Ecuador After Correa

The fate of the petrostate

Jorge Satorre, Lo Otro (detail). 2014. Courtesy of the artist.

On April 2, the night he lost Ecuador’s presidential runoff election by 2 percent, Guillermo Lasso was not as conciliatory as such occasions usually demand. Instead, the banking magnate denounced his leftist adversary and that night’s victor, Lenín Boltaire Moreno, and claimed electoral fraud. He vowed to defend the people’s will and warned Moreno, as well as the sitting president Rafael Correa, not to “play with fire.” Lasso’s supporters quickly took action. Thousands stormed the national electoral commission office in Quito. In Guayaquil, scuffles broke out between Lasso supporters and the police, who dispersed the crowd with tear gas. Images showed a sea of white shirts and mostly male faces, wet with perspiration.

The explosion of protest brought an especially fierce election to a climax, which arrived at the end of a politically transformative decade. Ecuador’s first democratically elected left-wing administration came to power with Correa’s victory in 2006 and presided over a commodity boom that financed its ambitious public-works and social-spending programs. In both the domestic and the international press, the 2017 election was cast as a bellwether for the future of the region’s “pink tide,” the rise of leftist governments that began with Hugo Chávez’s election in 1998 and peaked in 2009, when left-wing governments held sway over two-thirds of the region’s population. Moreno served as Correa’s vice president from 2007 until 2013. Lasso would have constituted a break: his policies promised a return to the neoliberalism that prevailed from democratization in 1979 until the Correa years.

The sense of a critical juncture was enhanced by events elsewhere: the defeat of the left at the polls in Argentina, the removal of Brazil’s president by a right-wing parliamentary coup, economic crisis in Venezuela, and — not unrelated — a precipitous drop in oil and commodity prices that depressed economies throughout the region. Ecuador would either defy the pattern or be the next to fall.

Usually classed alongside Evo Morales in Bolivia and the late Chávez — with whom he formed the Bolivarian Alliance for the Peoples of Our America — Correa’s administration did break in major ways from neoliberal orthodoxy, and portrayed itself, with some justification, as a “post-neoliberal” government. Correa renewed the state’s role in economic planning. He instituted social programs to pay off what he and other Latin American leaders called the “social debt” accumulated over decades of austerity. Poverty has been slashed and income inequality reduced, while outcomes in health, education, and nutrition have improved. Correa’s tenure saw an expansion in the political participation of the poor and the proliferation of new democratic and collective-rights institutions.

Yet these gains stand alongside crackdowns on social movements, the weakening of left opposition parties, and the centralization of power in the executive. Wealth and access to land and water remain concentrated in a few hands. After a decade of left rule, Ecuador is at once more equal and more unequal, more democratic and more centralized, radically transformed and still mired in patterns of domination that date to the colonial era. These contradictions arise from a left populism that made a pact with oil and mining — a story that has echoes across the continent.

From 1990 through the mid-2000s, Ecuador, like many of its neighbors, was witness to a fierce, sometimes violent struggle between neoliberal elites and popular movements. Following the “Washington Consensus,” political and economic elites in Ecuador sought to liberalize markets and open sectors of their economy. Over time, however, they found their path blocked by a growing indigenous movement, helmed by the Confederation of Indigenous Nationalities of Ecuador (CONAIE). By the late ’90s, that movement had become the most powerful in the hemisphere. Its work led to the downfall of two presidents, and its demands for a more democratic and inclusive political order helped bring about the 1997 and 2007 constituent assemblies; the 2008 constitution contains enormous advances in the recognition of indigenous collective rights.

CONAIE is a multitiered organization composed of regional federations, which in turn encompass base-level organizations. In the 1990s, it put down deep roots by working with urban neighborhood associations and peasant and labor unions. Building on the long history of radical peasant unions in the highlands and struggles for self–determination in the Amazon, CONAIE’s political program included demands for bilingual education, land redistribution, the nationalization of oil, the transformation of the economy along communitarian and ecological lines, and the recognition of ancestral territories. Throughout the years of neoliberalism, CONAIE and its allies provided one of the few bright spots, regularly mobilizing to resist austerity, privatization, and free-trade agreements.

By the early 2000s, however, the indigenous movement had gone into decline. CONAIE participated in a short-lived coup, led by Colonel Lucio Gutiérrez, that deposed President Jamil Mahuad. The movement then supported Gutiérrez when he ran for the office he had seized by force. Once elected, Gutiérrez abandoned his campaign promises with impressive speed, signing a loan agreement with the IMF that accepted punishing terms. At the same time, CONAIE’s political party, Pachakutik, failed to consolidate its reach beyond the highlands and never became a mass party. These missteps sapped CONAIE’s strength and hurt its legitimacy.

Political scientists refer to Ecuador’s party system as “inchoate.” Most of the country’s political parties lack a clear program, and their constituencies are defined less by ideology than by region. Though CONAIE was depleted, it had succeeded in making its anti-neoliberal program a popular one and fostered disenchantment with traditional parties. Correa’s party, Alianza PAIS, emerged in 2006 against this background. Despite some links between PAIS’s founders and the organized left, the party and the campaign avoided relations with social movements (in stark contrast with Evo Morales’s Movement for Socialism [MAS]). As the political scientist James Bowen has argued, Alianza PAIS functioned more as an electoral vehicle than as a member-controlled political party. Correa and his party proclaimed a “Citizens’ Revolution” — a slogan that has since become ubiquitous, emblazoned on everything from the state newspaper to thousands of billboards advertising Correa’s public-works projects. In the fantasy projected by Correa and his party, individuals would have direct access to the state, free from interference from the press, unions, or social movements.

Correa’s suspicion of movements notwithstanding, CONAIE officially endorsed him in the 2007 runoff election against the conservative Álvaro Noboa. In their official communiqué, indigenous leaders referred to him as a “comrade.” After his landslide victory over Noboa, Correa was reelected twice, and Alianza PAIS has consistently secured a legislative majority. In all four popular referenda that the party has proposed, including one to ratify the 2008 constitution, the party’s position has won. Between 2007 and 2013, Correa’s government enjoyed an average approval rating of 66 percent; after the 2014 plunge in oil prices, approval dipped to 43 percent. Despite this decline, Correa would have again been voters’ top choice for president if the constitution didn’t bar him from seeking another term. His electoral record is even more impressive compared with prior administrations: since the end of Ecuador’s dictatorship, in 1979, Correa is the only president to have been reelected.

Correa reanimated classic tropes of Ecuadorian politics, joining a long line of politicians who have denounced all other politicians as irredeemably corrupt. But he was the first to do so while also proposing a massive investment in programs to help the poor. Before his inauguration, Correa had never held elected office; a brief stint as a heterodox finance minister in 2005 earned him high approval ratings and credibility as a foe of neoliberalism. He proved a gifted campaigner and indefatigable orator: in the tradition of Castro and Chávez, he gave an hours-long speech every Saturday, broadcast live on radio and TV, that mingled expositions on public policy and global affairs with crass humor and, for enemies or wayward allies, biting insults. Even his opponents must concede that he has left an indelible mark on the country he governed for ten years.

Correa’s success was rooted in his administration’s model of commodity-dependent left populism. The model goes by different names. Officially, it is “socialism of the 21st century” or “post-neoliberalism.” Indigenous and environmental activists call it extractivism. Correa’s political opponents, right and left, refer to it as correísmo. Since 1972, when a nationalist military regime made newly discovered oil fields the center of its economic policy, Ecuador has been a petrostate: the revenues generated by oil extraction and export, undertaken by both state-owned and foreign companies, are the primary source of state income. Reliance on a small basket of exports is the prevailing economic model across the region, a paradigm with roots in colonial and independence-era patterns of dependence.

Beginning in 2000 and peaking in 2011, skyrocketing prices for oil, minerals, and soy reshaped South America. For years, anti-neoliberal protesters had called for the nationalization of resources in order to serve the people rather than foreign capital. Under new administrations, many states began to pursue contracts with the private companies extracting these commodities, shifting a greater share of profits to the state. The US and Latin American media framed these as “nationalizations.” And at public ceremonies in Argentina, Bolivia, and Venezuela, gestures were made toward anti-imperial independence — at last, the countries were taking back their patrimony. In truth, these agreements were rarely total takeovers; most were private-public agreements that left many forms of private ownership intact.

Ecuador’s reforms were less interventionist than other countries’, but they included a higher tax on windfall profits, and a provision to channel the proceeds of surplus production to the state. Until the crash in 2014, oil financed nearly a third of the state budget.

Despite what many on the left wanted, this hydrocarbon-fueled social-democratic bargain did not eliminate the private sector — oil money funneled through the state does not deter private companies from reaping their own profits. But it did buffer leftist governments against right-wing protests, violence, and even coups. Latin America has a history of elites mobilizing against democratization and the threat of redistribution.

The social spending for which Ecuador used its oil money was enormous. A hallmark of the Correa Administration, and key for Alianza PAIS’s constituency, was the institution of a monthly cash-transfer program for low-income families, the Bono de Desarrollo Humano, or Human Development Bond. Originally introduced as an emergency measure during the 1999 financial crisis, the Correa government twice raised the monthly disbursement and the number of eligible beneficiaries.

Health care and education have likewise seen major state investment, about double what prior administrations spent. The effect has been profound: according to World Bank figures, poverty dropped from 37 percent when Correa took office to 23 percent in 2014; inequality has gone down (Ecuador’s Gini coefficient lowered from 0.54 to 0.47). Health, quality of life, and education have all improved.

The most visible, and politically potent, state-led economic transformation has been the massive investment in public works: highways, ports, hydroelectric plants, irrigation projects, and a gleaming international airport outside the capital. The difference is palpable: in 2008, the 280-mile bus ride from Cuenca to Quito allowed me plenty of time to watch all five original Rocky movies; now, given highway improvements, you couldn’t watch more than four.

Progress wasn’t limited to economic development. The 2008 constitution incorporates the Kichwa concept of sumac kawsay (living well), and expands social and economic rights, the collective rights of indigenous and Afro-descendant peoples, and the rights of nature — the first constitution in the world to do so.

For all the progress, there are downsides. Despite the influx of oil rents during the boom years, state spending outstripped revenue. To support the economy, Ecuador purchased Chinese loans, which it paid for in future oil shipments. Ecuador’s economy is also highly vulnerable to price volatility: crude oil peaked at $111 a barrel in 2011, then dropped to $97 in 2014, then to around $50 in 2015 before recovering slightly. Although national-development plans envision an eventual transition to a “post-extractive” economy by maximizing investment in nonextractive sectors such as the knowledge economy and ecotourism, the oil and mining ministries have endeavored to squeeze out every last drop.

Other sectors have ridden the commodity-fueled economic boom, and not always to the benefit of the “Citizens’ Revolution.” Health care is a particular case in point. Universalizing access to health care and offering as many free services as possible was a major priority for the Correa Administration, but as the analyst Pablo Iturralde’s research shows, the result has also been a boon to private firms. Since the state didn’t create a fully nationalized health system, the sector is rife with public-private partnerships, which build clinics or procure medical equipment. These end up taking money from the state and turning it into profit. In addition, since the state-owned pharmaceutical company produces only a tiny portion of prescription drugs (0.04 percent) and there is little regulation of the pharmaceutical market, the increased spending on health care has proved a windfall for the top two pharmaceutical companies, which now control virtually the entire drug market. A similar dynamic holds with the exploding construction sector. As it grows, so does its political influence, rendering it less and less likely that the state will strengthen regulations.

The boom also reawakened indigenous resistance. Confronted with a state that co-opted their resource-nationalist stance in order to expand the extractive frontier, social movements began to oppose extraction altogether, holding community assemblies on projects and physically blockading work sites. In response, Correa and his ministers went to extraordinary lengths to demonize activists, painting them as “infantile” or imperialist tools. By 2014, the administration had pursued legal action against roughly 200 people engaged in peaceful protest of mining and oil policies, including dozens of indigenous leaders.

With each episode of resistance, delegitimization and criminalization have been the inevitable state response, in turn provoking more militant resistance. Recently, the dynamic escalated: in the Amazonian province of Morona Santiago, a territorial conflict erupted between the indigenous Shuar community of Nankints and the Chinese-owned mining company ExploCobres over the construction of the Panantza–San Carlos project, a multibillion-dollar copper mine. In November, residents of Nankints occupied the mining camp that had displaced their homes. After the military and police reestablished control, the Shuar occupied it again. On December 14, Correa declared a state of emergency. Meant to last thirty days, it went on for three months. Helicopters, tanks, gunfire, and incendiary bombs cleared out the camp. Residents of Nankints took refuge in nearby Tsunstuim; after a subsequent military raid, members of both communities fled to the mountains. According to witness accounts, two women gave birth in the forest, cutting their umbilical cords with sharpened branches.

Could it have been different? A look at Ecuador’s neighbor Bolivia suggests that another model of party politics was possible, one less antagonistic toward social movements and more economically resilient in the face of price volatility. Yet Bolivia’s success has been double-edged.

MAS, the leftist political party that has governed Bolivia since 2006, came out of the political struggles of the coca growers’ unions in the Chapare region. Many party members once belonged to the radical mining union but were laid off when the state-owned mining company was privatized — a traumatic experience for the nation as well as its miners. As cocaleros, they were hardened by battles against the US Drug Enforcement Agency, adding an anti-imperialist sensibility to their anti-neoliberal mind-set.

Evo Morales, a cocalero of Quechua and Aymara descent, was among them, and rose through the union ranks until he became president of the five-union federation. MAS first competed in municipal elections in 1999. By 2002, it had twenty-seven deputies in the lower legislative chambers, and in 2005 Morales was elected president — a historic victory for an indigenous socialist in the poorest country in South America, long ruled by the light-skinned elite. In the wake of the mass protests of the early 2000s — the Water War and the Gas War, in which privatizations were stopped by mass protest — the party scaled up, tapped into discontent with neoliberalism and traditional elites, and emerged as a viable left alternative to more established parties.

Despite MAS’s origins in indigenous peasant unions, the party’s skillful interweaving of class and ethnic grievances, appeals to national sovereignty, and explicit attention to economic inequality drew a broad constituency. From the outset, it had a unique organizational structure: it was a hybrid movement-party, a “political instrument” (in the party’s terms) of the popular organizations that it both incorporated and represented.

But the balance between bottom-up mobilization and the top-down pressures of party competition proved hard to maintain. Leaders of social-movement organizations were poached to serve as candidates in an exchange of loyalty for government positions. This party-building approach won elections and solidified the organization, but it weakened the bond with the militant and fiercely independent popular groups that had built it. In some cases, organizational mitosis occurred, as groups split in two, one pro-government and the other anti. Over time, the movements lost much of their autonomy — although by no means all of it, as evidenced by their successful protests against the proposed elimination of a gas subsidy in 2010, and the national trade union federation’s continued ability to force the government to negotiate on wages.

This economic model likewise reveals the pitfalls of success and the difficulty of an extractive route from capitalism to socialism. Bolivia benefited hugely from the commodity boom; its top exports are natural gas, metallic minerals, and soy. As in Ecuador, poverty and income inequality have fallen dramatically amid impressive growth levels (averaging nearly 5 percent between 2004 and 2014). But an interventionist and farsighted economic policy was key. Through negotiations with foreign investors, the Bolivian government increased prices, taxes, and royalties on gas extraction and export, and became the majority shareholder of the gas companies. Under Morales, the country has accumulated a large rainy-day fund of foreign reserves that add up to half the total GDP. These measures earned unlikely admirers in the World Bank and the International Monetary Fund.

While social spending has reduced misery, it hasn’t produced broad employment; many Bolivians eke out a living in the informal economy. Meanwhile, the boom produced new economic elites: a nascent indigenous bourgeoisie (a first for a country where, since the Spanish conquest, skin color has corresponded to class) and a new urban middle class. But with the recent economic downturn, these may prove a fair-weather constituency for MAS. The party’s turn toward pragmatism amid economic decline has increasingly alienated its more militant base. As Linda Farthing notes in her recent essay in Jacobin, while social spending and infrastructure investment have secured electoral support, MAS today is “a far cry from what their social movement constituency demanded.” Calls for a plurinational, communitarian socialism have yielded to a sober platform of national development and economic stability.

Although MAS was not created as an electoral vehicle, its fate is increasingly bound up with that of its charismatic leader. In February 2016, Morales narrowly lost a referendum to amend the constitution to allow him to run for a fourth term. Many factors accounted for the loss. Chief among them was the role of the antigovernment media in amplifying a series of corruption scandals (and an outburst of racist, anti-indigenous screeds on social media and graffitied in the street). But the “no” voters also included disaffected MAS supporters, who wanted to encourage the party to reconnect with social-movement organizations and move beyond Morales. In any case, defeat didn’t spark reorganization. This past December, defying the referendum results, MAS named Morales their candidate for the 2019 election.

In Ecuador’s first competitive presidential election in a decade, neither Moreno nor Lasso was an inspiring “outsider” candidate. Even Moreno’s ostensible differences from Correa — his subdued leadership style and openness to dialogue — reinforced his status as a calm representative of the new establishment. Lasso, like many of his ideological peers across the continent, identifies as the valiant opposition to the left-in-power but hails from a wounded segment of the oligarchy. He served as president of Banco Guayaquil, one of Ecuador’s largest private banks, for eighteen years. He retired in 2012 — ostensibly to devote himself to Fundación del Barrio (“an NGO aiming to improve the quality of life of the poorest Ecuadorians”) — but continues to sit on the board and controls a majority stake through an offshore trust. If the working class was going to vote for such a candidate — and some of its members surely would — it would be out of resignation, not enthusiasm.

Still, Lasso managed to siphon off part of Correa’s base. The entire southern Amazon voted for Lasso; he helped consolidate this constituency from the country’s poorest and most indigenous region with promises to enforce indigenous communities’ right to prior consultation, end oil extraction in protected areas, and stop criminalizing indigenous leaders. More generally, along with his commitment to “free markets” — the emblematic policy being the coastal free-enterprise zones (areas not subject to normal regulations, taxes, and labor laws) — he promised not only to maintain the monthly cash-transfer program but also to reenroll former beneficiaries.

Lasso’s commitment to cash transfers may have been informed by his forays into market-based social uplift. During his tenure, Banco Guayaquil pioneered the “Banco del Barrio” program, a microdeposit equivalent of microfinance, housed in neighborhood mini-marts for people whose incomes fell below deposit minimums and thus outside the formal banking system: a potential market segment. The micro-deposits made through the program consisted largely of monthly bonos. State spending on the bonos helped shore up Lasso’s banking empire.

It was not the first time Lasso enriched himself at public expense. In August and September 1999, in the midst of a dire financial crisis, Lasso served as a “super-minister” of the economy under President Mahuad. According to an investigation by the Argentinean newspaper Página 12, over that same period Lasso owned 58 percent of the shares of the Cayman Islands–registered Andean Investments, which in turn was a majority shareholder in the parent company of Banco Guayaquil. During the five-day “banking holiday” declared by Mahuad in March 1999, which suspended financial transactions and froze deposits, banks issued certificates to deposit holders. A secondary market in certificates quickly emerged: bankers purchased them at 40 to 50 percent of their value, and the state later bought them back at 100 percent, bankrupting the central bank. Andean Investments was among the “vultures” that profited from the speculation.

Despite this sordid episode, Lasso portrayed himself during the campaign as an anti-corruption warrior, with clean hands and a deep commitment to transparency. As a stance, “anti-corruption” is ideologically agnostic but has a particular affinity with neoliberal suspicion of the state. In Lasso’s deregulated dreamworld (as reported in the Financial Times, Lasso’s shelves are “lined with books that inform his politics: Adam Smith’s The Wealth of Nations; The Denationalization of Money by Friedrich Hayek”), “corruption” never implicates the extraordinarily wealthy or multinational corporations.

Despite Lasso’s strenuous efforts, harping on corruption failed to win him the election. More generally, as recent events in Brazil attest, corruption by nature resists partisan alignments. On the one hand, scandals often implicate people across party lines. On the other hand, as a prototypical “valence issue,” like “democracy” or “economic growth,” anticorruption does not divide voters; everyone is in favor of it. The Correa Administration staked out its own position with a novel popular referendum on the question of tax havens. On February 19, 55 percent of voters voted in favor of barring those who have money in tax havens from holding office. If proved in court, Lasso’s holdings in Panama, the Cayman Islands, and Delaware would jeopardize any future political career.

What proved more important to the election than scandals, personality, or concerns over Correa’s centralization of power was the bleak economic picture. Given the recession and Correa’s recent austerity measures, “retrospective voting” — the limited, after-the-fact accountability mechanism that citizens in a representative democracy have — could certainly have handed Lasso a victory. As the runoff neared, however, Lasso played to his base, glorifying his entrepreneurialism, while Moreno multiplied his promises for increased social spending. The traumatic memory of the neoliberal era — of chronic unemployment, hunger, and capital fleeing the country — dissuaded just enough voters from trusting Lasso to create “1 million jobs” or to close the budget gap without inflicting even more pain on the worst off.

In the final stretch before April 2, the campaigns veered right and left. For most of the campaign, both Moreno and Lasso had appealed to the imagined center, vying for voters disenchanted with the government but not quite committed to the opposition. Long before the election, Alianza PAIS was sliding further and further from its leftist commitments. Correa’s government struck a free-trade deal with the European Union; public-private alliances, such as the recent $500 million deal with a Dubai-based company to build a port near Guayaquil, have proliferated; ever bigger chunks of the Amazon have been sold off to foreign oil and mining companies; and the state pension fund has been disinvested. During the neoliberal era, any leftist who endorsed such policies would have been framed as a vendepatria — a Spanish word for “traitor” that translates literally as “country seller.”

But there has been no mass movement to rival the capacity, size, or duration of the anti-neoliberal uprisings of the ’90s and early 2000s. The life chances of those who might join such a movement have on the whole improved, and Alianza PAIS has filled the space opened up by decades of protest, claiming the legacy of social movements while excluding grassroots groups from policy-making. Ongoing resistance to extraction has put the state on the defensive, but resistance that begins in affected communities faces the challenge of scaling outward, and of linking itself to the demands and grievances of other movements.

The forecast for Moreno’s government is decidedly mixed. He faces a yawning deficit, mounting debt to China, and a slim mandate. Drumming up more oil means plunging deeper into the Amazon. Almost half of Ecuador’s remaining oil reserves are in the Ishpingo, Tambococha, and Tiputini fields in Yasuní National Park. Moreno can double down on extraction by watering down environmental regulations even further, lowering taxes, and sending in the military to crush the inevitable unrest. Or he can expand the tax base, risking elite defection: thousands from the upper classes took to the streets in 2015 to protest increases in inheritance and capital-gains taxes. Or he can simply pray for oil prices to rise. Regardless of the path he chooses, Moreno is not a charismatic figure, and there is no commodity boom on the horizon. The next five years will be a lesson in what a left-wing Latin American government looks like without either.

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