Everything about Ecuador President Lenin Moreno’s speech on October 1 appeared to be anachronistic. There he was, a smile on his face, offering his people an end to fuel subsidies for this energy-rich country and massive cuts in public workers’ benefits and wages. This, he said, was the price to be paid by the Ecuadorean people for a loan from the International Monetary Fund (IMF). The next day, the IMF described Moreno’s package as one that would “protect the poor and most vulnerable” and “generate jobs in a more competitive economy”.
Few Ecuadoreans believed either Moreno or the IMF. It appeared that once more the people were being asked to tighten their belts so that the country’s oligarchy and international creditors could emerge from the crisis unscathed. No wonder that the trade unions (the United Workers Front, FUT), the students, and most importantly, the indigenous organisation (the Confederation of Indigenous Nationalities of Ecuador, CONAIE) came out onto the streets to protest against Moreno and the IMF on October 3. They said they would go on an indefinite general strike as long as Moreno and the IMF continued to push the austerity agenda. For weeks now, Ecuador has been in crisis, with the momentum no longer in the hands of Moreno or the IMF; the streets are in charge, and Moreno appears less and less confident of remaining the country’s President.
It was this fragility that led Moreno to declare a state of emergency on October 4, on the second day of the protests. The Constitution allows the President to sustain this emergency for 60 days. Nonetheless, the declaration of emergency did not stop the protests. They continue unabated. Matters became so difficult for Moreno that he relocated his government from Quito to the city of Guayaquil. The protests, like a wave, crashed on the Carondelet Palace and the National Assembly. He ran from the anger, only to return days later when his armed forces had beaten back the protests for the moment.
Moreno has been trying to curry favour with the United States in order to secure both the IMF loan and political cover for the unrest that would necessarily follow. As a gift to the U.S., Moreno had WikiLeaks founder Julian Assange removed from the Ecuadorian embassy in London and he called for the arrest of the Swedish Internet activist Ola Bini. Moreno’s government backed away from prosecuting Chevron, the multinational U.S. energy corporation, for creating an “Amazon Chernobyl” in Ecuador. Moreno appeared willing to do anything to please the U.S. and get the IMF deal.
CONAIE called for negotiations with the government as a sign of good faith. As a precondition, CONAIE asked Moreno to dismiss some of his Cabinet Ministers (including his Minister of Defence), take responsibility for the deaths during this unrest and repeal the gas subsidies decree. When Moreno appeared ready to talk, CONAIE struck the demand for the return of the subsidies. But the streets did not respond well. The protests intensified, as did the repression. There is no guarantee that any deal will be possible as long as the IMF-imposed austerity programme remains in place.
IMF riots
A few days before Moreno’s announcement, Bulgaria’s Kristalina Georgieva was appointed the new head of the IMF. She came to the IMF from the World Bank, where she had made a name for herself as a major fund-raiser for the bank. Its assets have increased substantially. When she took the helm, she said, “It is a huge responsib ility to be at the helm of the IMF at a time when global economic growth continues to disappoint, trade tensions persist, and debt is at historically high levels.” She said that the IMF’s “immediate priority” would be to build up the resources for countries so that they are “ready to cope with downturns”. The IMF has forecast that world output will grow by a mere 3.2 per cent this year, lower than the 3.8 per cent in 2017 and the 3.6 per cent in 2018. A crisis in the financial markets is long expected. All this means that the IMF under Kristalina Georgieva will have to be prepared for major problems from a host of countries.
These problems are already before her. Ecuador’s unrest is an early canary in the coal mine. That the IMF went for an orthodox austerity programme with Ecuador suggests that few lessons have been learned from the past. When the IMF created the Structural Adjustment Programme (SAP) in the 1980s as a response to the Third World debt crisis, it produced a decade of unrest that took its name from the Fund, the IMF Riots. Neither Moreno nor the IMF is willing to roll back their proposals. These are not to be brought before the National Assembly or to the electorate. The niceties of Brexit—a referendum, a parliamentary debate, a media firestorm—are not to be granted to countries like Ecuador. The IMF comes with its medicine; Ecuadorians are expected to swallow it or be held down while it is being administered.
South of Ecuador, in Argentina, the IMF is also embroiled in crisis. It had provided the government of Mauricio Macri with the largest bailout in its history—$57 billion. Neither does Argentina have the funds to service this debt nor do the Argentinian people have the patience to give Macri a second term. He will likely lose the elections in late October. The likely removal of Macri and the political chaos around Moreno suggest that the IMF has failed in its two largest interventions in South America. The ballot and the riot have embarrassed Kristalina Georgieva even before she has had a chance to put her mark on the IMF.
Kristalina Georgieva came to the IMF with a commitment to tackle the climate catastrophe. She said that she would find the tools to involve the organisation in this arena. But the IMF is merely a lending agency. It does not have the mandate to demand policy changes to tackle budgetary problems faced by countries although this is precisely what the austerity programmes that emerged out of the SAPs produced. Cutting subsidies on fuel is not a good way to enter the climate change debate. This is not so much an environmental policy as fiscal austerity. The IMF, Kristalina Georgieva will find, cannot put a green cloak over its demand for budget cuts.
It is worthwhile to recall that a rise in fuel prices in France led to the yellow vest ( gilets jaunes ) protests. The protests in Ecuador now are both part of that yellow vest dynamic and part of the broader anti-austerity drive that runs across the world. More and more people are unwilling to buckle down to austerity so as to allow their creditors to be paid off. It will not do to dismiss this anger and try to paint it as a dynamic that is against a new environmentally conscious world economy. The indigenous protesters in Ecuador, for instance, are perfectly prepared for a new economic dispensation that is friendly to the environment; but they are not prepared to starve for it.
Moreno sat with the representatives of the streets on October 13, two weeks into the protests. He has now room to manoeuvre. He withdrew the decree that enforced the end of the subsidies. A wave of calm came over Ecuador, but this is not permanent. Moreno will have to return to the IMF and sell his withdrawal. He is caught between the people on the one side and the IMF on the other. Popular struggle put too much pressure on him and he had to withdraw the decree. But what will the IMF say?
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