Abandoning the Ostracism?
On November 11, Juan Carlos Cassinelli, Minister of Trade finally signed the accession of Ecuador to the free trade agreement with the European Union. Falling oil prices and the appreciation of the dollar forced Correa to put aside his bias against trade agreements in order to avoid some $0.5b in losses for the export sector by the end of the year when trade preferences are to end. Also, according to Cassinelli some 41,000 jobs will be protected by preserving the export market with our main non-oil sector trade partner.
An unprecedented financing of $11 b between January and September of 2016 together with rapid growth of debt in the last three years, has pushed public debt to 38.7% of GDP even without considering short-term debt and oil facilities the government refuses to consider as part of the total.
In view of the unavoidable violation of the legal boundary of 40% of GDP, President Correa signed an official decree in recent years by which this ceiling applies to “consolidated debt”. This virtually eliminates the debt with the Ecuadorian Institute of Social Security and even allows to include institutions from the financial public sector under this concept of consolidation.
The government owes IESS –the largest domestic creditor --some $8b from the total of $12.4 b of domestic debt. A fall in IESS revenues due to the loss of affiliates and to transfers of moneys from the pension system to the health system, are probably behind the very short-term roll-overs the government has been forced to carry out in these months. Liquidity pressures have also been covered with loans from the International Reserves of the Central Bank that between the end of 2014 and September 2016 increased from $900 million to $4208 million.
Presidential candidates have registered their candidacies setting the arena for the presidential elections of February 19, 2017. Despite the recent noisy scandal of corruption around Vice President Jorge Glass, he will accompany Lenin Moreno representing the official party. Guillermo Lasso (CREO), linked to Banco de Guayaquil will be accompanied by Andres Paez current legislator with long experience in politics. Paco Moncayo from Izquierda Democratica will run with Montserrat Bustamante a 40-year old political outsider linked to education. Cynthia Viteri (Social Christian Party) presented Mauricio Pozo as his second on board. Pozzo is a well-known and respected economic analyst who was Minister of Economy and Finance for Lucio Gutierrez back in 2003. Abdala Bucaram Jr registered his candidacy with Ramiro Aguilar a former independent legislator as his Vice President.
The new government will face the difficult task of keeping the Ecuadorian economy above waters, but will also face challenges on foreign policy. After the recent election of Donald Trump, a major objective should be to recover the lost space and improve the relationship with the US on behalf of the close to 700,000 Ecuadorians living in the US.
Now read on...
Register to sample a report