Latin America Advisor

A Daily Publication of The Dialogue

What Would the U.S. IDEA Act Mean for Ecuador?

The U.S. Congress is considering the IDEA Act. // File Photo: Ecuadorean Government.

U.S. senators Bob Menendez (D-N.J.) and Jim Risch (R-Idaho) earlier this year introduced the Innovation and Development in Ecuador, or IDEA, Act, a measure that would make the South American country an eligible beneficiary of the Caribbean Basin Economic Recovery Act. The legislation includes provisions to lower tariffs on nearly half of Ecuador’s exports to the United States and promote policies that the sponsors say would reduce illegal immigration from Ecuador and counter Chinese influence in the country. What are the most important parts of the IDEA Act, and what are its chances of winning legislative approval and becoming law? To what extent would it counter Chinese influence in Ecuador? How useful would the measure be to the United States and to Ecuador?

Ivonne A-Baki, Ecuador’s ambassador to the United States: “The IDEA Act is the culmination of a virtuous process of rapprochement between Ecuador and the United States, which has finally made it possible to materialize, in a practical way, our common values and objectives. This has been an example of how the United States can strengthen its relations with the region, at a moment when it’s urgent to move from declarations to actions. The IDEA Act allows to translate into concrete elements the common will of our countries to generate long-term solutions to problems that affect the United States, Ecuador and the entire region, for example transnational organized crime, especially drug and human trafficking. The IDEA Act is a win-win exercise. Through the expansion of bilateral trade, Ecuador will win, because this initiative will generate employment, especially in economically depressed areas, and, at the same time, the United States will also win, since it will be able to access the best products and supplies at more competitive prices. Ecuador will benefit because it will be able to generate more sources of foreign currency, which are essential for a dollarized economy, and the United States will strengthen its value chains with a reliable and close partner. Finally, both countries’ populations will be able to enjoy the fruits of a relationship based on democratic principles and values, respect for human rights and liberties, and economic responsibility that prioritizes their most disadvantaged populations and with great awareness of the environmental challenges of the current world. When all those elements come together, things are fated to work out. Passage of the IDEA Act would be a huge step in that direction.”

Felipe Espinosa, executive president of Amcham Ecuador: “The IDEA Act is a win-win. It benefits Ecuadorean exports, creates jobs in vulnerable and depressed areas, boosts the economy in a quick and significant way and would bring well-being to many. Also, on the U.S. side, it will create jobs—probably even more than on Ecuador’s side. It will give the U.S. consumer access to products that are of great quality, unique and available all year long (none of them compete with U.S. products). Since it creates jobs and well-being in depressed areas in Ecuador, it will help prevent migration and, furthermore, it will be a tool in the fight against narcotrafficking and international crime. We all benefit, and I believe that is the way many members in Congress are seeing the proposed bill. We are optimistic it will get approved this year. Market access for Ecuadorean products benefits the U.S. consumer as exports to the United States encompass the greatest variety of products from Ecuador to any other market in the world. It would benefit many more, large and small exporters, even entrepreneurs, making the United States a preferred destination over others including China, while providing access to a country that is closer and shares democratic values similar to the ones in the United States. That will only happen if Congress approves lower tariffs. Many of these products already reach the U.S. market, even with steep tariffs. A nontariff system will increase supply, variety and assure availability for the consumer. All in all, it makes sense.” 

G. Philip Hughes, former assistant secretary of commerce and senior vice president of the Council of American Ambassadors: “Timing is everything. And the timing of Senators Menedez’s and Risch’s IDEA Act in support of Ecuador (and the two-year-old conservative/market-oriented government of President Guillermo Lasso) is abysmal. Introduced last March as a follow-on to Menendez’s 2022 initiative, the U.S.-Ecuador Partnership Act, IDEA’s ultra-brief legislation (which simply adds ‘Ecuador’—after ‘Dominica’—to the Caribbean Basin Economic Recovery Act beneficiaries’ list) is clearly intended as an economic fillip for Lasso’s embattled reformist government. The problem is that it’s been completely overtaken by events in chronically unstable Ecuador. In response to the leftist-dominated Ecuadorean legislature’s second attempt (in two years) to impeach and remove the conservative Lasso, the president in May invoked a clause of leftist President Rafael Correa’s 2008 constitution enabling the president to dismiss the legislature and call snap national elections for both the presidency and a new legislature to complete the remaining terms of the old ones. Correa aimed to deter any revolt of Ecuador’s fractious legislature (which has curtailed four presidencies since 1997) since attempts to remove the president would mean the legislators’ ‘suicide.’ Correa probably never imagined it being used against the left. But with the Constitutional Court confirming Lasso’s invocation of this ‘muerte cruzada’ provision, Ecuador is headed for political turbulence that could well restore the kind of repressive, anti-market, anti-American, corrupt left-wing rule of the Correa years (2007-2017)—ideal conditions, incidentally, for China to exploit. Against this backdrop, IDEA—which lacks other co-sponsors—has almost no chance of enactment and, were it to become law, might, perversely, symbolically ‘reward’ another Correa-type hostile, leftist/populist regime while having negligible benefit for Ecuador’s economy.” 

Santiago Mosquera, head of research at Analytica Investments in Quito: “Ecuador is the only Pacific Rim country that lacks a trade agreement with the United States. Nevertheless, the United States is the main trading partner of the South American nation. This accomplishment becomes even more impressive when considering the tough competition it faces from countries sharing a similar export base and enjoying tariff-free access to the U.S. market. In recent years, the diplomatic relationship between Ecuador and the United States has witnessed significant strengthening. Notably, there have been noteworthy advancements in cooperation across various sectors, ranging from security and drug fighting to health, education and social development. A pivotal moment in this diplomatic journey was marked in 2019 when USAID returned to Ecuadorean shores after being expelled in 2014 during President Rafael Correa’s tenure. The momentum of collaboration continued, and not long ago, Presidents Joe Biden and Guillermo Lasso held crucial discussions to deepen the economic and security partnership between their nations. The mutual commitment was further solidified when they welcomed the U.S. congressional approval of the bipartisan United States-Ecuador Partnership Act of 2022. This act aimed to expand the United States’ cooperation with Ecuador. Moreover, the introduction of the Innovation and Development in Ecuador (IDEA) Act in March 2023, legislation to make Ecuador eligible for designation as a beneficiary country under the Caribbean Basin Economic Recovery Act, is further evidence of such collaboration. However, Ecuador’s current political landscape remains uncertain as the country finds itself amid a presidential election ahead of schedule. Depending on the election outcome, there is a potential risk of a new distancing period between Ecuador and the United States. During such a scenario, there could be a resurgence of China’s influence as a key political and economic partner for Ecuador, akin to what occurred between 2007 and 2017.” 


Latin America Advisor logo.The Latin America Advisor features Q&A from leaders in politics, economics, and finance every business day. It is available to members of the Dialogue’s Corporate Program and others by subscription.

Related Links

Suggested Content