Entering a new era of African investment
Media can't ignore financial scandal in Ecuador's presidential election
As Ecuador heads toward the second round of its presidential election on April 2, a scandal has broken out over the opposition candidate Guillermo Lasso's financial dealings.
The accusations are serious and largely based on public records, with most of it verifiable on websites such as the Panamanian Public Registry and Superintendency of Banks and the Ecuadorean Superintendency of Companies. The newspaper that broke the story was Página/12 of Argentina, with two articles there in the last week by journalist Cynthia Garcia, as well as on her website.
Yet, as of this writing, the major international media covering the election, as well as the big privately owned Ecuadorian media, have pretended for a week that the story does not exist.
This is despite the fact that President Rafael Correa has publicly denounced Lasso for his dealings and called on him to resign from his campaign. And Lasso publicly responded without denying the accusations. It is difficult to explain this gap in reporting on the basis of what most people would consider journalistic norms.
It is as if the U.S. and international media had failed to report on the controversy over President Trump's refusal to release his tax returns during the 2016 presidential election.
Lasso has been routinely described as a "former banker" who allegedly retired from banking activities five years ago. However, he remains a major shareholder in Ecuador's largest bank, Banco Guayaquil (through a trust named with his initials, GLM). And evidence from minutes of board meetings of Banco Guayaquil's parent company indicate that he is still a key decision-maker at the bank, where he has been executive president for more than 20 years.
This in itself would be big news in Ecuador, where banking interests ran the country in the years prior to the election of Correa in 2007, and are not held in high regard since they caused a severe financial and economic crisis in the 1990s. This crisis impoverished many Ecuadorians and sent large numbers of people out of the country to seek employment.
But there is more. In 2007, Banco Guayaquil created an offshore bank in Panama, which was called Banco de Guayaquil Panamá. In 2011, Banco de Guayaquil Panamá changed its name to Banisi; in 2014, Banco Guayaquil sold Banisi to Banisi Holding. This holding company is registered by alaw firm but belongs to Lasso, and he has admitted to this; but on paper there are a series of transactions of the kind often involved with offshore banking and tax avoidance that disguise this ownership.
These transactions and ownership manipulations involve various Lasso family members and cronies.
What makes this disguised ownership so important to the election is that Lasso's offshore bank in the tax haven of Panama appears to be primarily operating for the purpose of facilitating capital flight from Ecuador. There is much evidence for this, including the fact that about two-thirds of Banisi's liabilities are out of country; the Panamanian regulator authorized Banisi to open an office in Ecuador; and its website domain registry and servers are in Lasso's Ecuadorean bank in Guayaquil.
Most importantly, since 2014, it has been illegal in Ecuador for banks and their shareholders to own offshore banking operations in tax havens. Thus Lasso's ownership of Banisi, if proven in court, would appear to put him in violation of the law.
The issue of illegal capital flight and tax havens is a big one in Ecuador for a number of reasons, and was voted on in a referendum in the first round of the election on Feb. 19. The majority of voters approved a ballot initiative stating that Ecuadorians who have money in tax havens should not be allowed to hold office.
Capital flight is a global problem, with developing countries losing trillions of dollars (including tax revenues), which contributes to poverty and inequality. And it has special meaning in Ecuador: First, because of the devastating financial crisis caused by bankers in the late 1990s; and second, because Ecuador's success in the past decade under the Correa government was partly due to reforms that taxed capital flight, forced banks to repatriate liquid assets held abroad, and other re-regulation of the financial system.
The investigative reporting on Lasso's offshore holdings and banking activities raises additional questions. The reporting thus far indicates that some 50 companies associated with Lasso have been identified. Some of them have to do with disguising bank holding ownership through family members and associates and others appear to be involved in real estate in Florida.
But regardless of the unknowns and various complexities of Lasso's offshore holdings and transactions, the most important findings are clear: He appears to be involved in banking interests that facilitate capital flight from Ecuador.
The offshore bank, in tax haven Panama, appears to be in violation of the law. These are serious charges backed by serious evidence that is in the public domain. There is no justifiable reason for journalists covering this campaign to ignore this scandal.
This piece was corrected on March 23, 2017 at 7:58 p.m.
Mark Weisbrot is co-director of the Center for Economic and Policy Research in Washington and the president of Just Foreign Policy. He is also the author of the book "Failed: What the 'Experts' Got Wrong About the Global Economy" (Oxford University Press, 2015). You can subscribe to his columns here.
The views of contributors are their own and not the views of The Hill.