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PRESIDENCIAL DECREE - CREATION OF THE COMPREHENSIVE AUDIT COMMISSION OF PUBLIC DEBT


15 July 2007

CREATION OF THE COMPREHENSIVE AUDIT COMMISSION OF PUBLIC DEBT

RAFAEL CORREA DELGADO
PRESIDENTE CONSTITUCIONAL DE LA REPÚBLICA DEL ECUADOR

RECOGNISING:

That resources which are obtained via external and internal credits constitute an important source of funds to finance social and economic projects by the Ecuadorian State;

That, during recent decades, this important financial and economic instrument of the State has been distorted through its subjugation to a model according to which the interests of lenders and conditionalities have prevailed, combined with a lack of transparency to the point where external indebtedness has become an instrument of financial collusion.

That for these reasons, governments have been required to devote high percentages of the national budget towards servicing this debt, requiring new credits in order to finance the debt and creating within the Ecuadorian State, an increasing dependency on foreign governments and the international financial institutions. This has created a permanent threat to national sovereignty, to the fulfilment of human rights as well as an obstacle to sustainable development and the eradication of poverty.

That, according to the report of the former Comisión de Investigación de la Deuda Externa (CEIDEX), there are indications that, during debt negotiation and renegotiation processes, there are irregularities.

That it is the duty of the State to ensure that economic activities comply with legal norms and to monitor these in the interests of the public good and that compound interest (anatocismo) is not permitted within the credit system, according to article 244, number 4 of the Political Constitution of the Republic.

That article 3 of the Political Constitution of the Republic outlines the fundamental duties of the State which include, among others, to ensure the fulfilment of human rights, guarantee sustainable development of the economy and eradicate poverty and promote economic progress.

That article 1 of the Political Constitution of the Republic outlines, among other characteristics of the Ecuadorian Government, that it must be participative which means that the involvement of social organisations, and research and development institutes is desirable in the monitoring and management of public debt.

In using the attributions which are conferred upon it by article 171 of the Political Constitution of the Republic:

DECREE

Art. 1.- Creation of a commission for the comprehensive auditing of the public debt (CAIC), attached to the Ministry of Economy and Finance, headquartered in Quito, with administrative autonomy and of undetermined duration.

Art. 2.- A comprehensive audit is defined as the actions undertaken to examine and evaluate the process of loan contraction and renegotiation of the public debt, the origin and final use of funds and the execution of programmes and projects which are financed through domestic and external debt. The objective is to determine its legitimacy, legality, transparency, quality, efficiency and effectiveness, considering legal and financial aspects, economic, social and gender impacts, regional and ecological impacts and impacts on the people.

Art. 3. The principle functions of the CAIC are:

a.- To define a methodology in order to carry out an audit of each individual credit, as well as renegotiations and other forms of restructuring that have taken place; amounts charged in capital and interest; investments that have taken place as a result of the credit in question; impacts on the issues mentioned in article 2; and to apply this methodology to all agreements/contracts in force;

b.- To investigate agreements, contracts and other modalities related to the contraction of loans by the public sector in Ecuador, whether they are contracted with governments, multilateral institutions or banks and the private sector, both domestic and foreign, between 1976 and 2006; and to establish in each case;

1.The records, research and testimony of the technical, economic, financial and social viability of the project and other documents which support the application for the loan;

2.The amount of the loan and currency in which it was obtained, as well as any increases or subsequent extensions to the loan;
3.Economic, financial and commercial conditions which were agreed and applied;

4.Conditioning factors;

5.The stated purpose of the funds and the real use of funds;

6.Impact of the project;

7.People who, in the name of others, were part of the process or who subscribed to the contractual agreement;

8.Any other circumstance or information which is considered relevant.

c.- To create, with the information obtained, a database which will allow for an in depth analysis of the process of indebtedness.

d.- To establish a transparent flow of information, as much in the current research and audit process as for future processes of indebtedness. In order for this to happen, it is essential to compile all information on public and private, domestic and external debt, which comes under the responsibility of the State, and to obtain all necessary IT support systems which will assist.

Art. 4.- The CAIC is authorised to audit and make transparent all processes of indebtedness involving the institutions of the State.

Art. 5.- The CAIC will have a duration of one calendar year, which may be renewed by the Ministry of Finance and Economy if it is considered that this is necessary in order to fulfil its objectives. The Commission must submit reports each six months, during the time it is in operation.

Art. 6.- The Comisión de Auditoria Integral sobre el Crédito Público (CAIC), is composed of:

a.- Four representatives of State institutions related to debt processes and with the responsibility to monitor and defend the interests of the State:

1.The Ministry of Economy and Finance, or one person delegated to represent this body;

2.The Auditor General of the Sate, or one person delegated to represent this body;

3.The Attorney General of the State, or one person delegated to represent this body;

4.President of the Civic Commission for the Control of Corruption, or one person delegated to represent this body;

b.- Six representatives with their respective reserves from social organisations as well as Ecuadorian citizens who have worked on Ecuador’s debt;

5.Hugo Arias Palacios, principal; María Rosa Anchundia, reserve;

6.Aurora Donoso, principal; Ángel Bonilla, reserve;

7.Ricardo Ulcuango, principal; Blanca Chancosa, reserve;

8.Franklin Canelos, principal; Piedad Mancero, reserve;

9.Karina Sáenz, principal; Juan Montaño, reserve;

10.César Sacoto Guzmán, principal; Nancy García Intriago, reserve;

c.- Three representatives, with their respective reserves, from international organisations, of known expertise and linked to this issue:
11.Gail Hurley principal; Jürgen Kaiser reserve;

12. Maria Lucia Fatorelli principal; Alejandro Olmos, reserve;

13. Oscar Ugarteche, principal; Eric Toussaint, reserve.

Members of the commission, once assigned and having taken-on their roles, will elect from within the group, the president and vice-president.

The commission will be composed of working groups, with reserve members and involving other members of civil society or government institutions, which, due to their experience can contribute to the investigative process on debt.

Art. 7.- In order to fulfil its functions, the CAIC will have the following characteristics, duties and obligations:

a.- To design and take forward activities including the roles of collaborators;

b.- To issue internal regulations which are considered important for the proper functioning and achievement of the commission’s objectives;

c.- To define and propose to the Ministry of Economy and Finance, procedures for the taking place of national and international technical investigations, in accordance with the administrative norms and procedures which are established in the Constitution of the Republic of Ecuador and other relevant laws.

d.- To designate and monitor staff who will be essential in the fulfilment of the commission’s objectives.

e.- To be familiar with the reports related to the investigative and audit process as well as other studies which have been brought to the attention of the commission and technical units, via the Executive Coordination;

f.- To approve the annual budget and operational plans on the basis of plans prepared by the Executive Coordination, and to manage any corresponding finances where necessary;

g.- To request technical support from public sector institutions and when relevant the transferral of technical personnel to service the audit commission where required in order to implement concrete programmes, signalling the time that such service to the commission is needed.

i.- To organise meetings, two times a month and at other times where necessary where it is requested involving at least three members;

j.- To access information which is necessary in order to fulfil the audit’s functions;

k.- To present periodically, to the Ministry of the Economy and Finance, reports which outline advances made, with key recommendations and suggestions, as well as a final report. The report will outline key responsibilities which should be channelled to the auditor and judicial authorities so that they may begin administrative, civil or penal action, in accordance with legal norms.

l.- To propose norms and public policies aimed at strengthening the audit commission as a permanent function of the State.

Art. 8.- The attributes and duties of the President of the Commission are:
a.- To call meetings and preside over them
b.- To be the legal representative at the commission.

Art. 9. All public bodies are obliged to provide the information which is requested by the commission, under the terms and with the penalties established under the Fiscal Transparency Law.

Art. 10. The budget of the commissión will be recorded in the general budget of the state under the stewardship of the Ministry of Economy and Finance.

Dado y firmado en Quito, el 5 de julio de 2007

RAFAEL CORREA DELGADO
PRESIDENTE CONSTITUCIONAL DEL ECUADOR

RICARDO PATIÑO AROCA
MINISTRO DE ECONOMIA Y FINANZAS


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