Diesel, Discipline, and Dissent
La tercera es la vencida.
By Executive Decree 126, President Daniel Noboa eliminated the diesel subsidy that had anchored Ecuador's fuel prices since the mid-1970s, raising the pump price from USD 1.80 to USD 2.80 per gallon. The measure took effect on 13 September 2025 and will remain fixed until 11 December, after which a price-band mechanism applies. Guillermo Lasso and Lenín Moreno had both attempted the same reform and were forced to retreat in the face of mass protests. Noboa himself tied the move narrowly to the fight against smuggling (contrabando), pushing it through quietly and almost by the back door. The broader claims of fiscal responsibility and environmental virtue came from his officials and supporters. Neither justification withstands scrutiny. Far from being part of a green transition, the reform is better understood as a new episode in Ecuador's long history of externally conditioned austerity, one that shifts the burden of adjustment onto communities already reliant on remittances, precarious and informal work, and fragile survival strategies.
Ecuador is once again caught in the crossfire of the global economy. It played by the rules of neoliberal orthodoxy: dollarising, liberalising, opening its borders to trade and finance, and yet finds itself punished rather than protected. Those countries that most rigorously applied the neoliberal playbook are now the most exposed to its fallout. Ecuador exemplifies this paradox: a country that sacrificed monetary sovereignty, tied its fiscal policy to external creditors, and remains dependent on oil exports and remittances. Each attempt at subsidy reform is less about ecological planning than about securing compliance with IMF conditionalities and creditor confidence.
For some global audiences, eliminating fossil fuel subsidies might sound progressive. After all, subsidy removal is on the global climate agenda. But in Ecuador, this decision was not born of environmental concern. It was a response to IMF-backed fiscal consolidation under a 48‑month, US$4 billion Extended Fund Facility approved in May 2024. The government's own decree emphasised not decarbonisation but smuggling at the border and the need to "sanitise" public finances. While the IMF did not explicitly demand the removal of diesel subsidies, the Fund had long identified them as inefficient expenditures.
The official narrative of fiscal savings quickly unravels. Noboa's administration pledged US$220 million for public transport and temporary compensation for cargo transporters and producers, while promising not to raise urban fares. The supposed US$1.1 billion saving is in practice an ambivalent reshuffling of resources: cuts on one side, new subsidies on the other.
The distributive contradictions are stark. Research by the Observatorio de la Dolarización shows that diesel is used directly in 67 industries and represents, on average, three per cent of intermediate costs. The immediate effect of a 56 per cent price increase is an economy-wide rise in costs of about 1.67 per cent, concentrated in transport and fishing, where diesel constitutes 28 and 13 per cent of inputs, respectively. Households spend little on diesel directly, about 0.5 per cent of their budgets, but they pay indirectly through higher food and transport prices. By focusing narrowly on fiscal aggregates, the government obscures how the reform raises the cost floor of the economy. In a dollarised country that imports roughly 80 per cent of its diesel, the state may reduce its budget line, but families face higher living costs without the cushion of monetary policy.
The government insists that compensation will shield the most vulnerable: bus fares will not rise, farmers will receive one-off grants, and cash transfers will be expanded. Yet these measures are temporary, fragmented, and selective. They recall targeted assistance responses of the 1990s, but this is a different moment. Once they expire, the structural reality will assert itself, and Ecuadorians, after decades of experience with cash transfers, know what comes next: higher logistics costs, pricier food baskets, and shrinking disposable incomes.
The political economy of compensation is thus less about targeting than about deferring protest. History bears this out. In 2019 and again in 2022, attempts to reform fuel subsidies without consensus provoked nationwide uprisings led by Indigenous organisations. The elimination of fuel subsidies has long been a flashpoint, exposing Ecuador's deep inequalities, the polarisation between Indigenous groups and other social sectors, and the IMF's role in pushing austerity. Then, as now, subsidy reforms were imposed under conditions of debt and volatility, igniting resistance that revealed both the resilience and the fractures of Ecuador's social fabric. The parallels between 2019, 2022 and 2025 underscore how austerity is never simply technical: it is profoundly political, entrenching marginalisation and subordination. In 2025, after Decree 126, the government declared states of exception in several provinces amid protests and roadblocks. Noboa's relocation of the government to Latacunga for the announcement signalled his awareness of this explosive history.
The climate argument is the weakest pillar of all. If subsidy removal were embedded in a national energy transition plan, e.g., investing in electrified public transport, renewable generation and infrastructure, it could plausibly be defended as a green reform. Instead, Ecuador remains dependent on oil exports and lacks refinery capacity for diesel. For international audiences, the government frames this as environmental responsibility. Domestically, however, the discourse is securitised: the problem is narrated as controlling smuggling at the border, not as part of a green transition. The rhetoric of decarbonisation is thus hollow. What we see is austerity in green clothing, an environmental alibi for a fiscal measure.
In a comparative perspective, Ecuador is not unique. Kenya, under IMF programs, scrapped fuel subsidies and moved to cost-based energy pricing, packaged as both fiscal discipline and climate responsibility (IMF 2021). Haiti, meanwhile, was told by the IMF that subsidy removal was "essential" for fiscal sustainability, and a 2018 IMF-backed price hike sparked mass protests and toppled the prime minister. In both cases, as in Ecuador, the reforms were sold as fiscally prudent and environmentally sound, but in practice, they function as cost-push shocks in economies with austerity-driven erosion of social provision. The contradiction is structural: the same institutions that advocate cutting consumption subsidies encourage expanding fossil fuel production to generate export revenues. The result is a perverse double bind: populations pay more at home while states are pushed to drill more. What distinguishes Ecuador's case is the authoritarian turn that has accompanied subsidy removal. The decree did not come in isolation but amid states of exception, curfews, and a discourse in which protest itself is criminalised. Those who mobilise against rising costs of living are labelled terrorists or criminals, blurring the line between dissent and crime. Austerity and authoritarianism thus advance hand in hand, reshaping not only Ecuador's economy but its political order.
Subsidy removal has been securitised, framed as a matter of smuggling and disorder, while dissenters are criminalised. After Decree 126, Noboa's government declared curfews and states of emergency in multiple provinces, suspending the right of assembly. These measures illustrate how dissent is governed through security framing. Yet these very dynamics generate cross‑class alliances: Indigenous movements, transport unions, and other sindicatos have found common cause in resisting subsidy cuts. At the same time, fractures remain: some sectors of the Indigenous movement had backed Noboa earlier or even participated in official marches, complicating the landscape of opposition.
What emerges is a contradictory terrain: repression narrows democratic space, but it also catalyses solidarities across social groups that are otherwise fragmented by class and political affiliation. Ecuador's austerity moment is part of a wider story: the supposed technical neutrality of compliance masks the deep political costs imposed on debtor economies. The price of compliance is borne domestically through authoritarianism, repression of protest, and the recent green‑washed language of fiscal discipline.
Meanwhile, the Confederation of Indigenous Nationalities of Ecuador (CONAIE) has declared a form of community state of exception in Indigenous territories within the framework of the plurinational state. Entry of the police and armed forces is prohibited, and community guards have been activated to protect local populations. Noboa, for his part, has warned that anyone engaging in "terrorism", illegal roadblocks, or organised violence will be punished. "This is not repression," he maintains, "it is simply enforcing the law." In practice, however, governing has become a politics of confrontation between the state and the streets, between austerity and survival, between the official state of exception and the community state of exception declared by Indigenous nations.