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Private Financial Info at Risk If Ecuador’s Government Takes Over Credit Rating Agencies
Posted By James M. Roberts On October 16, 2012 @ 1:06 pm In American Leadership | No Comments
Earlier this month, Ecuador’s National Assembly passed legislation  that would nationalize the country’s private credit reporting industry.
President Rafael Correa has to decide by November 4 whether or not to sign it. The legislation would permit only the government’s central public data agency to provide credit reports and scores.
Private credit bureaus (domestic and foreign) would be nationalized and put out of business as private entities. The new law would also force them to hand over to the government—without compensation—their data about the credit histories of private citizens and companies.
This law directly violates Ecuador’s written commitment under the World Trade Organization’s (WTO) General Agreement on Trade in Services (GATS) , in which the country promised never to impose market restrictions or national limits on the provision of credit reference services.
Ecuador’s Association of Private Banks  has announced its opposition to the measure, noting that it would give monopoly power over citizens’ sensitive, private financial information to the government and potentially transform it into what one Ecuadorian journalist calls “Big Brother ” (Gran Hermano).
As the World Bank’s “Doing Business ” survey and other reports note, public credit registries and private credit bureaus  expand access to credit and contribute to economic growth and poverty reduction.  It is the poor who lose when restrictions are placed on access to finance (e.g., micro lending and micro borrowing). As Heritage has reported, Ecuador’s government has taken numerous other steps recently that weaken the rule of law .
Despite the worsening market conditions , President Correa has an opportunity to propose changes to the law to keep private credit bureaus in business and send a signal at home and abroad that he sees a future for Ecuador ’s market economy. Let’s hope he does.
Article printed from The Foundry: Conservative Policy News Blog from The Heritage Foundation: http://blog.heritage.org
URL to article: http://blog.heritage.org/2012/10/16/private-financial-info-at-risk-if-ecuadors-government-takes-over-credit-rating-agencies/
URLs in this post:
 Image: http://blog.heritage.org/wp-content/uploads/Rafael-Correa121016.jpg
 Ecuador’s National Assembly passed legislation: http://www.eluniverso.com/2012/10/09/1/1356/ley-buros-espera-ejecutivo.html
 General Agreement on Trade in Services (GATS): http://www.wto.org/english/tratop_e/serv_e/gatsintr_e.htm
 Association of Private Banks: http://www.ecuadorinmediato.com/index.php?module=Noticias&func=news_user_view&id=182850&umt=banca_privada_aduce_que_asamblea_cometif3_un_error_en_ley_que_elimina_central_de_riesgos
 one Ecuadorian journalist calls “Big Brother: http://www.larepublica.ec/blog/opinion/2012/10/12/gran-hermano/feed
 Doing Business: http://www.doingbusiness.org/reports/global-reports/doing-business-2012
 public credit registries and private credit bureaus: http://www.doingbusiness.org/methodology/getting-credit
 contribute to economic growth and poverty reduction.: http://siteresources.worldbank.org/EXTGLOBALFINREPORT/Resources/8816096-1346865433023/8827078-1346865457422/GDF_2013_Report.pdf
 weaken the rule of law: http://www.heritage.org/research/reports/2012/08/ecuador-should-forfeit-us-trade-preferences?query=Ecuador+Should+Forfeit+U.S.+Trade+Preferences
 worsening market conditions: http://www.businessweek.com/news/2012-10-09/occidental-dispute-marks-ecuador-colombia-oil-divergence-energy
 Ecuador: http://www.heritage.org/index/country/ecuador
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