Violent protests cost Ecuador millions, with likely knock-on effect for ports and business.
Country-wide roadblocks
The protest began on June 13 when the Confederation of Indigenous Nationalities of Ecuador (CONAIE), led by Leonidas Iza Salazar, convened indigenous groups and other social organizations, such as the Workers United Front (FUT), to declare a national strike aimed at blocking roads around the country.
At these roadblocks, trucks with food and other supplies, ambulances, and vehicles transporting medicines and oxygen were prevented from proceeding. The situation in many cities became critical, and many areas in Ecuador suffered from shortages of food, gas, fuel, and other basic supplies.
Demands on cost of living and rights
The protests aimed at strong-arming Ecuador’s President, Guillermo Lasso Mendoza, into addressing 10 demands. These included: (i) freezing diesel prices at USD 1.50 and Extra and Ecopaís fuels at USD 2.10; (ii) debt remission for small and medium producers in rural areas; (iii) fair pricing of agricultural products and improved agricultural subsidies; and (iv) employment, labor rights and unionization for the working class. As part of this, the protestors organized a large demonstration in the capital, Quito.
As well as leading to social unrest, including violent protests, the strike has had a significant economic impact on the country has suffered. According to Miguel Angel González, president of Ecuador’s Business Committee, the 18 days of the strike resulted in losses estimated at USD 772 million.
Enormous economic damage
One of the sectors affected is hydrocarbons, with protestors taking over key oil wells in Ecuador’s Amazon region. According to the Ministry of Energy and Mines, this cost Ecuador’s government almost USD 72.6 million in the first 12 days of the strike. Private companies, too, have been impacted by the protest. According to a survey by the Chamber of Industry and Production, 91.8% of companies lost sales, 73.5% claimed the strike had paralyzed their operations, and 67.3% registered a fall in product demand. The most affected sector was manufacturing, sales of dairy-related products falling by 50% and animal protein-related by 85%.
Foreign trade, too, has been harmed. According to the Ecuadorian Federation of Exporters (Fedexport), 68.2% of exports were affected, amounting to a combined loss of USD 64 million. More than 150,000 jobs in the export sector are said to be at risk due to the reduction in export activities.
Further, the protest caused millions of USD in damages to private and public property. The protestors attacked the Prosecutor General’s Office and the Comptroller’s Office in Quito. Police stations and army and police vehicles were destroyed, and police reported that 162 people were taken into custody. Some 238 policemen and 106 soldiers were injured, with one soldier dying, and 335 protestors were injured and six died.
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Political turmoil then agreement
A reduction in the price of diesel and gasoline failed to lead to the hoped-for negotiations, and the government abandoned attempts at dialogue after protestors attacked a fuel convoy on June 28, causing the death of a soldier.
On June 30, following a failed attempt by the opposition to vote out the president, and the subsequent declaration by the president of emergency powers and a curfew in four states, the Ecuadorian government and the indigenous movement finally reached an agreement. The protesters agreed to open the roads after the government (i) lifted the curfew; (ii) agreed to cut the price of fuel by 15 cents; (iii) grant a 50% subsidy on the price of urea; and (iv) pledged it would not issue any more permits for mining operations in wildlife reserves, hydric reloading areas, and indigenous territories.
The government further agreed to (i) write off?peasant families’ overdue debts up to USD 3,000; (ii) reduce the interest rate on current loans; (iii) increase the monthly assistance for vulnerable families from USD 50 to USD 55; (iv) double the budget for intercultural education; and (v), declare a state of emergency in the country’s health system. ?
The “agreement for the peace” was signed at the headquarters of the Equatorian Episcopal Conference, with other demands by the protestors will be discussed over the coming 90 days.
Still a difficult few months ahead.
The news is a relief for Ecuador, its population, and Ecuador’s commerce. Hopefully, the agreement will mark the first step in Ecuador’s recovery from economic losses. That said, many people argue that while the protests have been settled, the aftershocks will continue to be felt for the next three to six months.
In particular, companies that export to Ecuador can expect handling delays as the country’s ports struggle to clear a backlog of imports. In addition, many of their customers could face cash flow problems caused by the economic impact of the strike.
Written by: Ana Paola Rodriguez and edited by Daniela Palacios
*This article is informative and is not to be used as legal, economic, or commercial advice.