Drastic economic measures in Ecuador after quake

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By Santiago Piedra Silva, AFP

PEDERNALES, Ecuador — Ecuador announced drastic economic measures late Wednesday, including a hike in some taxes and mandatory wage contributions, to deal with the aftermath of the devastating earthquake that killed more than 500 people and injured over 5,000. Saturday’s 7.8-magnitude quake was the worst to hit the South American country in decades, causing hundreds of buildings to collapse and damaging roads and other key infrastructure in tourist areas. The official death toll currently stands at 525, with 5,733 injured and 163 still missing.

But aside from the staggering human cost, the quake comes as a big economic blow to oil-producing Ecuador, which has already taken a huge hit from the drop in global crude prices.

President Rafael Correa, in an evening address to the nation, estimated that rebuilding could come to as much as US$3 billion and knock two or three points off the country’s GDP.

Correa went on to announce a series of measures to help cover the costs, including an increase in the country’s value added tax from 12 percent to 14 percent for a year. He also announced mandatory wage contributions — people earning US$1,000 a month will have to pay the equivalent of a day’s salary for a month, those earning US$2,000, one day’s worth for two months, up to those earning more than US$5,000 who are being asked to contribute one day’s salary for five months.

And anyone whose assets exceed US$1 million will have to pay a one-time contribution of 0.9 percent of their wealth, he added. He also said unspecified state assets would be sold.