Assange’s Exit Buys Ecuador Goodwill But No Deliverance

(Bloomberg Opinion) -- To sympathizers and celebrity boosters, WikiLeaks founder Julian Assange, whose extended furlough inside the Ecuadoran embassy in London ended in handcuffs last week, is a legend and a maligned whistleblower.

To hear it from his hosts, he was the guest from hell. For the last six years and 10 months, Ecuadoran embassy officials claimed they put up with the Australian hacktivist’s tantrums, skateboarding and scatological eccentricities, garnished with cyber-sabotage. (Ecuadoran officials reported being hit by some 40 million attacks on government websites since Assange’s arrest.) Some 72 percent of Ecuadorans were keen to see him go, according to Cedatos, a pollster.

Still, President Lenin Moreno might miss the distraction. While ending Assange’s asylum may have bought Moreno goodwill with the United Kingdom, which is weighing a post-Brexit trade deal with Ecuador, and the U.S., where Assange is wanted for conspiracy to commit computer crimes, it’s hardly a free pass for the embattled Andean reformer. Moreno’s laudable policy reset — from willful populism to market-driven democracy grounded in the rule of law — risks losing momentum.

Ecuador is facing heavy debt, a fiscal mess and chary investors. A $10.2 billion credit from multilateral lenders, led by the International Monetary Fund, has earned the government some breathing room and spurred a bond rally. But it comes with sacrifices that will keep growth flat and tempers short at least through 2021. Throw in worsening crime, unemployment and social unrest, and it’s little wonder that Moreno’s approval ratings have sagged.

Since his election in early 2017, Moreno has made clear that he would be a one-term president, a rare demurral by a Latin American leader and nearly unspeakable in the Bolivarian Andes, whose presidential palaces are flypaper for supremos. “In theory, he could change his mind and run for reelection, but what are the chances for an incumbent with 30 percent approval ratings?” asks Risa Grais-Targow, Latin America director for Eurasia Group. If his fortunes don’t improve, Moreno risks becoming a lame duck with 18 months left in office, leaving Ecuador’s unfinished reforms in a race with political entropy.

That would be a shame. From Argentina’s Cristina Kirchner to Brazil’s Dilma Rousseff — Venezuela’s Nicolas Maduro is hors concours — Latin America has been a hothouse for disastrous populists. If only it were as indulgent to reformers. This week, Argentine president Mauricio Macri, who has been struggling to fix the economy that Kirchner broke, froze food prices, public transportation fares, and utility and mobile phone rates in a desperate attempt to catch the tumbling peso and cool inflation, which reached 55 percent in March. Calling the freeze voluntary was no solace to voters who elected Macri to retire such fixit prescriptions.

Like Moreno, Macri is wrestling with problems he mostly inherited. But turning around more than a decade of official profligacy and magical economic thinking is bruising work, and can consume the political capital of even the ablest leader. 

Moreno has admirably dismantled the authoritarian legacy of his predecessor, the eloquent and often rash Rafael Correa, who centralized power, bullied opponents and muted independent journalists. Moreno immediately reached out to business leaders and the media, revoking the most aggressive items of Correa’s imperious communications law. Attacks on press freedom decreased 52 percent last year, civil liberties improved and Ecuadorans ranked the country as less corrupt. Human Rights Watch praised Moreno for “policy changes that have fostered a climate of open debate and are aimed at repairing damage suffered by democratic institutions during former President Rafael Correa’s decade in power.”

At the same time, Moreno has made Ecuador more business friendly and clean, signing on to the Organization for Economic Cooperation and Development’s global initiative to fight tax evasion. More controversially, he also undertook judicial reform to ensure the independence of the courts and remove judges putatively beholden to “Correismo,” as the former president’s acolytes call their code. Citizens groups worry he was swapping one group of partisans for another.

Ecuador’s economic remake is still to come. Oil prices have improved and inflation is low, thanks to the country’s reliance on the dollar. However government spending is still out of hand and foreign debt looms, including around $1.5 billion in bond payments falling due next March.

The IMF agreement will help. Yet it also fuels political resentment, inviting comparisons with the bad old days when Latin American nations were wards of foreign lenders, who demanded sacrifice for cash. Ecuador must reduce generous fuel subsidies, running about three percent of gross domestic product, and slash government investment. Moreno also has pledged to cut the public payroll, renewing only one of every two expiring job contracts. Enacting a tax reform alone could save up to two percent of GDP, even as increased social spending should ease the burden on the poor, according to Oxford Economics.

Given Ecuador’s dismal credit history — eight sovereign debt defaults in 180 years until 2015 — skepticism over Moreno’s ability to deliver austerity and still repay loans runs high. His plan faces resistance in a fractious congress, which must approve fiscal and labor reforms.

“Organized crime, investment, foreign debt: There’s a big agenda Moreno has left untouched,” Andres Mejia Acosta, a lecturer in political economy at Kings College London, told me. “Yet he has been an astute politician, lowering partisan tensions, improving fiscal management and increasing transparency, all the while managing to survive the feuding factions.” Those moves may lack the revolutionary audacity of Latin America’s fading populists, but they have helped restore some democratic normalcy to an outlier country — never mind reclaim that corner room from an inconvenient guest.

This column does not necessarily reflect the opinion of the editorial board or Bloomberg LP and its owners.

Mac Margolis is a Bloomberg Opinion columnist covering Latin and South America. He was a reporter for Newsweek and is the author of “The Last New World: The Conquest of the Amazon Frontier.”

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