Gloomy and Difficult
A group of retired officers attended a February 26th military ceremony clad entirely in black, then stalked off across the red carpet when President Rafael Correa began to speak. Correa called them “little naughties,” but his nervousness was evident, when he entered the ceremony surrounded by heavy security. Tensions between the president and the military started over a $41 million dispute over property formerly owned by the Armed Forces, and bought by the government -- and increased to the point that Defense Minister Fernando Cordero resigned. The president replaced him with ex-Minister of Foreign Affairs Ricardo Patiño.
In the view of many analysts and of some high-ranking retired officers, Correa is not only not interested in improving his relationship with the military, but “with his incessant provocations to the Armed Forces”is seeking to increase the tension, staging a situation in which the military could seem poised to overtake executive power -- to generate support from the public, and to deflect attention from the evident economic crisis.
Finance Minister Fausto Herrera announced new 2016 budget expenditure cuts of around $800 million, in response to new lows in oil prices that forced a lowering of the oil reference price, from $35 billion to $25 billion. Also, new official estimates place financing needs at $8,500 million --$1,900 million above the initial estimate, of which $4,000 million has been secured, and another $3,000 million is under negotiation -- leaving a financial gap of $1.5 billion.
Economic contraction is helping decrease the external sector imbalance. While exports fell 27.65% y/y in January 2016, imports dropped 38.75%, reducing the trade deficit from $487 million to $121 million.
Private credit is following the downward trend that has accelerated since November 2015. Commercial credit has fallen by $1,357 million and consumption loans by $878 million, while housing credit has increased by $9 million, and microcredit by $13.7 million, between February 2015 and February 2016. On the other hand, deposits show a slight recovery, increasing 6.11% m/m between January and February 2016.
The political scenario continues to be uncertain, without agreements among opposition leaders, or a clear candidate for the ruling party. But a proposal for a referendum to allow Correa to be reelected in next year was approved by the electoral court, opening another door for 2017 –a door he might choose to open since 57% of Ecuadorians would vote for him in 2017 as a recent CEDATOS poll shows.
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