Transportation in major cities continues to be paralysed as bus and taxi workers strike over cuts to fuel subsidies.

Protests over fuel subsidy cuts paralysed transportation around Ecuador for a second day on Friday as authorities held 350 people in jail for unrest triggered by President Lenin Moreno’s belt-tightening fiscal package.

Witnesses said bus and taxi services remained on strike after fuel prices soared on Thursday following Moreno’s fiscal measures earlier in the week.

Moreno – putting Ecuador on a more market-friendly track after years of left-wing rule and aligning policies to conform with a $4.2bn International Monetary Fund (IMF) loan – has scrapped decades-old fuel subsidies and announced tax reforms.

That has infuriated transport unions, whose action has been joined by indigenous groups, students and other unions.

A demonstrator clashes with riot police during a transport strike against the economic policies of the government of Ecuadorean President Moreno [Rodrigo Buendia/AFP]

As the government declared a state of emergency on Thursday, police deployed armoured vehicles and used tear gas to beat back demonstrators and keep them from reaching the presidential palace.

‘Crisis’

Truck drivers’ leader Luis Vizcaino called for dialogue with the government on Friday. “All Ecuador’s transport sectors are in crisis … we have to reach a halfway measure,” he said.

Officials say the elimination of fuel subsidies was necessary to lift a struggling economy and stop smuggling.

“I have the courage to make the right decisions for the nation,” Moreno told reporters, praising the security services for quelling violence.

A demonstrator is detained during clashes which erupted during a transport strike against the economic policies of the government of Ecuadorean President Lenin Moreno [Rodrigo Buendia/AFP]

Ecuador hopes to save about $1.5bn a year from eliminating fuel subsidies. Along with tax reforms, the government would benefit by about $2.27bn.

The country has also begun laying off some state workers and is leaving the Organization of the Petroleum Exporting Countries (OPEC) to pump more oil and raise revenue. It produces nearly 550,000 barrels per day.

On Friday, Moreno vowed that he wouldn’t back down on the decision to end the subsidies.

“There will be a mechanism to alleviate the effects that (the end of the subsidy) could have on some sectors, of course,” he said, “and we are ready to do that, but under no circumstances will we change the measure.”

The government wants to reduce the fiscal deficit from an estimated $3.6bn this year to under $1bn in 2020.

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The unrest put Ecuador’s debt prices under pressure.

Moreno’s government has improved relations with the West and reached its $4.2 billion loan deal with the IMF in February, dependent on “structural” changes including raising tax revenue and bolstering Central Bank independence.

The deal allowed Ecuador to receive an immediate disbursement of $652m and paved the way for an additional $6bn in loans from other multilateral institutions.

Scepticism of the IMF runs strong in Ecuador and throughout Latin America, where many blame austerity policies for personal hardships.

Ecuador has a long history of political instability.

Street protests toppled three presidents during economic turmoil in the decade before Moreno’s predecessor, Rafael Correa, took power in 2007.