SNAPSHOT: Protests and state of emergency in Ecuador heighten security, travel and supply chain risks for corporates

SNAPSHOT: Protests and state of emergency in Ecuador heighten security, travel and supply chain risks for corporates

KEY POINTS

  • On 1 October, Ecuadorian President Lenín Moreno announced the elimination of subsidies for diesel and low-octane gasoline, among a series of economic measures aimed at reducing the fiscal deficit.
     
  • The announcement led to widespread protests across the country by transport unions, indigenous groups, and organisations linked to former president Rafael Correa, prompting the government to declare a nationwide, 60-day state of emergency on 3 October. This coincided with the nationwide suspension of school classes, dozens of police officers being taken hostage by protesters, and demonstrators staging roadblocks on major highways.
     
  • The state of emergency allows the police and armed forces, who mobilised after the declaration, to coordinate resources. It also suspends freedom of association and allows the authorities to limit freedom of movement.
     
  • Yesterday (6 October), a 35-year-old man was fatally run over in the south-central province of Azuay as a vehicle accelerated after it was attacked by protesting local residents; local media identified the man as a demonstrator. The incident marked the first fatality since unrest began.
          
  • Widespread protests, including violent confrontations between demonstrators and police, are likely to continue in the one-week outlook. Security managers responsible for staff and facilities in Ecuador should ensure security measures are commensurate to the risk environment.

President Lenín Moreno declared a state of emergency on 3 October

ANALYSIS

  • The decision to remove the subsidies marked a significant increase in prices at the pump: the price of a gallon (3.79 litres) of diesel has increased from USD1.03 to USD2.27, while a gallon of gasoline has risen from USD1.85 to USD2.30.
     
  • The policy, which is designed to save up to USD1.3 billion annually, comes amid a mounting series of macroeconomic challenges facing Moreno; these include low global oil prices and the inability to adjust monetary policy, given the country’s use of the US dollar. In February, the government signed a USD4.2 billion loan with the IMF, which has been accompanied by a series of measures to reduce the high budget deficit.
     
  • Moreno has said that he will not reverse his decision on fuel subsidies, which is the key demand of protesters. Barring an escalation of violent protests or mass civic mobilisations in the one-week outlook, Moreno is unlikely to backtrack on the policy.
     
  • Beyond the immediate risk of protests over Moreno’s decision, there is an elevated likelihood of demonstrations in the three-month outlook, as the hikes in fuel prices will lead to inflation throughout the economy, particularly in sectors whose business and pricing models are vulnerable to increases in transportation cost.

  • Protests are particularly likely in the central Sierra region, including the capital Quito; unlike in other regions, classes in schools in Sierra remained suspended today.

Some protesters are aligned with exiled former president Rafael Correa

RESPONSE

  • Health, safety, security and environment (HSSE) managers at organisations with staff and assets in Ecuador should immediately review security measures to ensure these are commensurate to the ongoing threat of civil unrest.
     
  • Ensure that site security measures are fit-for-purpose, particularly at facilities in major urban centres, which are most vulnerable to vandalism and looting.
     
  • Anticipate disruption to road transport, particularly on major highways. Factor likely supply chain disruption into short- and medium-term operational planning.

  • In the one-week outlook, minimise non-essential travel to major urban areas, particularly Quito, until there is a significant reduction in the risk of violent unrest. Where travel is necessary, conduct journeys under strict journey management protocols with trained and vetted drivers and under the advice of an experienced security professional.