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June 30, 2021

Latam

ECUADOR: Positive start for Lasso but challenges loom large

BY Nicholas Watson

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( 3 mins)

The early part of President Guillermo Lasso’s presidency was always going to revolve around his pledge to vaccinate 9mn people in his first 100 days in office – the so-called Plan 9/100. Five weeks after his inauguration, the target still looks ambitious, though new supply agreements and imminent deliveries offer hope of an acceleration in the weeks ahead. In other areas, Lasso is moving cautiously. Fuel subsidy reductions aimed at generating much- needed fiscal savings are under discussion. However, new dynamics in the indigenous movement could complicate progress – a reminder of the political challenges that Lasso faces.

Vaccinations

As of 28 June, a little over 4mn vaccine doses have been administered (including 1.34mn people fully inoculated). Encouragingly, the daily rate of vaccinations has been rising, while the supply pipeline also looks strong: 6mn Sinovac doses are expected over July, in addition to a 2mn Pfizer donation from the US government expected imminently. This should make up for a delay in obtaining the 6mn CanSino doses agreed on earlier in June. A deal for 18mn Sputnik V doses is being finalized. Apart from the obvious health benefits of the Plan 9/100, a strong vaccine rollout should a) help economic reactivation and b) boost Lasso’s political capital as he undertakes a politically delicate course correction.

Fuel subsidies

Lasso has already opened talks with transport unions over a fuel subsidy reform. The whole issue of fuel subsidies is technically complex and prone to flounder. Most significantly, the issue is politically charged, as the 2019 unrest prompted by the decree mandating their removal makes clear. Adding a layer of complexity to the discussions is the election last weekend of Leonidas Iza as president of the Confederation of Indigenous Nationalities of Ecuador (Conaie). Iza, who was instrumental in stoking the 2019 unrest which forced the then-government into a U-turn, opposes changing fuel policy.

Indigenous opposition

The indigenous movement is important because Conaie’s political arm, Pachakutik (PK), is a major player in the National Assembly (AN) – and the party holds the legislative presidency through Guadalupe Llori. Lasso’s Creating Opportunities (CREO) party together with its allies grouped under the new National Agreement Bloc (BAN) only have 25 out of 137 seats. Nonetheless, Conaie and PK are not always aligned and leading indigenous figures are often at odds with each other. That represents both a challenge and opportunity for Lasso. Reviving the secretariat for indigenous affairs is a move in the right direction but PK is unlikely to be a reliable partner.

IMF

Notably, the indigenous movement is united against large-scale extractive projects, while Iza will oppose any privatizations (Lasso has mentioned Banco del Pacifico, highways, and some refineries as targets). However, mining and oil development plus asset monetization are set to be on the menu in discussions to tweak the existing International Monetary Fund (IMF) agreement – especially given that any tax reform is likely to be modest and will seemingly not involve changes to VAT. The government is talking about wrapping up a new IMF deal in August. Ecuador’s re-accession to the World Bank’s International Center for Settlement of Investment Disputes (ICSID) could offer an early test of Lasso’s resolve and negotiation skills if it ends up in the National Assembly; PK and the Correista Union for Hope (UNES) coalition oppose rejoining ICSID.

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