LatinFinance - March/April 2015 - Supplement - 4

Economy
"With an exchange rate, if the
currency depreciates, imports become
more expensive and exports become
cheaper. We don't have that exchange
rate, so we have to use, for example,
commercial economic policies: tariffs to
make imports more expensive, and that
generate ﬁscal revenues with which we
can support exports."
The government announced special
tariffs on imports from Colombia and
Peru in January. They ended in February
amid complaints from the Andean
Community trade bloc, but the state
plans to unveil a new tariff policy that
will apply to all imports.

Come in
As part of its expansion away from
oil dependence, Ecuador is upping
its tourism proﬁle. The Ministry of
Tourism's annual budget has grown
exponentially, from $6 million in 2006
to $90 million this year. A chunk of
that went to capture attention in North
America with an ad played during the
heavily watched 2015 Super Bowl. The
spot encouraged viewers to discover a
country "like nowhere else".
Also, organizations including AARP,
Forbes, and International Living
magazine have put Ecuador at the top
of their lists of overseas retirement
havens for US expats.
Correa is similarly effusive when
discussing investment in Ecuador.

Correa says the country would
consider such a transaction again if
the need arises. "We don't rule out
participating again this year," he says.
"Right now we don't need to - the
budget is covered. That includes the
maturity of the 2015 bonds."
State-owned companies, including
two oil companies and a power utility,
may also consider bond sales.

Long-term view
Some believe that Ecuador's ﬁscal
deﬁcit will shoot past the government's
target of 5% this year. "Our position
is that the deﬁcit this year will be of
6.9% of GDP, and it's going to be
Prioritizing spending
higher, not only because of lower
Based on the projected fall in export
revenues, but because the government
revenues,
will not be able
the president
to secure enough
announced a $1.4
ﬁnancing and will
Ecuador - Fast Facts
billion budget
have no choice
cut for 2015 -
but to further
Ecuador has a population of 15.74 million
equal to 1.4% of
cut spending,"
GDP in 2013 was $94.47 billion
GDP. Observers
says Santiago
Per capital GDP in purchasing power parity terms was $13,958 in 2013
applauded the
Mosquera, head
move for its
of research at
Inﬂation was 3.67% in 2014
foresight. It
Analytica.
Source: World Bank, National Statistics and Census Institute
came, however,
Correa admits
at the expense of
the ﬁscal deﬁcit is
Correa's own belief in the importance
"a little high," but is set to diminish in
"Welcome! To all parts of the country,"
of a counter-cyclical ﬁscal policy, he tells
the years ahead, he says.
he exclaims. "We have clear rules of
LatinFinance.
"Before the oil price fell, we told the
the game, a sound economy, an honest
The budget cuts focus on capital
Ecuadorian people that it was going to
government, and above all a surfeit
investment that would end up off
be a difﬁcult year. Why? Because we
of proﬁtable projects. So welcome,
shore. "We've prioritized public
are ﬁnishing strategic projects that will
investment!"
spending that stays in the country,
change the history of the country."
Correa cautions that foreign
and that makes the economy more
But the payoff is near, Correa says.
investments should also make sense
dynamic," President Correa says.
Eight new hydroelectric plants will
for the country itself - he has no
He explains: "It could be for an
double Ecuador's energy production
time for reckless proﬁteering. But
important project, like a hydroelectric
capacity, making the country a net
options for investment are broad, he
plant. But if the $500 million that I
exporter of power and ending the
insists. Beyond tourism, an obvious
need to spend on the plant goes to
import of subsidized fuels.
opportunity for investment, he says, is
turbines that I have to import, this is
Savings in the energy bill will top $1
agriculture.
not the right moment to do that."
billion annually. That is set to trim the
"Real investors, real business people
Correa says the country does not
deﬁcit to 3% next year, 1% in 2017,
- even more, the innovative business
plan further cuts, although analysts say
and balance the budget from 2018.
people - are more than welcome."
they may be necessary.
Those targets may slip a little given the
Meanwhile, Ecuador may directly
Alberto Acosta, chief editor with
international context, says Correa. But
tap international portfolio investors
private consulting ﬁrm Spurrier Group,
the trend will remain.
this year. It has ﬁnancing agreements
says the only way Ecuador is going to
"We had already planned to have a
in place with other countries and
grow near the government target is if it
slightly high deﬁcit, but for strategic
multilateral lenders, and it could also
secures all the "ﬁnancing required for
projects," he says. "So it's perfectly
return to the bond market after a
2015. But it is going to be hard for this
manageable. The problem is not ﬁscal,
successful $2 billion transaction last
to happen."
it's external." LF
June.

4 A Supplement to LatinFinance - March/April 2015
LatinFinance - March/April 2015 - Supplement

Table of Contents for the Digital Edition of LatinFinance - March/April 2015 - Supplement
