Sunday, August 28, 2005

Ecuador gets a friend in need

An interesting story has been developing in the tiny nation of Ecuador for several days. Protesters have managed virtually to shut down the national oil industry, whose exports account for a quarter of the country's GDP, with a fierce campaign of demonstrations, occupations and sabotage. The country was in danger of defaulting on its export commitments. But Venezuela’s Hugo Chavez came to the rescue late this past week, and is sending a "loan" (actually a gift) of Venezuelan oil to cover off those exports. That was where I got interested.

I felt a certain sense of betrayal at first. Chavez is my kind of leader. He's a genuinely popular man of the people, who stands up to the US not just in word but in deed. He has, to Washington's foot-stamping annoyance, won a free election in 1998 with ease, handily survived an incompetent two-day Keystone Koup and an internationally-supervised recall vote, and, now more popular than ever, he's liable to see his support spike still higher in the wake of Pat Robertson’s recent call for his assassination.

Far from being a "strong-arm dictator," (Robertson's words), Chavez respected the astonishing ruling of his country's top court, which found the coup plotters not guilty of anything. They walk free today. Imagine that happening in Canada, or the US.

The wealthy elites and the Bush administration hate him with a passion, and their sludgy stream of lies finds ready acceptance in the mainstream media. In fact, the administration is so fanatical on the subject that they have even been asked to tone it down by staunch Republican Arlen Spector.

Chavez is busy these days: as reported by a right-wing Venezuelan, spluttering with indignation, he

Has bought half a billion dollars of Argentinean debt;

• Is bailing out the Uruguayan National Airline, cost unknown;

• Is injecting $50 million into PetroCaribe, a regional organization to provide the Caribbean countries with subsidized oil;

• Has donated $50 million to the Andean Community for unspecified social programs;

• Is promoting the creation of PetroSur, an oil organization similar to PetroCaribe for the Southern Cone;

• Has increased the supply of strongly subsidized oil to Cuba from 53,000 barrels per day to 90,000 barrels per day;

• Has sunk $10 million into a Venezuelan-controlled regional TV channel, Telesur;

• Is planning to buy 42 oil tankers from Brazil for some $2 billion;

• Has bought about $2 billion worth of helicopters, tanks, guns and other assorted weapons from Russia.

He's also teamed up with Fidel Castro to send doctors to impoverished parts of Latin America. More than 60% of Venezuelans now have free medical assistance. Food for poor families and prescription drugs are subsidized. Chavez has built housing, schools and clinics, increased literacy through more education spending, and abolished fees for public school attendance. Venezuela has one of the lowest infant mortality rates in Latin America. The vast majority of his people love him to bits.

So what's Hugo Chavez doing supporting a pro-American, free-market President, and undercutting popular protests?

First impressions, as it turns out, can be completely off the mark, and this proved to be one of those occasions where a little digging reveals a different story. Here's some background.

Ecuador is the fifth-largest oil producer in Latin America. Most of its exports go to the US. In the past, huge multinationals like Texaco and Occidental have invested heavily in Ecuador and made a lot of money, but the going hasn't been easy for them. Texaco, as noted below, is currently embroiled in a huge lawsuit brought by indigenous peoples in Ecuador. Occidental is being sued by the government for breach of contract.

Ecuador is a desperately poor country, despite its estimated 4.4 billion barrels of oil reserves. Oligarchs who once ruled Ecuador stripped it of its assets, and now sit in Miami as bondholders for this heavily-mortgaged nation. The country’s former president, Lucio Gutierrez, had to kowtow to the IMF and the World Bank just to get loans to survive.

Presidents of Ecuador have been between the proverbial rock and a hard place for some time. Popular unrest led to the deposing of Jamil Mahuad in January 2000, with Vice-President (and banana billionaire) Gustavo Noboa assuming power and presiding over the dollarization of the economy. Lucio Gutierrez, a left populist, governed from January 2003 until this past Spring, when he was driven from office.

Guttierez' story is in some respects remarkably similar to that of Hugo Chavez. He had risen to prominence when ordered by President Mahuad to break up indigenous peoples' demonstrations in Quito in 2000: instead, he set up soup kitchens for them. He engaged with others in an attempted coup, spent time in jail, and then ran for office against Noboa and won.

But he was deposed this past April when his compliance with "structural reform" had become too much for his people to bear, and his attempt to replace the Supreme Court had offended the Ecuadorian Congress. A well-circulated picture of him shaking hands with George W. Bush, and his increase in the price of cooking fuel and other supposedly voluntary "austerity measures," helped to send "Sucio Lucio" (Dirty Lucio) running to the Brazilian Embassy to seek political asylum.

The "voluntary measures," it turns out, were nothing of the kind. The Nation obtained a copy of the World Bank's 2003 Structural Adjustment Program Loan. It dictates that 70% of the windfall increase in oil revenues in the past few years be paid immediately to the bondholders, and another 20% be set aside for future payments. Only 10% was permitted to be used for social spending, in a country of grinding poverty where only a lucky few make the official minimum wage of $153US a month. Electricity prices were to rise to twice what the average American pays, to enrich Ecuadorian electricity suppliers such as American companies Noble Energy and Duke Power.

The new President of Ecuador, Alfredo Palacio, was Gutierrez' Vice-President. He happens to be a conservative, pro-market, pro-American former cardiologist, but the US is already unhappy with him, which is probably good news for poor Ecuadorians.

Says The Nation's Greg Palast:

I showed President Palacio the World Bank documents. He knew their terms well. "If we pay that amount of debt," he told me, "we're dead. We have to survive." Given the oil windfall, Palacio sees no need to follow Gutierrez's path to economic asphyxiation. "It is impossible that they condemn us not to have health, not to have education," he told me. He made it clear that handing over 90 percent of his nation's new oil wealth would not stand.


Palacio got the full "Chávez" treatment from the New York Times, which ran the headline "Ecuador's New Chief Picks Cabinet; Leftist in Economic Post" after Palacio's new finance minister announced Ecuador would put social-services programs first ahead of payments to bondholders. The Times said Palacio's views "ruffled some feathers" (whose, we don't know) and that foreign powers questioned the "legitimacy" of his right to office. Palacio smiled, "They don't say which ones."

Palacio might be a conservative, but he’s a doctor, and he's a realist: "Sick people are not going to produce anything," he said.

So who are the protesters at his door? The Financial Times calls them "community groups." Their leaders include mayors and regional governors from Orellana and Sucumbios provinces, in the Amazon region where much of the oil comes from. They want roads and jobs and more money spent on health, and they're demanding that the oil companies "reverse the environmental damage they have done," as one mayor in Sucumbios, Edmundo Espindola, put it.

Indeed, Sucumbios and Orellana provinces, with large indigenous populations, have suffered pollution ravages at the hands of Texaco on a catastrophic scale. This past May, after a US court ruled that a lawsuit launched in 1993 should be decided in Ecuador, a new suit was brought in that country. 30,000 indigenous people and campesinos affected by oil exploration and extraction are represented. In the current protests, then, we can see environmental, regional and indigenous factors at play, as well as the traditional demands of the poor. It's an explosive mix.

There's a shaky truce in effect at the moment: oil companies and the government promised road building and health spending, although it took only a couple of days for the deal to begin to unravel: protest leaders have angrily denounced apparent backpedaling. 16% of the income taxes paid by the companies were to be diverted towards health, environment and local development, but this, according to Espindola, has become "up to" 16%. Road construction, originally to be completed in three years, will now be done "when possible." The next few days should be interesting ones.

In the meantime, Palacio knows there have been seven Presidents of Ecuador in the past nine years. He faces a rebellious population on one hand, and George Bush, rich expatriate Ecuadorians, oil companies and the IMF/World Bank on the other. He has a hard row to hoe, as did his unfortunate predecessor. But he's found a wealthy supporter in Hugo Chavez, and the balance may have tipped in Ecuador's favour. As a former minister in his government, Rafael Correa, put it, "this time we will not negotiate with Wall Street but with friendly countries." How nice to have a choice.

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