The expression “the Hair of the Dog” comes to mind when someone tries to understand Ecuador’s current economic affairs. The definition of that coloquial phrase, according to Dictionary.com, is the following:
“A morning drink may be the last thing you want after a night of boozing, but that’s exactly what this quirky English expression means. Originally, the expression referred to a method of treating a rabid dog bite; hair from the dog was placed in the wound. So in that sense, having another drink (any drink) is like taking hair from the dog that bit you.” (Where Did the Strange Expression “Hair of the Dog” Come From?, 2020)
President Noboa is reaching its 90th day in Office. However, in this short period of time his administration has faced two main issues. The first it is the security control problems due to the presence of drug cartels and systematic corruption in all layers of the political and judicial systems. The second trouble is the economic situation of the country.
In the first case, Noboa declared the country in a State of War. The enemy all drug traffickers and their organizations that are recognized as terrorists groups according to the 110 and 111 Presidential Decrees, signed into law on January 8th and 9th, 2024. However, the government now faces the unexpected and un planned cost of providing resources for security matters must be paid by someone. And as it always is; citizens must pay for government expenses.
Ecuador’s security is at a brink of reaching a point of no return and drug cartels and terrorist must be met with equal or more powerful force; it is not the best classical liberal option for the state to intervene. However, in the case of Ecuador it seem to be the best option available within a fast and available response.
This means that Ecuador’s government deficit would increase from 6.1 billion dollars to cover the cost of the internal war. Hence, Noboa’s administration proposed a bill to congress where among other is the increase of Impuesto al Valor Agregado (IVA) -value added tax-, in order to cover the cost of war.
As of right now, the National Assembly, the country's congress, discusses and argues about what goes in and out of the bill. Then President Noboa would veto, or partially veto the bill. Nevertheless, all ideas in the bill are about increasing taxes to the population.
Sadly none, of the answers presented by the government follow in the following:
1. Reduce Government size and spending2. Efficient government spending
3. Decrease CIT
4. Decrease the barriers of entry for entrepreneurs
5. Delete all government subsides on fossil fuels
6. Sign a Free-Trade-Agreement with the US
7. Delete all government free-market restrictions
These are a few steps that a “well-intended government” must follow to clean and liberate the economy. However, if the government wants to keep the party going, means that the party must be paid and someone has to pay for it.
If the party continues, to hair the dog seems more likely. But the unexpected and horrendous consequences are yet to come, and the cure of “hair of the dog” is the cue to go.
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