Everything Is Going Wrong in Ecuador

As emerging markets come unhinged around the world, few nations face tougher challenges than Ecuador, a dollarized oil producer in El Nino’s path, where street protests are flaring up alongside one of the planet’s most dangerous volcanoes.

Bloomberg Business - Nathan Gill 25/08/2015

As emerging markets come unhinged around the world, few nations face tougher challenges than Ecuador, a dollarized oil producer in El Nino’s path, where street protests are flaring up alongside one of the planet’s most dangerous volcanoes.

With crude sinking below $40 a barrel and few reserves to bolster public finances, frustrated citizens wonder where profits from the OPEC nation’s oil boom went. President Rafael Correa’s popularity dipped to an all-time low in late June before rebounding. The Cotopaxi volcano outside Quito threatens its first major eruption in more than a century and one of the worst sets of El Nino storms since 1950 is forecast to bring crop-crushing floods to the Pacific coast.

“People are worried about it all, the eruptions, the economy,” said Michel Levi, a professor and coordinator of the Andean Center of International Studies at the Universidad Andina in Quito.

Some are reminded of the late 1990s, when the last severe El Nino cycle hit amid plunging oil prices and widespread protests. That collision of natural disaster and economic crisis ushered in a period of acute instability that culminated in the collapse of the nation’s financial system and the adoption of the U.S. dollar as the official currency.

Correa, who took office in 2007, turned much of that around. Record oil profits and more than $10 billion in Chinese loans helped him preside over record-setting construction of highways, hospitals, schools and hydroelectric dams, which jumpstarted growth. Improved access to public education and health care propelled him through two re-elections.