Ecuador’s economic policy is about to change, says new Finance Minister Carlos de la Torre.
“In the last 10 years, the government played the major role in developing the country’s infrastructure, both physically ans socially,” de la Torre says. “Today, it is time for the private sector to assume the lead role, to take advantage of the revitalized infrastructure and help build a strong economy.”
De la Torre, who served as director of the Institute of Economic Research at the Catholic University of Ecuador before joining Lenin Moreno’s administration, says the government will partner with private business to increase investment and to boost productivity. “Our goal, ultimately, is to improve the lives of Ecuadorians by creating good jobs and maintaining the advances we have made in recent years.”
According to de la Torre, the first step in strengthening the private sector is to listen to their concerns. “We are beginning a series of dialogues in which we will listen to the problems that businesses face and determine what the government can do to find solutions and improve productivity.”
Businesses have complained about what they consider over-regulation and unfair taxes imposed during the last years of President Rafael Correa’s administration. Although de la Torre does not offer specifics, he agrees that taxes are too high in some cases and agrees that regulations should be reviewed on a case-by-case basis.
“We are creating a tax advisory board that will include representatives from business and government and I am sure, in some cases, taxes will be reduced or eliminated,” says de la Torre. Among taxes to be considered, he says, are import taxes and fees, luxury and consumption taxes, and a recently enacted increase in real estate capital gains tax.
De la Torre acknowledges that Ecuador faces serious challenges in restoring the economy to full health. “The country has suffered huge economic setbacks as a result of three factors: The abrupt drop in oil prices, the rapid appreciation of the U.S. dollar and the earthquake,” he says. “On the other hand, it is important to understand that we are in much better shape today, despite the recession, than we were in 1999 or 2006. We have been able to withstand the shocks. Now, it is time build and grow, and this is where we need the private sector.”
Repeating claims Moreno made during his inauguration speech, de la Torre insists that the dollar will remain Ecuador’s currency. He also insists that the so-called electronic money system created during the Correa years will not be used to create a parallel currency. “It will be entirely voluntary to those who want to use it and will be backed by dollars,” he says.
Although de la Torre says the government will work to reduce Ecuador’s national debt, officially 27% of GDP, he believes the debt level is not a crippling factor to the economy. “We want to draw it down but it is within a reasonable range and can be handled.” One of his priorities, de la Torre says, is to begin negotiations with creditors to reduce interest rates. “Our rates are too high and given our record of payments since 2007, we think we can bring these down.”
De la Torre is not yet ready to consider the return of foreign banks to Ecuador, a proposal he made while he was at Catholic University. “It could be way of increasing competition among private banks and bringing down business and consumer interest rates, and we will look at the possibility down the road.”