Ecuador President Rafael Correa, re-elected in February on pledges to “radicalize” his socialist push, is proposing to modernize the country’s markets after the fashion of capitalist countries he has criticized.
Correa, a 50-year-old former economics professor with a Ph.D. from the University of Illinois, sent legislation to congress on April 5 that would integrate the country’s two securities exchanges and require them to convert into for-profit entities, according to a copy of the bill obtained by Bloomberg News and confirmed by a congressional press officer.
The bill also creates a regulatory framework under which financial firms could set up investment banks and mutual funds, and makes it easier for medium-size and small companies to raise financing on exchanges.
“While the securities market has been seen as a classic tool of capitalism and of large economic groups, as also happens in our country, this market could be an ideal mechanism to democratize companies’ property,” Correa said in a letter to Congressional President Fernando Cordero accompanying the bill. “The exchange market is a very important segment of the economy of a nation.”
Ecuador’s Economic Policy Minister Jeannette Sanchez wasn’t immediately available to comment on the bill, the minister’s press office said today.
As the head of a nation where about a third of the 15.4 million population lives in poverty, Correa has promised to “radicalize” his “citizens’ revolution” with free education and health care. The self-described socialist revolutionary dubbed foreign bondholders “true monsters” when the country defaulted on $3.2 billion of debt in 2008.
The Economic Policy Ministry had promised a bill to integrate the exchanges more than two years ago. The bill has been delayed since then amid ministerial changes in the president’s cabinet. Ecuador’s two exchanges, Bolsa de Valores de Quito and Bolsa de Valores de Guayaquil, operate mostly independently.
Under the proposed bill, the country would set up a new market regulator accountable to the president and create a “special” exchange where small- and medium-sized companies could list securities with fewer rules.
Ecuador, whose economy is about the size of New Mexico’s, had total trading volume of $215 million in March, down 35 percent from a year earlier, according to the most recent data from the Quito exchange. That compares with 148.3 billion reais ($73.9 billion) on the Sao Paulo exchange in Brazil, Latin America’s biggest economy.
Correa, who questioned the fairness of the British and Swedish justice systems last year when he granted asylum to WikiLeaks founder Julian Assange, is now touring Europe in a bid to boost foreign investment in Ecuador.
After meeting German Chancellor Angela Merkel on April 17, Correa pledged to sign an investment treaty with the European Union. The Ecuadorean Congress is debating a March proposal by Correa to tear up a similar agreement with the U.S.
In 2012, he forced oil companies to rewrite contracts under the threat of expropriation to give the government a greater share of profits. He also led efforts to limit bank profits, saying he planned to “transform the bourgeoisie state into a popular state.”
The government may have trouble convincing investors it’s serious about the market reforms, according to Walter Spurrier, director of economic research company Grupo Spurrier.
“I’m skeptical that they’ll get the desired results,” Spurrier said today in a telephone interview from Guayaquil. “This government isn’t a government with one single political tendency. It would like more investment, but at the same time it wants more socialism.”