Ecuador News

Moreno and Lasso both pledge to keep country’s Social Security system solvent

Guillermo Lasso warns that Ecuador’s Social Security system (IESS) is going broke and will soon be unable to pay pensions and cover health care costs for its members. His opponent in the April 2 presidential runoff election, Lenin Moreno, responds that the government will always guarantee the system’s financial health and that Lasso’s charges amount to nothing more than fear-mongering.

Retirees protest outside IESS headquarters in Quito.

Lasso’s charges are based on a 2015 government decision to end its contribution to IESS that covered 40% of the system’s expenses, and a later decision to write off a $2.5 billion debt it owed IESS.

As a result of those decisions, IESS has dipped into reserves for the past two years to cover a financial shortfall. In 2016, the shortfall amounted to $1.6 billion.

Based on actuarial tables used by Lasso, IESS will become insolvent in 2026.

In addition to its primary role of paying pensions to retired members, IESS also provides health care and offers low-interest housing loans through its affiliate BIESS. For more about IESS health care, click here.

“The system has been robbed by the government,” Lasso says. “It was desperate for money because of its fiscal mismanagement and IESS was the cookie jar it found to rob.” Lasso is supported by the country’s largest  retiree union which protested last week in Quito demanding that the government reinstate the 40% contribution and pay its debt.

Moreno and the government maintain that support of IESS is part of the public trust that will always be honored. “We will never allow the system to fail and we will never let down its members who have paid into it over the years,” he says. “Supporting IESS is this government’s first and most important commitment.”

If he is elected, Lasso says he will reinstate the 40% government contribution and pay the $2.6 billion debt. “The millions of Ecuadorians who contribute to Social Security must be assured that the system will be secure when they retire and that their pensions will paid on time and in full,” he says. “I will end the greedy Correismo that has an endless appetite for other people’s money.”

Two weeks ago, Lasso claimed that the IESS health care program was being mismanaged and was in financial trouble. “It might be necessary to increase members’ contributions but I will guarantee that the program will be fiscally sound.”

  • Dogoslave

    If “supporting IESS is this government’s first and most important commitment”. Why did it stop the 40% contribution and write off billions in debt? Just another aspect of Correa’s legacy left for EC to deal with once he’s gone………if he ever leaves.

    • Jason Faulkner

      Because IESS didn’t need the 40% to cover any expenses. They took all that money and used it to purchase government bonds. In other words, Ecuadorian tax payers paid a subsidy to an insurance pool that didn’t need it and then had to pay interest on the money they gave them. It was an absurd system.

  • baba free

    Lasso will keep it solvent by doing what all good ‘bankers’ do….privatize it. Rich people paying taxes in Ecuador??? No way…

    • Aging Expat

      Stop with the leftist nonsense. I have a small business but still pay more in taxes here in Ecuador than most expats gross. It boils my blood to hear people say those who have means aren’t paying their taxes, when I work my ass off to help support the people who mouth off and groundlessly assert otherwise. Last year I paid SRI over $35,000 in taxes, to say nothing of what I paid in the U.S. Don’t tell me that so-called “rich people” don’t pay taxes in Ecuador. You don’t know what you’re talking about.

      • StillWatching

        You’re wasting your time on baba free. to quote Simon and Garfunkel, “Still a man hears what he wants to hear and disregards the rest…”

        Socialists don’t deal in the currencies of fact, logic and reason. When they’re after the fruits of your labor, they hear nothing but the clarion call of a free lunch.

        • Globetrotter

          Labels obscure truth. In my life, the only societies I have seen fixated on such childish name-calling is the current USA and formerly, the communist block, largely extinct now. You fellas are heading the same way. You bring contempt upon yourselves.

          • StillWatching

            Julius, you’re full of crap. Have you absolutely no self awareness? Here you are, deriding people resorting to childish name calling and you have dumped Americans and Communists into a group so you can denigrate them with your own name calling.

            As Charlie used to tell you so often, you are a hypocrite. I wish Charlie would show up again and make you go away. I’m tired of the task. If anyone ever brought contempt upon himself, it would be you.

        • Karen

          Look on the bright side, StillWatching, after Moreno wins you’ll have something to continue to bitch about. LOL How smart were you to move to a socialist country to begin with? Not very.

          • StillWatching

            As I just told Beth, you don’t know your ass from your elbow. You have assumed my political position———————- Incorrectly.

          • Tommy H.

            His real name is Ken Merena, the one-legged wonder. He can hop around and complain. 1/3 of all the posts on these forums come from 1 man, Ken Merena, using 10 different names.

      • Karen

        Cry me a river, Aging Expat, who I’m sure pays his “help” third-world labor rates.

  • Beth

    ““It might be necessary to increase members’ contributions but I will guarantee that the program will be fiscally sound.” – Translation, Lasso WILL raise rates, period.

    • StillWatching

      Well who the hell do you think is going to pay for services, the tooth fairy?

      • Beth

        Selective reading much? Here’s what your boy, Lasso said – “The system has been robbed by the government,”

        • StillWatching

          1. My boy your ass. I’m not a Lasso supporter.
          2. What does your quote have to do with my question?

  • Blechdach

    Bravissimo, some one pays taxes. But why should we believe you. It’s the same when trump holds up his tiny hands and says they are huge indicating the size of his pecker and announced I am rich, I am really rich, believe me. Mr. Agingexpat, you are not rich and she didn’t talk about you. If you pay your taxes, then this is the right thing to do and if the amount is correct, then you obviously can afford it. Next time when I drive down the highway, I will sing the song “this highway was paid by Mr Agingexpat”. And if you are aging in the right direction then don’t forget, there are no bank accounts in the afterlife.

  • zoltan strigan

    Ecuadorean President Rafael Correa announced Friday
    that right-wing presidential candidate Guillermo Lasso is under legal
    investigation by the country’s Internal Revenue Service, SRI, for
    illegal activities involving his offshore companies.

    On Thursday,
    Argentine investigative news agency Pagina 12 released an in-depth
    report revealing Lasso’s connection to 49 companies in offshore tax
    havens. The companies, based in Panama, the Cayman Islands and Delaware,
    have diverse names that hide Lasso’s identity.

    Pagina 12 also revealed that
    between 1999 and 2000, Lasso’s fortune went up from US$1 million to
    US$31 million dollars. This was the same year former Ecuadorean
    President Jamil Mahuad, a close ally of then-minister of finance Lasso,
    dollarized the country’s economy. Dollarization left Ecuador’s economy
    in shambles, thrusting millions into poverty.

    The right-wing banker
    candidate is believed to have boosted his fortune 30-fold by speculating
    on government bonds ahead of dollarization.

    “I don’t know if I should
    call him Guillermo Lasso or Mr. Positano (a seaside village in Italy),
    because that is the name he uses to hide his offshore companies,” Correa
    said on Friday,
    HispanTV reports. He added that Lasso used names of other cities around
    the world, such as Montpellier and Berlin, to hide his identity.

    “That is why he is proposing
    to create free trade zones. So that if he brings back the money, he
    will be exonerated from paying taxes and can later take it out of the
    country again.”

    The investigation into Lasso presents challenges to his campaign ahead of Ecuador’s April 2 runoff presidential election.

    Last month, Ecuador became
    the first country in the world to pass a plebiscite to ban public
    officials from having assets or capital in tax havens. All public
    servants and elected officials now have one year to bring any offshore
    investments back to the country or they will be removed from office for
    violating the policy, aimed at combating tax havens and increasing the
    accountability of public officials.


    Ecuador shows why national sovereignty is so important

    Mark Weisbrot. The Hill. March 19, 2017

    National sovereignty is an
    undervalued asset in today’s world, especially by the international
    media, where the views of Washington and its allies largely prevail.
    This is true with regard to economic as well as political issues, and
    its consequences can be quite heavy in a region like Latin America, long
    regarded by U.S. officials as their backyard.

    The election in Ecuador is
    being watched, as well as contested by, forces that have opposing views
    on this question.

    On the left, there is the
    presidential bid of former vice president Lenín Moreno, and his party –
    which has already won a majority of the Congress – Alianza PAIS (AP).

    Like all of the left parties
    and governments that came to power in the “Pink Tide” that swept the
    region in the 21st century, the AP values national sovereignty and
    self-determination. Its leaders, as well as its activist and much of its
    electoral base, understand that the progress that has been made over
    the last decade would not have been possible if the government of
    President Rafael Correa had followed the economic prescriptions of

    This progress included
    reducing poverty by 38 percent and extreme poverty by 47 percent.
    Inequality was also substantially reduced: The ratio of the income of
    the richest 10 percent to the bottom 10 percent was reduced from 36 in
    2006 to 25 by 2012. Annual growth of income per person rose from 0.6
    percent over the prior 26 years, to 1.5 percent. And access to
    healthcare and education was substantially increased, with spending for
    higher education rising from 0.7 to 2.1 percent of gross domestic
    product (GDP) – more than is spent by even many high-income countries.
    Social spending overall doubled, and public investment more than
    doubled, as a percentage of GDP.

    In order to accomplish these
    goals, the government had to re-regulate the financial sector, tax
    capital flight, require banks to repatriate most of their liquid assets
    held overseas and make the central bank part of the executive’s economic
    team, among other economic reforms. Without this new role of the state –
    crucially, acting in the public interest instead of on behalf Ecuador’s
    bankers and richest citizens – Ecuador could not have made most of the
    gains over the past decade.

    The other presidential
    candidate, former banker Guillermo Lasso, proposes a traditional
    right-wing program of tax cuts for the rich and spending cuts that will
    have to more than match these so as to bring down the national budget

    He pledges to reduce the
    government’s role in the economy, which was actually quite important to
    the progress of the past decade, arguing that “free markets” are the key
    to unleashing the country’s economic potential. And he has pledged to
    restore the “independence” of the central bank, which would make it more
    an instrument of the big bankers, like it was when Lasso himself was in
    his prime in the late 1990s (when the economy was wrecked by a banking

    Lasso has also admitted to
    owning a bank in Panama whose main line of business is to facilitate
    capital flight from Ecuador. This is also a big issue of national
    sovereignty in Ecuador, as the majority of people just voted (in the
    Feb. 19 election) to approve a ballot initiative saying that people who
    are holding money in offshore tax havens should have not be able to hold
    public office.

    All this would bode ill
    under any circumstances, but the lack of respect for national
    sovereignty means that as the economy runs into trouble – which is
    likely, given the proposed budget cuts – Lasso would probably go to the
    International Monetary Fund (IMF) for a loan. This would mean the end of
    Ecuador’s hard-won sovereignty over economic policy, and a host of
    “structural reforms” made in the United States, which Lasso and his
    allies would be all too eager to implement.

    It is worth noting that,
    according to a leaked document from the U.S. embassy in Ecuador, Lasso
    briefed U.S. embassy officials on his efforts to organize business
    opposition to the Correa government in 2007. If there were hard evidence
    like this on President Trump’s relations with the Russians, that would
    spell the end of his presidency.

    We know what the decades of
    Washington-sponsored structural reforms looked like in the past: almost
    zero growth in income per person in Ecuador over an entire 20 years
    (1980 to 2000). We can also look at how the new, Washington-supported
    right-wing governments of Brazil and Argentina are doing.

    It is nearly a year since
    the right-wing President Michel Temer took power through an
    “impeachment” – which many experts labeled a coup because of the lack of
    an impeachable offense. Brazil’s worst depression has continued to
    deepen through the fourth quarter of 2016, with record levels of
    unemployment, and no end in sight. Investment continues to fall despite –
    or rather, because of – austerity and budget cuts that were supposed to
    excite investors even as they sank the economy.

    In Argentina, 40 percent
    inflation and a recession, as well as devastating hikes in utility
    prices, have given millions of Argentines second thoughts about the
    right-wing president that a majority actually voted for in December
    2015. Like Lasso and Temer, Argentina’s Mauricio Macri is a protégé of
    Washington. Leaked diplomatic cables from 2009 show him appealing to
    U.S. officials to come down harder on the Cristina Kirchner government
    then in power in Argentina.

    Now these people will have
    Trump and Republican extremists in Congress – people like Sen. Marco
    Rubio (R-Fla.), who would happily destroy Ecuador in order to save it –
    as their closest allies.

    Not a great time for Ecuador
    to give its hard-won national sovereignty back to Washington.

    Mark Weisbrot is co-director
    of the Center for Economic and Policy Research in Washington and the
    president of Just Foreign Policy. He is also the author of the book
    “Failed: What the ‘Experts’ Got Wrong About the Global Economy” (Oxford
    University Press, 2015). You can subscribe to his columns here.