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Can Peru’s Democracy Recover?

By Cynthia McClintock*

Photographs from the early hours of the Generation Z protest in Peru, 2025
(Source: Wikimedia Commons)

Since 2021, democratic backsliding has been severe in Peru, and Peruvians are furious. Peru’s Congress is loathed. In 2025, the approval rating for Peru’s President, Dina Boluarte, fell below 3 percent and she became the most unpopular president on the planet. Finally, in October, Boluarte was impeached on the grounds of “permanent moral incapacity”; it was the fifth time since 2018 that a president had been impeached or had resigned upon imminent impeachment.  Per Peru’s constitution, Boluarte was succeeded by the Congress Speaker, José Jerí. Presidential and Congressional elections are scheduled for early 2026.

Why are Peruvians so angry? What does their anger mean for the 2026 elections (with the Congressional elections and the first round of the presidential elections scheduled for April 12 and a likely runoff on June 7)? Is it possible that the elections can lead to a democratic recovery?

Why are Peruvians So Angry?

The key reason is not “the economy stupid,” but an escalation of organized crime and the perception that Peru’s political leaders are part of the problem rather than part of the solution.

Between 2019 and 2024 the number of homicides doubled and the number of reported extortions jumped sixfold. Extortion is hurting huge swathes of lower-middle class Peruvians. Transport workers have been particularly vulnerable; so far in 2025, approximately 50 bus drivers have been killed for refusing to make extortion payments.

The reasons behind the crime escalation are various. Demand for cocaine remains high and, over the last decade, Peru’s coca cultivation has increased. As the price for gold jumped, so did illegal gold mining. Peru’s gangs are fragmented—and therefore hard to track—and they have developed nefarious new strategies such as using WhatsApp for extortion.

But, Peruvians believe, the reasons also include the government’s complicity. In part because illicit operators have provided campaign finance, in 2024 approximately half of Peru’s legislators were under criminal investigation; these same legislators have passed laws to impede investigations and prosecutions. Boluarte herself is under investigation for various crimes, including illicit enrichment. She sported a Rolex watch priced at $19,000, despite no evident financial means for such extravagance.

Further, from the start large percentages of Peruvians did not deem Boluarte a legitimate president. In 2021-2022, Boluarte was Vice President under President Pedro Castillo. Leading a far-left party in fraught elections during COVID, Castillo was an accidental, unprepared president. He was virulently opposed by the dominant right-wing forces in Congress, in particular Fuerza Popular, the party of Keiko Fujimori, the daughter of former authoritarian President Alberto Fujimori. As Vice President, Boluarte had said that, if Castillo were impeached, she too would resign, triggering new elections. However, in the event of Castillo’s December 2022 impeachment, Boluarte stayed on, despite massive protests and ubiquitous calls for new elections.

As President, Boluarte appeared indifferent to Peruvians’ concerns. Between December 2022 and February 2023, 49 civilian protesters were killed by the security forces. Boluarte’s response was support for an amnesty law. And, amid an October 2025 transport workers’ strike, Boluarte’s advice to Peruvians worried about crime was that they should not open text messages from unfamiliar people—placing blame for crimes on the victims.

What Does Peruvians’ Anger Mean for the 2026 Elections?

Peruvians’ anger spells difficulties for its incumbent parties and advantages for parties that can claim an “outsider” mantle. Fujimori’s Fuerza Popular is widely considered the dominant party in the Congress, and it will struggle against this perception. Its presidential candidate, Fujimori, is running for the fourth time and is likely to have worn out her welcome.

Not surprisingly, demands for an “iron fist” against crime are strong. The current presidential frontrunner is Renovación Popular’s Rafael López Aliaga (aka “Porky”), a Trump-like far-rightist who placed third in the 2021 election and was subsequently elected Lima’s mayor. López Aliaga promises a hardline strategy against organized crime, including implementing similar imprisonment policies to those of El Salvador’s Nayib Bukele. But Renovación Popular holds the fourth largest number of seats in Congress and it will be difficult for López Aliaga to claim an “outsider” mantle.

A candidate likely to claim an “outsider” mantle is Mario Vizcarra, running as a proxy for his brother, former President Martín Vizcarra. As President in 2018-2020, Vizcarra confronted the dominant parties in Peru’s Congress, building his popularity but ultimately catalyzing his impeachment. After a strong showing in Peru’s 2021 legislative elections, he was disqualified from holding elected office for ten years. Yet, Vizcarra’s government was far from without fault. There are other candidates, including the popular former clown, Carlos Álvarez, who could seize the “outsider” mantle.

Can Peru’s 2026 Elections Lead to Democratic Recovery?

The challenges to Peru’s elections are serious. In recent years Fuerza Popular and other illiberal parties in Peru’s Congress have allied to skew the electoral playing field in their favor.  Interim President Jerí is, of course, new to his position and his possible impact on the elections is unclear. (His first-month record was better than was first expected.)

As elsewhere in Latin America, Peru’s illiberal parties have strategized to achieve the disqualification of viable candidates. As indicated, this strategy is currently being used against Vizcarra; it could also be used against a rising new candidate.

Peru’s illiberal parties have calculated that a plethora of candidates is in their interest. Currently, 39 party lists are registered. Such a head-spinning number is problematic for journalists trying to cover the campaign and problematic for voters trying to identify their preferred candidate, especially because pre-election polls are more likely to be inaccurate. Yet, Peru’s Congress cancelled a provision for a preliminary round of voting, in which parties would have been required to secure 1.5 percent of the vote in order to qualify for the “first round.”

Still, there are grounds for optimism. The massive protests of recent years have shown that Peruvians want their political views heard. Peruvians recognize the importance of honest, capable leadership and want to find it.

*Cynthia McClintock is Professor of Political Science and International Affairs at George Washington University.

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by clalsstaff on November 12, 2025  •  Permalink
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Posted by clalsstaff on November 12, 2025

https://aulablog.net/2025/11/12/can-perus-democracy-recover/

Bolivia Decisively Enters New If Unknown Political Territory

By Robert Albro, Associate Director, CLALS

Rodrigo Paz is sworn in as president of Bolivia, 2025
(Source: Wikimedia Commons)

Centrist Rodrigo Paz’s victory in October’s runoff election signals a dramatic change of direction for Bolivian politics. The era of dominance of the Movement Toward Socialism (MAS) party, led by ex-president Evo Morales, is definitively over. For only the second time since 2006 the MAS will not control the presidency. As a result of the recent election, it now has a mere two representatives in the legislature’s lower house, and no one in the upper house. Though it does not hold an outright majority, Paz’s Christian Democratic Party is now the single largest presence in both legislative chambers. How did Bolivia get here?

Twenty years ago, the leftist-populist MAS swept into power, as a new and energetic grassroots alternative to the elite-run traditional parties that had traded off governing Bolivia since the end of dictatorship in 1982, or one could even argue, since the 1952 Revolution. The MAS’s popularity sprung largely from the dynamism of Morales, himself, then a coca grower union leader adept at organizing and leading large-scale protests in opposition to prevailing Washington Consensus policies and government efforts to sell off Bolivia’s non-renewable resources to transnational corporate interests. The MAS styled itself a bottom-up social movement and not a party. Its participatory “lead by following” approach to governance appealed to a great majority of indigenous voters and working-class people of indigenous descent.

Morales and the MAS proved historically consequential in undertaking a contentious but innovative rewrite of the country’s Constitution, which went into force in 2009. It fully embraced Bolivia’s “plurinational” identity and incorporated an unprecedented variety of collective indigenous rights of consultation, to their traditional territories, and perhaps most controversially, of judicial autonomy. The Morales administration also used a large surplus from the country’s extractive boom to finance a wide range of new social safety net provisions that halved the number of people living in poverty, including cash transfers to families, a pension program, minimum wage increase, as well as public investments in schools, hospitals, and other infrastructure. Perhaps most importantly, his presidency raised the public visibility of Bolivia’s indigenous majority, no longer as second class citizens but as political protagonists of their own present and future.

Morales and the MAS were immensely popular. But then cracks began to appear. In 2011 a plan to build a controversial highway through a protected indigenous reserve brought the MAS government into direct conflict with the reserve’s residents, damaging its support among some indigenous groups. When the extractive boom ended around 2014, Bolivia’s economy slowed considerably, and the MAS fiscal policies that had lifted so many out of poverty became increasingly unsustainable. Part of the problem was Morales, who served two presidential terms and aspired to another, without any thought to a succession plan. Constitutionally limited to two terms, in 2016 he soundly lost a national referendum in a bid for a third and then ignored the result, further alienating many former supporters.

The upheaval around the contested 2019 election, which eventuated in Morales going into exile in Mexico and the persecution of MAS loyalists by a rightwing caretaker government, set the stage for the party’s eventual fall from grace. The 2020 election restored the MAS to power. But soon Morales and the new president, his ex-finance minister Luis Arce, were in a pitched battle for control over the party, a bitter and increasingly personal rivalry that fatally fragmented the MAS into opposed camps. Their protracted feud, which paralyzed congress, strayed into surreal territory, with accusations of a staged coup and mutual assassination attempts. The credibility of the MAS was so fundamentally damaged that the incumbent Arce, with his poll numbers plummeting, suspended his campaign. Morales, meanwhile, remains holed up in his coca grower redoubt to avoid criminal charges.

The MAS-led government’s political fragmentation, and its ineffectual response to Bolivia’s increasingly disastrous economy, have left the party deeply unpopular. The country is currently floundering amid its worst economic crisis in 40 years. Its natural gas production is half of what it was in 2014, with nothing to replace it. Bolivia has failed to develop its large reserves of lithium. Depleted currency reserves and a scarcity of US dollars have driven up inflation, creating severe shortages of fuel and basic goods. Over the past year, ordinary Bolivians have angrily expressed their discontent with the country’s economic collapse through repeated strikes and protest actions.

Emerging from this bleak political and economic state-of-affairs is the surprise election winner, Rodrigo Paz. Son of onetime leftist president Jaime Paz Zamora, former mayor of Tarija, and recently a senator, Paz’s campaign focused on restoring Bolivia’s economy, but gradually rather than by instituting sweeping fiscal austerity measures as his rival in the run-off proposed. Non-indigenous, pro-business, and ideology averse, Paz successfully positioned himself as a pragmatic reformer. He has delivered a strong anti-corruption message, pledged to restore relations with the US and bring back foreign investment. His populist call for a “capitalism for all” hopes to thread the needle by mixing decentralization, lower taxes, support for small businesses, and greater fiscal discipline, with continued spending on popular MAS-era social programs.

Paz’s critics argue that what he proposes is an impossible fiscal balancing act. Desperate and impatient Bolivians will expect immediate results. But it remains far from clear whether Paz will be able to overcome likely regional opposition to at least some of his policies. And if he does not stabilize the country’s dysfunctional economy quickly, Paz’s political honeymoon might be brief.

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by clalsstaff on November 11, 2025  •  Permalink
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Posted by clalsstaff on November 11, 2025

https://aulablog.net/2025/11/11/bolivia-decisively-enters-new-if-unknown-political-territory/

The Rise, Decline, and Crisis of Ecuador’s Indigenous Movement

By Dr. Pablo Andrade Andrade

October 17 Demonstrations (Manifestaciones del 17 de Octubre)
(Source: Wikimedia Commons)

Just six years ago, in 2019, the three major organizations of the Ecuadorian indigenous movement were on the rise. CONAIE (the Confederación de Nacionalidades Indígenas del Ecuador) led the charge against Lenin Moreno’s government. For eleven days their widespread demonstrations posed a serious threat to the government’s stability. The “Paro Nacional” (Nationwide Strike) not only facilitated CONAIE’s alliances with the other two indigenous organizations (FENOCIN, the Federación Nacional de Organizaciones Campesinas, Indígenas y Negras, and FEINE, the Federación Ecuatoriana de Indígenas Evangélicos) but also broadened its coalition with a diverse range of civil society organizations, marking a significant shift in Ecuadorian politics. The impact of the indigenous movement on Ecuadorian politics was profound, as Moreno´s government was seriously weakened. Two years later, in 2021, CONAIE’s political party, Pachakutik, won substantial representation in the National Assembly and placed third in the Presidential elections.

In 2022 CONAIE’s president, Leonidas Iza, led a successful national strike against Guillermo Lasso’s right-wing government. His leadership, bolstered by unity among indigenous communities and their allies, made it the most powerful leftist organization. Newfound solidarity among indigenous communities and stronger ties with student, feminist, and environmental movements, enhanced Iza’s national and international reputation. Less than a year later, President Lasso had to end his term and called for early general elections. However, at that moment Iza´s radical wing of CONAIE also attempted to impose its agenda over Pachakutik and the Amazonian federation CONFENIAE, which proved to be a high-cost strategy. The internal conflicts that followed led, in 2025, to the most serious electoral defeats that both organizations had suffered in decades.

The 2023 general elections were marred by prison massacres and political assassinations, including that of presidential candidate Fernando Villavicencio and the mayor of Manta, among numerous other government officials. Amid this unprecedented turmoil, a young center-right candidate, Daniel Noboa, emerged victorious as interim president. His win signaled yet another shift in Ecuador’s political landscape, with the country’s fragile democracy once again at the mercy of a personalist, plebiscitarian president.

The first warning sign of the current political turn to populist rule came with the 2025 regular election. The President’s party (Alianza Democrática Nacional, ADN) and the opposition party (Revolución Ciudadana, RC) totalled over 80 percent of National Assembly representatives. Noboa won his first five-year mandate. Pachakutik saw its representation shrink to five members, who the government rapidly coopted. Free from legislative checks, Noboa advanced his economic adjustment program. In addition, amid the ongoing public security crisis, Noboa expanded the military’s role in maintaining domestic order. Although assassinations have risen since 2023, militarization has strengthened Noboa’s control over organized violence, boosting political support for his government.

As part of its economic program, in September 2025, the Noboa administration raised diesel prices, a decision that in 2021 and 2022 sparked the wrath of CONAIE. But the leaders misjudged the lasting strength gained in 2021 and 2022, failing to account for damage from the 2023 and 2025 leadership races. As a result, they  rushed to emulate the apparent successes of the past. This time, however, CONAIE was at its lowest point. Unable to coordinate a nationwide strike, organizations in the northern province of Imbabura were left to their fate. The indigenous peoples of Cotacachi, Ilumán, Peguche, and Otavalo sustained demonstrations for a month. Still, they paid a high price in lost lives, injured people, and detainees due to systematic and brutal repression at the hands of the Armed Forces and the Police. This time, the government did not back down; the solidarity of  allied urban groups was, in this case, mostly symbolic and ineffective.

If CONAIE’s crisis should not be seen as the end of the indigenous movement, its significance cannot be overlooked. While grassroots mobilization once seemed effective, Noboa’s strong appeal and military support present new challenges. The aftermath of the national strike has called into question CONAIE’s representativeness and capacity to organize. An emboldened Noboa is now proposing a national plebiscite, in which he will likely be victorious, while Ecuador’s civil society appears weaker than ever. The challenges ahead are complex. The failed challenge to Noboa´s government could herald a new era of competitive authoritarianism, a scenario made even more likely by renewed international tolerance of hybrid forms of democracy. The lost battle left the indigenous organizations of Imbabura with wounds that could be challenging to heal, and racism lurks underneath the surface of Ecuador’s still young experiment with intercultural co-governance.

Pablo Andrade Andrade is Professor and Chair of the Germánico Salgado Lectures, Universidad Andina Simón Bolívar

*This post continues an ongoing series, as part of CLALS’s Ecuador Initiative, examining the country’s economic, governance, security, and societal challenges, made possible with generous support from Dr. Maria Donoso Clark, CAS/PhD ’91.

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by clalsstaff on November 6, 2025  •  Permalink
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Posted by clalsstaff on November 6, 2025

https://aulablog.net/2025/11/06/the-rise-decline-and-crisis-of-ecuadors-indigenous-movement/

On the U.S. – Argentina Currency Swap

By Dr. Susana Nudelsman

Central Bank of Argentina (Banco Central de la República Argentina)
(Source: Wikimedia Commons)

In October of this year, the United States Treasury Secretary Scott Bessent ratified the signing of a US$20 billion currency swap with the Central Bank of Argentina as part of an “economic stabilization agreement” (Buenos Aires Herald, 2025). Moreover, the U.S. Treasury announced it is working on a complementary US$20 billion credit line that would be provided by private-sector banks and sovereign wealth funds (La Nación, 2025).

According to the Argentine banking institution, this agreement seeks to contribute to the country’s macroeconomic stability, emphasizing the need to preserve price stability and promote sustainable economic growth. The swap operations will enable the Central Bank of Argentina “to expand its set of monetary and exchange rate policy instruments, including the liquidity of its international reserves”, in line with the regulatory functions outlined in its statutes. The agreement is an important factor of a far-reaching approach that aims to strengthen the country’s monetary policy and improve the Bank’s ability to cope with events of volatility in the foreign exchange and capital market (Central Bank of Argentina, 2025).

Why is Argentina interested in this agreement?

Peterson Institute Professor Maurice Obstfeld (2025) highlights Milei’s remarkable success in lowering inflation, achieving a federal budget surplus, and relaxing regulations. Prior to the present crisis, the IMF predicted that Argentina’s GDP would expand by 5.5 percent in 2025, after shrinking 1.3 percent in 2024. At the same time, the IMF’s initial assessment of April 2025 concluded that, with one exception, important objectives were met. Indeed, the country’s net foreign exchange reserves, which are primarily in US dollars, fell well short of their target level.

Harvard Professor Ricardo Hausmann (2025) explains that Argentina is trapped in a multiple equilibrium, that is, a situation in which given the same set of conditions, an economy can achieve two or more distinct and stable equilibrium outcomes. If investors are willing to lend money when they feel optimistic, this lowers interest rates helping the economy grow and keeping debt service low, thus confirming the initial expectations. Conversely, if investors become pessimistic, they demand high risk premiums, which causes interest rates to skyrocket, harming investment and making public debt more expensive, thus justifying their fear of a crisis.

For his part, the former Secretary of Finance of Argentina Daniel Marx (2025) underscores that the pre-election portfolio adjustment has been less complicated than in the past, which shows more credibility with banks and institutions. In this regard, financial support from the U.S. Treasury can be useful in creating a sequence that enables its orderly implementation. Hence, the funds obtained to cope with the ongoing problems could be used to address important unresolved issues rather than being used for other instances in which funds are being depleted in the short-term.

Why is the U.S. interested in this agreement?

As Brad Setser (2025), Senior Fellow at the Council on Foreign Relations, argues, Washington has an interest in Milei’s success, not only because of his emphasis on stabilizing the Argentine economy, but also because his commitment to the free-market approach could serve as an important example for the rest of the continent.

However, U.S. interest in the swap agreement should also be understood in terms of the momentous change that the architecture of international financial relations has been experiencing in recent times. Indeed, following various decades of growing global economic integration, the planet is now confronting the threat of policy-driven geo-economic fragmentation.

In this context, Argentina matters for the strategic interest of the United States. Scott Bessent (2025) has emphatically stressed that the country is “a systemically important U.S. ally and that the U.S. Treasury stands ready to do what is needed within its mandate to support Argentina.” In other words, the Trump administration’s bailout resembles Mario Draghi’s support for European stability in 2012 with his “whatever it takes” approach, applied to the Argentine case in 2025.

Vera Bergengruen (2025), a journalist for The Wall Street Journal, believes that Washington’s security policy is a sort of revival of the Monroe doctrine. While the prior doctrine sought to keep European powers out of the region, the current one is primarily focused throughout the Americas with an aim to reward loyalty and to root out enemies. In this respect, Argentinian political analyst Juan Landaburu (2025) points out that in the context of a North American withdrawal from other regions, the so-called “backyard” of the United States is gaining greater importance, but this time not because of European ambitions but because of China’s advances.

  • With the results of Argentina’s midterm elections, the government has gained public support for its pro-market approach, while also gaining ground in the international financial community.
  • For its part, the United States government welcomes this result, which reaffirms its political preferences and allows it to make projections about its strategic interests in Latin America.
  • That said, the swap agreement between the U.S. and Argentina, while not without risks, constitutes an opportunity to renew ties of cooperation in the context of the current complex architecture of international relations. The coin is in the air.

REFERENCES

Bergengruen Vera, 2025, Trump’s ‘Donroe Doctrine’ Aims to Dominate the Americas, The Wall Street Journal, October 22, available at https://archive.is/20251023231723/https://www.wsj.com/world/americas/trumps-donroe-doctrine-aims-to-dominate-the-americas-b31208dd

Bessent Scott, 2025, Argentina is a systemically important U.S. ally in Latin America, and the @US Treasury stands ready to do what is needed within its mandate to support Argentina, available at https://x.com/SecScottBessent/status/1970107351912075454

Buenos Aires Herald, 2025, Scott Bessent confirms Argentina-US currency swap has been signed, available at https://buenosairesherald.com/economics/scott-bessent-confirms-argentina-us-currency-swap-has-been-signed

Central Bank of Argentina (Banco Central de la República Argentina), 2025, The BCRA and the U.S. Department of the Treasury sign a USD 20 billion agreement for exchange rate stabilization, available at https://www.bcra.gob.ar/Pdfs/Noticias/acuerdo-bcra-tesoro-estados-unidos-EN.pdf

Hausmann Ricardo, 2025, Trump Alone Can`t Save Argentina, New York Times, October 15, available at https://www.nytimes.com/2025/10/15/opinion/argentina-milei-trump-bailout.html

La Nación, 2025, Estados Unidos prepara otra ayuda para la Argentina con el sector privado por US 20000 millones, October 16, available at https://www.lanacion.com.ar/estados-unidos/eeuu-prepara-otra-ayuda-para-la-argentina-con-sector-privado-por-us20000-millones-nid16102025/

Landaburu Juan, 2025, Por qué Trump mira a América Latina más que nunca? La Nación, October 25, available at https://www.lanacion.com.ar/el-mundo/por-que-trump-mira-a-america-latina-mas-que-nunca-y-cuales-son-los-riesgos-detras-de-su-estrategia-nid25102025/

Marx Daniel, 2025, De pesos a dólares: esta vez es algo diferente, El Cronista Comercial, October 21, available at https://www.cronista.com/suscripciones/?limit=false&continue=https%3A%2F%2Fwww.cronista.com%2Fcolumnistas%2Fde-pesos-a-dolares-esta-vez-es-algo-diferente%2F&kicker=Opini%C3%B3nExclusivo%20Members&title=De%20pesos%20a%20d%C3%B3lares%3A%20esta%20vez%20es%20algo%20diferente&summary=&image=https%3A%2F%2Fwww.cronista.com%2Ffiles%2Fimage%2F1272%2F1272625%2F68f969cdb980d_600_315!.jpg%3Fs%3D0eec9030d86ead2043d767eb59f61bac%26d%3D1761176231

Obstfeld Maurice, 2025, Argentina’s Credibility Trap, Brookings Institution, available at https://www.piie.com/blogs/realtime-economics/2025/argentinas-credibility-trap

Setser Brad, 2025, Will Trump’s $20 Billion Backing Help Milei Change Argentina’s Fortunes, available at https://www.cfr.org/article/will-trumps-20-billion-backing-help-milei-change-argentinas-fortunes

Susana Nudelsman is a Doctor in Economics focused on international political economy. Counselor at the Argentine Council for International Relations and visiting fellow at CLALS.

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by clalsstaff on October 28, 2025  •  Permalink
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Posted by clalsstaff on October 28, 2025

https://aulablog.net/2025/10/28/on-the-u-s-argentina-currency-swap/

Trapped by Debt? China’s Role in Ecuador Oil Dilemma

Photo credit: Xinhua, https://images.app.goo.gl/rBnL1kuwMixrzmCh7

Ecuador’s struggle to move beyond oil is deeply tied to its financial obligations—especially to China. Over the past 15 years, oil revenues have not only funded public spending but also serviced billions in external debt, locking the country into a path of continued extraction. This tension was already visible when the Yasuní-ITT Initiative collapsed in 2013: efforts to protect the rainforest were ultimately sidelined as social spending and budgetary needs remained—if not deepened—the country’s dependence on oil income. A decade later, Ecuadorians voted to halt drilling in the same region, but implementation has slowed. While officials have cited fiscal pressures and legal complexities, it is also clear that a significant portion of Ecuador’s oil production remains tied up in long-term prepayment arrangements—including those linked to past oil-for-loan agreements with Chinese lenders. 

Following Ecuador’s 2008 debt default, China quickly emerged as the country’s primary financier. According to the China-Latin America Finance Database, since 2010 Chinese policy banks—primarily China Development Bank and Eximbank—provided over $18 billion in loans to Ecuador. Many of these were backed by future oil shipments. The structure followed a two-track model: financial agreements with policy banks, and parallel supply contracts with PetroChina or Unipec. In practice, this meant that while Chinese banks lent Ecuador billions in cash, PetroEcuador committed to deliver oil to Chinese traders as repayment—regardless of market prices at the time of shipment. This arrangement locked in large volumes of crude in exchange for upfront cash. By 2013, nearly 90% of Ecuador’s oil exports were committed under term contracts with Chinese buyers, giving Beijing outsized leverage over the country’s oil trade. 

These deals have had long-lasting implications. By committing barrels years in advance, they reduced Ecuador’s ability to adjust production in response to new priorities—such as conservation mandates or global price shifts. Pricing terms further undercut the country’s earnings. Although contracts referenced international benchmarks like West Texas Intermediate (WTI) or Brent, additional fees, quality discounts, and opaque delivery terms often meant Ecuador received significantly less than market value. In fact, in 2017 Petroecuador sought to renegotiate oil-for-loan contracts with Chinese firms precisely to secure better pricing and reduce the volume of barrels exported under onerous terms. A 2022 audit cited by Infobae estimated that Ecuador lost nearly $5 billion in revenue due to oil sold at below-market prices under those contracts; up to 87% of crude exports were tied to formulas that paid less than the spot market could have yielded. 

Independent investigations by journalists have also found that Chinese firms profited by reselling Ecuadorian crude at higher prices, while Petroecuador captured only a portion of the potential revenue. Contractual provisions—such as repayment accounts held abroad and sovereign immunity waivers—further limited Ecuador’s flexibility to renegotiate terms without risking legal or financial penalties. 

In this context, many of the barrels extracted today are already earmarked through older pre-sale deals. This complicates efforts to curb drilling, even when doing so in response to a clear public mandate. Contractual rigidity—not just fiscal reliance—has narrowed the government’s policy space. Reversing course isn’t just a matter of political will; it requires untangling years of embedded financial commitments. 

The 2022 debt restructuring with China offered a glimpse of what greater flexibility can unlock. By renegotiating loan maturities and rescheduling oil deliveries, Ecuador freed up dozens of cargoes that had been tied to repayment. Instead of shipping them under discounted terms, the government was able to sell them on the open market—during a favorable price window—generating millions in additional revenue. The volume of oil remained the same. What changed was when and how it could be sold. This shift in marketing autonomy directly expanded Ecuador’s fiscal space, without requiring increased production or new drilling. 

While extractive arrangements remain deeply entangled with prior commitments, recent developments suggest Ecuador is gaining modest room to pursue a different path. In mid-2025, the country secured $400 million from China’s PowerChina—part of a broader $1 billion renewable energy package that also included Spanish financing—to support solar and energy storage projects. This marks a shift in Chinese engagement away from fossil-backed infrastructure toward cleaner investments. At the same time, Ecuador has turned to debt-for-nature swaps to ease financial pressures without expanding oil production. Although these were led primarily by multilateral lenders and NGOs, they reflect a broader shift. The 2023 Galápagos blue bond refinanced $1.6 billion in debt to fund long-term marine conservation, while a second swap in 2024 unlocked $460 million for Amazon protection. Together, these efforts point to the possibility of more climate-aligned partnerships—offering early glimpses of how Ecuador, with support from external actors, including China, might gradually move beyond extractive dependence. 

Three lessons stand out. First, oil-for-loan deals may offer quick liquidity, but they impose long-term constraints that complicate democratic and environmental decision-making. Second, transparent and flexible oil sales consistently outperform opaque pre-sale contracts weighed down by discounts and delivery restrictions. And third, while China’s engagement has historically centered on extractive finance, recent shifts—such as investment in renewable infrastructure—suggest there is room for more climate-aligned and cooperative models. Deepening this kind of engagement, alongside support for flexible financing tools like debt-for-nature swaps, in line with its constitutional commitments, could help Ecuador reduce oil dependence.  

There is no easy path out of an oil-dependent economy for Ecuador. Oil still plays a major role in the country’s budget. But the choice is no longer between drilling or defaulting. The 2022 restructuring showed that smarter financing—focused on freeing future production from rigid terms—can create space to act on social and environmental goals. Greater control over the extractive model would not mean extending Ecuador’s reliance on oil, but rather using what production remains in a more strategic and limited way. This includes regaining flexibility over how and when oil is sold and ensuring that any revenues are used to actively support, rather than delay, the transition toward a more diversified and sustainable economy. The 2023 vote to halt oil drilling in the Yasuní reserve signaled a shift in public priorities. Whether Ecuador—and its partners—can align financing with that vision will determine whether Yasuní becomes a turning point or just another deferred promise. 

Edgar Aguilar is a Researcher at the Center for Latin American and Latino Studies and a graduate student in International Economics at American University 

Edited by Rob Albro, Associate Director, Research, at the Center for Latin American and Latino Studies 

*This post continues an ongoing series, as part of CLALS’s Ecuador Initiative, examining the country’s economic, governance, security, and societal challenges, made possible with generous support from Dr. Maria Donoso Clark, CAS/PhD ’91. 

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by clalsstaff on August 6, 2025  •  Permalink
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Posted by clalsstaff on August 6, 2025

https://aulablog.net/2025/08/06/trapped-by-debt-chinas-role-in-ecuador-oil-dilemma/

Community Development Financial Institutions as Underappreciated Bridging Institutions for Latino Small Business Success

By Robert Albro, Associate Director, CLALS

March 26, 2025

Latina-owned business in Columbia Heights, Washington DC. Credit: Elizabeth Albro

Building upon its previous research on Latino entrepreneurship, with the generous support of the Wells Fargo Foundation, AU’s Center for Latin American and Latino Studies recently launched a project to assess the effectiveness of community development financial institutions (CDFIs) for Latino small businesses in the DC-metro region. CDFIs provide bespoke financial services and investment capital to underserved communities, and the economic crisis caused by the pandemic highlighted their crucial role as bridging institutions connecting minority small businesses with the resources they needed to stay afloat. But how have CDFIs gone about their work since the pandemic?

Together with our community partner, the Greater Washington Hispanic Chamber of Commerce, we surveyed representatives of CDFIs throughout our region to better understand how they interact with Latino business owners, but also post-pandemic challenges in doing so, as they seek to support this increasingly important community for our region’s economy. Here we report on preliminary results that show how the effectiveness of CDFIs depends upon their greater attention not just to the specific needs of Latino small business owners but also to the social and cultural circumstances, and communities, within which these small businesses operate.

CDFI’s have been a source of inspiration and innovation when it comes to engaging sometimes hard-to-reach minority small business owners. These include pioneering the use of cohort models when providing assistance, as a way to build peer relationships and support a more networked community of minority business owners. They also include the use of equity impact scorecards to help weigh disparities when evaluating eligibility for business loans. They further encompass a more strategic use of microloans and sustained efforts to rethink traditional risk evaluation systems, which have served as barriers to entrance for minority start-ups. But the role of CDFI’s as critical mediators between minority business owners and the formal financial system remains underappreciated.

Latinos are an increasingly important part of the U.S. economy, primarily through business ownership and job creation. They continue to start businesses at a faster rate than any other group, and are projected to be almost a third of business owners by 2050. But, despite comparable liquidity, credit risk and default rates, when compared with counterparts, Latino small businesses encounter more obstacles accessing capital for start-up, growth, and to survive downturns. They are, for example, 60 percent less likely than White-owned businesses to be approved for a bank loan. This disparity is a major contributor to the long-standing racial wealth gap among small business owners in the U.S.

Recent economic disruptions have also highlighted the greater vulnerability of Latino businesses. Less than half of Latino immigrants nationwide have a relationship with a bank. With less access to lending institutions, Latino business owners have relied disproportionately on personal funds, home equity, and informal social networks, leaving them more financially exposed in times of crisis. The Pew Research Center reported that Latino household wealth fell 66 percent as a result of the 2008 Great Recession, the largest decrease among any group.

During Covid-19, Latino business owners struggled to access capital to weather the pandemic. If more likely to seek funds, they were less likely to receive them from private lending sources. The Small Business Administration reported a success rate of 7 percent for Latino-owned businesses who applied to receive Paycheck Protection Program (PPP) funds provided by the federal CARES Act in 2020, compared to 83 percent for White-owned enterprises. In 2021 the Federal Reserve reported that Latino businesses were less than half as likely as White-owned businesses to receive a PPP loan. Such disparities highlight the urgency to understand the factors that continue to limit Latino asset building, and to identify successful alternatives for engaging Latino small businesses.

Overall, survey responses prioritized the bridging function of CDFIs. On the one hand, representatives of CDFIs emphasized the importance of not simply understanding the specific concerns of Latino business owners, but also the need to be actively present “in the community.” This included, as one respondent put it, “hyper local knowledge,” not just about specific industry sectors, socioeconomic status or tax rates, but about extra-financial social contexts impacting Latino business success, such as new immigration policies or incipient gentrification in a given neighborhood.

Being “in the community” encompassed the necessity of meeting business owners “where they are at.” Respondents emphasized strategies of direct personal contact, such as texting over email, the importance of “personal visits” to places of business, providing information in Spanish, access to bilingual financial professionals, use of social media platforms popular with Latinos, and outreach through Spanish-language media. This extended to attending family and other local celebrations, and was about “establishing trust” with a group, Latino small business owners, often suspicious of formal institutions. One takeaway is that CDFIs illustrate the need for lending institutions to adopt a more expansively encompassing approach to culturally informed “community engagement,” as a core competency of their work with minority small businesses.

On the other hand, respondents repeatedly emphasized that throughout the pandemic, and going forward, it has been challenging to make Latino business owners aware of their financial assistance options. For many, this boils down to a pervasive lack of “financial literacy.” Microenterprises and small businesses often do not keep adequate records and do not maintain basic financial management and accounting practices, which make it hard for them to provide the necessary documentation to qualify for grants or loans. Much of what CDFI staff spends their time doing is helping business owners “put their financial house in order.” Overcoming such informality remains a major challenge. If CDFIs are critical conduits connecting Latino small business owners to formal financial institutions, a second takeaway is the need to offer basic financial literacy assistance further upstream, prior to the business start-up phase, perhaps in coordination with immigrant-serving nonprofits and conceived as one among a set of core wraparound services.

This research project highlights the critical role played by CDFIs in connecting Latino small business owners with resources for success, but also bridging informal and formal dimensions of business practice, and often underserved minority communities with local and regional small business ecosystems. In our current environment, where federal funds supporting the work of CDFIs are under threat, it is increasingly important to bring attention to their value.

*The research for this post was made possible by a grant from the Wells Fargo Foundation. We thank Victor Burrola, who leads Wells Fargo’s philanthropy in the Greater Washington DC region, for his support throughout.

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by clalsstaff on March 27, 2025  •  Permalink
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Posted by clalsstaff on March 27, 2025

https://aulablog.net/2025/03/27/community-development/

Where Is Cuba’s Economic Policy Going?

by Ricardo Torres*

A photo of Havana, Cuba taken in December 2023 / Ernesto Castañeda / Creative Commons License

In the concluding sessions of the National Assembly in December, the Cuban Prime Minister alluded to new economic policy initiatives aimed at “correcting distortions and boosting the economy.” Subsequently, he emphasized that these reforms should not be perceived as mere continuation of previous policies. His discourse encompassed several areas, including pricing and subsidies, the role of the private sector and small and medium-sized enterprises (SMEs), international trade and tariff regulations, investment, and the foreign exchange market, among others. In the first weeks of January, various representatives from the government elaborated on the price increases of essential goods, which has become a focal point of discussions due to the immediate impacts on people’s daily lives. This new wave of measures is being introduced against a unique context:

  • The Cuban economy’s inability to embark on a path to sustainable recovery after the economic downturn triggered by the COVID-19 pandemic is noteworthy. The year 2023 witnessed a contraction in the Gross Domestic Product (GDP), marking this period as the most severe crisis encountered by Cuba since the revolution in 1959, given its widespread economic, social, and political implications.
  • The ineffectiveness of previously implemented economic policies, including the so-called “Monetary Ordering,” is evident. The Cuban authorities persistently attribute these economic adversities to external factors, notably the sanctions imposed by the United States. There is little mention of the government’s obvious mistakes.  
  • The Biden administration’s limited opening towards Cuba has narrowed the window to implement substantial measures to mitigate the island’s economic challenges. 
  • The Cuban government has continued to search for support elsewhere. For example, Russia and China have provided some economic support, and Mexico has provided cheap oil, oxygen after the pandemic, and some food. But not one country can provide all the support that Cuba needs.

The measures announced thus far appear to have limited potential in contributing to the economic recovery. The fiscal strategy focuses more on revenue collection rather than containing expenditures, as indicated by the incomplete budget data for 2024 when the deficit is set to increase. 

  • Notably, the emphasis remains on preserving the extensive public sector, including state-owned enterprises, without introducing substantial structural reforms.
  • The marginalization, or at most, a cursory mention of other structural reforms aimed at stimulating domestic supply, is significant. The criticism of the private sector and the lack of initiatives to address external debt are particularly conspicuous. 
  • The potential impact of the price increase and these newly announced measures on the fiscal deficit remains ambiguous, especially given the scant details regarding their implications for the 2024 budget. Besides, these measures will likely exacerbate inflationary pressures in the short term.

In a rather dramatic turn, Cuban authorities announced the suspension of the price increases on January 31st, citing a cyberattack, and failed to commit to a new date. Furthermore, the government reshuffled the cabinet, including the sacking of the Economy Minister. 

The challenges of runaway inflation and elevated fiscal deficits should be viewed as symptoms rather than the root cause of the economic malaise. Historical evidence from the 1970s and 1980s has demonstrated that attempts to manipulate aggregate demand to counter stagflation are futile. Cuba’s economic stagnation, however, presents a unique case, having persisted for decades and intensified due to a series of adverse external shocks commencing around 2016 with the decline of Venezuela’s economy. Superficial adjustments to economic policies are unlikely to yield significant medium-term benefits. Instead, a concerted effort towards systemic change by both the government and international stakeholders is imperative. The existence of the political will and strategic insight, both within Cuba and internationally, to enact such comprehensive reforms to the ultimate benefit of the embattled Cuban people remains an open question.

Copyright Creative Commons. Reproduction with full attribution is possible by news media and for not-for profit and educational purposes. Minor modifications, such as not including the “About the Study” section, are permitted. 

* Ricardo Torres is a Professor and Faculty Fellow in the Department of Economics, Research Fellow at American University’s Center for Latin American & Latino Studies, and Coordinator of the Red de Investigadores Cubanos (RedIC).

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by clalsstaff on February 14, 2024  •  Permalink
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Posted by clalsstaff on February 14, 2024

https://aulablog.net/2024/02/14/where-is-cubas-economic-policy-going/