The Legacy From the People’s Revolution
With about 90% of votes counted, the official candidate Lenin Moreno received 39.12% against 28.31% for Guillermo Lasso. Therefore, Moreno already has more than 10% over Lasso´s votes – one of the requisites to win the election in just one round, and is 0.89% away from the second condition: at least 40% of the valid vote. The Electoral Council (CNE) just announced that Ecuadorians must wait until Wednesday to know the official final results.
Either Moreno or Lasso will face a complicated political and economic situation. On the political side, over 60% of the people do not want this government to continue. This fact, along with a more fragmented legislature, which will prevent either Alianza Pais or the opposition from obtaining an absolute majority such as the official party enjoyed over the past 10 years, lays the ground for social unrest for both candidates.
On the economic side, a responsible government will have to make adjustments that will be socially painful and might deepen the economic contraction at least at first, since GDP performance is tightly linked to public investment – one of the legacies of the current government.
The fiscal deficit of the General Budget reached around 7% of GDP in 2016. Debt to GDP is over 40% (without the creative registration adopted by the government recently), and external debt alone has increased 9.5% of GDP between 2014 and 2016. Total debt service amounts to $2538 million in 2017 – almost the same as total expenditure on health, and it will rise to $3046 million in 2020.
Even though oil prices are increasing, and by December 2016 they reached $44.23/b, the annual average price was just $34.96, or $6.9/b below that of 2015. This level of prices has not only left the central government with no revenues, but has also produced a deficit of around $600 million after paying for derivatives and oil services.
Finally, 2016 finished with a positive overall balance in the balance of trade. But this obeyed to import controls established over the past two years, most of which will have to be dismantled during this year and the next. Also, the deficit in the balance of services is financed mostly by remittances from Ecuadorians abroad, of which the largest number live in the United States and are also facing an uncertain future.
All of the above requires a high degree of political maturity and a very strong new economic team. While the results of the elections are being finalized, a majority of Ecuadorians are hoping for the best but also fearing the worst.
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