(Bloomberg) -- Key highways are paralyzed across Ecuador after a night of clashes triggered by fuel price hikes, as a state of emergency enters its second day.
Hundreds have been arrested amid outbreaks of looting, while Ecuador’s Red Cross said that demonstrators in Quito pelted ambulances with rocks.
Quito airport reported mass cancellations of international and domestic flights. Schools and universities are closed.
The fuel price increases took effect at midnight on Wednesday and were welcomed by the International Monetary Fund and Moody’s Investors Service. Drivers of buses, taxis and trucks, responded by blocking highways with vehicles and burning tires.
The government has “exhausted the dialog mechanism” with transport unions and transit companies, President Lenin Moreno said Thursday evening, during a trip to Guayaquil, which suffered some of the worst looting.
Police and military are working to clear the roads and “some provinces are returning to normalcy,” Interior Minister Maria Paula Romo said via Twitter.
Prices for low-octane gasoline jumped to $2.40 per gallon from $1.85, while diesel prices more than doubled to $2.30 per gallon from $1.03.
Moreno’s “bold decision” is likely to strengthen the nation’s sovereign bonds, said Siobhan Morden, the head of Latin America fixed income strategy at Amherst Pierpont Securities in New York.
“There is now a clear path towards fiscal consolidation,” Morden wrote in a report. The yield on Ecuador’s dollar bonds maturing in 2030 fell four basis points to 9.29%.
This year, Ecuador had to budget close to $1.4 billion to keep gasoline and diesel prices below market prices.
Moreno announced the measure amid a package of economic reforms aimed at keeping a $4.2 billion funding package with the IMF as he struggles with the legacy of profligate spending inherited from his predecessor, Rafael Correa.
To mitigate the impact of the reforms on the poor, Moreno pledged to increase a social safety net so that it would protect close to 5 million Ecuadorians, increasing a monthly transfer by $15.
The government says the fuel subsidies have cost the nation close to $60 billion since they were introduced in the 1970s.
On Tuesday, Ecuador said it would quit the Organization of Petroleum Exporting Countries, to avoid having to cut output to meet quotas.
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