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Apr 21, 2016 12:15 AM

Ecuador hikes taxes to pay for post-quake reconstruction

The Associated Press

QUITO, Ecuador (AP) President Rafael Correa said Ecuador's worst earthquake in decades caused billions of dollars of damage and he is raising sales taxes and putting a one-time levy on millionaires to help pay for reconstruction.

The damage from 7.8-magnitude quake adds to already heavy economic hardships being felt in this OPEC nation triggered by the collapse in world oil prices. Even before the quake, Ecuador was bracing for a bout of austerity, with the International Monetary Fund forecasting the economy would shrink 4.5 percent this year.

In a televised address Wednesday night, Correa warned the nation of a long and costly post-quake recovery and said the economic pain shouldn't fall only on hard-hit communities along the coast.

"I know we're at the most-difficult stage right now but it's just the beginning," he said.

Using authority granted by the state of emergency he declared after Saturday night's quake, Correa said sales taxes would increase to 14 percent from 12 percent for the coming year.

People with more than $1 million in assets will be charged a one-time tax of 0.9 percent on their wealth, while workers earning over $1,000 a month will be forced to contribute a day's wages and those earning $5,000 a month the equivalent of five days' pay.

Taxes on companies will also go up, and Correa said he will look to sell certain state assets that he didn't specify. He is also drawing on $600 million in emergency credits from the World Bank and other multilateral lenders.

Unlike the deadly earthquake that ravaged Chile in 2010, when commodity prices were at a high and most of South America was booming, Ecuador must rebuild with prices of oil, the lifeblood of its economy, near a decade low. Manufacturing is also suffering because the economy is dollarized, depriving companies in Ecuador of the same jolt the rest of South America has experienced from devalued currencies.

The tax hikes come as the scale of devastation continues to sink in. A helicopter flyover of the damage zone Wednesday showed entire city blocks in ruins as if they had been bombed.

Late Wednesday, the government raised the death toll to 570. Officials listed 163 people as missing while the number of those made homeless climbed over 23,500. The final death toll could surpass casualties from earthquakes in Chile and Peru in the past decade.

Even as authorities turn to restoring electricity and clearing debris, the earth continued to move. A magnitude-6.1 aftershock before dawn Wednesday set babies crying and sent nervous residents pouring into the streets. Local seismologists had recorded more than 550 aftershocks, some felt 105 miles (170 kilometers) away in the capital of Quito.

While humanitarian aid has been pouring in from around the world, distribution is slow. In Manta on Wednesday, people waited for hours under the tropical sun for water and food supplies. Soldiers kept control with fenced barricades.

"They looted the store. I'm taking out what little remains," Jose Encalada said as he cleaned up his paint store in Pedernales, one of the hardest-hit towns.


Associated Press writers Marko Alvarez in Pedernales, Ecuador, and Joshua Goodman in Bogota, Colombia, contributed to this report.


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