Why inflation increases the gap between rich and poor – Sectors – Economy


Colombia accumulates the highest inflation of this century. In this context, financial aid can be perceived as a quick fix to a lack of liquidity; however, this urgency can make us incur risks that further complicate our situation. Carlos Ramos Juárez, professor of the Master’s Degree in Financial and Banking Advice and the Master’s Degree in Financial Risk Management from the International University of La Rioja (Unir), spoke with EL TIEMPO about high inflation.

(Also read: How to handle the slowdown and avoid falling into recession)

How do you interpret inflation in Colombia? What are the real causes?

Carlos Ramos Juárez, professor of the Master’s Degree in Financial Advice at the International University of La Rioja (Unir).


Time / Courteous

The interannual variation rate in Colombia has been, up to October, 12.53 percent. The prices of food and non-alcoholic beverages are noteworthy with an interannual rate of 27 percent, compared to the decrease in others such as education.

There are several causes: the increase in the cost of production factors, the increase in demand, the currency depreciation and expectations, because if people expect prices to rise, they may be more willing to pay higher prices now, which may contribute to higher prices.

(You may also be interested in: Why economists believe that inflation will begin to decline in 2023)

A fact to take into account is that as inflation rises, the differences in income between socioeconomic groups increase, and more so when it has been focused on basic necessities, such as food and non-alcoholic beverages. Colombia is not the only country facing a large-scale inflationary phenomenon. Brazil, Chile and Peru have also registered historically high figures.

Is there a shortage of goods or excess demand?

There may be some shortage of goods or excess demand in Colombia that affects prices, but it is important to note that these factors may affect prices temporarily and will not contribute to a sustained increase in inflation. As I said, there may be other factors, such as the increase in the cost of production factors, the increase in the exchange rate, inflationary expectations and expansionary monetary policies. Economic measures have already been taken, such as raising the interest rate.

Do you think that the inflation data reflects dark income such as drug trafficking, which puts pressure on prices?

It is unlikely that this type of income will have a significant impact on the inflation data. Those revenues may have some impact on the prices of certain individual goods and services, such as in the illegal drug market.

Can financial aid generate more resources to spend and, therefore, higher inflation?

They can contribute to inflation in certain circumstances. If these aids are used to increase the consumption of goods and services, they can contribute to an increase in demand and, therefore, to an increase in the prices of goods and services. However, it is important to note that the impact of financial aid on the explosion depends on several factors: the amount of financial aid available, the elasticity of supply and demand for goods and services, and consumer inflation expectations. In addition, it is important to take into account the other factors that we have previously mentioned, such as the increase in the cost of production factors, the increase in the level of demand, the increase in the exchange rate and monetary policies.

In such situations, families resort to microcredits and other debts. What do you think about this?

Debts can be a useful tool to help families in emergency situations or support the development of small businesses. However, it is important to note that taking on debt also carries certain risks and responsibilities.

Families must ensure that they can meet these debt payments in a responsible and sustainable manner. Otherwise, they may face financial problems and difficulties in meeting their credit obligations. Therefore, it is important that they carefully assess whether it is the best option, and that they seek financial advice if they are having difficulty dealing with their debts.

They should also keep in mind that there are other ways to get financial help, such as government or non-profit donations, which may be more appropriate for some families in certain circumstances.

What tips do you offer for handling this situation?

Compare different options and choose the one that offers the lowest interest rate and the most favorable conditions in the case of repayment. Read and understand the terms and conditions, assess whether they can afford the payments, consider other forms of financial assistance, and seek advice.

You may also like...