Grupo Spurrier is the leading company in the provision of strategic information on economic and political issues regarding Ecuador, which we monitor through Weekly Analysis and Análisis Semanal. We specialize in economic research, competition advice, market research, business plans, and workshops in economic scenarios and regulatory changes.
The most recent tax bill is out of the Assembly and would become effective on March 11, as mandated by law. It largely meets the 2024 fiscal needs, but does not allow reducing the arrears of 2023 nor provide adequate funds for 2025. How will this tax reform impact on credit availability? on growth? what can be expected from interest rates? what will happen to last year's budget arrears? what was the performance of sales, by sector? exports? imports? what is the inflation outlook for 2024? will the dollar strengthen or weaken? In this issue we update our review of the economy's performance based on the indicators available at end-February. WA#05 brought the review with the indicators available at the end of January.
In this analysis we review what the international community has to say about the Ecuadoran business environment. On January 9, President Daniel Noboa declared an "internal armed conflict" to combat the wave of violence and narcoterrorism. The first group of indexes are related to institution quality: Global Peace Index, Rule of Law Index, Corruption Perception Index, and Impunity Index. We continue with the group of economy-related indexes: Heritage Foundation Index of Economic Freedom, Fraser Institute Index, Harvard Economic Complexity, WIPO Innovation, and the Hinrich Foundation's Sustainable Trade Index. What indicators highlight the challenged health of both institutions and rule of law in Ecuador? How is economic complexity, competitiveness and innovation evolving?
The stock exchanges of Colombia, Peru and Chile are unifying their operations in a single regional platform that will kick off in 2025. Ecuador was left out of this initiative that will allow investors to access a broader, more liquid market with a wider range of financial instruments. In the meantime, Ecuadoran businesses will continue to have restrained financing availability. Why is the Ecuadoran securities market missing out of regional integration? Why does the ISD restrict the entry of funds to the capital market? Are securities depositories prepared to provide international services? What are capital markets financing challenges that business faces in 2024? What about banking? What about large institutional investors? What will be the performance of government bonds in the secondary market?
On January 9, President Noboa declared the existence of an "internal armed conflict" in response to a series of violent events including the armed break-in at the state television channel during a live broadcast. The new circumstances caused concern among policyholders who wondered whether life and property coverages would be maintained. What does the changed environment mean for policyholders? What events are excluded from coverage? Could these new events cause an increase in premium costs? How did insurance perform in 2023? Which were the most dynamic lines of business? Which were the worst performers? In which lines did the cost of claims rise? As of each insurer, what is their financial position? What is their risk rating? What is the line of business it specializes in? What has been the performance of life insurance companies? What is the balance sheet situation of prepaid medical companies?
The Assembly is debating the urgent tax bill the president sent on January 11. How much revenue would the law as it comes out bring in? How would the burden be shared among consumers, businesses, banks, large estates? How would insufficient financing affect creditors: external, internal, contractors, suppliers, government employees? If sufficient funds are not received from abroad or if ITT oil output is drawn down, what are the prospects for growth this year? Would the economy lapse into recession? In this issue we update our review of the economy's performance based on the indicators available at end-January. WA#50 brought the review with the indicators available at the end of December.
The fiscal crisis is taking its toll on the rest of the economy. A crowding out effect is occurring. Increased public spending crowds out private investment because it is financed through domestic savings funds, which raises interest rates. Higher interest rates make it more expensive for businesses to finance their projects and reduce their level of investment. In December, the government mandated large taxpayers to self-withhold income tax on a monthly basis for up to 10% of their taxable income. This will withdraw liquidity from business. In banking, the self-withholding will withdraw an additional $237M of liquidity in 2024. In addition, the government created the obligation for banks to temporarily pay ISD on interest and amortization of foreign loans. Bringing funds from abroad will become more expensive, and added to the domestic rate ceilings, many operations will become unviable. There will be less money available for credit. What will be the consequences be for banks of the taxes proposed by RC, Rafael Correa’s current electoral vehicle? Is it true that banks turned "extraordinary" profits? Have banks already overcome the impact of Covid 19? What is the relationship between profitability and credit supply? Do the measures discussed by the Assembly contribute to strengthening banking soundness?