There is nothing worse than an economist who doesn´t know how to economize. Everybody confides in him; they think he knows how to cut fabulous deals with China, the U.S., the European Union. They give him their total trust, their steadfast confidence, their unquestioning obedience.
And then...
Ecuador, which is blowing up this very moment (October 8 2019) is a case in point.
I know; I know.. You want to know what is going on.
This CNN article provides a good quick summary for the uninitiated.
What I think:
The country is heavily in debt to the International Monetary Fund. Most of the debt was not created by President Lenín Moreno, who took office two years ago. Rather, it was generated by the prior president, Rafael Correa. See below the chart of the country´s international debt. Correa was president 2007-2017; he is an economist.
Correa today is a fugitive in Belgium. Many of his top officials, notably his comptroller, also fled the country. They stole hundreds of millions of dollars. Nobody knows for sure how much. However, they do know that the amount of noise generated on the nightly news about corruption is inversely related to the people actually being convicted -- not just charged -- and going to prison.
Last week, the people put two and two together.
By that I mean:
Fact: Moreno was Correa´s vice president during his first administration. Today, Moreno is surrounded with Correistas. This despite the fact that Correa denounced Moreno as a traitor. Go figure. Moreno thought he could live in two houses -- obtain international financing and be a rough tough communist revolutionary. Instead of putting opposites together, he is falling through the cracks.
Fact: Correa and his accomplices were a one-trick pony. They built damns (which don´t function), highways, oil refineries (which don´t work), schools (which are empty), etc., etc., overpriced them and pocked the surplus.
Fact: the IMF always demands sacrifices by people least able to afford them. Instead of demanding that Moreno find the stolen millions -- billions? -- the IMF insisted the government stop subsiding gasoline. That demand is the initial cause of today´s protests; prices have skyrocketed over 100% since the subsidies ended on Thursday.. Last night, Moreno fled to Guayaquil where he announced he will never- ever-forget it-don´t even ask, restore the gasoline subsidies.
I know people who worked for the IMF. A conservative lot, if there ever was one. What may be behind all the Ecuadorian disturbances is this:
The IMF knew the end of subsidies would generate a political crisis in the form of a massive popular revolt. They want Moreno out of power so that his Vice President, Otto Sonnenholzner, can take over, even if only on an interim basis. Otto is from a well-off family; he speaks IMF fluently. If elections are held, the new president will be either Jaime Nebot or Guillermo Lasso. Both are tried and true conservatives. They. too, talk the IMF´s language.
For his part, Lenín Moreno, is a self-proclaimed, fire-breathing "revolutionary." It started in the crib; no need to ask whom he was named after. You will find here a video of VP Moreno and (then) President Correa singing a eulogy to Che Guevara: https://www.youtube.com/watch?v=r3S8n26Ok5g. No need to ask, either, what the IMF thinks of the performance; you can hear their silence which is easily explained. They consider the matter as beneath criticism.
Whatever happens politically and economically, the gasoline subsidy question is only the beginning. The government owes the iMF $4.2 billion. The end of the subsidies will save only $1.3 billion. Guess where the remaining money will come from.
And that means, I fear, only the beginning of serious disturbances.