The government is adjusting to its second year with some positive numbers, but is not sticking to its strategy of having the private sector drive the economy

He The government of President Guillermo Lasso is ending its second year with someone achievements, but also outstanding debt on the issue of economic transformation of the country. Although the economic authorities have said that they will try to do in six months what they could not do in two years, now with one foot outside, after the declaration of death on the cross, they will be able to rule by decrees and laws on economic matters. (they announced five of them), but limited because it has the filter of the Constitutional Court.

Thus, after the second year, the Government has some positive figures, while others seem stagnant and even alarming, according to several analysts.

President Lasso highlighted the economic achievements of his government in his speech before the Parliament, during the impeachment trial, as well as in interviews with various media. For example, he said that in the 19 months of the government, he managed to reduce poverty by 8 percent. that some have recovered 500,000 jobs. Delivering low-interest loans to thousands of families, totaling $250 million, while keeping inflation low. Raised base salary by $50 in two years (now $450). The idea was to reach $500 in the four years of his mandate…

However, for analysts, The government failed to implement its strategy, which relied on the participation of the private sector, nor was it lucid in communicating and implementing its plans.

“The private sector did not arrive as expected, and the public sector delayed execution due to lack of financial capacity. Added to this is a serious difficulty: the lack of execution capacity within key ministries,” he says Santiago Mosquera, political analyst and dean of the UDLA Business School.

Mosquera says that the achievements of the government of Guillermo Lasso on the economic issue are related to the successful vaccination process and the close relationship it maintained with the International Monetary Fund (IMF) and other multilateral organizations that supported the strategy of fiscal consolidation, which had moderate successes. Within this framework, there was a moderate recovery of the economy after COVID, the necessary financing was obtained, a surplus was achieved, reserves were improved, and inflation is low. Economic growth was on the rise, but unfortunately insufficient.

From the beginning, he recalls, the strategy consisted of attracting domestic and international investments through public-private associations, but such a process usually takes years. At first it seemed to be going well, and the country was seen as a possible investment destination since it has one of the few right-wing governments in the region, which is pro-business for both investment and foreign trade. Ecuador was put on the international map. There was even an event called Ecuador Open for Business, which raised expectations.

Strong indigenous protests in June 2022 obliterated expectations. The election results in February 2023 sharpened the level of uncertainty. The government made a mistake by including a national consultation in the central election process, in which, rather than the content of the question, the citizens’ disagreement with the regime prevailed. Finally, political judgment takes effect and later death on the cross is applied.

Mosquera believes that a golden opportunity for the country was lost in this way.

In addition, he believes that the Government then failed to communicate what was being done. Mosquera acknowledges the efforts made by the government in politics fiscal consolidation, but points out that the ability to execute the investment budget was neglected and it took its toll.

“The first mistake at the beginning of the Government it does not tell citizens how the country has fared in terms of public accounts,” says Jaime Carrera, executive secretary of the Observatory for Fiscal Policy (OPF). This is the result of the disastrous management of the economy by correísma and the consequences of the pandemic. What he wanted was to create confidence and make the citizens think that they will prosper and prosper. “Maybe they believed that with papers and the studies of state personnel who came from the private sector could move the state forward, but managing the public is something else,” he comments.

So, accompanied by high crude oil prices and aided by debt renegotiations carried out by the Lenín Moreno regime, the Government made a new mistake: to create the idea of ​​some kind of bonanza, to tell people that there was a surplus when there are no dollars in the public treasury. In this way, the citizens, without accurate information, asked where the oil money from the tax reform was and demanded that something be done to meet it.

For Carrera, the lesson left by correísmo, which neither the government nor the opposition nor the citizens understood, is that public consumption cannot be increased, debt to uncontrollable levels in dollarization, but that You must keep balanced accounts. Otherwise, dollarization is put in jeopardy.

He believes that there is responsibility on both sides, both on the part of the Government and on the part of the political and social sector, which does not want to understand how the economy works and is used to fiscal chaos.

For Carrera, it is false that the public accounts are fine and warns that there are very few resources in the box. On April 6, cash (Treasury deposits) was only $511 million, according to the Central Bank. “The fiscal situation is serious, the country is surviving,” he says. This year, there is less income from taxes and oil, he says.

In addition, it was decided to enact a legislative decree that cuts taxes to be good for the middle class. For Carrera, history has been repeating itself for forty years, when governments “forget to tell people clearly what is going on”.

In terms of energy and oil, the government did not have positive results. Oil production remained far from targets, price variations occurred, fuel prices were frozen, and imports increased significantly. But also, according to Jorge Luis Hidalgo, energy analyst and manager of Green Power, branch ministers did not know how to carry out the president’s directives given since his signing in Glasgow.

President Lasso has made commitments such as using lighter gas to reduce flare-ups. He was also interested in optimization Amistad field and its tender. In addition, the president has set a goal of reaching one million barrels of crude oil by the end of his term. Unfortunately, neither Juan Carlos Bermeo, Xavier Vera, and Fernando Santos did not present any plan to improve national energy security indices, says Hidalgo.

In the last period, comments Hidalgo, it is noticeable that Minister Santos has ignored the mandate of President Lasso, and since he started his administration he has gone in the opposite direction by not speeding up the tender for the Amistad field, with a series of excuses. In the end, fuel imports directly benefited. He believes that it would be positive if, in these remaining six months of his mandate, there is a change of direction.

It could be, for example, make short-term investments you work too much and maintaining wells in the Amistad field to double national production. Domestic production should be given priority, because it is at least 40 percent cheaper than imported production. The Shushufindi refinery is supposed to be connected to the Shushufindi substation which cost $27 million and is ready from 2017. This way, it would avoid burning imported diesel to generate electricity.

What would be desirable in the next presidential term?

Santiago Mosquera hopes that in the next administration there will be no return to certain practices that weaken the monetary system (dollarization). That the law in defense of dollarization will not be repealed or that there is a desire to return to monetary management practices that do not fit into a dollarized economy. In short, he hopes that the institutional progress that has taken place in recent years has not been thrown out. But it will depend on who will rule the country.

Can you reduce country risk?

The country’s risk, which has remained on the rise in recent months, could only fluctuate downwards after the first surveys and in the event that moderate candidates with clear debt statements are preferred. “It will depend on whether the spirit of default“, assures Mosquera.