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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 et César Carranza


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.

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1The 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).

2And 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.

3The 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 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.

4What 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.

  • 1 First case with covid-19 was reported on February the 29th, 2020.

5In 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.

6The 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.

7The 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.

8This 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

  • 2 « We are going to have to recognize that reality has exceeded legality, and we are going to have to (...)

9When 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. 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.

10Despite 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.

11Part 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.

12Another 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.

13The 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.

14The 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 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.

15The 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.

16Another 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.

17Cost 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.

18During 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 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 %.

  • 3 For Correa (Correa, et al., 2019), water pollution was not a result of mining but rather of a limit (...)

19The 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

20Another 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.

21In 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.

22Jean-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.

23A 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.

24In 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.

25Although 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.

26In 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.

27The 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

28The 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.

  • 4 It also implies keeping the Foreign Currency Outflow Tax (ISD). However, this instrument is in dang (...)

29These 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.

30This 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 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.

31When 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

32To 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.

  • 5 It is essential that liquidity is channeled through public banks, which act in a countercyclical wa (...)

33Monetizing 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.

34The 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.

35In 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.

36Companies 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.

37In 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.

38A 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.

39An 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

  • 6 Food sovereignty was incorporated into the Constitution of Ecuador of 2008; stating it as « a strat (...)

40With 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.

41Ecuador 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.

42The 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.

  • 7 During the lockdown, several initiatives were implemented by SSE and agroecological organizations f (...)

43The 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.

44The 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 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.

45Equally 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.

46The 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.

  • 8 The ENSANUT (Encuesta Nacional de Salud y Nutrición) figures refer to children under 2 years of age (...)

47According 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.

48A 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.

49Promoting 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).

50The 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.

  • 9 In February 2020, before the declaration of emergency, the government presented a proposal for Stat (...)

51What 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.

52It 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.


53Ecuador’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.

54The 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.

55Self-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.

56In 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.

57Secondly, 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.

58From 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.

59A 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.

60The 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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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).

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Katiuska King, Pablo Samaniego et César Carranza, « Facing covid-19 in Ecuador: a blueprint for monetary policy and food sovereignty », Revue de la régulation [En ligne], 29 | 2021, mis en ligne le 26 mai 2021, consulté le 14 juin 2021. URL : ; DOI : 10.4000/regulation.18524

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Katiuska King

Professor - researcher, Central University of Ecuador;

Pablo Samaniego

Professor, Catholic University of Ecuador

César Carranza

Professor, Central University of Ecuador

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Revue de la régulation est mise à disposition selon les termes de la Licence Creative Commons Attribution - Pas d'Utilisation Commerciale - Pas de Modification 4.0 International.

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