Ecuador’s President Dissolved Congress to Avoid Impeachment. Here’s What That Means

(Bloomberg) -- Ecuador President Guillermo Lasso, a wealthy former banker who’s popular among investors, found a way to fend off almost certain impeachment by the opposition-controlled congress: He dissolved the body. That set off Article 148 of the country’s constitution, a provision known as “mutual death,” which means new elections for president and the congress. In the meantime, Lasso rules by decree. Fears of a return to socialist rule and nationwide protests sent Ecuador’s bonds into a tailspin, leaving them deep in distressed territory.

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What is a “mutual death” provision?

It’s the colloquial name of a clause introduced in Ecuador’s 2008 Constitution that allows Lasso to dissolve congress at the cost of his own job, since it triggers both presidential and legislative elections. The clause, never before used, was designed to avoid period of protracted political paralysis in the country.

Are there limits on Lasso’s power?

Yes. He may govern by executive decree, but there are checks on his authority. For example, his orders are subject to approval by the Constitutional Court, which acts as an interim legislature, and he has authority only over economic issues, like the tax overhaul he signed as his first decree after closing the congress. Lasso has pledged to obey the constitution and has already asked the electoral authority to set a date for new presidential and parliamentary elections. A final schedule hasn’t been published yet, but authorities have penciled the vote in for Aug. 20.

What was his impeachment all about?

The impeachment case accused Lasso of failing to stop an alleged graft scheme at the state-run oil shipping business. His accusers say that the the losses incurred by the oil business amounted to embezzlement and misappropriation of assets. Lasso, 67, rejected the charges and said organized crime gangs were trying to unseat him. He also said the contract in question was signed in 2018, three years before he took office. Lasso’s hand was forced because he was set to lose his job anyway after 88 lawmakers voted to continue his impeachment trial on May 10 and the opposition kept control of the National Assembly with 96 votes on May 14. The opposition needed 92 votes to oust him.

What comes next?

The electoral authority has a week to confirm the date for the elections to choose a president and congress to serve until the end of Lasso’s term in May 2025. In the meantime, Lasso will continue to issue economic decrees, concentrating on wrapping up his administration rather than running again. Other early candidates are Yaku Perez, whom Lasso edged out in the first round of the 2021 election, and independent former lawmaker and investigative journalist Fernando Villavicencio. After a strong comeback in local elections in February, allies of former left-wing President Rafael Correa, who was convicted of graft and is living in self-exile in Belgium, have political momentum.

Could Ecuador erupt in violence?

Ecuador has so far remained calm. Social organizations have rejected Lasso’s dissolution of congress as dictatorial. An indigenous group known as CONAIE — which led major demonstrations in June 2022 that turned violent, paralyzing large swaths of the country’s Andean region and disrupting oil production in the country’s Amazon territory — called on the Constitutional Court to review the legality of Lasso’s decision. But it stopped short of announcing a new round of street protests.

Why are investors so sensitive to political instability in Ecuador?

Money managers are quick to abandon countries in times of political upheaval. But more than that, Ecuador has a checkered financial history. Since its independence in 1830, it has defaulted on its external debt 11 times, most recently at the onset of the coronavirus pandemic. Now, under Lasso’s government, Ecuador’s international reserves are near record highs, debt service payments in the coming years are minimal, and the fiscal deficit has narrowed. If the business-friendly Lasso were to be replaced by the left-wing opposition, Ecuador might continue to be a hard sell for investors who still have fresh memories of the country’s default under Correa in 2008.

  • A previous QuickTake on Lasso’s second impeachment.

  • A US Congressional Research Service report on Ecuador.

  • The Wilson Center’s analysis of Ecuador’s 2020 default.

  • The World Bank’s Ecuador overview.

(Updates with Lasso’s decision to bow out of the race)

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