2024-09-12 23:10:35
Ecuador has entered a period of uncertainty and continuous electoral processes since the cross-death in May 2023. The second half of 2024 once again begins a presidential campaign that affects an economy in recession.
In May 2023, the decree was issued cross deathThen, in August, the first round was held and in October the second round of the presidential election took place, in which Daniel Noboa won.
Según Felipe Ribadeneira, executive president of the Ecuadorian Federation of Exporters (Fedexpor)between December 2023 and March 2024 there was a small window of governability.
However, since May 2024, Ecuador entered an openly electoral period, where there is talk of candidacies and the political calculations and the uncertainty affect an economy already in recession.
“We are in a difficult moment that I had been warning about since the death cross was decreed. Normally, an election or an electoral period generates uncertainty. Ecuador since its return to democracy had not experienced a electoral period so wide”, said Ribadeneira.
This affects the investmentsproduction and further complicates the job creation. For example, there has been a drop of more than 10% in the import of capital goods, machinery and inputs. This is a clear sign of the poor health of the economy.
Alicia Mendoza, an economist and small business owner, explained that politics has been hampering the economy and, as there are no state policies in the country, new developments and investments are delayed or suspended until the situation is clear.
“Everyone wants to fish in troubled waters, from politicians and unions to social movements and pressure groups. The streets are starting to heat up and there are even threats of strikes. Doing business in the country is already complex; but political interests make it even more difficult,” he added.
Concerned about the impact of politics on the Ecuadorian economy
Currently, one of the biggest concerns of the international investors about Ecuador is on the political side.
Ernesto Revilla, chief economist for Latin America at Citi Research, stressed that attention is focused on the upcoming presidential elections and the possibilities of the President of the Republic, Daniel Noboa, to be re-elected.
“Now, precisely, it is the political variable that must be added to give stability and continuity to the reforms that Ecuador has undertaken to stabilize the economy. Of course, there are also challenges in terms of security“, he said.
Revilla is convinced that investors are cautiously optimistic about Ecuador’s fiscal consolidation path, which is why they are “paying attention to the electoral process and the problems between the President and the Vice President.”
A political truce is needed to revive the Ecuadorian economy
Ribadeneira has assured that there should be a truce, as a state policy, in which the economy is protected.
This would benefit everyone. political actorsbecause if the economy grows it is easier to manage a country.
“That is not the case. If we look at the news from the last month, there is a focus on political trials, on oversight, etc., and there is no real concern about how to get the country back on its feet, how to generate employment,” said the CEO of Fedexpor.
In other words, what prevails now is the political calculation with the elections in mind. The opposition is looking for all the ways to destabilise the Government and damage its electoral chances; and the Government is also acting under a campaign logic.
Instead, what should happen is a consensus or agreement between political forces on how to strengthen the economy.
Fedexpor argues that, in the midst of the economic crisis, the priority should be to find ways to expand the private sectorThat is, more companies and more businesses are created so that political decisions do not affect the economy as much.
In this context, the agreement would have to focus on how the country can produce more; and for that, a greater access to credit and effective security policies.
For example, one should consider a development bank for the export sectoras Colombia has through the Bank Business Development (Bancoldex). This, together with the creation of a guarantee fund, could make credit cheaper.
On the contrary, what we see today, according to Mendoza, is the same old political cannibalism, where “each one tries to step on the other’s to get to power, even if he has to govern a country in crisis.” (JS)
How to protect your business from uncertainty and recession?
Andrés Rodríguez, general manager at Oikonomics Economic Consulting, stressed that, in the midst of the current situation, businessmen and entrepreneurs They should take into account the following recommendations:
1 Given the reduction in consumption and demand, Rodríguez warned that companies must adjust the quantities they are purchasing to their Suppliers. It’s time to optimize costsreduce inputs and adjust production to the new levels of demand. This is in order to minimize losses. “You cannot continue producing the same thing if you are selling less,” he said.
2 Many businesses, especially small and micro companies, do not keep good records of purchases and sales. This is the worst mistake that can be made, especially in times of crisis.
“You must have a conservative approach. The basics are to prioritize resources and adjust the business to the new reality of customers,” he added.
3 It’s time to make decisions with as much information as possible. It’s recommended to ask customers about the products and services they need now, and how they need them.
Since the neighborhood stores until largest companiesthey must conduct surveys and gather information; work on the customer database (if they do not have one, create one).
“There are a thousand mechanisms to know what the client is looking for. You can contact them through WhatsAppin person when going to the store, by mail, among others,” said Rodríguez.
4. Seek synergies with other businesses. As the pandemic has already taught us, in times of crisis we must seek a closer relationship with other companies and suppliers to find better conditions for purchasing inputs, to establish joint sales strategies, among other measures.
By: LA HORA Newspaper