022, will not be felt in the same way in 2023, 2024, and 2025 because the district administration cannot sustain the rate of increase in public investment, given that its debt capacity is already maxed out and taxpayers’ coffers are very tight.

In addition, the Administration needs to open or expand public spending fronts that reduce unemployment and impact household consumption rather than capital formation -as is the case with large infrastructure works-.

The capital city needs the FTAs with the United States and the European Union to be seriously renegotiated. It is necessary that, in areas such as gasoline, electricity, and gas, prices stop rising and that public services in general and public transportation become more accessible, a situation that, in order to materialize, will surely lead to broadening the base of public transfers.

It would also be positive to rethink the contracts or public-private partnerships through which foreign agents capture excessive rents from these activities, making everything more expensive for citizens and decimating the competitiveness of non-monopolistic and non-financial companies. And, above all, that the national economic model really changes and that the Mayor’s Office of Bogota overcomes, through a kind of counterbalance of powers, that unhealthy habit of being a sounding board for bad national economic policies.

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