Ecuador’s increasingly polarized and disruptive political environment remains a drag on the economy
Earlier this month, Ecuador’s National Assembly began President Guillermo Lasso’s impeachment proceedings, citing allegations of embezzlement. Amid heightened political tensions, Lasso has responded by threatening to dissolve the National Assembly and force new presidential and legislative elections. Clients should closely monitor the current political situation in Ecuador, as it will impact the outlooks for growth, private investment, and fiscal and social stability. Clients should refresh their scenario planning for Ecuador to include new episodes of social unrest, heightened political risks, and a shift to less business-friendly political leadership, as these outcomes are increasingly likely.
Overview
On March 30, Ecuador’s Constitutional Court cleared the way for the opposition-controlled National Assembly to begin Guillermo Lasso’s impeachment proceedings, setting a 45-day timeline for the process. For the impeachment to succeed, the motion will have to secure support from 92 out of 137 legislators. A failed June 2022 effort to impeach Lasso amid widespread social unrest secured 80 votes.
The allegations of embezzlement at the heart of the impeachment process center on a public contract with an oil transport company. The Lasso government argues that there is a lack of evidence to support the case and that the public contract with the company was signed under previous administrations.
Lasso’s public support has fallen substantially over the past several months, with February’s local elections delivering major losses to his party and empowering Ecuador’s left-wing political coalition. However, the public has mixed feelings about the impeachment process. A recent poll found that 39% of Ecuadorans want Lasso to complete his four-year term in office. Just 15% of people want Lasso to resign, while 28% think Lasso should use a constitutional provision to trigger new presidential and legislative elections.
Our View
Ecuador’s opposition-controlled National Assembly has largely frozen Lasso’s pro-business reform agenda over the past two years. However, the new impeachment effort seeks to further shift the balance of power against a politically vulnerable president. Ecuador’s increasingly polarized and disruptive political environment remains a drag on the economy. With recent political shifts, it is increasingly unlikely that Lasso will finish his term in office. If Lasso activates new elections, it is also likely that Ecuador’s left-wing coalition will make legislative gains and win the presidency. However, there is still a realistic path for Lasso to remain in office if the impeachment case falters and public opposition to impeachment grows.
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