Reinventing Itself: Correa-ism’s Mission Impossible

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On 24 May last, Rafael Correa announced that he was presenting his last Report to the Nation. But, what about his remaining year as president of Ecuador? This statement has led to speculations, one of which is that he might step down from his office early. No fact supports this assumption. What is certain is that this year will be, by far, the worst of the decade that he will have governed. The President has two matters to attend to, which may be exacerbated by the election campaign that will take place, officially, at the end of the year but is, in fact, open.

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1. Do financial pirouettes to postpone bills: From before the earthquake on 16 April, the economy’s traffic lights were all red. But, this natural disaster, which officially caused 663 deaths, served the government to impose taxes (VAT rose from 12% to 14%, inheritance taxes, taxes on company profits…) and to ask for loans from multilateral organizations. These sums of money, which together could add up to some USD 2 billion, will also be used – it is suspected – to cover part of the government’s huge budget deficit. But, it is not enough. The government is still arranging loans, using money from the Social Security Institute, thinking of increasing the volume of electronic money, postponing suppliers’ bills, camouflaging figures and hiding them to avoid showing the magnitude of their fiscal and cash problems.

Even so, on 24 May the government was forced to announce cutbacks in the administration and sale of State assets. The first chapter included the removal of six State institutions, 12 vice ministers, liquidation of two companies and the merging of government media outlets. This saving, if it materializes, will be minimal because over the years Correa’s government admitted more than one hundred thousand officials to the State.

Among the State assets for sale are five companies and two T.V. channels. It is significant that the government wants to get rid of Sopladora, the hydroelectric beacon of the government, which was built with Chinese loans, and loans from Banco del Pacífico, the second in Ecuador’s market. The result of these announcements is uncertain because of the conditions created by the same government: taxes, legal uncertainty, country risk, work conditions, political environment… All of this militates against the announced sales. The same occurs with the T.V. channels, as the laws and courts created against the press demotivate potential independent buyers.

The fiscal year is complicated because all the events – uncertain and insufficient for the traffic lights to turn green – are political: they want to prevent Ecuador from resorting to traditional adjustment measures and a letter of intent with the IMF. The presidential challenge is to keep paying one card with another and to conceal the budget deficit that could leave even a successor from the same party without political backing.

For now, there is no social fever, but unemployment, the economic crisis in general, and the electoral campaign could foment unrest at any moment.

2. Remain in power through an intermediary: Correa avoided a referendum to be a candidate again as, according to polls, he would not have been successful. However, he has promised his voters to do what he can so that his party will remain in power. Two pre-candidates are clearly on his list: Lenin Moreno, his former vice president, and the current vice president, Jorge Glas. Both have appeared in the areas affected by the earthquake, clearly canvassing. Obviously, the governing party’s electoral campaign has already begun.

Politically, the government faces huge difficulties in trying to succeed itself. Its political discourse appears old and tired and, so far, the only way of turning things around is to run a negative campaign against the opposition. On this point, Correa-ism is like Kirchnerism (and that does not allow them to win against Macri): accusing the opposition of wanting to do away with the social benefits that they created thanks to the resources from the commodities boom.

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