Yet, the loan program for Ecuador includes the same failed policies of the past: austerity, cuts in public investment, wage suppression, privatizations, and deregulation. In the documents, phrases such as “protect the most vulnerable” can be found alongside policies that will most certainly not achieve that goal.
To make matters worse, by the IMF’s own description, the program aims to “advance the structural reform agenda initiated under the previous [agreement]”. Last year’s agreement fell apart after deadly protests and being rejected by the people of Ecuador.
The main exception in the new loan is allowing for some COVID-19 related temporary additional spending, which is unlikely to make up for the previous cuts on healthcare spending that occurred under the IMF’s watch. There is no acknowledgment from the IMF on how those cuts severely impeded Ecuador’s ability to handle the COVID-19 pandemic.
Austerity is still at the core of the new agreement, with the IMF demanding rapid fiscal consolidation, with both tax increases, mostly in the form of higher sales taxes, and spending cuts directly targeting public investment and public sector workers.
The structural reform agenda consists of typical Washington Consensus advice to “eliminate rigidities in wages and prices, improve the reliability and efficiency of the energy sector and capital markets.” The agreement has also pushed Ecuador to establish legislation to facilitate public-private partnerships, despite mounting evidence they often result in services that are lower quality and more expensive.
The new loan program targets the working people of Ecuador, with the explicit goal of wage suppression, which the IMF claims will “boost competitiveness.” Public sector workers are targeted directly: the program demands “wage bill rationalization” to be implemented through both layoffs and wage cuts. For those in the private sector, “labor reform” aims to put workers in a precarious position, and further depress their wages.
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