Wires

UPDATE 2-Ecuador arrests 275 people, protests halt transport for second day

Alexandra Valencia

(Adds latest details of protests, comments by president and by truck drivers' leader, political and economic background, details on IMF deal and Ecuador's debt prices)

QUITO, Oct 4 (Reuters) - Protests over fuel subsidy cuts paralyzed transportation around Ecuador for a second day on Friday as authorities held 275 people in jail for unrest triggered by President Lenin Moreno's belt-tightening fiscal package.

The 66-year-old president has set oil producer Ecuador on a centrist path after years of leftist rule under his predecessor Rafael Correa and is aligning policies to conform with a three-year $4.2 billion International Monetary Fund (IMF) deal.

But Moreno's scrapping of decades-old fuel subsidies this week incensed many Ecuadoreans and brought violent protests in a nation with a history of political volatility.

Witnesses said bus and taxi services remained on strike on Friday from the capital Quito to the coastal city of Guayaquil. In Quito, taxis parked across some streets to block traffic.

As the measure came into effect and fuel prices soared on Thursday, masked protesters hurled stones and set up burning barricades, causing extensive damage in the worst unrest in years in the country of 17 million people.

In Quito, burned tyres and rocks littered the streets on Friday morning, while lamp-posts were bent and broken.

Transport unions began the protests, but have been joined by indigenous groups, students and other unions.

Moreno's popularity has fallen more than half from above 60%after his 2017 election, but his political position remains strong given widespread support from the business elite, military loyalty, and the lack of a strong opposition.

However, Ecuadoreans will be mindful that street protests toppled three presidents during economic turmoil in the decade before the socialist Correa took power in 2007.

Moreno declared a 60-day state of emergency on Thursday, saying disorder would not be tolerated. By late Thursday, 275 people were arrested, while taxi union leader Jorge Calderon was detained on Friday morning, the Interior Ministry said.

Some 28 police officers were hurt on Thursday, the ministry added, as they deployed armored vehicles and used tear gas to beat back demonstrators.

'TRANSPORT IN CRISIS'

Diesel prices rose from $1.03 to $2.30 per gallon on Thursday, while gasoline rose from $1.85 to $2.39.

Truck drivers' leader Luis Vizcaino called for dialogue with the government. "All Ecuador's transport sectors are in crisis ... we have to sit down ... we have to reach a halfway measure," he told local television.

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.

Rings of soldiers and police prevented protesters from reaching his palace in Quito on Thursday evening, but authorities were unable to prevent some looting of shops in Guayaquil.

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

Ecuador is also leaving the Organization of the Petroleum Exporting Countries (OPEC) to pump more oil and raise revenue. It produces nearly 550,000 barrels per day.

Ecuador's debt grew under Correa, who endorsed Moreno in 2017 but has since become a critic of his successor's turn toward more market-friendly policies.

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

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 $652 million and paved the way for an additional $6 billion in loans from other multilateral institutions.

Skepticism of the IMF runs strong in Ecuador and throughout Latin America, where many blame austerity policies for personal hardships. (Reporting by Alexandra Valencia in Quito; Additional reporting by Jose Llangari in Quito, Yury Garcia in Guayaquil Writing by Andrew Cawthorne Editing by Jonathan Oatis and Matthew Lewis)