Earlier this week, Ecuadorian President Guillermo Lasso announced his intention to review debt negotiations with China. According to a report by Reuters, he intends to meet Xi Jinping, China’s supreme leader, on February 3. Officials will discuss Ecuador’s $5 billion debt to China at the meeting. Ecuador is expected to meet the majority of repayment obligations over the next three years. Still, Lasso, a former banker, will present a modified repayment proposal in hopes of minimizing the financial strain on the country.
Additionally, Ecuadorian Foreign Minister Juan Carlos Holguin said Lasso would also seek to sign a memorandum of understanding to begin negotiations on a bilateral trade deal. The agreement also hopes to incorporate environmental sustainability goals. Given that China has become one of Ecuador’s most important financial partners over the past decade, the results of the next meeting will have important implications for Ecuador’s economy.
Ecuadorian officials approach the Beijing meeting with optimism in the hope of reaching a mutually beneficial agreement. A report of Reuters indicates that the first discussions have been “positive”. Holguin said in a statement that “the problem is to treat our current debt payment mechanisms transparently and directly.” He added that “these are innovative proposals that are of broad interest to the international community, and we believe that China will be able to accept some of these mechanisms.”
The upcoming meeting is a natural next step for Ecuador, as Lasso and his administration develop strategic plans to stabilize Ecuador’s economy. According to a report by The World Bank, the COVID-19 pandemic triggered a devastating recession that caused a rebound in poverty. It amplified the macroeconomic imbalances that the administration had tried to correct. The recession also revealed structural weaknesses, including “macroeconomic buffers, a high level of informality, an ill-prepared health system and large gaps in access to public services”.
Since taking office in May 2021, Lasso has focused on using strategic relationships within multilateral organizations to boost Ecuador’s struggling economy. For example, it renegotiated a $6.5 billion loan with the International Monetary Fund (IMF) in 2021. Additionally, Holguin said Ecuador is focused on building a strong relationship with states. -United ; Lasso hopes to help advance security and human rights in the new year and settle negotiations for a trade deal.
Lasso works strategically to rebuild Ecuador’s collapsed economy. By relying on international partnerships, the nation is on the path to greater economic stability. The first item on the agenda in 2022 is the upcoming meeting with China, which is likely to have significant economic implications. If it goes as planned, it will relieve the growing economic pressure. However, if China does not cooperate, it could put significant financial pressure on the country, as Ecuador is unable to meet repayment requirements over the next three years.