Latin America Advisor

A Daily Publication of The Dialogue

Will Austerity Measures Lead to Unrest in Ecuador?

Ecuadorean President Guillermo Lasso is seeking to halve the country’s fiscal deficit, but austerity measures led to massive protests against his predecessor. // File Photo: Ecuadorean Government.

Ecuadorean President Guillermo Lasso said Sept. 2 that he aims to cut the country’s fiscal deficit next year in half, to approximately $2.4 billion, including by laying off state workers and other austerity measures. Lasso also said many people who benefit from fuel subsidies don’t need government assistance, but Lasso’s predecessor, Lenín Moreno, faced massive protests in 2019 after he tried to do away with the popular subsidies and was forced to reverse their cancellation. How critical is it for Ecuador to cut its deficit as much as Lasso is suggesting? How likely are Lasso’s plans to face large-scale protests? What types of cuts can Lasso make, and what should he avoid cutting, in order for his plan to win acceptance among the public and in the National Assembly?

Walter Spurrier, president of Grupo Spurrier and director of Weekly Analysis in Guayaquil, Ecuador: “In October 2019, then-President Moreno raised prices to eliminate fuel subsidies except for cooking gas. Leonidas Iza, an Indigenous leader who was preparing a Columbus Day uprising, changed the leitmotif of the protest to the fuel hike and almost toppled Moreno, who had to withdraw the measure. Moreno retook raising prices at a 5 percent monthly clip; Lasso has maintained the hike. The population seems to have reluctantly accepted the price crawl. Iza toys with the idea of a new uprising in October, but he is unlikely to muster popular support. Lasso will have to cut bureaucracy while avoiding tax hikes for the middle class; financing sources have dried up. Lasso has already reduced the number of employees in the president’s office by 30 percent. The public sector…”

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