Ecuador Under Lenin Moreno: an Interview With Andres Arauz

I explained in other articles on Counterpunch (here, here and here) that Lenin Moreno won Ecuador’s presidency in 2017 by campaigning to continue the “Citizens Revolution” of former president Rafael Correa (a leftist who was in office from 2007 until 2017) but upon taking office immediately shifted policy sharply to the right.

Below is a conversation I had with Andres Arauz, who was a member of Correa’s economic team throughout his time in office. Among other roles, Andres Arauz had been the Deputy Secretary for Planning and Development and the Coordinating Minister of Knowledge and Human Talent.

JE: You knew Lenin Moreno could not be trusted to continue Correa’s policies as he had campaigned to do when he was elected in 2017. How did you know?

AA:There were two ways to read this: as a structural matter and on a personal dimension. Looking at it structurally, our political project, the historic coalition that led to the Constitution of Montecristi [ratified by Ecuadorean voters in 2008] was gradually weakened over time by internal attrition.  Contradictions were generated that made it difficult to keep the whole coalition together. During Rafael Correa’s last term in office the contradictions were visible, but Correa was the synthesis of that historic coalition that included the political movement [Alianza Pais], social organizations and other forces. The moment Correa left the scene a kind of vacuum of power was created. It has happened in many historic periods when strong leadership disappears through death or by succession. Disputes arise – some ideological and some not ideological – as we have seen. In my opinion, it was a huge mistake not to continue with Correa’s leadership. It was a mistake to believe the institutions would hold up; unfortunately our democracies are still too immature. In fact, throughout Latin America, the conditions under which progressive projects have developed have made it very difficult to sustain revolutionary changes. So that is the structural reading.

On a personal level, I had information that ever since 2013, when Moreno didn’t run as Vice President, he was interested in making a presidential run. Even though he participated in all cabinet meetings, his role had always been mainly one of working on social assistance, campaigns for politeness, or helping people with disabilities. He advocated Correa’s political line, but while Correa confronted powerful interests, Moreno was a conciliatory and relaxed figure who avoided controversy. So when he left the Vice Presidency he had a 90% approval rating – applauded by left and right and pretty much all sectors of the public. That gave him tremendous political capital to use one day, especially if he basically removed himself from the national political scene. He confronted nobody.

So when he became the UN’s special representative for people with disabilities, still paid by the Ecuadorian government, his idea was to keep himself in an isolated position so he could preserve that political capital. It’s possible he never viewed that political capital as being a product of the political project he was part of, but as something he alone produced. And with an ecumenical attitude, he probably thought he would build a unity government of some kind.

There were other signs. He originally intended to have Isabel Noboa as his running mate. She is one of the most prosperous capitalists in Ecuador. That bit of information alone spoke volumes about the kind of orientation Moreno could have if he led our project into its next phase. It broke with everything we were about which was against elite dominance. We did work with sectors of private capital, but it was never at the level of having a Vice President with those characteristics.

JE: How did you know that Isabel Noboa was being considered by Moreno as a running mate?

AA: That’s old news that came from many comrades who had visited Moreno in Geneva. That helped me analyze what kind of orientation his government would have. In fact, Isabel Noboa’s son-in-law is Moreno’s minister of foreign trade and investment and plays a very important role. Isabel Noboa also contributed to finance Moreno’s campaign through a business group, “Proponle”. They have ample influence.

A key reason Moreno took this direction, and about half of the legislative block, is because we didn’t win the presidential elections in the first round. That led to backrooms deals between a part of Alianza Pais and the conservative right against the neoliberal financial right represented by [Guillermo] Lasso [Moreno’s opponent in the second round]. The conservative right is represented by the Social Cristiano party, the Banco Pichincha [Ecuador’s largest private bank], and conservative sectors of the Church and of the military. The backroom deal with them becomes visible during the second round. It is largely the reason we are living through this now. You can call this “betrayal” or you can call it a conservative involution of the Ecuadorian political process.

JE: Were you surprised by key players in Moreno’s government who then went along with Moreno’s about face: Pepe Serrano and Maria Vicuña [the new Vice president after Jorge Glas was removed from office after being placed in pre-trial detention]

AA: Not by Serrano. He was part of the backroom deal with Jaime Nebot [right wing mayor of Guayaquil] and the conservative right and he was going to have a lot of power as president of the National Assembly to cut deals. I was surprised in Vicuña’s case because she had been part of the more radical wing of Alianza Pais.

JE: Carlos de la Torre recently resigned as Moreno’s Finance Minister. Did he resign because he wanted to fire 54,000 public sector workers? Correa remarked that an unnecessary subsidy Moreno’s government is now paying into Ecuador’s social security system costs most than 54,000 public sector workers. Can you explain Correa’s remark?

AA: On the contrary, De la Torre was opposed to that adjustment. He did not want to fire public sector workers, and therefore found himself without support from Moreno and the rest of the cabinet who wanted the cuts. The Presidency has issued a formal order that all ministries are to cut 10% from their budgets. Imagine what that means. You cut wages or staff by 10%, or paralyze much of the work of many institutions – and that is especially bad in areas like health and education where there social debt is still pending. Despite Moreno’s rhetoric, De la Torre didn’t implement cuts. In fact, pubic spending in 2017 was greater than it was in 2016, and that is one of the reasons De la Torre left.

As for what Correa is referring to, due to demographics, there are vastly more active Ecuadorean workers paying into the social security system than there are retirees. In terms of cash flow and liquidity, the system has a tremendous surplus. It’s quite different from many European countries where there are pressures because of so many retirees in an aging population.  In Ecuador the population is predominantly young and there has been a huge increase over the last ten years in the number who pay into the system because of stronger labor regulations. There is plenty of liquidity. For that reason, Correa’s administration modified the law which previously said that the central government had to subsidize 40% of what is paid out to pensioners.  The modified law now said that if there is a shortfall in the social security system, the government would not guarantee only 40%, but up to 100% of the cost of the pensions if necessary. Central government’s responsibility to support the system was recognized, but, with the present cash flow situation, that wouldn’t be necessary for 10 or 15 years. What Moreno’s government did was team up with the Constitutional Court to declare the modification to the law unconstitutional. The state was obliged to continue to subsidize the social security system with about $1 billion annually. This generates stress and imbalances within the state budget.  In this case, it will squeeze out funds from other areas such as health or spending so that the IESS can accumulate liquidity.

What is ultimately behind all this? Ecuadorean financiers are looking to have that liquidity accumulated at a rate of $1 billion per year deposited in their banks.

JE: So it helps justify cuts in other areas.

AA: Of course.

JE: And private banks get state resources.

AA: Exactly. From the point of view of the right there are two goals. One is to force cuts like the firing of public sector workers. Two – get that liquidity into private banks like Ecuadorean governments did before Correa. The money ended up being deposited in Miami.

Some people claim the Social Security system is broke. They cite actuarial studies far into the future. Some are even audacious enough to say the system has shortfalls today. All of this ignores the fact that the system has the nations’ largest portfolio of investments and its own bank! Those who claim the system is broke are the same ones who want to raise the retirement age or who want to privatize it. They never propose increasing formal, secure and stable work that would increase revenues.

JE: Interesting that the Constitutional Court didn’t do anything when Moreno forced through his referendum but they sided with him on social security.

AA: Exactly. The Constitutional Court is supposed to be the protector of the constitution and we now see that they are destroying the constitution. They are aligned with Moreno and willing to tear down the entire legal structure built in Montecristi. It’s very dangerous.

JE: There was that recording leaked that revealed that some judges on the Constitutional Court were actually scared for their own safety when Moreno publicly “demanded” that they approve his referendum questions and fast.

AA: Indeed. In that case they didn’t even have the courage to say “yes we are with Moreno” but just stayed quiet and let the clock run without making a decision. It was very cowardly.

JE: Did that surprise you?

AA: I actually had hope that the Constitutional Court would act.

JE: Now Correa is being threatened by the comptroller’s office on the issue of public over-indebtedness. It is being alleged that a legal limit of 40% GDP may have been surpassed. Can you explain that?

AA: The debt limit allegation is outright false, but has many motivations.

One – to generate geopolitical conflict with China. Recall Ecuador had a sizable financial and investment cooperation program with China.

Two – to increase Ecuadorean debt’s risk premium and make government bonds held by the private sector pay a higher interest rate.

Three – to justify cuts in public spending and call upon the IMF.

Fourth – to retaliate against the audit (and default) of the public debt that Correa’s government did in 2008 – to teach progressives a lesson.

Fifth – issues that that have to do with the social security system (IESS) and the central bank. Conservative sectors find it unthinkable that the IESS and the central bank would finance the state. According to their economic orthodoxy the central bank lending to the government is heresy. This aligns with the interest of the financial sector who wants intra-public sector loans declared illegal so that banks can alone lend to the government and thus increase their political power. And if from all this they can stick Correa in prison that’s great, but that’s the political communications strategy. The structural reasons have to do with all the other things I mentioned. I wrote a detailed article on this, you can find it in

JE: Moving on to the case of [deposed Vice-President] Jorge Glas, I can’t be completely certain that he is innocent, but I think the case against is very weak. I don’t see how he could have been convicted in a fair trial. How do you see it?

AA: I share your point of view, but let’s look at it the following way. First of all, innocence need not be proved – only the contrary. There was no justification for placing Glas in pre-trial detention. That was the most riddling act that revealed the political nature of the attack. He was already forbidden from leaving the country and under surveillance by military police so his whereabouts were always known. When, in spite of all that, they put him in prison, that consummated the legal coup that ousted him. To me that was that most arbitrary act of the whole case.

Now, in my view Ricardo Rivera, Glas’s uncle, is guilty and the evidence is clear. This is what I personally find troubling. In 2008 when Rafael Correa’s brother [a businessman] was found to have contracts with the state, Correa himself took the lead in publicly cancelling those contracts and making sure he could never get any in the future. In this case, I don’t see that Glas took such decisive steps against Ricardo Rivera. Do I explain myself?

JE: Yes, I can see your point and agree that it’s troubling. 

AA: I also don’t see any justification for Odebrecht officials [who testified against Rivera and Glas] not being prosecuted in Ecuador. They’ve effectively been declared innocent and that bothers me because corruption always goes both ways. Key private sector culprits have been absolved in this case and that’s alarming.

However, momentarily, let’s put corruption aside. There is little to no geopolitical reading of the attacks on a firm like Odebrecht, which can be called a Brazilian “champion” in the development literature, widely partnered with Brazil’s Development Bank (BNDES). It was just as Odebrecht began to get involved in military projects (building submarines for Brazil) that this corruption scandal exploded – where else but in the US. My reading is “you can build infrastructure all right, but if you want to establish yourself as part of Brazil’s domestic industrial military complex, that’s a no no”. Aside from corruption (which of course it is important to fight) the Odebrecht case should also be read geo-strategically.

JE: Glas also made a lot of enemies over the past ten years (unlike Lenin Moreno) because of his involvement with public works, the demonized “public spending”. Even if he could prove he was innocent, it would have been very hard for him to be the presidential candidate in 2017.

AA: Indeed, but again, first, as a point of departure, in Ecuadorian law it is not necessary to prove innocence. Guilt must be proved. Second, Glas was Ecuador’s primary link with the BRICS countries. Glas had a key role working on deals with China, Brazil, Russia. He made some efforts in India. So he was the face of Ecuador’s multipolar approach. In the initial years he was also responsible for de-privatizing strategic state companies – utilities and natural resource firms. Of course, all of that weighed heavily on the kind of enemies he would make.

It would have been very hard for him to have been a victorious candidate even with party discipline behind him. Parts of the base tends to look for people more directly linked to social issues. That’s why Correa was ideal because he was also strongly identified with the battle for social justice and rights whereas Glas was symbolically linked with things many don’t see as being “left”. There is a left, in which I include myself, that believes that upgrading our social rights requires structural transformation: industrialization, economic sovereignty, state-owned control over strategic sectors and geopolitics. There is another left which concerns itself mainly with social assistance – almost caricatured as charity. That wasn’t resolved and we see the consequences.

JE: You really think things would have turned out much differently had Moreno won in the first round? I see him as so cynical that I find it hard to imagine him behaving differently.   

AA: Not Moreno, but the many within the block of Alianza Pais legislators and others in power would have behaved differently I think. They would have insisted on the original platform.

JE: You think the Constitutional Court would have behaved differently?

AA: I think it would have been less likely for Moreno to call that referendum. Moreno’s discourse was “we won in the second round but with fraud allegations so we need to do something to re-establish our legitimacy”. Ultimately, it’s hard to say. It’s speculation, but regardless Moreno would have tried to roll back the political gains of the revolution.

JE: Do you think Alianza Pais could have done more to avoid betrayal, to make it less easily by empowering the membership?

AA: Yes. One of the internal criticisms is that the base wasn’t sufficiently empowered and part of the problem is that social movements lost leaders as they went to work for the government.  We should have found ways to avoid bureaucratizing our political project.

JE: How is the registration of the new party coming along? [Correa and his allies left Alianza Pais]

AA: Its statutes have just been approved by the electoral authorities [CNE].

JE: They finally approved it? They were blocking it.

AA: They still are blocking it but the strategy was to pursue a parallel path – a plan B: to officially talk up the Alfarist party and try to register it; but from below, with other people, to pursue the registration of a differently named party. The CNE approved it because they didn’t know it was the same group of people. Finally, there is now the legal basis to do the rest.

This is a lesson for all of us. Fortunately after only a year – and because Correa reacted very quickly, and about half the legislative block reacted quickly against Moreno – we’ve been able to stop a lot of legal changes – attacks they wanted to perpetrate in the short term. So self-criticism is fine but so is quickly launching a counterattack, going on the offensive. Consider that in Moreno’s referendum, the “no” vote – sponsored only by Correa against all other forces – reached 36%, a sizable portion of the electorate. Less than a year into Moreno’s government, there is now a political instrument to participate in local elections next year: with 36% you can win because these contests are one-round elections in a multi-party system. After those elections, we’ll have a more complete map of our national politics.

The challenge for the forces of the Citizens Revolution, given the regional and domestic conditions, is to give permanent struggle from the left and from below. From this experience, it is clear you can’t be ambivalent to oligarchic interests (from the left) and that you need an empowered and strongly organized base.

Joe Emersberger is a writer based in Canada whose work has appeared in Telesur English, ZNet and CounterPunch.