Part 3 - Economic Reforms: Capital Over People
On June 21, at the request of the executive branch, Ecuador’s National Assembly approved the Productive Development Law, a law rejected by economists and activists for threatening social services and violating the 2008 Constitution.
The law prohibits the approval of the country's annual budget with a primary deficit. A provision that according to Ecuadorean economist Andres Arauz, who worked in Ecuador’s planning agency and the Central Bank will adversely affect social spending.
“Every year there must be more revenue (taxes) than expenditures (education, health, security)... There are only two ways to make the numbers match. You either increase revenue or reduce spending,” Arauz explained.
However, the same law includes tax reductions and exemptions for foreign investors for up to 15 years, as well as exemptions for all new investments on paying the tax on currency sent abroad.
Economists have warned that eliminating the second tax could gravely affect Ecuador’s dollarized economy by allowing the extraction of large sums of money.
The law also includes debt forgiveness for private companies who have failed to pay their share of taxes to Ecuador’s Internal Revenues Service. Economists estimate the country is giving up at least US$2.2 billion.
Instead of increasing public revenue to sustain social spending, the law corners the state forcing it to give up revenue and cut public spending.
In adherence to International Monetary Fund (IMF) recommendations, one of the law’s articles bans Central Bank loans to the Finance Ministry, which helped the former government to cope with lack of liquidity without affecting social spending or halting large infrastructure projects.
Sociologist Jonathan Baez has described these decisions as “self-sabotage with the aim to access multilateral loans as the only possibility for financing.” During Pence's visit, Moreno thanked the U.S. VP for his “willingness to support Ecuador’s financial needs by strengthening dialogue with multilateral organizations.”
Finally, the law brings back the unconstitutional Bilateral Investment Treaties (BIT), which allow foreign investors to take legal disputes to international arbitration bypassing the country’s courts.
Article 422 of Ecuador’s 2008 Constitution prohibits “treaties or international instruments in which the state relinquishes sovereign jurisdiction to international arbitration agencies.”
Moreno presented these reforms as inevitable to avert an alleged economic crisis. However, economic indicators such as rising oil prices and a sustained economic growth of around three percent contradict this narrative of inevitability.
The aim is to make Ecuador attractive for investments, disregarding the cost to national finances and to the people who rely on the state’s social services. It’s a mad race to the bottom all over again.
In a recent interview with David Suarez, spokesperson for the Center for Economic and Social Rights (CEDES for its Spanish acronym) explained that “austerity must be understood in its ideological, political sense as spending cuts for the people and advantages or subsidies to private capital.”
In an ongoing operation, the US imperialist hawks seek to wipe out the last Leftist governments in Latin America
Ecuador and Julian Assange in great danger as traitor Moreno is about to throw them into the hands of the US empire