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SOVEREIGNTY, CHINA OR CUBA In my recent visit to China, I was impressed as I was able to observe that this country has a booming economy, in which the nation’s leader corrects in an efficient way the distortions which are produced both inside and outside the country, to achieve an effective generation of work posts, as well as the strengthening to private property, of the business and investment sectors. It is a country in which socialism applies what works in successful countries, and the result is that around 400 million people have been withdrawn from poverty. This means that they make the opposite than Cuba which says “savings or death” besides of demanding Cubans not to consume, which means not to move the economy, and obviously unemployment shoots up. It’s a pity that we are being dragged towards Cuba, as one of the offers for change, which was accepted by Ecuadorians to improve everybody’s life level by creating work posts, which is nowadays far from reality because we aren’t allowed to import, they increase the interest rate on the credit cards, they rise the customs duty to increase life costs, they don’t motivate investment and consume which drives to reducing purchase power. All the above has the objective to diminishing work sources so the country again spins in the contrary way to its growing and developing. According to the dictionary of the Spanish Language, Sovereignty is “the quality of an Estate or other political power organism which is not subjected to other Estate or control organism”, concept which is accepted as valid by the majority of Ecuadorians. However, since two years ago it is emphasized each time and is destroyed afterwards with the same intensity. Nowadays we question everything, because sovereignty has been left behind and the perception is that we depend from Venezuela continuing with Cuba’s trend. Even in the international area we are excluded from the South American space, to be placed in the triangle Venezuela- Ecuador-Bolivia. The rules of the game and the chapters of this bitter soap opera are written in Venezuela and therefore the reason for which it has been so easy to predict what happens over there and is repeating here. Then my question is: ¿sovereignty of what? ¿to where do we go? Do we choose China for developing or Cuba towards misfortune? Where do they want to take us? Venezuela talks about nationalizing everything and eliminate the private property. The dependence to that country will make that everything is replied in Ecuador. Now Venezuela has eliminated the free press. Recently, the above mentioned triangle declared a fight towards the press, then, of which sovereignty are we talking about? Freedom is being eliminated and paradoxically while China breaths a booming business activity and action freedom, here we have a whip which limits the private initiative, so much so that in spite of the taxes to pay for money flow going outside the country, as well as for capital, it doesn’t like to be locked up, the investors pay and take with them their patrimony. THE ONLY EXISTING SOVEREIGNTY IS THE ONE FOR PEOPLE’S WELL-BEING, AND THIS IS GIVEN THROUGH GENERATING WORK POSTS AND OPPORTUNITIES WHICH ATTRACT CAPITALS WITHOUT FRIGHTENING THEM AWAY. IT SEEMS THAT IN OUR COUNTRY WE WOULD BE READING UNIVERSAL HISTORY BACK TO FRONT. UNTIL WHEN DO WE HAVE TO SUPPORT THIS SITUATION? Eng. Joyce Higgins de Ginatta


“We did something wrong” Next, we will transcribe the words which were said by Dr. Oscar Arias, President of Costa Rica in the V Americas Summit, held in Puerto España, Trinidad Tobago, on April 17-19, 2009. His participation was on April 18th. “I am under the impression that each time that the Caribbean and Latin American countries get together with the USA’s President, it’s to ask for things or claim for something. Almost all the time, it’s to blame the United States of all our past, present and future bad things. I don’t believe that this is fair. We can’t forget that Latin America had Universities before the United States created Harvard and William & Mary, which were the first universities of that country. We can’t forget that in this continent, as all over the world, at least until 1750 all Americans were more or less equal: everybody was poor. As the Industrial Revolution appears in England, other countries join them, such as Germany, France, United States, Canada, Australia, New Zeeland.... and therefore the Industrial Revolutions passed through Latin America as a comet, and we didn’t even were aware. We certainly missed the opportunity. There is also a great difference. As we read Latin America’s History, compared to the one in the United States, one understands that Latin America didn’t have a Spanish, or Portuguese John Winthrop, to come with the Bible in his hands willing to constructing “a City on top of a Hill”, a city which would sparkle, as the pilgrims pretended as they arrived to the United States. Fifty years ago, Mexico was richer than Portugal. In 1950, a country such as Brazil had a per capita income higher than South Korea. Sixty years ago, Honduras had more per capita richness than Singapore – in a matter of 35 or 40 years- it’s a country with an income of US$ 40.000 annual per inhabitant. Well, Latin Americans did something wrong. What was wrong? I can’t list all the things which were wrong. To begin with, we have seven years of schooling. That’s the schooling average of Latin America and isn’t the case of the majority of Asian countries. Certainly it isn’t the case of countries such as the United States or Canada, with the best education of the world, and similar to the European. From ten students which enter into high school in Latin America, in some countries only one finishes high school. There are countries which have infant mortality of 50 children for each thousand, when the average in Asian countries is of 8, 9 or 10.


We have countries in which the tax burden is the GDP’s 12%, and it isn’t anybodies responsibility, except ours, not to charge money to the wealthiest people of our countries. It’s our fault. In 1950, each North American citizen was four times richer than a Latin American one. Nowadays, a North American citizen is 10, 15 or 20 times richer than a Latin American one. That isn’t USA’s fault, it’s ours. In this morning’s speech, I related a fact which for me is grotesque, and which only demonstrates that the values system of XX century, is the one which seems to be applied also in XXI century, and is a wrong value system. Because it can’t be possible that the rich world dedicates 100.000 million dollars to relieve 80% of the poverty of the world’s population – in a planet which counts with 2.500 million of human beings with an income of $ 2 per day- and spends 13 times more ($ 1.300.000.000.000) in weapons and soldiers. As I mentioned this morning, it can’t be possible that Latin America spends $ 50.000 million in weapons and soldiers. I ask myself: who is our enemy? Our enemy, President Correa, of all this inequity which you point at with right, is the lack of education; it’s the illiteracy; It’s not spending money for our people’s health; we don’t create the necessary infrastructure, for highways, roads, harbours, airports; it’s not paying attention to the necessary resources to stop the environmental degradation; it’s the inequality we have ,what really shames; it’s the product, among so many things of course, that we aren’t educating our children. One goes to a Latin American university and it seems that we are in the 60’s, 70’s or 80’s. It seems that we forgot that on November 9th, 1989, something important happened which the Berlin’s Wall was falling, and that the world changed. We have to be aware that this is a different world, and I frankly think that all the academician, all the thinking people, that all the economists, that all the historian, almost all of them, coincide that century XXI is the Asians century, not the Latin American’s one. And I pitifully agree with them. While we continue discussing about ideologies, we keep on discussing (about which one is the best: capitalism, socialism, communism, liberalism, neo liberalism or social democrat....), the Asian found a realistic way for century XXI, which is Pragmatism. To only mention an example, let’s remember when Deng Xiaoping visited Singapore and South Korea, after seeing his own neighbours getting wealthier very fast, he returned to Peking and told his old Maoist comrades which went with him in the Long March: “Well, the truth my dear comrades, is that I don’t care if the cat is white or black, what is interesting for me is that it catches the mice”. And if Mao would have still been alive, he would have died again when he said that: “the truth is that getting rich is glorious”. And while the Chinese do this, and since 1979 until today they grow to an 11%, 12%, or 13%, and have taken out of poverty to 300 million inhabitants, and we continue discussing about ideologies which should have been buried long time ago.


The good news is that Deng Xiaoping achieved it as he was 74 years old. As I look around dear Presidents, I can’t see anybody which is near to 74 years. Therefore I only wish for you not to wait until you get to that age to make all the changes which we have to do. Thank you The Cumbre de las Amèricas is a reunion of Heads of State and Governors promoted by the Organization of American States (OAS) and held in any city of the continent to forming a common strategy to solve the regions problems. Its members... All the American countries are OAS members, besides Cuba which was expelled. Not the French Guyana or colonial current territories are members either. The first members were 21 American independent countries (May 5th, 1948): Argentina Bolivia Brazil Chile Colombia Costa Rica Cuba*

Dominican Republic Ecuador El Salvador Guatemala Haiti Honduras Mexico

Nicaragua Panama Paraguay Peru United States Uruguay Venezuela

Gradually the OAS began to expand mainly in the Caribbean countries which weren’t a colony: Barbados (since 1967) Trinidad Tobago (1967 Jamaica (1969) Granada (1975) Surinam (1977) Dominica (1979) Santa Lucia (1979)

Antigua and Barbuda (1981) San Vicente and Granadinas (1981) Bahamas (1982) San Cristobal and Nieves (1984) Canada (1990) Belize (1991) Guyana (1991)


Reflections about development Lcdo. José Vicente Maldonado D. Former Industry and Commerce Minister Former ADC’s Director, Representing Bolivia and Brazil Costa Rica’s President and Nobel Prize, Dr. Oscar Arias, in his speech at the Trinidad and Tobago’s Summit, is probably one of the Emails which has been forwarded with more frequency in the last days, among the Latin American citizens of all the region. By the subject matter of his speech I can understand people’s worries and the great affinity towards his way of thinking. President Arias, rejecting his colleagues’ speeches who justified the bad results of their governments and what was it that “we did wrong” at the inside of our countries which the last 50 years have been lagging behind compared to other regions and countries, which on the opposite could take off towards development in the same period of time. This circumstance has motivated me to write about the tortuous process which Latin America is taking in the last decades and the different visions applied about development. In effect, during the past decades in Ecuador and Latin America, we have been able to assist to significant changes in development policies. At the end of the decade of the 60’s, we could observe in our countries including Ecuador, coincident strategic orientations with the developing model oriented to promoting the internal market expansion, offering the “development towards inside”, but with an evident neglect to foreign competitiveness. In those years, the Estate, besides of its planning role, turned into a protectionist, interventionist and Estate’s owner. The CEPAL’s way of thinking and the socialists ideas which influenced at that time, proposed as an axe of their social policies, the estates subsidies, considered as the best way to redistribute the richness and reach social justice. The crisis of the 80’s (which was repeated again) deprived the Governments of the required resources to sustain the model and the economies collapsed in a deep crisis product of the high vulnerability, inefficiencies, loss of investment and loss in productivity and competitiveness in the region in front of other regions of the world. That period was known as the “lost decade”, because in spite of the Estate’s efforts, these weren’t enough to overcome the chronic problems of Latin America, such as unemployment, inequality and poverty. This critical scenario forced the region to reconsider the imposed model for development (in dictatorship regimes most of the time) during the 60’s and 70’s. It was so, that those strategies and policies named “The Washington Consensus” arose. I consider a mistake to be unaware or underestimate all the achievements obtained under the mentioned focusing. It particularly emphasized two: (I) the strengthening of the republican institutions and validity of the democratic principles in almost all Latin American countries; and (II) improvement in the procedures of macroeconomic policies and the coherent management of the fiscal and monetary policies, which gave us economic stability, more investments, improvement in international competitiveness and –I especially stress- in the evident reduction of economic


violations of the region’s countries in front of external economic shocks. I point out this as evident, of what is precisely happening nowadays in the world and the behaviour which the Latin American economies have had in front of a deep international financial crisis. The majority of the countries, especially those which completed their agenda to reforming, have achieved to confront successfully the current worlds crisis. On the other hand, those which deceive themselves as they affirm that the macroeconomic policies that came into effect at the Washington’s Consensus didn’t generate a sustained richness and growth among the regions countries. If we make an objective evaluation, those countries which kept the reform agenda, and deepened their efforts to strengthen the democratic institutions, and moved towards an economic and competitive opening, liberalizing commerce and integration with the world, those which decentralized and arrived to national agreements about development; those countries were able to take off towards development in a supportive and sustenance way. But –it’s necessary to emphasize- either the economic advances by themselves have been enough to correct social and skewers inequities which are still seen in Latin American countries. It’s true that experiences for each case and countries have been different. In Ecuador’s case, the reform process was paralyzed; it fell behind and had frustrated proposals. The application of an agenda for change, modernization and economies liberalization was undermined by historic difficulties which the countries suffered since the beginning of the Republic, and caused by its own political rulers and leaders with their own way of ruling and have been historically attempting against a sustained development, the institutions strengthening and a good way to governing the country. It doesn’t matter if there was a lack of deepness when applying the agenda for reforms, or because de own reference frame of what was written in Washington’s Consensus, looking at statistics and poor results about equity and poorness decrease, it’s evident that the mentioned model has also been exceeded and requires new ingredients and complements. Once all the above has been remarked, I would like to briefly talk about the challenges which Ecuadorian’s will confront in the following years, to establish a development agenda for political reality in the region. In recent years, some countries have elected governments of socialist wing: in some other cases we could observe a rabble and leadership current. Of course there is a third group of countries which clearly move forwards inside the frame of the reforms which were set out at the Washington’s Consensus. So, Latin America has turned into a real laboratory (still is) to analyzing the results of the application of different visions and strategies to reach the so long waited sustenance development. On the other hand, once more an old discussion has been reopened in the region, however pertinent, respecting to the Estate’s and the private sector’s role in the country’s development.


Regarding to the above mentioned, this time I only want to state briefly about some conclusions which perhaps could be some points of contribution to a national dialogue and search of basic coincidences among Ecuadorians to defining a sustenance model to developing. 1. The Estate’s role is being redefined in a process which hasn’t finished and is strongly argued since 1992 under the perspective of two ideological aspects. In this respect I think that there are minimum consents which could be channelled: (I) concerning to the Estate’s institutions strengthening to guarantee the democratic principles and the participation of the developing actors which are the citizens, the families and the intermediate societies; (II) to strengthen the Estate’s negotiations efficiency to be able to fulfil their tasks, to representing and complementing each one of the social, economic and political processes. 2. The private initiative. The tasks which are incumbent to private initiative still haven’t got appropriate mechanisms of support and foment. The efforts and risks assumed by the productive private sector should be supported by public policies of competitiveness in a systematic way. We propose a great alliance among the private and public sectors to productivity and competitiveness. This is everybody’s task and shouldn’t be imposed in a vertical way from a bureaucracy’s desk and even less, tangle them up in ideologies. The policies and actions to fomenting productivity and competitiveness should arise from a big dialogue and national consensus. The alliance should start recognizing that the productive sectors, big or small are the ones which are aware of reality, of the obstacles daily confronted to investing their capitals and growth; or about making the most about the comparative and competitive advantages which the country has. In this field it’s also required to examine deeply the commerce expansion, the investments and cooperation among other world’s regions; of course getting far away from ideological passion. 3. Dialogue and National Objectives. I insist referring to the big national dialogue which has to be held to have the answers to all the questions about the challenges which Ecuador confronts about globalization. An Ecuadorian strategy of poorness reduction can’t be exclusively responded by the government’s vertical action. 4. Defence to Democracy. It’s impossible to achieve growth and sustenance development, without a well understood democracy, according to J. Revel “in its modern sense, in which the society obtains to reconcile the Estate’s efficiency with legitimacy and its authority with the people’s freedom....”I affirm that the fundamental right of all Ecuadorians is to act with caution the validity of democratic principles and the defence of republican institutions. “20 years ago, Revel wrote about “how democracies end” and predicted that democracy would only be a parenthesis in political history of human beings, “judging the speed in which the powers grow and the trend to abolish them”. I


also affirm imitating Revel’s thinking, that the populist leadership which is being imposed in Latin America responds to a totalitarian failed model around the world and “achieves presenting itself as a perfect democracy, even if it’s an absolute denial”. 5. Sustainable Development. The country has an extraordinary heritage of natural resources to future’s great potential. For its sustainable advantage it’s required to improve the concepts and strategies, as well as the institutions related to promoting a sustainable development 6. To govern and transparency. A prominent Estate’s role as the one designed by the new Ecuadorian Estate’s Constitution sets out other problems of the way to govern and the bureaucratic discretionary way in the Estates procedures, which could bring with it the lack of transparency as assigning public resources. Finally I think that a last reflexion is needed. To really repeat once again –as we did during the 91’s and 92’s before the country as a part of a political proposal which suggested the need of a modern Estate and the essential liberalization of the economy- is a political option which I nowadays consider valid and can be used as a contribution for political debate, with another point of view in which the country has a dialogue and adopts a model to innovating and developing and appropriate to solve the current problems. The “models for development” have been many and various the proposals made from the Estate, the Academy, the International Organisms, the productive sectors and civil society in general. We are aware that the results have been insufficient as well as discouraging and that the country has gotten away from prosperity and development. ¿Why is it that we ask ourselves again as President Oscar Arias did before in his speech: What did we do wrong? To answer all the above, we probably must go back to a basic concept and recognize that in all the proposals which have been written in the Latin American way of thinking, which are abundant in technical terms, methodologies and futile discussions about left or right wing; in all this intellectual exercise there is a fundamental forgetfulness which is essential to respond our concern: there must be thought in the essence of the human being and recognize in it the person itself, gifted with Dignity and in consequence with Freedom. The model that wants to be found or the strategy to be followed towards development, must carry out the objectives of prosperity and reach people’s well-being, the human being and its nature must be taken in mind, its dignity and gifts such as freedom and in consequence to its enterprising and innovator capacity, to its private, endless and innovator capacity as a resource to generating production and richness. There can’t be created economic growth and supportive development by discouraging the private initiative and imposing human being’s freedom. By persecute the big and destroying the rich you can’t help the small and the poor. The models which were applied in the past, the strategies and policies which have failed in humanity’s history, have been unaware of the real dimension of the human being and its essence, as a truth prior to the Estate and to its representing capacity and complementary role to an organized society. It’s necessary to incorporating the concept of the human being, of its free nature and its enterprising


and innovation capacity. The free initiative as a motor which drives to developing and growth, have allowed to other countries and regions, as President Oscar Arias quotes, to achieve people’s well-being. These thoughts make us reaffirm about convictions and fundamental principles, permanent values which will inspire our society to achieve the common well-being for the human being’s fulfilment.


Protectionism and pandemic Dr. David Lemor President of Proinversiones in Peru The international economic crisis is going through a severe impact in world’s commerce. It also seems to show that the “AH1N1” could worsen and lengthen the crisis because of its impact in dynamic economic activities such as tourism, transportation, recreation and others, plus the enormous social cost which a pandemic would have, and was even already declared. In this not so encouraging prospect, the freedom for foreign commerce becomes even more important. Regrettably, protectionist winds can be felt from various regions of the world, in spite of the forceful declaration of the leaders of the Cooperation Econòmica Asia-Pacìfico (APEC) (Asian-Pacific Economic Cooperation) at their gathering held in Lima on last November, in the sense that at all costs, protectionism must be avoided as well as the restrictions to commerce, because all the above would only cause more recession and a worldwide GDP’s fall. In this world which has a globalized, and irreversible process because the speed in nowadays communications and will be even more in the future, the productive sectors of a country nourish themselves of others. The products of a country are consumables or intermediate goods for other countries. To establish protectionist measures, would also affect the national industry in a negative way. And in relatively small countries with weak economies and little purchasing power, to think about maintaining the national production in function of the internal demand, isn’t only a known short-sightedness but a punishment to consumers, which will have at short term, products of less quality and at higher prices. We have seen it before during decades and it doesn’t work. If any lesson was left after the 1929 big crisis –and history must be read better to avoid committing the same mistakes over and over- is that protectionism was applied as a strategy to alleviate its effects, and only made it worse and of more extend. Generally speaking, and especially in the current times of crisis, it’s not bad to promote the purchase of national products. I am passionate promoter of “Còmprale al Peru” (Buy Peruvian things), before I became Minister of Production in my country, and even more as I was representing the mentioned public office, but always not being done on the letter without the possibility of choosing, protecting national products from the foreign competition. It’s different the defence to national production from the disloyal competition and protectionism. To prefer a national product is very good if the quality and price is competitive. But with protectionist barriers you “don’t protect” the final consumer. Let’s fight against smuggling for example, but do not close borders. The United States, which is the Mecca of economic freedom, has been included almost in a surreptitious way inside their first aid for economic stimulation of 700.000 million dollars, the “Buy American Act”, which is nothing else than an order to the Estate to make the option to acquire certain goods exclusively made in their country. Exporters around the world from steel to clothing industry, for public American institutions are


now and for a good reason, very worried. Fortunately for Peru we had the FTA which gives us guarantee to “national treatment” in the estates purchases, which means that Peruvian steel and clothing industry must be considered as if they were American, by the Federal and Estate’s Government that have joined to the agreement. They aren’t still all, and probably this will be one of the biggest challenges which the Peruvian Ambassador in Washington, Luis Valdivieso, must carry out. Ecuador has also adopted protectionist measures because of the current checking account deterioration, and the reduction of the international oil prices, which would cause a big deficit around the GDP’s 5%. But there are some other things which haven’t been taken care of, or aren’t mentioned: Ecuador exports oil of the so called “crude oil” but it’s necessary to import the “light one” such as gasoline, oil gas and others, because its internal capacity to refine isn’t enough to supply their own demand. According to the USA’s Energetic Information Administration, Ecuador imports more products than it exports. In this situation of combustible prices falling, it isn’t that the deficit to be generating because of price fall could open an additional GDP’s 5% deficit. The rational part of this situation is to give an incentive to a bigger private investment in refineries, instead of turning them into state owned companies, with the disastrous result which Peruvians already know and suffered between 1968 and 1975. At the end of this type of populism adventure, the country and overall the lower social spheres, were in the worst situation of our history. The state owned companies went bankruptcy and sacked, and productive sectors leaders of the world just disappeared. The reconstruction of this disaster still isn’t over after more than thirty years. Ecuador, as well as Peru, is a member of the ANC, which eliminated the barriers to commerce. It’s the essence of the Andean Community, or what is left over. If it breaks and violates this principle, nothing of the ANC would be left over. If there is a difference among the “Buy American Act” protectionism and the Ecuadorian protectionism, is that the United States respects the agreements with their commercial partners, and in Ecuador’s case this wouldn’t be happening. Maybe one of the sectors to be of benefit to with the market opening at the inside of the ANC is the Pymes. And the most punished in the recent Ecuadorian protectionism is to that sector which made an effort to internationalize them, becoming formal for that matter, and invested and hired more personnel what for? To keep on looking the devastated way in which the inventory generated by orders which now are cancelled as a result of protectionism and also dismiss the workers? Wasn’t one of the ANC’s main objectives to promote the PYMES and decent employment inside the community? Besides all the above, the protectionism foments even more the smuggling with a bigger damage, because of the disloyal competition, and of course as a consequence the taxes evasion which ends damaging the fiscal duties and increases the deficit which supposedly wants to be avoided.


We all know by heart the prime phrase “every crisis generates opportunities”. This is the time to do what hasn’t been done in decades or centuries and in needed to do before a crisis starts: TO BE EACH DAY MORE COMPETITIVE. This is a great opportunity, a forced one, but finally an opportunity, to move forward in an intensive way to make the Estates Reforms so at the end of the crisis and the governments which people chose, more competitive country’s are found. Instead to protecting we have to move forward in the market opening, in facilitating the private investments and eliminating the barriers and obstructions. It’s proved that this is the best way to generating decent work posts, the poorness reduction and the increase to well-being’s majority. It’s true that in the lower spheres, the macroeconomic growth isn’t felt in the same way and is one of the biggest challenges which can only be confronted with expansive, inclusion and decentralized policies.


Beginnings of International Commerce Ing Guillermo Arosemena A. Business Consultant We live a dangerous current of world’s protectionism, similar to the one that rises at every global economic crisis, once or twice per century. The last one was in the thirties during the Great Depression, causing country’s commercial isolation with devastating repercussion. Wrongly the governments think that closing the borders to international commerce, is protecting the local businesses and the international monetary reserve. This philosophy corresponds to a commercial system based in shares of zero sums, prevailed in all continents until the middle of XVIII century. It was replaced in England, Holland and the United States at the end of that century: It was replaced in Japan at the end of XIX century; in the former Soviet Republic at the end of XX century and it’s still maintained in numerous countries of Latin America. The mentioned system, among the many weaknesses, declares that countries must always have commercial credit balance and also considers that before the one and only richness were the precious metal, and nowadays, the enormous monetary reserves. To highlight the risks which world’s economy is confronting, it’s convenient to go back 79 years. In 1930, The United States’ Congress passed a customs Law, called HawleySmoot which increased the customs of 20.000 items, to levels never seen before. An open letter published in the newspaper by 1.028 economists criticizing such a measure and noticing that far from taking out the economy of the crisis, it would increase it, was a futile effort. Immediately countries reprisals were taken, increasing the customs, and starting a war of tariffs which caused a collapse in international commerce. The world’s market dropped 66% between 1030 and 1934. In Graphic No. 1 you can appreciate the spectacular fall of international commerce from 68 to 23 million dollars.


Studious of World’s Depression affirm that if the countries wouldn’t have been isolated, the economic phenomenon wouldn’t have been so deep. The analysis is valid taking in account that it is through commerce goods, that employment is created, income taxes are paid and the economic flow benefits all the chain to supplying, from suppliers passing through producers and distributors. Nowadays the world confronts the strongest economic crisis since the thirties and reflects its severe exportation contraction, as it can be seen in Graphic No. 2. There are countries whose exportations have dropped in more than 40%, which means that for 2009, the world’s exportations diminish 13%, according to the last OECD’s estimates. China is more than four months after since the exportation drop, as well as Taiwan and the majority of Asian countries, which already have come out of poorness or are in the process, through an economic model based in international market.

To counteract the exportation drop, the majority of the countries are rising customs or trying to find the way to diminish their importations. President Correa took measures in front of its ANC’s partners. All of them try to justify the actions which were taken. India prohibited China’s toys importation and China prohibited pig importation from Ireland, as well as other food. The United States, France, China, Argentina and Italy have created direct and indirect subsidies to the automobile sector to impel the vehicle exportation. Between Mexico and the United States there are serious discussions related to the transportation of Mexican load inside the United States. Mexico has taken reprisals against USA, imposing 2.800 million dollars in customs and importation to USA’s citizens. Russia has increased their customs to used cars importation. Argentina has made something similar with the importation of spare parts and leather goods. As a consequence of the taken measures the number of disputes is growing. When the Group of the 20, conform by the main world’s potencies joined to the big emerging economies such as China, Brazil and India, gathered in London last April to revitalize the world’s economy, 17 of them had established 47 protectionist measures directed to restrict commerce. All the marked measures added to the world’s crisis itself, have caused a hard blow to foreign world’s commerce volume. The OECD just made the last evaluation of the world’s economy and considers that commerce among countries will decrease 13.2%, being the more affected in the


First World, United States, 11.9%; Japan, 8.4%; and Europe, 7%. The World’s Bank President, warns that 2009 will be very dangerous, because of the possibility that the tariffs continue the rise in prices. Kenneth S. Rogoff, a distinguished economist and professor at Harvard’s University, has warned that the next two years could be disastrous for free commerce. Graphic No. 3 GDP by Regions Asia’s percentage in the world’s GDP exceeds The one of United States and European Union

Asia was a Continent of thousands and million poor people during decades, being Japan an exception. The Asian’s life level was lower than the Latin American one, but in the last 40 years, they achieved to turn into a powerful continent, as it is confirmed in Graphic No. 3, which demonstrates it with more than 35% of the GDP worldwide. Asian economy is higher than the USA, European Union and the rest of the world, which includes Latin America. As for the expansion of exports, the achievements are more impressive. In 1913, Asia exported 23.000 million dollars, while in Latin America, 11.000 million. As the century ended, the exports of the first one, added 1.578 milliards and the second one, 286.000 million. The values are in a constant currency. While Asian exports grew 70 times, ours only reached 26. The CATO institute has a Centre for the study of commercial policies (http:/ /www.freetrade.org/) and its purpose is to prove through investigations and studies, that what the world needs is free commerce. Jagdish Bhagwati, a distinguished economist from India and professor of the well known University of Columbia has several books about globalization and in them he gives overwhelming information about globalization benefits which includes the human face of free commerce. Numerous studies of institutions of great reputation and of international experts, confirm that there is direct relation among countries with open economies and GDP’s; growth rate; one of them is the World’s Bank. In Graphic No. 4 we observe that in countries of the Third World, whose economies are more open, the income per inhabitant grows more than double of the First World ones. And this mustn’t surprise us. In the last 40 years, the income per inhabitant of some Asian and European


countries such as Ireland are equivalent to 70% of the USA’s, having started from 10% more or less. I have to mention that while income in the Third World’s countries, which haven’t been interested in free commerce, have gotten to a standstill or diminished.

Until 1820, the world’s middle class represented 2% of the whole. Few years later a process of globalization started and lasted until the beginning of the First World War in 1914. At this date, the middle class has been increased to 12%. Between 1914 and 1946, the commerce stagnation because of the two world wars and the Great Depression, brought to a standstill the world’s economy, but from 1947, as the GATT was born, a new globalization process began which lead to a spectacular growth of the middle class to 30% in 2008; for 2020, it’s expected an increase to 52%. Between 1987 and 2007, Brazil’s exports increased from 26.000 to 148.000 million dollars and the income per inhabitant from approximately 3.000 dollars to 5.900. In Mexico, exportations increased from 27.000 to 265.000 million and the income from 3.000 to 8.3000. In Turkey, the exportations grew from 10.000 to 104.000 million and the income from 3.300 to 8.000.The GDP’s growth rate at world’s level between 1980 and 2007; period of big commercial opening was much higher than at previous decades. Moises Naim, a famous investigator of the prestigious publication Foreign Policy, affirms that the world’s population will be increased to 1.000 million people and the middle class in 1.800 million of which 600 million will be China’s. To avoiding the tragedy which the world suffered 75 years ago, it’s imperative to stimulating international commerce. Without strengthening, the Ecuadorian exports won’t contribute to the country’s exportation growth and the GDP won’t either grow to levels which allow diminishing poverty, and also the foreign investment won’t grow and for the private sector it will be difficult to obtain credit lines. President’s Correa Government must support in an aggressive way the exportation sector and open the economy to foreign investing to generating more currency and avoid leaving the dollarization.


Joined together in the same path towards progress Mr. Enrique de Obario Vice-President of the “America’s Private Sector and Alternate General Coordinator of the Latin American and Caribbean Net for Democracy Recognized experts, prominent businessmen, high authorities of international organisms, have highlighted the important role of the public-private alliance and concrete examples of successful experiences which show that the region already has instruments, and mainly, the will and compromise of the businessmen to achieve their objectives. It highlights the importance of public-private investment in mega projects of infrastructure in the Americas for commerce, creating work posts and the regions competitiveness with environmental sustenance. Likewise to review, the public-private investment role in the energy sector, the need of policies to promoting the rational use and cooperation and energetic integration. The development of human capital, through the use of technologies in information, communication and education, is a common objective of the governments and the private sector and is essential to confront the crisis and promote human prosperity besides of fighting against poverty. The private sector performs a very important role to alleviating poverty, mainly through creating good work posts. The businesses of the region are each day more aware of the basic principles of social responsibility of the business which not only takes care of the interests of the direct involved parts, but also of the employees, the local communities, the providers and consumers. The responsible competitiveness is more supportive along the time and has more possibilities to generating confidence among the interested parts creating legitimacy for the businesses. To fomenting confidence is very important for social peace and political stability, besides of creating a predictable and reliable environment for the businesses. This is why we can’t allow that the crisis which we are going through puts in danger the achieved advances of the region in terms of growth and poverty reduction. To achieve this goal, the region requires a development vision at long term. It’s indispensable to have an appropriate environment for businesses in which the private sector can contribute to economic growth and employment generation. It’s important to emphasize the significant role of the public-private alliances, more relevant nowadays than in any other period of our history. These are presented in several ways. During the Private Sector’s Forum, organized by the Trinidad and Tobago’s government, with the OAS’s and the Americas Private Sector’s support, inside


the Frame of the V America’s Summit, new experiences of public-private alliances were presented in megaprojects of infrastructure, transportation and information and communication technologies, in which the joined financing was conclusive for their success. The private sector also highlighted many examples of alliances among the social, sanitation and educational fields, at the protection of the businesses social responsibilities, including from basic projects to improving milk and cocoa production to capacities development among the native population and small businessmen. The speakers and participants of the Americas V Summit urged the governments to stimulate the private investment and resist protectionism because it’s demonstrated in an empirical way that in time of crisis the protectionism inhibits development. It’s obvious that without a strong and profitable private sector there can’t be alliances with the public sector or social programs to lead the private sector. In front of the current crisis the joined work of the governments, private sector and civil society makes it even more necessary. Among the public-private programs which would help more to alleviate the unemployment increase at short term (and would besides help to improve productivity and equity at long term) are the following: housing programs for people of low income, small projects of public work, better and more focused transfers to reinforcing the income of the poorer families to allowing them to keep their children in school and using the medical care attention centres as well as the infrastructure programs. We are convinced that working together in front of a crisis, making up our minds, will help us to come out more strengthened as a region. But there is the need to have a social, constructive, effective and institutionalized dialogue, to promoting a confident atmosphere among the governments, businessmen and workers and with the participation of an organized civil society to contribute having priority, harmony and consensus achievement over the different challenges which are common to assure social peace, well-being for everyone and a sustained development. There is the need to bet for a not very distant future, with the public/political sector, productive sector and civil society sector. Let’s all learn to leave our ego outside the meeting place and let’s have one only meeting together, the main representatives of all the sectors, with the same agenda, a shared motivation, a inter sector mechanism with equity for the effective monitoring and performance of the agreements, and a shared objective, which should put an end to so much poverty and social injustice in our region and to replace individualism for more humanism. Let’s walk together, to confront all the social needs and be able afterwards to enjoy together the prosperity which should be collective, supportive, with extended richness, but always in the frame of a real democratic system.


How to add value? An unavoidable requirement to remain in the market Dr. Claudio M. De Rosa President of SICONSULTA The concept and need to add value springs up in the last 20 years, in the measure in which the world becomes globalized and the competition becomes accentuated. Those times in which the businesses survived thanks to the Estate’s protection, which responded to some businessmen requirements, in which the consumer had to accept the good or service without any other options, are left in the past. The market doesn’t belong anymore to the producers which sell whatever they wish and in the way and quality which they decide. Nowadays the market belongs to consumers which have to be completely satisfied or on the contrary the competition coming from any part of the world can get out of the market, any business. This is one of the big contributions of neoliberals, which has been so much beaten and whose contribution to social economic well-being (this is, the big majorities) is seldom understood. Nowadays, the free market without frontiers has imposed a new economy which also has a new business logic which is being mould by technology, information and knowledge which portrays the new era to which humanity is going to: The knowledge or information society. In this new knowledge context the intermediary of middle controls are reduced and employees which act between the producer and the consumer such as: agents, wholesalers, distributors, retailers among others are eliminated in some cases. The new economy is the competition to the future, something that can be visualized as the capacity developments to create innovating products or services or be of more value for the consumer. It’s the systematic effort to transforming businesses into new expressions, until now unimaginable. It’s important to understand that value generation isn’t a function or a group of isolated functions, but is a system which integrates and relates the activities of an organization in which each one of them contribute to value, to the good or service which is delivered to consumers. Therefore, it’s an analysis and strategic practice of the business, which in its development must achieve to form a value chain. This concept was set out by Michael Porter in its work “Competitive Advantage: Creating and Sustaining Superior Performance” some decades ago. The chain of value has the objective to having the client’s complete satisfaction, which is perceived when maximizing the benefits obtained by the acquired good or service less its cost. Therefore, the reason for the value chain is to creating a competitive advantage to benefit and attract the customer, and at the same time gaining its loyalty in the time. In other words, it’s the systematic search to productivity and competitiveness, which also builds up in knowledge which in words of Peter Druker “is the only determinant factor to production” and we could add saying, endless.


As inside the commercial world, to maximizing profits is a legitimate business objective, there is to watch out that the above mentioned aren’t obtained at the consumers cost, because this could work at short term, but also could be the beginning of the cause which will put in risk for the business to coming out into the market or that the competition throws it out. Druker who is considered the father of management, points out that “free commerce can’t be justified for only being a good business. It can only be justified because it’s benefit for the society”. Therefore the strategy is to creating a competitive advantage which means having more relative profitability than the competition, which has to be defensible in time, meaning that it can be reproduced before new conditions that market generates. All this demands the design of a strategic competitiveness of the business or company, to achieve the value chain which in its formation eliminates all those actions, activities, processes, goods or services which subtract or do not add value, cause unnecessary costs, do not increase quality, which put pressure to its final price meaning by this, less competitiveness. It must be understood that customers operate each time more, better information and aren’t willing to pay the costs for managerial inefficiency. This means that the company must look for the systematic, efficient and effective way to handle things in the market and compete with quality goods or services and prices which the customer is able to pay in exchange of full satisfaction. In this way, richness is generated: for the company which sells and earns more, and for the consumer which gets the benefit of an interchange of great satisfaction for the spent money. This maxim allows clarifying a conceptual mistake, which starts believing that a smaller price is per se enough attractive to conquer the market. First, there is a market for a same type of good with a high price or a low one. For example, some are willing to pay five thousand dollars for a good bottle of wine and others are willing to pay around three dollars; and both are being sold. In second place, there are values that go beyond the price such as quality, safety measures fulfilment, protection towards environment, the wish for difference, hygiene, acquired services subsequent to the good or service delivery, and even social status, among others. The values which are added to a product can be visible (i.e. quality, reliability, additional services, among others) as well as the invisible, which the customer gives great importance knowing with certainty that the product has it and even is in conditions to pay more for them. For example, if a supermarket sells meat in nice packages, people are willing to buy that product, but if there is a lack of desired hygiene people won’t buy it; therefore, hygiene value which is invisible, must be kept to generating consumers confidence and loyalty. This last example allows demonstrating that there are actions or measures which have cost and increase the value (i.e. consumables improvement, more strict quality control, respect for environment, among others) and others which don’t generate


additional cost. For example, if the meat instead of lying on the floor is hanged as it should be, add value has been added without greater cost. As a similarity, a kind attention, a return or correction which is done for healthy business conscience and not as a result of a claim, a deliver at the promised time, are actions and measures which generate more value to the acquired good or service, in benefit of the consumers. The above mentioned reiterates the need to create inside a business a culture of the add value to involve the whole personnel in each developed action, to watch over generating value, in which the last purpose of the chain of value is to increase the consumer’s satisfaction. Therefore, from a macro vision point or view, there are values such as the business, in the frame of a vision which projects towards the market and also its shareholders or potential ones, if they are quoted in the stock market. Another key value is the brand in which the market recognizes and appreciates it for having captured and being consolidated in the market, having created fidelity among their customers. This value doesn’t come alone and in a spontaneous way, but is the result of all the value chain work, from its design, acquisition of raw materials or intermediate, its transformation until the selling of the good or service to the final consumer, generating great satisfaction in which the benefit is sensed as to bigger price less cost. In this environment, Michael Porter developed a model of management, which sustains the concept of value chain, which divides the business activities in two general groups; of support and primary (Graphic No. 1). It’s true that this model already has some time but is valid, and isn’t completely known by an ample business sector for which it’s appropriate to revise it again.

In the level of supporting activities there are four areas to managing: (I) acquirement and supply, and the objective is to get better consumables at an adequate price and establish a proper process which gives value to that area; (II) investigation development, a key function and world’s modern business characteristic, which has to add value through incorporating new processes or simple measures to rising quality and reducing costs of the sold product; (III) the operation of human resources, in which


their systematic capacitating and the deal with deep human sense, are fundamental factors to increasing its productivity and loyalty towards the business, and (IV) the companies infrastructure, which is its whole productive scaffolding. The second level identified by Porter corresponds to primary activities, which are mainly developed at the inside of the business and are classified into five areas of procedures: (I) the internal logistic which helps to keep all resources for production; (II) the one to operating or producing which involves all the transformation or assembly processes, to produce the acquired good or service; (III) the external logistic, which is oriented to searching efficient systems for storage and distribution, in which, in the great majority of studied cases, are the cause to costs increasing and losses which put great pressure in businesses cash; (IV) of marketing and sales, which could be the reason of a good brand position and market capture or, in the other extreme, the cause of costs which haven’t got the awaited return on investment, with which it puts pressure on the product’s prices or in their profitability; and (V) area of additional services in which the after- sale service, maintenance and orientation for customers can end up having a key value for customers. An activity which isn’t mentioned, but is affected or affects the final price, is the financing, which could be seen as the business circulation system, because without this type of resources nothing of the previous is possible. But at the same time the conjugation activities to supporting and the primaries impact in a favourable way – when there is generation of value- or they can affect adversely- when there is devaluation- with which the financial costs rise. However the financing procedures can be seen as a special function, in which the good cash flow management, the maintenance of a managerial prestige and the responsibility in front of the obtained credits, reduces the risk, and therefore less costs (less interest rates) and the availability of financing resources when they are required as work capital or to investing. To obtaining a better result in the chain of value, it’s necessary to establish a good intelligence system, which has to provide an adequate and accurate information about each one of the processes, both at the inside as at the outside of the company, meaning: about the conditions of the market and the competitors, the technological advances which could be incorporated and the ones the competition is acquiring, and the national public, regional and foreign policies which could affect the market’s conditions in which the company operates or tries to operate. In this way, the intelligence must assume its strategic function of information, to diminish risks, maximize opportunities, achieve leadership or a good participation of the market and consolidate it through time. Therefore we can mention a quote which says “to be rich isn’t a matter of being efficient but knowing to choose where to be efficient”, to conclude that a business richness isn’t only in the product’s quality but in which way to be efficient in each process, from its design until its sale in the market. The previous mentioned shows that the adding value function isn’t a temporary activity or an objective at short term. It’s a managerial strategy which is developed in a


systematic way and at long term vision. This involves the type of investments which a business must maintain to be more competitive. Traditionally, one of the most notorious political positions is the one that tries the antagonism positions among the employer and the worker. However, excepting the public sector, there aren’t organized workers in a productive structure or of services without businessmen as well as there aren’t businessmen without workers. That’s why both constitute a productive core and have a common mission: the businessmen must protect the business which is their income source, while the workers must protect the business which is their work and income resource. Then, which is the threat which businessmen and workers confront in the same way? It’s the competition which can throw them out of the market. In front of this situation, the businessmen have to invest and the workers, work with loyalty for quality, for goods and services which are produced and sold at the market. In this context, it’s necessary to build a virtuous circle for investment, the generation of value and competitiveness. The businessman has to understand that to investing in human capital plus the investment in technology are unavoidable conditions to increase the company’s man power productivity. Then, a second challenge will arise: to reducing the operating system, except for the workers which must increase according to a bigger achieved productivity. For this last one, it’s fundamental to improve management and establish a chain of value, and involve each one of the business activities. The result will be having bigger competitiveness, which increases the possibility of gaining market and stay in it, generating more profitability for the business, and therefore having more resources to invest in human capital and technology, with which the competitiveness virtual circle closes.

These are the conditions of the new economy, which is stimulated by the competition and strengthen by technology, the information and the knowledge which develops to generating more national richness and employments when there is a confidence environment, with clear and predictable rules of the game, and freedom so the businessmen, the brilliant minds can spread out all their creativeness and productive ideas towards better social economic conditions for the whole society.


The importance of the fiscal austerity Econ. Mauricio Pozo C. Economic Analyst Former Secretary of the Treasury It’s insistently repeated that the fiscal austerity has some grade of connection with the economic orthodoxy or entails a kind of ideological slant near to neo liberalism. There isn’t anything more false than this, in spite of being almost an evil concept.

Just as Medical Science reaches to academic consensus about topics in its area, the Economic Science has also basic agreements. One of them is about the fiscal policy which a country applies. This last one must at least gather some basic conditions. One of them is that it must act against a cyclical way, and this is, the Treasury must save in moments of abundance to be able to using those savings in times of income shortage. A second element of academic agreement is the need to establish a policy of predictable income, which can be anticipated or been foresee in a relative sure way. A third component is the need for the permanent income to covering also the permanent withdraw and those which are extraordinary or save, and in the last of the cases, are also used for extraordinary expenses. A fourth component is the incorporation of the fiscal sustenance principle, meaning that the adopted decisions don’t entail a vision at short term but the impacts which these could have at medium or long term- The fifth factor is about not adopting fiscal decisions which could be of benefit to this sector, can have unfavourable impacts towards other sectors or the rest of the economy. Regarding to the negative cyclical role of the fiscal policy and part of the other mentioned concepts, in 2002 Ecuador approved the Responsibility Law and Fiscal Transparency, which among other aspects, introduced limits for public sectors, to getting into debt, a top of expenditure in function of economies’ growth, a gradual reduction of the fiscal dependence to income for oil exportations, the creation of microeconomic stabilization funds coming from extra income for oil sale and the option to repurchase public debt if the financing conditions were adequate. In short, it was an absolute convenient Law for the country, because it established principles of basic fiscal management, it set some legal restrictions which hindered excesses and fixed a certain course of action to public administration. Pitifully, during 2005 at the government which started in April of the same year with Alfredo Palacio, one of the first decisions was to abolish that legal rule, with which once again the fiscal squandering began among other problems. Subsequently in that same government other savings funds were opened for determined objectives but finally Montecristy’s Assembly eliminated them and incorporated those resources to the Estate’s budget without any real rule for fiscal management. The result was deplorable because the country accelerated the rhythm of a fiscal management outside any norm of prudence and discipline, which worsen


the economy’s vulnerability to face up to adverse factors, as indeed it is in the current international economic crisis. Economies which manage well the public finances generate certainty, give security to economic agents, transmit confidence to investors and avoid negative effects to other sectors. If the fiscal policy is expansive, this is, if the public expenses behaviour grows at a higher rhythm to economy’s growth, not only the Estate’s budget and the public finances turns unsustainable but generates distortions to other sectors, such as the external. For this reason, the importation restrictions without an adequate fiscal management do not produce a money savings as it could be expected. It seems like trying to close an open faucet which can’t be closed. An expansive policy of public expenses produces a destabilize effect in the balance payment and other sectors of the economy. In this example, if a fiscal problem doesn’t arise an external problem is nourished. The recent restrictions to importing without regulating the public expenses, already demonstrates the above mentioned and the impact isn’t the expected one. In a similar way, an excess of current assets in economy as a result of an excessive public expense is expressed in a very small demand, this is, that it can’t absorb that amount of resources without avoiding the inflationary pressure or flight of capital. It’s absolutely inconvenient to emit money without the economy being able to absorb such an amount of liquidity. Nowadays we don’t have Central Bank emitting money, but the treasury expands in an excessive way the expenses and acts as if it would be an emitter without back up. Likewise, the sign which the market receives of a fiscal squandering is “evil” in the sense of showing a demonstration of abundance which isn’t necessarily so, producing a chain reaction in the economic agents. On the other hand, it’s hard to believe that an excess of liquidity produced by an enormous public expense can’t generate destabilize pressures. At more investment more economic growth is promoted, which allows to absorbing more liquidity without destabilize the economy. This is precisely known as an increase of money demand. The treasury can spend more with less risk to generating economic instability. ¿What would happen if the treasury wants to spend the same amount of money with half of the income? Without doubt it will enter into a process or excessive getting into debt which can’t be supported along the time. Any fiscal policy can’t abandon the impact of their decisions at medium or long term, with which the economic populism is absolutely harmful. Without a responsible management of public expenses, any country weakens its economic stability, condemns the external strength and restricts the economy’s financing capacity, because on one hand it’s being squandered and on the other hand only the closing of financing is obtained. Without financing, for example in the construction area, the employment is weakened and work is harmed because it’s an important sector for manpower. It’s a priority in any economy, if it’s socialist or capitalist, to applying an economic practise to allowing achieve big objectives such as economic growth and better richness distribution. This isn’t any ideologies’ attribute, it’s a need. This is the reason why countries with socialist ideas, but with modern ones, execute an economic and


fiscal policy far away from populism and excesses, as we can see in Spain, Chile, Uruguay, Brazil, among others. If the fiscal authority doesn’t give a sign for a correct and organized fiscal management, when time comes in which it requires to raise funds for any need, it won’t be able to get it because a lack of confidence of the economic agents. This is the case of the emitting value titles of the public sector, and in Ecuador, the only buyer is the IEES, because the banking institutions and private actors perceive as an excessive risk any obligation emitted by a estate which doesn’t carry out its obligations. The result of all the mentioned is a serious difficulty for the treasury to financing its operations and investments, as a consequence of their own indiscipline Ecuador has moved forward in an important way in the burden of the GDP’s debt, in fact, it’s one of the lowest in Latin America. However the topics of getting into debt has been used as a political and electoral instrument instead of using the efforts to paying the countries’ compromises and solve much more important problems such as the public subsidies, the public expense quality, the rhythm of expenses growth in front of the increase of the economic activity, etc. Without an adequate fiscal management there is a serious attempt against macroeconomic stability, the inflationary pressures are bigger, the economic viability is affected, the GDP is threaten, the international relations are weakened and there is an evil pressure towards moneychanger system, in our case, the dollarization.


The decentralization of competitions in search of efficiency to services through a real regime of regional autonomous communities Dr. Jorge Pino V. Doctor of Law Democracy is the government of majorities, and centralism is the privilege of minorities. The free decision of people is autonomy, is democracy. Democracy is the government for people, in which the political decisions are taken by the majority in benefit of the community. It’s something more than a way to govern; it’s the population’s free determination. Democracy remerged in the West Europe and in North America during the XVIII and XIX centuries starting from a concept known with the name of Constitutionalism, which had as a main principle the idea that the government should be limited. The North American Federal System arose from the Constitutional convention as a means to avoid the extreme centralism of the British Empire. As Madison explains it when talking about it, the political power is divided among a country’s central government and the governments of the parts which constitute them so each level is legally independent from the other inside the same activity sphere. The principles are the same: if it’s the United States, Canada provinces, Switzerland regions, the German Landers or Spain’s Regional Autonomous Communities, all have a base of power which is independent of its Central government. Each one receives its share of authority directly from people. Each one in turn is entitled to exercising political authority above the town inside their own sphere of activities, without depending on the consent of the other government’s level. This governments system is the most democratic because it limits the excesses of political power, distributing it among the diverse government levels, appointed through written Constitution, and Estate statutes, Regions, provinces, in the respective spheres of the Central Government and Estates authorities protecting the control of competences of each one against the usurpation from the other side. The Spaniard Constitution of 1978 established the necessary principles to arrange the pass of a Centralized Estate to an Estate of Autonomies, with a decentralization of political powers, both ruling and administrating. Like that, this new territorial entities are called to participate in the Estate’s political power which entails the need to confer to the Autonomous Communities, a series of competences which allow to governing themselves. The Autonomous Community must be recognized at legal level in its own Statutes of Autonomy, which is approved by the Organic Law. There is the need to turn to the Statute of Autonomy to determine the legality of attribution of a competence to the Autonomous Community. A Statutory rule in this way turns into a competition attribute rule, without forgetting the Constitution supremacy principle over the rest of the legal order. The Autonomy Statutes are a part


of that ordination as a basic institutional rule of the Autonomous Community which the Estate recognizes and protects. The distribution taken place among the Estate and the Regional Autonomous Community is the traditional among three kinds of competences: Exclusive, Concurrent and Shared. The resources available to the Autonomous Communities are constituted, among others by: The own taxes, the especial taxes and contributions, the transferred Estate payments (totally or partial), the surcharge which can be established over the Estate’s payments, the transferences of the Inter territorial Compensation Fund, the income whose origins are from the patrimony and other income of private right, as well as the product of fines and sanctions in the spheres competence. It isn’t allowed, the overlapping of taxes, that is to say, that the autonomous tax already affects taxable facts burdened by the Estate; neither is allowed that the taxes fall onto patrimony elements and output beyond the community territory, or having obstacles to free circulation of people, merchandise or service. In the Estates with decentralized policies, two authorities are superimposed: the central governments one and the Autonomous entities. The Constitution formulates the pact, makes a systematic distribution of competences and establishes the Estate’s fundamental agencies. Through political decentralization it is tried to balance the two potentially antagonistic principles. One of them is the Autonomy as a way to defend diversity and pluralism, and the participation, as the other one to achieving more expanded communities. In short, the Autonomous bodies are public territorial entities provided of legislative and administrative Autonomy. Nevertheless, a political decentralised Estate continues being a Unitary and sovereign Estate. It’s also important to point out that, being provided the autonomous entities of self government -political concept of Autonomy which differences it from sovereignty- they haven’t been subjected to the Central Authority in the environment of their competences. From the limitations and controls, from the capacity to intervene in the Central Estate’s decision and the distribution of competences, the data is extracted to determine the differences among the diverse Federal Estates. The flexibility of the federalists’ principles is the fundament of its success, when allowing to adapting the structure without the need to move it according to the changeable social reality. There are big and small Federal Estates, such as: USA, Argentina, Canada, Switzerland, Austria or Germany, and this isn’t any obstacle for the Autonomy being bigger or smaller. For political decentralization to exist it isn’t necessary that all the Communities which form them, have their Autonomy; it’s enough having two Communities with peculiar Statutes to having a Federation. Let’s remember that Constitutional problems aren’t primarily problems of right but of Power.


Those which look for autonomy want a balance between the needed unity and the reality of its peculiarities and its differences; because the world works better when the differences are respected. Centralism is abuse of authority; its undue absorption of functions and competences that correspond to other organs of the Estate. It’s an old phenomenon which was present in monarchies, empires, absolutism and totalitarianism of last century’s beginnings, in its version of communism and fascism. It’s an obsolete, anti democratic, deficient and unjust system. Autonomy on the contrary, is democratic, its society which rules its own law, however, it isn’t sovereign. Since the Republic was born, its Centralist character inherited from colonial totalitarian and monarchic Spaniard habits from those times, it stamped what still the elites and Ecuadorian public institutions retain with the expressed intention to privilege a select group called bureaucracy, which the political power holds nowadays, besides of the economic power. The centralists abuse of their authority because of their interests and in defence of their privileges, citing “National Unity” as a joker. “The Centre of Power is everything”. This was the way Hitler, Stalin, Franco, Castro, among many others understood the previous mentioned, as well as the Monarchs from the past. Autonomy is the most democratic and efficient system which exists. With the Organic Reformatory Law of Municipal Regime (RO 429 from September 27 2004), in agreement with the Estate’s Political Constitution of 1998, an opportunity opened for the Estate to impel through the Municipalities, a deep decentralization and a lack of concentration, and a harmonic development which the country needs....according to that Law (perhaps those are the pioneer rules of the real growing Autonomous Regime), because “the Central Government was transferring in a progressive way the functions, attributions, competences, responsibilities and resources to the Sectional Autonomous entities or others of Regional nature”. “The competences of the Central Government could be decentralizing, excepting Defence and National Security, the direction to foreign policy and International Relations, The Economic and Estate’s Tribute Payment, the foreign getting into debt formalities and those which the Constitutions and International Agreements exclude. There couldn’t be transference of competences without equivalent resources. The decentralization was obligatory when a Sectional entity asked for it. According to the 1998 Constitution, The Provinces, Districts and Parishes could be associated for its economic and social development and also for the natural resources management. The Estate and its institutions were forced to respect and make everybody respect the Municipal Autonomy, transferring in a predictable way, direct, appropriate and automatically, the participations or assignations which correspond to Municipalities, inherent to the diverse fields of their competence. In any case of decentralization you couldn’t object or condition the transfer of competences to the fulfilment of requirements or formalities which weren’t foreseen in the Political Constitution of 1998 and the law. To asking for a transfer of competences, the Municipalities had to have the operative capacity to assuming it. The respective District Council determined the operative capacity to assuming new competences. Through Autonomies with decentralized competences, as the 1998


Constitution determined and the Organic Law of Municipal Regimes, everybody was favoured, less the Centralist Statists. The rest, young people, merchants, professionals, the big middle class and the rest of Ecuadorians perfectly understand that the Autonomous Regime with competence decentralization, is convenient and necessary for the country’s progress and development, and know very well that in Spain there are better opportunities to working (therefore the great immigration). We need a State with political and administrative decentralization, with territorial public entities, with self government (not sovereignty), and that are not subject to the Central Authority in the sphere of their competences, which will serve in an efficient and appropriate way to all Ecuadorians, in all the Districts, Provinces and Regions of our Country. Jaime Nebot leads the autonomous process and requests competences according to the law, and to what previously was agreed, as it corresponds to Guayaquil; Santa Cruz in Bolivia is already moving towards Autonomy. In the Constitution of the Republic of Ecuador, which is current in Title V, inside chapters I to V, and is about Estate’s territorial Organization, we can see: General Principles, Organization of the territory, Decentralized Autonomous Governments and special Regimes, Regime of Competences and economic Resources, which are for the first time taken in mind over the autonomous decentralized governments. Which is apparently a constitutional advance, to creating specifically autonomous decentralized governments, but is a backward step respecting to the effective decentralization of competences of the Central Government. Articulate 226 of the Political Constitution of 1998 said: “the central government’s competences are able to decentralize, except for defence and national security, the foreign political directions and the international relations, the economic and tributary policy of the Estate, the formalities for foreign debt and those which the constitution and international agreements expressly exclude. According to the fact of decentralization, there can’t be transference of competences without transference of equivalent resources, or the transference resources without the competences. The decentralization will be obligatory when a sectional entity requires it and has the operative capacity to assuming it”. The current constitutional regulations are a backward step over the Regime for Competences, in articulate 260 to 268, because it limits the competences of autonomous regional, provincial, municipal governments, of metropolitan district governments and rural parochial governments. However in articulate 260 of the Constitution we can see the following: “In practice of exclusive competences, it won’t exclude the concurrent practice of the formalities in the provision of public services and activities of collaboration and complementary among the Governments’ different levels”. And articulate 261, says: “The central Estate will have the exclusive competences over: 1. the national defence, internal protection and public order. 2. The international relations. 3. The people’s register, naturalization of foreigners and


migratory control, 4. The national planning. 5. The economic, tributary, customs; fiscal and monetary; foreign commerce and getting into debt 6. The teaching, health, social security and housing policies. 7. The protected natural areas and natural resources. 9. Those which correspond to applying as a result of international agreements. 10. The radio-electrical spectrum and the general regime of communication and telecommunication; harbours and airports. 11. The energy resources; minerals, hydrocarbons, freshwater, biodiversity and forest resources. 12. The control and administration of public national businesses�. The autonomous regional governments will have exclusive competences, without damage of others which determines the law that regulates the National Law of Competences, according to the established in articulate 262. According to articulate 263, the provincial governments will have their exclusive competences as well as the municipal governments, without damage of others which the law determines, according to articulate 264; the parochial rural governments will exert their exclusive competences according to articulate 267, without damage of the additional which the law determines. And finally, for the first time in Ecuador the autonomous metropolitan district governments are created and will exert the competences which are designed for the district governments and all the ones which are applicable to regional or provincial governments, without damage of the additional which determines the Law to regulating the national system of competences. In the sphere of the territory’s and competences, and in possession of their faculties, will issue district regulations. Guayaquil, and its historic and geographic area (Guayas, Los Rios, El Oro, Santa Elena, Southern part of Manabí), because of its sociological, legal and political links; for their identity and idiosyncrasy, naturally constitute an authentic regional community, with administrative, normative and tributary, decentralization because of the free determination of its people.


YANBAL Thousands of women in Ecuador have grown as successful professionals with Yanbal With three children and a wage which didn’t supply the needs of her home, Raquel Hidrovo from Ambato, Ecuador, decided to change the course of her life and turn into a Yanbal’s businesswoman. She needed a business which gave her freedom to also occupy herself of her home, and with Yanbal she found the solution: more time for her children, income which has allowed managing alone her home; training; and also the opportunity to train and prepare hundreds of women in various locations of the country. Nowadays, at 52, Raquel has accomplished everything. She has around 200 women in her group, three professional children who give her great satisfactions and three grandchildren. Her oldest daughter is also Director of Yanbal and manages one of the three offices which Raquel has got in the city of Guayaquil, place where she lives since she was small. “With Yanbal all my dreams became true, here I turned into a happy businesswoman and have achieved great personal, economic and professional goals” says Raquel. Just like Raquel, thousands of women in Ecuador have turned into real independent businesswomen thanks to Yanbal’s Opportunity and have grown making other women grow, because one of the main goals is to transmitting all the knowledge which Yanbal has given them so that each time there can be more successful businesswomen in the country. This is precisely the philosophy with which Yanbal was conceived at international level. In Ecuador, with 32 years of operating, this company has devoted itself as a leader in the cosmetic and beauty market, gaining the consumers’ confidence as well as the women’s which nowadays have their own business. An example of it is that currently Yanbal has more than 85.000 active consultants and 2.200 Directors at national level. 50% of Yanbal’s income is invested in their Sales Force, with a plan of incentives which include: first level capacitating, recognitions through conventions, national and international travelling and 0Km. Cars. All this is a recognition to excellence and compromise of all those who work at Yanbal “yanbalistas” which is what these independent businesswomen are called. Yanbal hires currently 575 people, has offices at national level and a production factory located in Quito, whose current investment is 2.3 million dollars in equipment and machinery. Besides, nowadays they have three certifications which guarantee the quality of the managing system: the ISO 9001:2008 to the High Quality of its processes and products: Good Practices of Cosmetic Manufacture (Yanbal is the only cosmetic


factory in Ecuador, to obtaining this certificate) and BASC (Business Alliance for Secure Commerce). Likewise, as a prove of its compromise with the country, Yanbal started the construction of a new Distribution Centre and the expansion of the current factory to producing lines which were never done before in Ecuador. These projects, destined to offer a quicker and efficient service, will generate around 440 new work posts in direct manpower and 100 more in indirect manpower. Yanbal Ecuador has also obtained big achievements, being recognized with some awards such as the recent Gold Ekos, Best Place to Work, Effie, among others, which recognizes them as a highly responsible company in all their corporative areas and with the community in general. About International Yanbal Yanbal International Corporation is 41 years now in Latin America and 5 years in Europe, producing and marketing their beauty products of world’s quality in eight countries: Bolivia, Colombia, Ecuador, Spain, Guatemala, Mexico, Peru and Venezuela. It has five modern production factories; with a centre to investigating and developing of cosmetics and fragrances in Florida. It also has a jewellery designers equipment in New York. It has been consolidated as one of the leaders in products for face, makeup, fragrances, personal care and bijouterie; offering women the opportunity to developing economically. www.yanbal.com


The succession in family business Mr. Alejandro Indacochea C. President of Indacochea $ Assocciates Professor of Centre Business Centrum of the Pontifical Catholic University of Peru “There won’t be any problem when I no longer will be in the business, the three brothers will be by turn, the general director”. Don Jorge, businessman

Even though it isn’t possible to have exact comparative figures at international level, there are clear tendencies which show that family business have a short life. Between two thirds and three quarters of these companies, go bankrupt or are sold by the family founder during the first generation, and only between 5% and 15% continue until the third generation in hands of the founder’s descendant. The remaining percentage of businesses close or are sold because of lack of competitiveness in the business, figures which in the Latin American case must be similar. By the way, the family business problematic is complex and there are diverse factors which contribute having these results; one of them is the problem of business succession. Planning Contrary to a non family company, in which continuity of it only depends of the business competitiveness, in the family business it is necessary besides of competitiveness, the planning of the business succession for the company to continue working in the future. The succession doesn’t occur in a natural way, or is the result of a spontaneous decision, but is a structured and planned work. The family businesses, during the succession can follow four models to transferring:  It is like the “king”, who dies never giving up, that is, the succession only happens at the founder’s death or in front of their children’s rebellion.  It is like the “general”, who plans his succession but always with the hope to return victorious to saving the company.  It is like the “ruler”, that when he finishes his term of office, retires completely from the post and usually dedicates to other activity.  It is like the “ambassador” who achieves keeping a link with the company, leaving the directive management to take care over some other topics.


Retreat styles

The variations The best way and at the same time the most difficult method to practically do the above mentioned is the model of the ambassador, which requires of a careful elaboration to all the succession strategies in business. The following graphic shows us the different existing options to succession of family business, being the most frequent, to doing nothing, which at the same time is the less advisable thing to do.

The designation of a member of the family as the successor is the favourite by the businesses founders and requires of a precise selection, as well as of a careful process of preparation which implies to understanding the company’s businesses and the development of qualities to leader them. This goes beyond to accumulating titles; make the inheritors work from below or from a passive assistance in the business.


Many families decide to hire an external administrator (which comes outside the business) and has the opportunity to develop his individual style and own leadership, more than designating an internal manager who at long term continues being the business employee. Other options In view of the absence of successors among the family, the sale of the business is an alternative which requires a convenient management and careful planning leaving aside the emotional part and fulfil an efficient operation. The option to fragment the business isn’t the most appropriate, but in determined circumstances the successors opt for different changes and there isn’t any other alternative. This option requires of an adequate technical work to defining and delimiting the different business units with the inheritors. To liquidate a business implies to selling the assets pay the workers and cancel debts, and the obtained value is less than the one obtained with a working or in function business.

Several precisions The final decision depends on: The characteristic decisions of each company, the existence of prepared successors, the family’s situation and financial needs, the way to distributing the property, the business organization, and the owner’s personal style and its successors, among other aspects. It’s also important to emotionally prepare the founder of the business, so his future life continues turning around the family business, task which isn’t easy at all because normally there is resistance towards succession. Besides, in the majority of the cases the topic gets complicated by the natural fear to losing control and the family’s influence. The most important decision As well as the company’s require of the elaboration and development of a strategic plan to be able to compete to future, the family businesses need to elaborate the planning and strategy to succession to allowing continue with the business, which isn’t a unilateral decision. It may be the most and greatest decision which the business founder has to take in a given and certain moment. Finally it is important to have in mind that when the conditions for an adequate succession aren’t there, the sale of the business would be the best option for the founder a professional and specialized work which requires of a careful planning and management besides of an adequate negotiation.


The use of social nets strengthens the businesses development Lcda. Diana Rivera R. Teaching at the Private Technical University of Loja With the evolution of technology and taking advantage of its new tools, nowadays the interpersonal relations have changed in an outstanding way. Nowadays the social nets have been used by people for different purposes; interpersonal, labour, political promotion and other relations. Even universities use them to foment the knowledge management (understood as the transfer of knowledge and experience which could be used as an available resource for other organizations). Before talking about the advantages of these businesses development nets, it’s necessary to remember that a net is a way of social interaction, defined as a dynamic exchange among people, groups and institutions in contexts of complexity, concept which has been used to developing tools which allow the interaction of diverse people which identify themselves in the same needs and problematic. Examples of these social nets are: Hi5, Facebook, Delicious, LinkedIn, Flicker, Twitter and many more and its use moves forward by leaps and bounds especially inside the web 2.0. Possibilities which some social nets offer: Facebook Allows the advertising inside a chain of relations and publicity addressed to segment targets. Sonico Opens the door for personalized campaigns and traditional online pieces of publicity. Netlog Includes supports for adsense and banners. Fotolog Allows making adsense and bannering advertisements. MYSPACE.com Offers support for adsense, rich media and special actions. Hi5 Suggests Proposes text advertisements, banners, rich media and personalized sponsors. The social nets increase productivity in the businesses Nowadays the institutions, because of their work, need to be integrated to new technology which looks forward to facilitating the user exchange of clients contacts both internal and externally with the purpose to avoiding the massive mails which are almost not read by users.


In this environment it’s interesting to talk about the inter activity operator which helps to a determined entity inside the interactive system, to creating products, developing applications and standards. Even nowadays businesses use the social nets to position their brands, for which they configure their profile in Facebook, which is the first option. They also often place banners besides the user’s profile, sponsor groups or create their own page. In this sense the net must be enough intelligent to see what is needed for each application. On the other hand the entities must be efficient in costs, incorporate new applications, be productive, see that the resources be optimized, and generate horizontal communication with all the members. To conclude we can say that there are many companies which use the social nets to developing their communication and knowledge. Likewise their employees do it to improve groups around common interests and create


Revista Ingles MiPYMES 39