Ecuador's President Gutierrez walks a tightrope

On June 10, the 10th round of negotiations for a free trade agreement between the South American nations of Ecuador, Peru and Colombia, and the United States, ended in a stalemate, with neither side willing to budge, in yet another example of Washington's increasing isolation on the continent.
Colombian farmers boycotted the negotiations, thousands of Ecuadorians protested in the streets of the country's largest city, Guayaquil, until police used water cannons and tear gas to disperse them, and on June 8, a bomb was set off outside the hotel in which the negotiations were taking place.

Ecuador's social movements, confident after forcing the overthrow of President Lucio Gutierrez on April 20, are demanding a referendum on the agreement. Protesters chanted: "We don't want to become a North American colony".

Gutierrez was unpopular for his implementation of neoliberal austerity measures, expansion of the US military presence in Ecuador and for attempting to subvert the role of the Supreme Court. 

His replacement, former vice-president Alfredo Palacio, came to power promising to hold a referendum on the trade agreement, increase social spending and to "re-found" the country by setting up a constituent assembly to rewrite the constitution.

However, while he initially spoke out against deepening military ties with the US, Palacio has since affirmed that the US air base at Manta, used as part of Plan Colombia, will stay, and there are fears he will cave in to Washington over trade as well.


Washington has not relaxed, however. Palacio's new cabinet contains a number of "leftists" opposed to US interests in the country. The appointment of Rafael Correa as finance minister sent jitters down investors' spines, as did Correa's statement that the highly unpopular decision by Ecuador in 2000 to adopt the US dollar was the "greatest economic error".

On May 16, the new energy minister declared that Ecuador will review all of its current oil contracts with foreign companies, and on June 15, Ecuador's Congress voted 64-1 to approve a reform package that redirects $745 million from an "oil stabilisation fund" into social programs and economic growth package instead of debt repayment.

Thirty-five per cent of the money will be used for investment, including reinvigorating Ecuador's ailing national oil company Petroecuador. Fifteen per cent will be spent on education, 15% on health, 20% will be kept in reserve, and the rest will be spent on roads, research, and the environment, the funding comes into effect in 90 days.

The bill is opposed by Wall Street, Ecuador's Central Bank, Ecuadorian opposition parties and the International Monetary Fund, which all claim that it will drive investors away and, if it causes a default on debt repayment, may end the dollarisation process and destroy the economy.

Oil is Ecuador's biggest export, providing 43% of Ecuador's national revenue, and any changes to the industry have huge flow-on effects. A reduction in global oil prices would hit Ecuador hard, and without a reserve fund, Ecuador could default on its payments.

The Ecuadorian government claims that it faces an international conspiracy, to prevent progressive reform and to destroy it. Gutierrez recently left his exile in Brazil and travelled to Washington to meet with representatives of the Organisation of American States (OAS) and Ecuador debt bonds purchasers.

Gutierrez, who rejects the Palacio government as illegitimate, has announced plans to return to Ecuador "within weeks", and called upon the OAS to support him in "restoring democracy" to the country.

Rumours abound in Ecuador that Gutierrez' brother Gilmar of the Patriotic Society Party (PSP), the right-wing Social Christian Party (PSC) and others are deeply involved in oil deals, which might be threatened by Palacio's policies, and are therefore engineering his overthrow.

Meanwhile, a number of Palacio's ministers have come under scrutiny for bad debts, and two, including energy minister Fausto Cordovez, have been forced to resign, claiming they have been pressured by the oil industry and financial sectors in Guayaquil.

While Palacio tries to maintain a balancing act between the social movements and international finance, the chief of staff of Ecuador's Public Administration, Luis Herreria, caused an uproar, accusing Venezuelan President Hugo Chavez of trying to spread his "horrible and diabolic" Bolivarian revolution to Ecuador.

Social movements supportive of the social policies of Chavez have demanded Herreria's resignation, but some see the outburst as a ploy by Palacio to assure the US and international interests that Ecuador is not following the path Venezuela has taken.

Ecuadorians, over two-thirds of whom live in poverty, have shown little patience with policies and politicking that do not improve their conditions. Palacio, and Washington, would do well to remember the main slogan used during the April uprising, "Que se vayan todos" ("They all must go").

First published in Green Left Weekly, June 22, 2005.