What's going on in Ecuador?

Ecuadorian President Guillermo Lasso has had a rough ride so far in 2023. The country’s most important GDP input is on the decline. Violence persists. Indigenous leaders don’t like him. And, the latest news about Lasso legalizing the use of small caliber weapons for personal defense just makes him look desperate. What’s going on in Ecuador?

Headlines in local and international press relate to symptoms, or what some people like to call “proximate” causes. Let’s explore some of the root causes.

First, the economy. Exiting the pandemic, Ecuador’s GDP has struggled to expand enough to outpace inflation. Rising base prices for some food items, and notably for fuel, brought masses to the streets in June of 2022.?

As a banker who sees his business-friendly policies as a solution for the economy, Lasso has tried to inject some optimism and positive outlook into the Ecuadorian economy since exiting the COVID lock down. He’s mostly failed, except with China. Ecuador’s debt with Chinese banks was renegotiated in September 2022. The windfall was reportedly over half a billion in saved interest payments; the money will be invested back into the Ecuadorian economy, he said. But this desire to invest and improve the country and its economy was lost on the people. More importantly it was lost on their cross-armed leaders who stand in opposition to everything Lasso represents.?

Meanwhile, the country’s top GDP contributor, oil, has been faltering as a source of sovereign forex. March alone saw an 11 percent drop in five days according to local reporting. It was the second significant drop in production this year. Again, protests haven’t helped. Oil platforms are an easy target.

Mining exports are down. The mining industry, another significant source of government revenue, is part legal and professional and part messy and illegal. As the two are often conflated, the professional miners suffer. Sub sector commodities for export, such as wood, leather, plastic and rubber have all suffered. I suspect this downturn is partially due to Ecuador’s dollarized economy. Inflation is difficult to control when you don’t manage the monetary policy of your country’s currency. Also, when the dollar is strong, exports suffer. But Ecuador’s macroeconomics clearly have social problems too.

Looking back at Lasso’s election from what we know today, it’s hard to see how he got elected. The Ecuadorian voting public seems to wholeheartedly reject Lasso, his ideas, and his role as the national leader. Lasso’s embarrassing loss in a February 2023 countrywide referendum reinforces this sentiment. Now, he is simply out of political capital and his political enemies are circling. His team has tried to spin the news into calling it a setback, but the opposition disagrees. They see blood in the water. As the pendulum swings in favor of Lasso’s political detractors, pressure ratchets up on another impeachment effort. It’s likely to push him out of office before his term ends in 2025.?

Then there is the violence. This is more of a proximate cause, but its persistence makes it worth mention. A long time observer of organized crime in Latin America told me in March that Ecuador “kinda snuck up on us.” It snuck up on me too. Deep infiltration of Mexican criminal structures has led to strong working relationships between Ecuadorian transportista networks, namely the Lobos and Choneros, and their Mexican clients. An attempted alliance between these two local black market brokers is reportedly what sparked prison riots in the first place.?

The US Ambassador to Ecuador, Michael Fitzpatrick, stated publicly his concern in December 2021 by calling out narcogenerales in Ecuador. The seasoned diplomat strongly warned that Mexican criminal groups have penetrated the highest levels of the Ecuadorian military, and possibly the intelligence apparatus with their plata o plomo offers. Based on what I’ve observed, and what both Southern Pulse and InSight Crime have investigated, I can’t say that the landscape has much improved in the past 18 months. No one, including the opposition, appears to have answers.

And now private citizens can carry weapons for personal defense, pepper spray too.

Finally, CONAIE. The Confederation of Indigenous Nationalities of Ecuador (CONAIE) represents roughly one million of the county’s nearly 18 million citizens. Arguably, this is their moment. They are reasonably-well organized, deeply intertwined with national politics, and led by Leonidas Iza, who has been gunning for Lasso since the beginning of the banker’s term in office.

Here’s an interesting scenario: Lasso is impeached and steps down. Mr. Iza and CONAIE usher their national political leaders into office through the Pachakutik Plurinational Unity Movement (Pachkutik). And now the sentiment that powered the street is leading the country. It’s a familiar story in Latin America that, historically, has seen mixed results. Opposition agitation is a far distance from governing.

Here’s the friction: while the Pachkutik and other opposition political parties can agree on their desire to remove Lasso, they have a hard time agreeing on much else, according to one Southern Pulse senior investigator in Ecuador I spoke with in early April. Divisions within these parties could preclude a smooth transition from opposition to governance. But they may be deep enough to prevent an effective presidential campaign.

In 2023, it’s a challenge to remember years ago when Ecuador looked a lot like Peru does today: several presidents in just as many years. What’s brewing now in Quito is a recipe that could find Ecuador in an extended period – years – of political instability unless Lasso can quickly learn how to be less of a banker and more of a leader. Ecuador is undoubtedly a challenging country to govern. It’s even harder when the president and his team are tone deaf to the people. Lasso may have learned this lesson too late. But it’s not too late for Ecuador’s next president to learn from his predecessor’s mistakes.?

P.S. Keep an eye on Mario Fernando Ruiz Jácome. He’s what I would call a “social barometer” for the Pachkutik movement, and is one of several individuals the Southern Pulse team tracks to keep in touch with what’s happening in Ecuador.