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Ecuador President Lenín Moreno met U.S. President Donald Trump at the White House on February 12 -- thefirst between an Ecuadorean head of state and his U.S. counterpart in Washington in 17 years. (Photo: Ecuador President's Office)
Wednesday, February 26, 2020

Ecuador: Moreno Strengthens US Ties

A US-Ecuador trade pact may not happen soon, but relations are strengthened.

Inter-American Dialogue

Ecuador’s president, Lenín Moreno, on Feb. 12 met with U.S. President Donald Trump at the White House. The meeting was the first between an Ecuadorean head of state and his U.S. counterpart in Washington in 17 years. Following the meeting, Trump said the United States is working on a trade deal with Ecuador and is also discussing the sale of military equipment to the South American nation. What did Moreno accomplish during his visit to Washington? How important are closer trade ties to the two countries? How well are Ecuador and the International Monetary Fund working together following Ecuador’s decision a year ago to agree to a $4.2 billion lending program with the IMF?

Nathalie Cely, president of the Centro de Competitividad in Quito and former Ecuadorean ambassador to the United States: President Moreno’s recent visit to the United States is, without doubt, a significant development in U.S.-Ecuador relations, which are at their best moment in recent years. President Moreno has been successful in setting a path going forward primarily in terms of trade and security cooperation. However, success will have to be measured by actual policy achievements. An important early signal going forward will be whether the Trump administration includes certain Ecuadorean products in the GSP program. The next step after this would be the start of a negotiation process for a vital trade agreement given that the United States is Ecuador’s third-largest trade partner and could easily regain the top spot it has traditionally held. However, there will be complications given the pre-electoral political scenario in both countries and misalignment on the building blocks for the trade agreement. Moreno has signaled that he would like to base his agreement on the E.U.-Ecuador agreement, while the United States would like to use the USMCA (which includes digital trade and labor provisions) as a base. Other developments such as the visit of the U.S. International Development Finance Corporation CEO and the entry into the ‘América Crece’ initiative will have to be measured by the actual financing agreements signed. Last but not least, Moreno’s trip could have an effect on the EFF agreement Ecuador has in place with the IMF. A good relationship with the United States undoubtedly positions Ecuador positively with the IMF board and a positive move forward on this front would be a further renegotiation of certain quantitative and qualitative targets that will be difficult for Ecuador to meet in the context of an economic slowdown, a pre-electoral scenario and recent legislative difficulties. The benefits Ecuador could reap from the trip could be significant, but this will require significant follow-up on behalf of the Ecuadorean authorities that face significant challenges at home and political will from a Trump administration whose priorities lie elsewhere.

Ramiro Crespo, president of Analytica Securities in Quito: Faced with daunting debt inherited from wasteful previous President Rafael Correa, a great deal of uncertainty regarding who will run the country from mid-2021 and a skeptical bond market, the Moreno administration is doing well to restore frayed diplomatic relations. None is more important than the relationship with the United States, and President Trump’s offer to have Ecuador obtain commercial terms similar to those of Canada and Mexico is remarkable. Despite the existing diplomatic expertise, Ecuador is unfortunately ill-prepared to immediately take advantage of this proposal, but the open door must not be shut. The government should therefore immediately work hard to solve legal problems and educate the public about benefits of trade for consumers. U.S. support is also fundamental given the domestic political uncertainties that could waylay even relatively uncontroversial reforms such as those necessary to fulfill the IMF program this year. Security and intelligence support is also key. Cuba, above all, is working to subvert the fragile democratic order and pave the way for a return of Correísmo. To keep that from happening, it’s all the more important to have friends in high places.

Walter Spurrier, president of Grupo Spurrier and director of Weekly Analysis in Guayaquil, Ecuador: Moreno has retaken cooperation with the United States on drug traffic control over Pacific Ocean routes, as U.S. aircraft will be able to operate from a Galapagos airstrip. This also allows control of illegal migrants, not only ones from Latin American but also ones from Africa and China who leave the coasts of Ecuador and Colombia in fishing boats for Central America. Moreno has become an ally in supporting Juan Guaidó as Venezuela’s interim president. All this is very important to the United States, while under Correa, Ecuador was a key ally of Maduro. For Ecuador, this cooperation with the United States is paramount, as drug traffickers, if left unchecked, could gain significant power in Ecuador, as they have in other countries. Close ties are also important as the United States is the chief market for Ecuador’s exports. Trump, in exchange for this collaboration, has firmly and openly backed Moreno. Ecuador is after a trade agreement with the United States, and the overworked USTR’s office would not otherwise have found space in its agenda for Ecuador, with complex negotiations with China and details of the new USMCA requiring full attention. Not having a trade agreement with the United States has cost Ecuador market share in the U.S. markets for shrimp, bananas, tuna and flowers. Clearly, President Trump wants Moreno to be able to continue his policies and finish his term. The IMF has shown uncharacteristic sympathy with Moreno’s difficulties in fulfilling his commitments and has agreed to tone down adjustment requirements. Without Trump’s backing, the IMF might have suspended disbursements.

Republished with permission from the Inter-American Dialogue's daily Latin America Advisor


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