Business group attacks government economic plan, says it discourages investment

Oct 28, 2019 | 40 comments

Proposals to turn the economy around are headed for failure, according to an organization representing Ecuador’s largest businesses. “We were hoping for measures that would encourage investment and lead to higher employment,” says Patricio Alarcón, president of the Ecuadorian Business Committee. “What we are getting is a program that increases taxes and discourages growth.”

Ecuador Finance Minister Richard Martinez

Although the Business Committee advised Minister of Finance Richard Martínez on ways to revitalize the economy, Alarcón says most of its advice was ignored. “We were disappointed in the process and personally disappointed in Richard for not considering the point of view of the productive sector. He came from a business background but seems to have turned his back on it.”

Martínez claims reforms to labor laws, including reducing hiring requirements and contract conditions, will provide a stimulus but Alarcón disagrees. “It was assumed that the plan would promote competitiveness and development in the private sector and reduce the cost of living. Now, they tell us that this will be achieved through labor reform alone while they raise taxes, eliminating the incentive for investment.”  he said.

He adds: “The emphasis is on collection of new taxes and fees to eliminate the deficit and it will not work.”

Among the Business Committee’s chief objections to the government’s proposals are new taxes on larger businesses based on gross revenue and the elimination of tax deductions for those earning more than $100,000 a year.

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In addition, Alarcón says his organization is disappointed with the government’s handling of the fuel subsidy elimination and the subsequent capitulation to Conaie. “I don’t believe Moreno had a choice but to rescind the order but he handled it poorly from the beginning,” he says. “Eliminating subsidies is essential for restoring economic health but it must be done properly, which means notifying and working with the affected groups before an announcement is made.”

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