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lenin moreno
People Reject Neoliberalism's Return, But Challenges Remain in Ecuador
Despite defeat of candidate backed by nation's oligarchy, newly-elected Lenin Moreno has much work to secure and further legacy of Rafael Correa
Apr 05, 2017
Ecuador has just staged another successful democratic election--as even the Wall Street Journal now reports, based on international election observers from the Organization of American States (OAS) that have no love for the Ecuadorian party that won the election. Most of the foreign reportage on the election focuses on Julian Assange, who has taken refuge in Ecuador's embassy in London. But what are the real problems that Lenin Moreno and the people of Ecuador will face when he becomes President?
Ecuador's oligarchs have run the country for most of its existence, crippling economic development and producing high rates of unemployment, poverty, and inequality. The neo-liberal policies that became synonymous with the "Washington Consensus" led to extreme financial deregulation and privatization that produced the typical wave of "control fraud." The nation's leading bankers led that epidemic of fraud by seemingly legitimate banks. The fraud epidemic led to one of the many banking crises of the late 1990s that swept through Latin America. The banking crisis drove a serious recession, led to exceptional levels of emigration from Ecuador, produced extreme political instability in Ecuador--and set the stage for the election of the reformist Rafael Correa. Correa and his supporters created the Alianza Pais (AP). Correa became president in 2007. The AP has a majority holds a majority of the seats in Ecuador's unicameral legislature.
The election of Correa and AP supporters, and the discrediting of the oligarchs based on their economic and political malfeasance and thefts, created the political space for dramatic changes in Ecuador's public policies that have broad support among the people of Ecuador. Hundreds of thousands of Ecuadorians have "voted with their feet" to return from emigration to work and live in Ecuador. Poverty, unemployment, and inequality all fell under President Correa.
Any president of Ecuador faces six major challenges. The most basic is its poorly diversified economy. It is heavily dependent on oil sales to produce dollars--and the price of oil has collapsed.
This second problem is that Ecuador's oligarchs "dollarized" the economy. Ecuador gave up its sovereign currency and made the U.S. dollar its official currency. Argentina did something equivalent, pegging the exchange rate of its currency to the dollar at 1:1. Ecuador dollarized because the public did not trust its government to limit inflation. Dollarization was so politically powerful that the AP has not dared to readopt a sovereign currency. Dollarization degrades or destroys Ecuador's ability to use appropriate fiscal stimulus against a recession, increases Ecuador's cost of borrowing, and poses a critical risk to Ecuador's ability to export if the U.S. dollar appreciates compared to the currencies in Ecuador's trading partners. Argentina had to break its dollar peg when the U.S. dollar appreciated and savaged Argentina's ability to export. President Moreno is unlikely to want to take on this controversial issue near the beginning of his term, but I urge him to restore Ecuador's sovereign currency.
The third problem is that Ecuador, despite the AP's doubling of expenditures on education, health, and infrastructure, remains a nation with significant poverty and educational systems that are not world class. Ecuador has made enormous progress on these areas over the ten years of Correa's term in office, but it started from an impoverished base. When we teach public finance, we tell students that the budget constitutes the government's real policies. President Moreno can show in his budget his dedication to the virtuous trinity of successful development--health, education, and infrastructure. I urge him to wean Ecuador away from its public subsidies to consumers to purchase energy such as cheap gasoline. The subsidy creates perverse incentives that slow growth and create serious budgetary constraints.
The fourth problem is political and social divisions. During much of his term in office, Correa was exceptionally popular, but ten years in office inevitably lead to opposition. The AP lost mayoral elections in some of Ecuador's largest cities. The AP respected the democratic process and there was a peaceful transition of power in these cities. There are regional divisions, primarily between the peoples of the Andean highlands and the coast. There are divisions based on race and ethnicity.
There are also gaping divisions based on extreme wealth. The oligarchs have not gone away and they dominate industry and banking. The oligarchs view tax evasion with pride. Their (narrowly) defeated candidate in the presidential election, Guillermo Lasso, is a bank leader notorious for helping the oligarch's evade taxation by sending their vast wealth to tax havens. Lasso ran on a campaign of ending the AP's increased spending on education, health, and infrastructure--even after Ecuador's brutal earthquake caused serious harm to that infrastructure. President Moreno can demonstrate that he intends to be a leader devoted to the welfare of every resident of Ecuador.
The AP, unlike the Trump administration, has many government ministers that are scrupulously honest and highly skilled technocrats dedicated to improving the welfare of the average Ecuadorian. President Moreno has a majority in the legislature. President Moreno will soon signal with his cabinet appointments whether he supports these true public servants.
Fifth, Ecuador has serious problems with corruption, particularly in the government-owned oil company and probably in major construction. Correa appointed a strong reformer to run the government procurement authority to root out corruption. The procurement authority, however, does not have jurisdiction over the oil industry and defense spending. President Moreno could expand its mandate and encourage public prosecutors and Ecuador's stellar antitrust authority to work to prosecute vigorously fraud, corruption, and cartels.
Sixth, Ecuador is far too bureaucratic. Correa made a serious effort to reduce substantially the number of hurdles business people have to get over to start a new business, but the oligarchs do not want to encourage competition. Encouraging the lawful entry of small businesses in Ecuador should be one of President Moreno's top priorities.
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Likely Leftist Victory in Ecuador Election Rejects "Oligarch's Candidate"
Julian Assange also expected to stay in Ecuadorian embassy in London after tense election ends with leftist candidate Lenín Moreno as president
Apr 03, 2017
A nail-biting election in Ecuador appeared to end Sunday with leftist candidate Lenin Moreno winning the presidency over conservative Guillermo Lasso.
The National Electoral Council declared Moreno the winner by 51 percent, just minutes after another organization had said the race was a technical tie with both candidates being within 0.6 percentage points of each other.
Lasso demanded a recount as his supporters protested.
Moreno, leader of the ruling party, is seen as the political successor to outgoing President Rafael Correa. Moreno also previously served as Correa's vice president.
William K. Black, lawyer and academic, wrote an op-ed for Common Dreams last week that described Lasso as "a leader in aiding Ecuador's oligarchs to evade taxation through offshore tax havens" whose "platform is the standard right-wing recipe that caused Ecuador's recurrent economic, social, and political crises."
Indeed, Moreno rose in the polls in the week leading up the vote, after his party criticized Lasso for profiting from the nation's 1999 banking crisis.
The election was seen as a temperature check of Latin America's recent rightward shift. Brazil's former President Dilma Rousseff was ousted in 2016 in what many called a coup, while Argentina elected neoliberal businessman Mauricio Macri the year before. Peru also elected a right-leaning government in 2016.
Moreno's victory also means that WikiLeaks founder Julian Assange will likely be able to remain at the Ecuadorian embassy in London, where Correa granted him asylum in 2012 after he released tens of thousands of secret U.S. diplomatic cables and documents.
Lasso had vowed that if elected, he would "cordially invite" Assange to vacate the embassy within 30 days.
Assange responded to the result with a pointed remark at Lasso.
"I cordially invite Lasso to leave Ecuador within 30 days (with or without his tax haven millions)," Assange tweeted Monday.
Assange has lived in the Ecuadorian embassy for the past five years, fearing extradition to Sweden over sexual assault allegations. He has said he believes extradition would end with him being sent to the U.S., where he is wanted for publishing the diplomatic cables.
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Ecuador's Tax Evading Oligarchs Try to Reconquer the Nation
Ecuador chooses Sunday between a socialist or a right-wing banker in tight presidential vote
Apr 02, 2017
The democratic elections of President Rafael Correa in Ecuador have enraged the oligarchs, particularly the wealthiest bankers who ruled and predated on the nation for so many decades. That predation led to a massive banking crisis led by fraudulent elite bankers. Ecuadorians fled the nation in record numbers. Ecuador suffered the highest percentage of emigration in Latin America. Political crises became the norm, with a series of presidents forced to resign within months. Correa and his reform party, Alianza PAIS (AP), changed all this.
Correa has served his full elected terms of office largely because he met his campaign promises to more than double expenditures on education, health, and infrastructure that have transformed Ecuador and substantially reduced poverty, unemployment, and inequality. Ecuador's democracy is real. When rival parties won elections in a number of Ecuador's largest cities, there was a normal, peaceful transition of power to those parties. Ecuador has several major political parties and employs a common democratic means of determining whether the first round of the election results produce such a dominant winner that no run-off election is required. Despite the fact that Mr. Moreno, the AP candidate for the presidency, came within a razor-thin margin of reaching that decisive plurality in the first round, the government required a run-off election in accordance with the law.
The AP's reforms were so successful that immigration to Ecuador exceeded emigration from Ecuador. The AP reformed banking to reduce the frauds by elite bankers that drove Ecuador's financial crisis. The oligarchs and bankers have been weakening the Ecuadorian economy by moving their wealth to offshore tax havens. The AP has adopted legislation to limit such tax evasion.
The oligarch's candidate in the run-off election is Mr. Lasso. He is a wealthy banker who runs a bank in Panama that is a leader in aiding Ecuador's oligarchs to evade taxation through offshore tax havens. Lasso's platform is the standard right-wing recipe that caused Ecuador's recurrent economic, social, and political crises. Lasso proposes tax cuts for the wealthy, large cuts to education, health, and infrastructure, and financial deregulation.
Lasso complains of Ecuador's (small) budget deficit, but he is a leading cause of that deficit. He is under investigation by Ecuador's equivalent of the IRS for aiding tax evasion. In addition to Lasso's Panamanian bank that leads his efforts to help the wealthy evade taxes, investigative reporters have found that Lasso runs a maze of 49 companies to aid tax evasion.
Most Americans are appalled that President Trump has refused to disclose his tax returns. Lasso has deliberately weakened Ecuador's economy by profiting from helping thousands of Ecuador's wealthiest citizens evade taxation. In a recent plebiscite, Ecuadorians adopted a law that America should adopt as a model. It bans public officials from having assets or capital in tax havens. They have one year to bring home their money from the tax havens or leave office. Lasso and his supportive band of tax-evading oligarchs are desperate to retake control of Ecuador so that they can destroy this reform and continue to evade taxation.
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