After nearly two months of a state of emergency to combat crime, president Daniel Noboa has decided to extend it for an additional 60 days
Amid the ongoing state of emergency, multinational corporations in Ecuador face heightened security risks requiring robust risk management strategies and employee safety prioritization. Adapting to mobility restrictions and engaging with local authorities is crucial for operational resilience. Additionally, ongoing curfews and extortion may impact retail operating income, particularly in coastal regions and major cities like Guayaquil and Quito.
Overview
- After nearly two months since the declaration of the State of Emergency implemented in January, the government has decided to extend it for an additional two months. Over the past 50+ days, homicide and overall violence have declined significantly throughout the country, though crimes like extortion, money laundering, and hydrocarbon trafficking persist.
- Security conditions have deteriorated in Ecuador since, on January 7, Ecuador’s prison authority confirmed the escape of José Macias Villamar, also known as Fito, the leader of one of the country’s major organized crime groups, from the Litoral Penitentiary in Guayaquil. Following this announcement, the Daniel Noboa government declared a state of emergency and initiated a nationwide search for Fito.
- On January 9, an alliance of gangs attempted to challenge the government’s decision by leading takeovers of several jails and civilian buildings, including schools, hospitals, universities, shopping malls, and even a TV station. During these takeover attempts, the armed groups took numerous hostages, including more than 94 civilians and up to 100 prison guards. In response, the government declared that the country was under “an internal armed conflict” and designated 22 gangs as terrorist organizations. The authorities mobilized the police and army to regain control of the hostage-held facilities. By day’s end, 12 gang members, 14 civilians, and 3 police officers had been killed in the crossfire. An executive decree was issued stating that lockdowns would be enforced in the most violent areas, with the army and police assuming control of the jails. Additionally, security forces were deployed on the streets to conduct operations aimed at capturing gang members.
- The extension of the state of emergency implies intensified constraints on mobility and an increased police presence, notably in Ecuador’s Pacific coastal regions. Up to 61 Cantons remain subject to curfews, with mobility restrictions in effect from 11 p.m. to 5 a.m. for areas with high restrictions, and from 2 a.m. to 5 a.m. for those with medium restrictions. Cantons experiencing low mobility restrictions can anticipate minimal police checkpoints on roadways, although no curfew will be imposed. Business establishments operating during nighttime hours, including restaurants, bars, and private clubs in cities such as Quito, Guayaquil, and other cantons along the Pacific region, have expressed concerns about the economic effects of curfews. They have observed a decline in sales attributable to reduced clientele resulting from the implementation of these measures.
- Despite police efforts on the streets, certain crimes, notably kidnappings and extortion of citizens, continue to rise. Between January 2024 and the beginning of March, the number of both crimes has surged to 1,543 cases in Ecuador. In Guayaquil, one of the cities hardest hit by the escalating violence, complaints have quintupled compared to the same period last year.
- Official statistics indicate that in Guayaquil, between January and March 8 of the previous year, the number of kidnappings and extortions had reached 120 cases. At the provincial level, Guayas is the most affected by this type of crime, with 650 reported cases, followed by Esmeraldas with 189, and Pichincha with 166 complaints.
Our View
Given the prevailing state of emergency in Ecuador, businesses, particularly those operating in the Pacific region, should anticipate ongoing challenges stemming from organized crime activities. Despite the measures implemented by the government to mitigate these crimes, the risk of extortion or kidnapping remains a significant concern.
In the months ahead, the continued enforcement of curfews in major cities like Quito and Guayaquil, as well as in the Pacific region, is likely to impact nightlife establishments, potentially leading to reduced sales in sectors such as food, alcohol, entertainment, and hospitality services. Moreover, the escalation in crime rates may also have repercussions on the costs of private insurance. Between 2022 and 2023, there was a notable uptick in overall insurance premiums, increasing by over 7.8% YOY.
The intensification of efforts in the war against organized crime is poised to exacerbate the strain on the Government’s finances, particularly amid an already encumbered public sector grappling with substantial debt. Compounding these challenges is the recent dismantling of the ITT-Yasuní oil fields, resulting in an annual income loss estimated at $1.2 billion USD. In response to these fiscal pressures, the Congress has passed measures to alleviate budgetary constraints, including the approval of a VAT increase to 15% scheduled for April. Furthermore, a temporary 3.25% tax on corporate extraordinary incomes has been implemented to support the financing of Noboa’s security policy.
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