When one considers the breadth and scope of infrastructure progress in Ecuador (covered in a separate report), under the President Correa Administration, it is truly, mind-boggling.\u00a0 Progress jammed into 5 years, unprecedented in the previous 50 years combined!\u00a0 It is impossible to look at this staggering success and not beg the question, \u201cHow?\u201d\u00a0 Exactly where did President Correa find the largesse for the largest public works investment in that nation\u2019s history?\u00a0 What factors created this road to economic prosperity ?\u00a0 The answers to those questions are both intriguing and diverse.<\/p>\n
At the top of the list, one cannot ignore the strong economic impact of ever rising oil prices.\u00a0 Some write this off to \u201cdumb luck\u201d on the part of Correa.\u00a0 No doubt that the oil market events were fortuitous, but it is what Correa did with the revenue that was the defining moment.\u00a0 This is not Ecuador\u2019s first oil bonanza and, yet, other administrations squandered much of it, with little to show in terms of benefiting the Ecuadorian populace, or stimulating economic growth.\u00a0 That Correa carefully earmarked oil revenues for targeted public works projects, which enhanced the nation\u2019s infrastructure, created skilled and unskilled labor jobs and helped other economic sectors improve their efficiencies, such as the agricultural sector being able to bring products to market more quickly and cost-effectively due to an improved road\/bridge network, is what defined the success of economic program backed by the oil revenue funds.\u00a0 At the end of the day, possibly for the first time in the history of Ecuador, the oil revenue largesse was shared with the public at large and not deposited in either the pockets of local politicos or gifted to exorbitant \u201cloan-shark level\u201d debt payments, to foreign governments, which served only to enslave the nation of Ecuador in a never-ending debt spiral.<\/p>\n
This latter point takes center stage, when one considers another key component to the recent economic success of Ecuador.\u00a0 When President Correa took office, not only was Ecuador heavily indebted, but the terms of that debt were wholly inconsistent with current market realities.\u00a0 In what amounted to one of the greatest \u201cfeats of magic\u201d by perhaps any global leader, President Correa oversaw a now you see them…now you don\u2019t…now you see them, again…bond debt miracle.<\/p>\n
Inheriting a bond debt crisis, literally weighing down any hope of Ecuador\u2019s economic expansion and sucking up much of the substantial revenue from oil, Correa faced a grim choice: follow the lead of the USA and much of Western Europe, in denying the economic crisis or swallow the very bitter pill of taking decisive action.\u00a0 Fortunately, for Ecuador, its citizens and subsequent investors in this nation, Correa opted for \u201caction\u201d, even if the action has been heavily criticized.<\/p>\n
Correa had Ecuador default on its bond debt.\u00a0 The national equivalent of having the head of household, default on credit card payments, filing bankruptcy, in an effort to reorganize finances.\u00a0 The move was lambasted in the Wester Press, where assurances were given that Ecuador would be hard-pressed to find future funding in the bond markets for decades to come.\u00a0 A mere 12-months later, President Correa had used the private sector to recapitalize his bond debt, at significantly more favorable current interest rates, freeing up considerable Ecuadorian economic capital for investment.\u00a0 Better a momentary black-eye, than succumbing to a knock-out sucker punch.\u00a0 This de facto, if unauthorized, debt restructuring was an economic boon to Ecuador, breaking the chains of endless financial servitude, at the hands of corrupt prior political leaders.\u00a0 It is interesting to note that the latter portion of the story, the successful and rapid recapitalization of debt, seldom sees the light of day, when the subject is discussed in the Western press.<\/p>\n
A third major component which has paved the road to economic prosperity for Ecuador is the introduction of – dare I say it – an efficient tax collection process.\u00a0 Note, we are not talking \u201ctax increases\u201d as the media often incorrectly hints.\u00a0 We are talking the collection of corporate tax debt, some of which remained uncollected for over a decade.\u00a0 The most extreme example saw an Ecuadorian corporation owe more than $300 million in unpaid back taxes, from just the period covering 2005-2012.\u00a0 Note, the quoted figure was the not the basis from which the tax revenue amount is derived, but rather the actual amount of unpaid taxes owed!<\/p>\n
Hundreds and hundreds of similar, even if not as extreme, examples of corporate failure to comply with tax laws could be cited across the country of Ecuador.\u00a0 Former politicians simply looked the other way, so long as campaign contributions remained strong and invitations flowed to all the \u201chigh-brow\u201d social functions.\u00a0 The rich got richer, as infrastructure collapsed and national poverty increased, choking off any vestige of a middle class.<\/p>\n
Furthermore, Ecuador forged strong partnerships with Asian and MIddle Eastern countries to cooperate on a host of public works projects, for the benefit of the citizens of Ecuador.\u00a0 The search for capital began, when the USA and Western Europe turned their backs on Ecuador, after the closure of a USA military base in the city of Manta, Ecuador and the subsequent bond default.\u00a0 In an effort to generate more revenue for his ambitious infrastructure program, President Correa sought global partners and various Asian and Middle Eastern countries step forth to partner and assist.\u00a0 The result is a series of completed and \u201cin the pipeline\u201d projects, aimed at further advancing Ecuador\u2019s infrastructure and creating sustainable economic development.<\/p>\n
Finally, Correa created an environment which supported the development and expansion of new business enterprises, especially small and mid-sized companies.\u00a0 From stream-lining and better organizing the corporate licensing process to providing industry-specific incentives for job creation, Correa sought to not only create a broader capitalist sentiment throughout the populace, but also to create a certain patriotic attachment to buying home grown and home made products.\u00a0 While the result of some of these policies did generate a certain amount of protectionist measures, ultimately it helped spur the more rapid evolution of corporations and greatly reduced the nation\u2019s unemployment rate, while simultaneously creating a bevy of better paying jobs.\u00a0 The entire impetus, as a whole, has dramatically spurred on the creation of a burgeoning middle-class in Ecuador, which while still relatively in its infancy, has arisen in a nation known for little distinction other than the extremes of the \u201chaves\u201d and the \u201chave nots\u201d.<\/p>\n
In summary, revenue from rising oil prices, the difficult decision to default and then recapitalize the bond debt, the creation of an efficient tax revenue collection system, partnerships with Asian and Middle Eastern companies, as well as economic incentives for business and job creation, all created the impetus for the rising tied of economic prosperity, which not only launched Ecuador\u2019s fledgling middle-class, but also allowed President Correa to move forward with his ambitious and much welcomed infrastructure development campaign.\u00a0 The end result has been a more prosperous, economically more stable Ecuador, creating a value investor\u2019s paradise for those willing to place smart money bets.<\/p>\n","protected":false},"excerpt":{"rendered":"
What factors created the road to economic prosperity in Ecuador ? The answers to those questions are both intriguing and diverse.<\/p>\n","protected":false},"author":308,"featured_media":38736,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"_acf_changed":false,"content-type":"","om_disable_all_campaigns":false,"footnotes":"","_jetpack_memberships_contains_paid_content":false},"categories":[3],"tags":[],"yst_prominent_words":[32395,32392,32390,32399,31757,4777,2120,32401,7731,26222,32398,32403,32393,31749,32400,32397,32413,32396,32402,32394],"acf":[],"jetpack_sharing_enabled":true,"jetpack_featured_media_url":"https:\/\/www.escapeartist.com\/wp-content\/uploads\/2020\/08\/Plan-Piloto-Para-Creaci\u00f3n-De-Empresas-Por-El-Internet.jpg","_links":{"self":[{"href":"https:\/\/www.escapeartist.com\/wp-json\/wp\/v2\/posts\/38875"}],"collection":[{"href":"https:\/\/www.escapeartist.com\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.escapeartist.com\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.escapeartist.com\/wp-json\/wp\/v2\/users\/308"}],"replies":[{"embeddable":true,"href":"https:\/\/www.escapeartist.com\/wp-json\/wp\/v2\/comments?post=38875"}],"version-history":[{"count":1,"href":"https:\/\/www.escapeartist.com\/wp-json\/wp\/v2\/posts\/38875\/revisions"}],"predecessor-version":[{"id":38897,"href":"https:\/\/www.escapeartist.com\/wp-json\/wp\/v2\/posts\/38875\/revisions\/38897"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/www.escapeartist.com\/wp-json\/wp\/v2\/media\/38736"}],"wp:attachment":[{"href":"https:\/\/www.escapeartist.com\/wp-json\/wp\/v2\/media?parent=38875"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.escapeartist.com\/wp-json\/wp\/v2\/categories?post=38875"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.escapeartist.com\/wp-json\/wp\/v2\/tags?post=38875"},{"taxonomy":"yst_prominent_words","embeddable":true,"href":"https:\/\/www.escapeartist.com\/wp-json\/wp\/v2\/yst_prominent_words?post=38875"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}