WORLD AFFAIRS

The path of tears

As the IMF-managed programme of austerity grinds on, the economic trials of Ecuador worsen, the ship of state buffeted by fiscal winds controlled elsewhere.

VIJAY PRASHAD

Ecuador, Ecuador... fever burns in the poor barrios, hunger's plowshare with barbed tines in the earth, and pity pounds on your breast with coarse cloth and convents, like a disease soaked in fermentation of tears. -- Pablo Neruda, Cantos General, 1950.

ON March 16, 1999, Michel Camdessus, Managing Director of the International Monetary Fund, appeared on Ecuadorian television. "There will not be help from the rest of the world," the IMF chief noted, "if there is not unity within the country. There is only one thing holding us back, the fact that there is no unity in Ecuador behind an emergency programme."

The episode is unprecedented. The seven-month-old Government of Harvard-educated Jamil Mahuad was in the midst of a crisis, with effigies of the President being hung daily on the streets of Quito. Unable to address the growing unrest in the country of 12 million people, Mahuad declared a state of emergency on March 9. However, rather than strengthening his hand, the emergency drew more workers and Amerindians together into a struggle whose roots are tangled and are global in nature. The coalition of workers and Amerindians organised a general strike in Ecuador from March 10 to 18. The resolution of the vibrant struggle on March 19 was simply a postponement of the problem. To discipline the population, Mahuad turned to the IMF - not only for funds to prevent a meltdown of the Ecuadorian economy but also to provide the political will that is non-existent in the country, caught as it is on the forward lines of the fight against globalisation.

Mahuad, a descendant of Arab migrants, cannot be blamed entirely for the trials of Ecuador. As Eduardo Galeano writes in his classic book Open Veins of Latin America, Ecuador remains imprisoned by its richness in raw materials. A major producer of bananas, coffee, cacao and oil, Ecuador is flush with possibilities of growth. However, these are very primary commodities, which are at the mercy of international financial forces and of the agri-business and petroleum conglomerates whose hegemony over prices is legendary. Whereas Ecuador's cacao sales rose by more than 30 per cent in volume between 1950 and 1960, the nation was able to realise an increase of only 15 per cent in value. The rest of the profit was absorbed by international cartels or passed on to consumers in the advanced industrial states (which in turn exported over-priced finished goods to Ecuador).

From the 1950s onwards, Ecuador's financial health suffered from fluctuations of prices, which it has not been able to control. By the early 1970s, 70 per cent of Ecuador's population suffered from basic malnutrition; the figure is virtually unchanged today. A feeble attempt at land reform in 1964 helped transfer only unproductive land to the landless in an experiment that bore comparison with the Bhoodan trials of Vinoba Bhave.

By late 1998, Ecuador's foreign debt amounted to $13 billion (60 per cent of the country's Gross Domestic Product), and the economy was hammered additionally by a $2.6 billion loss owing to the El Nino, the freak weather phenomenon, which seems to have acquired a more or less consistent pattern. With the banana crop of 1998 in disarray owing to climatic factors, the Asian 'flu' creating a reduction in exports, and oil prices having dropped, Ecuador is, as the IMF chief noted, at a "historic and dramatic moment."

However, recent events are not themselves the cause of the problem: that Ecuador cannot deal with these reveals that there is far more to the story than the 'Asian flu' and the El Nino - neoliberalism's two pet culprits for the economic trials of countries such as Ecuador. For example, the battle between the United States and France over trade in bananas in December 1998 reminds one that the world's banana market is controlled not by the South Americans and Central Americans (who produce most of the crop), but by U.S.-based multinationals such as Dole, Chiquita and Del Monte (who command two-thirds of the banana crop). The wiles of Dole, Chiquita and Del Monte will influence the lives of Ecuadorians far more, in the long run, than the shifting winds.

UNTIL 20 years ago, Ecuador, like most South American countries, was governed by a dictatorial regime. Civilian control of the government came in 1979, but there has been little attempt to extend democracy. Rather, political parties played musical chairs with the Presidency: they accused each other of corruption but indulged in their own private exploitation of the nation's resources. By all accounts, the rate of tax evasion in Ecuador is 70 per cent (a dispute over this led to the resignation of the Governor of the central bank, Jaramillo, in March 1998). The venality of the elite was intensified by the oppression of Amerindians.

HIERRO LEE/AP
A protest rally in the coastal city of Guayaquil, Ecuador, on March 22 after a city-based bank closed citing lack of liquidity.

As the Zapatistas rose in rebellion in the Chiapas region in Mexico (January 1994), the National Indian Confederation of Ecuador (CONAIE), the Indian Movement of Chimboranzo (MICH) and the peasant unions took control of rural Ecuador for two weeks in June 1994. The Amerindians responded to a neoliberal agrarian law which guaranteed private property, effectively ended the policy of land reform and privatised access to water. Victor Corral, who along with many liberation theologians joined the movement, noted that the law "only defends the interests and the viewpoint of the landowners who want to transform the country into an agri-industrial enterprise and reduce land to a commodity". (Maurice Lemoine in Le Monde Diplomatique, November 1994, offers one of the few reports on this semi-insurrection.)

The 1994 uprising was only the first act in an ongoing drama. Three years later, the CONAIE joined Ecuador's trade union federation (FUT) to organise a series of strikes against the austerity programme managed by the IMF. On February 5, 1997, two million people joined a 'civic strike' against the state as petrol prices rose 350 per cent and telephone rates went up by 800 per cent. The next day, Ecuador's Congress ousted President Abdala Bucaram for 'mental incapacity'. Incidentally, on January 29, 1997, U.S. Ambassador Leslie Alexander told El Universo, a leading Ecuador newspaper, that "unless a dramatic attack is initiated against the systematic corruption which afflicts the country, it will be my responsibility to officially notify Washington of the dangers in investing here."

On February 14, Alexander told El Republica that he was "very happy" with the ouster of Bucaram. In the aftermath of the ouster of Bucaram, the entire political establishment bowed to the inevitability of structural adjustment and austerity. Fabian Alarcon, who held office for a year, announced immediately after taking office (on February 15) that "our country must fulfil its international commitments". In the 1998 election, which resulted in Mahuad's victory, candidates for the major political parties promised to stay the neoliberal course. Indeed, Mahuad pledged to cut subsidies, to privatise the state-run telephone company Emetel and to allow foreign capital to finance the extension of a pipeline for crude oil. The entire election was about corruption rather than a referendum on austerity. "The crisis is the product of the application of an economic model that has meant the impoverishment of the people and a paralysis of national development," argued Labour leader Fausto Dutan, but this view did not succeed in determining the issues for the largely uneventful election.

There was to be no respite for Mahuad. On October 1, 1998, a one-day strike against the austerity measures resulted in street battles between the police and groups of workers and students. Even as Mahuad solemnly announced that "the Government is obliged to maintain order", one worker was shot dead in the southern coastal city of Guayaquil and another in the northern city of Esmeraldes. But the immediate cause of alarm was the devaluation of the Ecuadorian currency, the sucre, by 15 per cent.

SANTIAGO ANDRADE/ AP
President Jamil Mahuad.

ON February 4, 1999, teachers of 120,000 public schools went on strike (some of them remain on indefinite strike). They demand wage hikes, collection of unpaid taxes and expropriation of assets held by those who stole money from the exchequer over the past few decades. This was all in anticipation of the March 10-11 national strike organised by the United Workers' Front and the CONAIE. On the road to the strike, the sucre lost 40 per cent of its value against the dollar and the people began to withdraw their savings from the banks. Mahuad closed the banks and brought in rules that prevented such withdrawals. He called out the armed forces (3,000 soldiers and 12,000 policemen) to counter the strike and he raised taxes on primary goods by 50 per cent (the price of petrol was tripled). The response on the streets was instantaneous.

Quito, the capital, remained a ghost town and Interior Minister Vladimiro Alvaraz, announced that "all of the republic's territory has been made a security zone." In particular, "the armed forces will give all necessary support to oil installations," he said. The security forces clashed with demonstrators as tyres burnt in the streets and teargas filled the air.

Two days into the strike, 100,000 taxi drivers stopped work and brought the major cities to a halt. This is significant because taxi drivers of Ecuador generally see themselves as independent proprietors rather than as workers, and this difference of perception has been made invalid by the economic conditions. Oil workers joined them and caused oil production to drop from 410,000 barrels a day to 18,500 barrels a day. A stalemate between the Government and the labour unions continued for a week.

On March 18, Mahuad made a deal with the Opposition. He agreed to withdraw the price increases, and he was allowed to continue with the policy of austerity. Argentina had decided in January to adopt the U.S. dollar as the state's currency. As Ecuador plunged into its current financial crisis, the regime's managers considered the Argentinean course of action to be the only solution to their own problems. When Ana Lucia Armijos, Mahuad's Finance Minister, met Domingo Cavallo, the man behind what the Argentinians call 'convertibility', she noted: "it's an option we are considering. We haven't ruled it out". This is a solution that was considered in Indonesia and in Russia during their moments of crisis earlier, but it has not been thought through in any detail (especially since Ecuador holds only $1.2 billion in international reserves). Meanwhile, the austerity package that Ecuador will put into place (it has been given a boost by the presidential decree that forbids bank withdrawals for six months) would give the people some respite.

DOLORES OCHOA/AP
Taxis block a Quito street to protest against a hike in petrol prices as part of austerity measures adopted by the government to counter the economic crisis.

But with 63 per cent of the population officially below the poverty line and with the ship of state buffeted by fiscal winds that are controlled elsewhere, it is unlikely that one will not hear from the powerful workers' coalition in the near future. Stay tuned for another episode in this struggle over globalisation.

Vijay Prashad is an Assistant Professor of International Studies in Trinity College, Hartford.