By Matthew Carpenter-Arévalo
In April 2021, I wrote an article titled “Ecuador is F$%ked”. Over a year later, the thesis still holds. As paralyzing protests in the country’s capital enter their second week, it’s worth reflecting on how we got here.
The first thing I would point out is that the current context is very grey, and one should be suspicious of any interpretation that paints a picture in black and white.
Second, if I could summarize Ecuador’s current plight, I would do so by suggesting the country’s fiscal constraints have limited the government’s ability to attend to multiple crises across different fronts.
First, Ecuador emerged from COVID-19 as one of the worst affected countries on the planet. The then government of Lenin Moreno proved itself incapable of putting forward a credible plan to deal with the novel coronavirus. Moreno also lost credibility over his handling of week-long indigenous-led protests in 2019 that ultimately resulted in more state funds dedicated to fuel subsidies, as per the protesters' demands.
Presidential elections in 2021 resulted in the country choosing right-wing Guillermo Lasso, a lifelong banker, over the candidate representing the corruption-ridden left-wing party of former President Rafael Correa, currently in exile.
Lasso initially experienced a boom in popularity following a successful vaccination program that relied heavily on vaccine diplomacy followed by private-sector cooperation to distribute the jab. The honeymoon, however, did not last long. Not long after Ecuador reached a critical mass of the population with vaccines, the Lasso government found itself reacting to crisis upon crisis.
First and foremost on the government’s agenda was the country’s fiscal crisis.
During the Correa and Moreno governments, external debt reached all-time highs, stabilizing at approximately 57% of GDP.
When Rafael Correa took office in 2007, the foreign debt stood at $20 billion. When he left in 2017, Ecuador’s foreign debt eclipsed $40 billion, despite record-high oil prices, oil being the country’s top export and representing 1/3rd of the state budget.
Faced with a critical fiscal deficit, Guillermo Lasso’s first legislative agenda item included organizing the state’s finances. Despite campaigning on a promise to reduce taxes, Lasso raised taxes on the country’s middle and upper-class, leading to a drop in support from his base. The tax reform was enough to satisfy the IMF to continue to provide Ecuador with cheap credit.
The government’s next agenda item included a labor reform in order to address the country’s massive unemployment and underemployment, but events dictated otherwise.
A series of prison riots left more than 400 people dead. Organized by local gangs operating as proxy’s for Mexican drug syndicates, the gangs often targeted individuals who had no affiliation, many of whom were not yet convicted and were instead awaiting trial.
The prison riots shook Ecuador and made the country wake up to a stark reality: after Colombia’s landmark peace accord with its largest rebel group, the business of moving drugs from South America to North America moved from a consolidated business to a free-for-all among many dissident groups.
Ecuador, which for so many years was exempt from the worst social consequences caused by the drug trade in Colombia, is now at the center of a battle between rival drug gangs looking to control routes and ports. An increase in horrific gang-related crime alongside an uptick in events such as targeted assassinations in public places has left Ecuadorians clamoring for a government response.
The country’s corruption-plagued public health system has not recovered from COVID and continues to fail its patients. After COVID passed, the government began laying off doctors, leading to complaints of poor service. Medicines became scarce and corruption scandals revealed a network of operators, including sitting congressmen and a former President and his family, benefiting at the cost of desperate patients.
Finally, though not suffering the level of inflation seen in places like the United States, the 3%-4% inflation rate has disproportionately affected basic goods. With much of the population living below the country’s official minimum wage of $425 USD per month, small changes in prices affect the poor disproportionately.
For much of its history, Ecuador subsidized fuel at the pumps as well as home cooking gas. As a result of the 2019 Indigenous-led protests, the government adopted a series of pricing bands that allowed fuel prices to float while still receiving subsidies. Nonetheless, Ecuadorians have felt the pain at the pumps.
It’s worth pointing out that throughout the current legislative session, the country’s national assembly has done little to address Ecuador’s overlapping crises.
Fragmented along party lines and with the opposition controlling the single largest bloc in congress, numerous corruption scandals and infighting have hurt the body’s reputation.
Instead of proposing solutions to the country’s numerous problems, the national assembly has focused on blocking the Presidents’ agenda and seeking immunity for maligned collaborators of the former Correa government.
Ecuador’s social crisis came to a breaking point when, in June 2022, the country’s largest indigenous organization, CONAIE, led by the self-proclaimed communist Leonidas Iza, announced a march on Quito.
Foremost amongst the organization’s demands was the restoration of fuel subsidies.
In addition, the organization demanded an end to oil and mining operations in indigenous lands, alongside increased investment in health, education, and security, as well as job creation through public expenditure. (if you read Spanish or don’t mind automated translations, you can read my analysis of the CONAIE’s 10 demands of the government here).
Upon the announcement of the protests, things immediately got messy.
Unlike 2019, much of the transportation syndicate, including taxi and bus drivers, have (so far) chosen not to join the protests, thus reducing the protestors’ ability to choke off supply lines to Quito. Nonetheless, with road closures occurring around the country, products like domestic gas quickly became scarce.
As in the case of 2019, protesters began looting and attacking innocent bystanders, journalists, and others. In different parts of the country, skirmishes broke out between the police and the protesters, leading to a number of deaths. The flower industry, representing the country’s 3rd most important export, has been able to fulfill only 25% of its orders due to road closures.
As the protesters advanced on Quito, the government appeared to be improvising. First, the government arrested the CONAIE leader, Leonidas Iza, for blocking a highway. Many took the arrest as a provocation and most agreed it only strengthened Iza’s appeal amongst his base.
Iza was quickly released and must now report periodically to the prosecutor’s office.
The security forces then took over Quito’s Casa de la Cultura, a somewhat independent/somewhat government-run art and event platform that was used to host the indigenous protestors in 2019. The police claimed they had tips that weapons were being stored in the building, although none initially appeared.
Constant missteps and communication blunders have caused even the President’s most vocal supporters to question his ability to manage the crisis.
During the protests, Ecuador’s internal debate on Twitter became a dumpster fire.
Racism directed towards the indigenous protestors is rife and nasty.
All of the ways in which Ecuadorians divide themselves, including along race, class, and geographical linesare used to polarize and radicalize both supporters and opponents of the protesters. There has been little in the way of productive debate on public policy, including whether or not blanket fuel subsidies that reward the rich more than the poor are an effective instrument to fight poverty.
What’s more, it is clear that the protests also act as a blanket for political actors to pursue specific agendas. During the protests of 2019, non-indigenous protesters invaded the national auditor general's office in an attempt to destroy evidence required for upcoming corruption trials against President Correa’s collaborators.
In 2022, non-indigenous protesters this time invaded the attorney general’s office again in an attempt to destroy evidence. According to tweets from the state prosecutor, they were unsuccessful.
In 2019 former President Rafael Correa was amongst the first to call for his chosen successor, Lenin Moreno, to step down in the midst of the chaos. In 2022, Correa’s party initiated the congressional process to remove the President, a move unlikely to succeed. Despite governing for little more than a year, many of the government’s opponents have called for the President’s overthrow by either legal means or popular pressure.
Gasoline is the key ingredient in transforming coca leaves into coca paste. With many drug labs based on the border between Colombia and Ecuador, some analysts see the presence of Colombian drug gangs in the protests, specifically in those who would commit violence against people and property. Without fuel subsidies, the multi-billion dollar drug trade would suffer a major financial blow.
Finally, videos showing Venezuelans coaching Ecuadorian protesters on how to make effective Molotov cocktails has led others to suggest Venezuela’s regime may be involved in stoking violence.
Venezuela’s government is a key ally of former President Rafael Correa; indeed, Correa has admitted that part of his wages comes from advising the Maduro administration. With numerous high-ranking officials from the Correa administration currently living in Venezuela, often to avoid corruption charges at home, Venezuela has an interest in regime change in Ecuador.
It’s not entirely clear if the CONAIE is collaborating with any of the nefarious actors seeking to take advantage of the protests, but it is clear that the social commotion provides a convenient backdrop for different actors to pursue their interests.
So what comes next?
Anecdotally, it seems that, close to the protest's ground zero, activities have intensified, with confrontations between police forces and protesters escalating. Activists have denounced the government’s heavy hand as well as its role in promoting counter-protests, a trick reminiscent of the tactics used by former President Correa to quell dissent.
Away from ground zero, Quiteños are experiencing fewer roadblocks, with the road to the airport mostly uninhibited during daylight hours. Nonetheless, the scarcity of some goods, including home cooking gas, is increasing.
The CONAIE has demanded a number of conditions as precursors to come to the negotiating table. If their conditions aren’t met, the CONAIE has stated that the organization “won’t be held responsible for what happens next”, insinuating a threat of more violence and hardship directed at Quito’s three million inhabitants.
The government, for its part, seems to be more reactive than proactive in managing the situation. Shortly after the indigenous protesters arrived in Quito the government announced the President came down with COVID-19, complicating matters further.
Even if the two sides do come to the negotiating table, it’s hard to see where each side cedes ground to the other. If the government were to agree to all of the CONAIE’s demands, it’d immediately have to find a new fiscal sponsor to meet its domestic and foreign obligations.
With Russia embroiled in its ill-conceived war in Ukraine, the only conceivable lender of last resort may be China, and China’s primary interest in Ecuador involves access to Ecuadorian raw materials, a fact that clashes with the CONAIE’s opposition to increased oil and mining activities.
An alternative to the IMF or China would be extreme austerity or major tax increases, both of which would lead to increased unemployment.
There is still a chance the government could fall, either because the President agrees to dissolve congress and convoke new elections, or because social pressure becomes extreme enough that the country demands he step down.
Ecuadorian Presidents tend not to finish their terms if their approval rating dips below 25%, and President Lasso is dangerously close.
Having said that in the 2019 Protests the central government moved operations to the mostly peaceful Guayaquil, thus providing an alternative in the event protestors overrun the gates at the Carondelet Presidential Palace.
Despite the signs of economic recovery after COVID-19, the country’s social debt represented a powder keg that eventually exploded.
What’s more, Ecuador’s institutions are unable to respond to the country’s needs, in large part due to corruption. Corruption not only siphons resources; it determines agendas and sets institutional priorities.
On look at the country’s national assembly, for example, demonstrates how the institution is entirely focused on matters outside the urgent needs of Ecuadorians. Luckily for them, they’ve escaped the focus of the protestors.
Now, with the primary demand of the protestors being fuel subsidies, from a public policy perspective, it’s unclear how a successful protest will ultimately lead to a more equitable country. If anything, the massive economic cost of the protests will likely lead to more migration, less investment, less employment, and more social division.
In short, Ecuador is still F&$ked.
On June 30th, 2022, the Ecuadorian government and the CONAIE reached an agreement to end the protests. The agreement included a reduction in the cost of fuel and a commitment to reduce mining in indigenous territories.