Ecuador will try in Davos to shore up the reliability after the wave of protests



Ecuador attends the Davos Forum after a socially and economically turbulent year because of the need to reorder its fiscal and tax structure, and with the intention of moving forward on a path that reduces dependence on the public sector and attracts private investment.

The trip of President Lenín Moreno has coincided with the publication of the first data of the Central Bank on the damages and losses of the social protests of October, which raised to about 821 million dollars: 120.07 million in direct damages and 701.62 millions in losses due to "unearned income".

Damages, it is specified in a report made with the support of the World Bank, which meant a negative impact on the national GDP, which of an expected growth of 0.1 or 0.2 percent would now turn into a negative sign, very small but negative.

Even so, the Minister of Finance and Economy, Richard Martínez, is convinced that his country goes to Davos in a "good position", mostly because "the international community finally highlights the effort being made by the Government and the country in as a whole, to take a structural turn. "

"The important thing is the trend, which is a reduction trend and this year we intend to continue with this optimization process," insists Efe.

It refers to the changes that the Executive has introduced in recent months, and that include from the reduction of public spending to fiscal and legal reforms, through the restructuring of institutions, monetization of public assets and policies to encourage investment and develop the private sector.

"We have raised the development horizon we want: a horizon open to private investment, with an economy less dependent on public spending that was an already unsustainable model," he says.

Martínez, as well as the Foreign Minister, José Valencia, will accompany the president in Davos in the presentation of an Ecuador that tries to break with models of the past, when the high price of oil encouraged all economic activity.

But the high debt of the inherited country and the general slowdown of the economy worldwide, weigh on Ecuador's finances, which in response to international assistance (more than 10.2 billion dollars from multinational organizations) had to go into a process of cuts and reforms.

In October, the elimination of gasoline subsidies - after which it was repealed - generated a massive wave of protests that left, in addition to significant damage, a dozen deaths and more than 1,500 injured.

And they forced the Executive to amend their plans to generate more income - through taxation - and less expense - through layoffs and elimination of certain subsidies.

"Certainly, the protests are a component that is no stranger to the analysis of investors," said Martinez, although it highlights that the recent issuance of a social bond for 400 million dollars, with international support, still expresses confidence in the Government from Moreno

"It shows that the international community, both multinationals and investors, still see in Ecuador a country where they can invest with a guarantee that these commitments will be honored," he said.

However, the measures adopted by the Executive in 2019 have not been sufficient for the private sector, for which "the Government has a merely" fiscal "objective, in the words of Patricio Alarcón, president of the Chamber of Commerce of Quito (CCQ ).

It reminds Efe of the new taxes introduced and ensures that they do not seek to "promote private enterprise or investment," that is, it is an economic model that "has not changed in the last twelve years" and that "does not understand the problem of business sector".

The minister warns in this regard that the Government will continue to work in 2020 "to focus on a" tax and benefits scheme that no longer benefits "a group of the population that should not be benefiting", "people with high purchasing power" .

"We also see it from the point of view of economic efficiency, also from the environmental point of view and from the point of view of justice and social equity," Martínez is justified.

He warns from a sense of commitment "with transparency" that "the figures do not lie" and "the problem of Ecuador is profound".

"We have serious weaknesses in the fiscal part, but when you see the trends of stabilization and salary mass, that is what the market greatly values," he points out, stressing that "increasing the coverage of the social population is also well valued by the international community and by investors. "

Beyond propping up the image of his country before multinational organizations, Ecuador brings to Davos "a portfolio of the main assets that it seeks to monetize", for which its leaders will hold meetings with investors in the hydroelectric, financial, oil and communications fields.

After being absent for a decade, this will be the second consecutive time that the country goes to the World Economic Forum to publicize a new opening to the world and strengthen "the image of a nation committed to sustainable social development and, the result of legal certainty , attract the interest of companies to invest in Ecuador. "

Elias L. Benarroch

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