Corruption and Political Crisis Threaten Economic Recovery
The internal crisis in the governing Alianza Pais has ballooned into a government and national political crisis that is threatening President Lenín Moreno’s already-difficult plan to lead Ecuador to economic recovery.
The roots of the crisis are twofold. The first is ex-president Rafael Correa’s withdrawal syndrome from power, as Moreno himself has noted. This is being caused not only by Correa’s psychological characteristics, which without a doubt still hold decisive influence over his followers in the Assembly and the new administration, but also by Moreno’s relative autonomy.
In fact, Correa warned Moreno of the consequences of daring to depart from the well-defined government plan he left. Correa is now even threatening to leave Alianza Pais, and to form a new political party, to punish the “treason” of the man he’s now labeled a “mediocre” successor.
The second crisis trigger is undeniably the blunt corruption that has emerged everywhere and in different shapes, and has reached into the highest level of the government – specifically, to Vice President Jorge Glas. The Attorney General has already opened a preliminary investigation into Glas’ activities.
The outcome of the Correa-Moreno confrontation is not yet easy to predict. Current signals seem to favor Moreno, because of Alianza Pais’ limited capacity to emerge unsullied from the sewer in which it is now mired. In fact, Moreno -- who on May 24th reduced the VP’s functions, eliminating his mighty influence over the strategic areas – has now stripped Glas of his remaining official duties. Since the VP is an elected official, he can’t be fired -- but even the national flag has been removed from the vice-presidential building, and Glas has been banned from using the official airplane.
On the other hand, Alianza Pais still controls 56% of votes in the Assembly, and its 74 legislators can stop or delay any initiative from the executive to modify or pass new bills, including tax reforms, the anti-corruption bill and the communications bill. Legislators are now in recess, but their first task after reconvening will be to review 2017 budget execution.
The budget projects a deficit of $4795 million, and financing needs of nearly $13.3 billion. While it calls for 15% revenue growth over actual 2016 revenue, spending would rise by just 5.71%. Current expenditures are up by 11.72%, while capital spending is down by 4.98%. This balance – if accurate – implies that the government must raise nearly $4.3 billion more financing by yearend. The document fails to clearly back up Moreno’s promises of austerity.
Moreno also announced that he’ll implement complementary measures: sell public real estate assets and the hydroelectric facility Sopladora, and cut the salaries of 7,000 of the highest-paid public officials by 10%. A good start notwithstanding, much more is needed to recover future fiscal sustainability.
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