The results of the upcoming presidential election in Ecuador should signal the return to power of a mining-friendly government in the South American country. The election results - whether confirmed Feb. 7 or after a subsequent runoff of the top candidates - is likely to provide security for the future of Solaris Resources’ Warintza project.
The election will signal a new Ecuadorian administration because President Lenín Moreno chose not to seek reelection.
Elected in 2017 as the successor of former President Rafael Correa, Moreno spent much of his four years in office attempting to roll back Correa’s populist and protectionist legacy, negotiating with bondholders, responding to popular unrest and managing the COVID-19 pandemic.
As a result, correísta, or pro-Correa supporters, have thrown their support behind the newly-formed coalition, Union for Hope, and are backing economist Andrés Arauz. He is the frontrunner among the crowded ballot of candidates.
Correa’s minister of knowledge and human talent, Arauz is running on a platform that promises to reverse what he has termed Moreno’s “neoliberal reforms” and to revive Correa’s strategy of heavy government social spending funded by commodity development such as new oil infrastructure.
His chief rival is Guillermo Lasso, who is not new to Ecuador voters. Lasso is on the ballot for the third time. A businessman and former economy minister, Lasso hopes to consolidate the anti-Correa vote and unite Ecuador’s private-sector elites, social conservatives and center-right.
Polling third is Yaku Pérez. A member of the indigenous Pachakutik party, Perez is a former governor who rose to prominence in the October 2019 anti-austerity protests.
But it is Arauz who is out front as the Feb. 7 election draws near.
His lead in the polls ranges from 7 percentage (Market, Jan. 10) to 18 percent (Perfiles de Opinion, Jan. 5). In the later poll, Arauz was polling at greater than 43 percent. If those numbers hold up, Arauz would be the victor on the Feb. 7 ballot, dispensing of the necessity for a runoff election.
Arauz would need to garner at least 40 percent of the vote and beat his next closest opponent by at least 10 points to win outright on Feb. 7. Otherwise, a runoff will be scheduled.
And the voters appear ready for a new administration under Arauz.
While nearly six in 10 likely voters polled have already decided whom they will support in the Feb. 7 election, more than 90 percent believe the country is headed in the wrong direction – seeming to suggest they want the country to return to the leadership it had before the 2017 election.
A Toronto-based stock analyst’s research found that Arauz is polling at between 26 and 34 percent, up from 10 to 23 percent.
He notes “a victory for Arauz would be encouraging for Solaris Resources as it would be viewed as electing a mining-friendly government with a strong mandate to govern implied with greater than 40 percent vote share. With the uncertainty of the election gone, it would provide the basis for continued support of the industry and reforms aimed at improving the environment for the (mining) sector to grow.”
It was Correa’s administration which initially opened up the mining industry. Correa’s legacy includes creating a dedicated mining industry, making windfall mining taxes more bearable - since eliminated - reducing royalties and allowing for VAT rebates, investor protection agreements and reducing regulatory red tape.
Indeed, the Correa government effectively opened the mining sector in 2014. And Arauz has reiterated Correa statements that mining is sustaining the Ecuadorean economy via the two projects brought online under his government - Mirador and Fruta del Norte - which have generated over $100 million of taxes and royalties for the country, and that mining is key to Ecuador’s economic future, with particular emphasis on the under-developed but resource-rich Amazon provinces of Morona Santiago and Zamora-Chinchipe.
Lasso, who is polling at 15 to 26 percent, views the mining sector as critical to draw foreign direct investment to the country, generate economic growth, and boost exports in order to alleviate the current economic crisis. In recent weeks, Lasso has commented that he believes prior consultations must be made legally binding for mining projects and he is committed to the development of mining projects in an environmentally and socially responsible manner, the stock analyst reported.
During a Jan. 16 debate of presidential candidates, Lasso proposed among other things, promoting mining.
Daniel Earle, President and CEO of Solaris Resources says, “We are delighted to see strong support for candidates that recognize that the mining sector has a critical role to play in Ecuador’s future, in growing the economy, employment and tax bases through responsible mineral development, particularly in rural and remote parts of the country that historically have lacked opportunity. Likewise, Ecuador has a critical role to play in supplying the ongoing global energy transition to electrification in which copper is both indispensable and increasingly scarce.”
As the analyst concluded, “even if the results of the Feb. 7 election led to a run-off between Arauz and Lasso, it would be perceived as positive for the mining industry because it would imply that a mining-friendly government would ultimately be elected, at a later date.”