Government boosts spending to counteract effects of a slowing economy; offers business investment incentives and says it will support the dollar

Oct 5, 2015 | 4 comments

Reeling from lower oil prices, Ecuador’s government pumped a record $3.8 billion into public spending during the second quarter of 2015, most of it for infrastructure projects. It also unveiled incentives it hopes will spur investment by the private sector.

Finance Minister Patricio Rivera

Finance Minister Patricio Rivera

During a press conference last Wednesday, Ecuador Central Bank president Diego Martínez admitted that the country faces difficult economic time. “We are working on solutions that will keep the economy healthy while, at the same time, we must face the reality that we have limited options for increasing the national debt.”

For the first time during the Rafael Correa presidency, the government is offering businesses generous incentives to join a private-public partnership to fund infrastructure projects as well as to increase investment in private spending. Among the incentives are a 10-year exemption on corporate income tax and elimination of the 5% currency exit tax. According to finance minister Patricio Rivera, the government is taking these steps to avoid a recession. “We need to help of the private sector, especially for investment in public projects that help everyone,” he said.

Rivera acknowledged the country faces unprecedented challenges. “We have low oil prices, a strong dollar and the collapse of the Chinese markets. At the same time, we face an El Niño and two active volcanoes. These are very unusual circumstances and very unusual times.”

Rivera also said that the government is taking measures to protect the dollar. “Although the strong dollar is causing trouble, it is also our stability,” he said. “We will continue to enforce tariff rules and fight smuggling to protect our businesses and to keep dollars in Ecuador. Any talk of abandoning the dollar at this time is irresponsible.”