Moreno Ends Fuel Subsidies In Ecuador
Lenín Moreno, the president of Ecuador, announced that he would be ending fuel subsidies. This led diesel fuel prices to double, from $1.03 to $2.30 per gallon, and gasoline prices increased from $1.85 to $2.39.
The loss of revenue is one of the main reasons that President Moreno ended fuel subsidies: they cost roughly $1.3 billion every year. By eliminating them, he can save a rather large amount of federal expenditures.
Ecuador has seen very little economic growth over the past few years, but the national debt has continued to increase. In 2018, the country’s debt was $49.6 billion, and President Moreno has been taking austerity measures to decrease government spending and increase taxes. By doing so, he hopes to finally start tackling the perpetual debt problem.
Ending these fuel subsidies will be an important step towards decreasing government spending, which in turn will minimize the debt to GDP ratio. He has also accepted a $4.2 billion loan from the International Monetary Fund (IMF) as part of his economic policy.
However, IMF loans are conditional, and in order to fulfill the demands, fuel subsidies have been cut. These subsidies have been in place for 40 years, and are incredibly popular with transport unions and poorer citizens who cannot afford high fuel prices.
The unpopular decision immediately sparked protests in the capital, Quito, as well as other large cities. Transport unions, indigenous groups, and students took to the streets, blocking roads and destroying police cars. In response, security forces have been using tear gas, and have also arrested over 350 people.
President Moreno called for a state of emergency for 60 days, but refuses to back down on the policy, despite his decreasing popularity. It is one of the main steps he has taken to reach the IMF conditions for the loan, which includes changing the current budget deficit into a surplus.
However, the president went even further, announcing that Ecuador would be withdrawing from the Organization of Petroleum Exporting Countries (OPEC) in January. OPEC regulates international oil production, led by Saudi Arabia and Russia, in order to stabilize oil prices. This means caps on how much oil each member country can produce, and President Moreno hopes to avoid those limitations to increase revenues.
Moreno took office in 2017, and has been taking a more centrist stance than his leftist predecessor, Rafael Correa. Correa was popular during the beginning of his term because of his expansion of big government. He eventually lost support due to his authoritarian tendencies, and Moreno was elected on the promise to decrease the debt that had accumulated.
Moreno has been standing firm against protests and criticism to his unpopular policies. The president has claimed that the subsidies have been distorting the economy and labelled the protesters ‘criminals’. Even as his popularity ratings fall, he has the advantage of military and business elite support, as well as weak opposition.
Ecuador has a history of uprisings against unpopular leaders and is more than capable of ridding itself of Moreno. The question now lies with the general population themselves: will the end of fuel subsidies be the tipping point?