Date first published: 25/05/2017

Key sectors: all

Key risks: policy continuity; political stability; governability; corruption fallout

‘I am a president for all. I owe everyone. I respect everyone’. Left-wing Lenin Moreno’s statement after being sworn in as Ecuador’s President on 24 May is indicative of the conciliatory approach he is expected to imprint in Ecuadorean politics after the mostly confrontational 10-year rule of his friend and ally Rafael Correa. Moreno narrowly won an unprecedented presidential runoff on 2 April by securing 51.16 per cent of the ballots over centre-right Creando Oportunidades (CREO) candidate Guillermo Lasso, who received 48.8 per cent of the vote. Correa leaves behind an increasingly polarised country, with a weakened opposition that has nevertheless contested the results and could continue to question the legitimacy of Moreno’s presidency. Hence Moreno’s drive to insist dialogue will be the centrepiece of his administration. He has promised to broadly continue Correa’s ‘Citizens’ Revolution’, and he will have to do so while implementing a fiscal adjustment programme to address Ecuador’s debt, deficit and economic growth troubles.

Moreno’s apparent departure from Correa’s style of governance is not expected to be followed by a significant change in policy. Even though Moreno has recognised that fiscal adjustment will be necessary, the pace of such measures is likely to be slower than what it would have been under Lasso. Nevertheless, the fact that Moreno appointed a cabinet including business executives and personalities from the private sector in key ministries such as Hydrocarbons, Mining and Trade indicates a willingness to ease divisions and improve efforts to attract private investment to sectors that will remain a priority.

The balancing act will not be easy, and much remains to be done to reassure investors about Ecuador’s long-term intentions. On 13 May Correa signed a series of decrees terminating 16 bilateral investment treaties (BITs) which were denounced by the National Assembly on 3 May. The BIT’s were under review since 2013 as allegedly incompatibility with the 2008 constitution, particularly regarding international arbitration. Although ‘survival clauses’ theoretically guarantee the BITs will remain in place between 5 and 12 years, the move indicates that legal uncertainty will remain a concern at least during Moreno’s first four-year term.

The ruling Alianza PAIS’ (AP) majority in the National Assembly to an extent guarantees Moreno will not have to deal with legislative gridlocks that could hamper his governability prospects. Despite getting 39 per cent of the vote in February’s legislative election, thanks to gerrymandering AP managed to secure 74 of the NA’s 137 seats. On 14 May AP also secured the National Assembly presidency, further consolidating Moreno’s ability to move forward with his legislative agenda. However, deepening polarisation and the almost-unavoidable need to cut public spending have the potential to fuel anti-government sentiment and associated unrest. These trends could intensify should major promises, including moving forward with corruption ongoing probes, should not be fulfilled.

Moreno will have to prove that he is not Correa’s puppet if he is to truly heal Ecuador’s growing divisions. He was, after all, Correa’s vice president from 2007 to 2013 and his chosen presidential candidate. Most of the ongoing corruption investigations could potentially affect high-ranking AP politicians, including Correa’s inner circle. Striking a balance between fulfilling promises to disgruntled sectors, restoring macroeconomic fundamentals, attracting investors and remaining loyal to Correa’s AP and the ‘Citizens’ Revolution’ will ultimately define if this is, indeed, Moreno’s turn.