Moreno's hardships in the way of the IMF Agreement?

ECUADOR - Report 16 Aug 2019 by Magdalena Barreiro

President Moreno has stated he is not seeking re-election. However, it seems he wants to finish his office term as a popular president, or at least not be forced out of office.

He recently had to face the protests of thousands of teachers who retired under the promise of former President Correa of receiving a bonus of around $50,000 each ‒ one of the many unfulfilled promises from the past regime that this government has had to finance. The total liability amounted to $1.2b, of which $700m was paid last year, and the pending $500m will be paid this year through bonds that BIESS will purchase so the teachers can realize their bonus. This problem resulted in three motions of impeachment for Minister Richard Martinez that were withdrawn once the government reached an agreement with the retirees.

In addition, Minister of Health Veronica Espinosa was impeached and sanctioned this week, and there are two motions of impeachment for Minister of the Interior Maria Paula Romo waiting the green light from the Administrative Council of the Assembly.

Other unpopular decisions are under way. The tax reform should include a VAT rise of around 3% and a labor reform, both under the IMF agreement. The latter has general acceptance among all groups, including some unions, and its approval by the Assembly might not be a problem. The tax increase, however, has no one’s support. It has been criticized by the productive sector, legislators who have threatened to oppose it, economic analysts who deem it unsuitable amidst an economic recession, and President Moreno himself, who according to rumors, is against it. Thus, at this time the possibility of seeing this reform passed through the authority of the law has a much lower probability than three months ago, and it is possible this tax increase will not even be included in the reform proposal.

Approval of the completion of goals for Q2 will face no big problems during the ongoing revision of the IMF, although the international reserves target should be reviewed again. Veronica Artola stated that the official year-end estimate is approximately $4.0b, or about $700 below the already revised goal.

On the other hand, Minister Martinez must present an acceptable alternative to increase tax collections by 1.5% of GDP by 2021 to guarantee that the program with the IMF continues beyond December this year.

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