Experts divided on Ecuador’s economy; Some want less government control, others want more

Jan 19, 2018 | 40 comments

By Liam Higgins

President Lenin Moreno got an earful Wednesday about how he should run the national economy, with conservative and liberal economists offering vastly different strategies.

Conservative economist wants less regulation, more transparent accounting.

Meanwhile, a former vice president attacked the government’s economic policy for being a “continuation of failed Correismo” for not focusing on debt reduction.

Besides the president, Wednesday’s economic round table in Guayaquil included four members of the Forum of the Economy and Public Finance, established by Moreno after last year’s election.

University professor Diego García warned that the government is moving too quickly to deregulate the economy. “We are hearing a great deal of reviving the economy but very little about building an equitable society and protecting our most vulnerable citizens,” he said. “The focus is on money the interests of capitalists not on the people of Ecuador.”

García recommended increasing duties on imports, especially for what he considers luxury items, to protect domestic businesses and workers and increasing the IVA tax on non-essential purchases.

Socialist economist Garcia advocates for more regulation of imports and higher taxes.

He also criticized the notion that taxes are too high in Ecuador and should be reduced. “It is false that Ecuadorians have a high tax burden. Argentina taxes at an average rate of 32 percent and Colombia and Chile at 30 percent while Ecuador has a rate of only 21 percent. It is time to consider raising taxes, not reducing them.”

Conservative economist Walter Spurrier disagreed and said that regulation and an uneven taxation system have stifled economic development and said less regulation and lower taxes are essential to improving the lives of Ecuadorians. He also criticized government bookkeeping methods, saying they present a rosier picture of the national economy than actually exists.

“The Ministry of Finance continues to use public money to balance its books and to maintain a high level of public spending,” he said. “This creates a false impression that the economy is recovering when it is not. Moving public money from one account to another to be used for financing the general budget must stop if we are to have  a robust recovery.”

Spurrier added that more policy changes are needed to attract foreign investment. “There has been much talk on this point but very little action,” he said.

Although he was not part of Wednesday’s forum, former vice president Leon Roldós attacked the Moreno government Wednesday for continuing the economic policies of the Rafael Correa government and concealing the full extent of the national debt.

“We need a radical change of policy, not more of the same,” Roldós said. “When the new administration took office, it acknowledged that the debt was more than 50 percent of GDP and then it went back to accepting the deceitful numbers of Correa. If we don’t tell the truth, we are building an economy out of mud and manure that is destined to fail,” he said.

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