Ecuador: an Election With Global Impact on Banking and Tax Heavens

Candidates Guillermo Lasso, a 65-year-old elite banker; and Andres Arauz, a 36-year-old progressive former Central Bank official have very different visions of how to lead Ecuador out of the pandemic and the current economic recession, but also on the role of international banking, he says in an article published by rebelion.org.

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“In 2016, the Panama Papers leak exposed the extent to which the world's rich and powerful had used offshore tax havens to launder money, evade taxes and hide their wealth. The leak exposed politicians and corporate executives from around the globe, including numerous heads of state. Iceland's prime minister was forced to resign after his hidden assets came to light. Virtually every country was splashed, including Ecuador, after it was revealed that Lasso owned a bank in Panama.

“It is estimated that the use of tax havens costs governments between $500 billion and $600 billion each year. Low-income countries lose more to offshore tax havens than they receive in foreign aid from developed countries. That is money that could be invested in education, health care, infrastructure and other pressing needs.

“Four years ago, during another election in which Lasso participated, Ecuadorian voters approved a referendum banning politicians from holding capital in offshore tax havens. It was the first vote of its kind anywhere in the world. In 2018, the government acted on voters' wishes by formalizing rules against tax havens into law. Not only were public officials banned from having assets or capital in such jurisdictions; but the ban also includes electoral candidates.

“Today, on the eve of the second round of elections in Ecuador, this issue takes on great importance. The election pits Lasso, a banker who for years has used tax havens and other low-tax jurisdictions, against Andres Arauz, an economist who helped design Ecuador's groundbreaking anti-tax haven reforms when he was head of the Central Bank.

“Lasso himself has admitted that he owns a bank in Panama, although he claims it is not a violation of the law. In 2014, even before the Panama Papers, Ecuador passed legislation prohibiting banks or their shareholders from having subsidiaries in tax havens, such as Panama. This law is of utmost importance for the Ecuadorian economy and the Ecuadorian people.

“Capital flight facilitated by offshoring is a global problem, but it is especially relevant in Ecuador's recent history. Banks, and bankers - like Lasso - played a major role in the economic crisis of the 1990s that saw poverty rates skyrocket in Ecuador. In the 2000s, under former President Rafael Correa, the government introduced new taxes on capital leaving the country, raising significant revenues to help rebuild the economy, drastically reduce poverty rates and avoid economic crises that could arise from dollar shortages; especially since Ecuador has had the dollar as its national currency since 2000.

“Ecuador was one of the first countries impacted, and one of the hardest hit, by the coronavirus pandemic. A new wave has forced the nation to declare a state of emergency in several provinces. After years of fiscal austerity, the current government of Lenín Moreno has a single-digit approval rating. Whoever wins next week's elections will assume leadership in a state less able to respond to a public health crisis than the state of 2017, when Moreno was elected”.