By Ronald J. Morgan
We all know that this has been extremely difficult since 2015. Not having the liquid resources, we turned to foreign and domestic financing. Entering in a complex economic situation the decisions that were taken were not as measured as they should have been and they put a limit to the sustainability of our economy. Today we find a country with more equality, with more infrastructure, services and a growing human talent. But we have to pay for it.” President Lenin Moreno during his July 28 televised address.
After being elected as the successor to President Rafael Correa, Ecuador’s new president, Lenin Moreno, has begun a startling political turn away from his mentor and from the policies of the last decade.
During a televised address July 28, Moreno announced that the nation was facing a critical economic situation. In May, Correa had left the presidency saying the “table was set” for further economic progress but Moreno reported that overspending had been greater than first reported and that overall indebtedness had reached 49% of GDP. (Finance Minister Carlos de la Torre has since lowered the amount to 43% of GDP) 1,2,
The government, he said, was facing an annual financing shortfall of $8 billion. The deficit forced Ecuador to break with an OPEC oil production quota and begin pumping extra petroleum.
See: Lenin Moreno to Continue Ecuador’s Citizens Revolution
In the first 100 Days of the Moreno Administration the Correa legacy of a Decade Won has come under withering attack. Economic problems have resulted in the public sector role in the economy needing to be reduced. A new austerity program is being characterized as changing the Ecuadoran economic model toward one that depends on private sector investment for growth.
Moreno and Correa have sparred publicly. There have been charges of a theft of Correa e-mails and Moreno has denounced that Correa did not inform him of a hidden camera in the presidential palace. 3,3a
Added to the economic crisis is a corruption scandal involving bribes by the Brazilian Olderbrecht Corporation which has ensnared Vice President Jorge Glas. A corruption probe into money laundering and illicit enrichment in the state oil company Petroecuador is also underway. 4,5,6
Another scandal involving administration of the justice system and undo pressure of judges, threatens to bring down a number of former Correa officials. A recent release of Correa e-mails (The emails are likely stolen) has brought calls for prosecution of the former president for illegal influence over the justice system. 7
Moreno has moved to establish a more conciliatory tone for his administration by improving relations with the nation’s Indigenous movement. An indigenous organization headquarters has been returned to the organization and seven indigenous protesters have been pardoned for criminal violations. Moreno has also undertaken an extensive dialogue with the political opposition and the private sector. 8,9
In what could spell the end of a number of the more controversial policies of the Correa period, Moreno has announced a possible public consultation on a number of Correa Administration laws and policies, including a recently passed right to an indefinite reelection, a restrictive media law, and a government agency charged with naming persons to major government posts. Also expected to be on the ballot are justice sector reform and a property tax law. 10,11,12
The public consultation and a new government austerity program will set the Moreno government on a more centrist course than expected. In foreign policy, Moreno has reduced Ecuador’s support for Venezuela slightly, by criticizing the number of so-called political prisoners being held.
So far, Moreno is receiving strong support in Ecuadoran opinion polls. The opinion poll Perfiles de Opinion gave Moreno 84% approval. Many of those polled said they approved of the president’s opening of dialogue with the opposition. 13
See: Ecuador Elections: The Citizens Revolution Without Correa
In the past, Ecuador has experienced strong economic crises. And president’s who have betrayed their campaign promises have been overthrown by street protests.
A number of prominent official party members have criticized Moreno’s new policies as being too close to those proposed by the opposition. Former President Correa has accused Moreno of turning the country over to right-wing bankers and political parties interested in back room power sharing agreements.
Several important Moreno cabinet members have resigned in order to defend the original Alianza Pais platform. These include Ricardo Patiño, government counselor under Moreno and former Defense Minister under Correa, Paola Pabon, National Secretary of Political Administration, and Virgilio Hernandez, presidential counselor for Housing and Environment. 14
Correa loyalists in the Partido Alianza Pais have issued a strong criticism of Moreno’s political shift and said they will not support a public consultation which responds to the right wing agenda and the economic powers, the removal of political rights or the “destabilization of the national institutionalism”. 15,16
The pro Correa group has said if the consultation is too pro opposition they will propose a constitutional convention to consider political reform. Such a reform could allow Correa to run as a delegate.
Moves by the president which have angered Correa and his supporters include:
!. Appointment of associates of former president Abdala Bucaram (1996-1997) to government posts.
2. The turning over of a new digital money system to private bank operation. Under a previous plan the system was to be operated by the central bank. The new digital money will save on the amount of dollar currency which must be purchased each year.
3. Use of a decree to strip Vice President Jorge Glas of his ability to carry out duties as Vice President after he publicly criticized the president for turning away from the Citizens Revolution.
4. Depiction of the Correa economic policies as reckless overspending that lead to unsustainable indebtedness. Correa has maintained that the over all indebtedness is less than the Moreno government says. He also objects to the charge that corruption was widespread in the government. Moreno announced the government’s public debt at $57.788 billion while the Correa Administration figure for May, showed a consolidated debt of $26,896 billion.
5. Moreno reorganized and fired Correa backers at the government-owned media, including El Telegrafo. 17
The Moreno administration, faced with heavy debt ($8 billion dollars in public debt payments and $12.5 billion in total financing requirements) and less revenue due to low oil prices, low mineral prices and a dollar currency that makes Ecuador less competitive against its competitors, is falling in line with a regional trend toward more austerity and increased reliance on private sector investment to propel the economy forward.
Nevertheless, Moreno has vowed to push through a major housing program and maintain current social programs. Government salaries have been cut 10%, positions eliminated and new hiring restricted for a savings of $2.8 million per month.. Six coordinating ministers have been cut. Government buildings, cars, presidential jets and other property valued at $107 million will be sold immediately with more to go on the auction block later. 18
Tax incentives to return money from offshore are also expected.
The total fiscal austerity plan will be presented in two parts: The 2017 updated budget passed in September and the 2018 budget which will be passed in October. A total of $365 million to $369 million is expected to be saved through the new strategy. 19,20,21
The objective of the fiscal austerity will be to reduce the non-financial public sector deficit from the current 7.6% of GDP to 2% of GDP by 2021.
The economy is expected to grow slowly from 2017 to 2020 : 0.7% 2017, 1.6% 2018, 2.39% 2019, 2.49% 2020. Annual inflation was 0.28% in August due to the dollar economy. Unemployment was 5.78% in June according to the Ecuadoran Central Bank.
The new Moreno strategy will eliminate most large government infrastructure spending projects. The focus will be on stimulating private projects in the construction industry (The government will eliminate a new real estate tax aimed at stopping land speculation in hopes of increasing construction investment to $ 4.8 billion. Non petroleum exports will be promoted through the new European Common Market free trade agreement. Products such as bananas, shrimp, chocolate, tuna and cafe are expected to increase from $7.04 billion to $8.3 billion in 2020.
The government also expects to promote an increase in mining projects to offset dependency on petroleum.
The government plans to save on purchases of U.S. currency by implementing an electronic money system which eliminates the use of currency.
Public highways will be opened to private concessions. Other private-public partnerships will also be promoted.
Focusing of fuel subsidies will save S300 million.
Despite the austerity program, social spending will be increased 27%. The government major public spending effort will be new housing. This year the government will build 325,000 homes. Of those, 191,000 will be given away free to extremely low income families. 22
The housing program will begin with a $500 million dollar appropriation which will stimulate the construction industry and the economy in general.
Eight social programs known as Plan Para Toda La Vida will be budgeted at 878.3 million dollars.
SOURCES:
1. 28 de julio de 2017 20:26 Lenín Moreno dice que situación económica del país es crítica http://www.elcomercio.com/actualidad/leninmoreno-acciones-presupuesto-economia-ecuador.html
2. Cadena nacional del Presidente Lenín Moreno 28-07-17, You Tube https://www.youtube.com/watch?v=pXn3oxvEfMQ
3. 100 días del Gobierno de Lenin Moreno.
3a. Ecuador’s Succession Politics Get Ugly Mac Margolis https://www.bloomberg.com/view/articles/2017-07-17/ecuador-s-succession-politics-get-uglyEcuador’s Succession Politics Get Ugly 17 de julio de 2017 9:00 GMT-
4. 25 de agosto de 2017 16:30 Asamblea autorizó procesamiento penal del vicepresidente Jorge Glas http://www.elcomercio.com/actualidad/asamblea-autorizacion-enjuiciamiento-penal-jorgeglas.html
5- 9 de septiembre de 2017 00:00 Pareja Yannuzzelli acordó con la Fiscalía aportar datos sobre ilícitos http://www.elcomercio.com/actualidad/carlosparejayannuzzelli-acuerdo-fiscalia-corrupcion-petroecuador.html
6. 12 de septiembre de 2017 19:04 El CAL resolvió convocar a Gustavo Jalkh a la Asambleahttp://www.elcomercio.com/actualidad/cal-convocar-gustavojalkh-asamblea-judicatura.html4
7. Unidad Popular demanda a Rafael Correa por supuesto tráfico de influencias Martes, 12 de septiembre, 2017 – 12h5 http://www.eluniverso.com/noticias/2017/09/12/nota/6377989/unidad-popular-demanda-rafael-correa-supuesto-trafico-influencias
8. 16 de agosto de 2017 15:16 El Gobierno no concederá más indultos a líderes indígenashttp://www.elcomercio.com/actualidad/gobierno-indultos-lideres-indigenas-conaie.html
9. 10 de agosto de 2017 11:08 Comodato de la sede de la Conaie por 100 años se concretóhttp://www.elcomercio.com/actualidad/comodato-sede-conaie-mies-convenio.html
10. 30 de agosto de 2017 00:00 Consulta sobre la reforma institucional cobra fuerza
http://www.elcomercio.com/actualidad/consulta-reforma-instituciones-leninmoreno-asamblea.html#.Wab7kG10yR0.twitter
11. 1 de septiembre de 2017 00:00 13 organizaciones coinciden en la extinción del Cpccs http://www.elcomercio.com/actualidad/organizaciones-extincion-cpccs-consulta-popular.html
12. 9 de septiembre de 2017 17:07 Glas propone una Constituyente para ‘cambiar la estructura del Estador http://www.elcomercio.com/actualidad/jorgeglas-asamblea-constituyente-ecuador-leninmoreno.html
13. 21 de agosto de 2017 00:00 Moreno con alta aceptación, según sondeos de cuatro encuestadoras http://www.elcomercio.com/actualidad/presidente-leninmoreno-aceptacion-sondeos-encuestadoras.html
14. Ricardo Patiño, Paola Pabón y Virgilio Hernández abandonan el gobierno de Lenín Moreno
15. Jorge Glas critica en carta pública acciones del gobierno de Lenín Moreno http://www.eltelegrafo.com.ec/noticias/politica/2/jorge-glas-critica-en-carta-publica-acciones-del-gobierno-de-lenin-moreno
16. 2 de agosto de 2017 12:30 Expresidente Correa propone un nuevo movimiento si AP calla ante supuesto pacto con Bucaram http://www.elcomercio.com/actualidad/expresidente-correa-movimiento-alainzapais-bucaram.html#.WYNZ6_nAvSg.twitter.
17. Moreno dinamita al correísmo en los medios públicos http://4pelagatos.com/2017/07/12/moreno-dinamita-al-correismo-en-los-medios-publicos/
18. 27 de agosto de 2017 00:00 El desempeño económico será modesto los próximos cuatro años http://www.elcomercio.com/actualidad/economia-crecimiento-deficitfiscal-austeridad-leninmoreno.html#.WaNmMrulync.twitter
19. En la Asamblea Nacional hay al menos cinco prioridades en materia económica, 4 de Septiembre http://www.elcomercio.com/actualidad/asambleanacional-prioridades-economia-leyes-debate.html. Si está pensando en hacer uso del mismo, por favor, cite la fuente y haga un enlace hacia la nota original de donde usted ha tomado este contenido. ElComercio.com
20. 9 de agosto de 2017 00:00 USD 395 millones generarían las medidas de austeridad http://www.elcomercio.com/actualidad/leninmoreno-medidas-auteridad-inmobiliar-sueldos.html
21. 4 de septiembre de 2017 00:00 El Ejecutivo alista su agenda de reformas y proyectos de ley http://www.elcomercio.com/actualidad/ejecutivo-agenda-reformas-proyectosdeley-asamblea.html
22. 4 de agosto de 2017 00:00 USD 878,3 millones en subsidios al área social http://www.elcomercio.com/actualidad/ecuador-subsidios-area-social-economia.html:http://www.elcomercio.com/actualidad/ecuador-subsidios-area-social-economia.html. Si está pensando en hacer uso del mismo, por favor, cite la fuente y haga un enlace hacia la nota original de donde usted ha tomado este contenido. ElComercio.com
Roads to Resistance 