Moreno faces challenge of squaring economic reality with campaign promises

Apr 27, 2017 | 0 comments

Less than two months before he takes office, President-elect Lenin Moreno and his advisors are focusing on how to cover the costs of the new government. In particular, they grapple with how to make good on promises that candidate Moreno during the campaign.

Moreno says policy changes are coming.

Moreno promised to build more hospitals, universities, technical training centers, roads, and increase payments to the poorest citizens. He also promised to extend financial security to vulnerable groups by expanding enrollment in the country’s social security system.

At the same time, he has told business groups that he will examine taxes with the intention of rolling back those that discourage innovation and new hiring. He claims that small businesses, especially, have been treated unfairly by the Correa government and promises incentives to promote growth.

Moreno has also promised to allow the additional 2% VAT tax, applied last year to help with earthquake recovery, to expire in June.

Moreno acknowledges he faces a tall order. In post-election speeches, he has acknowledged that Ecuador remains mired in recession despite claims by Correa and the Central Bank that things are improving. “These are difficult times and we must be honest about it,” he told a group of small business owners recently. “We must be realistic and have a plan and the resolve to improve the economic climate.”

According to Moreno, the government will need to extend its borrowing to bridge the gap between the current difficulties and what he calls a “healthy revival.” Although he says he will not roll back social programs, his government will focus on investment in the private sector. “This has been neglected and we cannot afford to neglect it any longer,” he says.

He acknowledges that, in some cases, public sector spending is wasted without a strong private economy. “I stand firmly behind the government’s commitment to provide a free university education to all qualified students, but today many of those who graduate cannot find work that corresponds to their training” he says. “We need a strong and growing private sector to provide professional jobs.”

Economist and journalist Alberto Acosta-Burneo says Moreno enters the presidency at an extremely difficult time. “He inherits a government with unbalanced accounts and a high annual deficit but I believe he understands that it is time for fundamental change and that the focus needs to shift from building a massive state apparatus to encouraging the private sector to be a partner in improving the lives of Ecuadorians.”

Adds Acosta-Burneo: “From what I see, Moreno understands that policy changes must come and come quickly. We will soon see if this happens.”


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