A Deciding Moment for Ecuador

Championing a strong reformist agenda, Rafael Correa won overwhelmingly in the second round of last month’s presidential election. His campaign capitalized on voter antipathy and despair with a much-maligned political system often unable to deliver the benefits of democracy. Over the course of his term, the president-elect promises to follow-up on his campaign slogan – correazos – to eliminate corruption from government while strengthening socio-economic conditions.

His opponent, Álvaro Noboa was no match for Correa’s charisma and strong public presence. In the public’s eye, Álvaro Noboa represented close ties with big business and a continuation of the status quo, which in most voters’ minds translated into a continued grip on power by the wealthy and few opportunities for the indigenous and working class. To gain popular support during the campaign, Noboa cast himself as part messiah and supporter of both neo-liberalism and free housing for the poor. However, in the run-up to the second round, a popular backlash, reflecting skepticism of policy proposals and leadership credibility, led to a dramatic decline in popularity and Noboa’s November 26 defeat. At the same time, as the days drew closer to the presidential run-off, Correa had softened his campaign speeches and moved closer to the center, covincing many voters that his views could be both centrist and pragmatic.

An economics professor and former minister of economy, Correa is no novice to economic fundamentals and the importance of prudent fiscal and monetary policies. But on the international economic front, Correa has promised to substantially cut Ecuador’s debt payment to international creditors and has hinted that he may restructure or default on certain debt without consulting congress. These threats have already damaged Ecuador’s standing in international capital markets, and if implemented, would further increase the cost of servicing the remaining debt. Investment banks have responded by selling off Ecuador’s sovereign debt, pushing the cost of buying protection against default above that of Iraq and other highly unstable countries.

Despite Correa’s at times fiery anti-U.S. rhetoric during the campaign, the Ecuador-United States relationship under a Correa government may still evolve into a cooperative partnership with the U.S. In the days before the second round, Correa attempted to correct for past mistakes when assuring Ecuadoreans and the international community that his government would always maintain a cordial dialogue with the United States. President Bush reciprocated Correa’s gesture of goodwill when he called the president-elect to congratulate him on his victory.

While pledging to reduce overall U.S. influence, Correa’s specific plans for doing so – refraining from free-trade agreement (FTA) negotiations and non-renewal of the Manta military base lease – should not dominate the bilateral agenda for at least a few years. The lease does not expire until 2009 and U.S. FTA priorities in the region are currently focused on ratification of the Peru and Colombia FTAs. With the mid-year expiration of U.S. Trade Promotion Authority (TPA), the U.S. administration will be severely handicapped in its ability to negotiate new FTAs; only TPA guarantees negotiating partners that congress will not ask for line-by-line re-negotiation of signed agreements.

Last week’s extension of the Andean Trade Promotion and Drug Eradication Act (ATPDEA) may be the first step towards creating goodwill between the two countries. Renewed for an initial six months, the legislation calls on the U.S. Congress to extend trade preferences for an additional six months for any country that is in the process of concluding an FTA. ATPDEA extension would boost the creation of new industries and new jobs, in particular helping to generate jobs in the flower industry. Employment stability decreases the immigration push to the U.S., and on the political front, a U.S. trade commitment to Ecuador keeps the United States engaged and sends the right message to the Ecuadorean citizens.

Realistically, it will be an uphill battle for Correa to implement radical reform. Correa has maintained his deep conviction that the only way to create a more viable and responsive government would be to rewrite the constitution. But, without any party representation in congress, Correa will have to make compromises and forge alliances with the political parties of his election opponents - Álvaro Noboa, Gilmar Gutiérrez and Cynthia Viteri. Congress is unlikely to approve the formation of a constituent assembly since it would probably attempt to assert authority over the legislature. Such legislative resistance to a key element of Correa’s platform could well bring the Congress into conflict with the executive, a relationship marked recently by congressional victories over past presidents. Correa knows this but boasts that he is ready to take on the Congress.

Despite the euphoria of a Correa victory for his supporters, many Ecuadoreans are skeptical that any president can bring greater opportunity and prosperity. But, for now, a glimmer of hope remains that this is the moment for a great leader who can overcome past political and economic missteps. With a fresh start, Correa’s initial actions will signal to both his domestic population and the international community if he is up to the test.

---

Sofia Mancheno was born in Quito and is the Director of Public Affairs at the Council of the Americas. Previously she worked for the Council on Foreign Relations.

ABOUT VIEWPOINTS AMERICAS
Viewpoints Americas is a publication of the Americas Society and the Council of the Americas. It helps Council member companies achieve their business goals by stimulating thoughtful debate on the most pressing issues facing Latin America. The positions and opinions expressed in this publication are those of the authors or guest commentators and speakers and do not represent those of the Americas Society and the Council of the Americas or its members or the Board of Directors of either organization. No part of this publication may be reproduced in any form without permission in writing from the Americas Society and the Council of the Americas.