President Rafael Correa was inaugurated on 10 August under the new
constitution, for a second term, only 31 months after his first term began. His
inaugural speech was a mixture of populism and revolution. What Correa will
actually do over the next four years is far from clear, however. He is eligible
for re-election under his new constitution.
On the populist side he promised higher wages and more public services. On
the revolutionary side, he promised to construct an “inclusive, mutually binding
and fair" society, elevating human capital over financial capital, fighting
corruption, and reforming the state.
Correa is one of the most multi-faceted of the new generation of leftwing
leaders in the region. He is a highly qualified economist, who clearly
understands both how to use markets (witness the hugely successful “voluntary"
foreign debt reduction deal he pushed through in June 2009) and where markets
fail. He understands the US (he did his economics doctorate at the University of
Illinois) yet appears to be repelled by the opportunities the US offers. (Some
commentators suggest this attitude is the result of the US gaoling his father,
when Correa was five, for three years for drug trafficking offences: Correa's
father committed suicide soon after emerging from jail.) It is significant
however that Correa's doubts about dollarisation, which were prominent in his
first election campaign, have subsided.
What is obvious is Correa's political shrewdness. The prime example of this
was his decision to devote the whole of his first term to reforming the
constitution so that his second and third administrations could effect change.
Unlike President Evo Morales of Bolivia who set out with the same objective,
Correa paid enough attention to detail to avoid giving the opposition any
opportunities to derail his project. Correa's only real setback came in the
congressional elections at the end of the process when voters did not support
his movement in the numbers he expected. Nevertheless he ended up in the
strongest position of any president since the restoration of democracy 30 years
ago.
Another, more recent example of Correa's shrewdness was that he was the first
president to ask the seemingly innocent question about the Honduran crisis: what
would happen if the forthcoming elections took place without President Manuel
Zelaya being restored to the presidency? It has become clear, over the past
couple of weeks, that the region's major powers will not recognise any new
Honduran government elected in such a circumstance. Correa's question had to be
answered, as he anticipated, and the answer substantially weakens the de facto
government in Tegucigalpa, underlining Correa's alliance with radicals such as
President Hugo Chávez of Venezuela and Morales.
Although Correa is a radical he seems to understand that abusive monopolies
can establish themselves in public services as well as the economy. Correa's
critics on the Right are impressed by his determination to break the lock the
teachers' union (and its Maoist political allies) has on public education.
Correa seems determined to introduce independent monitoring of teachers'
performance and merit-based pay for teachers, undermining the authority of the
union.
Correa is also shrewd about balancing the needs for economic development over
the rights of indigenous peoples and the needs of the environment. He has stood
up to pressure from environmentalists and indigenous groups to give them an
effective veto on all mining and oil projects in Amazonia, but he is also using
the US courts to chase Texaco for money to clean up the mess its oil business
made in Amazonia. He is also challenging industrialised countries to put their
money where their protests are and to pay Ecuador not to prospect for oil in a
national park.
Coupled with Correa's shrewdness is his sense of mission. He underlined this
by timing his second inauguration to coincide with the bicentenary of Ecuador's
independence. He blatantly exploited the opportunities the bicentennial
anniversary afforded. “We won political independence then," Correa said, “but we
have still not won independence from tremendously unjust structures that have
crushed our people." He promised a “new and definitive independence" through the
radicalisation of his 'citizen's revolution'.
Correa's constitutional reforms strengthen the presidency at the expense of
the legislature but it is still unclear to what use Correa will put his enhanced
powers.
One of Correa's most striking commitments in his second inaugural address was
to call on the region to do something about the press. Correa said that his
fellow governments should “not be afraid" to rein-in “the excesses" of the
largely opposition-controlled media. Correa said, in his inauguration speech,
that he agreed with political analysts who argued that a free, independent and
critical press is a key element in a healthy democracy. But, he asserted, a free
press is not the same as a press with its own private agenda. He argued that
since he took office his biggest enemy had been the press which had been playing
an overtly political role without any democratic mandate. The implication is
that the press represents the interests of big business and traditional ruling
elite. Correa denied that he was against a hostile press: “That's wrong," he
said. “We're against a corrupt and second rate press".
Correa's frank and disgusted reaction to the revelations about his elder
brother, Fabricio's business dealings with his government [RA-09-07]
demonstrates that his government will not suppress an investigation into a
matter of public interest even when it is personally embarrassing.
The most immediate threat to the press is that Correa will strip radio and TV
broadcasters of frequencies. On 3 August Correa said that the state would take
over most broadcasting frequencies once a study of the allocation of
broadcasting licences had been completed.
On the broader economic and social aspects of Correa's proposals, his critics
pointed out that he tends to promise more than he delivers. They point to his
policy towards the banking sector. Despite Correa's fierce rhetoric about
lowering financial costs, real interest rates for individuals are substantially
higher than they were three years ago.
Correa is trying to present his government as completely different from
corrupt administrations of the past. Correa acknowledged that even his
government was not free of the curse of corruption, alluding to his brother,
Fabricio. Correa said during his inaugural speech that this “one case of
corruption" in his government had been a bitter pill to swallow but had been
“investigated".
It is difficult to get a reliable gauge on the public reaction to the scandal
through opinion polls. One pollster, Market, said Correa's approval rating had
fallen by as much as 19 points to 40% between May and July, but this company is
run by a businessman critical of Correa and was only conducted in Guayaquil and
Quito. Another poll, by Correa's own pollster, Santiago Pérez, gave Correa 66%
support, only eight points less than when he took office in January 2007, but
this poll did not take into account the east of the country, where he did poorly
in April's elections. Even at 40%, Correa enjoys an unprecedented level of
popularity since the return of democracy 30 years ago.
Immediate problems
The media is currently taking issue
with Correa's assurance that Ecuador is over the worst of the international
financial crisis and the economy will grow this year. Economic commentators also
argue that although the price of oil is rising it is insufficient to sustain the
social investment the government is promising.
The media have a point about oil production. In the first half of 2009
private-sector oil production was 6.3m barrels down on the first half of 2008 at
38.3m barrels. There is also some evidence that foreign oil companies sense that
they can squeeze better terms from the government when they come to renew their
current short-term contracts. Under the current contracts the government swipes
40% of the private companies' oil production and taxes windfall profits from
higher-than- expected oil prices at 99%.
The three key contracts, all short term ones negotiated in Correa's first
term, are with Andes Petroleum, Petrobras and Repsol and they all up for renewal
by the end of 2010. The idea was that the government would come up with a new,
longer term structure for managing foreign investment in the oil industry before
these contracts expired. This may not happen. Until there is a longer term
structure, oil companies are unwilling to invest much fresh money in the
industry.
Private sector output has fallen from 239,000bpd in July 2008 to 203,000 bpd
in June this year. Spain's Repsol, one of the largest oil investors in Ecuador,
says its production will decline to 44,000bpd this year, from 53,000 bpd in
2008.
The long running row between the government and Perenco, which the government
accuses of evading taxes culminated in Perenco suspending its operations in
Ecuador in mid July.
The government's big card is that Andes Petroleum, whose contract comes up
for renewal at the end of this August, could be used to show that the government
has alternatives. Andes is owned by China's National Petroleum Corp. and China
Petrochemical Corp. Both Chinese companies are controlled by the Chinese
government, with whom Ecuador has close relations.
To be fair, production from the state oil company, Petroecuador is up by 7%
in the first six months of 2009, but this rise does not compensate for the 14%
fall in private sector output. In volume terms Ecuador exported 59.7m barrels of
oil in the first six months of 2009 down from 66.2m in the first six months of
2008. Private companies operating in Ecuador exported 19.31m barrels, or 32% of
the total sold by the country between January and June of 2008. Petroecuador
exported the remainder. In barrel per day terms, the average export level in the
first half of 2009 was 329,977, down from 363,786 barrels a day in the same
period of 2008.
Congress: Although Correa's ruling Acuerdo País (AP) fell
four seats short of a majority in the 124-seat congress, it has stitched up a
deal with smaller parties and has secured the presidency of at least nine of the
13 legislative commissions.
The ruling Acuerdo País (AP) won the presidency
and two vice-presidencies in the new congress, which convened for the first time
on 31 July. Fernando Cordero will be the president of congress. He presided over
the rump of the constituent assembly - the transition legislature, or
congresillo. He was chosen by 74 of the 124 legislators. Only the Partido
Sociedad Patriótica (PSP), the party of former president Lucio Gutiérrez,
contested the positions. The nominally Maoist Movimiento Popular Democrático
(MPD) and Pachakutik, the political arm of the umbrella indigenous organisation
Conaie (which have nine deputies between them) abstained from voting.
The government has cut its inflation target for 2009 from 9% to 4% after
inflation in July fell for the third consecutive month. Consumer prices in
Ecuador fell by 0.07% in July compared with a year earlier, the national
statistics institute (Inec) reported. Accumulated inflation during the first
seven months of the year was 2.79%. The economic policy minister, Diego Borja,
said inflation could be less than 3.5% by the end of the year.
President Correa demanded that El País, a Spanish newspaper, apologise after
it asserted that statements made by a leader of the Fuerzas Armadas
Revolucionarias de Colombia (Farc) were true. The Farc leader, Mono Jojoy,
claimed that the Farc had financed Correa's first election campaign. Correa and
his government deny this and say that the Farc may have been duped by
intermediaries into giving them money in the belief that these intermediaries
represented Correa's campaign.
President Correa has pledged to invest heavily to boost the output of
state-run oil company Petroecuador, which last month raised its 2009 investment
budget by nearly 60% to US$1.7bn.
