According to the official discourse, the exploitation of the Yasuní is essential for the country to obtain resources to advance in its development; if so, the PLAN C (prepared by CDES) Redistribution of wealth and safeguarding isolated indigenous people should be a valid alternative proposal that citizens should support to draw the government's attention to the fact that we know that the exploitation of the ITT is not an insurmountable barrier.
Starting from the premise that countering poverty in Ecuador does not depend on the exploitation of the Yasuní-ITT, since this is the result of unfair income distribution structures and that it is not possible to overcome underdevelopment without affecting the excessive concentration of wealth.
This reasoning has even been made by President Rafael Correa himself:
“This poverty is not a consequence of a lack of resources, but rather, basically, of inadequate systems, perverse systems (…) we are in one of the world champion countries in inequality.” (The Citizen, May 8, 2012).
The figures are very clear in this regard: during 2012, the wealthiest 20% monopolized 52.5% of the income and, in contrast, the poorest 20% only benefited from 4.1% of the same.
Despite this, the national government is currently promoting a new discourse on “fighting poverty,” which ignores the need to deepen changes for a better redistribution of wealth and, instead, argues that it is necessary to obtain new oil resources to counteract economic scarcity. This new fatalistic discourse ensures that we must choose between the lesser evil, falsely stating: oil exploitation or greater poverty for the country.
This argument aims to justify the start of oil operations in the Yasuní nature reserve which (according to official information)[2] It is considered one of the most biodiverse areas on the planet and a transit place for uncontacted indigenous peoples.
Thus we went from Plan A (which sought to preserve the Yasuní, first promoted by social movements, and then rightly taken up by the government of Rafael Correa), to Plan B, which consists of the government's intention to begin oil operations.
However, there is also the proposal to implement a Plan C, which states: transform the unjust structures of wealth distribution so as not to exploit the ITT Yasuní area and still obtain the necessary resources.
Plan C considers increasing resources from the country's largest economic groups that pay low taxes in relation to the region's tax burden and that are also a major source of foreign currency. For example, the IRS reported that in 2012, $22 billion left the country, of which $2.23 billion went to tax havens. This represents much more than the $730 million per year estimated to be obtained from the exploitation of Yasuní.
Income gap by social strata
Source: Urban Employment and Unemployment Survey – INEC
Despite all the limitations that are visible, it is important to note that during the current government, social inequality was further reduced as a result of major redistributive reforms.
However, these reforms are currently in danger: the priority has changed from a progressive fiscal policy (that is, one aimed at making those who have more pay more) to a regressive policy, which is beginning to show signs of leaning in favour of the supposed need to generate an attractive environment for foreign investment.
This trend is surprising, since the government itself has seen how redistributive reforms have yielded good results for the majority of the population, although they are still far from having exhausted their redistributive possibilities, which were, moreover, limited.
We can thus arrive at two conclusions: first, redistribution helps to lift people out of poverty, even when these are still timid reforms; second, public policies have not yet been entirely satisfactory, as they have not generated results very different from those achieved by neoliberal governments (Noboa, Gutiérrez, Palacios) that shared increasing economic stability with an upward trend in international oil prices.
CAPITAL ACCUMULATION IN A FEW ECONOMIC GROUPS
If the current economic growth has had insufficient social results, on the other hand, the results for the large companies based in Ecuador have shown high profit rates for the wealthiest owners, generating an alarmingly concentrated economy. Income and productive assets are in a few hands.
Information from the latest Economic Census shows that the largest companies, which represent 101% of all businesses in the country, accounted for 95.81% of all sales made in 2010. Different sectors of the market are controlled by a few companies, which in certain cases reach levels of control similar to monopolies.
Examples of internal market control in the Ecuadorian economy
(market share)
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Sector
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They control the market
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Rest of the Market
|
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Agro-industrial food retailers (supermarkets)
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50% (La Favorita Corporation)
31% (El Rosado Corporation)
10% (Megasantamaria)
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9% (others)
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Oil production
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92,22% (two companies)
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7,78% (others)
|
|
Meats
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62,16% (Pronaca)
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37,84% (others)
|
|
Production of milling products
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71% (five companies)
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29% (335 companies)
|
|
Production of dairy products
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61% (five companies)
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39% (436 companies)
|
|
Hygiene products (soap, detergent, perfumes, cleaning and polishing preparations)
|
76% (two companies)
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24% (88 companies)
|
|
Manufacturing of textile products
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61% (nine companies)
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39% (1,493 companies)
|
|
Communications
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42,15% (Conecel/Claro)
31,88% (Otecel/Movistar)
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25,97% (others)
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Source: Martín & Varela (2012). National Economic Census 2010, INEC, SENPLADES.
The market is controlled by large companies, which in turn belong to economic groups linked to a few families from the privileged strata of the population. As these groups have greater control of the market, they also have the power to impose their conditions on production and circulation in the economy, and in this way to obtain higher profit rates on their investments.
Ecuador's tax authority (SRI) provides some compelling evidence of the high weight of these groups on the economy. The income of the 110 largest economic groups in the country is equivalent to 621 TP3T of the entire GDP. These revenues grew 91 TP3T between 2011 and 2012, reaching a total of more than 40 billion dollars.
The 10 largest economic groups alone (including Banco del Pichincha, Andes Petroleum, Eljuri, La Favorita and Banco de Guayaquil) had revenues exceeding 12 billion dollars in 2012.
The country's economic power is closely related to the control that multinationals have. Among the 110 economic groups, there are 408 companies that have registered as foreign, and half of these are companies that are domiciled in tax havens, making them difficult for tax authorities to control.
HOW MUCH DO ECONOMIC GROUPS CONTRIBUTE TO THE STATE?
Although economic groups increased their relative weight in the national economy as a whole, their Income Tax (IR) tax burden decreased in relation to their sales, that is, they paid a smaller proportion of taxes in relation to the increase in their income.
This tax burden went from 2,14% in 2011 to 2,01% in 2012. This means a reduction of 6,18% in taxes, although their income increased by 9%. However, the lower IR burden was offset by an increase in the ISD (Foreign Exchange Outflow Tax) tax burden, which went from 0,45% in 2011 to 0,86% in 2012.
In this regard, the Coordinating Minister for Production, Richard Espinosa, announced that the Government is making efforts to reduce the tax burden of the business sector with the intention of increasing investment to promote the change in the productive matrix (El Ciudadano, July 6, 2013). To this end, he announced that the tax burden on total sales of all companies was reduced from 2,06% in 2011 to 2,05% in 2012.
PLAN C: TO REDISTRIBUTE
The central argument of Plan C is that poverty itself is not a problem that depends solely on the volume of state income, but on how it is distributed.
For this reason, various voices from social movements have generated several proposals that are based on the need to democratize the current highly concentrated economy, improving income distribution and access to productive assets (land, water, credit, machinery, goods, etc.).
In recent months we have heard, among others: elimination of subsidies for high-income segments of the population and protection for low-income segments; declaration of national interest or nationalization of economic assets of the economic giants; promotion of labor reforms that guarantee a higher income for the families of workers; or, as we are arguing in this proposal, promotion of a reform of the entire tax system that seeks to collect from those who have the most, etc.
In this same sense, it is necessary to underline the demand for access to land and water that the indigenous and peasant movement of the country has been demanding. Examples of how to move forward in this direction are the approval of a land law that facilitates access to property for peasants, or a water law that deprivatizes and decentralizes the management and provision of water, while guaranteeing community management of water. These measures are urgent if we consider that less than 1% are representatives of powerful families who monopolized 51% of the hectares of land, while 99% of peasant families must share the remaining 49%. Regarding water hoarding, 1% of users belong to the private sector and receive 67% of the flow, on the other hand, 86% of users belong to community irrigation systems and receive only 13% of the flow.[6]
Another specific example of redistribution is to increase the tax burden on the 110 economic groups, which were the “greatest” beneficiaries of the growth and economic stability experienced in recent years. Currently, the tax burden on sales of the 110 richest groups is 2.91 TP3T. If we only increased this burden by 1.51 TP3T, we could obtain at least 2 billion dollars “extra” to what is expected to be collected, in the same period of time (25 years), by the exploitation of the Yasuní.
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Results of the proposal
|
|
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Net present value of Plan C
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20,585.3 USD
|
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Net present value for exploitation of Yasuní
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18,292.0 USD
|
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Surplus due to the difference between Plan C – Yasuní Exploitation
|
2,293.3 USD
|
Based on the estimate that economic groups paid an Income Tax of 221 TP3T (tax on profits), an increase such as the one we are proposing of 1.51 TP3T of tax burden on sales, is equivalent to an Income Tax of 381 TP3T, that is, an additional 161 TP3T to the current percentage that the Organic Code of Production, Commerce and Investments provides for. This is still a low tax burden on profits compared to what has been reported in the region, only higher than in Paraguay (351 TP3T) and Chile (281 TP3T).
This government has received the largest oil revenues in the country's history, but these resources did not significantly help overcome poverty because oil revenues did not serve to change the accumulation model. From January 2007 to January 2013, current oil revenues of 51.497 billion dollars were generated, a figure greater in six years than the 41.769 billion current dollars expected to be received from the exploitation of Yasuní in 25 years.
It is necessary to redistribute income through different mechanisms. This government has proven that such measures are possible, for example, when it made the banking sector pay for the increase in the human development bonus, when it renegotiated the foreign debt or when it forced private oil companies to change the types of participation contracts to service provision contracts with greater benefits for the State.
All these reforms were carried out without destabilizing the economy, as the promoters of private foreign investment often argue. In the end, it was shown that the companies did not leave and that the conditions of distribution can be transformed in a way that is more favorable for the majority of the population.
We firmly believe that we cannot give up on this type of measures that have not yet been sufficiently explored. It should be time for proposals, alternatives and debate.
We must not forget that this is a fundamentally ethical issue; human rights cannot be sacrificed in the name of finance; doing so results in barbarism, even more so when there are many socially just alternatives. If exploitation is, as the government claims, for social development policies, why not apply this Plan C that is more consistent with social equality and human rights?
To read the full proposal, please visit the website of the Center for Economic and Social Rights.
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