Feb. 1, 2015


HE Jorge Glas

Ecuador

HE Jorge Glas

Vice-President, Ecuador

BIO

Jorge Glas studied electrical engineering at the Escuela Superior Politécnica del Litoral, and moved on to play a key role in the development of the national telecommunications and electrical sectors. From 2007 to 2009 he was president of the country’s Solidarity Fund, a public entity with assets in numerous major telecommunications corporations. He also oversaw the merger of Andinatel S.A. and Pacifictel S.A. to become the Corporación Nacional de Telecomunicaciones CNT S.A. In addition, he headed up the fusion of electricity generation and transmission firms into the Corporación Eléctrica del Ecuador (CELEC) and the Corporación Nacional de Electricidad (CNEL). He has served as Minister of Telecommunications and Information Society and Minister for Coordination of Strategic Sectors, and played a key role in the renegotiation of hydrocarbon contracts and the development of the mining sector.

Why is it necessary for Ecuador to transform its productive matrix?

The National Strategy for the Change of the Productive Matrix was a response to the prevailing conditions of our country. When the government entered office, Ecuador was a country with serious deficiencies in energy and infrastructure. There was also a lack of investment in roads, ports, and airports. We also had the second-lowest broadband penetration in all of Latin America, as well as many other challenges. Having had a dollarized economy for 14 years, we have a fixed exchange rate. As a consequence, we cannot use monetary policy as a means of generating competitiveness in the way that many other countries can. This affects our trade balance, which is why we are focusing on projects like the Pacific Refinery. We subsidize petroleum in Ecuador, which we see as part of a social transfer, but it is increasingly expensive for the country, and worsens our trade balance. We have improved the quality of life for people in Ecuador, but this has also contributed to increased consumption, which means a further increase in imports of the kinds of goods and appliances people want for their homes and daily lives. Now, our goal is to change our economic structure in Ecuador to help ensure the competitiveness of the economy and generate more wealth and opportunities for Ecuadoreans. We have traditionally been an exporter of non-value-added products, such as petroleum and agricultural goods. We need to make the leap to industrialization and Buen Vivir, while keeping in mind the protection of our environment. We are dependent on primary exports, and need to step beyond this dependence. This is why we have proposed the strategy for the change of the productive matrix.

What does the transformation of the productive matrix mean, more practically, for the economy?

The first step is to develop industrializing industries, that is to say, the primary industries that can spur further industrialization in other sectors. These are industries, such as petrochemicals, iron and steel, copper, aluminum, and shipbuilding, among others. The growth of these industries can allow us to overcome our dependence on primary exports. Other countries, such as China, South Korea, and Singapore, have made this transition in the past, but we cannot take the same amount of time that they did to realize the transition. We need to accelerate this process and will invest in this with financing and strategic alliances with friendly nations. I have visited a number of our allies to discuss this, such as India, China, and Cuba. All of this comes down to strengthening national productivity on all levels, from micro-enterprises to large-scale industries and projects.

What role can the agricultural sector play in this transformation?

Agriculture will remain an important part of our economy. We need to increase productivity per hectare for our agricultural products, such as bananas. Moreover, whatever we produce in the agriculture sector, it is important that we produce much more in the agro-industrial sector as our neighboring countries do. We have defined quality standards for our national products, so that their quality can be recognized not only locally, but also internationally. More generally, the idea is that we need to look not at individual products, but at value chains in order to determine what components can generate the most profit. This will mean greater revenues for producers, allowing Ecuador to move up the value chain. Ecuador is proud to produce the best cocoa in the world. But a kilogram of chocolate sells for much more than a kilogram of cocoa. We can use technology and innovation to make the most of our agricultural strength.

How does regional integration fit into this strategy?

We have identified that integration as an important part of this, not only in terms of political integration, but also in terms of building regional value chains. Specifically, we are looking at the integration of our energy systems and how this can be used for economic development. We recently signed an agreement with the Ministry of Energy of Chile. Ecuador will soon have an abundance of renewable energy from the eight new hydroelectric projects set for completion by 2016. This is the energy we need to sustain our development and industrialization. Looking at regional value chains, Ecuador has proposed the construction of a copper refinery. Chile and Peru export copper concentrate, but refined copper is a much more preferable export. The refining of copper involves significant energy consumption, and Ecuador will shortly have a substantial supply of environmentally friendly electricity. This is energy that can also be used, for example, for the aluminum industry, another industry that could play an important role in industrializing the country.

What role can private international investment play in transforming the productive matrix?

The main protagonist in this transformation is the private sector. We have decided to invest here because it is not feasible to await private sector commitment. My country lost decades though neoliberal policies that shaped our economy and lives. Much of the private sector's investment of that time, in the energy sector for example, was costly and inefficient. These plans represent $10 billion of investment and imply many opportunities for investment for the private sector. We have seen considerable interest from investors in countries such as Russia and the Middle East, as well as opportunities to obtain both financing and expertise from other friends, such as China and Brazil, and a few European countries interested in becoming a part of the development of these new industries. Now, here in the Vice-Presidency, we receive international investors from all over the world who are interested in the opportunities that are presented by the productive matrix strategy. These include technology providers, financial institutions, and strategic partners, all of whom are waiting for us to finalize studies in many of these investment areas. At the Vice-Presidency we are working to promote investment, and seeking the technology to transform our economy. Our goal is to ensure that the private sector has the financing and the human talent available to make the necessary investments. That is why Ecuador ranks among the highest-level countries regarding investment in education as a percentage of GDP.

How would you characterize the importance of the trade agreement with the EU?

This agreement represents opportunities not only for our current exports, but also for export growth across new segments. The important consideration is exports with value-added. This trade agreement will allow us to export everything that represents the new industries that we are building in this country. Ecuador went into this negotiation with a number of clearly defined red lines in terms of public policy, tax policy, public procurement, and strategic areas of the economy to protect. Ultimately, I think we have achieved our objectives. The agreement has yet to be ratified in Ecuador, and during negotiations we have not lost sight of our dollarized economy. We are unable to devalue our currency to generate competitiveness, and, therefore, need to ensure no loss of competitiveness upon signing.

What makes Ecuador an attractive destination for international investment?

The intensity of our development objectives and our plan to industrialize the economy in the timeframe we are talking about, and with the conditions that we have already created in Ecuador, is something unique. During our time in government we have provided energy, infrastructure, roads, ports, and we have the backing of our citizens. We are proposing $10 billion in investment in basic industries, not including projects like the Pacific Refinery, or our hydroelectric, or infrastructure projects. Ecuador represents opportunities because of its geographic position, and because of its natural resources.

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