Tales from my trip to Ecuador, where inflation protests have turned violent

Fires burned in the towns. Roads were blockaded. Transport links targeted.

It’s a scary time for a lot of people, and I witnessed this first-hand last month as I spent three weeks in Ecuador. The South American nation, which has used the US dollar since the collapse of its native sucre currency in 2000, has been crippled by protests against a variety of issues, the most prominent being the cost of living.

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The protests have brought the country to a standstill, and I was lucky to be able to grab a flight and get out as things turned really sour, as protesters blocked highways and other routes in the cities, trapping people inside. At least four people have been killed and over $1 billion in damage has been caused. However, the real impact is the long-term hit to the tourist industry, which Ecuador has been working so hard to cultivate. The consequences of this will be devastating for the nation going forward.

Ecuador is beautiful

I was immediately struck by two things upon landing in Ecuador’s capital city, Quito: beauty and altitude sickness. Quito is 3,000 metres high in the Andes, and the oxygen is notably thinner. Walking around for the first few days with what felt like a constant hangover, I was also adjusting to the colder temperatures being so high in the sky.  

But the beauty was spectacular; the imposing Andes mountains everywhere to be seen. Climbing Cotapaxi volcano (5,000 metres high, with resting required every ten metres due to the thin air) and completing a two-day hike on a loop around Quito, the landscape is unlike anything I have seen.

Ecuador is also suffering

But the beauty of the landscape is juxtaposed with the ugliness of what commenced while I was there – protests which swiftly turned violent.

An indefinite strike in the country was launched on 13^th June by the Confederation of Indigenous Nationalities, who had demands including a decrease in the price of fuel, increased health and education funding, and several price control measures covering a wide array of goods.

Protestors went after highways and important transport routes, meaning there were cases of tourists getting airlifted out, and regions completely closed off with even medical care such as fire engines and ambulances unable to get into cities. While the official death revealed by authorities is four, there are rumblings that the real number is higher.

Two weeks in, on Monday 27^th June, negotiations appeared to be coming to a resolution, but then another attack on a fuel convoy killed a military officer and left twelve wounded, leading to the government calling off negotiations.

However now, with food shortages causing whatever food that has reached the cities to rocket to scarcely believable levels, the government has been forced back to the negotiation table and an agreement has been reached, in what has been viewed as a big win for the people.

Inflation’s disproportionate impacts

Gas will decrease 25 cents to $2.40 a gallon as part of the agreement,  limits to the expansion of oil exploration in the Amazon, mining in protected areas will be forbidden, and price controls on a variety of goods introduced.

Monsignor Luis Cabrera, who acted as mediator in the deal, stated that “if state policies do not resolve the problem of the poor, then the people will rise up”.

This is the problem with inflation. It disproportionately affects the poor. All over the world, we are seeing companies lay off employees in response to the Fed’s move to hike rates. Rates increasing means the incentive to invest is less and unemployment spikes. Similarly, heavily indebted households that need loans (credit card or other) face steeper interest.

Inflation is an incredibly personal thing because it affects everyone in society – it’s just that those at the bottom of the rung bear the brunt of it.

Price Controls

In Ecuador’s case, price controls won’t do anything. This is a deep-lying issue following the unprecedented money printing of the last decade, which ramped up significantly through the pandemic.

In order to cool the inflation down, there needs to be a removal of all this injected capital and this is best done through raising rates, increasing unemployment and shrinking the economy – there is no other way. In raising unemployment, people will theoretically be willing to work for less, helping to restrain wage growth, which has often been used by politicians in defending the state of the economy and the seriousness of the inflation issue.

Go forward

“We know we have a country with a lot of divisions, a lot of problems, with unresolved injustices, with important sectors of the population that are still marginalised,” Ecuadorian government minister Francisco Jimenez said upon signing the agreement.

Sure, Americans reading this may discount what is happening in Ecuador as irrelevant given its development compared to the US, but what is to say this doesn’t start happening in other countries? The economy is in a bad state, and there is no easy way out. The saddest part of all is that, as it tends to be, it’s the people at the bottom of the pile who will have to suffer the most.

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