Page 11 - MONTT LATIN AMERICAN MAGAZINE, MAY 2021, (English)

Guillermo Lasso Assumes the Presidency of Ecuador
President-elect Guillermo Lasso took o ice as the country’s highest authority in a crowded ceremony with 400 guests, including international personalities such as King Felipe VI and Brazilian President Jair Bolsonaro.
For analysts, the decisions that the new President of Ecuador will have to adopt are risky, because on the one hand there are the enormous social demands and on the other the threats of large protests and demonstrations, in addition to the management of the pandemic. But to meet his commitments to the International Monetary Fund, Lasso must grow the Gross Domestic Product and collect more taxes.
The economy slumped -7.8 percent in 2020 from the pandemic, the deepest drop on record. Poverty increased to 33 percent of the population. When the Covid-19 crisis hit last year, Ecuador was already in recession and the Lenin Moreno government had made some much-needed cuts to public spending. Relying largely on oil, the fall in prices in recent years made government spending unsustainable. Dollarized and with a low credit rating, Ecuador cannot easily access international markets, so during 2020 it relied on IMF nancing.
Necessary Tax Reform
To meet its commitments, Ecuador must nd a way to expand its economy and, at the same time, collect the equivalent of 2,5 percent of its Gross Domestic Product (GDP) from taxes. A new Tax Reform, after a very diluted one approved by Congress in 2019, could revive the social protests that took place in the country that year. Costa Rica already experienced this scenario, when the Government announced a tax proposal that would allow a new agreement with the IMF. And, closer still, is the case of Colombia,
where the protests do not stop and were triggered, precisely, by the proposal of President Ivan Duque to raise the surcharges and expand the taxpayer base, forcing part of the middle class to pay taxes when before they did not.
Businessman and Banker
The victory for Lasso, the centre-right candidate, was a surprise. In the rst round of voting, he lagged considerably behind, but the voting trend was reversed for the nal round, allowing him to win by a small margin of votes. The businessman and banker, who led Coca-Cola in Ecuador, will come to power with only 12 of 137 seats in Congress for his party. Any reform he wants to pass will have to be through coalitions.
“There will have to be a signi cant scal adjustment to ensure the soundness of public nances in the coming years but it faces, at the same time, an exceptionally di icult social and political environment,” says Todd Martínez, analyst at the credit rating agency Fitch Ratings. The country that Lasso takes over is experiencing the worst crisis in its history.
The great challenge with which the new Government will be measured is to achieve a massive vaccination. For now, Lasso, who formed a business alliance in the early days of the pandemic in 2020 to assist vulnerable people in Guayaquil, began negotiations with the United States, Russia and China to obtain the millions of immunizations necessary to proceed.
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The New Presidente of Ecuador
Montt Latin American Magazine p11