Three years
after the dollarization, what has been the
effect of the new monetary system on the Ecuadorian
economy?
The picture of the Ecuadorian economy in
1999 was the worst of the last century in
almost all sectors. Today, three years after
the dollarization scheme, the political
and social economic status of Ecuador is
completely different.
The economic picture of the country points
to various important improvements in terms
of stabilisation policies: inflation is
reduced, speculation related to the exchange
rate is eliminated, interest rates are now
decreasing, economic growth is stable, wage
earnings have improved, foreign direct investment
has increased thanks to the oil pipeline
project, and I would add that the social
standard is better than before. To say that
the situation is better does not necessarily
mean that we are satisfied; it simply means
that it is improving compared to previous
years.
If you examine the development of our economic
policies in the past years, you will note
that the fiscal picture is completely different
in terms of fiscal reforms. The reforms
seek to reverse problems of liquidity, to
apply structural reforms that could not
be implemented in the past and to create
a social environment that supports this
new adjustment process. Three of our main
challenges have already been addressed:
1. First of all, we are applying new policies
and in the first three days of our mandate
we announced an ambitious economic program.
This unique program promotes sustainable
economic growth for the next 5 years, focusing
on long-term solutions instead of simply
proposing short-term financing to fill in
the gaps of past mistakes.
2. Then we sent a fiscal budget to Congress
which reflects this change in economic policies,
taking into account the situation last year
and the projected growth for the coming
years.
3. Our next goal was to sign an agreement
with the IMF (International Monetary Fund),
which we achieved on the 11th of February
2003. This is a very rigid program which
sent a very important and positive signal
to the international and domestic community.
Therefore, we have reached three important
goals of our administration during the first
five weeks of our government.
Would you say that the medicine that
has been prescribed by the IMF will be a
difficult pill to swallow for the Ecuadorian
economy?
The announcement that we have made is for
four years, so we are only starting to take
our medicine. We are in the initial step
of the process but we will need to approve
these reforms. Customs reform has been passed,
and more reforms are expected to be passed
in April.
The Congress is divided between the
right and left political spectrum. Will
it pass these tough reforms?
Politics is difficult in any part of the
world. We are in a democracy, and we have
to play within that framework. In order
to strengthen our position in Congress,
the reforms we are proposing have been elevated
to the level of national importance, which
means that the final veto is in the hands
of the President. Therefore, I hope that
the main characteristics of the reforms
will be approved, in order for us to have
the tools to control inflation and fight
against corruption.
In 2001 Ecuador experienced a 5.4% GDP
growth, followed by over 3% growth in 2002.
What is your prognosis of economic growth
in the next few years, and how can you increase
it?
This year we hope to reach a growth of
3.5% to 4%. In 2004 we hope to attract increased
foreign investment in order to sustain an
economic growth level of 5.5% to 6%. Then
between 2005 and 2007 we plan to reach levels
of 5% growth per year.
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The country has
postponed important structural reforms, which
represents a very important opportunity today
to stimulate rapid economic growth. Rapid
growth of 4% or 5% can rarely take place in
countries that have already applied structural
reforms, since it requires a greater amount
of effort for them to boost the economy. In
contrast, in Ecuador almost all sectors are
open to reforms and foreign investment: telecommunications,
electricity, oil, tourism, and many more.
In terms of the oil sector, we will create
conditions that should triple actual production
in the coming nine years. The heavy crude
oil pipeline will double actual production,
and if we tap into the potential of our
fields in the south-east of country, we
may reach $1.2 Million per day of oil production
in nine years. This means that Ecuador will
be a different country in the next decade.
How can you make sure that liquidity
and banking reforms restore the health of
the financial sector?
This is a process - we are in a market
scenario and thus we cannot force the repatriation
of Ecuadorian resources that were deposited
abroad. We need to create the right conditions
in order to attract these resources. With
the application of a rigid and orthodox
economic program along with the participation
of foreign investment, those resources will
gradually come back into the Ecuadorian
economy. In fact, liquidity is not the root
of the problem, it is a result of the problem,
so we expect to solve the situation by implementing
strong reforms while working hard to attract
capital back to the country.
What is the greatest success of the
recent trip of President Guttierez to the
United States?
In one word: confidence. We have gained
the confidence of the international market
and of our main commercial partner, the
United States. We are also building on this
momentum thanks to the work of international
investors in the oil pipeline project.
The current government hinges on the
support of the Pachakutik party, which is
a left-leaning political party, yet you
are a liberal-minded businessman from the
financial sector. Is it a difficult balancing
act to manage these two political visions
of Ecuadorian society?
It is a problem, but it is also an opportunity.
The Pachakutik is participating in the government
and seeing for themselves the difficult
situation that the country is in. They need
to accept certain realities, and to achieve
this I intend to include members of the
Pachakutik party in order to help them better
understand the dilemma we face: we have
many financial requirements, yet we have
very few resources. So it is important for
them to be involved in order to open their
eyes to this reality. The Pachakutik party
is in the process of understanding that
Ecuador is not a closed country and that
we need to work within the framework set
by international markets.
In light of your role in the economic
development of the country, could you tell
our readers a little bit about your background
as an economist?
I graduated in economics at the Catholic
University of Quito, then worked in the
Central Bank of Ecuador for ten years, which
was an excellent learning environment to
work on macro-economic issues. Between 1985
and 1987 I studied at the University of
Notre Dame in the United States, then I
studied at the Economics Institute of the
University of Colorado. I returned to the
Central Bank in 1991, then worked in the
private bank Produbanco. In 2000 I formed
a private consultancy company in macro-economy
and finance, while teaching at the University
of Monterrey and writing for the Economist
Intelligence Unit.
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