Government income drops 23% in 2023; U.S. and Ecuador sign security agreement; Lasso pardons 130 women; Guayaquil records 29 weekend murders

Ecuador’s Central Bank reports that revenue from all sources dropped 23% in the first six months of 2023 compared with the same period of 2022. The largest loss, the Bank says, was in oil revenues as a result of lower prices, strikes by indigenous groups and technical problems.

In addition, collections from the value added tax, the exit tax on currency sent out of country, income tax, and other assessments have dropped since 2022.

The Central Bank reports that revenues amounted to $10.5 billion through June, compared to $13.8 billion in 2022.

“Although some of the decline in income can be blamed on specific factors in the oil industry, it also reflects an overall deterioration of the country’s fiscal situation,” says economist José Hidalgo. “We see an alarming accumulation of arrears owed to the Social Security system, local governments and private suppliers of goods and services.”

Ecuador Central Bank, Quito.

Hidalgo adds: “The revenue losses come at a bad time since the country’s ability to borrow from international public and private sources is limited. Even if loans can be arranged, the interest rates would be extremely high.”

In addition to Hildalgo, several economists are recommending immediate tax increases and other measures to cover the budget shortfall. “President [Guillermo] Lasso has been reluctant to increase taxes, but I do not see an alternative at this point,” says Carla Pontón, of the economics faculty at the University of Guayaquil. “Since he is not running for reelection, it would be a logical move on his part and leave the country in a stronger economic position.”

Pontón also says eliminating fuel subsidies should also be addressed. “Despite the social risks, I see no alternative but to finally deal with this issue and end most of the subsidies. It is clear the country can no longer afford them.”

Hildalgo says he is worried about campaign promises made by presidential candidates in the coming election. “They are promising more stuff, more services, more infrastructure, but they don’t explain how these things will be paid for,” he says. “They need to understand that now is not the time for new budget items. It is the time to repair the economy and make hard choices to provide funding. This is not a very popular political position but if the economic crisis is not addressed — and very soon — the country could face disaster.”

He adds that he is especially concerned that three candidates are proposing “raids” on Central Bank reserves. “They are taking the easy way and not facing the reality of the circumstances. It’s time for hard choices, not quick fixes.”

U.S. and Ecuador to sign security agreement
Representatives from the U.S. and Ecuadorian governments have agreed on a package of security measures to assist in law enforcement, particularly against organized criminal activity. Ecuador Defense Minister Luis Lara will travel to Washington, D.C., to sign the final agreement on July 20.

Highlights of the bilateral agreement include: Modernization of Ecuador’s aircraft fleet and equipment upgrades for the armed forces; implementation of cybersecurity measures to improve intelligence systems; promotion of programs for environmental sustainability and the fight against illegal mining; and logistical coordination and aid related to possible impacts of El Niño.

According to Assistant U.S. Secretary of Defense Daniel Erikson, the U.S. has pledged $3.1 billion to the project over a seven-year period. “We are committed to strengthening the bonds with our friends in South America and this agreement addresses several major issues, including the transport of illegal drugs, environmental protection and assistance and, if needed, assistance for El Niño damage,” he said.

Guayaquil records 29 weekend murders
At least ten people were shot to death and another ten were injured in two gang-related attacks Sunday night in Guayaquil. The deaths brought to 29 the number of murders recorded since Friday night in the city.

According to the National Police, the first Sunday night attack occurred in the La Florida neighborhood in northern Guayaquil, when gunmen broke into a house and shot all the occupants. The second occurred in the nearby Siete Lagos barrio when three armed men opened fire at a party. The shootings in Siete Lagos followed two attempts by police to disperse partygoers due to noise complaints from residents.

According to police, preliminary information shows that both attacks involved territorial disputes between criminal gangs.

Lasso pardons 130 women prisoners
President Guillermo Lasso signed an order Monday pardoning 130 women prisoners based on “humanitarian concerns.” The prisoners will leave their detention centers within 24 hours and will be provided assistance for reintegration into society, he said.

According to the president’s office, the women face “double and triple vulnerability” due to illness, time served, and responsibility for children and other family members. In some cases, the children of the prisoners are living in penitentiaries with their mothers, an “unacceptable situation,” according to Lasso.