A political victory amidst the darkness
The past referendum and public consultation gave President Daniel Noboa a victory on nine out of the 11 questions proposed. This was a setback for the Correistas, who were campaigning for a “no” vote on all the questions. The winning questions all concerned crime control measures, while the two remaining ones related to returning to international arbitrage for disputes in public/private contracts and to an amendment to the labor code to allow per-hour hiring in the productive sector.
Although people voted against hourly hiring mostly due to faulty communication from the government on the advantages of this type of employment, this topic could still be discussed in the Assembly. However, the chances of such a debate are low.
The referendum took place amidst a suspension of electricity service that extended for up to eight hours daily, affecting all provinces until the end of April. An unprecedented regional drought laid bare a crisis in the sector that has been cooking for the last 12 years because of corruption and bad strategic decisions. The “cherry on top” was that Minister of Energy Andrea Arrobo proved to be a "fifth column" in the Noboa Cabinet and was fired by the President. She was replaced by Minister Roberto Luque who was the head of the Ministry of Public Works. Luque is displaying effective leadership in trying to contain and reverse the crisis—an endeavor that also requires funding, as the only temporary relief has come from the rain but not from structural improvements.
Fiscal results between January and April 2024 show that resources were scarce in this period, leaving a small overall fiscal surplus of $189 million, with arrears of around $1.5b despite tax reforms that increased collections by $1.96b between March and April this year, but only $41m between January and April y/y.
The government received $2090 million in extraordinary revenues during the above-mentioned period, but they increased total revenues just 6.6% y/y, which did not help to reduce arrears, which amount to $4.5b including those of 2023.
In this context, the Extended Fund Facility Agreement with the IMF for $4.0b comes at an opportune time. However, additional financing of around $1b from multilaterals and/or international investment is required to face the extraordinary needs imposed by crime control and the above-mentioned energy sector needs.
We would like to thank US Ambassador Patrick Fitzgerald for his unquestionable support of Ecuador’s efforts to control organized crime. We hope that the newly appointed Ambassador Arthur Brown continues the clear path of his predecessor.
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