Ecuador's Correa Considers Price Controls for Food Staples

By Stephan Kueffner

Dec. 22 (Bloomberg) -- Ecuador's President Rafael Correa is considering price controls along with antitrust legislation to fend off increases in everyday staples such as milk and rice.

``I don't believe much in official prices, above all if one wants to control all prices, but with five or six key products it's possible,'' said Correa today in his weekly radio address.

The government also wants to offer consumers subsidized goods out of a basic basket of products, as well as free up imports of these staples, he added.

Correa, a 44-year-old economist who studied in Belgium and the U.S., said he plans to introduce an antitrust bill, which would help insure competitive pricing, as well as push banks to improve how they operate.

This week, Agriculture Minister Carlos Vallejo got dairies to roll back a five-cent price increase in the price of milk to 60 cents from 65 cents.

Argentina and Venezuela have used price controls to try to control double-digit inflation. Ecuador has the region's lowest annual inflation rate at 2.7 percent as of November.

The government also wants to reform the financial system, introducing deposit guarantees and liquidity reserves in case a bank goes bankrupt, Correa said.

``We have one of the most inefficient banking systems in the region,'' said Correa. ``It has the highest operating costs in Latin America.'' Boosting efficiency will allow them to cut interest rates, he added, without specifying a level to which he expects them to drop. ``In January, via the central bank, a cut in interest rates will be decided,'' Correa said.

Correa pledged to push ahead a tax package that legislators in the government-dominated constitutional assembly plan to vote on by Dec. 29.

The government says reform will help fight tax evasion and introduce progressive taxation, leading the 20 percent wealthiest to pay more while easing the burden on the poor and the middle class.

Other plans for legislation include eliminating per-hour work contracts and raising the minimum wage, Correa said.