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Abstract

In Ecuador, in a context of social and political conflict, the pandemic has revealed structural problems that are becoming increasingly acute for a country with a dollarized economy. The situation has its roots in inequality resulting from a number of sources and which has become more evident during the pandemic. A compounding factor is the dislocation of a population obliged to turn to informal work or self-employment due to the application of structural adjustment policies and deregulation of markets. The government boosts large-scale mining. Within this framework, the article proposes measures that could help to mitigate some of the problems faced by a country that does not have its own currency. A major component is a what we call conditional integral regulation, together with lines of liquidity which would promote the repatriation of capital. In terms of food sovereignty, while food is available, distribution problems in an agricultural sector based on the campesino and family economy are exacerbating a situation of chronic malnutrition in children.
Revue de la régulation
Capitalisme, institutions, pouvoirs
29 | 2021
Covid-19-L’économiedévoiléeparlacrise
pandémique
Facing covid-19 in Ecuador: a blueprint for
monetary policy and food sovereignty
L’Équateur face à la covid-19 : propositions pour une politique monétaire et
souveraineté alimentaire
Ecuador frente a la covid-19: propuestas para una política monetaria y de
soberanía alimentaria
KatiuskaKing,PabloSamaniegoandCésarCarranza
Electronicversion
URL: https://journals.openedition.org/regulation/18524
DOI: 10.4000/regulation.18524
ISSN: 1957-7796
Publisher
Association Recherche & Régulation
Electronicreference
Katiuska King, Pablo Samaniego and César Carranza, “Facing covid-19 in Ecuador: a blueprint for
monetary policy and food sovereignty”, Revue de la régulation [Online], 29 | 2021, Online since 26 May
2021, connection on 24 June 2021. URL: http://journals.openedition.org/regulation/18524 ; DOI:
https://doi.org/10.4000/regulation.18524
This text was automatically generated on 24 June 2021.
Revue de la régulation est mise à disposition selon les termes de la Licence Creative Commons
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Facing covid-19 in Ecuador: a
blueprint for monetary policy and
food sovereignty
L’Équateur face à la covid-19 : propositions pour une politique monétaire et
souveraineté alimentaire
Ecuador frente a la covid-19: propuestas para una política monetaria y de
soberanía alimentaria
Katiuska King, Pablo Samaniego and César Carranza
Introduction
1 The economic and social impact of the covid-19 pandemic on Latin America is
unprecedented. According to the World Bank (2020), when comparing the history of
economic growth in the region the current projections foresee « the worst performance
since 1901 […]. Neither the Spanish Flu of 1918 (-5.1%), nor the Great Depression (-5.2%
in 1931), nor the second oil crisis (-2.4% in 1982) […] resulted in a contraction such as
the one presently projected » (López, 2020).
2 And in this exceptionally severe crisis, various indicators suggest that the Ecuadorian
economy will be one of Latin America’s hardest hit. According to Ecuadorian Central
Bank (ECB) estimates, the economic contraction is expected to be at least 9.1%; a
scenario which will intensify structural problems in the economy: increasing
inequality, poverty levels, unemployment and informality. In this context, and in a
country with a dollarized economy, the pandemic has served to demonstrate its
vulnerability to external shocks while government boosts large-scale mining.
3 The current situation in Ecuador cannot, however, be understood without reference to
changes in the economic model brought about by the current government. It has now
assumed a conventional neoliberal orientation, and in compliance with the
commitments assumed in the Expanded Service Agreement with the IMF in
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March 2019, in early October the Ecuadorian government announced the elimination of
fuel subsidies, as well as a set of additional measures aimed at reducing public spending
and the flexibility and reduction of labor rights. The political tensions that resulted
from both the specific measures and general the orientation and social implications of
the new model, found their expression in the social protest of October 2019.
4 What should also be highlighted is the lack of policies and planning related to the
financial system in the first period of the present government, and how that void was
subsequently filled by the program agreed with the IMF. Before the agreement was
signed, the most significant government policy related to the financial system was the
transfer of the electronic wallet jurisdiction to the Association of Private Banks of
Ecuador (ABPE) from the Central Bank of Ecuador, which at the time already had a
functioning system, with low costs and a growing number of transactions.
Notwithstanding, the ABPE postponed the re-launch of their system (now with higher
transaction costs) from 2017 until the end of 2019, a period in which its operation could
have reduced the need for cash.
5 In then, in the midst of the widespread popular discontent evidenced by the events of
October, the extremely low levels of credibility and acceptance of the government, and
a stagnant economy that at the beginning of 2020 was expected to experience the
greatest reduction in the last 20 years, covid-19 arrived in Ecuador1. The government
subsequently declared a State of Health Emergency at the national level
(March 12, 2020) and four days later, a general State of Emergency.
6 The main measure used for avoiding the collapse of hospital capacity due to the virus
was confinement of the population, implying a major blackout or a « great shutdown »
of the economy, as Martin Wolf (2020) has called it, due to the effects on both supply
and demand. Taken together, the declaration of the State of Emergency and a lockdown
reduced the possibilities for protest and offered the ideal scenario for the
implementation of the neoliberal program stipulated by the IMF. A program, according
to King & Samaniego’s analysis (2020) of the agreement, that if applied could push
Ecuador over the economic precipice.
7 The end result has been poor management of both the spread of the virus and of its
negative effects on employment, education and food. And in this context of reduced
household income, mobility limitations, border closures and the reconfiguration of
food supply systems, the need to protect household food sovereignty has only been
heightened.
8 This article elucidates the strengths and weaknesses of a dollarized economy such as
Ecuador’s and sets out regulatory and policy proposals for mitigating the effects of the
covid-19 crisis. It is organized in five sections, the first contextualizes the situation in
Ecuador; the second reveals the state of inequality in the country; the third discusses
financial regulation in an economy without its own currency; the fourth shows food
sovereignty to be a strong point of the economy and a need for children; and the last
contains the conclusions.
1. Inequality
9 When the government of Ecuador announced the first measures designed to combat
the covid-19 pandemic, it referred to the fiscal deficit as the economy’s only weakness.
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Based on typical neoclassical arguments, it imagined that all could be resolved by a
simple modification of public spending, believing that economic policy based on their
logic is all-powerful. However, one of the government’s economic advisors2, as well as
the Minister of Economy and Finance himself, affirmed that reality their vision of
reality – had overtaken the law, in effect suggesting they were not unwilling to break it.
10 Despite the supposed easy solution promoted by neoclassical rhetoric, the pandemic
has been, and continues to be a severe setback for the population. The supply and
demand problems the quarantine brought with it due to the country’s high level of
socioeconomic inequality, still remain to be solved. And inequality is one of the factors
that determine poverty, understood in its broader sense: as the deficiencies suffered by
a significant part of the population that compromise their capacity to fully develop
their capabilities (Sen, 2000). On the other hand, the situation could have been worse
given potential scenarios of hunger in the population were avoided due to the country’s
capacity to produce food.
11 Part of the problem can be seen in increasing income inequality, which grew after
reaching its lowest point in 2017 (World Bank, 2020), while in December 2019 income
poverty affected one quarter of the national population, an increase of 3.5% from 2017
(Lombeida & Serrano, 2020). In other words, the country was facing an alarming
deterioration in the income levels necessary for a living a decent life, a deterioration
that can be explained by, amongst other factors: inaction in the public policy area,
fiscal losses (tax expenditure), etc.
12 Another feature of inequality in Ecuador is the variety of forms in which the population
is linked to the labor market (for example, 45.8% of the EAP was underemployed at
December 2019) forms which have a major influence on the vulnerability of households
due to dramatic differences in income. Pablo Samaniego (2020), for example, has
demonstrated the magnitude of the economic insecurity faced by households whose
members do not have a permanent job, are not protected by the social safety net, and
were in a situation of poverty in December 2019. The crisis provoked by the pandemic
has consequently had a differentiated effect on the population, depending on the way
in which their income is earned. This has led to hunger in some sectors, while in others
to successful pressure on the National Assembly (by business associations) to reject the
‘Humanitarian Aid’ legislation that would have assisted at least a part of those
households that have lost their sources of income.
13 The rejection highlights one of the major sources of tension the country is presently
experiencing: high-income sectors are reluctant to adopt progressive measures, despite
the fact that dealing with the pandemic requires guaranteeing the provision of basic
services and cash transfers in order to avoid cases of extreme poverty. This is
tantamount to a refusal on the part of economic power groups to share wealth formed
by the efforts of workers and, in many cases, resulting from the comparative
advantages the country enjoys due to its abundance of natural resources and climatic
regions.
14 The aim of the private sector, as represented by its associations, is to reduce the size of
the public sector and limit its functions, assuming that it has many limitations and
inefficiencies, while favoring the solution that deregulated markets can supposedly
provide. However, limiting the action of the State in societies as unequal as that of
Ecuador, is an error. Without the State, correcting market failures is not possible
(Stiglitz, 2012); nor is it possible to ensure universal and free access to education and
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health, as indicated in the country’s Political Constitution; nor to act as most emerging
countries (Nagy-Mohacsi, 2020), to expand quantitative fiscal stimulus measures; nor to
reduce interest rates in order to lower the financial burden on households, and the
consequent transfer of resources from them to the financial system.
15 The economic authorities have not in fact used their power to control the active
interest rate ceiling for credit operations, and as a result the interest rate remains
extremely high for a dollarized country. This lack of regulation has the greatest impact
on the activities of micro and small entrepreneurs, who face effective interest rates
between 23 % and 30 %, while rates established for the corporate sector stand at 9.33 %
(Banco Central del Ecuador, 2020). The agreement with the IMF included freeing up
interest rates, that is, eliminating the possibility to reduce the cost of money.
16 Another problem that modern societies face, and that requires the intervention of the
State, is what William Baumol, et al. (2012) calls ‘cost disease’. Along with his co-
authors, he explains that unlike other types of goods, it is not possible for the cost of
services to remain stable or fall in relative terms (or compared to income) due to their
intrinsic characteristics. It is very difficult, the author notes, for productivity gains to
be made in the provision of services (medical consultation or the interpretation of a
symphony orchestra), compared to the production of other types of goods, especially
industrial goods where this is possible and where taking advantage of economies of
scale or technical innovations is a constant. Thus, while societies demand and have the
right to access more and better education and health services (in addition to better
justice, electoral, and protection systems, etc.), these services must be improved in an
environment of increasing costs, because improving them implies employing more
qualified personnel.
17 Cost disease has many implications, especially as access to these types of services,
whether administered by the public or private sector, will require families to allocate
greater, or at least an equal amount of resources over time. However, if the State is not
the provider of the services, a percentage of families will be excluded, producing failure
in those markets and the perpetuation of poverty and inequality, one of the main
consequences of such failures. Consequently, while it is possible to make sure that
services are provided efficiently, which is as far as the neoclassical discourse goes, their
innate characteristics suggest that this is not the principal problem to be solved, as
societies will always require more resources for health, education, protection, etc.,
unless, of course, we were to presume that inequality does not matter. The economy
must therefore be prepared to solve this challenge i.e. that of allocating more
resources to the aforementioned public services as inequality in the distribution of
public services and goods will otherwise cause segments of the middle strata to be
rapidly impoverished, and the poorest to suffer disproportionately the consequences of
the pandemic.
18 During the time of former President Rafael Correa (2007-2017), several tax reforms
were introduced with the aim of accessing income from alternative sources and
resolving the need to provide resources for public services. A similar policy should be
implemented now, including, and in particular, increasing the progressivity of income
and providing stricter controls on import transfer prices (see King & Samaniego, 2020),
while at the same time paying more attention to the financial sector given that during
the pandemic, the sector has continued with « business as usual ». Despite the
economic downturn, loans have continued to be collected, in the process increasing
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inequality given that the lowest income strata of the population is paying more for
credit, while only the arrears were not charged. There were capital deferrals, but with
interest charges. As of July 2020, it should be noted, the consumer portfolio in Ecuador
was 43.4 % of the total and effective interest rates was close to 17 %.
19 The major income alternative of the current government, however, is a major
commitment to large-scale mining and the expansion of the extractive frontier. But the
strategy has serious downsides. Mining policy and projects have not only increased
conflict with social organizations but also put important water sources3 and
consequently food sovereignty, at risk. The policy was initiated during the Correa
government, and Monika Meireles (2016) refers not only to the contradictory
relationship between fiscal and monetary policy in the Correa era, but also to its
transition towards a « dollarized extractivist model » that conflicted with
constitutional mandates and has serious implications for indigenous and campesino
populations. For Correa et al. (2019), the balance between and disputes over pollution,
above all of water (affecting food production), and the dollar income derived from
extractive activities was reduced to a technical issue, « you have to be careful with
rapid fire analyses that associate mineral extraction with major pollution : technically,
we know how to extract without causing the irreparable environmental damage of the
early 20th century ».
2. Financial regulation in the dollarized economy
20 Another major weakness of a dollarized economy fully exposed by covid-19, and one
that directly affects inequality in households in times of external shocks, is the inability
to fashion monetary policy. This lack implies liquidity problems, given that in a
dollarized economy the money supply is largely endogenous, and the country is
consequently vulnerable to difficulties in its external sector caused by a reduction in
world demand and/or a fall in oil prices.
21 In the past Ecuador benefited from the commodities boom but the pandemic has
multiplied the circumstances of shortage and as Marco Missaglia (2020) points out, a
dollarized economy is more unstable than economies with their own currency. The goal
then is to attend the pandemic urgent problems to prevent an even worse crisis. The
dollarization can now be better understood and will be discussed to a greater extent in
the future.
22 Jean-François Ponsot (2019) argues that dollarization has given the country monetary
stability, but at the price of an inability to move to another alternative development
model distinct from the Washington Consensus. Instead, Missaglia (2020) points out
that in times of crisis, while the poor increase their preference for liquidity, the middle
class relies on the operation of a lender of last resort, while the choice of the rich is
capital flight.
23 A tool that could have been used to overcome the problem and to alleviate the liquidity
needs of the Ecuadorian economy, was the so called « electronic wallet » already
mentioned handed over to private sector banks in 2017 (King & Samaniego, 2019). This
implies that Ecuador has virtually no public liquidity tools with which to manage this
situation and alleviate people’s vulnerability.
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24 In a context in which monetary instruments are not available, and room for fiscal
manoeuver is extremely limited, avoiding the collapse of the payment chain is crucial.
Financial regulation can solve some of the problems related to capital flight, but any
proposed regulation must contain an integral macroeconomic component and must
meet at least two objectives: 1. the reduction of delays in the chain of payments and, in
the worst case scenario avoiding its suspension, 2. the reduction of capital outflow.
25 Although capital outflow is common in developing countries, in a country that lacks its
own currency avoiding it is fundamental, given that the monetization of the economy
depends on the current account balance. There are however two complicating factors:
in Ecuador the external sector is highly dependent on oil exports, whose prices are
presently low, and on remittances from migrants, which will probably fall due to the
world economic situation.
26 In these circumstances, a possible alternative might be to withdraw from the
dollarization (an exit to the bottom according to Ponsot, 2019) as a way to eliminate its
associated problems. But this is not a viable alternative, considering it would initially
drag to a deep recession, as wealthy individuals, who keep their resources abroad,
would be the only socioeconomic stratum in a position to maintain the value of their
assets. Leaving the dollarization behind would consequently lead to a greater economic
concentration than the crisis of 1999.
27 The proposal contained in this paper, as presented below, consequently advocates a
new type of regulation : conditional integral regulatory policy. It has two aspects : one
related to the financial system, and the other to the provision of lines of liquidity, both
features aimed at curbing capital outflow.
2.1. Conditional integral regulation
28 The first element of a macro-prudential regulation requires: funds and capital
contributions from the shareholders of banks and cooperatives; additional buffer
requirements (requirements for the buffers, or conservation (Conserv), and
countercyclical (C-cycl) buffers that require additional reserves); and liquidity
indicators (liquidity coverage ratio) for banks and financial institutions (King, 2021).
These elements, as established by Basel regulations, would make it possible to ensure
the solvency and liquidity of the banking and cooperative system, and thus guarantee
the stability of the financial system.
29 These measures must be accompanied by a capital control administrative regulation; in
the Ecuadorian case this is called a domestic liquidity coefficient (DLC)4. The
mechanism would oblige banks to maintain a percentage of their liquidity in local
instruments, with the goal of guaranteeing that new capital contributions serve to
increase the resources available in the country through new placements, rather than
being re-invested abroad. One part of the liquidity retained in the country could be
used for the purchase of public sector titles, which could be used for investment in
health or promoting reactivation, while another could be used to increase the
availability of working capital for companies with cash flow problems. This aspect is
discussed in the following section.
30 This double regulation would link monetary with financial and fiscal policy, ensuring
the solvency of the financial system with capital contributions from the shareholders of
financial institutions. In this way, the financial system could increase the monetary
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multiplier (or grant more credit) and lower the preference for liquidity. The
requirement of greater levels of capital from bank shareholders would not only
improve liquidity levels in times of pandemic, but would also encourage repatriation of
capital. In this way, the soundness of the financial system could be guaranteed in the
event of a run, while the outflow of capital would also be reversed.
31 When financial institutions are obliged to keep resources within the country, they also
become jointly responsible for ensuring the reliability of the entire system, and these
additional resources should be channeled to sectors of the real economy that have
managed to carry on during the pandemic. This new proposal is analyzed in the next
section.
2.2. Conditional lines of liquidity
32 To safeguard the chain of payments, lines of credit should be offered to companies that
require them, thus supporting efforts to maintain both employment and agricultural
production that guarantees food sovereignty.
33 Monetizing to the economy by means of both the private and public financial systems is
an urgent need5; however, differentiation must be made between companies that
require support from those that do not, and that support must be conditional on the
payment of taxes and employer contributions to social security, when companies are
capable of doing so. In Ecuador companies and financial institutions tend to stop
complying with these obligations in order to temporarily obtain liquidity or to provide
resources to shareholders who take move them out of the country.
34 The institutions that control taxes (the Internal Revenue Service) and regulate
companies (the Superintendent of Companies) have the ability to identify companies
whose shareholders keep resources abroad, especially in tax havens, and to
consequently establish which companies do not require credit. Ecuador is one of the
non-central countries that keeps this type of information, and a list of firms not
needing credit would facilitate the placement of working capital loans by private and
public banks based on transparency and true accountability.
35 In addition, the institutions that control the financial system (the Superintendent of
Banks, and the Superintendent of the Popular and Solidarity Economy) must: monitor
the prohibition on granting loans linked to companies of the same group by means of
triangulation; regulate the concentration of the portfolio in the few companies with
liquidity; and control illegal and/or excessive charges for people with less resources to
avoid making inequality more acute.
36 Companies could access liquidity credit provided they are neither multinational
companies or foreign public companies, as these can obtain financing from abroad, nor
national industries whose shareholders keep resources overseas. Public sector banks
could facilitate financing for small and medium enterprises (SMEs), microenterprises
and small farmers based on similar conditions, i.e., that the owners do not have access
to outside resources. In the case of public sector banks, problems of moral hazard
should be avoided by means of stronger control measures, thus reducing the
expectation of forgiveness and forgetfulness that surrounds these operations as a result
of a history of recurring write-offs.
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37 In the case of companies that keep resources abroad and also require additional capital,
these could obtain working capital by means of a tripartite scheme: 30% from private
sector banks and 30% as public sector lines of credit based on the resources they
repatriate, thus sharing risk and avoiding corporate fraud. A lower financing cost could
be established in the case of higher levels of repatriation and the percentage of
liquidity needs.
38 A novel aspect of this proposed regulation is that it does not reward those who
repatriate capital flight resources, but rather operates as a type of negative incentive
given that those who keep their resources abroad will not be able to access the
proposed lines of credit. This is unusual in the sense that it breaks with the tradition of
offering amnesties in order to encourage the repatriation of resources. Missaglia
(2020) reminds us that on adopting a dollarized economy, one of the promises was that
it would entail the entry of foreign capital, not only that of nationals who had
expatriated them, but also of foreigners.
39 An additional condition for companies availing themselves of liquidity, to the extent
that productive capacity is maintained, would entail a commitment to keep their
employees and consequently not aggravate social disintegration. In times of pandemic
the disintegration of the social fabric is also a matter of maintaining food sovereignty
and meeting rural needs by taking advantage of and promoting organizational
potentialities. It is crucial, and has the additional benefit of making the sector more
visible. Unfortunately, the agricultural sector is presently being threatened by
previously mentioned government proposals that promote mining and put water
sources, and consequently food sovereignty, at risk.
3. Food sovereignty
40 With regard to food sovereignty6, the current situation in Ecuador is paradoxical,
constituting on the one hand a strength and an opportunity, and on the other growing
structural difficulties that have been exacerbated by the pandemic.
41 Ecuador not only produces and has sufficient nutritious and quality food to meet
domestic demand, something indispensable in times of pandemic, but also has
surpluses for export. This availability was made evident during the closure of
international borders due to the pandemic, and led to a social situation less serious
than it might otherwise have been.
42 The abundance of natural resources, the presence of various ecological niches and
climatic regions, and the country’s high levels of biological diversity are both a
strength and an advantage.
43 The production and supply of food during the confinement of the population has been
maintained mainly by campesino and family agriculture, and by SSE organizations7.
The result is that the pandemic has highlighted the importance of their role in
sustaining the supply and availability of food in the country, above all in times of crisis.
It is however, as mentioned previously, a role which is now being threatened by the
advance of mining projects.
44 The emergency has also had a profound effect on the organization of the food supply
for the population. From the end of March, new precautionary health measures were
established for people entering the premises of supermarket chains as well as the
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markets and fairs of every city in the country. Supply chain agents have also had to
reorganize, adapt, and re-functionalize the different supply channels, particularly in
light of the difficulties and restrictions imposed on transport on both the local (daily
hours, and extended restrictions based on license plates), and interprovincial levels.
45 Equally important are the effects the emergency situation has had, and will have on the
food demand side. The prohibition on the use of public areas by informal economy
workers, together with the loss of employment and the reduction of the working day,
means that the survival strategies of broad sectors of the population are now off limits;
while at the same time the salaries of the remaining private and public employees have
been reduced. The March 2019 Agreement with the IMF, besides blaming public
spending for all problems at a time when a State is required in order to draw up plans
for dealing with the emergency, clearly does not pay enough attention to domestic
demand, and even less to the rural sector.
46 The result is that the ability of important segments of the population to access food has
been impacted due to loss of income; many homes will now experience hunger, thus
exacerbating the structural problems the country has not been able to overcome, such
as chronic child malnutrition.
47 According to the latest available information (ENSANUT, 2018), in Ecuador one in four
boys and girls under the age of five suffers chronic malnutrition (height-for-age delay):
the greatest impact being felt by indigenous people, those living in rural areas, and the
sons and daughters of families living in poverty (Serrano, et al., 2019). The incidence of
chronic malnutrition in children under two years of age (24.8% in 2014) has even
increased. In 20188, the rate amongst children under two, boys and girls born mostly
during the time of the current government, was 27.2%, reflecting its neoliberal
orientation and policy of reducing public spending that has aggravated structural
problems, thus widening existing gaps and limiting future opportunities.
48 A rise in the levels of malnutrition and hunger is even expected given the increase in
levels of poverty and extreme poverty caused by the current economic crisis and the
pandemic. It has also been shown that chronic malnutrition in the first years of life has
irreversible consequences on physiological, neurological and emotional development.
Its presence is also related to the increase in infant mortality and morbidity, as well as
to cognitive limitations and future productive capacity. As a consequence, malnutrition
affects the capability and options of individuals, as well as opportunities for their
development and that of society as a whole.
49 Promoting mining as a way to sustain the dollarization could consequently be a serious
mistake, as neglecting the food production sector will have consequences that go far
beyond the difficulties involved in accessing and distributing food. It is essential to
consider that despite the restrictions, and with or without the support and protection
of the government, formal and informal farmers, ranchers and vendors must continue
their activities, implying exposure to the virus and the possibility of becoming focal
points of contagion. The lack of regulation of prices to producers and of food
distribution, has also caused a:
Distortion of the commercialization circuits, given that the phenomenon of
speculation is present; intermediaries arrive at the farm and pay ridiculous prices,
and there are more intermediaries than in normal times. Such a phenomenon could
have the effect of causing decreases in production in the next productive cycles,
thus putting the supply of food at risk (Foro Agrario, 2020, p. 2).
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50 The government has been aware of these effects, but has directed its efforts towards
controlling food distributors, rather than providing them with the facilities they
require to continue working without exposure to the risk of infection. The
beneficiaries, on the other hand, are the large supermarket chains, where the food on
offer is accessible to low-income sectors at prices higher than in local markets, and its
circulation does little more than sustain the intermediary dynamic that has negative
economic impacts on campesino producers.
51 What the pandemic has made clear is that Ecuador needs to change an agricultural
policy9 that has traditionally favored monocultures destined for export, redirecting it,
towards the promotion of the campesino economy and solidarity economic practices. In
this process, provincial and cantonal level governments must play a role in shortening
the chain of intermediaries, and guaranteeing price policies that do not discourage
producers from sowing and harvesting in the present or following cycles. Solidarity
economic circuits should also be strengthened in order to facilitate the connection
between producers and consumers.
52 It is also essential to reorient the traditional food assistance programs that have been
operating in Ecuador for more than a decade: for example, the School Feeding Program
and the food provided in Child Development Centers. These programs should stop
focusing their purchases on industrialized products manufactured by only a few
industries, and direct them to purchases from suppliers and local organizations related
to the campesino economy and the SSE.
Conclusions
53 Ecuador’s present situation is extremely delicate. The country’s dollarized economy is
vulnerable to external shocks such as the volatility of external markets, including oil
prices, as well as the inability to devalue in order to compete with similar products
produced and exported by neighboring countries. The covid-19 pandemic has only
exacerbated these difficulties, further increasing economic inequality and the
vulnerability of households in a country whose labor market has always been marked
by high levels of informality. In order to combat these woes, we must look at two
distinct areas the financial system and food sovereignty.
54 The pandemic has demonstrated the necessity of applying measures to strengthen the
internal monetary system, as due to its characteristics, these cannot be left to the
profitability and/or « security » decisions of those with the ability to transfer their
resources overseas. It goes without saying that basing an economy on personal
decisions is not a good way to avoid further serious crises; it is consequently necessary
to recognize that the common good the liquidity of the system must take
precedence over individual interests.
55 Self-regulation does not work in the financial and insurance sectors, as was observed
during the world financial crisis of 2008 and regulation is crucial in preventing capital
outflows and appropriately channeling savings. During a pandemic, and in the absence
of monetary policy, Ecuador’s economic situation has become more complex;
alternative and innovative regulation must respond to this reality in a comprehensive
way in order to limit greater economic concentration or financialization of the
economy.
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56 In order to reduce the outflow of legal and illegal capital, in the first place the above
proposed integral regulation emphasizes the financial system, as this is one of the
facilitators of capital flight and illicit financial flows. It also seeks to sharply increase
capital requirements in order to strengthen domestic liquidity.
57 Secondly, lines of credit to companies must be conditioned by certain parameters that
ensure that fiscal policy and social security are not negatively affected; in other words,
non-payment of taxes and social security contributions cannot be used as a form of
temporary financing or allowed to be taken out of the country as capital flight by
shareholders. Thirdly, the proposed regulation must also include direct provision by
public sector banks, as they act in a more counter-cyclical fashion.
58 From the perspective of food sovereignty, the current scenario in Ecuador reflects
more weaknesses than strengths. With regard to availability, Ecuador produces enough
food to meet domestic demand ; however, serious structural problems linger and the
threats increase. The export of primary goods, supported mainly by monocultures,
continues to dominate the national productive structure, a tendency that intensified in
recent years due to the commodity boom. The campesino and family economy, the one
that principally produces food for national consumption, is an historically neglected
sector that is excluded from public policy. Likewise, economic problems have led to
difficulty in accessing food for broad sectors of the population and consequent high
rates of chronic child malnutrition that reduce capacities and limit future possibilities.
59 A reorientation of agricultural policy in Ecuador is a priority. Intermediary chains in
markets must be shortened, and economic solidarity circuits strengthened, in order to
facilitate closer contact between producers and consumers. This process must integrate
the different levels of government (central and regional) and involve the participation
of organizations and social groups.
60 The promotion of mining began in the Correa government have been strengthened in
recent years by Moreno’s government; however, the pandemic demonstrates the need
to change priorities and place the emphasis on taking care of water sources and
maintaining food sovereignty.
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sanitaria generada por la pandemia del COVID, [Mimeographed document], Facultad de Ciencias
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NOTES
1. First case with covid-19 was reported on February the 29th, 2020.
2. « We are going to have to recognize that reality has exceeded legality, and we are going to
have to begin a period in which the law is the agreement between the parties » (Plan V, 2020),
phrase pronounced by Augusto de La Torre, during a discussion on April 2020.
3. For Correa (Correa, et al., 2019), water pollution was not a result of mining but rather
of a limited capacity to treat wastewater.
4. It also implies keeping the Foreign Currency Outflow Tax (ISD). However, this instrument is in
danger due to the agreement signed with the IMF (King & Samaniego, 2020).
5. It is essential that liquidity is channeled through public banks, which act in a countercyclical
way, as opposed to private banks, which are more pro-cyclical.
6. Food sovereignty was incorporated into the Constitution of Ecuador of 2008; stating it as « a
strategic objective and an obligation of the State to guarantee that individuals, communities,
peoples and nationalities achieve self-sufficiency in healthy and culturally appropriate food on a
permanent basis » (Art. 281).
7. During the lockdown, several initiatives were implemented by SSE and agroecological
organizations for the production of « solidarity baskets » of food, which were delivered directly
to the homes of the families who required them, contributing to the « stay at home » initiative,
or that were commercialized in the agro-ecological fairs that continued to operate.
8. The ENSANUT (Encuesta Nacional de Salud y Nutrición) figures refer to children under 2 years
of age. According to the ENSANUT technical note, the data collection was carried out between
November 15, 2018 to July 17, 2019, meaning that these children were mostly born after Moreno
assumed the presidency.
9. In February 2020, before the declaration of emergency, the government presented a proposal
for State agriculture policy for the period 2020-2030, which consisted solely of a declaration,
without containing specific activities. The proposal was characterized by a developmental
discourse that did not coincide with food sovereignty. The reality, on the other hand, is that
under the orientation of austerity and reduction of public funds, the government decided to
suppress or merge several key institutions related to the agricultural sector; for example, merge
the institution responsible for water policy (SENAGUA) with the Ministry of the Environment,
and close the National Storage and Marketing Unit (Foro Agrario, 2020).
Facing covid-19 in Ecuador: a blueprint for monetary policy and food sovereignty
Revue de la régulation, 29 | 2021
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ABSTRACTS
In Ecuador, in a context of social and political conflict, the pandemic has revealed structural
problems that are becoming increasingly acute for a country with a dollarized economy. The
situation has its roots in inequality resulting from a number of sources and which has become
more evident during the pandemic. A compounding factor is the dislocation of a population
obliged to turn to informal work or self-employment due to the application of structural
adjustment policies and deregulation of markets. The government boosts large-scale mining.
Within this framework, the article proposes measures that could help to mitigate some of the
problems faced by a country that does not have its own currency. A major component is a what
we call conditional integral regulation, together with lines of liquidity which would promote the
repatriation of capital. In terms of food sovereignty, while food is available, distribution
problems in an agricultural sector based on the campesino and family economy are exacerbating
a situation of chronic malnutrition in children.
En Équateur, en contexte de conflit social et politique, la pandémie a révélé des problèmes
structurels de plus en plus aigus dans un pays à économie dollarisée. La situation trouve ses
racines dans les inégalités résultant de nombreuses sources. Inégalités qui sont devenues plus
évidentes encore pendant la pandémie. Le facteur aggravant est la dislocation d’une population
obligée de se tourner vers le travail informel ou le travail indépendant en raison de l’application
des politiques d’ajustement structurel et de la déréglementation des marchés. Le gouvernement
renforce l’extraction minière á grande échelle. Dans ce cadre, l’article propose des mesures qui
pourraient contribuer à atténuer certains problèmes rencontrés par un pays qui ne possède pas
sa propre monnaie. Une composante majeure est ce que nous définissons comme une régulation
intégrale mais conditionnelle, ainsi que des lignes de liquidité qui favoriseraient le rapatriement
des capitaux. En termes de souveraineté alimentaire, alors que la nourriture est pourtant
disponible, les problèmes de distribution dans le secteur agricole basé sur une économie
paysanne et familiale aggravent une situation de malnutrition chronique chez les enfants.
En Ecuador, en un contexto de conflictos sociales y políticos, la pandemia ha revelado problemas
estructurales cada vez mas agudos, en un país con una economia dolarizada. La situación
encuentra sus raíces en las desigualdades que resultan por diversas causas. Las desigualdades han
llegado a ser mas evidentes todavía durante la pandemia. El factor que lo agravó es el
dislocamiento de una población obligada a ingresar en el trabajo informal o un trabajo
independiente en razón de la aplicación de políticas de ajuste estructural y de la desregulación de
los mercados. El gobierno intensifica la extracción de minerales en una gran escala. En ese marco,
el articulo propone medidas que podrían contribuir a atenuar ciertos problemas que se
encuentran en un país que no posee su propia moneda. Un componente mayor es lo que nosotros
definimos como una regulación integral pero condicional, y también que las líneas de liquidez
que favorecen la repatriación de capitales. En términos de soberanía alimentaria, mientras que
los alimentos están sin embargo disponibles, los problemas de distribución en el sector agrícola
basada en una economia campesina y familiar agravan una situación de malnutrición crónica
entre los niños y niñas.
Facing covid-19 in Ecuador: a blueprint for monetary policy and food sovereignty
Revue de la régulation, 29 | 2021
14
INDEX
Keywords: inequality, covid-19, integral regulation, conditional lines of liquidity, dollarized
economy, food sovereignty
Palabras claves: desigualdad, regulación integral, covid-19, líneas de liquidez condicional,
economía dolarizada, soberanía alimentaria
Mots-clés: inégalité, covid-19, régulation intégrale, lignes de liquidité conditionnelles, économie
dollarisée, souveraineté alimentaire
AUTHORS
KATIUSKA KING
Professor - researcher, Central University of Ecuador; kkking@uce.edu.ec
PABLO SAMANIEGO
Professor, Catholic University of Ecuador
CÉSAR CARRANZA
Professor, Central University of Ecuador
Facing covid-19 in Ecuador: a blueprint for monetary policy and food sovereignty
Revue de la régulation, 29 | 2021
15
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Producción y comercialización de alimentos en el contexto de la emergencia sanitaria generada por la pandemia del COVID
  • Foro Agrario
Foro Agrario (2020), Producción y comercialización de alimentos en el contexto de la emergencia sanitaria generada por la pandemia del COVID, [Mimeographed document], Facultad de Ciencias Agrícolas -Universidad Central del Ecuador. URL: https://uceedu-my.sharepoint.com/:w:/g/ personal/fsmontenegrosuceeduec/EalUlCtiUJpMuYZZ-H3MXcEBMFKCbuPplD7IVVvwU2xwDA?
Latin America, the pandemic and the challenge of building better instead of going back
  • H López
López H. (2020), Latin America, the pandemic and the challenge of building better instead of going back, World Bank, june 8. URL: https://blogs.worldbank.org/latinamerica/latin-americapandemic-and-challenge-building-better-instead-going-back [accessed on 20/08/2020]
« The quiet revolution in emerging-market monetary policy », Project Syndicate
  • P Nagy-Mohacsi
Nagy-Mohacsi P. (2020), « The quiet revolution in emerging-market monetary policy », Project Syndicate, august 18. URL: https://www.project-syndicate.org/commentary/emerging-marketsunconventional-monetary-policy-by-piroska-nagy-mohacsi-1-2020-08
« 'Esta es la crisis más virulenta en los últimos 100 años' : visión económica de
  • V Plan
Plan V. (2020), « 'Esta es la crisis más virulenta en los últimos 100 años' : visión económica de
El precio de la desigualdad
  • J Stiglitz
Stiglitz J. (2012), El precio de la desigualdad, Buenos Aires, Taurus.