Playing Political Games, As the Economy Burns
With his popularity and credibility falling to 35%, from 60% last year, and government corruption scandals erupting everywhere, President Rafael Correa is reverting to an old political strategy: targeting new enemies, in a strategy to regain lost support.
The first target is Catherine Holligan, a board member of the American Institute for Democracy, accused of being a CIA spy. In fact, Correa indignantly claimed that the CIA is the main source of discredit of his government, as portrayed in a ludicrously fabricated video broadcast by Telesur in Venezuela.
The president is also taking on Ecuadorians who hold ownership or investments in offshore and “fiscal paradise” locations, and is seeking to accompany the next presidential elections with a referendum question on whether to ban those holding such investments from running for public office. Such a referendum not only would affect the democratic rights of some candidates, but would also jeopardize the transparency and objectivity of the presidential race.
Such a proposal would be ironic, too, since several members of Correa’s government have already been associated with the infamous Panama papers affair. In fact, a recent poll released by CEDATOS showed that only 30% of the population approves of the government’s control over public corruption.
Government economic management also received just a 30% approval rating, and 84% of the population is calling for a change of course. The consumer confidence index shows in part Ecuadorians’ lack of optimism, with a plunge from 51.6 in April 2013 to 34.4 in April 2016. That’s not a surprising result, when consumption that was growing by 3.5% y/y on average fell to -2.5% y/y in Q4 2015, and will probably worsen in 2016. Disposable income will shrink even further, given growing unemployment, and the tax burden increase approved last May.
The government knows that political problems follow fiscal constraints, in a country where rent-seeking has not been reversed, but has in fact been stimulated by this government. Budget financing is therefore being covered at the expense of long-term debt sustainability, and monetary vulnerability.
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