The correct path to recovery

ECUADOR - Forecast 19 Jul 2021 by Magdalena Barreiro

The first 150 days of President Lasso’s administration have been characterized by economic openness with sensible protection of Ecuadorian producers; transparency, efficiency, and investment attraction for the oil sector; recovery and improvement of domestic productivity; hard work to continue with the IMF program and revise it according to the new political vision and reality; and an aggressive program of vaccination.

The cabinet members led by Minister of Production Julio Jose Prado are working actively to help Ecuador come down from the shameful place (129 among 190 countries) it occupies when analyzing factors such as difficulty in starting a new business, dealing with construction permits, trading across borders, and enforcing contracts or resolving insolvency. The Ministry of Finance is working to design a tax reform that can be submitted to the Assembly by year-end.

On another front, the Central Bank and the Financial Board are working to set up a more competitive and technical methodology for interest rates. Hopefully, this effort will achieve President Lasso's objective of lowering interest rates and increasing access to private lending. Regarding public credit, Lasso expects to negotiate credit lines with multilateral institutions to provide cheaper credit with longer maturities to non-prime businesses and agriculture.

In addition, looking to the long term, the government has defined its stated policy on hydrocarbons, with ambitious but achievable goals. It intends to completely reformulate the rules to convince private capital to make huge investments in this basic sector, to which end it will make transparent tenders to delegate to private companies both the exploitation of fields currently managed by Petroecuador as well as other fields, in order to increase daily production to one million barrels.

We are looking forward to seeing similar policies applied to the mining sector, where Ecuador has a promising future. We also believe that attracting FDI to sectors other than oil and mining, for example agriculture, will be critical for continuous growth and job creation.

In the meanwhile, the vaccination campaign – the gateway for economic openness and recovery – has gained momentum, with a record number of people vaccinated in the past week. Thus, Ecuador, which in April last year was one of the countries hardest hit in the world by the pandemic, now is Number One in vaccine doses administered per 100 people.

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