Today I would like to propose a reform that, in and of itself, could constitute a great legacy of the Government: financial openness. Ecuador needs to attract capital again in order to grow at a faster rate and overcome the stagnation we have suffered for more than a decade. With this objective in mind, the Government must set itself the mission of turning the country into a leading financial center.

Having a dollarized economy with a financial system isolated from the rest of the world is like owning a Ferrari without hitting the gas. We must exploit the unrealized potential of having an economy without exchange rate risk. Furthermore, as a small economy, we shouldn’t limit our growth potential to domestic savings, even worse when we’ve been destroying capital for almost two decades, financing an overweight state apparatus.

Panama’s international financial center as we know it today is a relatively recent phenomenon, initiated by the banking reform of 1970. Panama waited almost seven decades to exploit the potential of a dollarized economy and is today the richest country in Latin America, with a per capita GDP of $35,995. We must foster competitiveness in the financial sector through the free flow of capital, openness to foreign investors, and territorial taxation.

Panama’s loan and deposit portfolios both exceed 100% of GDP, while Ecuador’s barely reach 37% and 41%, respectively (September 2024 figures). The external savings captured by Panama’s financial system constitute 38.2% of the total deposit portfolio (March 2025 figures), while in Ecuador they are almost nonexistent. Instead of persisting with the failed policy of controlling interest rates, which, like all price controls, leads to shortages and black markets, we should inject competition into the financial sector. International competition will ensure that Ecuadorians benefit from a greater supply of credit and better financial services.

A key part of the barriers to entry for foreign competition are the foreign currency outflow tax (DST), the global tax framework, a tax burden that exceeds the regional average, and mandatory profit sharing. Star financial centers, on the other hand, have a regulatory framework that prioritizes free competition for national and international financial institutions and simple, low territorial taxation.

The reform could be implemented by adapting current financial legislation to the open financial regime in place in Panama. If the political class resists transforming the country’s entire financial and tax system, another alternative is to make Ecuador a “virtual free trade zone” for financial services, aligning its financial, tax, and labor legislation with that of Singapore—thus surpassing the competitiveness of the Panama International Banking Center.

To successfully implement this reform, it is essential to finance the elimination of the ISD by eliminating the fuel subsidy, thus implementing another structural reform that the government could leave as a legacy.