The IMF Program in Ecuador: A New Report by Mark Weisbrot

Thirty pieces of silver

As they discuss the new candidate for the International Monetary Fund (IMF), and it seems that the lead candidate for Lagarde's position is the former Dutch finance minister Jeroen Dijsselbloem, a pro-austerity member of the Labor Party (which I guess is at least nominally on the left), it is worth reading the new CEPR report on the possible effects of IMF programs in Latin America, more specifically the one in Ecuador, now that the country has been brought back into the fold of well-behaved nations (after expelling Assange from their London embassy, in the post-Correa period).

From the abstract:

This report examines Ecuador's March 2019 agreement with the International Monetary Fund (IMF) and finds that Ecuador is likely to have lower GDP per capita, higher unemployment, and increased macroeconomic instability under the program. Even the program itself, the authors note, projects Ecuador to have a recession this year and increased unemployment for each of the first three years of the program. But these projections are optimistic, the report concludes. [Full report here]

I'll have more on the IMF and Argentina soon. Also, something on Brazil, for those interested in the situation in Latin America.

On Ecuador

The original letter I co-signed is here, and the debate that followed was posted by Bill Black here.

50+ Economists Warn Against Neoliberalism's Return in Ecuador

Ahead of upcoming elections, a call for austerity and economic policies structured for the elites to be left in the nation's past

by Ha-Joon Chang, James K. Galbraith

Over the past ten years, Ecuador has achieved major economic and social advances. We are concerned that many of these important gains in poverty reduction, wage growth, reduced inequality, and greater social inclusion could be eroded by a return to of the policies of austerity and neoliberalism that prevailed in Ecuador from the 1980s to the early 2000s. A return to such policies threatens to put Ecuador back on a path that leads not only to a more unequal society, but to more political instability as well. It is important to recall that from 1996 to 2006, Ecuador went through eight presidents.

Unfortunately, there is much confusion and misinformation about Ecuador’s achievements in recent years. It has all but become conventional wisdom that the economic and social progress in Ecuador, such as it is recognized, resulted simply from a commodities boom and a spike in oil revenues. This explanation ignores the innovative and important reforms that the Ecuadorian government has enacted that have played an instrumental role and allowed the country to emerge, relatively unscathed, from the 2009 Global Recession and the more recent collapse in oil prices. These reforms included bringing the central bank into the government’s economic team, a tax on capital exiting the country, a large increase in public investment, re-regulation of the financial sector, and countercyclical fiscal policy.

Read the rest here.

Central Bank of Ecuador Journal's Call for Papers

The journal, Cuestiones Económicas, is being re-launched. I had a paper published back in 2001, pictured above. And have been invited to be a member of the board now. Call for papers (in Spanish) here. Interestingly, the paper is not the one on Ecuador and dollarization (for that one go here).

Argentina, Ecuador and Greece

Well ... not really about Greece, but this paper that has been finally published on Argentina and Ecuador (in the Journal of World-Systems Research) does say something for the euro area countries in trouble.

From the abstract:

The paper draws lessons from the failed Argentine experience with convertibility to highlight the dangers of dollarization in Ecuador. Argentina’s currency peg to the US dollar was successful in reducing inflation but given the overvalued real exchange rate, created burgeoning twin deficits and a chronic dependency on foreign capital. Ecuador too suffers from chronic current account imbalance. In contrast to Argentina, Ecuador seems to be relying on remittance income to close its external financing gap. Though perhaps this model is less unstable than that of relying on foreign capital it is no more sustainable. The paper closes with a realistic critique of this development strategy.