Criminal uprising in Ecuador threatens to derail Noboa’s comeback plan

QUITO, ECUADOR - JANUARY 09: Ecuadorian soldiers take security measures with a military armored vehicle on roads after Ecuador president declares 'internal armed conflict,' orders military operations against organized crime groups in Quito, Ecuador on January 09, 2024. Ecuador declared a state of emergency Monday after one of the country's most dangerous gang leaders disappeared from his prison cell, triggering riots in at least six correctional facilities across the country. President Daniel Noboa declared a 60-day state of emergency, the first since he came to power on Nov. 23 last year. (Photo by Rafael Rodriguez/Anadolu via Getty Images)

A narco terror campaign across Ecuador threatens to sabotage President Daniel Noboa’s attempt to deal with the nation’s debt crisis and break out of years of economic under-performance, according to Bloomberg.

Gangsters torched cars, stormed a TV station and took police and prison officers hostage in response to Noboa’s attempt to impose a crackdown on organized crime. The army was called out as the president said the country was in an “internal armed conflict” against gangs. 

At least 10 people, including two law enforcement officers, have been killed, AFP reported citing local and national police, while authorities were still struggling to regain control on Tuesday evening.  

Noboa, the 36-year-old leader who took office just six weeks ago, had been trying to get a grip on a fiscal crisis and secure funding from multilateral lenders when the gang violence broke out. The mayhem immediately dented investor optimism, with the nation’s distressed dollar bonds extending losses. 

Images of masked goons taking journalists and production staff hostage on live TV and firing pistols in the streets of the capital are also likely to dent business confidence and hit Noboa’s plans to kickstart the tourism sector. The closing of schools nationwide this week and widespread working from home by fearful employees also adds to the disruption. Cities were snarled in traffic as offices closed early on Tuesday. 

Noboa’s emergency decree and orders to mobilize troops against the gangs “could have the effect of unifying the country,” according to Oren Barack, managing director of fixed income at New York-based Alliance Global Partners. “But it’s going to be a lot of background noise now. You have a volatile environment and it tarnishes the appeal for Ecuador.”

Noboa’s office didn’t immediately reply to questions about whether the president will cancel his trip to meet with world leaders at the World Economic Forum in Davos next week. 

The government is preparing to submit a raft of measures on security and investment for a referendum. On Tuesday, the government unveiled nine additional questions for review by the Constitutional Court, including one to allow international arbitration options to resolve controversies regarding contracts, and another to permit the extradition of criminals. 

Gangs responded with murders, kidnappings and prison riots after Noboa imposed a nationwide curfew on Monday and declared a state of emergency amid a manhunt for notorious drug lord Adolfo Macías. 

Prison guards noticed the absence of Macías, known by his alias Fito, from a penitentiary in Guayaquil on Sunday. Fabricio Colón, a senior member of a rival gang, also escaped from jail in Riobamba in a 40-inmate prison breakout. 

The twin escapes came just days before Noboa was expected to unveil a plan to reform the prison system, which has experienced a rash of deadly riots in recent years. 

The 60-day state of emergency sets an 11 p.m. to 5 a.m. curfew and suspends the need for warrants for searches.

Seven police officers in different parts of the country were kidnapped Monday night, according to the national force, with three since freed. Ivan Saquicela, president of Ecuador’s top court, said an explosive went off near his home. Riots continued at several jails, with guards held by inmates. 

Peru declared a state of emergency in its border region with Ecuador and is moving troops into the area, while Assistant Secretary of State Brian Nichols said the US is “extremely concerned” by the violence. 

Ecuador’s sovereign bonds extended losses. Notes due in 2030 slipped more than 1.5 cents Tuesday to 47.6 cents on the dollar, further blunting a modest rally that began in mid-December, according to indicative pricing compiled by Bloomberg.

The chaos, however, may create space for reform. “A war always gives you the opportunity to advance issues that you couldn’t under normal circumstances,” including economic reforms, according to Sebastian Hurtado, head of political risk consultancy Profitas in Quito.