Ecuador is to increase some taxes, sell assets and might issue new bonds on the international market to fund a multibillion-dollar reconstruction after a devastating magnitude 7.8 quake, Ecuadoran President Rafael Correa said on Wednesday.
The death toll from Ecuador’s weekend earthquake neared 600 and rescue missions ebbed as the traumatized Andean nation braced itself for long and costly rebuilding.
“It’s hard to imagine the magnitude of the tragedy. Every time we visit a place, there are more problems,” Correa said, fresh from touring the disaster zone.
The leader estimated that the disaster had inflicted US$2 billion to US$3 billion of damage and could knock 2 to 3 percentage points off growth, meaning the economy would almost certainly shrink this year. Lower oil revenue had already left the poor nation of 16 million people facing near-zero growth and lower investment.
In addition to US$600 million in credit from multilateral lenders, Correa, an economist, announced a raft of measures to help repair homes, roads and bridges along the devastated Pacific Coast.
“We’re looking at the possibility of issuing bonds on the international market,” he said, without providing details.
Ecuador had been saying before the quake that current high yields would make it too expensive to issue debt.
Yields on its bonds are close to 11 percentage points higher than comparable US Treasury debt, according to JPMorgan data, and creditors are likely to be wary after the quake.
Correa’s government in 2008 defaulted on debt with a similar yield, calling the value unfair. His government has since returned to Wall Street and Ecuador has about US$3.5 billion worth of bonds in circulation.
In a nationally televised address later on Wednesday, Correa also announced that the OPEC nation was poised to shed assets.
“The country has many assets thanks to investment over all these years and we will seek to sell some of them to overcome these difficult moments,” he said.
He also unveiled several short-term tax changes, including a 2-point increase in the Valued Added Tax (VAT) for a year, as well as a “one-off 3 percent additional contribution on profits,” although the fine print was not immediately clear.
The VAT tax is currently 12 percent.
Additionally, a one-off tax of 0.9 percent will be imposed on people with wealth of more than US$1 million. Ecuadorans will also be asked to contribute one day of salary, calculated on a sliding scale based on income.
Another earthquake shook the coast before dawn on Wednesday. The magnitude 6.2 temblor terrified survivors, while briefly pausing talk of reconstruction and hindering rescuers.
Saturday’s quake, the worst in decades, killed 570 people, injured 7,000 others, damaged close to 2,000 buildings and forced more than 24,000 people to seek refuge in shelters, according to government tallies.
Speaking from the highland capital, Quito, Correa said the death toll would likely rise further, although at a slower rate than in previous days.
“May these tears fertilize the soil of the future,” he said.
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