The Big Idea
Ecuador | Puzzling out the political strategy
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There is no quick fix for economic reform in Ecuador, but the next few months will be critical. Ecuador’s Lasso administration just released the questions for a constitutional referendum next year. The focus falls on democracy, the environment and security issues. The referendum may provide some marginal near-term political leverage for Lasso if it strengthens approval ratings and weakens opposition. If the polls show voter support for the referendum, the Lasso administration can improve governability and pave the way for economic reform.
This kick starts a process leading to a popular vote next year. The process includes submission of specific questions to the constitutional court for review within 20 days (cannot modify structure of the State or restrict rights) and then an executive decree to convoke the CNE to launch the referendum (maximum of 60 days after convocation). This took five months under the Moreno administration in 2018 from inception to referendum. Lasso is aiming for a referendum in February 2023, allowing for potential revisions and possible inclusion of “popular consult” questions before determining the final questions.
The Lasso administration has been openly discussing a referendum proposal over the past year; however, the context and political strategy is now quite different. It was originally intended to leverage strong presidential approval ratings into popular support for economic reforms, such as investment and labor reforms. Referendums are a common strategy for the executive branch to bypass an uncooperative and fractured legislature. The referendums are often viewed as a vote of confidence for the executive branch that could either strengthen or undermine their political mandate and their economic agenda.
This is now a higher risk strategy with approval ratings of the Lasso administration below 20%. Referendums typically succeed only when approval ratings are above 50%. Perhaps the intentions are to boost the approval ratings of the Lasso administration based on the popularity of the questions, or further weaken the already low approval ratings of the opposition-controlled Assembly. This referendum now seems more like a vote of no confidence against the legislature. There is probably not much downside risk considering the already low approval ratings of the Lasso administration and the current paralysis with the legislature.
The specific questions become highly relevant to whether the referendum succeeds or fails. The “security” and “environmental” questions should be well received, with recent polls constantly citing security issues as top voter concerns and environment issues the main concerns among the indigenous community. It seems somewhat controversial to broaden the scope of the Armed Forces to reinforce national security; however, polls provide the highest approval ratings to the Armed Forces relative to all other institutions. The popularity of these security and environmental questions may perversely serve as a boost to the Lasso administration with a de facto vote of confidence while the democratic questions seek to capitalize on the low approval ratings of the legislature.
The “democratic” questions are a clear challenge to the Assembly and the CPCSS (Council of Citizen Participation and Social Control) on reducing the size of the Assembly (from 137 to an estimated 121 deputies), reducing the number of political parties as well as allowing the Assembly to select CPCSS officials via a meritocratic process as opposed to popular elections. This may resolve the political fragmentation and policy paralysis with better overall accountability and legislative cooperation. The proposal to strengthen the meritocracy of the CPCCS would allow for stronger checks/balances and less political interference amongst regulators.
Success of the referendum will require an extensive socialization process across all relevant sectors, similar to the consultations in Costa Rica ahead of their IMF program. The referendum documents include plenty of details and supportive arguments. The opinion polls will monitor the voting tendencies ahead of the referendum similar to any election cycle. The referendum now becomes the policy priority and the political strategy, determining whether the Lasso administration can improve either near-term or medium-term governability and ultimately tackle the economic reform agenda necessary for debt sustainability.
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