RIO DE JANEIRO, BRAZIL – The Western Hemisphere director of the International Monetary Fund (IMF), Alejandro Werner, assured on Thursday that there is an “important understanding” with Ecuador’s president-elect, conservative Guillermo Lasso.
Werner explained in a press conference that the Fund was “awaiting the electoral result” in Ecuador while its teams conduct the second technical review of the US$6.5 billion loan to the government of outgoing president Lenín Moreno.
“When the president-elect’s team is ready to start interacting with our teams, we will clearly start exchanging points of view,” he said about Lasso, who last Sunday became the new president of Ecuador after winning the elections with 52.3% of the vote, against Andres Arauz, political protégé of ex-head of state Rafael Correa.
“They know very well the program that is in operation with President Moreno because we have had conversations with all the candidates and also with the team of President-elect Lasso, there have been meetings for many years,” he detailed. “There is an important understanding that will basically allow us to start working on a basis,” he added.
In September last year, the IMF Board of Directors agreed with Moreno’s government a loan for the country to access US$6.5 billion to tackle the crisis caused by the coronavirus pandemic.
Arauz had stated that, if he came to power, he had no intention of complying with the conditions agreed between the Fund and Moreno.
The IMF, for its part, released on Thursday a revision of the regional economic projections, which include a 4.6% growth of the Latin American economy in 2021 driven by the rebound in the United States, the acceleration of the pace of vaccination and the reopening of certain sectors.
During an interview with CNN, Lasso announced that on the first day of his Government -next May 24th-, he will submit to Congress a tax reform with the aim of boosting the country’s economy.
“The reform will not be aimed at increasing taxes. On the contrary. There is a sales tax on micro-entrepreneurs that we have to eliminate because there can not be an income tax, but a sales tax”, commented Lasso.
In this respect, the new head of state will seek to eliminate the 2% sales tax on micro-enterprises. He also announced that he will gradually eliminate the tax on foreign currency outflows during the four years of his term.
With the intention of reactivating the tourist sector, the leader of the Creando Oportunidades (Creo) movement said that he will raise the possibility of lowering the VAT during four holidays of the year.
“We do not plan to create a tax or increase the current rates,” said Lasso, who also clarified that he will fight tax evasion: “Do not tell me that you have been an entrepreneur for 10 or 20 years and you never make money and do not pay taxes.”
During the campaign, Ecuador’s president-elect pledged tax incentives, credits at 1% interest and a progressive adjustment of the minimum wage up to US$500. He also stated that he will seek to create 2 million jobs and build 200,000 rural housing units.
Lasso also promised that he will propose new risk-sharing contracts with private companies in the oil sector in order to boost oil production and that he will respect the contracts already in operation.
Lasso, a conservative who advocates free trade, also stressed in his campaign the importance of Ecuador “becoming part of the Pacific Alliance, as urgently as possible.”
The new president will have to face an economy hard hit by the pandemic, but with long-standing problems, such as the lack of liquidity and a debt that grew even more during the health crisis caused by the coronavirus. To this end, he stated that he will seek “from day one a free trade agreement with the United States.”
Last year Ecuador recorded a 7.8% drop in GDP. In addition, it has a public debt of over US$63 billion, which represents 63% of the Gross Domestic Product (GDP).