Latinnews Archive
Latin American Weekly Report - 28 July 1967
Ecuador: how to make money and influence friends
In the next twelve months Ecuador is to receive large international loans. It has undertaken to raise more money locally in taxes. The country's foreign trade is also coming along nicely.
The Ecuadorean finance minister, Jose Federico Intriago Arrata, arrived back in Quito from Washington last week with the news that in the next twelve months the country would be the recipient of an astonishing variety of new loans to a total value, he claimed, of 57.1 million dollars.
Though the financial promises he received hardly made it necessary for him to put it into so many words, Intriago pointed out that the International Monetary Fund was looking with distinct favour on the policies of the Ecuadorean government. According to the minister the 'Intriago Formula' of attempting to maintain fiscal equilibrium and monetary stability and at the same time continue development programme, earned high praise from the Fund, whose officials felt it could with advantage be exported to other developing countries in similar circumstances.
Just after his return details were known of important new measures of taxation that the government proposed to put into force.
Intriago enumerated the loans whose negotiation, he said, had either been concluded or which were in advanced stages of completion.
This year the Inter-American Development Bank is to lend 3 million dollars for the settling of some 1,800 peasant families on land belonging to the Junta de Asistencia Social in the northern Andean region of the country. The programme has been worked out by UN and Ecuadorean experts and was to be carried out by the Instituto Ecuatoriano de Reforma Agraria y Colonizacion.
The IDB is also to grant a 10 million dollar loan to promote local production of such agricultural products as wheat, oil seeds and other staples which Ecuador is currently importing. This loan will be administered by the Banco Nacional de Fomento.
A third IDB loan, for 3 million dollars, will be granted for industrial development considered basic to the nation's development. A fourth, for 5.5 million dollars, from the IDB, will be placed at the disposal of the Corporacion Financiera Nacional for local industry.
The World Bank is giving a 4 million dollar loan to develop the beef cattle industry. This loan, to be supervised by the ministry of agriculture, will be spent principally in the coastal and eastern provinces.
A second World Bank loan of 4 million dollars will go on developing a fishing fleet and on building 18 to 20 fishing boats.
The third, for 7 million dollars, will be for secondary education and will be administered by the ministry of education.
The International Development Agency is to grant a 3.1 million dollar loan for higher education, including the provision of loans to students wishing to take up university education.
During the first half of next year, according to Intriago, the IDB will lend 6 million dollars to assist the housing plans of the Banco Ecuatoriano de la Vivienda. A further 5.5 million will come from the IDB for the provision of drinking water in various provinces by the Instituto Ecuatoriano de Obras Sanitarias. The World Bank will provide 3 million dollars for afforestation and the IDA will lend 3 million dollars for various supervised agricultural and cattle rearing schemes.
Help from abroad was followed by the announcement that, after some delay, the Constituent Assembly had finally approved far reaching tax measures in order to balance the country's budget, which had been in deficit for some years. Some 280 million sucres is expected to be raised annually from new taxes. The new taxes announced included ones on stamped paper for official transactions, on electric power (to finance new electrification projects), on foreign cigarettes (for new roads), on coffee (for hydraulic schemes in the wheat producing provinces), on aguardiente and spirituous liquors (for social programmes including state hospitals), on gramophone records and shows (to finance a national symphony orchestra), on tinned fish, rice, beer, industrial alcohol and carbonated mineral waters (for education).
The minister said the international organisations believed Ecuador was on the road to economic recovery. Evidence to support this came from another quarter.
Ecuador's foreign trade is showing distinct signs of buoyancy. Exports rose by 23 per cent in the first six months of the year compared to figures for the same period of 1966 to reach a level of 1,409 million sucres.
The largest increase was registered by cocoa whose sales nearly doubled to more than 270 million sucres, bananas, which went up by 97 million sucres and coffee, whose sales increased by 41 million sucres. Increasing trade with communist countries explains much of this rise.
This, however, was not enough to achieve a favourable trade balance as imports rose by 24.5 per cent to reach 1,836 million sucres, leaving a trade deficit of some 427 million sucres. The authorities are taking some comfort from the fact that there has been a faster growth in imports under List A of capital goods and other essential items than under any of the other groups. This would support the thesis that there is a faster growth in imports of economically vital goods than in imports of consumer and luxury items.
Despite some pressure to the contrary the Junta Monetaria and the Central Bank of Ecuador are maintaining a policy of maintaining a certain freedom for importers and are not being persuaded to extend import restrictions.
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