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Ecuador Leader Outlines Harsh Plan

March 12, 1999

QUITO, Ecuador (AP) _ Ecuador’s president announced a tax hike and other harsh economic measures Thursday, the country’s latest attempt to address this small Andean nation’s worst financial crisis in decades.

In a nationwide television address, President Jamil Mahuad also said he will partially freeze checking and savings accounts. He also detailed plans to jail tax evaders and eliminate sales tax exemptions except on food and medicine.

Mahuad defended himself against criticism that he had acted too slowly during his first seven months in office to take action against the country’s deepening financial crisis.

He said he was a man of consensus who had sought the support of Congress and that had given the mistaken impression of ``a government without leadership.″

Mahuad said his plan covered four main points: fiscal and banking reforms, restructuring of the state and increased support for Ecuador’s poor.

The announcement came as a two-day nationwide strike to protest the government’s economic programs wound down and just hours after the Central Bank’s board of directors, including president Luis Jacome, resigned.

Mahuad decreed a 60-day state of emergency Tuesday to offset the double impact of the strike and financial crisis, and ordered machine gun-toting police to guard oil and electricity installations from strikers.

Mahuad detailed the following points of his plan to end the budget deficit:

_ Restrict withdrawal of money from checking accounts for amounts greater than $150 and savings accounts greater than $385 for one year, with interest to be paid monthly on the embargeed accounts.

_ Propose an increase in the sales tax from 10 percent ot 15 percent.

_ Increase the price of a gallon of gasoline from $1 to $1.90.

_ Create a luxury tax of 4 percent on luxury cars.

_ Propose a law that would permit imprisonment of tax evaders.

Mahuad said the increase in gasoline prices was an emergency measure until Congress approved the increase in the sales tax. He said gasoline prices would be gradually reduced after the sales tax increase went into effect.

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