A turn of 180 degrees
Richard Martinez, a young economist who has been linked to the productive sector through the Chamber of Industries and the Ecuadorian Productive Committee, is replacing Maria Elsa Viteri, who was in office only for two months. Viteri had presented the economic program for this and the next three years but failed last Friday to submit to the Assembly the necessary economic bills to make this program viable. Also, Viteri chose not to recognize the validity of the Comptroller’s debt report or follow its recommendations, and she insisted that the debt-to-GDP ceiling had not been exceeded.
Therefore, Martinez has the titanic task of examining the sustainability of the program (which, as presented by the former minister, is neither clear nor well sustained), reviewing and submitting the economic bills urgently for approval by the Assembly, and proposing a compromised but viable solution to the practical and legal problem of public financing. Martinez and the rest of members of the Chambers of Industries and Commerce held a recent meeting with Viteri regarding precisely the content of the above-mentioned bills and made their disagreement explicit regarding taxes and import controls, including the infamous recently created customs´ fee. He has also been a harsh critic of the high public expenditure and deficit, which in his opinion, has led to unsustainable levels of debt.
In this context, the new Minister might face an impossible trilogy. He cannot reduce the deficit by eliminating or reducing taxes, he cannot finance the budget without further public financing, and he cannot dramatically reduce current and capital expenditure without collapsing the economy or confronting President Moreno´s political stance. Thus, the new Minister urgently needs to receive clear and accurate information from mid-level officers of the Ministry of Finance regarding the cash-flow situation for the next 60 days. Confronted with this harsh reality, we think he will realize the unavoidable need to take the bull by the horns and make quick and assertive decisions that are unlikely to satisfy all sectors.
So far, Minister Martinez has taken a very positive approach. In his first public address to the nation, he stressed the need for transparency in the fiscal and economic situation, starting with a thorough assessment that results in the right solutions. He also recognized the need for further public financing and declared the unquestionable intent of the government to honor its current obligations. Finally, he stated his intention to follow the recommendations of the Comptroller´s report on debt and to continue with the financing program under legal parameters.
We believe this 180º turn taken by President Moreno goes in the right direction to start solving Ecuador’s fiscal and economic conundrum.
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