Interview to Pablo Celi, Comptroller General of the State
What was the objective of making a special examination of the country’s public debt?
It was to analyze the legality, the sources and uses of the debt. The audit seeks to understand, transparently and fully disclose the debt situation between 2012 and May 24, 2017.
Why this period?
Because the Comptroller has, by law, seven years to carry out control actions.
What are the key revelations of the test?
They focus on six topics: the regulations developed in the debt process; the declaration of reservation of contracts, agreements and debt operations; the implications of Decree 1218 for the calculation of indebtedness; the agreement between Finanzas and Petroecuador; the oil presales, and the state of the documentation of the indebtedness.
Why is regulation a relevant issue?
There was a set of legal and administrative decisions that altered the registration and calculation of public debt. With several regulations and Decree 1218 a whole process was generated that relaxed the control over the debt.
How is that evident?
In 2010, with the issuance of the Organic Code of Planning and Finance, several rules of fiscal prudence were eliminated. Before, for example, the pronouncement of autonomous entities such as the Central Bank or the Attorney General was needed, but that was eliminated. With the Code, debt decisions were concentrated in the Debt and Finance Committee. And its three members depend exclusively on the Executive. There was a whole scaffolding of adjustments to regulations that generated a discretional management of the concept of the debt and its components. And that made the values that register as debt discretionary.
What problems were generated for having declared reserved the doubt contracts?
The secrecy and reserved declaration included not only contracts, but administrative acts, agreements and other documents on debt operations. That was done with three ministerial resolutions of 2010, violating the Code itself.
What was violated?
To declare secrecy, it must be argued that in the negotiation process there could be a loss for the country. But the reserve was extended until the debt operation was closed, that is, when the total of the obligations had been paid.
What did that mean?
First, public information was withheld from the public. And second, a restriction was created to audit those operations, since the Comptroller could only act at the end, when all the obligations have been paid. The Law gives the Comptroller seven years to do the control and the credits were contracted to more than 7 years.
What observations do you have about Decree 1218?
It was signed in 2016, just when the Debt / GDP ratio was around 39%, close to the legal limit of 40%. With the Decree, USD 12,400 million of internal debt were eliminated from the calculation and the Debt / GDP ratio fell to 27%. It was an artificial reduction that caused a distortion on the public debt and opened an additional space of indebtedness, without complying with Article 124 of the Code.
What went wrong?
The obligation to request authorization from the National Assembly to contract more debt and submit a fiscal strengthening and sustainability plan.
The government justified its decision based on an IMF manual. The IMF does not legally govern the indebtedness of the country and is not the entity in charge of auditing the public debt. That’s what the Comptroller’s Office is for.
The principle of consolidating the total indebtedness of the public sector had to be maintained, but several things were left out.
Oil presales, contingent liabilities, several tranches of domestic debt, floating debt. In addition, 2 735 entities had to enter the consolidation process, but only 2 565 did. There were 170 that did not present financial statements, including IESS, Tame or Petroecuador. The Ministry of Finance did not provide information on contingent liabilities and floating debt, whose values cannot be determined and should be subject to other audit examinations.
If so, how was the state liabilities determined in USD 65.7 billion?
The State recognizes this amount as total liabilities. And until December 31, 2016, it recognized USD 50 500 million of debt. There are close to 15 billion that were not considered public debt. For the Comptroller’s Office, oil pre-sales, contingent liabilities, internal debt, floating debt and entities that did not enter the consolidation process are part of the debt and should be considered.
If all this is included, how much does the country’s public debt amount to?
We cannot determine it yet, because there is no information on several items. The report of the Comptroller, beyond giving a debt figure, is raising the existence of a set of items that were not considered in the calculation and, therefore, calls into question the exact amount of the debt.
What role did Petroecuador play?
The oil company hired debt that was not for its operation, but to provide liquidity to the fiscal fund. That did not have any legal backing.
Since 2008, Pablo Celi has held various positions in the Comptroller General of the State, but in different periods. In 2012 he was appointed representative of Ecuador to the Center for Strategic Defense Studies of Unasur, in Buenos Aires, Argentina. Since 2014, Celi was the General Sub-Controller of the State; Now he is the surrogate comptroller. (I)