TBY talks to Santiago León, Minister of Coordination of Production, Employment, and Competitiveness, on the performance of the productive sectors, the “single-window” system, and new trade procedures.
TBY How did the productive sectors perform over 2011?
SANTIAGO LEÓN It was a highly positive year, with a very good growth rate of over 8%, and in the third quarter of 2011 we saw an 11.2% growth rate. We have experienced sustained growth over a few periods that reflects our healthy economy. I can qualify 2011 as a highly positive year owing to continued growth, and anticipate a similar forecast for the years to come.
What specific accomplishments has the new Code of Production achieved after one year?
The Code of Production has two categories of incentives: general and specific. There are many incentives for new industries, innovations, and people who want to invest in the country. One of the most important aspects of the code is the tool to guarantee FDI. Another positive aspect is that the tool acts as a contract with the Ecuadorean government, stating the incentives an investor is entitled to, and confirming where arbitration will take place. Following this agreement, the investor signs a contract for up to 15 years. Within the code, we guarantee investments and protect foreign investors.
Has the investment level been measurable since the Code of Production came into effect?
It cannot be measured because of the fact that these incentives are tax related; they are applied when investors pay income tax. The code came into effect in 2011 and the income tax for 2011 was paid in April 2012. However, there has been interest from certain companies waiting to sign investment contracts that add up to $400 million. These are companies interested in investing in the country in compliance with the code. We are using this as our first result in terms of investment. We will begin to see the fiscal impact of the 2011 tax incentives by the middle of 2012.
In which ways has Ecuador’s competitiveness been reinforced?
We have increased our competitiveness in two ways. Firstly, we have been able to reduce the trade balance deficit, despite being mainly an import-reliant country with limited export offerings. Under this government, we have been working to improve our range of exports, and we have accomplished this. As a government, we have created policies favoring national production, aiming to become more competitive. In other words, we have reduced tariffs on raw material and capital goods to 0%, in order to lower company costs. Secondly, we have carried out a significant amount of export promotion, which has increased our export levels and reduced the trade balance deficit.
How will your Ministry implement the new trade procedures?
We will transform the way foreign trade is done in Ecuador into a “single-window” model. The single window is set to start functioning in April 2012, and will be a model for the whole region. In Ecuador, the system will be very specific. The single window consolidates all the procedures and paperwork necessary for export and imports, and can be done anytime, anywhere, and from any electronic device.
How will companies benefit from the new single-window system?
The program is aimed at creating systemic competitiveness, allowing all paperwork to be done rapidly. We are also working with municipalities to accelerate the procedure, because there’s no point in establishing a company quickly if there are a host of other bureaucratic procedures setting companies back six months. We are working with municipalities to carry out a project called sin trámites—no paperwork—in order to facilitate the procedure of establishing a business.
What will be the investment of the Ministry to implement those programs?
The Ministry of Production Coordination has a budget of $20 million, mainly because we are coordinators rather than executors. More that 50% of our budget, or some $12 million, is destined to improve our competitiveness in all sectors.
Why is Ecuador focused on exporting raw materials rather than finished products?
Currently, the trade balance issue is driving us to strengthen the export of traditional products such as bananas, shrimp, coffee, cocoa, and flowers. Although we are currently not adding any value to those products, it is one of our main goals for production. Through public-private synergies, as a government we entity aim to create the necessary incentives to improve productivity, packaging, promotion expenses, and much more; these elements are contemplated in the Code of Production. However, the government is not necessarily the main investor. Instead, we work toward designing policies that inspire the private sector to take the investment leap.
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