Petro reforms are ready for their second ’round’ in Congress

This July 20 begins a new season at the Congress of the Republic, and also another opportunity for President Gustavo Petro you can move forward with your reform projects. In the last legislature, the Government obtained the approval of its tax reform, at the end of 2022, and also presented its reform projects to the social security system (health, pensions and labor).

(See: Key Petro reforms struggle to stay afloat.)

But the ambitious plan of the president to advance the three reforms simultaneously did not prosper. While the labor reform collapsed and will have to be presented again, the initiatives for the pension and healthcare reform did make it through their first debate, but not without some bumps in the process.

Although in principle the health reform seemed like the ‘Achilles heel’ of the Government before the Legislative, and It even cost him the breakdown of the government coalition for Petro, the great defeat of the President before Congress It came from the side of the labor reform, which did not even manage to be voted in its first debate and sank.

The initiative was widely criticized, because according to several experts, it could have adverse effects on employment due to the increase in wage costs for employers, as a result of measures such as the start of the night shift from 7:00 pm (although the original project wanted it to be froms 6:00 p.m.)or the payment of 100% of the surcharge on Sundays and holidays, to name a few aspects.

Despite the fact that the Minister of the Interior, Luis Fernando Velasco, had confirmed about a month ago that this July 20 would be Once the new labor reform has been established, the project will not land again in Congress this Thursday.

The Speaker of the House of Representatives, David Racero, assured in an interview with EL TIEMPO at the beginning of this week that the Minister of LaborGloria Inés Ramírez, told Congress that she would take a few days to “polish the project.”

(See: Analysis: what is coming for the social reforms of the Petro government).

In addition, Portfolio learned that the Ministry of Labor will wait for the boards of directors to be formed in Congress -task that can even take a couple of weeks- to file the project again, and this week the ministry had technical tables to adjust the reform, with changes that would focus on the work of the rural sector.

Although several unions had pointed out as an “opportunity” for improvement the fact that the project sank, businessmen still demand greater dialogue with the Government.

“Fenalco has asked us to sit down with the Government to write the labor reform that Colombia needs, but unfortunately the Government has not invited us or convened the labor agreement commission, as we have repeatedly requested”, assured Jaime Alberto Cabal, president of the merchants’ union.

In addition, Bruce Mac Master, president of Andi, assured several days ago that the union had not received an invitation from the portfolio. “We hope that the Ministry convenes, so that it listens to all the positions, we do not make the mistakes that the previous reform brought and we do not forget the unemployed or the informal. It is an opportunity to work together “said.

The other two bills to reform the social security system, pension and labor, must continue their transit through the Legislative, with the second of four debates.

These two projects have also received criticism from various quarters, and neither
The pension reform received the approval of Commission VII of the Senate of the Republic in June, and is pending a vote by the full Senate before going to the Chamber.

In its first debate, the project saw a series of changes compared to the project filed by the Government.

The most significant has to do with the transition regime to the new system. The text approved in the first debate establishes that women who have a minimum of 750 and men who have at least 900 weeks of contributions, and who are less than 10 years from retiring, will continue to apply the rules of Law 100 of 1993 and they can take advantage of a ‘pension window’ to change the regime.

The original project aimed at 1,000 weeks in both cases.

(See: Petro reforms: the path that awaits them in the second semester).

Another important adjustment that occurred in the first debate is in the minimum age to access the solidarity and semi-contributory pillars. Previously, these two pillars required that all beneficiaries be over 65 years of age, in the first debate it was approved that the age for women be 60.

However, The Anif economic studies center raised another alert and assured that with the modifications that the project saw in the first debatethe pension liability would increase even more than what was estimated in the original project.

“It is in the transition and in the pension window where the most important increase in the fiscal cost is observed. Under the new transition, the cost rises to 20.1% of GDP. This is 3.3 times higher than the previous cost and supposes a strong fiscal pressure for the Government”, said Anif.

In the case of health reformthe project achieved approval in the first debate of Commission VII of the House of Representativesbut upon reaching the plenary session of this legislative body, the process stopped.

The text became the bone of contention between the President and various parties, and was even a reason for the break in the coalition with the liberals, conservatives and ‘la U’, and for the president to change half of his cabinet , including the Minister of Health, Carolina Corcho.

Besides, the possibility of a turtle operation in payments by the Executive has been raised, to get the project approved in this legislature.

According to the political analyst, Carlos Arias, “There is a turtle plan in the system and therefore a commission has been created to investigate. If that is verified, there would be a coercion for them to approve it in this legislature.

In turn, the former Minister of Health, Augusto Galán, explained that there is uncertainty in the face of prevention and doubt about the accounts of historical budgets. “These are attentions from 2021, 2022 and part of 2023 and great distrust is perceived on the part of the Government ”, Galan said.

For the former minister, it is necessary to see how the reform evolves. “The project as it is and with everything that has been added and the way in which it has been processed makes it particularly inconvenient as it is defined,” assured.

The fiscal impact of pension and health projectsas well as the economic effect of the labor reform, is one of the points that has been most questioned in relation to the reform initiatives of the Government.

In that sense, There are several estimates that have been presented, on time, in relation to the health and pension projects and that differ, even between them.

The Treasury, for example, assured in recent months that the pension reform project can reduce the present value of the deficits of the contributory and semi-contributory pillars of the system by between 7 and 12 percentage points of GDP, whose net present value by 2070 of the deficits it could be reduced from 67.5% (in a scenario without reform), to 55.2% of GDP.

(See: The extra sessions will not include reforms but will include budget additions).

In the case of health reform, Government accounts indicated that only in 2024 the fiscal expenses of the project would amount to $9.04 trillion. Of these, $5.49 trillion correspond to direct expenses, such as the Primary Health Care Centers (CAP), the strengthening of the Public Network, infrastructure expenses, scholarships, information system and hospital sanitation.

However, the Government’s estimates not only differ from that of other experts such as Fedesarrollo or Anif, but they were also made based on the original projects, and do not incorporate the changes approved in the first debate of each project, so there is no estimate of its current potential costs.

From the Autonomous Committee of the Fiscal Rule (Carf), for example, it was estimated that, in the short term, these two reforms may represent a greater need for annual spending of more than 0.7% of GDP, with 0.4 percentage points on the health side and an additional 0.3 points on the pension system.

In relation to the labor reform, a group of researchers from Banco de la República developed a report in which the main conclusion was that, due to the increase in salary costs around the reform would cut around 450,000 formal jobs in a horizon between three and four years.

The study estimated that in the intermediate impact scenario, salary costs would increase by 6.73%, and if compensation costs are considered, the increase would be an additional 1.59%.

However, since the publication of the study, the Government has already agreed to some changes on issues such as night shifts, that it would start at 7:00 pm and not 6:00 pm as initially intended, and in the gradual incorporation of the new cost of surcharges for holidays and Sundays in the coming years.

(See: Health reform: what’s next for the Government’s bill).

Besides Of the reform agenda that the Government will take to the Legislature, another project that should be discussed this semester is the General Budget of the Nation (PGN). by 2024, and it will be Commissions III and IV of the Senate and Chamber, the economic commissions, in charge of processing it.

To meet the deadlines stipulated by law, it is expected that in the coming weeks the Ministry of Finance will file the project that defines the amounts for next year.

In April the draft of the PGN 2024 was presented, and According to the preliminary figures that the Treasury has already delivered, the amount of necessary resources that the Government projects for next year amounts to $435 billion, 7.2% more than the amount of $405.6 trillion in the budget for this 2023, without counting the budget addition of $16.9 trillion for this year that was approved in June; and 2.95% higher than the final amount of $422.5 trillion reached by the PGN of 2023 with the addition.

According to the draft, by 2024 resources of $103.1 trillion would be secured to cover public debt service, and among the sectors that would have more resources available for next year would be educationwith about $60.4 billion, followed by health, with $54.6 billion, and defense, with $52 billion.

In accordance with the deadlines defined for the different budget stages, the final project of the General Budget of the Nation for 2024 must be approved before September 15Therefore, the Government will have to calibrate its support in Congress, taking into account the spending needs for next year.

In this legislature, the Government will add another challenge to the legislative initiatives: a draft of education reform. According to the Ministry of Education, it will present the bill for public discussion to “Colombians” on July 20, also inviting actors from the educational community to dialogue spaces.

The objective is to modify Law 30 of 1992, which is the foundation of higher education in Colombia. According to Minister Aurora Vergara, the bases of the project will be to increase the financing of higher education institutions.

It also seeks to increase the coverage and the free policy, as well as dignify the work of teachers, strengthen the educational infrastructure and bring higher education to the territories that most need it.

“This reform goes from a vision of service education to the vision that it is a fundamental right,” said Vergara.

LAURA LUCIA BECERRA ELEJALDE
Journalist Portfolio