Forging a path toward economic freedom in Ecuador

A new tax reform law in Ecuador is laying the foundation for greater economic freedom, and Ecuador Libre, an Atlas Network partner, is a key player in defining new opportunities for Ecuadoreans to thrive.

Government spending, taxation, and regulatory barriers are obstacles to freedom and prosperity in Ecuador—and these factors have kept the country consistently near the bottom of Fraser Institute’s Economic Freedom of the World Report. Over the last year, Ecuador Libre conducted an Economic Freedom Audit in conjunction with Fraser Institute with support from Atlas Network, analyzing the country’s policies and institutions in order to diagnose the root causes that limit economic freedom. The new tax law, la Ley de Simplicidad y Progresividad Tributaria, is a direct result of the audit’s initial recommendations, and Ecuador Libre plans to propose additional bills to reform the country’s central bank as well as labor regulations, judicial efficiency, and trade agreements. Ecuador Libre reports that 1,000,000 people will benefit from the change.

Guillermo Avellán, Research Director at Ecuador Libre, with former Ecuador Finance Ministers Jorge Gallardo, Alberto Dahik, Francisco Sweet and Fausto Ortiz.

Ecuador lags behind other countries in the region significantly on issues of economic freedom, scoring the lowest across four of the five categories listed in the Economic Freedom of the World 2019 Annual Report and a dismal 118th out of 162 countries in overall rankings. The four low scoring indicators were Legal System and Property Rights (ranked 129th), Regulation (ranked 138th), Size of Government (ranked 77th), and Freedom to Trade (ranked 117th). These factors have contributed to Ecuador’s steady economic slowdown during the last decade, evidenced by high unemployment and underemployment, unprecedented recurrent fiscal deficits, and restrictions on free trade. Ecuador Libre research director Guillermo Avellán points out, “a key challenge to overcome is breaking through the social stigmas over free-market ideas and the benefits they bring.”

As part of the audit’s fact-finding mission, Ecuador Libre organized conferences in Cuenca, Guayaquil, and Quito, engaging representatives from the public and private sectors on issues such as the country’s low supply of skilled labor, gender disparity in the workforce, government spending (currently 38% of Ecuador’s GDP), the highest tariffs in the region, regulatory trade barriers, and more.

In addition, Ecuador Libre spoke to university audiences and reached out to local media in order to spread the message that economic liberation is the most effective method to reverse this slowdown. Their work was covered in 92 radio interviews and 19 television interviews, attracting more than 17,700 followers across social media platforms and over 5 million impressions.

Atlas Network’s ongoing Economic Freedom Audit series is designed to help local partners communicate the advantages of free enterprise, using research, media, and direct engagement with policymakers to recommend public policy changes that move the country toward greater economic freedom. Countries with greater freedom improve their ranking in the Fraser Institute’s annual Economic Freedom of the World Index. Audits have been undertaken in Argentina, Bosnia, Brazil, Côte d’Ivoire, Ecuador, Egypt, Ghana, Greece, Jordan, Kyrgyzstan, Lebanon, Malaysia, Morocco, Namibia, Nepal, Oman, Panama, Serbia, Sri Lanka, Tunisia, Turkey, Ukraine, Uruguay, and Venezuela.

Ecuador Libre received an Atlas Network grant to conduct an Economic Freedom Audit in partnership with the Fraser Institute.