Wealthy ex-banker campaigns as Ecuador’s ‘candidate for change’

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Guillermo Lasso’s promises for Ecuador’s coronavirus-hit economy may seem extravagant, especially from a former banker: to create 2 million new jobs and balance the budget in four years while cutting taxes.

But as Ecuador’s presidential election on Sunday polarizes in a two-horse race between Mr Lasso on the right and his rival Andrés Arauz on the left, the two leading candidates are making ever-bigger promises to woo a battered electorate high unemployment and growing poverty.

At stake for investors is the future of a freshly signed IMF agreement, the recent restructuring of $17.4 billion in bond debt and one of Latin America’s largest oil industries, a sector that Mr. Lasso wants to double in size to help balance the government’s books. .

“My goal is zero deficit – absolute zero,” he told the Financial Times in an interview from his home in the commercial capital of Guayaquil. “The vicious circle that Ecuador finds itself in is ‘deficit, debt, deficit, more debt’ and in the longer term we can never get out of it. If Ecuador wants to create jobs, it must solve the problem budget, and you do this by increasing oil revenues and controlling spending.

Guillermo Lasso’s campaign distributes T-shirts to Ecuadorians © Santiago Arcos/Reuters

Aware this might not sit well with voters in a country where the government has cut spending and liquidated state enterprises after running out of cash during the coronavirus crisis, Mr Lasso is trying to pose as a candidate for the change. He’s playing on the differences with incumbent Lenín Moreno, whose ratings have plunged into single digits.

“Lasso is change, change is the Lasso,” chants a group of young dancers in one of its campaign videos. Whether voters are buying this message is less clear. The 65-year-old former Coca-Cola executive, who is still co-owner of one of the country’s biggest banks, Banco Guayaquil, has been active in politics for a decade and has already run for president twice , having been easily beaten the first time around. but closing in on victory in his second run.

In his interview with the Financial Times, Mr. Lasso tried to connect former Ecuadorian president, left-wing instigator Rafael Correa, with his successor, Mr. Moreno, and Mr. Arauz, a young socialist economist who is the main adversary of Mr. Lasso.

“Mr. Moreno was a continuation of Mr. Correa and Mr. Arauz is a continuation of both,” he said. “I do not represent continuity with Mr. Moreno.”

Risa Grais-Targow, Latin America director at consultancy Eurasia, said Mr Lasso’s strategy was unlikely to work. “This is an election for change, and the demand for something truly different is a real problem for Lasso because he is seen as the establishment’s ultimate candidate,” she said. His party, CREO, is one of Mr. Moreno’s biggest supporters in congress.

Although Mr Lasso cites Britain’s Margaret Thatcher as one of his heroes, he insisted that he “is not proposing neoliberalism”.

“What I propose is an efficient public administration that promotes investment, that generates jobs and that, through economic growth, generates revenue for the state, revenue that is properly administered,” he said. he declares.

Andrés Arauz is one of the other main presidential candidates © Jose Jacome/EPA-EFE/Shutterstock

Mr. Lasso pleased investors by promising to honor the terms of hard-won debt agreements with private bondholders and the IMF. Mr Arauz wants to renegotiate the deal with the IMF and has attacked the bond deal as unconstitutional and overly generous.

Opinion polls suggest that Mr. Lasso and Mr. Arauz are ahead of the other 14 candidates on the ballot, although there is little consensus on who is in the lead. If neither wins 50% of the vote – or 40% with a 10-point lead over the nearest rival – the election moves to a second round in April.

Mr. Lasso’s proposals are ambitious. Its goal of creating 2 million jobs is set for a country of only 17 million. Some 700,000 jobs have been lost during the coronavirus pandemic and he is confident they can be recovered as the economy rebounds. For the remaining 1.3 million, Mr. Lasso relies mainly on the oil industry.

He estimates that Ecuador can double its production from 520,000 barrels a day to around 700,000 by the end of its government and more than a million in the medium term by attracting foreign investment with new contracts. This is a major challenge for a country that has never averaged more than 570,000 bpd.

Despite his promise to eliminate Ecuador’s budget deficit, another ambitious goal in a country with chronic borrowing habits, Mr. Lasso pledged not to raise taxes. Indeed, he said he would reduce some and eliminate others.

He disagreed with the IMF when he suggested Ecuador raise the value-added tax, preferring to balance the budget and maintain the fund’s $6.5 billion loan program on the on the right track, for example by privatizing one of the biggest lenders in the country, Banco del Pacífico, or by limiting fuel. subsidies for the poorest drivers.

An advocate of free trade, Mr. Lasso has pledged to gradually abolish Ecuador’s 5% tax on remittances and to sign trade agreements with the United States, China and South Korea, an agreement with Washington being the priority.

Guillermo Lasso rides in the back of a truck during his campaign © Santiago Arcos/Reuters

Mr. Lasso is also in favor of further dollarization. Ecuador has used the US dollar as its official currency since 2000, the only country in South America to do so. This brought stability but also removed its freedom to set monetary policy and borrow locally, while blunting competitiveness.

Despite his considerable wealth as a co-owner of a bank, Mr. Lasso’s upbringing was far from privileged. The youngest of a family of 11 children, he started working part-time at the age of 15 at the Guayaquil stock exchange to pay his school fees.

“I started without a penny in my pocket,” he said. “I don’t have a university degree. I come from a middle class family. My father was a civil servant and my mother was a housewife.

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