The Minister of Finance, Richard Martinez, assumes this Wednesday, May 16, 2018, at 12:30, the State Portfolio. The official, who for the first time reaches the public sector, was forged in the business guilds for 15 years.
Although he has not yet commented on the first decisions he will make in the Finance Portfolio, his vision of the economic management of the country can be seen in the proposals he promoted from the business sector.
These proposals were presented to the Government since July 2017 within the framework of the Productive and Tax Consultative Council. He emphasized them again this year, after President Lenin Moreno announced the presentation of an economic program last February.
In an interview with this newspaper in April 2018, Martínez said that the public debt is unsustainable and considered that it has grown at an “explosive” rate, leaving as a result “a chronic fiscal deficit”.
Due to the size of the fiscal gap, the country will have to go into debt, he acknowledged, adding that the best alternative is to seek re-profiling, paying off expensive debt with new debt under better conditions, with the help of multilateral entities.
“In order not to generate uncertainty, it requires the support and assistance of multilaterals. They can help us in the re-profiling, “he said. The ex-manager is also involved in renegotiating the debt with Chinese companies and the Government of that country.
According to this lojano economist, economic growth should not be leveraged in greater state spending, which should rather adjust. Martinez believes that the implementation of policies that imply lower production costs and alleviate the tax burden for the productive sector will lead to a greater generation of employment.
As president of the Ecuadorian Business Committee, a position he held until last Monday, he promoted a proposal to obtain USD 9 billion in four years with non-tax measures. In order to obtain these resources, Martínez promoted a referral to collect part of the USD 4,000 million in tax trials, lift the quota that the country committed to OPEC, process a law to recover resources for acts of corruption, among others.
Another of the business proposals that prompted the now Minister is to prohibit, via Law, that the resources of the Central Bank and Social Security finance the state deficit.
One of his urgent tasks will be to finalize the bill to implement the economic plan that was to be presented on April 22 by his predecessor María Elsa Viteri, who has not yet delivered. From the guilds, Martínez had questioned Viteri’s proposal to eliminate the tax credit for the Foreign Exchange Tax.
His arrival in this Portfolio generates expectations in international markets. According to a report by Credit Suisse, the change “will help calm part of the current concern of international investors with Ecuador’s external public debt.”
With this scenario, the yields of the sovereign bonds of Ecuador fell; which is positive. For example, on Monday, before the change of Minister, the rate of return of the 2028 Global Bonds stood at 10.13%, while yesterday it dropped to 9.99%.
Danilo Albán, from Analytica Investments, explains that this reduction is important because it means that if Ecuador goes to the market for new debt, it will pay less interest. Although bond prices are already rising and rates of return have fallen, it is still too early to talk about a major impact, the expert noted.
The country risk fell yesterday 32 points.
Santiago Mosquera, teacher of the USFQ, Business School, tells that yesterday he talked with investors and that they are anxious to know the team that will accompany Martinez and the measures he will take to solve problems such as the fiscal deficit and the imbalance in the balance of payments .
For Miguel Ricaurte, an economist and former representative of Chile before the IMF, although the initial message is positive for the markets, Martinez’s challenge will be to form a work team that is able “to go beyond the business agenda and to propose clear solutions “To solve the country’s main problem: the fiscal gap. “He will have to remove his entrepreneur’s hat, balance the demands of the sectors and make decisions with a technical team that does not respond to his own interests,” he said.
Professor Pablo Dávalos fears that with the change, the agenda promoted by companies will be the priority now. (I)