Economy

Colombia extends isolation until the next April 26th; 'cost' of the measure may exceed 10% of monthly GDP

This Tuesday, President Iván Duque announced the start of emergency aid payments to the poorest, and new lines of credit for companies

Image: Iván Duque Twitter
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With the aim of controlling the spread of the new coronavirus, Colombia’s Presidente Iván Duque announced that the social isolation measures that will extended till the next April 26th. Although necessary, the measure will impact sectors responsible for no less than 70% of the country’s GDP, according to the Hernán Echavarría Olózaga Institute of Political Sciences.

According to the Institute, the stoppage of these sectors will result in a monthly drop of 10% in the country’s GDP and will aggravate the expected economic crisis due to the pandemic, also influenced by the drop in oil prices and the rise in the dollar.

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According to data from the National Association of Financial Institutions (ANIF), among the 12 main sectors listed, 7 would be the most impacted: Civil construction, financial activities, real estate, entertainment, industry, mining, and commerce, transport and tourism.

ANIF’s latest forecast is that Colombia’s economy will grow only 0.5% in 2020, a blow to the country that, until 2019, was the fastest growing in Latin America.

As of this Tuesday, the country had 1,579 confirmed cases of Covid-19, and 46 deaths from the disease.

Credit for companies to mitigate isolation impacts

As a way of mitigating the impacts already expected from the pandemic, and in line with what other countries are already doing, the Colombian government created a new credit program to help companies finance working capital and payroll. To this end, the government reinforced the National Guarantee Fund (FNG), with a total of COP 12 billion (equivalent to).

“The Special Guarantee Program ‘Unidos por Colombia’ (as the initiative has been called) is a tool with which companies will be able to solve cash flow problems, avoid mass layoffs and maintain their business,” assured the Minister of Commerce , Industry and Tourism, José Manuel Restrepo, according to La Republica.

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In the program, half the cost of commissions that the FNG usually charges for issuing guarantees and which are normally paid by businessmen will be borne by the federal government. In general, it is the government that will pay 60% of the credit amount. Any Colombian company with revenues of up to COP 51.9 billion (equivalent to $13.2 million) will be eligible to the program.

And this is not the only credit initiative for companies at the moment in the country. According to Reuters, Bancolombia, the largest financial entity in the country, has announced a special credit line of COP 600 billion (or $146.3 million) line of credit for small- and medium-sized businesses and other parts of the corporate sector.

Emergency aid for the poorest

This Tuesday, the country also started to pay the emergency aid of COP 600,000 ($ 40.3). In total, about 3 million families are expected to receive assistance from the program called Ingreso Solidario in the coming months.

The identification of the population to be benefited came from Sisbén, a database of social and income transfer programs in the country, which already has 39 million Colombians registered.

Whoever has a bank account will have the money deposited. Those who do not have it will receive assistance through a digital account, which is being made possible through a partnership between telecom operators, fintechs and financial institutions: AV Villas (Cuenta Digital), Bancolombia (Nequi and Bancolombia a la Mano), Davivienda (Daviplata) and Movii (Movii).