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Ecuador Referendum and Business

Latin America Advisor

In the April 15 referendum, more than 70 percent of voters supported President Rafael Correa's plans to restructure Ecuador's political system through a constitutional assembly. What does the vote mean for Ecuador's outlook? Is the business and investment climate improving as a result of the process, or is it a setback?

Walter Spurrier, Publisher and Editor of Analisis Semanal/Weekly Analysis in Ecuador: It means Correa's plan to overhaul Ecuadorean institutions and the power structure has surmounted its first important test, three to go: assembly elections; referendum on a new constitution; and elections under the new rules, probably including presidential elections. The referendum was a lose-lose situation. Had the 'yes' vote failed to surpass 50 percent (less than the 'no', spoilt, and blank votes) the outlook would have been a strengthened opposition that would impeach President Correa, with no legitimate successor at hand. With Correa's victory the outlook is uncertain, thus enhanced danger for business and investment. There is the distinct possibility that a victory of Correa-sponsored candidates will bring an anti-market assembly majority that could write a Socialist constitution banning private companies from operating oilfields, or toss out dollarization. The 'yes' vote landslide enhances the likelihood of this outcome. But voters could prefer the parties they supported in last October's election, in which case the assembly could decide that a new interim president is required. A third option is stalemate. Here, the president could be expected to play hard ball as he did with Congress when, through his control of the Electoral Tribunal, Correa recently managed to toss 57 opposition congressmen out of Congress. A fourth but less likely outcome is that the assembly agrees on structural reforms while preserving a pluralistic society.

Michael Shifter, Vice President for Policy at the Inter-American Dialogue: Correa's resounding win at the polls opens up another opportunity to reshape and improve Ecuador's badly discredited institutions of governance. It will be extremely difficult, however, for Correa, his supporters, as well as his detractors to take full advantage of the historic moment to advance democracy and insure greater stability. Correa is emboldened with this victory, and will be tempted to continue to steamroll the opposition and maintain his confrontational politics. At least some elements of the opposition could well press a hard line, thereby fueling the already acute polarization. The constituent assembly process, fraught with risks, is more likely to resemble what is happening in Bolivia than the Venezuelan experience, which is sui generis. The best scenario would be for Correa, having built power and secured his political footing with this triumph, to begin to temper his populist rhetoric and seek to forge a consensus with more moderate forces in the opposition and independent movements not necessarily aligned with his party. Especially in the near term, however, that may reflect wishful thinking. After all, it won't be easy for Correa, lacking a party infrastructure, to muster overwhelming representation in the new assembly. So for now it is reasonable to expect continued turbulence. Still, unless there is compromise, it is hard to see how Ecuador gets out of its political predicament.

Alexei Páez Cordero, Professor at the Latin American School for Social Sciences (FLACSO) in Ecuador: Having counted 98 percent of the votes, President Rafael Correa's referendum triumph exceeds 81.79 percent of the total, constituting an absolutely indisputable decision expressed through the ballot box by the sovereign public. The restructuring not only targets the representative system—political parties—but also aims to reconstruct a state institutionality that has fallen into an unprecedented crisis of legitimacy, as well as aiming to redesign the state's territory structure according to criteria in keeping with national socio-diversity, as stated by those who seek these transformations. Thus, the transformation involves these three integral parameters for institutional order, as well as a redefinition of the state's operating structures. This means that the so-called Constituyente could alter the composition of functions and controlling bodies, as the president has clearly pointed out since the beginning of his campaign. Therefore, it's not limited to the institutional structure, but also involves actual operations. Personally I believe that the country's structural crisis, which has dragged on for more than ten years, has a last chance of an institutional out this time through a procedure that could be seen as heterodox, but which is urgent, necessary, and has an enormous social consensus behind it … After a long succession of controls and interventions—designed to impede transformations that would discipline political elites and predatory economics—Ecuador could substantially improve its image as a highly volatile and unpredictable country and, in this way, reconstitute a long-lasting social consensus based on broadened redistributive policies, real control of widespread corruption, punishment for its beneficiaries, and clear investment rules, and thus create a credible climate endorsed by an overwhelming citizen majority from the national and sovereign point of view for foreign capital interested in, for example, mining, oil, and infrastructure.

Republished with permission from the Inter-American Dialogue's daily Latin America Advisor newsletter. 

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