Although evidence that Ecuador’s economy is in recession may not be visible to the casual observer, a review of government investment over the last four years paints a dramatic picture.
Nationwide, federal and local government investment in infrastructure projects, including the constructions of schools and hospitals, has dropped by more than 50% since 2013. In Cuenca and Azuay Province, the drop is even more dramatic.
In 2013, infrastructure investment in the province totaled $549 million. Last year, it was $144 million.
Officials point out, however, that the local numbers are skewed by three major projects: the Sopladora and Mazar hydroelectric projects and the tranvía, any one of which, by itself, would rank as the largest public works investment in Azuay Province history.
“The province has been the beneficiary of billions of dollars for public projects and as those projects are finished it is natural to expect a drop in funding,” says San Francisco University economic professor Pablo Dávalos. “That would happen no matter what condition the economy is in.”
Dávalos says, however, that the recession will mean deeper cuts in federal investement in the coming two to three years. “The shock will more dramatic given the fall in oil prices since oil was the source of most of the revenue for the large public works projects.”
On the day after he assumed office, President Lenin Moreno signed an austerity order affecting all branches of government and requiring reviews of all major public works projects. “My first priority is to protect and strengthen the economy,” he said. “We must face reality that the times require fiscal responsibility, some of which will be painful.”
Dávalos points out that even under tighter federal budgets, Cuenca and Azuay Province will still fair better than it did 10 years ago. In 2005, he says, the province received only $25 million in federal funding. “Compare this to 2016, when the economy is in recession, when it received $148 million,” he says, adding: “And in 2005 we weren’t technically in recession.”
In addition to the tranvía and the hydroelectric plants, other major projects completed in Azuay Province since 2007 include: reconstruction of the Pan American highway to Pasaje, Azogues, and Loja; 15 bridges; the Ordóñez Lasso reconstruction; the Cuenca-to-Guayaquil petroleum pipeline; two hospitals and six health clinics; and 14 public schools.
“There will be austerity in the short-term, but the area is in much better condition than it was a decade ago,” Dávalos says.