Until when do we have to wait for solutions?

For years we have been circling around the same place, as a carousel. Solutions for our problems aren’t decided on, years go by, the rest of countries move forward and we still are stagnant which means that there is a backwards move. Countries are like shop windows, and these can be tidy or messy and disorganized. For those who intend to invest (local or foreign), compare them and only visit them when they are motivated, this is, when they are clearly designed with: order, legal security, private property rights and with everything which gives certainty on short, medium or long term. In our country’s case ten years have passed since the tragic crisis caused for not solving what could have been solved, keeping us circling in that carousel. With the dollarization we said that it was the central axe to developing, because to obtaining a sustained growth there were many things to be corrected as part of these solutions, such as: the complete elimination of monopolies, among them the electric and oil (nowadays stronger as ever); the investment attraction through legal security to recover and establish a state of right and a country for everybody; the competitiveness and freedom of action (both nowadays in backward move). In the fiscal and financial sector we talk about eliminating an obese estate, diminishing its size and with a zero base budget. In the topic of foreign debt to be able to restructuring it avoiding doing what shouldn’t be done. Nothing has been done. They have forced us to continue in the carousel, in part because a political morbidity which through populism, hypnotizes the population dragging it to continuing in the carousel. The other part, because many elites have left an empty space thinking that they are able to manage themselves inside this squall without being affected, because if they intend to changing things, it would mean to becoming politicized, when what really happens is the opposite. It’s necessary that those elites, get personally involved and/or with resources to capacitating the civil society and obtain a favourable public opinion towards the forward move, and be able to getting off from the carousel. This is the only way for everybody’s rights to strengthening by giving the opportunities which the country needs to equal or exceed Colombia or Peru, country’s which are taking our prosperity. Unfortunately, we are living a parenthesis in Universal History in which we do not exist for applying regulations of XXI century. In this way, they keep us going around in a carousel at the same place, hindering to entering into the high speed train of financial history, for a strong present and an extraordinary future. ¿Until when are we going to allow this situation? Until when do we stay in stagnation? Until when do we go around in the carousel?

Ing. Joyce Higgins de Ginatta

Guayaquil, August 2009

“Dollarization: récipes for success”

On June 22nd the IX FIE’s Congress was held and was called: “Dollarization: recipes for success” which gathered well-known characters with vast knowledge in the chosen topics for this event.

At the event’s opening from left to right appear: Claudio de la Rosa, El Salvador FIE’s President; Rodney Goodwin, USA FIE’s President; Jaime Nogales, Guayas’s Prefect; Joyce de Ginatta, Global FIE’s President; Luis Chiriboga, Guayaquil’s Vice-Mayor; and Enrique de Obarrio, Panama FIE’s President among others.

Moments in which Mauricio Pozo, former Ecuador’s Secretary of the Treasury, explained to the audience, the country’s positive changes thanks to dollarization system.

As usual, Guayaquil’s Mayor Jaime Nebot words were an incentive to the audience.

Her own experience in foreign investment was told by Ana Vilma de Escobar, former El Salvador’s Vice-President.

Alvaro Vargas Llosa, emphasizes the importance of the taken decisions or the rejected ones, by the Latin American Governments, because the Continent’s future will depend on them.

“To be educated, be informed, keep a democratic interview, offer perspectives and be critical, severe, acute and respectful”, where some of the characteristics which Alberto Padilla, CNN’s conductor of Economy and Finances, said a journalist must have.

Claudio de la Rosa, El Salvador FIE’s President was very clear as he said that only with add value to what is made, the country’s achieve development.

We can see from left to right appearing: Abelardo Pachano, Mauricio Pozo, Diego Ordonez, Joyce de Ginatta and Franklin Lopez.

From left to right: Enrique Obarrio, Panama’s FIE’s President; Luis Chiriboga, Guayaquil’s Vice-Mayor; Joyce de Ginatta Global FIE’s President, and Jaime Nogales, Prefect of Guayas.

From left to right: Carlos Vera, Alberto Padilla, Jaime Nebot, Joyce de Ginatta, Álvaro Vargas Llosa, Ana Vilma de Escobar and Emilio Palacio.

Once more, we are able to appreciating everybody attending at the Guayaquil’s Hilton Colon Hotel conference room, who where witnesses of the gathered massive audience.

On August 4th, Ing Joyce de Ginatta was part of a Forum discussion debating the topic “Democracy: Failures in Mexico and Latin America for democracy” organized by Civic

Power A.C. and the Friedrich Naumann Foundati

Latin America must forewarn its course

Dr. Alvaro Vargas Llosa

Latin America (LA) and Ecuador are living a decisive borderline moment. Depending on the taken decisions or the ones which aren’t taken nowadays, the destiny of this important but traumatic continent in which we have to live has to be solved. It’s important that the Ecuadorians are aware of the situation in which they live and what is also happening in other regions of the continent. Together with two more authors, many years ago, we published a book titled “The Manual of the perfect Latin American Idiot”, for which we travelled through LA, including Ecuador, to be able to presenting it. I remember that in the question and answer sessions a very interesting psychological phenomenon happened: somebody requested the word and said: “I must confess that sometime ago I was an idiot but not any longer”, someone else said:”I’m in the process to deciding but I still think that I’m a half idiot and would like to know what to do to stop being it”, and a third person said: “I stopped being an idiot, but I have relapsed again. What can I do to cure myself completely? The mentioned session turned into one such as the anonymous alcoholics, in which everybody confessed the degree of idiocy. The other book writers and I never suspected that after more than a decade of its publication there were still some questions which were set out and would be a matter to debating. For what the depressing conclusion is that those big decisions haven’t been solved still. However, it’s not necessary to lose the hopes neither the battle encouragement, and there is to be aware that the future for freedom is being risked within the continent, and who wants to win that match has to be part of that decision. We find ourselves in the context of a very important international crisis, a crisis which the enemies have qualified as the collapse of capitalism, which is a big fallacy that is being used to try to strengthening their shady totalitarian purposes. It isn’t the capitalist system, the free commerce or liberalism system (whichever you wish to name it), which entered in crisis, but it was an excess of Estate’s intervention, a populism measles which appeared unexpectedly all around the World. In an incredible way some of the leader countries, became infected of some of the Latin American vices, which in the last years began to adopt incipient or partial shapes of populism which generated terrible consequences. The case of the United States The United States which is a role model country at capitalism field for many people, in the last years denial capitalism, something which no society should give away: to live beyond your means (that is, to forget the capitalist process) and savings, because before investing it is necessary to save. The process to creating richness, is a constant dynamic of saving and investment, and if a society stops saving and spends beyond its means it’s incubating an immense crisis.

In the decade of the 90’s the savings rate was only at 17%; however in that same period of time the investment rates exceeded the 20%, so to speak, investment was bigger than what was saved in an irresponsible Latin American way. In the following decade (2000) the North American situation worsened because of the governments, the businesses and all society actors’ failure, because the savings rate continued falling and was reduced to approximately to 14%, while investment stood to more than 20%; as the savings rate dropped, the investment rate rose: the result was inflation. It was so that when the savings stopped, the crisis of the system was unavoidable. Any society in which the savings rate are reduced in a irresponsible way or that live an infinite credit, is destined to succumb both in the economic as to the financing. In this context several other aggravating factors were produced. Fearing an economic recession which they were going through, the North American Estate began to make money in an irresponsible way; between 2001 and 2003 the interest rates dropped from 6.5% to 1%, without any justification. At 2008, dollars were manufactured in such a spectacular way that doubled the economy’s growth rhythm; the monetary mass grew approximately a 30%, while the economy grew between 16-17% (accumulated from 2001 to 2008). To all the above mentioned we add a policy of populist incentives, so the responsible of the financing system would grant credits to those which weren’t in conditions to pay them. A great amount of regulations and laws created evil incentives in the financing system so the bankers and other institutions would lend money without any type of guarantee in exchange. This generated a kind of frenzy investor, and the ones involved in production and investment wanted to participate in the real estate prosperity. On the demands side it also produced another frenzy equivalent: everybody thought to be under the conditions (with or without the necessary means) to the housing dream, which is noble and without objection, but has to be sustained to an inexistent economy. With this strategy another outbreak was produced, with planetary consequences. Great part of the world is in recession. What did this mean for Latin America? It was a brutal impact. LA was decreasing to average rates of 5% and 6%; last year it was around 6%; while this year, the economy will contract. However it’s calculated that in the last five or six years, poverty had a substantial decrease (approximately 40 million people aren’t poor anymore). In the 2.000 decade, the middle or middle low class has been linked mostly to the market; it has ended up being MIPYMES which in many cases offer services to the big businesses, which is a more dynamic and sustainable process in the medium and long term. All this has happened by the combination of the 90’s liberal reforms and the temporary prices of raw materials in foreign markets, which produced a capital injection in LA (estimated around 300 million in the 2.000 decade). The money assumed for the governments (populists or not) fiscal revenues that were in many cases partially redistributed to certain sectors of the society through social programs. Combining the factor to energizing the economy (thanks to the 90’s reforms) and the

important increase of capital which entered to LA (thanks to the commodities), it was possible to decrease poverty. However this process came to stop last year, because of the international crisis. Then, the context in which we are in now is very interesting because what happened in recent years was also a form of friction in LA. When an astronomical capital injection is produced linked to a temporary price of raw materials the trend is to diffuse, to fade the border which separates who does things well or bad. So, in those countries such as Venezuela, Bolivia, Nicaragua or Ecuador, which were doing things badly or weren’t doing them well, had good results and even exceeded the neighbouring countries which are in the right path towards progress. The countries which will succeed will be those which are able to watch for themselves, do the required reforms, and be able not only to confront the new international context but to make the most of the crisis and turn it into an opportunity. Nowadays in LA there are many types of governments, which I want to divide into two models: the modernist, which with nuance and variants want to hook La to the great currents of modernity, opt for democracy, lead with the institutional coexistence and political system, open their economies, grant legal security to investment and create institutional protection systems of the individual so that commercial society would be capable to generating more richness in an infinite way. We have people from left and right wing, an interesting phenomenon which our countries live. We have countries ruled by the right wing governments such as Colombia or Mexico, which are part of the modernist. But we also have countries which are ruled by centre-left wing, a social democracy, such as Brazil, Peru, Uruguay, Costa Rica or Chile, an important group which nowadays register (at least partially) in the modernist wave but really come from the left. Then we have a group of those with an archaic vision of LA, the enemies of modernism, who want to back down La to a cave, because in that context only they can win. This is a left which I call “carnivorous”, and to which belong: Venezuela, Bolivia, Nicaragua, Ecuador, maybe Paraguay and I hope not El Salvador. It is a current which isn’t the majority in LA but starts to be sufficiently significant for us to have the civic compromise to revert that tendency, because it could be transmitted to the rest of the continent and because there isn’t any reason for these countries to suffer regimes which already proved their failure in the past, which was in great part the XX century history. We also have the side of the revolutionary, which propose an authoritarian populism. The populist systems devaluate legality and they are controlled by a leader, who is seen as a kind of semi-god, and has power over all authority and legality; apparently it is a challenge to oligarchy, which is a fraud because all populists replace one oligarchy for another one; forces the rich to transfer money to the poor. In LA, populism probably starts at the beginning of XX century (around the Mexican Revolution). At the beginning of the 80’s we find ourselves with the greatest disaster

that the Latin American history could have ever imagined, because not only the productive system was ruined but also the whole society was dishearten, they didn’t believe in anything or anyone and this made them vote for anybody. That was a moral and psychological consequence (much more than economic) which was for decades present at the disastrous Latin American populism and it is a pity that currently several Latin American countries are going back to populism. Venezuela’s case In the 50’s, Venezuela was seen as a successful and promising country. The income per inhabitant was around 70% of the North American one, that is, a country which was clearly headed towards success and progress. However after the disastrous populism, this country was ruined and with it, neo liberalism came, which was the consequence of populism. Learnt lessons

It isn’t true that big companies can only emerge in countries in which an extended education level and easy access to credit exists.

It isn’t true either that the size is the cause for business economy success. The size of the businesses is a consequence of its activity; it’s a process of bellow up.

It isn’t the access to great capital which makes the capitalism greatness, but the other way around.

When big crisis are produced to the system is when businessmen creativeness becomes sharper.

It’s not understandable that Bolivia sits upon an extraordinary richness of natural gas which could be able to revolutionize the world’s energy doing things correctly instead of destabilize democracy (as it has been done in the last years) in the name of sovereignty.

There is to improve technology innovation which is what allows businesses to producing more.

Along my investigations, I have discovered that the poor countries own an extraordinary and infinite managerial reserve which can be exploited in moments of crisis to the point of ending up being a referring. It’s fundamental to understand that the market economy or capitalist liberal model must succeed in LA; to understand that the greatest allied are the poor, because there is a big business reserve.

Director of Global Prosperity Centre at Independent Institute, he is the editor of Lessons from the Poor, columnist of the Washington Post and author of several books. He was born in Peru and obtained his B: S. C. In International History at the London School of Economics. He has been member of the Miami Herald Publishing Company Directive, correspondent of London’s ABC newspaper and Wall Street Journal, Los Angeles Times, BBC World Service and Time Magazine contributor. His articles are published in twenty countries and is lecturer in Latin America, Europe and the United States.

How to attract foreign investment?

Dra. Ana Vilma de Escobar Former El Salvador Vice-President

In these times of crisis, the investments have a very important role. The dollars flow come from remittances, exportations, some foreign investment, debts, etc. However we can do a lot to attracting investment in a direct way towards our countries, because there would be immediate benefits in the improvement of deficits of current and capital accounts. In the last five years I’ve made more than fifty trips around the world, staying more than 360 days outside my country, to attract foreign investment. I’ve made them convinced that it is an important bet to not only transform El Salvador’s looks, but also transform Central America’s appearance. Several times I used the Central American hat, with the eagerness to locate my country inside a more ample context and show the potential which the Central American region has. The world moves in economic regional roles and Central America has turned into the third more important market of Latin America (LA). It’s necessary to impel competitiveness, without detriments or ideologies When I arrived to the Vice-Presidency, it was the moment to apply my professional experience to serve my country (something which all politicians offer). I was impressed in a positive way, as I travelled in 2004, with the candidate to the Presidency at that time, and visited the country’s 262 Municipalities to get to know their needs. We got in touch with the local leaders of each city council, and their answers surprised us, because they didn’t ask for gifts or anything else, but only “opportunities”, to solve by themselves the needs they had: an employment which would allow them to develop and have better income. Currently, El Salvador has a young population, great part of their families are in the United States (more than two million Salvadorians) and 5.7 million inside the territory. When young people think about working, they think about going to USA, which reflects that there aren’t many opportunities in the country in spite that El Salvador has changed in the last two decades in a long term vision. They have been two decades in which we reached political stability, which has allowed continuity in the economic policy. Since 1989, we launched a program of macroeconomic deregulation reform. As a result of that initiative we were in second place as the more open country in LA, according to the Heritage Foundation; we adopted the dollar as our legal currency: we maintained the legislation level and interest rates which were the lowest in Latin America; we modernized the telecommunication sectors, the energy distribution, the pension; we privatized the banking system which had been nationalized since the 80’s. The Salvadorian banking system represented the third of the total of banking assets in the Central American region excluding Panama.

We have kept international rankings which we take care of. For example, El Salvador is one of the three countries inside LA (with Mexico and Chile) which maintain an important grade of investment. According to the World’s Economic Forum, we are the eighth most competitive country (five years ago we were in third place at LA level); if we don’t take care of the ranking, the country could weaken. Since the 90’s we started an important social development. Our GDP practically tripled between 1992 and 2007, achieving to reducing our poverty index from 60 to 34 points; while the extreme poverty decreased from 28 to 14 points. We raised the literacy campaign rate to 85%, and for young people among 15 and 24 years it rose to 95%. What is necessary to do to attracting investment? The political stability can be obtained with social stability, because this is the way in which the investors measure the countries, besides of: observing their economic development, evaluate the compromise which the country has towards human development, to notice the way it is governed, the state of right, and the ability with which decisions are taken at country level. It’s necessary to define and construct concrete strategic ways to promoting growth and fight poverty, which should be part of a country’s vision. There must be a clear identification of the objectives; define to which countries we want to go and ask for investment; what compromises will be established among the institutions of the private and public sector, were are all the efforts going to, how will the compromises be achieved among the local governments so the foreign companies aren’t seen as the goose that lays the golden eggs which come to solve all their problems. The definition of strategic challenges helps to define public policies which will be adopted to be able to impel certain initiatives. In his way and at every level (public and private), it is possible to understand the benefits which the direct foreign investment brings, such as: employment, transference of technology; infrastructure development, new tendencies, the modernization of the approach to elaborating public policies, the development of new commercial partners, etc. The direct foreign investment in El Salvador We are allied of Taiwan, which in a determined moment offered us a technological fleet, for which they would look for to attracting Taiwanese businesses to our country, according to their governor’s agreement. We worked two years for this purpose, but the companies didn’t show up. Taiwan with willingness to help offered a fund for the businesses to be installed in our country but even so, it wasn’t successful. It is necessary to be aware that nobody gives away money. The investors go to another country to do businesses. Therefore, our country which at that moment didn’t offer competitive advantages to Taiwan, did not call the attention of the investors, and we weren’t prepared with human capital to absorb the employment which was coming.

Something similar happened to us with some Arabic countries, with which we were also allied, and they offered us a fund of 300 million dollars, but we didn’t have any concrete project to analyze. This was another opportunity which was wasted. In the topic of the textile sector in which we were severely hit by the entrance of China to the World’s Commerce Organization, we saw many businesses running away (approximately more than 35 businesses went away), besides of losing 10% of the total of employments in the mentioned sector. It was then that to avoid more escapes and that the sector continues to destabilize, we designed a strategy with the public and private sector, for the industry to betting to the chain of value. With this we headed the efforts to attract investment from Brazil, a country with which he had very little commercial or diplomatic relationship, however we had competitive advantages to offering and we were successful to attracting investment. Another type of investment was the businesses attraction, such as Dell Computers. El Salvador was aware that it already had an economy of services (63% of GDP competed in this area), we had developed telecommunications and wanted to impel the development of contact centres. However, at the beginning, Dell didn’t want to know anything about us. So then we went after them, and we were able to make the high executives to be interested, and they came to our country, at least, to take a look. The day was prepared as for a gala, we managed time in a fantastic way and we achieved that the directives of the companies which they wanted to visit would be there to answer and assist to all their questions. When we dropped them at the airport they already had another mentality. It was so, that Dell settled down in my country and was the cause for the development of the centre of contacts Another success has been the strategic alliances to expand the maintenance sector of aircraft, because we identified the competitive advantage we had in that sector. El Salvador has its own airline: TACA and we were giving maintenance to their aircraft with 100% Salvadorian personnel, during the last 20 years. In a given moment the company of aeronautical maintenance, AEROMAN, looked for strategic alliances with other airlines that due to the increment of the cost of the fuel, they needed to lower their budgets and they requested the government that supported this initiative, which committed through maintaining an approach with those implied to be able to overcome the biggest obstacle: the lack of mechanics. That’s how an alliance with Air Canada was achieved to give maintenance to their aircraft and be able to expand the sector in the developing process. El Salvador has now identified, that one of the strategic bets is to turn into a distribution and logistics centre at regional level, for which a first level harbour structure was constructed. But when we decided to start the tender process to granting it, we were aware that time had passed because during five years we have had four presidents of the Harbour Commission, beside of the fact that the discussion of the decision of the port was also given in middle of a presidential campaign, which ruined it completely. This made lose what had already been achieved that was two years of promotion with the international global port operators, who already had

showed interest to participating in this process of concession in El Salvador. In fact there was a lot of interest of several countries, but regrettably it shattered. It will be now for the new government to take up again this topic; investment or the concession of the port must be analyzed with more care and a cold mind without misunderstandings or nationalism. Conclusion We must always be aware to thinking what the investors are looking for in the countries. The majority will look for: political stability, clear rules of the game, that the country isn’t going bankruptcy, but overall the human resource quality, education, infrastructure development, the competitive energy, etc. The investment would help to solve many of the problems which our countries have nowadays. The moments of crisis are moments of reflection to be able to adopting decisions and measures to helping us to attract investment. The foreign investment will not come unless we are able to understand what investors are looking for; in the end they come to generate business, but there is to be aware that with them they can help us to construct more viable countries and that finally the investors are partners of our development.

¡Foreign investment requires everybody’s commitment!

Dollarization and competitiveness

Dr. Rafael Rosenthal Vice-President of ITAU International Bank, Argentina.

Dollarization was and is somehow or other, a lesson which each citizen decides to take when the time comes in which they want to keep their dollars in their pockets and not changing them for the euro, yen or any other currency, but even less for the bolivars (from Venezuela). Argentina had a similar situation as the one in Ecuador. In 1991 Argentina had a hyper inflation; there was political instability in spite of having a president which was elected with much support; income taxes weren’t collected; the economy was closed and we had to ask permission to the politician in turn to exporting; the secretary of commerce decided if you could or couldn’t import. Likewise a vice was suffered: the fiscal deficit, to spend more money than it enters, to spend what one doesn’t have and get into debt to pay. Not knowing how to save is a vice in which the United States has also fallen into and nobody is free of this and it is required a lot of fiscal discipline for not falling into it. The debate about dollarization was abundant and arduous; its complexity drove that the system denominated convertibility be hybrid, because it ended up being a quasi dollarization. What the government did was deciding not to print more local pesos and have them as a reserve (in gold, foreign exchange or dollars) in the Central Bank, and basically 90% of the those reserves of foreign exchange were dollars. The following measures were taken:

Monetary reform, viable thanks to the Central Bank’s independence.

Aggressive Fiscal Reform (taxes were lowered)

Some evil subsidies to exportations were eliminated.

Some internal incentives for external production were cut down.

The economy opened up, because the country was forced to competing.

There was an increase in the customs union which was called MERCOSUR, and its 90% was the commercial interchange opening.

The convertibility was a pillar for a more structured reform. Inflation decreased in an impressive way in those years, in which the German marc still existed, as well as the Italian lira, etc. The topic about sovereignty was discussed, because they claimed that the loss of the peso was to give up the sovereignty, for which they decided to maintain it. Sovereignty really is to give up the inefficiency and manage the public administration with responsibility.

Inflation One of the main objectives of convertibility was to control the price evolution, and in that aspect the plan was successful. At the moment in which the convertibility was implemented, in April 1991, the annual rate of inflation overcame 260%. However, in the following years, the inflation rate decelerated gradually, until reaching one digit value until the end of 1993. Between 1994 and 1999, the Consumer’s Price Index, had an annual average increase of 1.34%, in which deflation was registered until the end of the mentioned period.

Prices Index toward Consumers Percentage Variations

Type of exchange Between 1991 and 2001, the economy moved with a real exchange under rate, but quite stable, basically to a 1 to 1 of the nominal exchange rate against the North American dollar. The still dollars stability in front of other foreign currencies (and not the current strong depreciation) and the low inflation were predominant during convertibility. Between 2002 and 2007, we are able to observe in the same graphic that the real type on exchange suffered a strong devaluation because the Argentinean peso and the majority of the other currencies versus the dollar, lost value at the end of 2001. The real exchange rate improved more regarding to Brazil and the Euro Zone (185% and 180%) than regarding to USA (89%), being the main cause of this differential behaviour among different foreign markets (the last years depreciations) of the Argentinean peso versus the euro and the real. We appreciate exchange differences between exporting to Brazil and the European Union than to making it towards USA, because of the strong depreciation which the peso experimented versus the real and euro.

Exchange Rate

Index of Multilateral Real Exchange Rate

Exchange Rate Index of Bilateral Real Exchange Rate

Growth The deposits and credit increase gave a strong economic support between 1992 and 2000 which was only interrupted by external shocks such as the Mexican devaluation on December of 1994 and the Brazilian devaluation in 1999. The above mentioned demonstrated that the convertibility contributed with great strength to the macroeconomic variables although showing certain violations in front of devaluations of the main commercial partners.

Growth

Gross Domestic Product Annual Variation

Growth Gross Domestic Product

Index 1980 = 100

The economic growth showed a clear growing tendency since the implementation of convertibility.

Foreign Commerce When being increased the predictability horizon a substantial increment of external trade took place. The imports of capital goods increased 492% in the period 1991-1998. Argentina improved its external image in those 10 years. What is important to monitor under convertibility outline?

1) Fiscal Equilibrium: Since in outlines of convertibility the Estate isn’t able to finance through monetary emitting, it’s fundamental that the primary result of the public sector is balanced. Otherwise, and as it happened in Argentina, the situations of fiscal deficit under the convertibility outlines generate increases in the foreign debt level, re nurturing the weakness of the public accounts and increasing the probabilities of a sovereign default.

Foreign Commerce

External Sector US$ millions

2) External shocks: In outlines of the type of fixed exchange rate, the external shocks affect seriously the local activity level because the monetary policy cannot respond rapidly to changes beyond the fact of this situation. In the Argentinean case, you can enhance the Mexico crisis in 1995 (“tequila effect”) and the Russian devaluation in 1998.

3) Competitiveness: As the exchange rate is fixed to the dollar’s evolution there is the risk that the type of exchange is appreciated respecting to the commercial partners. This would reduce the local exportations competitiveness, weakening the external accounts and the internal activity level. The local production is replaced by imported products, generating a vicious circle which could drive to a macroeconomic instability.

Conclusions

The convertibility supported the general growth of the Argentinean Economy during 10 years. However, the plan wasn’t based only in the exchange type, but being accompanied of the Economy’s general reform.

Convertibility allowed resisting important external shocks such as Mexico’s and Brazil’s devaluations and the Russian default.

Likewise, it didn’t hinder the exportations growth, even with average prices of WTI of US$ 24 or of soya at US$ 120 (nowadays US$ 70 and US$ 400 respectively)

However convertibility’s security was severely affected by the fiscal indiscipline and growing debt to financing the current account deficit.

The Convertibility Plan was not accompanied by a program for labour flexibility and unemployment restraint.

The exit of the Plan affected the right for property, with the savings confiscation; foreign debt stopped being paid; and the Principle of Contracts Execution which was ratified by the Supreme Court of Justice.

Post convertibility, a strong contraction was experimented accompanied to inflation.

Currently, Argentina suffers economy stagnation with a high index of inflation, with less unemployment and a positive fiscal balance.

A country is successful when it competes and gets rid of obstructions (regulations), because it gets to its maximum potential. It is very difficult to leave a monetary system without affecting the right to the property. For what I allow myself to suggest not taking that risk, improving what you have, taking the example of successful experiences.

Rules for a successful business

Mr. Robert Watson YANBAL’s General Manager Ecuador

Peru

In my concept, success is reached when the opportunity meets with preparation. In our countries there are many opportunities, but unfortunately in many occasions they aren’t near you and on the other hand there are tremendously prepared people which don’t reach the opportunities. To make a small business successful the person’s preparation which is investing plus the opportunity to developing it, must be joined. To be an enterprising and start a business isn’t easy; it’s easier to be an employee, have a place, a roof upon you, and a schedule and not have the worries for the risks in which a person’s goes into when starting a business. In fact, 50% of these undertakings or new businesses fail during the first year, generally, because of a lack of planning or the way to leading the market, or simply because they weren’t prepared to face that challenge. There are a 95% of the enterprising or new businesses which fail before the fifth year so there is only 5% left of those which achieve getting to be there for 30 years. However, inside that group there is a 90% which also disappears sooner. This happens because basically the business changed or it wasn’t that good, or it didn’t grow or supported the growth, because of the transition, family involvement, etc. How can a business prosper? A proposal of value or service is required-considering people’s wishes- and of an enterprising with vision and the necessary passion to push forwards the business. At the beginning there can be lots of ideas, but if one of them turns into a business and it is managed and worked through time in a consistent way, all the obstacles can be defeated and break all barriers, they are signs that the business will be viable. The economic stability which dollarization offers us helps us to force ourselves to push those businesses to make them grow and be successful. I could notice that in Ecuador, the long term is one year and the short term is one or two days; but for a business to be successful there must be an ample view. We define the short term, from one to five years; the medium term, between five and fifteen years; while the long term, is around 30 years. Let us observe next what the businesses require in each term. At short term... They offer profitability. - No business which isn’t profitable will be able to prosper along the time. If it is based in political or economic advantages which are at short term, it will disappear. For example, Bolivian soya exporters earned a lot of money exporting the above mentioned product to Colombia because they had a preferential price; the moment, in which a change arose, the business was over. Therefore, it’s necessary to have a value equation to be supported by itself through time.

Organization: Because it is required from the enterprising to have a work team (small or big) with a structure to be able to grow. Reinvestment: For a small business grows, it’s necessary to reinvest. Often it is believed that the external credit is the salvation, when really this has taken us to the current situation, because there has been an easy way to grant credits without any type off guarantees or support to assuring that it can be paid to the granting entity. Credit comes with credibility and not from a simple “sign now and afterwards we’ll see how to recover the money”, because this measures are detrimental to harm many countries and the MIPYMES. To get credit is easy, but the difficult part is working it and with profitability. At the medium term.... Permanent capacitating in new techniques and better practices so the small businesses can grow and adapt to a changing environment. Distribution Channels: Many MIPYMEs fail because they don’t know how to distribute their products. To manufacture is easy, and the difficult part is to selling and to get paid. To be able to sell and reach a more ample sector, it’s required having a good distribution system. In this aspect, internet is a very helpful tool, because the purpose it to reaching all sectors. Clients’ fidelity: If the product and/or service is good, the person will come back for it, on the contrary it wouldn’t. If there is a lack of fidelity, there won’t be a continuous purchase and with it, failure comes. The brand recognition is very important because the majority of the purchases are emotional. The human beings decide about a product, because of the concept we have about the brand. When we first try a product, we make up an opinion, we make an equation relation of value and if the product caused a positive impact it’s probably going to be purchased again; if this isn’t the case, it’s also probable that we will never see it again. Profitability is present once more. At the long term.... A succession plan: Generally, along the years, the companies grow in an organic way, this is, and more than it should, being the human resource, the one which leads the mentioned growth, without generating profit. This is the reason why many businesses disappear along the time. In front of this situation it requires to get reorganized again and to be profitable. An own business Many people decide having their own business because of the following: economic independence, schedule freedom because they really love what they are doing and wish to dedicate completely to it or for lack of work. There are also people which retire early but still are in the capacity to continue producing and decide to have their own business. Perhaps the last group is the one which has more risk, because after being

employees they haven’t got the experience of having worked in an environment in which there isn’t security or fixed income which before he had each month, and generates difficulties. The flow of money

People start convinced and invest their time for an amount of money. Generally speaking, time and money are limited. The Independent professional, self employee or the small businesses, maybe 90-95% of the economy are based upon them, and the big question is if they are owners or slaves of their businesses. If the day comes in which a doctor, lawyer, etc. Gets sick and doesn’t work, they simply don’t earn money; this is the economic case in which the majority of people are in. The so called businesses are company’s which already have around 200 employees and have a turnover of more than one million dollars per year. They depend of other people and the Estates economy. However, good labour environments make businesses more stable and grow easier. At the beginning the great majority start as employees. Some have the courage to start an own activity, invest more time and effort, and assume the risks, therefore they earn more. This is the other hand respecting to an independent professional, because it’s evident that a surgeon earns more than an employee because of its capacitating

and education investment. But if that same doctor creates businesses which generate income which do not depend of his work, it’s probable that at a certain point his income doesn’t depend on his personal efforts. What a MIPYMES wishes is having a good life quality, some freedom, power to decide and not be a complete slave of the business. It is in the investments in which everybody wants to be, not to working for money but instead that money works for us, and be able to have in a monthly basis, money in our pockets. The generated interests would accumulate and with it there would be a rent which would allow us to live better and have a better life quality. When there is devaluation or inflation money loses its value, and people which worked for years and saved to having a good old age, can see their money swept away. Yanbal’s case It came up with the idea to give women a developing opportunity (personal, professional and economic) through an independent business of beauty products. That idea which started 42 years ago nowadays has more than 300.000 micro businesswomen developing in Ecuador which have been successful as watching more than 2.000 women which already have their own house, because they prepared themselves, worked, invested in their business and afterwards grew and enjoyed trips and other benefits. Very often, women work to helping solve their homes expenditures; however this also gives them the strength to overcome adversity. What is necessary to have since the beginning?

Vision at long term, even if it is a small business.

A mission is important because if a person doesn’t believe in what its doing and besides is helping other people through its undertaking, it won’t grow.

Principles and values which will rule the business, are unshakeable and don’t depend on a government in turn, competences or external factors, but from each worker.

¡Take care of your business and it will take care of you!

To identifying within reach or potential to growing: Sometimes people set up a business taking advantage of the moment; for example a business inside an airport will only sell to those who pass trough, but it won’t grow. It’s there when frustrations arise, when not understanding the infrastructure limitations. No business based on temporary advantages can be successful in the long term.

To identifying the barriers when entering: There is to be aware that always you’ll find limitations to compete in the market. The main barriers are: the fear of not having economic stability through time, the laziness or inactivity to fulfilling the obligations based on excuses, the lack of focus on and don’t understand the difference among being an employee or a businessman. To be a

businessman isn’t easy; very often the governments mistreat businessmen in an impressive way without having in mind that they are people which work very hard, have no type of security and all they do is contributing to society through their work, jobs paying taxes, opportunities, goods and services.

Scale economies.

Technology, etc. Ecuador has a great potential to developing small businesses which don’t depend so much of an economic frame. It is true that a favourable frame will make a business prospe, one unfavourable in spite of being slow, will achieve creativity to flow and make growth possible.

Global economy perspectives and from Latin America

Economist Luis Oganes Manager for Economic Investigation for Latin America

JP Morgan

The recession began because of a financial crisis linked to the Real Estate sector which began to spread through the rest of the world. Pitifully the panorama of the global economy recovery isn’t very optimistic and it can take more than many of the economists have predicted, approximately about two years. Since the recovery rate isn’t sufficiently fast, there won’t be enough employments as to watch a drop of the unemployment rate. The economies in development are three quarts of the world’s GDP; the emerging or developing economies are usually one fourth. Then, if the developing economies are in recession it is impossible that the emerging ones can avoid it, because one depends on the other. At the beginning of the crisis, its worth to remember that there was a theory in which there could be a lack of connection and that Latin America (LA) could resist the pressures of a global recession. What could be observed from last year’s fourth trimester was that many economies registered negative sequence growth rates, something which continued this year also. It is necessary to remember that the classic definition of recession is having two consecutive negative trimesters, something which all countries are going through. If we would have to separate the LA economies in added supply and demand to see what is happening in each component, we have that on the supply side we follow only one indicator: the industrial production, which had a spectacular drop at the fourth semester of 2008, and is still around in this year’s first trimester and even in the first months of the second one. When carrying out an average for the whole region, we can see that the industrial production drop is starting to stop. However, the demand/consume is weak, being one of the reasons the consumers banking credit, which not necessarily have been denying lends, but the banks at LA level are much more conservative and have adjusted the credit grants standards. Another motive is the employment weakness; if we have the feeling that tomorrow we could lose our jobs, we abstain consuming and instead we save. Both factors generate a consume reduction and a negative shock towards confidence. But consume recession is not only seen in LA but around the whole world, making more people save. The commodities percentage in LA import is pretty high; its prices determine the country’s future. What country’s should do is diversify exportations, but since this process demands much time, the suitable thing to do would be obtaining that the economies don’t reflect those sways of external prices in such a marked way. In Chile’s case, they established an average price for copper which is the most important

exportation product in their budget. Any surplus is saved, as it happens when the prices drop bellow of the budgeted; that saving is used to maintaining expenses. In the last years, as we can see the prices, all LA oil exporters country’s were obviously benefit to something called “exchange gain”, this is, that the price which could be offered was higher or grew faster than the purchase price to the rest of the world. In Ecuador’s case, from 2004 to 2008, the exchange gain went over a 60%, being the second country after Venezuela, which was a great help to the economy. If there wouldn’t have been exchange gain in the whole region, LA would have stopped exporting 500 thousand million dollars; this is that from 2004 to 2008, the export excess price of LA was of the specified price. This piece of information is for you to have an idea of what it has represented the commodities price rise for the region in the last years. There is less exportation and less demand than what LA sells and the exports are dropping tremendously, which is also linked to the commodities price drop. At the same time this also generates an import drop in other countries. The indirect foreign investment is being reduced in almost the whole region and this is showing how vulnerable the foreign accounts can be, because there is less investment to financing them and it causes pressure in many countries. The Inflation is dropping everywhere because of the recession and the drop of the commodities. LA didn’t carry out its goals in the last two years, and it is expected for them to do it this year. What many of them are doing to try to supporting the economies which want to generate more growth, is to reducing the interest rate of the monetary policy which the Central Bank fixes. The fiscal deficit will deteriorate not only in LA but everywhere around the world. Obviously the recession implies smaller tributary revenues; many countries are trying to spend more to restraining recession. It’s necessary to stand out that in some countries the improvements which were seen the last years in public finances, was also a product of the commodities price increase. So it’s not the case that things are being done well, but that LA was lucky with that increase because their public finances improved. Ecuador’s Case The crisis which the world is going through has made Ecuador vulnerable in front of the external shocks, as well as the need for the economic policies to be according to the dollarization regime. For the dollarization sustenance, in the measure in which Ecuador can’t print its own currency, the exportations must be higher than importations, the remittances must be attracted, and have foreign investment or financing flows. When measuring Ecuador’s direct foreign investment with the GDP’s percentage and if we compare it to other LA countries, the first mentioned is among the lowest.

This has to change, because the only way to maintain the dollarization is attracting capital on the long term. The previous year’s growth has been impelled more by public investment (Public expenditure) than the private investment. If Ecuador is so vulnerable to what happens to oil prices and production, it would be logic to promote the oil production to assure the amount, but pitifully the policy isn’t yet well defined. The production in private hands has been dropping, while on the public sector there have been certain achievements to increasing production; however when adding both, you can notice that production is static. There should be policies to promoting investment so Ecuador could be able to producing much more oil. The liquidity accounts that the public and private sector had, have been rationed in a very important way. The oil price increase could help to make up the reserves and give stability. However, we have to recognize that this crisis has shown a situation of no sustenance. ¡It isn’t about payments’ capacity! The perspective that one has about the decision of not paying the 12 and 30 bonds and of paying 35 cents of dollar in a repurchase for each dollar of the debt, although it objectively generates savings of 65% of the capital towards the future what has implied in the short term a big expenditure because it has already spent around a thousand million dollars in 91% of that debt and there is still a lack of 9% which means almost 300 million dollars. If we buy this amount (1.300 million) with what it cost to serve this debt annually (approximately 300 thousand) it means that the service of the debt has been spent in one year instead of four years, and therefore the reserves have dropped. It is spoken about savings at medium term, but in the short term when there is a global crisis, when there is a flight of capital, when it is required to bring more dollar flow, they use the reserve that was meant for another situation which didn’t

seem to be the economic or financially justified, because it’s an imperative topic in Ecuador. Predictions

Regarding to the growth there is a 2% drop in the present year, while in the next one there will be a small recovery of 0.5%. This is an initial prediction which will depend of the government’s actions.

The inflation until the end of the year will reach to 5% dropping the next one to 4%.

Deficit in checking account (GDP’s %): It will be 3.5% this year, and reducing to 1.5% in 20010, waiting for exportations to recover and bigger drop of imports.

Regarding to the fallen reserves, we have a prediction of 2.800 million dollars this year and having for the next one a drop to 1.800 million; once again the future is in risk, because this wouldn’t allow keeping the dollarization.

The external crisis, just as it is happening should be seen by countries such as Ecuador as an opportunity to take advantage to what is going to happen to the developing economies in the next years and be able to obtain more benefits. What I mean with this is that for sure the developing economies will grow very little in the next years because of the distorting factor of the government’s intervention. The United States growth potential which was estimated before the crisis in 2.5% could possibly end in 2% or even lower, which would cause having less production. There is a higher production cost, of making business or innovate in USA which should be observed by developing economies as an opportunity when offering an alternative product to be more attractive for the American consumer. Obviously to be able to use that opportunity which the crisis gives, the suitable is having more integration, more opening towards market, more commercial integration, more flow of goods and services and not the opposite. The worst a country could do in the current moments as a political answer is closing towards the world.

Dollar vs. National currencies

Ing Joyce de Ginatta FIE’s President

Ten years ago, when the exchange rate was 6.000 sucres per dollar and after nine months of intense struggle, we presented our economic plan whose essence was the dollarization, designed on September 1998. I designed the strategy of communication for the dollarization on October 1998. Therefore, the first forum for this process was titled: “¿Dollarization, convertibility or what? It was held in the Guayas Small Industry Chambers on December 21st 1998, with the participation of the former Vice-President Economist Alberto Dahik, who took part via satellite from Costa Rica, Economist Walter Spurrier, Ing Jorge Gallardo Zavala and I. At that date the exchange rate had rose to 7.239 sucres per dollar. I organized a second forum on February 1 and 2, 1999, and it was called: “Rescue of the Ecuadorian Economy Part II” with the participation of: Carlos Alberto Montaner, Francisco Swett, Abelardo Pachano, Carlos Julio Emanuel, Pablo Lucio Paredes, Mauricio Torres and Franklin Lopez. At this moment the exchange rate had reached to 9.220 sucres per dollar, which is approximately 50% en only six months. On Monday March 8th 1999, a little more than a month later of the second forum, a bank holiday (the banks closed their doors) was granted and was extended until Friday March 12th. Once the banks opened their doors on Monday March 15th the most evil act of the Ecuadorian Republican History became a reality, which was, the freezing of the Ecuadorians funds. The most private resource of people was confiscated, their pockets. That is, with one and only action they sent the economy towards the cemetery when steeling their savings, leaving only a 30% of the money. Much later, the ones which had saved in dollars received their money back in the saved amount but steeling the correspondent interests. So to speak, if they had saved $100 dollars, long time after they received the same $100 dollars. On the other hand, if their savings were in sucres, they only received a third part. The interests and great part of their money was stolen. One month later, on April 8th, 1999, we organized a march and called it the march of crapes (150.000 people); in a civic and organized way we started going through the streets for the seven coherences, in which the dollarization wasn’t included because both the Commerce and Industry Chambers didn’t want to, because they didn’t believe in the benefits of this change.

Later to this march we continued in the fight pro dollarization. There is something interesting to be mentioned, when revising documents of this historic process, and it was remembering that my good friend Alvaro Vargas Llosa was an important part of this heroic deed, because he accompanied me approximately 10 years ago in the first Congress of the Small and Medium Industry: “The PYMES rescuing Ecuador’s and America’s economy”, held on June 28th, 1999. An historic phrase was born then: “neoliberals don’t exist. You can’t be neoliberal as well as you cannot be half pregnant”. Inside the economic plan proposed in that congress, we can highlight several things:

We proposed the way of changing the local currency to the dollar in an exchange rate of 15 thousand sucres per dollar.

In the monetary reserve there were available 688 million liquidity dollars

We only needed 463 million dollars to take the sucre out from the economy. On the other hand, in that same congress, we argued the more common objections against dollarization which the fortune-teller for disaster formulated to hinder it. Objections such as:

The current conditions of the country aren’t opportune or timely.

There aren’t enough reserves to dollarize.

The dollarization would end exportations.

The dollarization will increase unemployment.

Drop of exports prices would cause unemployment and recession.

First of all the fiscal deficit must be eliminated.

The dollarization needs a solid financing system.

Dollarization would be an obstacle for economic growth at long term. Those objections were a result of acts of bad faith or ignorance. However, the dollarization demonstrated that there were enough reserves to dollarize; that it decreased inflation; that non traditional and not oil exportations would increase besides of the number of businessmen which did them; they also argued that the unemployment decreased; that the financial system strengthen and grew; and the dollarization in spite of the harass towards the private sector made the countries’ economy grow, which meant a growth in the middle class and improved its life level and could buy and sell on hire purchase which gave as a result the arising of many micro businessmen. And there is something that couldn’t be predicted, at that time and was that it gave armour to the economy to the extreme that not even the fall of Lucio Gutierrez’s government produced an economic crisis.

But what was the reason why we didn’t grow more? Because the rest of the suggestions weren’t executed such as:

The autonomies, which were few and now want to be eliminated.

The reform of the provisional system.

Elimination of monopolies, which now they want to be increased.

Elimination of the discretionary, which on the contrary are being strengthen.

Accountability strengthening.

Commercial opening to the world, which nowadays isn’t done and on the contrary they close them to the country.

A tributary system to incentive the productive sector.

To promoting production, savings and investment, both national as foreign.

Fiscal discipline. This was only fulfilled in the period between 2004 and 2005 and because of the good management of the Secretaries of the Treasury, and therefore inflation was reduced to 1.95% in 2004, and ended up to 1.39% in March 2005 (previous to the fall of the government of president Gutierrez), being one of the lowest in Ecuador’s history, etc.

For then, the value of the dollar had been reduced even more, reaching the cipher of 11.158 sucres per dollar. Now, we weren’t 10 but 19 professionals pushing the dollarization, inside which the following had been added: Dora de Ampuero, Francisco Zalles among others. Little by little other people were joining to our ideas, convinced that the country could only begin its recovery eliminating the discretionary in monetary policy, generating credibility and recovering peoples’ pockets. On January 9th, 2000, the Ecuadorian economy was officially dollarized, because in an informal way it had been working long time ago. From there on, the pockets of the poor have been safeguarded from the politician’s appetite. The monetary stability which dollarization has being offering us is the main reason of the economic improvement which could be seen and felt after 2000. And as I mentioned before, we haven’t grown more because the recipe hasn’t been totally fulfilled. But at the time in which we were dollarized, we didn’t even think that a world economic crisis was going to be produced and those which were dollarized (Ecuador, Panama or El Salvador), would have much support and advantages to bear the great potencies world recession, without harming the micro, small and middle businesses. It has to be understood that the dollarization produces Mario and Marias. Who are they? They are micro businessmen which were born as I was, when the sucre was a strong currency and grew from nowhere. Why do I call them so? Because there is Marias which starts in a small neighbourhood store and develop little by little working out their future; or as I who started selling iron in a former garage. Examples such as El Cafe de Tere, Fernandez poultry store whose initial capital was a trip by bus from Quevedo to Guayaquil and began as a meat seller, and afterwards had a poultry business called Pollo Campero and finally in 1995, it turned into what nowadays is the Avicola Fernandez.

These miracles are produced only with hard currencies. Each one of you could be potential successful businessmen, if you have a future in action. This means to hinder dismantling something which is put up, taking it back to the half of past century, with ideologies which make people poor instead of becoming wealthier. In these systems only the ones which are near the power get to be rich. That’s the reason why we have to hinder entering into the ALBA, a club of unsuccessful people. The most evident proof of its inefficiency is that nobody goes to Cuba or near countries with the same ideology. To look for a better future, the immigrants go to prosperous countries, in which the developing recipe which we have proposed is carried out. Not only the figures count, but the micro development also and the last mentioned isn’t obtained through gifts but eliminating inefficiencies. The excess of proceedings and hound don’t harm the wealthy because they simply move to other countries. On the contrary of the small and medium they can’t bear that level of harassment. We have a marvellous country, with working people and lots of sources in any sense. We can’t allow them to continue impoverishing us, dismantling the built or hindering to build or even promoting the hate of classes. What is important is freedom, and to let us do and build. I will end paraphrasing Abraham Lincoln: “Do not let anyone who does not own a house, destroying the house of another, but leave it to work diligently and build your own, thus ensuring, as an example, that this not be exposed to this violence when build”. We have to work for this to become true.

Democracy, government and political system

Dr. Roberto López Lawyer

The only written Constitution which England has had was issued in 1.653 (1) and was called “Instrument of Government”. This name is particularly interesting for the investigator, because it shows that in the Middle Ages obscurantism, a society which hardly could foresee the technological development of modern times, already had –on the contrary of the Ecuadorians of XXI Century- the appropriate concept of what a Constitution is: a simple instrument to developing the governmental process (2). And it isn’t a lyric declaration of principles or an instrument to externalize the class struggle or social frustrations of its editors. The above mentioned allowed the ancient English people to using the Constitution in a proper way: to take the Governments’ decision. So that in full rigor of the feudal period, this already was an indispensable tool to adopt the decisions of power, because the government’s decision, is nothing else than a power decision. If the Constitution is well structured –at least in theory – the government’s decisions are correct. If this isn’t so, the process of power is being held and democracy is destroyed, because the previous means nothing else than a government. The people for the people and the people, as Abraham Lincoln quoted in the Gettysburg famous speech. However, it is necessary to precise that the most relevant element to assure the government is the constitution of a system of rules which at the same time configures a political system. It might be advisable to remember that the 1998 Constitution, established the need to “Guarantee the validity of the democratic system”, which was suppressed in an inexplicable way in Montecristi. Such reminiscence reveals the need of a system constructed by legal norms which –in a harmonious way are related one with another-allow the development of the governmental process. So it would be advisable to solve another question, why is it that the democratic system which is referred in 1998’s Constitutions is a legal system of regulations? The answer is simple, because since men came down from the trees, and turned into a gregarious human being, they became aware that it was necessary to impose regulations for coexistence in society. Perhaps the initial wisdom contained in the Ten Commandments, could be enough to establish as socially condemned the fact of killing

or loving one’s neighbour. But in the measure in which the evolution of the human

conglomerate is produced, the transgression of the mentioned moral regulations,

demands a sanctioning element for the transgressors, because this is the only way to

live in peace. This is the moment in which the simple moral rules turn into legal

regulations, like this, in rules of right with an obligatory socially content and coercive

power to be able to get tranquillity and social peace.

But as time passes, the initially developed moral principles and rights to be obeyed by

everybody start to describe exceptions which are violated precisely by those which

have the power to make the rules, meaning, by the rulers. An excellent example of the

previous mentioned is found in the Droit de Seigneur (rights of the first night) which

established that the feudal authority to having sexual intercourse with the maiden of

its feud in the wedding night. This is an example of how, -having the power to rule –

takes advantage of his legal authority to abusing them. Isn’t it perhaps –to love one’s

woman – the old moral prohibition that now the other way round with the

characteristics of a law, is imposed by the force to allow the feudal gentleman’s abuse?

But those outrages don’t only find their limitations in the lasciviousness of the

noblemen, but they are also projected in damage of them affecting their right of

property. The King loads them with taxes only because he has the power to do so. The

1215 Constitution (Magna Charta) arises precisely as an expression of resistance

towards oppression, as the noble, -with sword in hand- force powerless people to

signing, prohibiting the taxes imposition without consulting with a council or a bar.

Here it is the precedent of constitutionalism and the Rule of Law, a political system

through which you obey regulations and not the people, to avoiding the Droit de

Seigneur and the power excesses of whom exerts the power of making the law. For the

system to work a minimum conditioning factor is however required; that the

regulations be drawn up by experts, to be correctly conceived according to the

principles of a very ancient science which is as old as the human race: the science of

right, which through centuries has developed principles universally accepted in the

whole civilized world. When a topic is being unaware of accepting it, -as it happened in

Montecristi – there is being ignored all the advances of a continuous social evolution.

Therefore the imperative need that the legal regulations which rules the human

being’s behaviour, the bringing into operation of the Estates organisms and the ruler’s

performances, are constructed in an adequate way, because if this doesn’t happen, the

abuse of power is given which are the characteristic of authoritarian regimes.

It’s deplorable to see how nowadays Ecuador, repeats the story over and over –even if

it isn’t applied to the maidens- the Droit de Seigneur is applied in a series of

regulations made by the whim or convenience of whom has the power at the time to

do them. There is a “Congress”, a “National Supreme Court”, a sui generis

constitutional control and a “fifth power”, but it seems that none of them exist

because of the addiction which aren’t repairable and stigmatize its birth. This is to say

that we live in a territory (6) with an apparent institutional structure, but with legal

fragile foundations which could collapse before a slight breeze, because they don’t

configure a true democracy but a simple copy of it. This by itself constitutes a

spectacular failure for the Government but overall for the Ecuadorian’s and added to

an incalculable cost.

Therefore, on the opposite of what Thomas Carlyle thought about conceiving

democracy “as the desperation to not finding heroes to rule us”, which can’t be based

in a leader’s transitory attributes, but trying to construct a well conceived system

which could work well without the need of heroes. We have already said that in a rule

of law, the regulations are the ones to be obeyed and not the people. That’s why we

join to Camus way of thinking, who said that, the paradigm of “freedom is not made of

privilege, but is mostly made of duties”. With the result that all and each one of us,

have the task of shaping an adequate system of civic freedom and an organizational

structure of the Estate which in the future –finally – would be susceptible to lasting

through time.

(1) See Verdu, Pablo Lucas, and Theory of the Constitution as a cultural science, pg. 23: “....is the

Instrument of Government from December 16, 1663, which was called by Jellinek the first and

only constitution that England has had”. Of course it is a written Constitution of forty two

articles, accepted and in force during four years.

(2) No to “ the social and richness appropriation” as a very known “ outlaw” and broadcasting

gentleman, -afterwards elected in the Assembly in the government’s Block- in the program

Cero Tolerancia, transmitted by Ecuavisa on December 10, 2006.

(3) According to the etymological meaning, democracy is synonymous of people’s government

because in Latin demos mean people and kratos government.

(4) See article 3, numeral 6 of 1998’s Constitution.

(5) It was possible to perceive the deplorable process for the Integration of Citizen Participation

and Social control.

(6) A territory with borders and an apparent “institutionalization” doesn’t constitute an Estates reality.

The press role in a globalized and in crisis world

OPINION

Lcdo. Alberto Padilla CNN’s Journalist Mexico The journalist, the representatives of the media and broadcasting and the government, have their responsibilities and compromises. First and foremost, the journalist has to threat everybody in a well

mannered way; he must be critic, severe, sharp and respectful. A journalist cannot be pushy to anybody because he wouldn’t be serving his profession; there are journalists which are so aggressive that at a certain point stays without guests to be interviewed. The journalists must be well informed to be able to manage an interview, because if not, they wouldn’t be doing a good job. An interview must be democratic, the guest must have its space for him/her to express freely, and afterwards to be able to carry out the strong questions. To put in context the information which is being provided, offers perspectives to the audience so they are able to be informed in the best possible way. The journalist in Latin America not only has the pressure of the country’s situation; of its rulers or its information sources, but upon everything, has the pressure of the media’s directors. Very often the owners or even the sales department people interfere in the journalistic daily routine, which isn’t proper. As a journalist I don’t agree that the channel’s owner has other interests beyond the channel, because it is then when he/she feels the pressure by the previous mentioned and interferes with the journalistic work. The independent media is able to accomplish its work with more freedom and the journalist can develop much better in his/her profession. The government can’t interfere with the journalists’ work or the media and even less a government which pretends to be changing. A mature government is the one which understands with amplitude the journalistic job, who understands that having a free press, is having one more tool for democracy. It is surprising how in the United States, the presidents are being mocked both in quality as in quantity and they stay unperturbed. I think it’s shameful the fact that a president lowers himself to the same level of a journalist which is doing that mocking. When the Clinton-Lewinski case arose, the first one never did say a word. When was it that Bush answered to Chavez? It never happened. A president’s investiture cannot allow lowering himself to criticizing or going into a ring with a journalist, commentator, somebody who expresses its opinion, or actor which could ridicule him; this cannot happen.

I think that the first thing which the current Ecuador’s government, should have done is a demonstration that it was a government for the change and modernism and precisely leave the press untouched, assuming that its citizens are intelligent enough to differentiate between a piece of gossip and an item of news and let them judge who at a given moment could even request the removal of any journalist or media.

Lcdo. Emilio Palacio Publisher of El Universo Newspaper “The freedom of speech, isn’t a conflict between socialism and capitalism; between free market and estates’ regulations (as it wants to be presented), nor is it a social debate. It’s good to know that not everybody thinks the same way. The real conflict is among those who defend and those which are enemies of democracy. There must be a system to processing

the disagreements which arise from different points of view, to avoid the verbal confrontation.

Lcdo. Carlos Vera Journalist “In times of crisis, a journalist’s duty is to inform, but also to express an opinion, assuming a position, having its own criterion, risking about making a mistake respecting to their causes, consequences and opportunities. If the press is understood as a free one, independent and critic, it has to defend certain causes, such as: surveillance of the acts, respect towards minorities, fair distribution of richness,

promotion of work, the expansion of production, among others. One thing is to get mixed up information with opinion; the objectivity and pluralism are there to informing. With the opinion, by its nature, people are given biased viewpoints; it’s defined and must be solved, aligned, identified and respected”.

Javier Segarra: ¡ 25 years of journalism!

“History is made day by day, in each act, in each fact, in each event, in each individual or social civic opinion. The journalist walks, observes, process, analyzes and searches always the best way to transmitting the written, radio and television press, without slant, or inappropriate adjectives. ¡Difficult to ignore objectively convey a feeling for an event hard to convey! ¡How hard it is to forget conjugating “me” in first person singular and using the plural “us”, with a real face and heart! After working 25 years for the Ecuadorian TV, thousand of questions arise now in my mind remembering each time in which I worked for social or television communication, in which I believe having acquired respect, honour and professional integrity. In this daily work as journalist, one learns in the streets to get to knowing reality of an unfair society. The professional capacitating which the educational centres offer, gives us the tools to face the technical, the modernity, the manipulation of the media production, to the way of expressing the contents. But the solid moral principles, the way of being impartial, using the form without changing the substance, be fair and equitable, that alone gives us a sound moral formation. This is a journalist’s responsibility, which is the integrity which must be shown and for which we have to fight day by day, against the temptations offered by power, money or politics. It isn’t enough having knowledge, but you must know how to apply it... The day, in which everybody is able to applying their knowledge in an adequate way, we could be able to solve social, economic and political conflicts of the society in which we live.

The journalist’s orientation will always be the truth over friendship, the objective over the subjective, the social interest over the individual, and the deafening cry against the submission of an abuse of those which the manipulation of power causes and calls. Here I am, 25 years after my first journalistic appearance, I still believe in my noble profession, surrounded by those which with their sympathy and opinion, can testify in an irrefutable way that I have lived and acted as I have preached. Here before you, I renew my faith in the democratic system, only guarantor of truth; I reaffirm my unconditional respect for justice, possessing the majesty of sanction, whether it exceeds a citizen’s authority or institution which violates the law or walks through lies or personal interests. The press freedom isn’t expressed; one lives, it’s breathed, one perspires; it emanates from each citizen’s act, from each emitted word, from each written letter. The free press does not call on the knees or a taped mouth; it must be shown from an unscarred chest shouting to people and claiming until the voice is over; standing until the legs falter; free until the chain will bind us and with the heart beating until it shuts down. Until then and only at that moment, we are able to say that we have accomplished, that we honour life and our profession and that we are worthy of respect and consideration of citizenship and our family. When press freedom is in risk, all the rest of human rights are also threatened. There was a time in which I read an article highlighting how to achieve that life is valuable and is summarized in 4 letters: learn, try, stay and worry. And these are the things which I have been trying to apply during the years to achieve the equity and harmony, which allowed me to develop my activity as a social communicator. Credibility is our greater asset and a free press is essential for Democracy. They have been 25 years of good and bad news, of virtues and errors; they have been 25 years in which I met good friends and enemies, 25 years of happiness and suffering, and of learning which doesn’t end within this difficult profession which always has challenges. I would like to conclude with a quote from Walter Williams, a distinguished U.S. journalist who said: “No one should write as a journalist, if it cannot be said as a gentleman”. (1)

(1) Speech that Lcdo. Javier Segarra T, News Director of ETV Telerama, offered in the tribute for reaching 25 years of journalistic work.

To undertake: The most effective way to combating

poverty and a challenge for today’s young people

Day by day our specific objectives are to seek new productive investments and try to find more creative ways, and be able to producing richness and overall well defined paths that allow us to improve the quality of life of our collaborators and our future associates or clients. Currently we manage three different brands in different business sectors, for which we have created work places for young people with knowledge and skills focused on each one of this areas. Citylights, was the first idea to arise. This is a magazines’ brand for entertainment which we can be proud of calling it “different”, because it will write about topics of urban culture night, not only in Ecuador but also at international level. As the initial idea of the project started to develop, we came to the conclusion that in the country there isn’t any type of innovative and complete magazines. We can define it this way, because you’ll be able to find diverse types of writing and multiple topics, besides of the traditional concept of binges and parties information we would like to know something more about night life, which helps the magazine not having a specific target but that people of different profiles and interests are attracted towards it. Therefore we believe that it is a unique opportunity, which we should submit and get the most out. It has a great way of writing, a variety of readings complemented by excellent photography; this magazine will be launched within months. We have also been able to create Creare, an agency of commercial design, corporative image and identity whose main objective is to turn your brand into the first option in the consumers mind. Each firm (client) is a different world, so to achieve the positioning it has to rely on strategic way of thinking to generate innovative advertising content. On the other hand, Homefirst is a brand which offers service of maintenance on air conditioning and refrigeration technician created to meet the great demand which our community expects. Its mission is to protecting the environment of comfort and tranquillity of all our customers, providing maintenance, repairing or improving the climate of the place in which they develop their personal or business activities. The above mentioned will be done with great motivation to serving and with the main purpose of contributing to improving the quality of life in our society. This is how we started creating WJCORP, a multipurpose business which is born by the need to generating new investment, to providing with its structure the fight against the lack of employment and create opportunities in our troubled market. Those which constitute this company are young undertakers, who find it necessary to take that risk because the private sector has so many political fronts, so it has to reinvent itself to generate investment, production and wealth. We believe that one of the strategies to confront new commercial challenges and invest in time of crisis, is being creative. In addition we can diversify our businesses,

which is nothing else than investing in new and different products or services and go into new markets even if they aren’t related to the current business. Likewise, we think about taking the risk to investing and producing, because it’s one of the most effective ways to fight poverty and thus demonstrate that with commitment and responsibility it is possible to start a prosperous business.

Bajo la Lupa Objective analysis for a productive

growth

“Phrases and characters that pass through La Lupa with Eng. Joyce de Ginatta”

Dra. Ana Vilma de Escobar, former vice president of El Salvador Dr. Manuel Hinds, El Salvadors’ former Secretary of the Treasury

Topic: The route of the dollar “The powers to attracting companies and bring investment to the country to mount operations, allows us to generate employment opportunities. The investment attraction and the exporting promotion are very important pillars in economic growth; besides they allow generating work opportunities”, Dra. Ana Vilma de Escobar.

“In El Salvador, the currency’s stability and credibility gave its population access to long- term credit for all durable consume as well as for housing”, Dr. Manuel Hinds. Econ. Cesar Robalino, Ecuador’s President of Private Banks Association Topic: Labyrinth or what?

“The governments and countries cannot say: “I will develop myself, I will adopt an endogenous model in the sense that the development and progress only depends on the internal forces of the countries. Ecuador can’t practice that policy, because it would simply push the population’s future to full stagnation and to poverty. We can’t abandon the possibility that globalization gives us, which will remain even if we are in crisis”.

Dr. Vladimiro Alvarez Grau, Ecuador’s former Minister of Government, of Labour and Education. Topic: Franchise or what?

“There is no doubt that there was an attempt to submitting Honduras to the Venezuelan franchise, this is, a copy of the libretto issued by President Hugo Rafael Chavez. This was also made in Ecuador, Bolivia, and Nicaragua, to some extent it has succeeded in Argentina and now it has being done in Honduras. There has to be respected the principle of internal politics and the principle of self-

determination of people to be able to be their own governments. There can’t be presidents’ of the Venezuelan franchise those who tell Honduras and impose their president”.