What to expect from Ecuador’s upcoming elections

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Nearly 13 million Ecuadoreans prepare to head to the polls on February 19 to elect a new president, vice president, 137 National Assembly members, and five Andean Parliamentarians. Keeping his promise made last year, leftist President Correa will not be running after a decade in power, the longest in the country’s history. In his stead, Correa has handpicked as running mates two of his former cabinet members – his former vice-president Lenin Moreno (2007-2013) and Jorge Glas (2013-present) – who represent a continuity of his policies. Although Moreno, representing Correa’s left-wing Alianza Pais (AP) incumbent coalition, currently leads polls in the race, he will likely be forced into a runoff, where the divided opposition will have an opportunity to rally behind a single candidate from the other seven currently running against the AP.

Fortunately for Moreno, the opposition remains large and divided. However, the AP currently faces its first real threat in the past decade since losing key cities in the country’s local elections in 2014, especially as voter discontent runs high in light of growing dissatisfaction with corruption scandals and Correa’s management of the economy. In fact, a December Cedatos poll showed that 87% of the electorate is looking for change, and that 70% desires a “dramatic” change for the country, which ultimately favors the opposition. As such, if Moreno fails to win during the first round1, then the opposition could easily coalesce behind a single candidate and present a formidable opponent who would have a high chance of winning in the runoff.

At the moment, it is difficult to predict a winner in light of a largely undecided electorate (although the figure has gone down from 51% in December, to 39% as of January 23). However, FSG’s base case is that the election will result in a runoff, and that the opposition is able to successfully rally behind either Guillermo Lasso (CREO) or Cynthia Viteri (PSC) to beat Moreno in April. The factors that generally provide indication as to the potential success of a candidate point to an advantaged opposition:

  • Ecuadoreans, reeling from the impact of the country’s economic downturn and 18 months of recession, are not optimistic leading up to the elections, with 87% of the electorate seeking change
  • Incumbency would theoretically benefit the AP; however, Moreno’s approval ratings and national recognition nowhere near match those of charismatic Correa, thus an unfair comparison
  • The trend in recent elections throughout Latin America points to surprises for incumbents and leftist governments, as voters have shifted their preferences toward the right in hopes for change

We will examine the top three candidates most likely to win the presidential election.

Lenin Moreno (Alianza PAIS) – He served as Correa’s vice-president for two terms, and currently leads the polls. As vice-president, Moreno promoted programs for people with disabilities, and was later appointed as special envoy on disability and accessibility to the UN. Moreno represents a continuation of Correa’s Citizen Revolution, and has vowed to continue his predecessor’s social programs. Also, he has proposed new agreements to stimulate production and employment; to strengthen higher education; to fight against violence and drug trafficking; and to provide better services to care for the elderly.

Guillermo Lasso (CREO-SUMA – Creating Opportunities-United Society More Action Movements) – He is a former conservative banker with 45 years of experience, former Minister of the Economy, former presidential candidate in the 2013 elections, and trailing Moreno in the polls. Lasso has denounced corruption, promising common sense and market-friendly measures to restore growth. His political movement proposes a center-right political platform, advocating a free market economy and an increase in private sector participation. Lasso has said he would like to push for tax cuts in various areas (environment, sales, vehicles, sodas, among others) to leave about US$3bn back in the pockets of the Ecuadorean people.

Cynthia Viteri (PSC – Social Christian Party) – The only woman in the race, Viteri is a former candidate in the 2006 elections seeking to position herself as a moderate candidate between right-wing Lasso and left-wing Moreno, although her political agenda has historically tended to lean toward the right. She proposes lowering and/or abolishing several taxes, and reducing production costs to improve the efficiency and competitiveness of the country’s productive sector.

Although Moreno currently does lead voting intentions, polls show he does not have enough support to win the first round: he has 34.3% support according to most recent Cedatos poll, followed by 22.9% for Guillermo Lasso, and 11.4% for Cynthia Viteri. On the other hand, the pollster Market put Moreno with even less support, at 28.17%, Viteri at 17.98%, and Lasso at 16.57%.

Regardless of who wins the presidential election, Ecuador’s next president will face difficult and unpopular decisions, which potentially include slashing the budget, increasing taxes, and renegotiating external debt. Ecuador will most likely have to undergo a period of protracted austerity as it faces a painful process of fiscal consolidation. The country’s debt continues to grow as the Correa administration managed to stave off a worse economic crisis by taking on additional debt and loans against future oil exports, racking up almost $14bn in debt in 2016 alone, which helped the AP keep from cutting popular social programs or public sector jobs in the run-up to the election.

However, despite government efforts in 2016 to increase the VAT and implement solidarity contributions (from wages, company profits, and wealth of those with more money), the $1bn raised has not been enough to offset overall economic losses. While oil revenues fell in 2015 and 2016, Correa’s government continued to spend on a variety of initiatives, which placed additional pressures on the country’s finances. Moreover, the combination of low oil prices and a dollarized economy that has weakened export competitiveness will continue to hurt growth, leaving the next country’s next president to inherit an economy in the red. Ecuador’s only upside would be a potential supply shock, which would boost its export revenues and provide much-needed reprieve.

The problem that Moreno faces, in particular, is that Ecuador’s current economic model cannot be replicated or continued for much longer, not only because oil prices are nowhere near as high as they were a few years ago, but because the next president will undoubtedly inherit an economy that simply cannot support these programs.

Ecuador's prospects as a market

1 In order for a candidate to win the first round of the elections, he or she must garner either an absolute majority, or win at least 40% of the vote and finish with at least a 10-point lead over the nearest rival. If neither of these conditions are met, the top two candidates will go to a runoff election on April 2.

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