Three challenges facing Lenin Moreno in Ecuador

Agencia de Noticias ANDES / Flickr / CC BY-SA 2.0 (Edited)

While many talk about the return of the right in Latin America, Rafael Correa’s “citizen revolution” won another term in office: former vice president Lenín Moreno will rule until 2021 after defeating former banker Guillermo Lasso in a close second round vote. Although the opposition candidate denounced electoral fraud, other Latin American governments, as well as the observation mission of the Organization of American States (OAS), have recognized the results. On May 24, then, Correa will hand his chosen successor the presidency and a series of challenges: economic decline, social polarization and (less urgent) a foreign policy in need of some adjustments.

Moreno’s main challenge will be the economy, since Correa’s model shows clear signs of exhaustion. After years of strong government spending in social programs, public services and infrastructure, the fall in commodity prices (oil represents more than 35% of Ecuador’s exports) dealt a heavy blow to the economy, which fell by 1.7% in 2016 after a meager 0.2% growth in 2015.  In addition, a rising government deficit has led to an increase of the public debt, which represents close to 40% of GDP after a low of 15% in the year 2009.

The recession is compounded by the more than 3 billion dollars required to finance the reconstruction of the area affected by a recent earthquake, and the impossibility of devaluing to increase competitiveness (since Ecuador’s economy is dollarized). During the campaign, Lasso promised to slash taxes and reduce public spending to promote foreign investment and growth. Moreno, in contrast, pledged to expand public credit and investment, including an ambitious housing plan and the social program “Plan for a Lifetime”, which will cost more than 2 billion dollars.

Whether the new government has the necessary support to reform Correa’s economic model will depend on the way it resolves its second challenge: Ecuador’s growing social and political polarization. Although Correa’s and Moreno’s Alianza País party kept the presidency and its control of Congress (partially because of an electoral system that granted it 54% of the seats in the Assembly with only 40% of the vote), its support has fallen drastically since the economy stopped growing: In fact, Moreno won the runoff against Lasso with 52% of the vote, while only four years ago Correa defeated Lasso with more than 57% of the vote in the first round. This diminishing support has to do with economic stagnation, the natural erosion after a decade in power, and a growing rejection of the concentration of power in Correa’s hands. Since becoming president in 2007 he has drafted a new constitution that granted him more powers, harassed the press, labeled opposition leaders as pro-imperialists and members of the oligarchy, and split society in half between correistas and anti-correistas.

Moreno was picked as the presidential candidate for Alianza País because of his moderate image, which allowed him to get support from people who support Correa’s social policies but not his confrontational style. Despite his campaign promises, the state of the economy demands changes, and Moreno will have to increase the efficiency of public spending and boost competitiveness without cutting popular social programs. It is therefore fundamental that he talk to business leaders and social movements (many of whom are against Correa), and even mend fences with the influential armed forces, which used to be close to the government but have had public disputes with Correa.

Rafael Correa will remain the leader of Alianza País and the main figure in Ecuadorian politics. The question is whether he will support Moreno when the new president proposes changes to his legacy. Additionally, if Correa wants to return to the presidency in 2021 (as many in Ecuador believe) he will have to make sure that Moreno is successful but not too successful so that he does not overshadow his predecessor and attempt to run for reelection.

Finally, Moreno will inherit a foreign policy that presents some challenges. He will surely maintain the strong alliance Correa forged with Venezuela, but Ecuador’s closeness with the chavista regime has become a challenge for the government’s international image and domestic support. In fact, during the campaign the government was forced to clarify that “Ecuador is not Venezuela”, given the economic collapse and authoritarianism of Nicolas Maduro’s government.

At the same time, in the past decade Ecuador strengthened its ties with Beijing, becoming one of the main recipients of Chinese investment and financial assistance in Latin America. According to the Dialogue’s database, Ecuador has received 17.4 billion dollars from China since 2010, behind only Venezuela and Brazil.  Environmentalists and indigenous groups have linked Chinese financing with environmental degradation, especially because of the construction of hydropower dams in Ecuador’s Amazon. Correa dismissed these warnings, but Moreno might try a more conciliatory approach.

Lastly, the new government will have to deal with the prolonged stay of Julian Assange in its embassy in London. Although Assange welcomed Lasso’s defeat (since the opposition leader had promised to expel him), he has become an uncomfortable presence for Ecuador that affects the country’s relationship with Washington because of Wikileak’s role in US domestic politics. 

In the past ten years Ecuador has achieved its political stability and made progress in terms of social development, but as in other Latin American countries the economic model based on the export of raw materials and high government spending needs urgent reforms. In a way that contrasts with other leaders of the Latin American left, Lenín Moreno promised to respect dissent, and promote dialogue and moderation.  In doing so, he could show the way for other Latin American countries that need to reduce polarization and soften the movement of the ideological pendulum.