Expect continued political instability until it is determined whether Lasso will be able to move forward with the dissolution of Congress and eventual snap elections
While the Armed Forces and police have signaled support for Ecuador’s President Guillermo Lasso, risks of social unrest are high, particularly from the National Indigenous Confederation (CONAIE), which had previously stated it would lead protests if Congress was dissolved. Firms should expect unrest, with the likelihood of roadblocks and disruptions to airport and port activity increasingly high. Mass protests would hit economic activity, worsening the country’s existing economic slowdown. Furthermore, elections in the next six months are unlikely to lead to a continuation of the Lasso presidency; rather, Ecuador could either experience a return to correismo or, more likely, allow the non-correista left-wing, likely led by indigenous leaders, to gain further political momentum. Therefore, it is likely that in the medium to long term, Ecuador’s operating environment will deteriorate further.
- On May 17, President Lasso dissolved Ecuador’s National Assembly in an unprecedented move in the country’s history, triggering the “muerte cruzada” clause in the Constitution, meaning he will govern by decree until the country holds snap legislative and presidential elections.
- If the measure is ruled constitutional by the Constitutional Court, the elections are expected to be held within the next six months. Officials elected through the snap elections would hold their posts until 2025.
- Lasso faced his second impeachment trial yesterday following accusations of corruption and embezzlement surrounding a contract with an oil exporting firm. With opposition lawmaker Virgilio Saquicela recently retaking his role as president of the National Assembly, the likelihood of impeachment was high, particularly since Lasso’s coalition only holds 25 seats in the assembly, compared to the opposition’s 96 seats. While the opposition was unable to gather the necessary 92 votes to impeach Lasso in previous attempts, ousting Lasso was possible under the current congressional composition.
- Furthermore, Lasso is an extremely unpopular president; the country’s cost-of-living crisis has pushed the president’s approval rating to under 15%.
Firms should expect continued political instability in Ecuador until it is determined whether Lasso will be able to move forward with the dissolution of Congress and eventual snap elections. The constitutional court is reviewing whether Lasso’s justification for dissolving the National Assembly—that the country is facing “grave internal commotion”—holds up to legal scrutiny. If the court rules against it, Ecuador could face a constitutional crisis. If Lasso is able to move forward with ruling by decree, it is likely he will seek to implement the pro-business reforms that he had been unable to push during his term. For instance, he has already announced a decree that reduces taxes for Ecuadorian families and stated that other measures would follow. While these reforms are likely to be favorable for Ecuador’s operating environment, they may lack legitimacy and could worsen tensions between Lasso’s government and the opposition, which will seek to block these moves through the courts and by pushing for mass protests.
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