Again, and in addition to the serious problem generated by the COVID-19, a lethal and highly contagious virus, Moreno’s government and the media, insist in saying that the situation is aggravated because “Correa‘s government left no savings to face the coronavirus crisis”.
I want to ask the government and those pseudo journalists:
1.- Isn’t it a huge saving having built hospitals, health centers, hydroelectric power generating plants, laboratories for schools, colleges, universities, etc.?
2.- Isn’t a huge saving for companies having more efficient workers, because they have better education and better health?
3.- Isn’t stopping imports of energy from Colombia and Peru, an average of more than 1,000 million dollars a year, a very important saving for the country?
4.- Isn’t saving borrowing at lower interest rates and generating public investment, jobs and, therefore, public assets?
5.- Is the non-collection of fines, interests, surcharges and others, for more than 7,500 million dollars, both in the tax and labor fields, consider a saving?
So, what savings are you talking about, Mr. Moreno and pseudo journalists?
In the field of public finances, saving depends on the needs of a country and its population. After about 3 decades (1980 – 2006), where the country was highly indebted and there was no public work, the needs of the country and the population were huge. Therefore, starting 2007, this situation had to be faced, and it was very well done, through investment and public spending, generating savings and, therefore, public assets. But, from the neoliberal vision of this government, from the vision of the OCP economists (orthodox, conservative and prudent), saving means not building anything, not investing in anything, not spending on anything.
Is this really public savings?
What would have happened in this coronavirus crisis if there hadn’t been hospitals, if the hospital capacity had not been expanded? Then, why is the situation of public medicine about to collapse? Because Moreno’s government kicked out doctors, nurses and assistants, epidemiologists; because it reduced the purchase of medical supplies and medicine. And it was done so, because these neo-liberals think that saving is reducing investment and public spending. No, gentlemen, that is not savings.
Between 2007 and 2017, the generation of public assets was carried out through public Works: 1.- Health projects: 21 new hospitals were built, 37 hospitals financed and in execution; 74 type C health centers, 27 type C health centers, financed and in execution.
2.- Education projects: 833 educational infocentres7,000 laboratories for schools and universities, 4 new universities, expansion of 22 public universities, 3 new public institutes, 428 new schools.
3.- Road projects: 196 new roads, 9,790 km of highways.
4.- Strategic sectors: 8 hydroelectric energy generation plants, 6 mega projects; thousands of km of optic fiber for the National Corporation of Telecommunications, CNT (acronym in Spanish); the Esmeraldas refinery was upgraded to process about 280,000 barrels of oil per day.
5.- Other projects: 1,000 Buen Vivir Children Centers, 176 UPC (Community Police Units), 825 major works in different provinces.
This generated more than $ 90 billion in public assets, and savings of more than $ 6.5 billion annually in medicine, education and electrical energy. Not buying energy from Colombia, Peru or to the barges of certain Ecuadorian politicians (because they are not businessmen), saves the country more than 1,300 million dollars, annually: 1,000 million, thanks to the hydroelectric plants, and 300 million, through the repowering of the Refinery of Emeraldas. All this has generated savings to the country, in addition to greater assets and, therefore, greater wealth and patrimony, during the government of Rafael Correa. This government’s disastrous neoliberal policy has left the citizens defenseless, because health services have been reduced, and not because there were no savings left from the previous government. If Moreno’s government had wanted to have more savings, it should have charged large evaders (bad businessmen) more than 7,500 million dollars, both in the tax and labor fields: $ 4.5 billion for tax remission; more than $ 2 billion for lawsuits from shell companies; more than 1,000 million dollars for labor and employer debts. So, what savings are you talking about, Mr. Government and pseudo journalists? Where are the savings generated during this government? These estimates should be considered as orders of magnitude and not as certainty of magnitude.
How many assets have been generated in these almost 3 years of Moreno’s government? Virtually, none; even worse, assets have been sold for more than 200 million dollars and the government intends to sell public companies, that represent more than 40,000 million in assets. How much has Moreno’s government generated in his administration? Only the savings generated by what was done before his government; that is, the savings now obtained by the Moreno’s government, are those generated by all the public investment done by Correa’s government. Only a neoliberal blind man, with deep hatred (because the people running the country today were supposedly affected by Correa’s government), cannot see that savings were generated. This generation is also shown in the following chart.
The chart shows that between 2007 and 2016, despite having less financing, less collections, less spending on wages and salaries in the General State Budget, there was more public investment and, therefore, more savings.
In addition, there has been so much talk about the anticipated oil sales and, furthermore, Moreno’s government and the pseudo journalists, believe that it was an embezzlement to the country, and a loss. The following chart shows the obligations acquired through the sales of oil. Where has this anticipated sale of oil money ended up during Moreno’s government? In private pockets, because there hasn’t been any public investment at all. ¿Where did the anticipated sale of oil end up in Correa’s government? Definitely, in public investment, and the statistics show it clearly.
But, what was the amount of indebtedness of the previous government and what is the amount of indebtedness of this government? Between May 2017 and March 2020: debt for 24,239 million in 34 months. According to Ecuador’s Central Bank, the previous government became indebted in the same amount after 9 years and 9 months (117 months), when the debt went from 10,205.3 millions, in August 2007, to 24,426.4 millions, in September 2016. Where has this heavy indebtedness of Moreno’s government gone? And despite this, these neoliberals say that there is no saving. Why is there no saving, neoliberals? You already know the answer.
In the same way, public statistical information shows how the country was received in 2007 and how it was transferred to the new government in 2016, regarding indicators of fiscal sustainability. The difference during these 3 terms is where has the indebtedness ended up? What savings are you talking about? When do savings exist: when there is investment or when there’s no investment? When do savings exist: when the debt has a return (through public investment) or when it’s a debt without return?
Debt processes have generated, either public assets, on one hand, or no public assets at all, and this has affected public patrimony, which can be used for future debt processes.
Public assets / external public debt (in millions of dollars): 90,000 / 16,600 = 6.5 times assets on debt in the Government of Rafael Correa.
Public assets / external public debt (in millions of dollars): 50,000 / 24,423 = 3.6 times assets on debt in the Moreno Government. If you consider the sale of public companies: hydroelectric power generating plants, the Pacific Bank, CNT, whose assets are close to $ 40 billion, the ratio drops to 2.04 times assets on debt. ¿What savings are neoliberals talking about?
But equity also shows the generation of savings that accumulates, with equity being the difference between assets and liabilities:
Equity = external assets – liabilities (in millions of dollars): 90,000 – 16,600 = 73,400 million dollars in the government of Rafael Correa.
Equity = external assets – liabilities (in millions of dollars): 90,000 – 24,423 = 65,577 million dollars in Moreno’s government. Equity is reduced by $ 8 billion. If you consider the sale of public companies: hydroelectric power generating plants, Pacific Bank, CNT, whose assets are around 40,000 million dollars, the equity will be 25,577 million dollars. In other words, if the country’s companies are sold, the assets lost during this government will be $ 47,823 million.
Therefore, privatization must be avoided.
Neoliberals: do you understand, now, why the country risk is so high? Because, if the international market hears that the state is going to sell assets and this implies a reduction in wealth, then it will be also known that the country does not have the conditionality to guarantee, worse to pay the dept. What savings are the neoliberals talking about? If the international market learns that a Productive Development Law (Trolley I and II) will not collect taxes for up to 20 years, the country will not have the resources to meet its debt commitments. Do neoliberals understand now why the country risk is so high?
Despite all this neoliberal implementation, based on the reduction of investment and public spending, and despite having higher incomes and greater indebtedness during Moreno’s government, the savings do not exist. Please, neo-liberals: it’s time to be honest and consistent.
Despite the above, let’s consider that the Productive Development Law I and II will not generate an increase in taxes in public finances during 20 years, and the fiscal deficit remains at 5% of GDP: after 20 years, the accumulated supplementary debt will be the equivalent to 100% of GDP. And if the government does no effort to pay the capital and only pays the interest, at that interest rate of 5% (considering the payment of the American debt), the government would have to pay 5% of the GDP to the holders of that supplementary public debt during a lifetime. This shows that long-term public debt with tax cuts is a mechanism to serve private capital accumulation.
This non-saving practice is being applied in Moreno’s government. There is no way of saving, but of reduction of assets and public patrimony.
So, what public savings are neo-liberals talking about? Don’t lie to the country anymore!
“From time to time, tell the truth, so that they believe you when you lie.” (Jules Renard, 1864-1910).
Informa Ecuador / Marcelo Varela / @MarceloVarelaE