Scraping the barrel
VISITORS arriving at Quito’s new airport are swept to Ecuador’s capital, 35km (22 miles) away, along a brand new six-lane motorway. Together with new hospitals, schools, social housing and benefits and student grants, the vastly improved road network is the work of President Rafael Correa’s “Citizens’ Revolution”. With his melange of technocratic modernisation and leftist populism, Mr Correa leads a strong and hitherto popular government that has lasted eight years in a country where none of his three predecessors completed their terms.
But now Mr Correa is running out of money and the citizens are starting to turn against him. In June, in the biggest of many protests, some 350,000 people took to the streets of the port city of Guayaquil to demonstrate against plans to impose punitive additional taxes on inheritances and gains from property transactions.
The protests came as the plunge in the oil price and the strength of the dollar—which Ecuador has used as its currency since 2000—have combined to halt economic growth. The economy contracted in the first quarter of this year compared with the previous one. Independent economists forecast either no growth or a mild contraction this year and next.
The government claims to be diversifying the economy away from the export of oil and bananas. “It takes time,” concedes Nathalie Cely, the minister of production. She points to investments in food processing and tourism, and soon-to-be-opened Chinese-built hydroelectric plants (which will cut fuel imports). But the driver of growth has been public, rather than private, investment. “If you stuff businesses with taxes…that produces a lack of confidence, an economic slowdown and companies don’t invest,” says Jaime Nebot, the mayor of Guayaquil, who organised the June protest.
http://www.economist.com/news/americas/21660140-will-ecuador-turn-latin-americas-greece-scraping-barrel
