A referendum at last – but will it be groundbreaking?
After a year of hesitation, President Guillermo Lasso has decided to go for a referendum to amend the Constitution approved in 2008 regarding three general aspects: national security, democracy and the political structure, and the environment. The questions for a referendum require the approval of the Constitutional Court before they go to the Electoral Court to finish the process. The Constitutional Court does not have a maximum term to approve or disapprove them, however, it could take around 20 days to do so, in which case, its decision would be ready by mid-October.
The timing of the referendum is not the best as approval for President Lasso is around 20% and the political environment is much more complicated than a year ago. CONAIE and labor unions have already stated their opposition to this mechanism. However, it is the only political path open to a government trapped between a hostile Assembly and belligerent social groups.
Many analysts have stated their disappointment over the absence of economic and labor questions from the government's proposal. These topics were eagerly awaited by a majority of citizens, and would have helped generate a more positive response from the people, while the government is clearly betting on security as the central moving topic.
We are all hoping that the Constitutional Court takes responsibility on the urgent need to control organized crime and to reform a political structure that precludes governability by approving the questions sent by the government instead of washing their hands of it, as they did with the intercultural education bill that raised salaries for teachers at a cost of over $700 million to the budget. Therefore, the success of the long-awaited public consultation depends on the many "ifs" that overshadow the illusion of real change in Ecuadorians' daily lives.
In other sectors, the fiscal accounts and financing look quite manageable for year 2022, but raise questions about 2023, when we cannot expect further disbursements from the IMF. Also, high US interest rates, together with a country risk that does not appear to be giving way, make private debt issuance only a distant possibility.
This is why there is great expectation about the ongoing conversations between the government and China, as China is set to be an important possible creditor in the coming years. Petroecuador and Petrochina have already reached an agreement to free 10 million barrels of crude oil tied to previous oil facilities to be sold on the spot market, securing a better price for Ecuadorian oil. However, it is also necessary to reach an agreement for better terms on the existing debt and to secure new disbursements to guarantee the financing of future budgets.
Given the ongoing problem with Synohidro and the hydroelectric plant Coca Codo Sinclair, and the plan to sign a bilateral trade agreement with China, negotiations with the Asian giant are of the utmost importance and should be undertaken with thoughtfulness and diligence. But as of today, we have no information on any visible results except those with Petrochina.
Now read on...
Register to sample a report