FACTBOX-Key political risks to watch in Ecuador

Mon Oct 4, 2010 3:54pm GMT

By Frank Jack Daniel

QUITO Oct 4 (Reuters) - A rebellion by police officers that ended with a fierce shootout to rescue President Rafael Correa revived memories of Ecuador's volatile history and concerns about stability in the oil exporting nation.

The role of the military, a struggling economy, slow-moving oil negotiations and a possible move by Correa to dissolve Congress, rule by decree and call elections are all points to watch this year:


Correa had threatened to dissolve Congress, rule by decree and call new elections shortly before the police rebellion. Although he appears to have since backed away from the move for now, it is still a clear policy option. It would allow the government to pass tough new rules for investors and increase its short-term financing options, although it would also anger Correa's opponents and raise the risks of new protests.

Correa won support for a new constitution in 2009 that gives him the power to dissolve Congress, call elections for the president and lawmakers and rule by decree in the meantime. The government says the mechanism is designed to help break political deadlocks in a the country of 14 million people where lawmaking has often been paralyzed by conflicts between the president and Congress.

Correa's popularity is strong despite a slow recovery from the global economic crisis. With no obvious candidate to oppose him, the European-trained economist would be a clear favorite to win a new election, but his increasingly fractious Alliance Country party could lose seats in Congress, limiting his ability to pass laws.

Friction between Correa and legislative opponents, including members of his own party, has stalled key laws and came to a head over a law that will cut bonuses for police and soldiers as part of an austerity plan. The president last week said he was preparing to activate the rule known locally as the "double or nothing" law but backed down after the revolt.

The police protests led to eight deaths and Correa has decided against the measure in the short term, with a top minister telling Reuters the government would instead try again to work with Congress.   Continued...

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