'None of the scenarios is good, but the best is for Lasso to continue'

Ecuador is immersed in a political crisis revolving around the impeachment proceedings against President Guillermo Lasso.

The outcome of the efforts by the opposition to remove him will come to a head in May and whether or not the conservative president has a chance to complete his term in 2025 or will be forced out of government at the halfway point.

BNamericas talks to Walter Spurrier, president of local consultancy Grupo Spurrier, about the landscape for investment in the country considering the political situation and the possible scenarios when the national assembly makes a final decision on the case.

BNamericas: How has the political crisis affected investment?

Spurrier: Investment decisions can be divided into three parts. The first has to do with investments linked to public sector decisions, including those directed at mining, oil and public works, which are very low due to a lack of execution in the public sector and partly due to the uncertainty on the part of potential investors.

In second place are important projects in the private sector, which are also on hold, some due to the political problem and others because they lack environmental permits.

In third place are the investments that companies have to make constantly to update their machinery, keep up to date, make repairs, among other things, which have been maintained, perhaps not with the speed seen in other circumstances, but they have been maintained.

If we look at investment as a whole, it has to be said that it's far below what it could be if there was political stability and better execution by the public sector.

BNamericas: In May it will be known whether there is sufficient backing to remove the president. How do you see the scenario?

Spurrier: I don't see the removal of Lasso. I believe that if the president and his team consider that they don't have the necessary votes to throw out the impeachment, Lasso will make his defense in the national assembly, and immediately submit the 'cross death' decree [dissolving the national assembly to call early presidential and legislative elections].

I don't think he will let himself be removed because removal would make it appear like he has done something wrong.

It's not understood internationally, and it's thought that if there is a political trial, there must be corruption and no further investigation is done in this regard.

BNamericas: Would the cross death scenario deepen the political crisis?

Spurrier: None of the possible scenarios is good. If Lasso stays, the opposition will continue trying to remove him.

If he stays, a lot will depend on whether his government regains governability and begins to become more effective. So far, in these first two years, it has been very ineffective.

With the cross death scenario, there's more uncertainty, as it won't be known which government will come next.

In the scenario that the opposition manages to remove him, it's clear that the goal of Correism [the left populist movement that emerged under former president Rafael Correa] is to seize power, and unless the new president is willing to accept orders from Correa, they will try to remove him or force him to resign.

None of the scenarios is good, but the best is for Lasso to continue.

BNamericas: But if there aren't sufficient votes to remove him, he'll still be too weak to govern?

Spurrier: At the time when there are no more institutional means of removing him from power, with better decisions, Lasso could attract more investment to the country. He could generate more dynamism in the economy and complete his presidential term in 2025, improving his popularity with a more effective government.

Much will depend on what defense strategy Lasso has against a possible uprising organized by the president of the confederation of indigenous nations [Conaie], Leonidas Iza.

But for now, the indigenous communities aren't willing to finance Iza's political project, which is also weakened, with their work and economic losses, but everything will depend on how Lasso faces this possible situation.

BNamericas: Should the effectiveness of the government be seen first in terms of the crime issue?

Spurrier: Partly yes. We’ll have to see how successful the participation of the armed forces has been in controlling crime because the police have been very ineffective.

The chief of the joint command of the armed forces has been effective with the plan to deal with crime and if the plan is carried out, it could greatly improve the situation. Unfortunately, we don't know for sure whether the government will become more effective.

If the Lasso government does become more effective, both in its defense management and in its management of the economy, removing obstacles to investments, the outlook will improve.

At the moment, there's a lot of investment on hold because environmental permits aren't being issued. Two years have gone by and this hasn't been resolved. The situation can't continue like this and if it doesn't improve, the country will continue to deteriorate.

If there's an effective reaction, good management both in terms of crime and in the operation of the public administration, the country will recover.

BNamericas: Lasso's victory originally generated a lot of positive expectations. How has it come to this?

Spurrier: Due to political management and the lack of actions to fulfill the plans. Political management has been totally ineffective. Lasso won the presidency with an alliance with the Social Christian Party [PSC] and the same day that he took over , the alliance was broken and the PSC became intransigent opposition.

Both Lasso's party Creo and the PSC lost out. The PSC then failed to form a logical alliance and there was an exodus of several of its leaders. Lasso's government was left weak as it lost almost half of those who voted for the Creo-PSC ticket.

Lasso did nothing to maintain the alliance and then he handled the situation with the strikes and threats from Conaie very badly.

He was also unable to maintain a legislative bloc, which, even if it wasn't a majority, could block the worst things in the national assembly.

Only now, with the new minister of government Henry Cucalón, a former PSC member, is he beginning to straighten out the political side.

BNamericas: Has the lack of success on economic issues also led the country into this situation?

Spurrier: In the economic area, on taking office, Lasso issued a series of very clear provisions on what had to be done, but they haven't been fulfilled.

For example, in mining there's US$1bn of investments held up for projects that are about to start development and which will be able to produce and export in a few years' time.

The projects are stopped either due to the lack of environmental permits or because illegal miners, disguised as environmentalists, have caused damage to the mining facilities and the government isn't defending [mining companies].

In the oil sector, no tenders have been launched at all.

In Colombia, President Gustavo Petro said that the oil industry is on its way out. The oil companies that are in Colombia have to diversify and the logical thing would be for them to come to Ecuador, a few hundred kilometers away, but these investments aren't being attracted.

In general, there has been ineffective management. There has been a good approach to what needs to be done, but no follow-up. There's been no execution, and that has caused discontent and even confusion.

Holders of Ecuadoran debt bonds have been selling them to such an extent that country risk has risen to exaggerated levels.

I would say that the lack of political and economic management has meant that the expectations there were when Lasso took office haven't been met.

BNamericas: If Lasso manages to ride out the current situation, will he be able to correct course? Would he have room to do so?

Spurrier: With respect to correcting course, we don't know why two years have passed and there haven't been the necessary corrections. Let's hope there will be now. Let's hope there's a reaction. Those who have been on the verge of political death tend to reflect and change course, and we expect that to happen now.

For now, what is clear is that uncertainty continues and the outcome of the impeachment process cannot be foreseen.