President Lasso carries an important agenda to China

ECUADOR - Report 21 Jan 2022 by Magdalena Barreiro

Thanks to the fragmentation and disagreements among legislators, it proved easier for the government to raise taxes than to reduce significantly public expenditures in 2021. Even so, $1000 million of additional tax collection and $2,000 million in higher oil revenue, together with a reduction of $1,115 million in interest payments resulting from the debt renegotiation of 2020, helped the government to end 2021 with an overall deficit of $3,783 million, which is $2865 million lower than that of 2020 and $991 million below the deficit in 2019.

The Central Bank upgraded its estimate for 2021 GDP growth from 2.8% to 3.5%. An average monthly inflation rate of 0.21% in Q4 – the highest since 2014 – and an increase in y/y tax collections of $548 million in this period seem to back up the official optimism. We hope that the economic reactivation and recovery in the last part of the year does not suffer because of the exponential increase in COVID contagions this month, which once again forced authorities to reduce permitted capacity in public places.

In 2022 the government needs to continue to focus on economic reactivation, and the labor reform – an important axis of the campaign – is an important pillar. Given the already evident and expected opposition from labor unions to the proposal of a new, parallel labor code to boost employment, President Lasso announced that this topic might be included in a public referendum, possibly taking place next May.

As another axis for economic recovery, President Lasso appointed Juan Carlos Holguin the new Minister of Foreign Affairs – his bet for a stronger and more active approach to achieving his external commerce objectives. Also, Italo Cedeno is the new Minister of Energy, who will hopefully align with the president's commitment to aggressively increase oil production.

President Lasso is traveling to China to meet Xi Jinping with an important and sensitive agenda. Lasso aims to get Jinping’s commitment to fight evident corruption in previous Chinese loans and oil transactions. He should also put on the table the need to renegotiate the Republic’s debt with China, as this is the only entity with the space to do so. In addition, there is the urgent problem with the Coca Codo Sinclaire hydroelectric dam built by a Chinese company and whose stalling could compromise Ecuador’s electric supply. China should address its responsibility in the matter and offer its cooperation in coming to a prompt and definitive solution, but securing this is not an easy task for President Lasso. Finally, there are ongoing conversations for a bilateral proposal for a trade agreement that will significantly help the negative trade balance of Ecuador with the Asian country.

Now read on...

Register to sample a report

Register
Sign-in
Forgot your password?
Copyright 2024 GlobalSource Partners. All rights reserved. This report is prepared for GlobalSource Partners’ clients and may not be redistributed, reproduced, stored in a retrieval system, retransmitted or disclosed, in whole or in part, or in any form or manner, without the express written consent of GlobalSource Partners. This report is distributed simultaneously to our website and other portals used by GlobalSource Partners. The information herein was obtained from various sources and is believed to be reliable but GlobalSource Partners does not warrant its completeness or accuracy. Neither GlobalSource Partners nor any Country Analyst, officer or employee accepts any liability whatsoever for any direct, indirect or consequential damages or losses rising from any use of this report or its contents.