Ecuador: Approach to poverty could change under new government

Schoolchildren in Manobí, Ecuador. While in office, incumbent President Rafael Correa dramatically increased social spending on education and healthcare. (IICD/Flickr)

After a decade of landmark reductions in poverty and inequality, Ecuadorians voted for a runoff election between two presidential candidates with vastly different approaches to reviving the nation’s economy.

To win the first round of the election, left-wing candidate Lenín Moreno needed to secure at least 40 percent of the vote and maintain a 10-point lead over his conservative party opponent Guillermo Lasso. The Guardian reported that a runoff vote appears likely, as Moreno appeared to fall just short of the 40 percent required for outright victory with almost 90 percent of votes counted early Monday morning.

Moreno, of Rafael Correa’s Country Alliance party, represents an extension of the nation’s leftwing government, with its focus on fighting corruption, reducing poverty and ensuring disability rights.

“Today’s country does not compare with that of a decade ago,” Moreno told Argentine newspaper La Nación. “…To sustain and deepen the transformations we need to generate an atmosphere of unity, dialogue and joint work. We must take advantage of the good and rectify or improve what needs to be changed.”

In his first five days of government, Correa’s hand-picked candidate promises to reduce the value-added tax rate by 12 percent to 14 percent, propose a plan for housing construction and another to boost youth employment, form an “anti-corruption front,” and build 40 technical universities.

Meanwhile, Lasso – from the Creating Opportunities party – has vowed to trim government spending and cut taxes in an effort to stop capital flight. The banker has also promised to generate a million jobs in 4 years and make Ecuador’s central bank independent of the government.

The incumbent party remains popular among poor voters thanks to social welfare programs. A defeat for Moreno would signal a swing to the right, as previously left-wing governments have recently done in Venezuela, Argentina, Brazil and Cuba. Some experts warn that the change in government may not benefit Ecuador’s poor, pointing to President Mauricio Macri of Argentina, who vowed to revive the country’s economy with market-oriented policies but has had trouble attracting investment.

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The new presidency comes after a decade of social and economic progress under Correa. According to a new report from the Center for Economic and Policy Research (CEPR), the poverty rate dropped 38 percent and the extreme poverty rate by 47 percent since the leader obtained office in 2007.

Fueled by economic growth and an increase in social spending on education, health, and urban development and housing, inequality – as measured by the GINI coefficient – also dropped from .55 to .47 last year (a score of 0 indicates perfect equality and 1 perfect inequality).

Co-Director of the Center for Economic and Policy Research (CEPR) Mark Weisbrot said he expects Moreno will try to maintain his party’s approach to poverty and inequality reduction.

“You will see some continuity,” he told Humanosphere. “But it is difficult with oil prices much lower, and with him coming in with a deficit.”

As in Venezuela, Argentina and Brazil, the social programs that lifted millions of Ecuadorians out of poverty were underwritten by a commodities boom that fizzled out years ago. Government revenue spiraled after global oil prices fell last year along with the appreciation of the U.S. dollar, which the South American country has used as its currency since 2000.

Weisbrot said the economy is growing again, and that the media has consistently used out-of-date estimates from the International Monetary Fund (IMF), which project a negative 2.7 growth for 2017. He said the latest data show that the Ecuadorian economy returned to positive GDP growth in the second quarter of last year.

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“You can see that there was growth in the second quarter and the third quarter, and we don’t have fourth quarter data, but all the indications are that it’s growing too,” Weisbrot said. “So I can say with confidence that Ecuador is not in a recession.”

Regardless, Ecuador’s fiscal woes became a forefront issue in the election, allowing conservative candidates to make headway with their criticism of Correa’s creative economic policies. Lasso and other candidates have argued that Ecuador’s next president will need to take a tougher stance on spending, reduce the number of government workers and cut subsidies like the ones used to reduce gas prices.

Meanwhile, Moreno promises to do more with less, such as following Correa’s lead in avoiding cutting social programs and gas subsidies used by the poor. Agencia Andes reported one of his plans is to build new housing units for the country’s poorest. According to María Fernanda Espinosa, the candidate’s spokeswoman, the project will be financed by the General State Budget and will not impose additional taxes on Ecuadorian citizens.

“Lenin Moreno’s entire proposal to build a house for everyone and a free house for the poorest 191,000 people is technically developed and can be financed. There are 325,000 homes that will generate about 160,000 direct jobs,” said Espinosa.

If Moreno fails to meet the threshold needed to secure victory, the second round of the election will take place on April 2. The new president takes office on May 24 for a four-year term.

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Lisa Nikolau

Lisa Nikolau is a Madrid-based reporter for Humanosphere, covering gender equality, indigenous rights and poverty in Latin America and worldwide. Find her on Twitter at @lisanikolau, email lisa.nikolau@humanosphere.org or see her latest work at www.lisanikolau.com