Correa Outlines Ecuador Response to Economic Crisis

Latin American Herald Tribune, 7 January, 2008

QUITO -- President Rafael Correa explained to a group of Ecuadorian business leaders Tuesday the measures his government plans to adopt to mitigate the impact of the global economic crisis on the Andean nation's economy.

The steps will include some restrictions on imports, relying on regional institutions for any needed financing and better tax collection, he told the gathering in Guayaquil, Ecuador's largest city and business capital.

In regard to trade, Correa said he will prohibit imports of "certain products that (should not be imported) given the situation of the Ecuadorian economy," such as perfumes, he said.

He added that "steep tariffs" will be imposed on imports of unnecessary products, specifically noting some that are made in China.

"We can't keep throwing our petroleum (earnings) or remittances from emigrants out the window," the left-leaning president said, referring to Ecuador's two leading sources of revenue.

Correa also criticized the banking sector, saying that despite profits in 2008 exceeding $350 million bankers have slammed the measures adopted by his government to regulate the financial system.

"How can they have $360 million in profits and complain so much, what is the root of the problem?," the U.S.-trained economist wondered, adding that the bankers are unhappy because "they're losing power, because they no longer have a president they can call and order around."

Other measures the government is studying to bolster the economy include the sale of assets held by the Central Bank and the Deposit Insurance Agency. They came into the hands of those institutions following the onset of a severe banking crisis in Ecuador in 1999.

But the economy minister, Diego Borja, said the measures would not include tax increases.

He also said that if the price of oil does not climb above $40 a barrel, the government may seek to borrow from institutions such as the Andean Development Corporation, Inter-American Development Bank and the Latin American Reserve Fund.

After soaring to nearly $150 a barrel last summer, oil plunged to less than $40 a barrel amid a big drop in demand due to the world economic slowdown. The U.S. benchmark crude, West Texas Intermediate, settled at $48.58 a barrel Tuesday on the New York Mercantile Exchange.

Borja also said the government will step up its plans to recover what it considers unpaid taxes. Quito is currently is in court disputes over the money with companies "that have not been paying for years" and estimates that total back taxes amount to $1.2 billion.