Going gang-buster: we meet Ecuador’s president

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Hello and welcome to The Intelligence from The Economist. I'm your host, Jason Palmer. Every weekday, we provide a fresh perspective on the events shaping your world. As we've lurched from one giant news event to another, markets haven't dipped much or for long. In fact, yesterday, the S&P 500 and NASDAQ closed near record highs. It shows a surprising truth about animal spirits. Big geopolitical trauma just doesn't keep them down. And the next installment of our Archive 1945 project.

which relives The Economist's reporting on the last days of war in Europe. This week, 80 years ago, the founding of the United Nations. But first...

Footage from a body-worn camera shows a bearded man, his face pressed to a tiled floor. A gun is held to his head. He's asked to state his full name. Speak louder, they shout. He is Jose Adolfo Macias, better known as FITO, the leader of Ecuador's Los Choneros criminal group. The country's most wanted fugitive was recaptured yesterday after escaping jail last year. Afterwards, Ecuador's president Daniel Neboa posted on X.

More will fall, he said. We will reclaim the country. No truce. We've done our part to proceed with Fito's extradition to the United States. We're awaiting their response. Happy afternoon, Ecuador. Fito's arrest was a win for the uncompromising policies of one of the world's youngest and best protected leaders.

When Mia and I met the president of Ecuador, Daniel Laboa, he'd actually just come back from a run with his wife. He was, of course, accompanied by a motorcade of black SUVs and a lot of heavily armed soldiers. He was still in his running gear. when he first arrived and you could actually skim a tattoo of four phoenixes on his arm. Kinley Salmon is our Latin America correspondent and Mia Dahl also writes about the region for The Economist.

His national security plan is also called Phoenix, so I just had to ask him if there was a connection there. The general idea is I almost lost my arm in an accident and the doctor said that I had an 80% chance of... not being able to move my left arm ever again. So after that, I prepared myself. I ran for office. I helped my family in a few things. So it was also how to be reborn.

So the four phoenixes are the father and my three children. And when my arm moves, the three smaller ones get closer to the father. It actually has a tattoo with the movement. It's a good running tattoo. Yeah, yeah, exactly. It's a good running tattoo.

The security plan, which he brands the Phoenix Plan, aims to prize the country, really, from what's become a terrible and bloody grip of transnational criminal gangs. And they've got links to Mexico, Colombia, and even as far as Albania. And those gangs... shipped thousands of tons of mostly Colombian cocaine through Ecuador and on to Europe and America.

And we wanted to find out how President Neboa plans on stopping them while also respecting the rule of law himself. And aside from very fitness conscious, what did he seem like to you?

President Obama really seemed a kind of curious mix of things to me. I mean, on the one hand, you know, he's the son of a billionaire, a banana magnate. His father ran for president unsuccessfully five times. His social media posts are made up of a combination of... poses of him with, you know, seized drugs and cowed-looking bad guys, and then him and his influencer, Glamorous White, working out.

So you might expect, in a way, for him to be a dash of charm, perhaps a little bit arrogant from all that privilege, and maybe with a bit of chest-thumping machismo. But he actually came across as... Quite introverted, a little bit nervous at the beginning, and in a way quite wonkish. He also admitted to some doubts. I asked him if the job is actually worth the dangers.

Well, I'm not gonna lie. There's moments that you start questioning it, but most of the time it feels right. It hasn't been easy. We've had death threats on a daily basis for the last two years. But if I'm afraid, what can I expect for 80 million people? So I cannot afford to have fear. And Mr. Nebo was re-elected in April on a platform of saying he wanted to make Ecuador safe. How unsafe is it at the moment?

Well, the country has really gone into chaos, which has been quite shocking. You see that back in 2019 the murder rate was just below 7 per 100,000 inhabitants, which is similar to levels in the United States. But then by 2023, it had increased by more than 540% to 45 per 100,000 inhabitants, really making it mainland Latin America's most violent country.

And that happened in part because of a shift in cocaine export routes with some increased checks in the ports in Colombia, but also because of fragmentation of criminal gangs there following their 2016 peace deal. as well as some splits in criminal gangs in Mexico. And then on top of that, we see that Ecuador's exported bananas are really ideal for hiding. the cocaine. And they also have this dollarized economy that means that money laundering is really quite easy.

The other thing that's interesting, of course, is he had already had 18 months in power. So he was being re-elected, saying he wanted to make it safe, but obviously not having achieved that much first time around. He had taken a tough line in that. early period you know declared a state of internal armed conflict in january 2024 that was after gangs rioted in prisons and even attacked journalists live on television

And he also has built mega prisons. He's designated gangs as terrorist organizations. He's militarizing law enforcement. He wants to bring in foreign troops. So there's a kind of real approach of cracking down. So far, the results have been quite underwhelming. Homicides fell first by around 15% from 2023 to 2024.

But then they surged and the first months of 2025 have actually been the bloodiest on Ecuador's record. And so some say that Nabor's tough approach has weakened the gangs and they started lashing out. Others say that gangs may simply be splindering and that increases violence. But then there's also the possibility that his strategy is simply not working.

There's a lot of echoes here with what we talked on the show about not so long ago, another young Latin American leader with quite a strong hand, Nayib Bukele, the president of El Salvador. He's been smashing gangs in his country, going after, well, criminals and his... critics are the similarities as prominent as it seems well you know a lot of people are interested in that and so we put it directly to him and and he more or less laughed it off

My wife sometimes compares me with Cristiano Ronaldo as well. Ideologically, it's a bit different, I would say, than Bukele. It goes a bit closer to Lula or Macron in a mix of those two. He compares himself to Emmanuel Macron of France and Lula, the president of Brazil, a sort of centrist and a leftist, respectively.

To be fair to Noboa, he does expound on the need to invest in education. He talks about creating jobs for the youth who might be vulnerable to gang recruitment. And that is, I think, as he also said, quite different to the narrative of Bukele and El Salvador.

I mean, that's kind of taking an inward looking focus on the problem at hand. What about cooperating with other countries, with the neighbors, with the source of the cocaine? Unfortunately... President LeBeau is doing a pretty terrible job in terms of cross-border collaboration that's particularly conspicuous with Mexico. That bad relation is because Noboa ordered a raid of Mexico's embassy in Ecuador to arrest the former vice president, Jorge Glass. That basically broke international law.

The vice president had been convicted of corruption and was sort of sheltering there, but it was still an extraordinary move. Yeah, and Kindly, the craziest thing to me was really when the foreign minister told us that all of the communication between Ecuador and Mexico is done through Switzerland.

Yeah, that is not a recipe for effective collaboration against gangs, I suspect. You know, Nabo also disagrees with the president of Colombia, his neighbor, who's approaching the gangs with the idea of achieving total peace through negotiations.

That's a very different strategy and doesn't make border cooperation easily. Instead, Noboa is very keen to kind of ally closely with President Trump. But of course, with the America First agenda, I think there are limits to the kind of help that President Trump is likely to send. to Ecuador, particularly Naboa's aspiration to have American troops seems pretty unlikely. I was struck that Naboa didn't rule out getting help from China, even on security matters.

So no matter what kind of help that he gets, how do you rate his chances for ultimately successfully taking on the gangs? Well, Nopo is not really helped by the fact that Ecuador has very weak and compromised institutions. At least 15 judges or prosecutors have been killed since 2022. Ecuador really needs an independent chief prosecutor and strengthened institutions.

But Nobor still is in a strong position to execute his plans, and he himself... believes that he can win his war in gangs, even despite the high demands for cocaine. I think that we can win this war because this war isn't just about cocaine. This war is about terror. This war is about criminality, anarchy. It's about using resources, stealing resources to affect the population and using that quick money also to terrorize the population.

His strength and position is pretty striking. The opposition, the traditional left of Ecuador, is pretty much in disarray at the moment. Noboa's allies dominate the National Assembly, and the courts, some people told us, may be wary of ruling against it. Of course, that can also bring worries, that kind of strength, specifically that his strength might make him into something of an authoritarian. And we also put that directly to him. And he was very robust, I thought, in trying to push back.

I won't stay one second more than what constitution allows me. I will never ignore the importance of a parliament or judicial branch. and I cannot go against a constitutional court. That's what keeps this country civilized. It's good that Nobor can articulate the importance of an independent judiciary and legislator. But now Ecuadorians will want to see that he's really constrained by them in practice. Kinley Mie, thank you both very much for joining us. Thank you, Jason. Thanks very much.

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moving business forever forward keep your eye on the ball it's as important in investing as it is in tennis for blue owl that means keeping our eye on the private markets A laser focus that helps us redefine alternatives and inspires us to support the players who are redefining the game. So keep an eye out for Blue Owl at the Grand Slams and learn more about us at blueowl.com slash investing. Blue Owl. Redefining alternatives.

When missiles began to fly between Israel and Iran, the S&P futures index dropped by more than a point and a half. But within hours, it climbed right back up, then got close to all-time highs. Investors basically hardly reacted to the prospect of epic-defining regional war. Choosing to look away from the news and back at the stock ticker might seem foolishly complacent.

Actually, it's more sophisticated than you might think. The astoundingly muted reaction in markets recently to major global events is reflective of a new market mantra among young investors. Nothing ever happens. Mike Bird is our Wall Street correspondent and a host of Money Talks, our subscriber-only show on business, finance and economics. The phrase emerged on an online forum, a pretty grubby place called 4chan.

more than a decade ago and it's become popular again recently for the sense that there are major major global events which take up a huge amount of news space that seem to fizzle out it's quite a cynical take But if you look across events like China's anti-lockdown protests, the Wagner Group's rebellion against the Russian state, the skirmishes between India and Pakistan, there is a sense that you get these flashbacks.

Now it seems like the same thing is happening in the conflict between Israel and Iran. Well, one of the things that was supposed to rock the markets a lot was the giant trench of Trump tariffs. What happened with that? Did that happen? Absolutely. It's a much more concrete thing for companies. You're not just pricing sort of uncertainty and risk and ephemeral danger. You're pricing something very concrete, which is a meaningful change in prices.

inputs and prices of your goods. But in reality, if we look at it now, it looks like the tariffs have barely really dented the US stock market. The S&P 500 is basically back to a record high. in spitting distance less than a percent off as we speak. The expected earnings of companies in the S&P 500 index over the next year are actually now slightly higher than they were when Trump announced his tariffs. Markets have continued...

to climb. We've seen this relentless inflow from retail investors who've bought about $20 billion worth of stocks in the past three months, according to research by Goldman Sachs. So basically, the combination of sort of... Trump backing down a little bit on the tariffs and the economic impact of what's already happened not being as severe as people expected led to a market reset back to where, frankly, it was before any of these announcements.

So nothing ever happens is not just a cynical worldview, but investment strategy. And from what you're saying, it kind of works. No matter what happens in the news agenda, keep piling in. It is very cynical, to be clear, but there is some good reasoning behind it. In 1988, David Cutler and James Paterba at MIT and Larry Summers then at Harvard University tried to figure out what moved stock prices.

And they looked at about five decades of data, including some huge historical events. You know, this is a period of time that includes the Japanese bombing of Pearl Harbor, the Cuban Missile Crisis, the Chernobyl nuclear meltdown. And they established that these really massive world-changing news events produced about the equivalent level of volatility of a week of regular news. That is to say...

Almost nothing at all. The genuine impact of this stuff is so small relative to the overall trend that it barely registers in the long term. It is simply not that important. It's not a good explanation of what moves the stock market.

Why though? Why should big news events not move the animal spirits like anything else that changes in the markets? So I think there's three main reasons why this is true. Two are all time reasons and one is a more recent change. Firstly, it's very hard to price. big geopolitical events with all or nothing outcomes. Markets are actually not enormously good at this. The best example is the risk of conflict between North and South Korea, which emerges occasionally.

that could end in a nuclear war on the Korean peninsula. It is very, very difficult to price that risk, as grim as it is to think about. And a lot of investors tend to frankly simply look past it. There is very little war risk priced into the Korean stock market, despite that being a big talking point, a huge area of sort of geopolitical tension. The second thing is that whatever these geopolitical events do, they have to dent what has driven...

U.S. market outperformance over the last 15 years. And that is basically that consumer spending has risen, innovation has progressed, growth continues. A geopolitical event has to interrupt those forces or really the markets are eventually going to look through it. And the third point is that...

The global economy is more resilient now to shocks, particularly from the part of the world that we're currently looking at. So when you look at Iran and Israel, one of the main ways that that local conflict or regional conflict becomes... global one is because it's a very energy-rich region. And had we been talking about this 20 years ago, we might have talked about the serious risk of a disruption in global oil and gas supplies.

Particularly for the US, that might have caused a shock to the US economy as a major oil importing nation. Now, of course, America is no longer a major oil importing nation on net. It's an energy exporter, which cushions the impact for consumers. and the higher oil prices that might result.

from conflict in the Middle East, in this case, it hasn't really resulted in that, but it might result from that, is actually good for some US companies. If you look at the oil and gas exploration industry, the higher the price, the more likely they are to explore, the more likely they are to... to invest in that sort of activity. So it's much more muted as an impact on the US economy than it used to be and as a result on the US stock market as well.

So in summary, it would take an almighty news event, like epic-defining news event, for the markets to notice by this stage. We shouldn't be too cynical. There is a valuation element to the stock market here. You could see a shock raising uncertainty so much that people were a little bit worried about the steep valuations of companies. But really, we do need

something that is large enough to move the needle against the sort of general progress of American dynamism, American innovation, and the almighty American consumer. It's difficult to bet against them. Good reason that most of the time markets seem to broadly just ignore all of this stuff going on. Mike, thanks very much for joining us. Thank you very much.

Eighty years ago this week, on June 26th, delegates from 50 countries signed the UN Charter, creating an international body entrusted with containing the bellicose passions of the world. Now names are not Wilson, George, or Clemenceau, but Stettinius and Truman of the United States. And there's hope that history will not this time repeat itself, but will improve by the failures past.

The shortcomings of the League of Nations, the previous attempt to ensure peace after the First World War, haunted the delegates. Fraser McGillraith is the author of The Economist's Archive 1945. The United Nations was long in the making. As early as 1941, America and Britain had signaled their desire to establish what they called a wider and permanent system of general security.

The signing of the treaty at a conference in San Francisco came after nine weeks of difficult discussions. Weakness wounded the League of Nations, the conflict killed, but there is strength in the United Nations.

That week's edition of The Economist was optimistic that the UN might succeed where the League had failed. First, unlike in the League, this time both America and the Soviet Union would be involved from the start. This was crucial, we argued, because the force of any such organisation would inevitably come from its strongest members, who, we said, are above the law because they are the wielders of the power behind the law.

This was reflected by the fact that America, Britain, China, France and the Soviet Union would be permanent members of the UN Security Council and each would have a veto on UN policy. Second, The vain hope that countries could be led to peace by the better angels of their nature was this time put aside for a more Hobbesian realism. The Charter cannot be accused of excessive idealism.

On the contrary, almost every article is marked by the experience of two grim decades between the wars, during which, in Europe especially, Power politics, imperialism and aggression grew up like tenacious ivy within and over the brave New League.

In the United Nations Charter, there is no reliance upon better and more idealistic methods of conducting international relations. The dominant position is occupied by those whose physical power would give them a dominant position in any unorganized way. world society cynics we wrote might complain that the charter was nothing more than old expedience and separate nationalism writ large and covered over with a stucco facing of general goodwill yet we pointed out

that it was precisely that high-mindedness that had caused the League to fall apart. Assured of the value of their collective endeavour, its members lost sight of the need to take individual responsibility for the defence of peace with arms. Did not the belief that the League transcended the powers which were its members, that the Covenant was in itself a guarantee against war, and that collective security was an alternative to national defence and not an extension of it?

Did not these illusions make the chance of keeping peace more, not less difficult? By making the checking of aggression the responsibility of all, left it the responsibility of none. We wrote that the new body...

shorn of the League's utopian elan, and that with the responsibility for keeping the peace resting with the great powers, the UN resembled the patchwork of alliances that had so far not been able to prevent war. But it had one great advantage over them. It offered a forum for the airing of grievances. The conference itself had already shown how powerful the effect of world opinion can be on the policy of great states.

and how salutary the public airing of injustice and heavy-handedness can be. As a forum of world opinion, the international structure of the new league can play a direct part in checking wrongdoing and aggression. As with the League of Nations before it, the UN would only work if the powers within it so desire and so work. And if the Covenant's most powerful country is observed good and pacific international conduct.

As the UN's first 80 years have shown, such benevolence is often in scarce supply. To find Archive 1945, just open up the Economist app or visit economist.com slash interactive. That's all for this episode of The Intelligence. The show's editors are Chris Impey and Jad Gill. Our deputy editor is John Joe Devlin and our sound designer is Will Rowe. Our audio correspondent is Sarah Larniuk. Our senior creative producer is William Warren.

and our senior producer is Rory Galloway. Our producers are Henrietta McFarlane, Benji Guy, and Jonathan Day, and our assistant producer is Anne Hanna, with extra production help this week from Emily Elias. We'll all see you back here tomorrow for the Weekend Intelligence. This week, we take a hard look at America's centuries-old traditional black church. For generations, it's been the foundation for civil rights movements. But like other religious institutions, it's fading.

We ask what happens to America's fight for equality if the black church disappears. To succeed in the future of work, forward thinkers use AI to deliver measurable results. Workday is the AI platform for HR and finance that frees you from the mundane so you can focus on more meaningful work. Keep your eye on the ball. It's as important in investing as it is in tennis. For Blue Owl.

That means keeping our eye on the private markets. A laser focus that helps us redefine alternatives and inspires us to support the players who are redefining the game. So keep an eye out for Blue Owl at the Grand Slams and learn more about us at blueowl.com slash investing. Blue Owl. Redefining alternatives.