The effects of new Ecuadorian import taxes and quotas will begin to hit home by early February according to the director of the National Association of Merchandisers. “Get ready to feel the pain,” Juan Maldonado warns.
Ecuador began limiting imports and imposing higher taxes on 630 products January 15. The government claims that the move is aimed at equalizing the trade balance and slowing the outflow of foreign currency due to the drop international oil prices.
Although Maldonado’s organization was involved in negotiations that set tax rates and imposed import restrictions, he questions whether the measures will have the desired affect. “We understand the economic problems they are trying to solve but when governments take these kind of actions, the law of unintended consequences often comes in to play. I expect to see a lot more activity on the black market, especially near the borders.”
Among imports that will see taxes rise 30% to 35% are perfumes, alcoholic beverages, biscuits, toys, disposable diapers, pencils, notebooks, markers, cosmetics, cellular phones, shoes, clothing and car parts.
Products affected by import restrictions include food items, automobiles, appliances and electronic equipment. In most categories, imports will be limited to 65% or 70% of previous levels.
According to a Cuenca store manager, it will take several weeks before the full impact of new taxes and quotas are felt. "We have not yet raised the price of imported goods such as chocolates, shoes, textiles, because we still have merchandise in stock. The situation will change, of course, when new shipments come in and begin to show up on the shelves,” said Manuel Ortega, manager of the Tia store, at Gran Colombia and Borrero.
Ortega and other store managers noted that the import limitations will have the same affect as higher taxes, depending on the demand for specific products.