Mipymes megazine 55, Ene – Feb 2012

RIO GUAYAS YES OR YES It's not about Guayaquil, it's not about Duran, it's about Ecuador! let's dredge the river! Rivers are like channels, if no maintenance is given to them. If people are not aware of the importance of keeping them clean, due to backups and clogging, and excess rain, it will overflow. When thinking about people, we cannot allow this negligence to occur, thousands of people could die, crops would be destroyed and the cities and countryside would flood.

On the other hand, rivers can feed thousands and thousands of people by agriculture and ecotourism means. The microenterprises have the ability to turn this river into festival of opportunities.

It has been repeated that the demand to generate jobs, take care of people and give them health is of the utmost importance. It is urgent that the dredging of the Guayas River and its tributaries begin in 2012, this would be a miracle with the excess of money from oil and mining products, there's no excuse to delay it.

Just as Galo Plaza is remembered for the starting of banana exports, the current President will be remembered if he rescues the Guayas River not only for agriculture but for the future of agro tourism and new forestry programs. This important initiative should not be taken as a response to the problems in Guayaquil and Duran, but in Ecuador. It’s about turning habitants into true citizens.

Civic responsibility as a source of growth and development Ec. Eduardo PazmiĂąo Urrutia (Panama) As an airplane that turns off the engines in flight is destined to lose altitude with the terrible consequences that it might entail; to abandon the search for new opportunities for business management, means plunging the communities in the most unforgivable social and economic lethargy.

It is so because the world moves on. Faster or slower, but it moves on.

The reason: the global irreversible economy, is a market; and market is like water, it seeks and finds its bed.

I am aware of the cheerless predictions that warn emerging nations of a fall in the growth rate; and even a potential collapse.

In view of this situation, each nation shall take safeguards to protect its international reserves and means of payment in general; but their people, make the water flow, since it is in the real economy the output, from the initiative of its citizens and their enterprises.

That is, it corresponds to the average citizen to bypass secular economists, that exacerbate global demand when it is less needed and depressed it when it is more needed.

The average citizen is not an object of the economy. Otherwise, it is the subject of it.

The figures and fiscal and monetary macroeconomic aggregates, are a result of the action (or inaction), individually and collectively, of man and woman in the street.

Inaction is the opposite face of economic freedom, and it can only be supported temporarily by past and future savings of the general population, which by definition, is finite. Inaction implies dependence, confuses the economic growth and eliminates any possibility of development.

It should then be noticed what is happening in the city of Nata de los Caballeros located in the province of Cocle, Republic of Panama, in the exercise of civic duty.

As a reference, the story tells that after Don Gonzalo de Badajoz came to this region in 1515, once his attempt to get more gold from the Cacique Paris was frustrated, he had to seek refuge in the territory of the Cacique Nata, appreciating the great fertility and richness of the place and the visit of Gaspar de Espinoza, Mayor of Castilla de Oro, who to demarcate the population, turn it in the center of expeditions for the conquest and colonization of other regions.

It was founded by Pedro Arias Davila on May 20, 1522. He held the title of Mayor and received 100 knights sent by Charles V, King of Spain, since then it was said to be named Nata de los Caballeros due to this historical circumstance, and “barn of the kingdom� for its productive potential.

But this productive potential was his true reason for being; according to a deep analysis of Dr. Alfredo Castillero Calvo, in his recent article.

He states that “…In 1519 Panama was first founded, as capital of the Pacific, then, Name of God, in 1520, as a terminal in the Caribbean, and finally Nata, in 1522, following a plan of Pedrarias Davila in order to organize the territory to comply with a mission as transit area and a spearhead for future discoveries. Nata function would be to serve as a granary of the country”, all based on “…the city’s role as an instrument of territorial organization of the colonies.”

Then, Nata de los Caballeros is by herself, a national and humanity product, visited daily by tourists from all over the world, spontaneously, to visit, among other things, St. James church, patron of the people, and San Juan de Dios chapel.

It is attributed to this last the operation of the San Juan de Dios hospital, which facilitated both the process of evangelization of the indigenous population as well as the contribution of the construction of St. James church, one of the first churches of the Pacific coast and the only one still standing. In addition, there are more than worthy sites to visit.

Taking into account, among other things, the reference framework before mentioned, next May it will be 10 years of the creation of the XXI century Foundation Nata de los Caballeros, under the motto “NATA IS UNITED FOR ITS HISTORY, CULTURE AND DEVELOPMENT”.

Its management style: INSTITUTIONAL AND ORIENTED TO THE RESULT AND CREATION OF VALUE TO THE CITY OF NATA DE LOS CABALLEROS, IN AN ENVIRONMENT OF UNITY, GOALS, RESPONSIBILITIES AND SPECIFIC DATES. Result: While the historical scathing was rescued by the “RESTAURATION OF THE SAN JUAN DE DIOS CHAPEL”, the cultural level of the community rose through the creation of the “Yought Music School”. Likewise, an effective action was performed repairing the church’s roof and paint, as well as the restoration of religious images of deep value.

Consequently, in view of the responsibility and achievements attained by the business community at national level, the lighting outside the Church of St. Paul the Apostle was installed, and the lighting in the Chapel San Juan de Dios is in the process of installment. This has been concomitant with a wide dissemination through the media of the completion and implementation of the different projects.

All this drove the local municipal authorities to carry out the project JAMES APOSTLE MAIN SQUARE that makes evident the concept of the city design originally outlined by Pedrarias Davila, in order that Nata de los Caballeros fulfill its function.

Once this face work is accomplished, the challenge is to obtain for Nata de los Caballeros and its citizens the greatest possible added value, from which they will enhance their standard of living. In other words, the process of growth and development of the city and districts will be consolidated, attached to the historical and culture background, and the best local practices.

To do this, lectures will take place to highlight and unify criteria about the origin, reason for being and value of Nata de los Caballeros.

Similarly, forums addressed to recognize, rescue and enhance their folk identity, local customs and traditions are organized.

A strategic alliance is in the process of termination with important universities to develop the competence of tour guide for youth and children in the community.

Courses of tourist management and handicrafts enterprises shall be arranged as well as fair offers of funding by private and public institutions.

A Career Guidance Fair and technical and vocational university programs together with financing plans from public and private institutions will be given to youth.

They will also participate in contests addressed to start the environment for the celebration of the Quincentenary of Nata foundation.

We have noted that the entire activities schedule has been designed and will be performed by young professionals of the city of Nata de los Caballeros.

As an airplane reaches its destination, if all engines work well at a time, the people grow and develop if all the citizens of all ages constitute themselves in both actor and beneficiary of the growing process.

As observed, the working model is simple, but only what is simple works and gives results, and besides, it can be communicated and measured.

It is estimated that the cost of the operation is minimal compared to the added value that it will generate to strengthen the foundations of a business management, which, among other things, adds the tourism component to life, which led the national authorities to put this population of only 6,000 inhabitants to be considered in the same economic stratum of Panama City, capital of the Republic.

It encourages us to know that the expected impact is already being felt.

Notable investors of the tourism sector have already expressed their intention to develop projects in the city of Nata de los Caballeros in view of and with respect to their identity, history and culture, and in response to a citizens action UNITED BY HISTORY, GROWTH AND DEVELOPMENT.

CHALLENGES OF YOUTH IN UNDERDEVELOPED COUNTRIES: THREATS AND OPPORTUNITIES Dr. Rene Leon Economic development specialist Creative International Associates, Washington, D.C.

The phenomenon called “youthbulge” or “swelling” of the population aged between 14 and 29 years, considered as youth, has become one of the most serious problems in underdeveloped countries around the world. In many countries this phenomenon threatens governance, peace, social coexistence and government stability. Along with the widening of the population pyramid base, violence and conflicts are generating, as well as appeals for young people to join gangs, be recruited by organized crime, be involved in all kinds of criminal activities and in extreme cases, there is a tendency to enlisting young people in terrorist groups, as it is happening in some countries in the Middle East and Africa.

As an example, in Afghanistan, with 31 million inhabitants, and a DGP per capita of $ 900 per year, the unemployment rate reaches 41% of the working age population, and among youth (range aged between 14 and 29 years) the unemployment rate exceeds 53%. It is not surprisingly that this situation exacerbates radicalism, violence, conflict, terrorism, and promotes state fragility, but it is more important at long term, that this situation undermines the prospects for development and political and economic viability of this country in which it has been invested literally, billions of dollars in economic and military aid.

Yemen, to cite another country located in a hot zone of the world, has a population of 23.5 million inhabitants; 41.8% live below the poverty line; 54% are college graduates and 44% who have a degree in intermediate education, remain unemployed. This brings the unemployment rate for youth aged 18-24 years, over 50%. This reality encourages crime, violence, smuggling and the incorporation of hundreds of young extremist groups in the country from Al-Qaeda to tribal paramilitary factions. Nor should it surprise that thousands of these young people express every day their desire to oust President AliAbdullahSaleh.

To approach this problem closer to us, in Dominican Republic, a country that together with Panama has best deal with the global economic crisis in our region, the population living below the poverty line in 2010 rose to 52%. Open unemployment is 14.4% with a percentage of underemployment and working population in the informal sector, over 56%. It is known that rates of unemployment and underemployment are much higher among youth. The increasing rates of drug trafficking, violent events, gang action, school desertion, drugs, and illegal migration are this reality most visible results.

The Arab Spring, conflicts in Libya and Syria, Uganda, Nigeria and Somalia, to name a few, show that a new type of conflict is emerging. From civil wars and conventional wars, the world is changing to a vicious cycle of repeated low-level violence, characterized by political and criminal violence, which is mutually reinforcing.

The 2011 World Development Report of the World Bank, “Conflict, Security and Development” studies the detriment that conflicts have in the development and the fundamental importance of security for stabilization and reconstruction of countries in conflict or in post-conflict. This report identifies correctly that organized crime, trafficking in drugs and people, for example, are components and determinant factors of violence in many countries such as Sierra Leon, Colombia, Mexico, Pakistan, Ukraine, Georgia, etc., but it fails to recognize that in many vulnerable

underdeveloped countries, is emerging a generational conflict, a youth revolt, in which young people are participants and victims of violence.

These “Wars of young people”, are the expression of material deprivation, hopelessness, lack of economic opportunities, concerns about changes and political opening, and in many cases, they reflect the denial and lack of respect for their rights, including the right to work and development. If we see it positively, it may mean that young people are becoming agents of change and reforms and political openings as it happened in Tunisia and Egypt. But seen it negatively, it also involves the risk of aspirations manipulation and legitimate needs of groups interested in destabilizing conflict and violence.

To clarify, the determinant factors that have let youth in risk to violence and conflict are linked to social, economic and political exclusion; low quality of formal education programs, poor training and training young people to enter the labor market; poor quality of formal education and dysfunctional tertiary education concerning the needs and employers demand; structural presence of high rates of unemployment and lack of decent and formal employment opportunities for youth; little or no access to housing, health and financial resources, high rates of poverty affecting more women and young people; unequal horizontal and near-zero social mobility in such a way that criminal networks, terrorists and organized crime are taking advantage to recruiting part of the youth in illegal activities.

However, some governments, international development agencies, multilateral financial institutions, civil society organizations and all types of international actors working with youth programs around the world are seeing in this phenomenon an opportunity for changing direction. They realized that there are possibilities for channeling and directing the energy and impatience of youth to interventions, projects and programs that accelerate the pace of economic and political reforms postponed policies, and that they are technologically innovative, inclusive and equitable for youth so that they can transform the threats to which in some opportunities youth is exposed.

This is precisely what they are trying to do in many countries, cooperation agencies such as USAID, GTZ of Germany, JICA of Japan, AECI of Spain as well as World Bank, IDB, UNDP and many NGO's work directly on projects with youth. This interest in the subject is observed simultaneously in various countries such as Saudi Arabia, Morocco, Jordan, Panama, Colombia or the northern triangle countries of Central America: Guatemala, Honduras and El Salvador.

A essential feature of these projects is to promote freedom, strengthen the Rule of Law, consolidate governance and base themselves on market solutions and in public participation since peace, stability, social harmony and development opportunities for young people cannot be bought. It has been proven that if the state does not appropriate projects with these characteristics, and aims to promote youth development and the progress of a country on the basis of patronage, political rentseeking, or subtracting resources from those that invest and generate economic growth, or by socialist cutting measures programs, programs will eventually fail, they become ineffective, selfdefeat and ends up being part of the problem.

Which are then the kind of measures or “interventions” that are proving being more effective in addressing the problem of youth as an opportunity?

1) Support for entrepreneurship and information availability of micro and small enterprises: job creation does not arise by spontaneous generation, there are no “job factories” nor NGOs, neither government by themselves creates jobs permanently. It is the facilitation of business formation, the minimum condition for youth to take risks that allow them to selfemployed, create jobs for other young people, and become productive citizens. This allows many countries to promote opportunities for improvement among youth.

2) Training youth (what is called in English “work force development”) is being used as an essential measure for young people to acquire skills and abilities that will enhance their

employability. I have worked successfully with programs that are based on the profile of job demanding required by the private sector and to know how to interpret the needs of the labor market, following the strategic economic bet of several countries. In all of them, these programs are performed simultaneously with the institutional strengthening of technical and vocational schools that provide coaching and training. Normally this is complemented by accelerated learning programs, skills and practical tools for a productive life, lifelong learning courses, mentoring programs and internships, and educational reforms that emphasize learning in a modern world, that live more or less governed by the economy of knowledge.

3) By strengthening the functioning of markets and the creation of innovative marketing systems, identifying and incorporating companies and with the cooperation of all productive stakeholders in value chains, clusters promotion, positioning in specific market niches, is a way to promote maximizing the potential of the driving force of the economic growth of a country, based on its competitive advantages. Also with the cooperation of those new and traditional sectors with greater capacity to generate jobs, income and wealth for the young and in general for the economically active population.

4) The adoption of public policies that rewards high performance, academic excellence, leadership and that create incentives to firms to hire young people, as well as the creation of scholarship funds to reward academic excellence, reforms to the working code to eliminate the rigidity of labor markets, deregulation to doing business and investment, are proving being very effective in promoting employment opportunities and progress among youth. In this process, the issue of genre is gaining great importance as a major crosscutting theme in all youth projects.

5) The search for public-private partnerships (PPPs) and global partnerships for development with the private sector, that allows multiply the resources to invest in education, health, sports, training, job centers, etc. by leveraging resources and direct private investment, is turning into another “crosscutting� theme, always seeking to find mutually beneficial activities for companies and beneficiaries of the projects that are supported.

The lesson from those who work by implementing development projects in different countries around the world, whether they are for youth, economic growth, livelihoods, stabilization and reconstruction, or education, is that those are the countries that see in youth an opportunity, those who have a vision, capacity and political will to promote market reforms are those that are moving forward and developing themselves.

In my experience, after working on different projects in some of the countries already mentioned, I have learned that there are no secrets, nor magic formulas, nor miracles, nor Messiah savior to whom development problems should be addressed. There are only policies, strategies and technical market solutions that have proven to work successfully; while there are others based on the belief that the state is the agent of change and where the ability to solve development problems is awarded, which has proven solutions that do not work and had failed with a crash.

What is unusual and unfortunate, paraphrasing Einstein, is that I know countries that continue to bet on the solutions that do not work, but they keep expecting l different results.

Brief review of the petroleum policy of Rafael Correa’s government Eng. Rene Ortiz International policy analyst

I BACKGROUND th

Now, Rafael Correa’s government, in his 6 year of administration dominated by ideology, √

has lack of savings (because he never did anything to save) of the extraordinary oil revenue of his administration with high prices and a great bonanza;

√

has no opportunity that the high growing of GDP continues at high rate of export “commodities” for the world;

√

is with a poorest and difficult to remedy declination of his petroleum extractive industry; and,

√

is blocked by a set of ideological myths of the past.

High and rising prices generate valuable and progressive income, “even if oil productions falls”; and even so, the government has spent the savings and has got into debt.

In fact, since 2007, Rafael Correa annihilated the “oil contingency savings funds” established by previous governments, which were to be invested and overcome periods of shortage of oil revenues due to the seasonal price drop and for other reasons.

Also, since 2007, it should be pointed out, that the governmental administration of Rafael Correa has fully benefited from the petroleum policy of previous administrations that promoted E & P contracts to increase production and reserves, including a new OCP pipeline. In this context, his government has collected tons of petroleum revenues due to the high petroleum prices in the international market, even though the oil production has declined for four consecutive years, namely 2007, 2008, 2009 and 2010. This fact should be noted because the income would have been larger if production rates would have not fallen because, for example, to the lack of investment due to the suspensions and constant improvisations during renegotiations of the sharing production contracts, CPC with the international operating companies. Moreover, once that stage was fulfilled, the government continues to improvise endless changes to their industry, which only creates more and more uncertainty in the sector, but also it delays plans and exploration programs to find, discover and develop new reserves, which replace the nearly one billion barrels consumed only in Rafael Correa's administration. But, the worst of all is that some of its bureaucracy is still trapped in that ancient Marxist creed, that cover themselves to comply it with the popular adage “the gardener’s dog, neither eats nor let them eat”…/…”.

However, since 2011, some of the international operators, have resumed their investments and activities regulated by a particular type of contract that yield and pays for “barrel produced”; but, it is not clear in cases such as “barrel discovered”. This is one of the explanations why Ecuador does not increase oil reserves.

In fact, the fifth year of Correa’s administration is also completed with very meager results. The total production target of all the companies operating in Ecuador, estimated in 504,825 barrels of oil per day, was not fulfilled. In this context, it should be explained that they failed to comply with the

production targets both Rio Napo CEM (PDVSA of Venezuela and Petroecuador) in the Sacha field expected in 63.401 barrels per day; as Petroamazonas EP, which did not reach the proposed target of 161,054 barrels per day, respectively. Instead, the international oil companies reached to exceed the expected target of 137,000 barrels per day, with a production of 142,580 barrels per day; and, the state company Patroecuador also exceeded its estimated production of 143,147 barrels per day, as shown in the graph below.

Even when a way to see numbers would be to say that even if targets were not achieved, the sum of the two state companies slightly exceeded the goal of oil production in 1,35%, with 4,133 barrels per day; but if we add the state company, with the negative performance of the Rio Napo CEM, the result is negative.

The international oil companies have managed to overcome the estimated target for 2011 in 5,357 barrels per day, to the extent of the expected investments and limited to some blocks that restrict their activity to a minimum.

Company

Production target

Real production

Difference %

EP Petroecuador

143. 147

151. 512

8.365

Petroamazonas EP

161. 054

156. 822

(-) 4.232

State Subtotal (1)

304. 201

308.334

4.133

Río Napo

63. 401

49. 464

(-)13.937

Subtotal CEM* (2)

367. 602

357. 798

(-) 9.804

Private

137. 223

142. 580

5.357

Total

504. 825

500. 378

(-)4.447

5.84% 1.35%

3.9%

*MEC= Mixed Economy Company.

Regarding to new oil reserves, Petroecuador states that it has put into production a new field that has about 18 million barrels. This is more or less equivalent to 10% of Ecuador's total production in 2011.

The industry standard states that produced and consumed oil reserves shall be compensated at least with the annual production. In the case of Ecuador, this is about 180 million new barrels of oil.

The crude oil trade by “barter” with petroleum products under government-government agreements, has shown that Chinese sell more than 90% of the oil that they lift in the Ecuadorian ports in international market; the Venezuelans do the same; and, the “Uruguayan oil companies” that – following a political complaint in the media of Montevideo – showed that the state company ANCAP would have frozen out a $ 6 million agreement with Petroecuador and also would have sold more than 90% of Ecuador's crude oil in the market like any other “Oil Trading Company”, legally qualified in the records of Petroecuador Foreign Trade Management. The “markup” of China and Venezuela is not known, but in fact the figure of “a trade brokerage on another trade brokerage of crude oil and oil products, should have left margins that reduce the margin itself of Petroecuador.

Or, alternatively, that “business between different state companies of different countries” do not have the advantages that politicians try “ to sell publicly” in each one of their countries.

The repairing projects and the restructuring of processes of the oil refineries in Esmeraldas and Shushufindi, have been programmed by Petroecuador for 2012 and 2014. It has been noted the arrival of large process equipment at the port of Esmeraldas and therefore the completion of the installation of such systems to evaluate their results, will have to wait.

In the area of fuels, the government – as the saying goes, “fail the year” – the generalized subsidies are an embarrassment of organization in modern times and with all the computer technology available. If we add to that disorganized trade system the “illicit trafficking” problem by sea and land

borders, with amazing figures of about one billion dollars, according to some media. The figure is not accurate and it is difficult to know with certainty, according to the government spokesmen.

Finally, if we add the poor fuel quality to the above said, then, you reader, can imagine where in the world Ecuador would have been placed. For that reason, now for 2012, the government announces a plan to improve the quality of automotive diesel and gasoline. The plan is to enable consumers to use Euro 5 type fuels.

II RESULTS The results – in the context of the background set out above – simply “leave a bitter taste” of negligence, careless and apathy in the management of those important issues, with a sequel of corruption that involves any activity that does not evolve in the legal framework and under strict rules of procurement, where competition at least guarantees a better price and better quality for Ecuadorians, than “the finger point”.

CONCLUSIONS III Although this is an election year, it is said in anticipation of political events that will dominate the scene of news and views in Ecuador, that the conditions may not be the same ones that have prevailed in previous years and there will be limitations that will force the government to think that there must be a better way of governing this nation and that two thirds of GDP, representing the private productive sector, deserves a better government administration to secure very well acquired foreign markets and only as complement, support the expansion of the exportable offer to more complex markets less attractive. *2012, Rene G. Ortiz, Ex-Chairman of the Council of Chambers and Production Association, ExChairman of the National Association of Entrepreneurs, ANED. Ex-executive President of the Association of Hydrocarbons Industry of Ecuador, AIHE. He has been Ministry of Energy and Mines of Ecuador and General Secretary of the Organization of Petroleum Exporting Countries, OPEC.

TAXES ON DEMAND

Luis Fernando Torres, Attorney in Law President of the Corporación Autogobierno y Demoracia www.cad.org.ec The national Government and the governments by section still have the bad habit of raising taxes annually. Those who govern the country, both national and by sections, not considering some few and honorable exceptions, such as the Guayaquil Mayor’s decision not to raise taxes, the annual expropriation of one part of the income and of tax payers patrimony, under the fallacy “who has more must pay more” has become a simple routine.

The tax reform is already in force raising the outflow of foreign exchange, creating the “green” taxes on assets and plastics; modifying the system of exceptions and introducing a lethal device for the coercive collection of liabilities not generating taxes and, according to some specialists, it is also to collect tax liabilities. The “tax collecting day” was celebrated in December in tribute to this reform, with many tax collectors in cities such as Cuenca.

Significant tax increases were activated in some Ecuadorian municipalities under the protection of COOTAD. The Cantonal Council of Quito approved the revisions to property taxes, buying and selling properties tax, improvement contributions tax, municipal license tax, security tax and road tax. The City Council of Ambato, in turn, changed the license tax and approved a budget with high tax revenues. To support it, it was necessary to increase the revenue from property and utility taxes, as well as the improvement contributions.

The tax burden on Ecuadorian tax payers is already around 18% of GDP, one of the highest in Latin America, excluding taxes per sections. In other words, Ecuadorians are among those taxpayers who charge the state more. With the last national and regional tax increases, tax pressure will be higher. Thus, the government and municipalities will have more money, while taxpayers will have a reduction in their income and patrimony.

According to the Ecuadorian tax structure, the one who has more has no problem in paying taxes.

The rich, at the end, knows that he can pay without irreparable financial conditions. Instead, middle class Ecuadorians (teachers, professionals, public and private employees) and small and medium businessmen do have serious difficulties paying more and new taxes. They have a hard time paying taxes. To meet their tax obligations, they should not take vacations, stop saving and invest, put aside daily and family expenses and they will hardly be able to transfer costs to third parties.

The billionaire Warren Buffett said that the United States should raise taxes to the ultra-rich. This apparent demonstration of tax sacrifice was hidden a truth: he did not care for any tax raise, at less 100% of his income is taxed. On the contrary, to a middle class North American any tax increase would affect him, because to pay it, he must save the earnings of the first two months of the year.

This explains why many billionaires applaud socialist-style governments, while the productive middle-class and small and medium businesses often are aligned with the conservatives who are opposed to progressive taxation.

Taxes are necessary to sustain a moderate state to deal with the essential issues, that is, to protect citizens’ life, property and individual liberties. They are unlawful when they are confiscatory and, on behalf of the people, they expropriate part of the income and patrimony. Ludwing von Mises said in view of the advance of a “moderate” socialism in countries of Europe and the United States: “it is

not difficult to prophesy that one day not too far, any income that exceeds the average individual wage, be absorbed by tax”.

Taxes inhibit the formation and accumulation of new capital, distorting the market economy and stopping the technical progress and improved productivity. Mises was right when he said: ““once a capitalist suspects that all taxes and the tax on income will absorb 100% of his income, he chooses to use the accumulated capital to prevent the Treasury for getting it.”

Tax rises have natural limits, are these limits exceeding in the country?

Incorporation of micro and informal small enterprises into formal sector Dr. Nicolas Ardito Barletta Ex-president of Panama

The National Competitiveness Center (NCC) has developed a project at the request of the Ministry of Economy and Finance of Panama and supported by the Inter-American Development Bank, to encourage and facilitate the integration of micro and small informal enterprises into formal sector.

The whole world is aware of the need to incorporate as many micro and small entrepreneurs to the economy, as it would be of wide benefit to all. It would improve the opportunity for these deserving entrepreneurs/businessmen to develop their businesses for their own benefit and that of their families. It would add value to the entire economy with the increased production and market integration that it implies. It would be recognized that entrepreneurship and natural talent of people is the best vehicle for its economic improvement and personal fulfillment. It would accelerate human and social development, adding to a sense of inclusion, peace, justice and democracy.

Therefore, all countries try different vehicles to achieve this worthy and necessary goal.

In Panama we have discussed this issue finding the ways to reduce costs and obstacles, that these entrepreneurs face, to participate and formalize themselves and increase the benefits that may result from such action.

The national survey to learn more about the situation, attitudes, trends and the reality of these entrepreneurs, produced interesting results. 65% of non-agricultural micro-businessmen are informal, in the sense that they have no records such as municipal permits or notices of the Ministry of Trade and Industries, social security and others. The other 35% are in different stages of formalizing. These enterprises employ nearly one third of the non-agricultural labor force. They have little access to credit, working mainly in the local market where they are located.

The law in force gives them little protection and the public administrative processes are costly in time and resources, and often of difficult access. Being unable to be formalized and to organize their business well, they are not creditworthy and have trouble chaining with larger enterprises to become their inputs suppliers. Having no title of property or business, it is difficult for them to take risks, make contracts and expand their markets.

The project developed by NCC, together with public authorities responsible for serving the enterprises and with the private enterprise union support, has prepared a series of concrete recommendations to lower formalization costs and increase the benefits for the micro and small enterprises. The main ones are: 1. Create a Limited Liability Company (LLC), equivalent to a public corporation, but not with the costs of it, allowing the micro-entrepreneur to register and protect themselves against third parties, at a minimal cost. It would only be applicable to microentrepreneurs according to their legal definition.

2. To expand the real state collateral to include new methods to allow the microentrepreneur to use those assets as loans collaterals.

3. To strengthen the real state collaterals, accelerating property deeds processes and in case of “possession rights�, that is, an informal property not yet entitled, but with a right recognized by the law, enable it like a formal title, until it is finally processed.

4. To prepare a law project creating the standard to regulate and facilitate micro-credit, which would allow strengthen the credit market for the MSMEs.

5. To contribute with the Banking Superintendence to prepare the rule allowing the nonbank correspondent to increase banking in the country and facilitate credit operations for the micro enterprises.

6. To propose the creation of a sole digitized bank window to serve MSMEs from the municipal level, the Ministry of Commerce and Industries, the Public Register, the Authority of the Micro and Small Enterprise, Social Security, National Income Direction and other public entities. A pilot plan was even made with a municipality to test the system successfully.

7. To strengthen Municipal Judges to meet, first in mediation and then in dispute, the MSMEs cases at a lower cost and with a more expeditious service.

8. To strengthen with information the register of the Panamanian Association of Credit that has the information needed by banks to assess creditworthiness.

9. To make a formal chain pilot plan of the MSMEs with medium and large enterprises to incorporate them into a larger market, with better control of guarantees and product quality.

10. Some conditions of the Labor Code become flexible to facilitate the work overtime, vacations granting and other special aspects to improve working conditions in the MSMEs. These are perhaps the main recommendations that have been made and that now are going to be considered by the government for adoption, having been consulted repeteatedly with the corresponding ministries and organizations of the private enterprise to improve them in its content.

We trust that with the adoption of such measures the legal and administrative environment will be created to allows a faster and profitable incorporation of the MSMEs to the formal market.

Of course this improved regulatory and administrative environment for the MSMEs needs to be complemented with the technical assistance and training programs necessary to support the micro entrepreneur. It also requires a closer coordination with the public authorities of all its administrative actions and support policies, so as to facilitate the beneficial incorporation of so many small businessmen to the national economy.

Education for Development

Dr. Abelardo Garcia Calderon Director General of IPAC (Instituto Particular Abdón Calderón)

Talking about development without doubt involves referring to advanced science, advance technology, facilities and fluidity of communications, first class infrastructure, organizational and administrative capacity and, of course, people capable of supporting everything through skills, abilities and the dexterity of its citizens. We have discussed it more than once, we can have the best road system communication, the most impressive and advanced equipment in the world, even the best intentions, but if the human being is not prepared to maintain, to manage everything using thinking skills and especially creative capacity, we cannot go very far up the road of progress.

Development requires and demands a lot from contemporary men, as it requires and requests them to be more competitive, more flexible in reasoning, more secure when making decisions, and at the same time, willing to change; clear, precise, organized.

Once these recitals have been established, here comes the questions where today’s man, or when does he get prepared to meet that profile, that model, that ideal? The chisel polishing all this, turns out to be with no doubt, education, hence it is important that a country is able to properly design the necessary educational model to train their people according to future needs.

In education it cannot be projected for the present, it is done thinking in tomorrow, in their needs, in their requirements, and planting then in today's student potential and necessary characteristics for that required flowering.

Once this criterion has been established, we can say then that education can certainly become a key for building people development. This has been indicated by some countries statistics; just think on the so-called Asian tigers or in Nordic countries where, once they educated their society, significant leaps were achieved.

Today, when knowledge is spread through social networks, websites and all kinds of media, it is worth to remind ourselves that students no longer go to school to get it, to acquire it, to meet it for the first time.

The child recognizes numbers, knows the operation of appliances and anatomical systems, learns biology, history, science, outside of the classroom and in addition, comes to class with a prior acquired knowledge. It is the today's educator who has to teach to work with the knowledge and from knowledge, developing the student's logical thinking, encouraging him to make the leap from concrete to abstract, encouraging him to develop critical thinking, but mainly driving his class to generate a creative thinking.

Today's educator, rather than being a transmitter of culture, is a process facilitator for the student to think and reason, making reasoning an instrument for personal growth. XXI century education should be a platform to stimulate and of course and above all, to develop intelligence.

The educator cannot continue being a repeater of these truths, but the stimulator for the meeting of new truths, promoting the process needed. The educational system, then must meet other features, should stop thinking so much about what to learn and support more how to teach, so that clear connections are established between the teacher and the student in the new roles that they have.

We are interested as ever to develop abilities, skills or competencies, or as we have always called them “capabilities or potentialities� and the model should therefore be more than a curriculum, checking from assessments the level of development of thought that students have reached.

The subjects, as stated in the common language, are now a pretext; they are means to encourage new ways of thinking and learning; they are means to become a way to stimulate the development of logical thinking, critical thinking and creative thinking. The model must be loaded, obviously, of demand, because it must look for quality; all this does not happen overnight, it implies process, involves preparation of each one of the actors in the educational process.

The student cannot remain overprotected, being the spoiled, the child or young person to whom things have been made easier to stop him from thinking, from working hard, so in summary, to have a good time. Today as ever it is more important what he learns than just being promoted or accumulate diplomas that have little or nothing to say against life demands. The development therefore implies that we all go into one line of thinking to make the education a frontier where you have to work hard to achieve the purposes that growing implies.

Wage Behavior in 2012

Dr. Jorge Izurieta Director of Mundo Laboral Consulting Co.

This year brings some fundamental changes to the Ecuadorian wage scheme. It has enforced the new minimum wage, which came to $ 292.00. At the same time twenty of twenty-two committees by sector, currently existing, reached agreements and in two of them, in the absence of agreement, it was increased by ministerial agreements. Moreover, for the first time it should be calculated and pay until March, once a year, what is called the “Decent wage”. On the other hand, profits may be canceled by company shares previous an agreement between the employer and the worker. 

2012 UNIFIED MINIMUM WAGE

The Ministry of Labor Relations, by Ministerial Agreement 369, published in the Official Register 618-S, of January 13, 2012, set the unified basic wage in $ 292.00 a month, starting January 1, 2012 for the following workers: o

Workers

o

Small industry

o

Farmers

o

Maquila

o

Domestic service

o

Craftsmen

o

Micro-enterprise collaborators

It is worth mentioning that two years ago, the criterion of unifying the basic wage was imposed at the same level as domestic workers.

The Ministerial Agreement states that the value of the unified basic wage set up, shall be the basis for the calculation of the minimum wages by sector of the 22 committees by sector, which in no case may be lower. 

2012 MINIMUM WAGE BY SECTOR

By Ministerial Agreement No. 370, published in the same Official Register, in the first place, 5 levels are established in the occupational structures of the committees by sector, ranging from the level of managers to operational support, which are: 1. Level A. Management. 2. Level B. Supervision, which is subdivided into B1.- General supervision, B2.- Technical supervision and B3.- Operational supervision. 3. Level C. Operation, which is subdivided into C1.- Specialized operation. C2.Technical operations and C3.- Basic operation. 4. Level D. Assistance, which is subdivided into D1.

Administrative Assistance, D2. – Technical Assistance and finally 5. Level E, called Support, which is subdivided into E1.- Administrative support and E2.- Operational support. The idea behind establishing these five levels, responds to a standardization effort, which must be recorded by the Instituto Ecuatoriano de Seguridad Social (IESS) (Ecuadorian Institute of Social Security) to implement new codes of positions. As previous said, it responds to a need to redefine positions

that have not been taken into account in the respective committees by sector. Therefore, many positions that were reflected in the ministerial agreements of previous years are not currently included, creating confusion when making an entry in the IESS or establishing a remuneration. An example of the previous statement is what happened in the Commission by sector No. 15, called Marketing and Product Sales, wholesale market and retail branch. In 2011 there were 30 positions including Delivery Driver; however in 2012 there were 26 positions and that position no longer exist, creating a confusion since if it is positioned in the Committee by sector No. 17 corresponding to the branch of transport, drivers branch, the minimum wage by sector is much higher. Many companies most probably appeal to what is set in the agreement itself that established the possibility that if any position or job that is not covered by the respective wage structure, could not fall below the minimum of the corresponding branch of the enterprise, in which case the employer must notify the Labor Ministry about the or positions not covered, until June 30, 2012, in order to be considered by the commissions by sector whose activities will be performed in 2012.

The increase of the minimum wage for the 22 commissions by sector, records an increase that we have limited to the first level or higher category (A), managing level and fifth level or lowest category (E2), operational support, has been considered as follows: No.

SECTORIAL COMMISSION

A

E2

1

Farming

299,30

292,00

2

Livestock

297,84

292,00

3

Fishing, Acuaculture and mariculture

294,92

292,00

4

Mines Quarries Deposits

518,00

348,00

5

Food processing

578,32

292,00

6

Pharmaceutical Products , Chemicals

299,30

292,00

7

Beverages and Tobacco

309,52

309,52

8

Metallurgical industry

305,55

292,00

9

Crafts

301,11

292,00

10

Textile products leather and footwear

296,38

292,58

11

Vehícles and parts

303,68

192,00

12

Hardware and Software Technology

337,36

192,00

13

Electricity Gas and Water

308,02

192,00

14

Construction

322,72

192,00

15

Marketing and selling products

303,10

192,00

16

Tourism and food

393,90

192,44

17

Logístics and transport

914,55

308,40

18

Financial Services

325,45

192,00

19

GeneralServices

372,72

192,00

20

Teaching

439,96

192,00

21

Health Activities

314,97

192,00

22

Community Activities

631,19

192,29



DECENT SALARY

The Decent Salary is in effect from the issuance of the Production, Trade and Investment Organic Code, published in the Official Registry 351-S of December 29, 2010. Companies and individuals, required to do accounting, that made profits in the previous fiscal years, (not applicable to companies that did not generate profits or those whose income tax advance was higher) have the obligation to pay a financial compensation if their workers have not achieved the decent salary, when the earnings of their workers in 2011, is less to the one determined as decent salary.

This compensation is computed as the difference, for which, part of the basic family basket cost divided by 1.6, which is the number of “earners in a household”, as defined by the INEC (National Institute of Statistics and Census”. This value should be compared with the total income earned by company workers in 2011. The following components will be added to this calculation: A. B. C. D. E.

Monthly wage Thirteenth remuneration divided by twelve Fourteenth remuneration divided by twelve Variable commissions to be paid to workers The amount of participation in the company profits for 2010 and paid in 2011, divided by twelve F. The additional benefits received in cash by the worker by collective agreements that do not constitute legal obligations, and periodic voluntary contributions made in cash.

G. Reserve funds.

If the worker has worked for less than a year, the calculation shall be proportional to the time of employment.

This financial compensation will not be part of the remuneration and is not considered as tax deductible for social security and income tax purposes.

PROFITS MAY BE CANCELLED WITH SHARES OF THE COMPANY Another news that brought the issue of the Production, Trade and Investment Organic Code, was the possibility that prior to an agreement between the employer and the worker, all or part of the profits payable to the workers, may be cancelled with shares of the company where they work, only if it is registered in the stock market and complies with the protocol for the fulfillment of business ethics defined by the state and the requirements established in the Production Code Rules, that will be issue soon.

The manipulation of history

Eduardo Estrada Guzman Researcher and writer of History

The attempts that the current Ecuadorian government is making to manipulate the history of Eloy Alfaro Delgado and some of their relatives murdered on January 28, 1912, make me think about the handling to which the Ecuadorian history has been subject through the times.

Of course it is not only Ecuador’s history that has suffered manipulations. Since they began to record important events for posterity in different cultures, attempts have been made to represent facts that benefited and highlighted certain individuals’ actions while it injured and minimized those of other. These efforts only serve to confirm the egotist and manipulative nature of the human being.

But we, Ecuadorians, are champions in the tasks of historical alteration. Let’s consider a practical case. Anyone who has read the book “Eloy Alfaro and his victimizers”, authored by Jose Peralta, would have read the author’s preface in which he says: “History must not be written in the heat of overwhelmed passions, in which turmoil get lost the most serene and straight criterion…”, and proceeds to write a work that is a turmoil of passions and contradictions. In this case, the author wants us to believe in his words, to be accepted by us without question, his statements in defense of Mr. Eloy Alfaro Delgado.

But who reads this book carefully, will find in few pages contradictions bordering on the ridiculous.

It says on a page that Eloy Alfaro was invincible in all battles, but few pages later says that he (Peralta) often helped him to overcome his defeats. And, as an example, it is well known that the Jaramijo Combat, one of the Alfaro's “victories”, was actually a military defeat. But for Alfaro it was a triumph, so much that he named “Alajuela” as the ship that sank in that battle, and so without the h mute, one of the military battalions that served throughout the Alfaro history to repress the people of Guayaquil. For those who do not know, the Alajuela battalion was used in 1898 by Colonel Jose Luis Alfaro Delgado, Commander of Arms, to put in prison the governor of Guayas, Mr. Ignacio Robles Santistevan, after that the first authority of the province requested President Alfaro to take the necessary measures to prevent that the Commander of Arms, the President’s brother, continue abusing the power and public funds that he had in charge.

And that abuse of Alajuela was repeated eleven years later, in 1909, when Colonel Medardo Alfaro Delgado, another President’s brother, used him to shoot at close range innocent policemen and citizens who wanted to prevent the abuse of a Colonel Alfaro's friend who, drunk, caused a terrible incident during the festival of San Pedro in Sabana Grande. It was a massacre of innocent people who had come to celebrate a feast day that was a tradition in the city. Why does history ignore the massacre? Because the authorities of Alfaro at the time, silenced the newspapers after a few days when the facts were reported and criticized the government’s inaction to punish the guilty. There has not been 15 days when suddenly every newspaper stop mentioning the tragedy.

But, contrary, history has not forgotten nor will forget the massacre of November 15, 1922 in which crowds used by political manipulators looted stores in Guayaquil. The neglect of a massacre and the memory of the other one are closely linked with the historical manipulation that governments do through the media at their disposal. Alfaro’s government agreed to hide the massacre of June 30, 1909. It is convenient for the current government to disseminate the massacre of November 15,

1922. And now it is convenient for it to manipulate and fictionalize the events that let to the massacre of January 28, 1912, to take political advantage of this tragedy.

The key to everything is, of course, to manipulate the people where authoritarian governments are specialists. Alfaro' governments were authoritarian although its defenders deny it. Peralta, Alfaro’s apologist, tells us when, according to the circumstances it is convenient for him, that the people are noble and intelligent; but, when it is equally suitable for him, he says that they are ignorant, barbaric, savage.

“Eloy Alfaro and his victimizers” is an elementary work for Alfaro’s defenders, but it is a manipulated and false history; and what is worse, not due to ignorance, but quite consciously, to alter the facts and thus absolve himself psychologically of his own responsibility in the events leading to the “barbaric fire”. In his own words: “who lack this sacred duty, prevaricates and is guilty of betrayal and deception of humanity”.

The brilliant historian Aurelio Espinoza Polit, S.J. says: “History has a social function of prime importance: to provide the basis for the patriotic conscience of a people”. That is why today we see a tireless fight from the government to change history. They are determined to manipulate the patriotic conscience of the Ecuadorian people changing the facts in order that the people who dragged Alfaro be seeing as innocent and manipulated by the elites and the oligarchy.

Peralta himself, the greatest Alfaro’s apologist, tried to assign the blame of manipulating the people, to the Conservatives and Curuchupas. What the government would be doing in this endeavor, is simple modernizing terms the terms used.

But just as Peralta at the time altered reality to justify himself, historians related to the current government do not see reality because they do not want to see it. They have enough documents in the national archives and other primary sources, but they do not go to them. They prefer to base their assertions on secondary works, namely books, pamphlets and articles published by Alfaro’s supporters or detractors; and they believe in them; works like Peralta’s justify alfarismo as if they were bibles and was declare victim of the villain convenient for that historical moment.

These historians, in their eagerness to meet the president’s wishes, are willing to accept as authentic history even a novel, declared as such by the same author.

But if they bother to investigate in primary documents and make a balance between the papers for and against Alfaro, they would realize that the Ecuadorian people, not just the people of Quito, were tired of Alfaro and his cabal. This was demonstrated in late 1909. The conflict with Peru in April 1910 was a key for Alfaro to regain popularity and almost all of the newspapers contributed, but after a few months discontent started again. The situation got worse and by mid-1911 the alfarismo unpopularity was patent.

Jose Peralta himself complains when he denounced the revolution of August 11, 19111, that no one of the soldiers of the battalions stationed in Quito defended the leader (Caudillo). Indeed it was and the triumph of the revolution, that ended the intention of Alfaro to extend his mandate, was because the troops of the army no longer wanted Alfaro as well as an important and active part of the people of Quito. The same Peralta also complains of the chaos in Quito in the early days of the revolution.

What he says is correct since there was no army to control de soldiers who were uncontrolled because of the absence of the higher command, and it was little what the police could do against the people and armed soldiers.

What happened on August 11 and the subsequent day, was a clear warning that the alfarismo was no longer wanted in Quito. It was a so serious situation that they could not get Don Eloy out of the Legation of Chile, place of his asylum, until September 15, more than a month, because it was not

possible to guarantee his safety. And when he was going to Guayaquil to embark into exile, despite the secrecy with which the transfer was planed, the people went to the station to insult and offend the prisoner. But that feeling was not only in Quito. It was all over the country. Few people still wanted Alfaro and most did not want to know anymore about him.

Therefore, the return of Alfaro in January 1912 was a terrible mistake. Alfaro returned to a country where he was not wanted thus his life was in danger from the moment he landed in Guayaquil. He had several opportunities to embark and return to Panama, but the general was deceiving himself believing that the people still loved him, and when he realized that he was wrong, it was too late, since he was already a prisoner of war.

It was a relief for Guayaquil when the government ordered the transfer of Alfaro and his companions to Quito, since if they had not taken him prisoner, the massacre would have occurred in Guayaquil. Montero’s murder and drag was already the warning of what would happen if the prisoners remained in the prison of the provincial government.

But historians in government service do not see this reality. They only see that the elites and oligarchs used the people to kill Alfaro; but the facts contradict these statements, because after Alfaro's death, the Liberal Party continued to rule the country for many years. What indeed disappeared was the alfarismo, the cult to the leader (Caudillo) was so well-profited by his family and friend to keep, for nearly sixteen years, a political power that democratically did not correspond to them.

Measuring what matters Dr. Juan Jose Daboub Managing Director and Founder Institute for Global Adaptation in Washington

Adaptation to climate change and other global forces is an imperative. The world is changing rapidly and countries face the challenge of preparing themselves and, if possible, minimize the effects of climate change and other global phenomena, “said Dr. Juan Jose Daboub, Managing Director of the Institute for Global Adaptation based in Washington, DC, USA. The Institute for Global Adaptation is the new commitment to face the effects of climate change and other natural phenomena. The institute, established in December last year, is led by Dr. Daboub, former Managing Director of the World Bank and former Finance Minister of El Salvador.

This organization, whose chairmanship of the Advisory Council is exercised by the former Spanish President Jose Maria Aznar, has a seed capital of 10 US million dollars donated by a natural gas company in Texas, United States (NGP Energy Capital Management, LLC).

Dr. Daboub expresses that the institute is a non-profit study and action center; it is the first organization worldwide dedicated exclusively to adaptation. The intention is to help solve the problems arising from the vulnerability of climate change and other global forces.

One of the main products that the institute has recently launched is the Global Adaptation Index TM (“ GaIn™”), developed with the support of scientists, businessmen and representatives of governments for the creation of indicators on adaptation. This index was unveiled last September 14th in Washington and it was presented as a navigation tool to help policy makers prioritize actions and to guide investment opportunities for the private sector, on the issue of adaptation.

Global™ is an indicator of a country's vulnerability in view of the effects of climate change and their readiness to introduce successful solutions in adaptation. Dr. Bruno Sanchez-Andrade Nuño, Director of Science and Technology Institute, says that “Index comprises 14 measures of Preparation and 24 of Vulnerability from which arises the matrix preparation to demonstrate visually and in simple terms, the position of the countries regarding their grade of vulnerability and preparation; and how they evolve over time”.

“We have transformed a picture of reality in an indicator that provides details of 161 countries with data from 1995, so that investors can evaluate and compare the situation of a nation in terms of energy, water use, productivity…” said Dr. Daboub. The important thing, says Juan Jose Daboub, is that unlike mitigation, which will have results in one more generation, the changes made in adaptation can be displayed in the next 5 years. “Businesses and governments will see their efforts materialize”, he says.

The institute recognizes that countries are struggling against the challenges of vulnerability but some, either by the geographic situation or socioeconomic status, have greater challenges to face.

Some countries are better prepared by government action, public awareness and responsiveness of the private sector.

In the case of Ecuador, which is currently ranked 81 Global™, low vulnerability and relative low preparation is placed in the left quadrant of the preparation matrix. Ecuador has been losing positions since 2003 when he was number 66 worldwide.

Vulnerability in Ecuador has been declining (improving) gradually since 1995, largely due to improvements in the access to health systems and rural population decline. He is currently in third place in South America, after Chile, Argentina and Uruguay. The best score comes from facing comparatively better the Water Sector and in general the adaptive capacity. The worst scores are due to the high sensitivity to changes, particularly those related to health (relatively few workers in public health). The impact projected on future crops due to climate change is a relatively important challenge to overcome.

In terms of preparation, Ecuador has been losing ground since 1995, when he was at position 58.

In absolute terms, Ecuador has been recovering since 2000 when he got his worst score. In 2008 began a decline in his score, the effect adds to the gradual decline in the overall ranking due to the advancement of other countries. The current position, 81, is the worst in these series, although Ecuador has demonstrated a strong ability to improve positions quickly, as it did in 2001 to 2003 (11 positions) and 2005-2006 (4 positions). The economic situation is the one that has marked in greater extend the current loss of positions. The social preparation is the factor that has improved the most since 1995, supported by better education and greater access to information and communication.

For a full report on the country and its evolution over time in each one of the measures, visit http://gain.globalai.org/country/ecuador In conclusion, says Dr. Daboub, “we must adapt in a pragmatic, realistic way and based on the principle that individuals are able to take the reins of destiny into their own hands. Global™ demonstrates how concrete actions can attract private investment for adaptation.â€?

LATIN AMERICA AND THE EXAMPLE OF DETROIT

Dr. Manuel Hinds Ex-Minister of Finance of El Salvador The government and citizens should study the case of Detroit and apply to the case of Latin America what they have learned. As noted by Edward Glaeser, a professor of Economics at Harvard and member of the Manhattan Institute, in his recent book (Triumph of the City, New York: The Penguin Press, 2011), Detroit shows a bleak prospect. Between 1958 and 2008, the city lost 58 percent of its population. Nowadays one third of the population lives in poverty, a high percentage for a U.S. city, and most of the rest is almost poor. The family income is half of the national average. Unemployment is 25 percent, 2.5 times that of the country. Its murder rate is 10 times that of New York City.

Glaeser analyzes how do Detroit get to this point after having been one of the most prosperous cities in the United States. Many people believe that the decline of the city is a result of the decline of the automotive industry, which dominated the city’s economy. But the dates do not match. And many other cities have recovered from declines of their industries by creating more profitable new industries. Detroit could not do it. The automotive industry began to decline in the seventies, when due to the first oil crisis North American cars became too expensive, the huge North American cars of that era. Detroit’s decline has begun at least a decade before, with the 1967 race riots, which included fires and widespread violence. These disturbances resulted in a very heated political climate that culminated with the election of Coleman Young as Mayor of the City. Coleman came with the clear intention to avenge from the upper and middle classes, which he believed were responsible for the problems of African-Americans in Detroit.

In this line, Coleman Young quickly opened an era of insults, public accusations against private enterprises, the middle classes and whites in general, accusing them and all previous governments of all problems they could not solve. Then he put a high tax on income for which, he thought, were the rich and the affluent to pay the increasing costs of the City Hall. The poor, who were mostly African-Americans, felt so claimed with these actions that they reelected Young for 20 years. With every insult that the others received, they felt better.

The insulted, the upper and middle classes, who were the heart of the city’s economy, first stopped investing in the confines of the city, and then they migrated to the suburbs, which were beyond Young’s control, leaving Detroit converted into a city of the poor. That’s how Young managed to turn Detroit into a city with such a high proportion of poverty and with so few human and capital resources to combat it.

Young tried to counteract the rapid impoverishment of the city doing great municipal works, such as main offices Renaissance, elevated rapid transit system, Disney World type and Joe Louis Arena, which became white elephants in a poor city that had no use for them. The losses were enormous.

For example, the Renaissance Center, which cost 350 million and was built in 1977, was sold in less than 100 million in 1996. In addition, the city of Detroit became one of the most corrupt in the United States. And all this was paid by the poor because the rich and the middle class (white and black) had already gone to the suburbs or other cities. The situation became worse with the decline of the automotive industry, as there were no entrepreneurs or engineers or people with high capacity to invent new activities and create jobs.

Glaeser then compared Detroit with another city that suffered the same problems as Detroit: New York. Unlike Detroit, which in the sixties was still in the automotive industry expansion, New York

was already declining at that time because the clothing industry which was his support was no longer profitable in the city. In that place, after riots similar to those of Detroit, they elected a Mayor as populist as Young, John Lindsay, who led the city to the brink of bankruptcy and let the crime climb as much as in Detroit.

Unlike the inhabitants of Detroit, New Yorkers realized the error and elected serious Mayors, conservative, who do not devoted themselves to blame previous governments not to take revenge on anyone or build white elephants, but to improve the human environment of the city. They cleared New York of crimes, rationalized taxes, leaving the private sector to develop new activities, more profitable than the manufacture of clothing, and the city managed to get through. Nowadays, the poor of New York are much fewer in number than those of Detroit and live in better situation than them. African-Americans are integrated into a more open society in New York, while those in Detroit are living in an appalling environment of crime and poverty.

It seems that this lesson does not apply to Latin America where populism and the promotion of class struggle have coexisted with very high rates of economic growth. It seems that instead of leading to poverty, these policies are leading to growth. But this is an optical illusion. The problem is that high growth rates in Latin America have nothing to do with local politics but, as shown in the graph below, with a lucky factor: the boom in commodity prices that has been since 2003. As shown in the graph, the growth of gross domestic product of Latin America has traditionally relied on commodity prices, rising when they go up and down as they come down. We are now in a period in which they have risen to near record levels in real terms (deducting general dollar inflation). This has led to very high exports, which have resulted in the entry of huge amounts of money into the economy, which in turn have generated very high levels of domestic activity. This is why there are high rates of economic growth.

After seeing this, one can say that Latin America is very fortunate to have many primary resources.

But, as shown also in the graph, the other side of the coin is that prices of commodities go up and down violently, thereby causing the economy of the region not only large growth, but also great low ones. In the past 45 years there has been two and a half cycles in the prices of these products.

The first two ended in serious depressions in Latin America. In the third cycle, in which we live now, there have been a scare- 2008-2009 falling prices, which led to a simultaneous drop of income per person.

Cambio en PIB reasl por persona

Cambio en precios de productos primarios

LA: Cambios en precios de productos primarios y PIB por persona

Precios productos primarios PIB por persona

SOURCE: International Financial Statistics, IMF.GDP per person in dollars at 2000 prices.

Prices recovered quickly as a result of measures taken by developed countries to expand demand in these countries, which allowed that exports of China and other Asian Countries continued to grow fast, demanding very strong commodity. These efforts are continuing but each time they are becoming less effetive and less sustainable, as the debts of those countries have already grown to higher levels. The probability of a fall in prices in the near future is increasingly high. The risk is increasing. And the region is not ready because they did not invest the enormous resources that they received during the boom in developing its economy, but wasted them in large subsidies and other populist measures that have not left in the population a greater capacity for growth and neither have freed them from this dependence, so insane, on the prices of some volatile products.

This has been the eternal history of Latin America –to spend as unstitched over the boom years only to suffer in poverty during the lean years. We are already advanced in boom years and there are already signs that the lean are to come. That is, we are in a similar period of the fifties in Detroit and New York when the economic activities, that supported them, were held at its peak and were about to begin to decline.

When time comes, we will have to decide whether to follow the example of Detroit, listening to the siren of populism and abandoning us to a sterile class struggle that would eliminate the possibility of creating new value-added activities, which finally stabilize the region and we become independent of these so marked fluctuations that generate the volatility of commodity prices. Or we can mature and begin to create societies governed by the rule of law that dedicate their taxes not to pay subsidies, that leave nothing for the future, but to invest in human capital formation which is the only source of the societies'

History. A custom-made suit

Alberto Medina Mendez Argentina The implementation of an institute for Historical Revisionism in Argentina, reinstalls with unusual power, a debate that lives with us for years.

The public education system, so blindly defended by the entire global political spectrum, has been nurturing for decades, a compulsive pattern of indoctrination that continues to evolve dangerously.

Our children are being educated in the school system in a more and more crude, linear, less concealed way. The central idea of the system is to implement “their� right paradigms so that it works as a lens to evaluate good and bad.

That ideological perspective is trying to prevent that more young people develop a critical judgment so that they do not have to think and process information unless it is previously chewed by others.

In fact, handbooks, teachers, all available and suggested material are registered in an alignment of events that corresponds with a unique discourse.

In this context, it is not surprising the creation of a new state institute in Argentina. This is only one more step, an additional one, vulgar and treacherous, that shows the degree of impunity of a sector of the society that thinks that they have the strange right, granted by a majority election, to impose their vision to the rest of their fellow citizens.

After all, it is the format being applied in many ways. They understand democracy as a bounty, as a reward for winning an election. Under that provision, the one who attains the eventual majority, get the right to impose their view on others.

Yet many citizens of our countries continue to believe that democracy is an end in itself, not realizing that it is just an inefficient way, although it is imperfect, that we, human beings, have built up to now, to live in peace and harmony.

Some fundamentalists of democracy, exercising their political activity with extreme power commitment, have developed a reinterpretation of the concept, with special emphasis on the need to give the winner, broad powers to make and break with taste at their own will.

In reality, whatever the government systems are, that is right or wrong, with more or less defects, aim to find mechanisms to ensure the full exercise of individual rights, appropriate scheme of rules aimed to allow a life full of agreements, consensus and shared lifestyles.

Those are not systems to be imposed, to make the rest give up, to break others with their own moral. Coexistence implies tolerance, respect for diversity, live and let live, and not as some continue pretending being a tool to force others, to chasten those who do not think alike.

However, in our country, the Institute for Historical Revisionism moves in to reinterpret what is known so far. And we must say that the goal is not disposable. After all, any citizen or group intending to voluntarily meet to develop a legitimate activity, are fully entitled to do so.

What is immoral is to do it from a government, to use the state to do so by appealing the use of resources previously subtracted from the community (all) through taxes, for a look to prevail over the rest.

The problem is not what they do, but the arrogance, discretion and authoritarianism exercised on the mechanism of pretending that everyone pays their vision with their resources, a view that they not even share, just because they want to make it prevail.

The endlessly repeated argument by defenders of this bold initiative is that they consider that the existing account is the opposite, and that they also have the right to have their vision be exposed equally.

The right is unquestionable. What is not reasonable is to pretend that ALL fund their rhetorical pluralism. The state is to guarantee rights not to impose outside visions to all the inhabitants of a community.

And if your look is so laudable, if that reinterpretation of the history if so necessary to rescue the same characters, then, surely there will be no missing people willing to contribute voluntarily with the necessary funds for such a noble cause.

Research history, continue digging on new information that enriches with new insights on the events, are welcome. Now, setting up a state institute with a foretold bias in the creation decree that says among its goals “vindicate everybody and all who defended the national and popular ideology before the liberal and foreign onslaught�, is really an aberration worthy of being questioned.

Scientific knowledge always deserves to be revised, always, but not at any price or using improper means, but acting with seriousness, professionalism and the essential ethics for the outcome of this research have the necessary support. Science reaches results after much questioning, and it does not start from pretended conclusions to build later, from there, premises.

Obviously, they are not satisfied in obtaining financial means exhausting everyone in order to rewrite their interpretation of history, but now those pseudo-scientific pretend that their ideological preferences become history in a real custom-made suit.

BETWEEN BIO KNOWLEDGE AND BIO TRADE Eng. Giovanni Ginatta Executive Director of FIE A few years ago (2001) I had the pleasant experience of establishing within Ecuador the first Bio Trade promotion project in Ecuador. It was achieved with the support of UNCTAD (United Nations Conference on Trade and Development) and some national strategic partners such as the Ministry of Environment of Ecuador, CORPEI (Corporation of Exports and Investments Promotion) and Ecociencia. The Bio Trade initiative left us some important lessons from the rights and wrongs made in its implementation. However, it was a first experience that showed that there is a great potential in Bio Trade projects in a country where we boast our biodiversity, but we do not make economic benefit out of it.

Last year in April, a new agreement between CAF (Corporación Andina de Fomento), the Ministry of Environment of Ecuador and CORPEI was signed to reestablish Bio Trade in Ecuador. As a result of this agreement, CAF with the Global Environment Facility (GEF) have allocated about 2 million US dollars for a project to promote Bio Trade officially called “Facilitation of funding for biodiversity-based businesses and support to market development activities in the Andean Region”.

Besides, it is the responsibility of the local coordination of the project (this project operates simultaneously in Ecuador, Colombia, and Peru) to obtain at least 2 more million dollars in counterpart funds or in services (contribution in kind).

Despite its sophisticated title, this new project has the same intention to promote the sustainable use of our native biodiversity and is done under the scheme of six components: 1.

2.

3.

4.

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To develop, rationalize and simplify policies and processes related to BioTrade from the public. The same Ministry of Environment is leading this component to provide legal and regulatory processes related to BioTrade. It is very important to review internal processes ranging from health records up to the exploitation of flora and fauna so that small businesses and associations linked to BioTrade, do not have to go through a via-crucis of procedures and internal obstacles. Likewise, the MFA will work with the trade-related bodies and the external sector of Ecuador to review and file the international barriers to trade which also makes it difficult the access to international markets. It should be noted that this project not only supports export projects but local retail market that also offers good opportunities.

To provide a range of services to help enterprises accessing to markets of products derived from the sustainable use of biodiversity.

To enhance entrepreneurial skills and necessary techniques to drive these projects. That is, in this component are concentrated tools to empower companies to overcome their weaknesses not only in management aspects but production and sales also.

Information technology.- It is based on web tools and databases to provide small business owner the necessary information to move forward with their projects. It is also intended to create a “shared community knowledge” related to BioTrade.

Funding: Financial tools to guide them to BioTrade initiatives. A fund of 1.7 million US dollars will be created for associated credits.

Non refundable fund for pilot projects as an example and generate a multiplier effect in Ecuador.

In the case of Ecuador, the priority areas to support this project are: a) National cocoa with biodiversity b) Natural ingredients for cosmetics, pharmaceutical and food, especially medicinal and aromatic plants. c) Sustainable tourism with special emphasis on bird-tourism.

In order that these projects and enterprises be really Trade, it is important to comply with principles and basic criteria as follows:

considered

Bio

1. Conservation of biodiversity. This is an essential axis. Projects should serve to promote conservation and biodiversity assessment in the area of project operations.

2. Promote true sustainable use 3. To apply the principles of fair and equitable sharing of the benefits of the project or company. That is, that in the value chain, there is a fair distribution of project benefits. This is especially important in projects involving communities.

4. Another essential principle is that projects are economically sustainable. If they do not work at that time, there will be no future projects and everything will end. This has been very common in Ecuador with many cooperation projects that live while there is cooperation and then they die because they are not really profitable.

5. Projects must comply with current legislation in all areas of business.

6. Projects must respect the rights of the actors involved, especially with regard to Indian communities and ancient knowledge.

7. It must be clear regarding land tenure, use and access to natural resources. We know that in Ecuador still the subject of legal land tenure has unsolved problems, but at least that the project has no problems on land dispute creating a potential destruction problem of the project.

Ecuador is one of the most bio diverse countries on the planet and if we consider it in relation to the size of its territory, we can conclude that it is the one with highest biodiversity per square kilometer.

However, we must reflect on why we were unable to generate local development alternatives based on sustainable use of biodiversity? Why is it still destroying biodiversity in a miserable way causing in some cases an irreversible loss of resources? The current government has as its fundamental strategic axis in his National Plan for Good Living to “Bio knowledge. Then, let’s drive all together, with the public and private sector this Bio Trade sector for the benefit of a new way of doing business, create jobs, generate enterprises and to protect these wonderful resources that make Ecuador a unique country in the world. Let’s put all theory aside and implement a national sustainable promotion project and valuation of our bio diversity. Let’s stop squeezing Ecuador as it is a country of trinkets and convert Ecuador into a producer of high added value, of Bio knowledge and high level environmental services.

For more information on programs and services providing project financing for biodiversity-based business and support market development activities in the Andean Region, please contact us at: biocomercio@corpei.org.ec