Amid so much inequality and poverty: who benefits from Lenín Moreno’s regime?

The flight of capital or outflow of foreign currency is also a growing factor in the Economic Groups that the current Ecuadorian government has privileged

Lenín Moreno’s regime arrived in Ecuador with the promise of continuing the Citizen Revolution that former President Rafael Correa began. But, it did not take many days for the former vice president to show his true colors, to agree with the powerful sectors of the oligarchy and betray the will of the people that led him to the Head of State after Correa raised his hand as his successor .

The betrayal perpetrated by Moreno to the revolutionary forces was decisive, it marked an immediate distance with those who trusted their vote in him. A judicial persecution began against Correa and the man who was elected as his vice president, Jorge Glas; he turned his back on those who supported him in the campaign and joined forces with those who for more than a decade opposed the project that led Ecuador to be one of the most thriving countries in Latin America.

Thus, began a governmental management marked by the return of neoliberal conservatism or, as Correa describes it, a “dictatorship” that is progressively ending the rule of law, constantly violates the Constitution, hands over its sovereignty to the United States and lies to its people.

On this situation, the economist and researcher Jonathan Báez Valencia wrote an article -published by the Analysis and Study Unit of the Economic Research Institute of the Central University of Ecuador- entitled: The great winners of the Government of Moreno: Economic Groups 2017 -2019, wealth, currency outflow, tax havens and tax debt. In the article, he explains with figures and graphics the Ecuadorian reality and how Moreno benefits only the business community with whom he made a pact and carried out his betrayal.

Báez Valencia highlights in his publication that “the exacerbated growth of large economic groups during Moreno’s corporate government, led in economic matters by the former president of the Ecuadorian Business Committee (Richard Martínez Alvarado, current Minister of Economy and Finance), while inequality and poverty prevails in the great majority, is a clear example of who benefits from public policy and who it harms”.

“With a historic increase in assets, wealth and the outflow of foreign currency to tax havens, it has been one of the best times for the business elite and the worst for the working class. This article shows this increase and presents the rankings of these variables”, adds Báez.

Sustained growth of economic groups with Moreno

Báez explains that the wealth or assets of economic groups in Ecuador has grown steadily over the last three years, reaching 124,000 million in 2019, according to data from the Internal Revenue Service (SRI), the institution in charge of managing tax policy in the country.

The same has happened with the assets of these sectors, which has a growth of more than 45,000 million in 2019, a situation that also occurs with a delicate loss of the country’s growth, reflected in the fall of the Gross Domestic Product (GDP).

“The most serious thing about this growth is that it occurs alongside the generalized and constant decline in national growth –measured by GDP- (…) This shows that while the whole of the country is affected, these economic groups see a growth of its resources”.

In 2019 -adds Báez- the gap was clearly observed: economic groups grew 4.96%, while the economy stagnated with a minimum increase of 0.05%, compared to 2018.

In the case of income, a constant increase in money from businessmen was also observed. At the same time, a low level of collected income is evidenced, to the point that it does not represent more than 2.45% of income, in the case of “the Effective Tax Rate: Income Tax / Income”.

“That is, for every $ 100 they earn, they pay less than 2.50. Although in 2019 there is a drop in income, it is higher than in 2016, with a difference of more than 68,000 million dollars”.

Foreign currency flight and tax havens

The flight of capital or outflow of foreign currency is also a growing factor in the Economic Groups that the Moreno Government has privileged. “In this sense, there is a constant increase in the period 2016–2019. In 2019, the outflow of foreign currency abroad reached almost 9.9 billion dollars”, warns Báez.

“This implies that 270 Economic Groups are responsible for 43% of the outflow of foreign currency from the country, considering that in 2019 the amount was 22,801 million, according to the SRI”.

Báez explains in his research that the flight of foreign currency specifically spiked towards tax havens during 2019, by 228 economic groups. “This reached 685 million dollars, which implies an increase of 23% compared to the previous year. A more than greater increase if you consider that the increase in foreign currency outflow in general was barely 1%”.

This flight of capital contrasts with the holding of companies in tax havens, territories used to evade taxes, as Moreno himself has with his family group. Hence, there are 94 Economic Groups with a total of 426 companies in tax havens and 41 Economic Groups with 300 members and offshore companies published in the Panama Papers.

“It is not surprising that these same elites, that captured the State and the legislature, are the same ones who oppose tax havens being taxed in the latest laws, but they do agree on the aspects that make work precarious in the so-called Humanitarian Law and they condemn the country to the delivery of resources for arbitration awards to multinationals, the true destination of the funds of the law on the ordinance of public finances”, denounces Báez.

The investigation adds that a similar situation occurs with the actions of the Government against workers, “who instead of defending work, defending employers”, such as the “Ministry of non-work with ministerial agreements that condemn the working class, while these elites get richer every day”.

Increasing tax debt and precarious employment relationship

The Báez study adds that in addition to the flight of capital in the Moreno regime, there is another serious situation such as the tax debt, which is also increasing.

“The situation that contrasts with the elimination of the article on the collection of debtors in the misnamed Humanitarian Law, of which the section that makes the labor relationship precarious was left. Thus, as of February 11, 2019, the debt amounted to more than 727 million dollars; while up to May 18, 2020, the figure increased to approximately 1,156 million ”.

Báez adds that this situation “not even with the tax remission, made by the Productive Development Law, meant that 218 economic groups pay their debts. This implies an increase of 59%. Of this total, the firm debts amount to 146 million dollars and the disputed debt to 768 million”.

In conclusion — says Báez — the Economic Groups in the Moreno regime do not pay what they must pay for their taxes. In addition, “there is the fact of the series of tax havens they have, mechanisms used to avoid paying taxes and, therefore, the State runs out of revenue”.

“With this information it is clearly visible that the economic elites are the beneficiaries of Moreno’s corporate government. And, on the other side are the injured, the middle classes, those laid off from the public sector, closed companies, self-employed workers”, highlights the investigation.

Finally, he adds that “if the management of the economy is left in the hands of the Business Chambers, only they benefit as the empirical evidence shows, while the great majority are left falling from a cliff”.




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