Nearshore Americas

What the Lasso Presidency May Mean for Business in Ecuador

On Sunday 11 April, the conservative former banker Guillermo Lasso emerged victorious in Ecuador’s second round presidential election. The victory marked a significant political swing away from the decade-long leftist presidency of Rafael Correa that came to an end in 2017. 

While the margin of victory and circumstances surrounding the election mean it is too soon to suggest that a wholesale shift in the country’s long-term political outlook, the Lasso administration promises a new dawn of opportunities for business in the country that the local and international investment community must grasp with both hands.

Craig Dempsey
Craig Dempsey of Biz Latin Hub believes Ecuador must tread carefully to maintain a long-term business-friendly environment

Lasso has four years with which to implement a more business-friendly approach in one of South America’s smallest nations. However, having won the second round with less than a 7 percent margin over his leftist rival Andrés Arauz, any hope of changing the political tides on a extended basis will require the new president to act with sensitivity to the social demands of large swathes of the electorate if he is to avoid a swift return to socialist policies as has happened elsewhere in the region.

Interpreting Lasso’s victory

With many in the business community celebrating Lasso’s win in anticipation of an opening up of the economy and a boom in commercial opportunities, the circumstances of his victory must be taken into account.

Lasso won the presidency after gaining less than 53 percent of the popular vote in the second round election in an unexpected meeting of conservative and environmentalist political forces in rejection of Arauz, who had promised a return to the politics of Correa.

In the first round election held back in February, one of the most notable outcomes was the strong showing of Yaku Pérez, who campaigned on a platform of indigenous rights and environmental protection. 

In that first round, Pérez narrowly missed out on a spot in the second round by some 30,000 votes to Lasso, who won 1.83 million. By contrast, Aruaz came out of the first round the clear winner, gaining over 3 million votes – or almost 33% of all votes cast.

The election outcome is complex and will demand deft political maneuvering from Lasso in the coming years if he hopes to cement a political base that could offer more business-friendly politics

That result saw Pérez claim that electoral fraud had been committed to deny him the opportunity to challenge Arauz, causing widespread outrage in the country and forcing a recount of the vote. While the recount maintained Lasso’s status as challenger to Arauz, Pérez’s strong showing was heralded as a political milestone for the country.

Many would have expected supporters of Pérez to back Arauz, despite her calls for a boycott of the second round, not only because of the frustration felt towards Lasso, but also because of their more socially-focused political outlooks. However, the picture that emerges from the second round is far more complex. 

While Lasso would have been able to pick up votes from some of the other six main first round challengers, the simple numbers – assuming very few first round Arauz voters switched sides – point to a significant portion of Pérez’s supporters voting in favour of the man many claimed had unfairly taken her spot on the second ballot. 

This paints a complex electoral picture that will demand deft political maneuvering from Lasso in the coming years if he hopes to cement a political base that could offer more business-friendly politics on a longer-term basis.

Recent Examples from the Region May Promote Restraint 

Given the narrow nature of Lasso’s victory and the apparently unusual confluence of political forces it suggests, Lasso will need to take on board recent lessons from elsewhere in the region if he hopes to lock in a new political future for Ecuador.

Late last year, in another unexpected result, Bolivia returned to the socialist politics of the Movement Towards Socialism (MAS) following a year of interim conservative rule after former President Evo Morales had been forced to abandon office and flee the country. 

Lasso will need to take on board recent lessons from elsewhere in the region if he hopes to lock in a new political future for Ecuador

That victory came on the back of what many observers saw as the vindictiveness of the interim presidency of conservative Jeanine Añez, who had pursued criminal proceedings against Morales and more than 100 key players in his party and who today is facing similarly vengeful charges against her.

When the Bolivian election came around, it was the public disquiet over those moves, as well as the success of winner Luis Arce Catacor to cast himself as a more moderate politician than his political godfather, Morales – in a way Arauz failed to do in comparisons with Correa – that brought victory.

Meanwhile, in 2019, Argentina witnessed a similar shift back to leftwing populism following four years of conservative rule under Mauricio Macri. Once more, in electing Alberto Fernández with Macri’s leftwing predecessor Cristina Fernández de Kirchner as his running mate, the Argentinian electorate rejected the austerity measures imposed by Macri to tamp down the country’s huge deficit.

While Macri achieved a measure of success in economic terms for his efforts, the severe economic pain they brought to many in the country ultimately saw it return to the populism of the past.

Lasso will need to work to avoid such an outcome in Ecuador, which will be no mean feat given the complex political picture of the country that recent electoral politics paints.

What to Expect from the Lasso Administration

As a former banker and previously runner-up in the 2013 and 2017 elections, Lasso espouses a more open economy based on free-market policies. That should see him move to cut red tape for businesses and offer greater incentives for free enterprise and investment.

However, he will also need to take into account the strong political tides in the country that call for protection of the country’s environment, as well as expectations for a robust social safety net that were cemented during the 2007 to 2017 presidency of Correa.

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Lessons can be learned from Correa’s successor and current President Lenin Moreno, who was originally Correa’s anointed successor, before turning against his predecessor and forging a more moderate political path.

Moreno chose against running in this year’s election, but his more measured approach has seen the country’s economy open up, contributing to the reversal of the economic decline witnessed at the very end of Correa’s presidency — following years of almost continuous exponential growth. 

Lasso will need to take into account the call for protection of the environment and exceptions of a robust social safety net

Some of those gains have been undone by economic upheaval caused by the global pandemic, however valuable lessons can be drawn from the Moreno presidency. The question will now be whether Lasso implements pro-business policies without abandoning the incremental path that Moreno came to adopt, or seeks a serious overhaul of economic policy. 

While the rejection of populist leftwing politics should be welcomed by the local and international business community, recent lessons from the region suggest that moderation will be key to the new president firming up a political base with a lasting electoral future and locking in long-term gains for business and investment in Ecuador.

While the business community will want to avoid a return to the populist politics of a decade under Correa, it should also be wary of the turmoil seen in the decade beforehand, which resulted in three elected presidents being deposed. 

Stability is critical for doing business anywhere in the world and Lasso will have a lot of work to do if he is to forge an more open economy that promotes sustainable social and political cohesion. 

 

Main photo credit: Samarai Juan

Craig Dempsey

Craig is the Managing Director and Co-Founder of the Biz Latin Hub Group. Craig holds a degree in Mechanical Engineering, with honours, a Master’s Degree in Project Management and various other diplomas covering logistics, personal management and government administration. Craig is also a military veteran, having served as an Australian army officer on numerous overseas operations and is also a former mining executive with experience in various jurisdictions, including, Canada, Australia, Peru and Colombia. You can contact Craig here.

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