Investment in Ecuador

Today Hernan Pérez Loose of El Universo has an op-ed piece titled "El costo de la inseguridad" The op-ed is interesting because it reveals what is wrong in my country.

The whole problem started when oil companies using the current Tax code tried to get a refund on the taxes that were paid and when the tax forms were filled the state had the duty of returning the overpaid taxes. Instead of that the Internal Revenue Service said that according to their oil concessions they were getting enough from the state. In a clear violation of the same tax code the state refused to pay back the oil companies the overpaid taxes. The solution as I saw it was either Ecuador government paid back those taxes and then modifies it's own tax law or they paid back them but at the same time they modify the concessions to the oil companies. In any case the state had to bite the bullet and be the first one to comply with the law. Neither of those 2 options were taken.

So the oil companies decided to take the ecuadorian government to a higher international court and obviously they lost. Perez Loose op-ed hightlights the government contradictions that forces its citizens to comply with stupid regulations that are damaging to their own interests and the government itself is incapable of abiding to the same rules.

That denial that the rules are for everybody is root of all the problems with legal insecurity and the reason Perez Loose says, why people prefer to invest in guerrila battered Colombia rather than doing it in peaceful Ecuador. Ecuador is a country where anybody with a slight connection to a government official feels the right to be above the law. Very few people follow the law to its full consecuences.

Why nobody wants to respect it is the big question. The answer has two angles. The first one is pure and simple lack of tradition of respect. Since colonial times the law was designed not to impose some restrictions on freedom and recognize people's freedom, but rather as a tool of control and benefits to certain groups of power. That in turn has made the law a complex collection of restricitions and benefits that makes people think twice before complying with it. Only fools comply with the law. The law is not for smart people. My friend Enrique Ghersi likes to quote a peruvian dictator that said, "For my enemies the Law, for my friends everything". That in a way reflects why in Latin American countries the law is a tool of power, not freedom. Only those that we don't like should comply with the law following this logic.

In regards to the Law Ghersi says :

"The compliance of the Law is a cost benefit behavior. That is the reason why the people in Latin America barely comply the law, because it is too expensive to meet the regulations"

Getting back to the issue that Perez Loose points out, the Ecuadorian government should apply the same standards that requires to the general people. If they find it too hard to comply, then there is no reason for the people to comply with it.

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