Lasso suffers new setback as Ecuador's presidential elections approach

The government of Ecuador’s President Guillermo Lasso suffered a new political setback on Friday when the constitutional court rejected two key economy-related bills.

One would allow the restructuring of companies with financial difficulties to make it easier for them to reach agreements with creditors and to continue operating. The other sought to support those who have unpaid student loans and face legal proceedings.

Previously, the court rejected a bill designed to attract investment by creating duty free zones.

After the latest setback, local analysts believe little can be expected until a new government takes office in October or November.

“For such a weak government, which is on its way out and with so little legitimacy, it will be very difficult to carry out important reforms,” the head of political risk consultancy firm Prófitas, Sebastián Hurtado, told BNamericas.

In May, faced with an imminent vote in an impeachment trial, Lasso resorted to a constitutional mechanism known as cross death that allowed him to dissolve the national assembly and call early presidential and legislative elections.

Under current legislation, the president is empowered to govern by decree until a new government takes office but with the approval of the constitutional court when dealing with urgent economic issues.

There were very important bills in Lasso's economic program which the assembly did not approve but now the court has been an obstacle, said Patricia Estupiñán, director of Revista Vistazo, one of the most influential magazines in Ecuador, in a television interview.

“The idea of the cross death is that the president can govern and do what the assembly did not let him do. However, the court has turned out worse than the assembly… Lasso failed with cross death because he has not won anything,” added Estupiñán.

Presidential and legislative elections, along with referendums on whether to stop oil production at block 43 and prevent metallic mining in the Chocó Andino zone, an area rich in biodiversity, will be held on August 20.

There will be eight candidates in the presidential election. Luisa González, the candidate of former leftist president Rafael Correa's political movement, is leading the polls.

Hurtado considers that during the remainder of the government Lasso could only carry out minor reforms, which do not need the approval of the court, and advance in the environmental consultation processes of two mining projects, although this will not be without problems due to strong opposition to metallic mining.

The new government will be in office only until May 2025, when Lasso’s term was due to end. After that, a new president and legislators must take office for a period of four years.

According to Hurtado, whoever wins the elections in August will be tempted to be populist because they will not see the impact of their decisions in such a short time and will try to pave the way for potential re-election in 2025, "which is a risk for the markets and the economy."