Ecuador builds nation of the future

Ecuador's presidential election held on February 17th was won by the current president Rafael Correa who secured 10 percent more votes than in 2009. The experience of Correa's government in overcoming the crisis and building socially-oriented country is unique.

The Ecuadorians also elected 137 legislators of the National Assembly. The president's block won the absolute majority (60-65 percent, according to EFE agency). Approximately 11.6 million voters for whom the voting procedure was mandatory took part in the election. The victory of the president was not contested. All preliminary polls showed a large gap between the 49-year-old Correa (as a result he won 60 percent of votes) and his closest rival, former banker Guillermo Lasso, who was supported by 24 percent of Ecuadorians.

An economist by training, Rafael Correa won his first election in 2006 with the slogans aimed at struggle against poverty and building socialism of the 21st century. He inherited the country in a completely dysfunctional state after neoliberal reforms of Lucio Gutierrez, and in 2008 faced the global financial crisis, whose consequences were devastating for Ecuador. Oil prices that account for 62 percent of exports and 34 percent of the state budget revenue fell by nearly 80 percent. The revenue from other export sectors and Ecuadorians working abroad has also dramatically declined. However, in 2010 the country's GDP grew by 3.6 percent, and in 2011 by 7.8 percent, according to the CIA World Factbook.

Public debt in December of 2011 was $10 billion, less than 10 percent of the country's GDP. According to the Central Bank of Ecuador, in 2012 unemployment was at 5 percent, a record low indicator in the region over a 25-year period. The poverty rate declined to 16 percent (versus 25.5 percent on its peak in September of 2009).

The level of foreign investment was low. For example, in the first half of 2012 from 94 billion dollars invested by the U.S. in Latin America, only 265 million were invested in the economy of Ecuador. The president of Ecuador is not concerned. "We are developing steadily without foreign investment," said Correa. Indeed, public spending on education adjusted for inflation has more than doubled since 2007. Spending on health care and other social budget items, including subsidized housing loan program, has also increased.

What measures has Correa taken to get the country out of the crisis in record time and send it on a path of sustainable development? In December of 2008, he defaulted on sovereign debt of Ecuador, with a total nominal value of about 3.2 billion U.S. dollars, which accounted for 30 percent of Ecuador's foreign debt. In May of 2009, Ecuador bought back 91 percent of their impaired bonds through an international auction. The problem of debt was solved. Today, only 1 percent of the country's GDP is spent on servicing the national debt. Then, in late 2009, the government ended 13 bilateral investment treaties that were not beneficial for the country, including those with the United States, and in November of 2010, revised 15 of 24 oil contracts and provided the rental payments of up to 80 percent, compared to 18 percent in the previous scheme. Oil revenues in the six years allowed doubling social spending by 25 percent and increasing GDP by 50 percent.

Correa found an alternative investor to the U.S. - China. In 2011, the government signed a contract for $2 billion with the China Development Bank that won the rights for priority oil contracts up to $1 billion. Correa also signed a contract with China for financing hydro-power projects. In 2000, Ecuador abandoned its currency in favour of the U.S. dollar, and Correa could not adjust the exchange rate to counter the recession, or print the money like the U.S. Federal Reserve.

He made another brilliant step by nationalizing the Central Bank and forcing it to return assets held abroad in the amount of over $2 billion. A tax on transferring money abroad was introduced. Banks are required to keep 60 percent of their liquid assets in the country. A program of preferential mortgage loans was launched, and now this money is coming back, fuelling the economy. This was Correa's way to provide the country with liquid assets in the shortest possible time. The government abolished the monopoly of banks and large oligarchic structures on the media. This important step allowed providing informational support to the reforms.

"You cannot cover the sun with your finger and deny radical changes in the country," Correa said in his recent campaign rally. "We jumped into a departing train, there are jobs and health, we have gained dignity, justice, and sovereignty," said the President. The President of Ecuador has shown the world how to build a modern state by taking natural resource rents through taxes, nationalizing the central bank, imposing restrictions on the movement of bank capital, getting rid of the national debt and preventing its increase, and increasing the regulatory role of the government in the export sectors of the economy.

These advances allowed Ecuador along with other governments in Latin America (Brazil, Argentina, Uruguay, Bolivia, Nicaragua, Cuba, and others) to confront globalization by the transnational capital and create a scheme of socialism of the 21st century, the future model of human existence. This is precisely why it is strongly discredited by the neoliberal West through its media that fiercely criticizes Rafael Correa, Cristina de Kirchner, Dilma Rousseff, Hugo Chavez, and Daniel Ortega.

In 2005, U.S. Secretary of Defence Donald Rumsfeld said that the process of regional consolidation of Latin America was a temporary phenomenon. He said that this unit (ALBA) was unlikely to hold for five years. The U.S. has been trying to fulfil his "prophecy" for many years. They organized the coup in Honduras in 2009 and Paraguay in 2012, and now a "peaceful transfer of power" is being prepared in Venezuela, Brazil and Argentina. They are using Chavez's disease, corruption in Brazil, and economic difficulties in Argentina. But there is a very strong key player Ecuador and its young leader.
Lyuba Lulko


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Author`s name Dmitry Sudakov