The health crisis has been a kind of mirror that reflected the inequalities of an unequal society that were not always admitted. The coronavirus pandemic has meant for Ecuador a serious deterioration in the living conditions of its population, especially the poorest, and a devastating blow to its fragile economy. 2020, which closed with public accounts in red, will be registered as the worst year in economic history from the country.
Putting the economy in order requires that the pandemic be controlled, but also measures that provide confidence to investors who, for now, do not have it when the country risk is 1,150 points. It also demands structural reforms to solve the problems that Ecuador has caused before. About to go to the polls, on February 7, this task will correspond to whoever assumes power on May 24, replacing Lenín Moreno, although some reforms will have to be made by the current government, until April, to receive a new disbursement of $ 1,000 from the International Monetary Fund (IMF), part of an agreement by $ 6,500 signed last August– which requires lower the fiscal deficit and expand social protection coverage, considering that poverty will increase by 10 percentage points in 2020, which is equivalent to about 1.8 million people (or 450,000 families).
Part of the decade he ruled Rafael Correa (2007-2017) The country had the highest income due to the high cost of oil, but when the bonanza ended, onerous debts were contracted, especially with China; part of that money went to large infrastructure works, contracted with premiums. The deficit in the state budget, in those 10 years, exceeded 30,000 million dollars. Public debt exceeded 40% of GDP.
The poverty level grows 30%
The figures that the pandemic has left, so far, are devastating. The poverty level increased by just over 30%, and the number of people who lost their jobs, as of September 2020, was 620,000; All this implied a contraction of 9%, something never before registered in national history and which is much greater than the 1999 financial crisisAlberto Acosta Burneo, director of Weekly Analysis, comments to ABC.
The situation is absolutely critical. The deficit that the new ruler will receive is 6,000 million dollars (six points of GDP), and a public debt that amounts to 63,000 million dollars. Moreno received in around 50,000 million dollars. The renowned economic analyst Jaime Carrera, director of the Fiscal Policy Observatory, says that the debt is unmanageable, so a fiscal sustainability program is imposed for the next four years 2021-2025 (the period of the new president), with more income and less expenses. And encourage private investment with a good environment and boost exports.
Doing these tasks and reaching the goals is likely, according to Carrera, since the country has four pillars on which it could support the way out of the serious economic crisis. It refers to dollarization, a sound financial system, debt that is restructured, and the agreement with the International Monetary Fund (IMF).
Hold the dollarization, which has been in force since 2000, is the biggest economic challenge. It is considered a lifeline for the pockets of citizens, who have not lost their purchasing power as happened with the sucre (the previous local currency). But it is always under threat, when exports fall and taxation falls, or because of the announcements of electronic money to emit dollars, made by one of the candidates, although all the presidential candidates agree that dollarization must be sustained. “We must not give back to politicians the power to reissue money to finance public spending. Savings are liquefied and less is bought every day ”, Acosta Burneo sentence.
George is Digismak’s reported cum editor with 13 years of experience in Journalism