Economy Minister Pablo Arosemena will present arguments before the Constitutional Court on Tuesday and Thursday of next week as to why the two sent decree-laws are urgent and necessary: ​​to put more money in citizens’ pockets and attract investments and therefore employment. It is awaiting approval and is already thinking about two new regulations: one on the stability of public finances and the other on the stock market. He points out from his administration that he managed to reduce several taxes and that, if the decree on the tax law is adopted, the seven reduced taxes since he took office will be harmonized.

The Constitutional Court waited for several days not knowing what would happen to the laws from the decree, and now it has already decided how it will be handled. How do you see the route taken?

We will appear next week, Tuesday and Thursday, to expand and deepen the arguments that justify the economic urgency of the two sent decrees. With the tax reform, we lower taxes for 340,000 people from the middle class and for half a million micro-entrepreneurs, thus putting more money in people’s pockets. The second regulation of the law, on free zones, serves to attract investments, increase exports and increase employment. This was sent two years ago, but the problem was that the Assembly was stingy and prevented the Ecuadorians from taking advantage. This law encourages investment by having 0% income tax, zero foreign trade tax and regulatory stability. For these reasons we are convinced that in the next few days the decree laws must be made viable. The mistake made by the Assembly of being stingy towards the Ecuadorians must not be repeated.

But as you can see this path taken by the Court, searches amicus curiae and other steps that according to legal experts would not be in the law?

We respect that, we don’t share it. However, we respect democratic institutions. We hope that the Court will be sensitive to the sense of urgency that Ecuadorians have and that the decrees will be approved.

There are many of them amicus curiae, some for and others against: sports prediction companies and even a group close to correísmo are against the regulation… How do you see that participation?

Tax reduction for 340,000 people and half a million micro-entrepreneurs is positive. If a company, like a forecast, looks at its own interests, that is understandable, but the state looks at the interests of the majority. We know there are more amicus curiae for tax reform. This reform has the support of the taxi sector since they asked for it to be in Rimpe and not in electronic invoicing, and it also has the support of the craft sector, which is more than a million craftsmen who asked for a return to the previous system. Ecuadorians generally support this because when that money is rotated, a multiplier effect is created.

The objection to the Decree on the Tax Law is the issue of retroactivity, which would be unconstitutional, because the reduction would be for this year, not for the next one, how can that issue be saved?

There is a tax principle that the benefit of the taxpayer prevails. If this is approved, in the month of July this year, the citizen could obtain a lower coverage and will immediately increase the net salary. Someone working as a dependent earning $2,400 currently pays $1,000 in income tax. With this reform, if you have two loads, you will pay zero. Someone earning less than $1,900 currently pays $237, and with the reform – regardless of whether they have dependents or not – they would pay zero. As for micro-entrepreneurs, under the current law, if you sell $0 or up to $20,000, you pay $60, but with the reform, if you make $0 to $2,500, you pay zero. Therefore, we introduce the concept of progressiveness that the Court itself indicated.

What are the next legislative decrees you plan to pass?

In the Ministry of Economy and Finance, we continued to work on improving the economy as an arrow that only goes in one direction. So we reduced the ISD from 5% to 4% and increased the collection. Now in 2023 it has dropped to 3.75% and in July we will reach 3.50% and in December 2%. We have also reduced the ICE for consumer products. We lowered the ICE on weapons and ammo from 300% to 30%, and the first quarter collection is higher than the historical collection because the security companies were able to refurbish the weapons. I reduced the VAT on vacations, Eco Delta and Ecuador Tourist Power tourist taxes. We have also lowered tariffs for lithium batteries. We propose, now, in the decree law to reduce income tax and Rimpe. We have reduced seven taxes since I have been here: five have already been reduced and two are proposed in the new decree. In the same direction, we will present a new Fiscal Balance Regulation to strengthen public finances and protect the Ecuadorian pocket and a second Stock Market Regulation to encourage investment. We have other investment and venture issues.

As for the balance of the finances, can I predict what it is?

What we want is to strengthen public finances and protect citizens’ pockets. We will make a statement about this later, in a few weeks, when the first two initiatives are approved. In addition to the reduction of seven taxes, we are preparing new reductions in customs duties in order to stimulate production and make consumption cheaper, and this does not require a legal decree, but an executive decree. This would refer to construction inputs, everyday citizen questions about technological tools.

In terms of investment, did they present amicus curiae or no interest?

There are many groups that are in favor and will present it as they see fit. The manufacturing unions expressed their approval. Everyone wants to export more, produce more. And if there is a negative government tomorrow, that already leaves you without armor.

However, there is talk that the new assembly could change the laws on decrees, to what extent can we talk about protection?

The best guarantee of any reform is that it is good for the people. Tax reform puts money in people’s pockets. Will there be a politician who wants to turn it around? There is a sense here not only of urgency, but of continuing to promote productive development and help the micro-economy gain more strength.

Speaking of the fiscal balance, if the government said at the beginning that the tax increase was necessary, why is it now going back and achieving a fiscal effect of 76 million dollars instead? How to make up for it?

Two things should be clarified. I have been here since July 2022 and in my administration we have reduced taxes and increased collection. This is not a theory, but something we did in practice. We are reducing seven taxes. The reform itself is compensatory, slightly more than 130 million dollars has already been compensated by sports forecasts, VAT on public services that are not health or food or basic service goods. Compensation also comes from the closure of tax spending.

Does the Government have six more months and how do they leave the bills for the next one, especially due to the drop in oil revenues, and now also tax revenues? What is the deficit?

Fiscal deficit of 1.5% and 1.7% of GDP, the fiscal order strategy is working. We have revenues that were not foreseen, such as the elimination of a subsidy of 225 million dollars that was not considered, efficiency levels and optimization of spending. We have a regulated macro-economy and a reactivated micro-economy. Sales in 2022 amounted to 227 billion dollars. This figure, adjusted for inflation and discounting population growth, is the highest level of sales Ecuador has ever had, surpassing pre-pandemic levels. Before the pandemic, the economy grew at zero, now in 2022 it grew by 2.9%, which is higher than Ecuador’s average in the last seven years.

Nevertheless, markets are nervous about the possible arrival of an irresponsible government that refuses to pay its debt. What is that topic?

Ecuador did two historic things: a debt renegotiation with China in which we lowered interest rates, extended terms and freed the price of crude oil that was tied, generating a $1.4 billion profit. We lowered the debt level, which was 61 percent in 2020, and 55 percent in 2022. We have completed the largest nature conservation debt swap in history. It is the most important positive news from Ecuador in the last 30 years. We have generated savings of $1000 million in stock debt and 400 million dollars is intended for the preservation of the reserve of the Galapagos brotherhood.