IMF and Lasso agree on recipe for Ecuador | The neoliberal policy of the ex-banker

The IMF he has just given new support to Ecuador’s neoliberal policy. The government of Guillermo Lasso announced a principle of agreement with the organization for the arrival of $ 1.5 billion until the end of the year. A sum more than necessary for a country in economic crisis which erupted two years ago, under the government of the former president Lenin Moreno. Lasso talks about rebuilding the Ecuadorian economy using the famous neoliberal scenario: opening up the economy, reducing public spending and tax reform. To carry it out successfully, he will have to negotiate with a very fragmented Assembly, where his party has barely ten seats. If they do not support him, he has already said he will appeal to the popular consultation. And he knows he has the upper hand: he led a successful vaccination campaign against the coronavirus.

Vaccine mattress

The money that will come from the IMF is part of a previous agreement that the agency signed with Moreno in 2020 to $ 6.5 billion. The arrival of new disbursements depended on the achievement of the objectives (and demands) formulated by the Fund, which we know very well in Argentina. In this sense, Lasso was clear during an interview with the EFE agency. “They asked us to increase tax collection by 0.7% of GDP from 2022», Declared the president. And this despite the fact that the country shows an improvement in its figures, after having gradually lifted the restrictions due to the pandemic: the IMF forecasts economic growth of 2.7% in 2021 and 3.5% in 2022 .

The panorama posed by the Fund and the government is based on obtaining income from foreign investments. In this sense, Lasso’s cabinet and the related press cited the vaccination campaign as a successful example of a mix between public and private. The promise of the candidate at the time had been “nine million vaccines in the first 100 days”. The American laboratory Pfizer stood out as a star to achieve this goal. However, reality forced to recalculate. The government knocked on the door of China and thus obtained the arrival of millions of Sinovac vaccines.

Lasso took office on May 24. To date, only 1,400,000 people had been vaccinated with at least one dose. Therefore, and especially since June of this year, the vaccination campaign has continued to grow. The government has achieved its objective. As of September 11, 12 million Sinovac vaccines had been applied, nearly six million Pfizer and two million Astrazenca. Coordination with the private sector included vaccination of employees, their families and even suppliers, within companies; give discounts on products in exchange for vaccines; and free transfers to health centers; to name just a few examples.

Deregulation and financial openness

But meeting the IMF’s goals and the plan with which Lasso came to power also has a less bright side. The president spoke of the need for tax reform and reducing public spending. We know very little about the first. The slogan with which they came out to give impetus to this initiative is a tax on the richest sectors of the country. “May the cost of the pandemic fall on those of us who have it most in EcuadorThe president said. The tax will be concentrated on the richest four percent of the population. The rest will not be impacted in terms of taxes, neither by the increase in rates, nor by the creation of new ones. taxes, ”Lasso argued. The other details remain unknown.

The other component, the reduction of expenditure, has as its flag the promotion of private investment. For this, the former banker proposed a very ambitious program of deregulation and trade opening. The first step was taken on June 21, when the Ecuadorian Ambassador to the United States signed the return to school at the International Center for Settlement of Investment Disputes (ICSID) from the World Bank. For the economic sociologist Andres Chiriboga It is a clear decline, since the country had succeeded in leaving this space in 2009. “Under this type of regulatory authority, the State is always the loser. At best, you don’t pay severance pay, but you never win. What is sought with this is to tilt the field in favor of the private sector, ”said the academic.

Entry into ICSID was the prelude to the President’s other great goal: join the Pacific Alliance, a regional block that includes Chile, Peru, Colombia and Mexico. For Pablo Iturralde, director of the Center for Economic and Social Rights (CDES), a study group linked to correísmo, these measures benefit the financial sector. “A branch is promoted linked to foreign exchange income from agro-exports, the importing and petroleum sectors, all linked to the foreign market. The peasants, who sell inside, are economically suffocated, ”said the academic. In this sense, Chiriboga pointed out that Lasso is winning over an important enemy. “During the campaign, he had said he was going to grant credits to agriculture, which he did not fulfill. The government is not taking the route of injecting resources into the population, ”said the economic sociologist.

A limit to the Assembly

One of Ecuador’s main sources of resources is the export of petroleum. The pandemic has represented a sharp decline in this regard. In 2019, exports reached $ 8,680 million, while in 2020 they fell to $ 5,250 million. The figures showed an increase over the period January / May 2021: $ 3.45 billion. Along with this recomposition, Lasso has promised to double its production over the next four years, relying on alliances with private actors. For Chiriboga, the plan goes through privatize the state-owned company Petroecuador. “Through a decree on the release of capital in public enterprises, it is preparing the ground for its privatization,” said the academic.

The main obstacle that Lasso must take forward with more measures of this type is in the Assembly. In this year’s first round of presidential elections, which defined legislative seats, his force won just 19.7 percent of the vote, securing 12 members of the assembly. The forces that stood out most were the Correísmo, which, under the UNES Front, won 49 seats, and the indigenous Pachakutik party, with 27. This context forces the former banker to show his face as a negotiator. However, he has already argued that if the legislator does not approve his plans, he will go another way. “If the members of the assembly are not sensitive to the reality of the country, we will have to go to a popular consultation so that the people decide their future at the polls.“said the president.

The plan is already underway. Government representatives suggest that one of the questions to the population be whether or not dollarization should be included in the Constitution from the country. For Iturralde, this question will function as a hook to put more controversial ones, behind an all-encompassing “yes”. “The only two consensuses that exist in Ecuador are support for the tricolor (the football team) and dollarization. They will ask for a truism in order to be able to obtain the approval throughout the consultation, ”said the director of the CDES. The truth is, the tailwind of a successful vaccination plan can serve as a boost. The political and economic support of the IMF too. It remains to be seen how a very divided opposition will react, another element that can work in Lasso’s favor.