Crisis in Ecuador: Corruption, Violence, and Tax Havens

In the early hours of Tuesday, October 26, social and indigenous organizations, as well as workers’ unions in Ecuador began a new day of protest against the economic policies of President Guillermo Lasso. The demonstrations were called by the Ecuadorian indigenous sector, the Unitary Workers Front (FUT) (the largest union in the country), the Popular Front (FP), and the Confederation of Indigenous Nationalities (CONAIE).

Organizations such as the Federation of University Students of Ecuador and the National Confederation of Peasant, Black, and Indigenous Organizations, among others, joined the call. According to the convening bodies, the national strike is to reject the increase in fuel prices, announced by President Guillermo Lasso, while the country is plagued by economic problems, political tensions, and an increase in insecurity. The protests demand fair economic and social policies for workers and the lower-income sectors. Some of the demands include freezing the price of fuel and support for the Labor Code project, recently presented to the Legislature by the FUT, as well as a rejection of the proposed “Law for the Creation of Opportunities.”

The national strike implies a challenge for the authorities within the framework of the state of emergency decreed last week by the president. The measure, adopted for 60 days to combat “crime and drug trafficking” in the streets, enables the Armed Forces to collaborate with the National Police in controlling internal security, something that will undoubtedly be used against social protests. The president also stated last week that he will not tolerate acts of violence, and that he has “the support of the Armed Forces.” On Friday, October 22, the president reversed monthly increases on fuel prices: a decision that generated uproar among the opposition and a large part of society. However, the working class, peasant, and indigenous movements pointed out, before backing down on the increase, the president applied a hike of 21 cents per gallon in the case of diesel and five cents on gasoline. Thus, the price was set at $2.55 a gallon for the regular “extra” gasoline and $ 1.90 for diesel.

For their part, peasants from the Confederation of Indigenous Nationalities of Ecuador (CONAIE) blocked the roads in ten of the 24 Ecuadorian provinces, on the second day of protests against the president’s measures. The protesters blocked the passage of vehicles in Pichincha, Imbabura, Cotopaxi, Carchi, Los Ríos, and Guayas. Meanwhile, that night, Lasso invited CONAIE to talk at the Carondelet Palace on November 10. However, the organization decided to extend the protest, which was mainly driven by the rise in fuel prices. Some 37 detainees, five wounded police officers, and two soldiers detained by the protesters were the balance of the first round of demonstrations, according to the government.

For their part, civil organizations suggested that this would be only the first of several rounds of protest if the president does not listen to their demands. “Blockades against the city of Quito are not ruled out if the national government does not understand that it must back down in its policies that have hit the majority of the Ecuadorian people (…) We do not rule out new actions in the course of the month and in the first days of November, ”said Nelson Erazo, president of the Popular Front, which brings together various social sectors.

The mobilizations have also brought to light the division between CONAIE and its political wing, Pachakutik. The election of Leonidas Iza as CONAIE leader at its seventh congress in July represents a certain shift to the left of this important organization. During the second round of the presidential elections in April, Iza publicly opposed Pachakutik candidate Yaku Pérez’s line of supporting the banker Lasso to prevent the victory of the Arauz (former left-wing president Rafael Correa’s preferred candidate).

Ecuador, 24 de Mayo del 2021, Cambio de Mando Presidencial, toma de juramento y posesión como Presidente Constitucional de la República del Ecuador al señor Guillermo Lasso Mendoza a cargo de la señora Guadalupe Llori, Presidenta de la Asamblea Nacional. Fotos Equipo de Fotografía / Asamblea Nacional
After only five months in power, the conservative Guillermo Lasso is facing serious economic and political problems. / Image: Asamblea Nacional del Ecuador, Wikimedia Commons

Now, CONAIE has publicly disavowed the Pachakutik legislators for having agreed to negotiate with President Lasso on the rise in fuel prices, and in its national general meeting it agreed to use indigenous justice to sanction the assembly members who had dialogued with the government.

The protests take place precisely two years after the October 2019 insurrectionary uprising against the government of Lenín Moreno. On that occasion, the masses forced the president to flee from Quito and threatened to seize power by installing a People’s Assembly. However, at the last minute, the CONAIE leaders (including Leonidas Iza himself) reached an agreement with Moreno that deactivated the mobilization.

Two important factors played a role in the betrayal of that movement, and it is important to draw the necessary conclusions from this experience. On the one hand, the sectarianism of the CONAIE leaders towards correísmo, which in the end led them to fall into the arms of Moreno. Second, and most importantly, the CONAIE leaders did not have, nor do they now have, a perspective for the seizure of power. As a consequence, in a situation in which the question of power was raised (who governs, the president and the National Assembly; or the workers and peasants through the People’s Assembly?), not wanting to resolve it led them to keep in power the hated Lenín Moreno, whose hands were stained with the blood of the people due to the repression of the movement.

After only five months in power, the conservative Guillermo Lasso has several problems. Added to the economic and social conflict is the prison crisis, which already caused 1,900 deaths this year; the wave of violence and contract killings that ended the life of the athlete Álex Quiñónez, one of the best sprinters in the world who was shot to death; and the legal complaints stemming from the discovery of his offshore companies, that revealed how he allegedly hid assets in tax havens, and for which the president faces three parallel investigations.

Pandora Papers

The International Consortium of Investigative Journalists (ICIJ) has released the largest-ever leak about offshore operations. The source of the work includes more than 14 law firms who specialize in the creation of financial companies in tax havens; these firms have different clients in various parts of the world. This work saw the participation of more than 600 journalists from all over the world, belonging to 117 media outlets who analyzed different types of files, submitting them to rigorous analysis to reveal the maneuvers made by public figures with the intention of evading taxes in their countries.

Some 35 heads and former heads of state appear in the Pandora Papers. From Latin America and the Caribbean, there are 14 heads and former heads of state such as the president of Chile, Sebastián Piñera (and some of his sons); from Ecuador, President Guillermo Lasso; from the Dominican Republic, Luis Abinader, as well as other ex-presidents; from Colombia, César Gaviria and Andrés Pastrana; from Honduras, Porfirio Lobo; from El Salvador, Alfredo Cristiani and Francisco Flores; from Paraguay, Horacio Cartes; from Peru, Pedro Pablo Kuczynski; from Panama, Juan Carlos Varela, Ricardo Martinelli, and Ernesto Pérez Balladares; and from Haiti, Laurent Lamothe. According to the ICIJ, in an era of increasing authoritarianism and inequality, the Pandora Papers investigation provides an unrivaled perspective on how “money and power” (read, capitalism) operates in the 21st century, and how “the rule of law has been bent and broken throughout the world by a system of financial secrecy enabled by the United States and other wealthy nations.”

pandora paper Image Public Domain
From Latin America and the Caribbean there are 14 heads and former heads of state appearing in the Pandora Papers, including Ecuador President, Guillermo Lasso. / Image: public domain

In Ecuador, President Guillermo Lasso is involved in a political crisis due to his ties with offshore companies and trusts in Panama; and in South Dakota and Delaware in the United States. The law prohibits candidates and public servants from having offshore accounts. The opposition has requested the resignation of the president. He faces his first scandal after coming to power on May 24. At the beginning of his term, he had an approval rating of over 70 percent, and that has decreasing by 20 points according to the latest polls.

Ecuador’s attorney general announced that it has opened a preliminary investigation against President Guillermo Lasso for tax fraud, after an opposition leader presented accusations against him related to the Pandora Papers leak, which points to Lasso as the creator of 14 financial companies in Panama and the United States. The president is also being investigated by the National Assembly, which has tasked a special commission to meticulously review the documentation and call the president, his wife, and one of his children to appear to explain the circumstances in which the 14 companies were opened. Lasso did not appear before the legislative commission and, instead, sent a letter in which he affirmed that he has clarified his compliance with his tax obligations in Ecuador. He also said he is willing to receive the members of the commission in the Presidential Palace to give explanations once all the relevant appearances have been held. Of the 14 financial companies, 11 are inactive and the president denies having any relationship to or benefit from the other three.

According to the president, in an interview with the newspaper El Universo, he detailed his alleged statements in recent years and stressed that he is one of the Ecuadorians who pays the most taxes. He claimed to have contributed 588 million dollars to the treasury in a personal capacity and through Banco Guayaquil, in which he is the majority shareholder. So, the president alleges that he took money abroad because national laws prevent bankers from investing in the country. At the end of 2017, two trusts were created in South Dakota, the Liberty Trust and the Bretten Trust, which were formed from the shares of the other companies already dissolved by Lasso. Nevertheless, he claims he does not “ have any ownership, control, benefit, or interest relationship of any kind” with these entities.

We recently wrote the following about the Pandora Papers leak:

[They] reveal what we already know; that those who hold the most wealth and power are also the most corrupt. The lengths they will go to in order to protect “their” money and privileges have been exposed countless times, most recently in the Panama Papers in 2016, followed by the Paradise Papers in 2017.

This rotten capitalist society certainly does constitute a “paradise” for the rich, as they hide their wealth and avoid paying tax, using a combination of exclusive bank accounts, trusts and foundations in offshore financial centers. Notably, many of these measures are perfectly “legal” in the formal sense. The system itself is rigged in favor of the rich, who seek to enrich themselves further still.

The super-rich seem to live in a different universe to the rest of us. Even when their companies collapse—condemning thousands of workers to destitution in the process—these bloated leeches continue to enjoy the lap of luxury… The scale of this avarice and greed ultimately reflects the deep crisis of capitalism. The bourgeois class are not capable of carrying society forwards. They have become a fetter on human development through their parasitic tendencies: sitting on huge piles of money rather than investing it back into developing production for the betterment of mankind.

The capitalist state is certainly a pandora’s box full of corruption and scandal. This is no accident. It is a very conscious decision on the part of capitalists to use all the tricks at their disposal to maximize their privileges. It is clear that no matter what rules and reforms are put into place against offshore tax havens and the like, the rich will always find a way to escape the net…

The hypocrisy on display here is staggering. The capitalist class and its political representatives will continue to attack the poor and working class through cuts, austerity and privatizations, whilst at the same time bending over backwards to protect their own wealth and privilege.

Only by overthrowing capitalism can we end the immense corruption and greed of the small minority, which continues with the impoverishment and suffering of the majority of humanity.

In Ecuador, this disparity between the wealth of the few and suffering of the many is especially pronounced. Poverty stands at 35 percent, and extreme poverty at 14.2 percent. More than 5.6 million Ecuadorians survive on less than $84 a month. In rural areas, it reaches 47.9 percent of families. Malnutrition affects 26 percent of children up to five years old, figures that increase to 40 percent in rural areas.

The crimes of ruling elite have been thoroughly exposed by the Pandora Papers—as if any further evidence of their utter rottenness were needed. The Ecuadorian people must complete the tasks of the 2019 uprising, unite on a class basis to bring down Lasso and his filthy-rich clique, and run society in the interests of the worker and peasant masses.

Are you a communist?
Then apply to join your party!