On 28th August of 2020 Ecuadorian President Lenin Moreno announced on his Twitter account “a technical agreement with the IMF to access 6.5 billion dollars for social protection and reactivation”. After passing an anti-corruption law required by the agency, they have already reached an agreement for the disbursement of the first 2 billion, which the president rushed to celebrate on the networks. It is a new loan from the IMF in addition to the one for 200 million dollars and that will further impoverish Ecuador’s economy signed in March 2019.
Gone is the time when Ecuador formed a Citizen Audit Commission (CAIC) under President Rafael Correa to prepare a report that included arguments to declare the country’s debt illegitimate and odious in 2008. This report was used as a support to suspend debt payments. Thanks to this suspension, foreign creditors were forced to reduce the price of Ecuadorian debt to 20%, which the country took advantage of to buy back its own debt in secret, assuming an 80% reduction. This meant an increase in social spending in the Latin American country between 2009 and 2011.
In the midst of the Pandemic and with Lenin Moreno in the presidencythe country seems to be marching again towards the same debt situation from which it had to flee in the past. The new agreement includes requirements such as:
- […] Reduce spending related to the crisis next year and implement a fiscal reform package that includes a moderation of current and capital spending.”
- “[…] A smart and comprehensive tax reform and better governance of public spending […] the reforms include strengthening of the institutional foundations of the Central Bank and improving supervision of the financial sector.”
In other words: The agreement will once again involve the usual neoliberal measures: More cuts (and therefore less investments in health and education), layoffs in the public sector, regressive tax reforms (such as increases in VAT and reductions in corporate taxes) in addition to a autonomy of the Central Bank vis-à-vis the State, at the same time that dependence on financial power groups increases.
Despite the sweetened language used in the press release, the Institute of Economic Research (IIE) of the Faculty of Economic Sciences of the Central University of Ecuador warns that the letter of intent will further complicate the economic and social situation of the country, in a context of great need as shown by the ECLAC projections for 2020: The inequality index will increase this year by 6 percentage points with a Gini coefficient close to 0.53 and the poverty index will go from 25,7% to 32,7% between 2019 and 2020. The new agreement could lead Ecuador to the biggest crisis in its history.
We must hope that the Ecuadorian people react as in other times and face the extortion and the yoke of the IMF and its leaders. Let’s not forget that it is capable of this, as demonstrated by the massive mobilization in September 2019 that forced President Lenin Moreno to cancel the increase in fuel prices that he had decided to apply in consultation with the IMF. Other countries could follow its example if Ecuador will suspend payment in 2021.
1 https://www.imf.org/es/News/Articles/2020/08/28/pr20290-ecuador-imf-and-ecuadorian-authorities-reach-staff-level-agreement-on-new-eff 2 https://twitter.com/Lenin/status/1341209808112934912 3 http://www.cadtm.org/IMG/pdf/Informe_Deuda_Externa.pdf 4 http://www.cadtm.org/La-deuda-ilegitima-de-Ecuador 5 http://news.bbc.co.uk/2/hi/7780984.stm 6 https://www.youtube.com/watch?v=4tbkGu8boyo&t=40m28s 7 https://www.imf.org/es/News/Articles/2020/08/28/pr20290-ecuador-imf-and-ecuadorian-authorities-reach-staff-level-agreement-on-new-eff 8 https://dolarizacion.ec/2020/09/01/instituto-de-investigaciones-economicas-uce-un-nuevo-acuerdo-con-el-fmi-solo-ahogara-mas-la-compleja-situacion-de-ecuador/ 9 https://repositorio.cepal.org/bitstream/handle/11362/45602/1/S2000313_es.pdf 10 https://www.newtral.es/revueltas-ecuador-subida-precio-gasolina-empuja-gobierno/20191008/