Idealex – COVID-19 and international trade

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DATE: 15-05-2020

CORRALROSALES IN THE NEWS: 

-Andrea Moya

MEDIA: Idealex

The world is facing a health, human and economic crisis without precedent. The measures taken to reduce the effects of the pandemic, such as isolations and social distancing, have direct impacts on the supply and demand. The suspension of commercial and productive activities generates a global recession and higher unemployment.

In 2019, the global economy recorded its worst performance since 2009, with a grow rate of 2.5% and with global GDP grow projections for 2020 revised downwards. In 2019, the volume of world trade goods fell by 0.4% against 2018 and it is projected that in 2020 it would contract even more. COVID-19 appeared in this scenario.

According to the Economic Commission for Latin America and the Caribbean (ECLAC), COVID-19 is affecting the region for the following reasons:

  1. The decline in the economic activity of the region’s main trading partners.
  2. The drop in commodity prices.
  3. The interruption of global value chains.
  4. Lower demand for tourism services.
  5. Greater risk aversion and worsening global financial conditions.

According with ECLAC, the value of Latin America and the Caribbean exports will fall at least 10.7% by 2020 due to lower prices by 8.2% and volume in 2.5%.

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In the case of Ecuador, given that its main commercial partners China and the United States are the countries with the most infections, it is foreseeable that the value of non-oil exports reduces. This fact added to the fall of the oil prices will generate a significant fall on the value of Ecuadorian exports.

Under these circumstances, the country’s trade policy must facilitate a prompt answer to this crisis. The reduction of non-tariff barriers to import and exports, especial procedures for the release and clearance of goods, simplified mechanisms for the reimbursement of taxes and payment facilities for taxes on foreign trade are measures that would allow companies to overcome the challenges derived from the pandemic.

The Ecuadorian Customs Authority has made and efficient work in order to facilitate foreign trade operations during the state of emergency, it has maintained its services in all customs districts through electronic channels, it has implements specific procedures for the inspection of goods and it has suspended the terms applicable for the abandonment of good through the duration of the emergency.

However, the following measures are needed urgently:

  1. The Law for Simplification and Tax Progressivity issued on December 31, 2019 amended the Production, Commerce and Investment Code adding article 157.1. This article establishes a simplified procedure for reimbursing any taxes applicable to foreign trade (drawback). The amount of the reimbursement is equal to a percentage of the FOB value of the export and must be done automatically after the export customs forms are definitive. This process must be put into place in an effective and immediate manner.
  2. The Law for Tax Equity establishes that the foreign exchange tax (ISD) paid on the import of raw materials, capital goods and other goods to be incorporated in production processes may be regarded as tax credit for the payment of the importer’s income tax within the following five years. The importer is able to request a reimbursement of the foreign exchange tax that has not been credited against its income tax. However, the reimbursement request procedure is slow and bureaucratic. It is necessary to adopt simplified reimbursement processes that are effective and resolved on a timely manner.
  3. Article 116 of the Production, Commerce and Investment Code establishes that the importers are able to request payment facilities on foreign trade taxes derived from the import of capital goods. This benefit must by applicable to the payment of foreign trade taxes on the import of raw material and similar goods.
  4. The third general provision of the Law for the Development of Production, Investment Attraction, Employment Generation and Fiscal Stability establishes that the investment incentives included in such law will be applicable for 24 months, this deadline expires in August 21, 2020. The President is able to extend this deadline for 24 additional months. It is importer to extend this deadline in order to stimulate local and foreign investment which may generate employment. It is also important to simplify the processes needed to access certain benefits such as the exemption of tariffs and foreign exchange tax on the import of raw material and capital goods needed for the development of investment projects.

These measures will contribute to protect the cash flow of the taxpayers which is a fundamental issue in order to keep companies’ operating and avoid, to the extent possible, its closure and the subsequent loss of jobs and default with its creditors.

This crisis has worsened the country’s fragile economy, particularly for the fiscal imbalance that has been occurring for several years, and the lack of contingency funds to be injected in an economic recession. The alternative is not the “deglobalization”, but an international cooperation policy that allows each country to develop its best capacities. Ecuador urgently requires structural changes in the labor and tax areas, along with a clear foreign trade policy.

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Table’s source: Special Report COVID-19 issued by the Economic Commission for Latin America and the Caribbean (ECLAC) – https://repositorio.cepal.org/bitstream/handle/11362/45351/1/S2000263_en.pdf

Idealex – Technological Tools in the Workplace

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FECHA: 24-11-19

PROFESIONALES EN LA NOTICIA: 

-Edmundo Ramos
-Rafael Serrano

MEDIA: Idealex

Most companies provide their employees with technological tools (“ICTs”) such as corporate email, mobile phone, and computers in order for them to fulfill their tasks. It is common for the worker to use them for personal purposes, resulting in situations of unauthorized use of work ICTs, or the incorrect handling of information owned by the employer.

Since the employer is the owner of the ICTs, he may establish limits for the proper use of them. Article 46 of the Ecuadorian Labor Code does not establish any laws regarding the treatment of information and the consequent right of the employer to access and control it. Nevertheless, the employer must respect constitutional rights granted for the protection of data, correspondence and privacy. 

The right to inviolability and secrecy protects the communications made by the worker. For this reason, the employer will not be able to access email or information contained in the company’s computer or cell phone without the worker’s consent.

Communications can also be protected by the constitutional right to personal data protection: “The right to personal data protection, which includes access to and decision on information and data of this nature, as well as their corresponding protection. The collection, archiving, processing, distribution, or transferring of this data or information will require the authorization of the holder or the mandate of the law.”

Personal data is all the data or information that makes a person identifiable. In general, corporate emails refer to names, surnames, or positions of the person to whom the email is assigned, just as the cell phone number is linked to a specific person. The definition of personal data would include both the email and the cell phone number. Therefore, since this information can be considered as personal data, the authorization of the holder is required to access and review this information. 

Finally, the right to privacy also protects the use and access to ICTs. The American Convention on Human Rights recognizes this right, which provides the following: “No one can be subjected to arbitrary or abusive interference in his private life, his family, his home or his correspondence, nor of illegal attacks on his honor or reputation.”

The Inter-American Court of Human Rights has indicated, “… The scope of privacy is characterized by being exempted and immune from abusive or arbitrary invasions or attacks by third parties or the public authority.” The right to privacy would apply to personal communications made by the worker using work ICTs.

The rules that define the use and control of technological tools must be in writing in the different legal documents of each company, in order to have the necessary support to sanction their misuse:

Employment Contract: the employer must establish in the employment contract the delivery of technological tools and the use of them. The contract shall also recognize the rights of the employer to recover the ICTs and obtain a backup of the information contained therein.

Internal Work Regulations: It is essential to incorporate in this document, rules that regulate the use of technological tools. Employers may establish sanctions in their Internal Labor Regulations for their misuse or the inclusion of employee’s data and personal information. The internal regulation must establish the ownership of the information contained in these tools, as well as the periodicity for monitoring or supervision.

Internal Policy of the Company: these documents must explain the rights and obligations that the workers have regarding the ICTs. The policies shall establish the right of the employer to access and obtain copies of all the information within these technological tools. Workers must be notified and informed to the worker.  

Delivery / Receipt certificate: At the time the technological tools are delivered, the employer must establish the limitations and conditions under which the tools are delivered. It is important to detail the physical state and the data content of the tools so that, at the time of their return, the worker is responsible for any deterioration not attributable to their normal use.

Training: The employer shall conduct training for workers regarding the importance and limitations of the use of technological tools.

In conclusion, technological tools facilitate the execution of the functions performed by the workers, but their use must be regulated in detail so that both the employer and the worker know the limits and the sheer work-related purpose that must be given to them. The adequate protection of the company’s ICTs and information that they contain will be possible only if there is clarity in the rights and obligations regarding the use of such tools.

Edmundo Ramos’s Bio:

Edmundo Ramos is a partner at CorralRosales. He has more than twenty-five years of expertise representing local and international clients in labor and social security matters. Edmundo leads the CorralRosales Labor Department and participates actively in the area of ​​Dispute Resolution in the management of labor disputes.

Rafael Serrano’s Bio:

Rafael Serrano is an associate at CorralRosales. He has more than five years of expertise in the TMT industry. He leads the Data Protection Department with an emphasis on personal data protection, electronic commerce, and emerging technologies.

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Evolution of the Legal Sector in Ecuador 2008-2018

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DATE: 10-08-19

CORRALROSALES IN THE NEWS: 

Francisco Corrales

MEDIA: Idealex

To better understand the legislative evolution in this decade, it is necessary to take into account that the presidency of the Republic was exercised by a single character from 2007 to 2017: Rafael Correa, an unprecedented case in Ecuadorian history. There have been presidents who have exercised the presidency for a total of more than 10 years, but not continuously.

In 2008 a new Constitution, the twenty-second, was issued for which a Constituent Assembly was convoked. Its mission was to draft a political letter which to enter into effect required the favorable vote of the majority of citizens expressed in a referendum convoked for the effect. President Correa had an absolute majority in the Assembly and managed to have the 2008 Constitution built to suit his political project: The Ecuadorian version of the so-called 21st Century Socialism. The main ideologues of this movement who played the same role in the constitutions of Venezuela and Bolivia were two Spanish professors belonging to the extremist group “Podemos”.

The 2008 Constitution that currently governs the country, with 23 modifications introduced in three separate occasions, consists of 444 articles, 30 transitional provisions and a transition regime developed in 30 additional articles. The constitution has 52,831 words, compared to that of 1998 with only 29,162 words. It is a convoluted, contradictory, incoherent, and regulatory political letter which strengthens the presidential power to the extreme. In addition, it was shielded in such a way that its reform requires long procedures along with qualified majorities and for certain matters even the convocation of a new Constituent Assembly.

To consolidate the indefinite political power of the XXI Century Socialism sought in Ecuador during the period under review, large numbers of codes and laws were dictated; most of them penned by the presidency of the Republic. There is hardly any law whose initiative came from the Legislative Assembly itself. The assembly members of the political group led by President Correa were an absolute majority which allowed them, without the need for agreements or alliances, to approve as many laws as they considered necessary to suit their interests.

Among others, the following laws were issued: Organic Monetary and Financial Code, Commercial Code, Organic Code of Territorial Organization, Autonomy and Decentralization, Organic Code of Judicial Function, Administrative Organic Code, General Organic Code of Processes, Code of “Ingenios” (Organic Code of the Social Economy of Knowledge, Creativity and Innovation), Organic Law of the Legislative Function, Law of Jurisdictional Guarantees and Constitutional Control, Organic Law of the Council of Citizen Participation and Social Control, Organic Law of Higher Education, Organic Electoral Law and Political Organizations, Organic Law of Ombudsman, Organic Law of Land Transportation, Traffic and Road Safety, Organic Law of the National Public Procurement System; To this extravagant number of codes and laws, we must also add reforms of all kinds due to the fact that 11 reforms were issued in the period under review only with regard to tax laws.

Therefore, it is correct to affirm that between 2007 and 2017 Ecuador endured a legislative incontinence of new laws, reforms and counter reforms that have thwarted the institutional and legal structure of the Republic. The vast majority of members from this movement in the government have had the sole goal of strengthening the presidential power and facilitating the fulfillment of the political objectives of the group that held power, that is, its indefinite command of the Republic. This situation has become such a problem that several private and public sectors have suggested that the least traumatic way to end the current legal chaos would be to convoke a referendum in which the people would repeal the 2008 Constitution replacing it with the 1998’s. Therefore, the legislature would adapt the current secondary laws to the constitutional norms of 1998.

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