Amid an economic recession, power outages and organized crime, President Daniel Noboa and Correa candidate Luisa González are vying for the presidency.
Ecuador opened the 2025 Latin American electoral calendar with a surprise. Most polls predicted a comfortable victory for President Daniel Noboa, even without the need for a runoff. However, the official results show that the young president's days at the Carondelet Palace could be numbered.
Noboa came in first with 44.17% of the vote, but was closely followed by Luisa González, presidential candidate of the Citizen Revolution, with 43.94%. It was a very polarized election between the populist right of Noboa and the progressive left of González, who will seek to capitalize on the votes of the indigenous movement Pachakutik, to defeat the president.
The winner of the election will take over in May the reins of a country plagued by organized crime, a serious energy crisis and an alarming economic stagnation. A report by the Central Bank of Ecuador (BCE), published on January 15, revealed that the economy declined in the first three quarters of 2024. And although the results of the last quarter have not yet been confirmed, the downward trend is expected to continue.
In the labor field, the National Institute of Statistics and Census (INEC) maintains that unemployment rose from 3.5 to 3.7% between 2023 and 2024. That same year, extreme poverty rose to 12.7%. This means that more than 2.4 million Ecuadorians have a monthly income of less than US$ 51.
For Alberto Acosta-Burneo, an economist and editor of the financial publication Análisis Semanal, a clear indication of discontent with economic management is that during the first round, the presidential candidates offered populist proposals of all kinds. For example, one of the most striking was reversing the increase in the Value Added Tax (VAT) from 12 to 15%, which Noboa decreed in April 2024 to finance the fight against crime.
There were candidates who proposed lowering VAT to 10 or 8%, despite the fact that in Ecuador, permanent tax revenues are scarce and vital in the face of low oil production. But amid this avalanche of promises, there was one key detail.
“For the first time, many candidates recognized the importance of private investment in sectors such as oil, mining and electricity, which in Ecuador are state monopolies. There is a consensus in favor of trade openness, something that did not exist in the past. Even left-wing candidates supported this policy and very few spoke of social security,” Acosta-Burneo told AméricaEconomía .
Looking ahead to the second round, the economist says that both Noboa and González should focus on legal reforms that make Ecuador a more stable and secure economy for foreign investment. Subsequently, to create competitiveness, entry barriers should be eliminated in strategic sectors such as mining, hydrocarbons and telecommunications.
“The second priority is to open new markets. This is something that is being done, and with a lot of delay compared to Peru and Chile. Ecuador has the highest average tariffs in the region, but in any case, progress is being made in signing trade agreements. This week, an agreement was signed with Canada, but 17 years later than Peru and Colombia. Meanwhile, with the United States, we withdrew from the negotiations,” laments Acosta-Burneo.
A third group of reforms is aimed at the financial sector. For the editor of Análisis Semanal , the next Ecuadorian government should free up the flow of capital and modernize banking legislation. The current framework was established in 2014 during the administration of Rafael Correa (2007-2017) and prioritizes state intervention in banking activity. This approach prevented Ecuador from adopting the Basel Framework, a set of international measures that seek to strengthen the regulation, supervision and risk management of banks.
“What the country has is legislation that maximizes the possibilities for the State to set interest rates, to which segments to lend, with what guarantees and terms, and even imposes limits on bankers' salaries. In addition, we have a limit on the flow of capital through the tax on the exit of foreign currency, which in practice also limits the entry of foreign currency,” he adds.
According to Acosta-Burneo, these trends are due to a protectionist tradition in Ecuador that dates back to the middle of the last century with the influence of the economic policies of the Economic Commission for Latin America and the Caribbean (ECLAC). After the economic crisis that led to the dollarization of the country in 2000 and the political instability that marked the following years, the rise to power of Rafael Correa in 2007 accentuated the role of the State as the central axis of the economy.
“We still have industries that depend on state protection, which were created under import substitution industrialization. In addition, we are a very protectionist country, where there are business groups that depend on tariff privileges and do not want to lose them. We are also talking about a society where the majority of the population is suspicious of the private sector and there is a prejudice against the profit motive. What Correa did was exploit and maximize that feeling,” explains Acosta-Burneo.
However, the economist says that in recent years, Ecuadorian governments have adopted some more pragmatic policies. In fact, Correa ended up accepting a trade agreement with the European Union in 2016, after having previously refused. Although Acosta predicts that this change in the citizens' mentality will be gradual and is not yet perceptible, as demonstrated by the strong hold of Correaism at the polls under the figure of Luisa González.
The latter raised alarm bells for many economic agents during the 2023 election campaign, when he promised to use part of Ecuador's international reserves to inject resources into the economy. For Santiago Mosquera, economic analyst and Dean of the Business School of the University of the Americas (UDLA), this measure is a cause for concern, because it weakens the country's dollarization scheme by reducing support for the currencies in circulation.
“Another hot topic will be to propose concrete policies to strengthen Ecuador's energy matrix and prevent the country from experiencing more power outages, like the ones we had last year. On the other hand, it is essential to evaluate labor legislation, because a reform of social security is increasingly urgent,” Mosquera explained to AméricaEconomía .
Although the origins of the energy crisis date back to the last decade, the economic analyst admits that Noboa's government had its share of responsibility, by not making a series of investments that were to be materialized in August 2024. Only two temporary barges for electricity generation were contracted, belonging to the Turkish company Karpowership, but other solutions such as the import of generator motors have not yet been finalized. Other photovoltaic and wind energy projects have been paralyzed in Congress awaiting approval.
As a sign of the times, on January 31, the Ecuadorian Engineering and Economics Advisory Council (CCIE) warned that there would be new blackouts in April. Although the Mazar reservoir, the country's main reservoir, is five meters away from reaching its maximum level, in a dry season it would only provide energy for 30 days and its capacity would depend on the next rains. Neither Acosta-Burneo nor Mosquera rule out the return of blackouts, despite Noboa's promises.
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On the other hand, the diplomatic crisis between Ecuador and Mexico that began last year with the arrest of former Vice President Jorge Glas in the Mexican embassy in Quito, reached a new peak of tension. On February 4, President Noboa announced the imposition of 27% tariffs on the Aztec country under the excuse of pressuring for a trade agreement. Criticism was not long in coming, because this measure would increase the price of Mexican medicines in Ecuador.
“President Noboa’s decision to impose tariffs on Mexican exports is more closely linked to geopolitical than economic issues. At the same time, we should maintain a close relationship with the United States. Even though USAID is being eliminated, there is a very close link between Donald Trump and Noboa that can effectively guarantee a flow of resources through technical assistance from different US government agencies, as has happened in the last five years or through the World Bank and the International Monetary Fund,” Mosquera explains.
However, Trump's recent decision to apply 25% tariffs on Argentine aluminum and steel exports entering the United States shows that not even the Republican president's allies are safe from his protectionist agenda. It is worth asking whether Noboa will have to face a similar obstacle or whether the burden of the energy crisis will put an end to his troubled government.
