MercoPress. South Atlantic News Agency

Ecuadorean bankers concern about “financial stability”

Members of Ecuador's private banking sector expressed concern Friday that recent government financial decisions and overall policies, together with the global crisis, are putting the country's financial system in jeopardy.

"Stability could be lost from the negative effects that the financial security law and tax reforms will cause," said the Private Banks Association of Ecuador in a statement. On December 17, a temporary legislative commission, which will operate until a new Congress is elected next year under the new constitution, approved a 0.084% tax on funds and investments outside of the country. The commission also approved an increase to 1.0% from 0.5% on the tax of taking funds out of the country. Instead of generating money for Ecuador, Rodrigo Espinosa, an independent economic consultant said it "instead, provides an incentive for companies and the banking sector to maintain resources outside of the country." Fernando Pozo, the association's president, said that industry executives may seek to talk with the government on the issue. "We're open to having a dialogue with the government, but we have the responsibility to say that things are not going well," Pozo said. Pozo added that the government should adjust its 2009 budget and repeal certain taxes on the banking industry. The situation could lead to "a new economic, political and social crisis" as happened in 1999 when leading banks went broke forcing the country to impose the US dollar as the country's currency, recalls the ABPE release. ABPE also underlined that currently Ecuador's financial network is "solid, solvent and liquid" but "stability and public confidence could be imperilled by negative effects" of recent financial decisions. But President Rafael Correa reacted emphasizing "the financial system was in excellent health" and although admitting the global crisis is serious, "we can overcome it with imaginative decisions". This was in line with previous statements when he said that "hard times are ahead for the country," particularly because of falling oil prices. Ecuador is South America's fifth-largest oil producer with a daily production of around 500,000 barrels a day.