Lenín Moreno's mistake was not to end fuel subsidies but to fail to prepare the ground for that
a familiar story. In the aftermath of the South American commodity boom, a centrist president has to repair economic damage caused by a leftist populist and, either because of technical or political mistakes, botches the job. Theis blamed for measures that would be even more painful without its money. It has happened in Argentina. And now it is happening to Lenín Moreno in Ecuador.
Mr Moreno was elected in 2017 as the successor of Rafael Correa, an autocratic populist. Ending a period of instability which had seen five presidents come and go in ten years, Mr Correa ruled successfully for a decade, thanks to the commodity boom. Higher oil revenues, plus expensive and opaque Chinese loans, allowed him to build roads, hospitals and schools while also squandering billions. He doubled the size of the state.
But the price increases were steep—for diesel, from $1.04 to $2.27 per gallon, and for higher-octane petrol from $1.85 to $2.39. This was hard on remote rural areas, which depend on road transport. The government failed to prepare the ground in advance by consulting people and mitigating the impact on the poor. After the price hikes had taken effect, the cash-transfer payments which go to the poorest 20% of the population were increased; but by then the damage had been done.
The measure united disparate opponents: the indigenous federation , bus owners, students and supporters of Mr Correa. The ex-president’s allies, according to the government, caused much of the violence. Pickup trucks of thugs patrolled Quito, the capital. In two weeks of mayhem, at least six people died, more than 1,400 were injured and more than 1,100 arrested. The economic damage may have reached $1.5bn .
Mr Moreno gave in and scrapped the decree. He will work with Conaie on a new package that involves targeted subsidies, he said. That may involve forfeiting around half the proposed savings, reckons Siobhan Morden of Amherst Pierpont, a securities firm. A weakened government will have to find the rest in other ways.for unpopular measures their governments would have to take anyway.
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