October 27, 2006
The presidential election in Ecuador is attracting more international attention than would normally be directed at this country of 13 million people, the majority of whom are poor. The reason? Rafael Correa, who came in second in the first round of balloting this month and has a good chance of winning the runoff on Nov. 26.
Correa, an economist, would make Ecuador the next country to join the “pink tide” of leftist governments that have swept the region over the last eight years. His opponent — Alvaro Noboa, a billionaire banana magnate and the richest person in Ecuador — strongly backs U.S. policies for the country and the region.
Correa clearly has official Washington worried. He has denounced the International Monetary Fund and the World Bank and their economic policy prescriptions, vowed to scrap a proposed “free-trade” agreement with the United States and proposed getting rid of a U.S. military base in the country. He has called for collecting more taxes on foreign corporations — including in Ecuador’s important oil sector — and has not ruled out defaulting on the nation’s foreign public debt.
Most reports in the U.S. have viewed Correa’s candidacy in ideological terms — he is depicted as “anti-American” or an “ally of President Hugo Chavez” of Venezuela — and this “us versus them” framework will likely predominate in the weeks ahead. But opposing Washington’s policies for his country is not anti-American, and Correa has no alliances with anyone. And if we look at this election from a Southern Hemisphere vantage point, Correa’s arguments make a lot of sense.
IMF and World Bank economic policies, for example, have fared badly in Ecuador. From 1980 to 2000, the country’s income per person fell by 14% — about equal to Africa’s disastrous performance during this period. Ecuador was under IMF agreements for most of the years between 1983 and 1995 and accordingly adopted many of its recommended reforms and policies. And the World Bank, since Paul Wolfowitz took over, cut off a promised loan in an effort to make Ecuador use most of its windfall oil revenue to pay off debt rather than for social spending. So Correa has good reason to see the “Washington consensus” policies of these institutions as a terrible failure, and many economists and political leaders in Latin America agree.
In fairness, the country has done better under the most recent IMF accords of 2000 to 2004, with the country pulling out of a severe economic crisis and restoring reasonable economic growth while bringing inflation down from 96.1% in 2000 to 3.2% today. Correa has said that he would maintain the most significant reform of this period: the adoption of the U.S. dollar as the country’s currency — a change that he and many other economists initially opposed. Correa, who received his doctorate in economics from the University of Illinois in Urbana, is pragmatic despite his rhetoric.
As for the proposed “free-trade” agreement with the U.S., it has provoked demonstrations that shut down much of the country for nearly two weeks in March. Indigenous groups that led the protests wanted to protect farmers from subsidized U.S. exports. They also astutely pointed out that it did not make economic sense to make sacrifices for increased access to the U.S. market when that market was likely to shrink in the near future as the U.S. trade gap inevitably narrows.
Correa’s threat of hard bargaining with international creditors is not as risky as it may seem. Ecuador is barely eligible to borrow, at even very high interest rates, on international markets (because of a 1999 default on its foreign debt). Further, the country is running a trade surplus and therefore may not need much international borrowing in the near future. And the government of Venezuela, which has loaned $2.5 billion to Argentina and hundreds of millions to Bolivia, has previously offered credit to Ecuador.
Ecuador doesn’t necessarily need the blessing of the Bush administration or the financial institutions that it controls, or even the international financial markets, especially if the conditions that they require would prevent the government from taking steps to alleviate the crushing poverty that afflicts the majority of its people. That is Correa’s first priority, and as he said of his own program, “The only thing radical about me is the reality of my country.”
Mark Weisbrot is Co-Director of the Center for Economic and Policy Research, in Washington, DC.