[Marxism] Nation magazine take on events in Ecuador

Fred Feldman ffeldman at bellatlantic.net
Thu May 12 23:42:11 MDT 2005

I think we should be careful about characterizing changes of government
in Latin America are rightist because traditionally more rightist
parties on the bourgeois spectrum are involved. 
The attempt to reconquer the Falklands was carried out by the successors
of the rightist dictatorship and dirty war. Kirchner's party was
traditionally to the right of Peronism.  And Peronism arose out of what
was universally portrayed outside Argentina as a rightist and even
pro-fascist coup -- not to mention how Peronism itself was portrayed.
Chavez's coup attempt was largely regarded on the international left as
right-wing populism.

I recently sent in a Militant article which upheld the view, after
initially saying the opposite, that the replacement of Gutierrez was a
shift to the right, supported by the  middle classes.  Of course, the
Militant's fanatical aversion to the petty bourgeoisie makes me wary of
any assessment they make.  Their assessment was closer to the ones made
on this list by Nestor and Jose, who, unlike the Militant, often do know
what they are talking about on these subjects. But still I suspect
something is off in the analyses.

Anyway, it seems to me that the bourgeoisie of Ecuador is under
agonizing pressure from both unrest below and threats of economic
devastation coming from US extension of its domination.  The
bourgeoisie, sacrificed a lot of its power of self-defense when they
went for the dollar, and quite a few of them must be feeling painful
consequences as their economy becomes a free fire zone for hedge funds
and other fast-buck operators.

Palast's portrayal of the new government as "Chavez'd" is pure wishful
thinking. There is a strong chance that the government will capitulate
entirely to Washington.  But the fate of Gutierrez really doesn't make
that a promising option. Bucaram, presenting himself as a Chavez, is
waiting in the wings, even if in Panama, for another shot.  The pressure
to try to do something else must really be becoming agonizing. 
Fred Feldman

The Nation
Ecuador Gets Chávez'd

[posted online on May 11, 2005]

George Bush has someone new to hate. Only twenty-four hours after
Ecuador's new president took his oath of office, he was hit by a
diplomatic cruise missile fired all the way from Lithuania by
Condoleezza Rice, then wandering about Eastern Europe spreading
"democracy." Condi called for "a constitutional process to get to
elections," which came as a bit of a shock to the man who'd already been
constitutionally elected, Alfredo Palacio. 

What had Palacio done to get our Secretary of State's political knickers
in a twist? It's the oil--and the bonds. This nation of only 13 million
souls at the world's belly button is rich, sitting on 4.4 billion
barrels of known oil reserves, and probably much more. Yet 60 percent of
its citizens live in brutal poverty; a lucky minority earn the "minimum"
wage of $153 a month. 

The obvious solution--give the oil money to the Ecuadoreans without
money--runs smack up against paragraph III-1 of the World Bank's 2003
Structural Adjustment Program Loan. The diktat is marked "FOR OFFICIAL
USE ONLY," which "may not be disclosed" without World Bank
authorization. TheNation.com has obtained a copy. 

The secret loan terms require Ecuador to pay bondholders 70 percent of
the revenue received from any spike in the price of oil. The result:
Ecuador must give up the big bucks from the Iraq War oil price surge.
Another 20 percent of the oil windfall is set aside for "contingencies"
(i.e., later payments to bondholders). The document specifies that
Ecuador may keep only 10 percent of new oil revenue for expenditures on
social services. 

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." He argued, with logic, "If we die, who is going to pay

We met two weeks ago in the Carondelet Palace, where, on April 20, his
predecessor had disappeared out the back door to seek asylum in Brazil.
A crowd of 100,000 protesters had surrounded the building, seeking the
arrest of fugitive president Lucio Gutierrez. 

"Sucio Lucio" (Dirty Lucio, as the graffiti tags him) had won election
in 2002 promising to break away from the supposedly voluntary austerity
plan imposed by the World Bank. Then, within a month of taking office,
Gutierrez flew to Washington. There he held hands with George Bush (a
photo infamous in Quito), and US Treasury officials instructed him in
the financial facts of life. Lucio returned to Quito, reneged on his
campaign promises and tightened the austerity measures, including
raising the price of cooking gas. The public, after a dispirited delay,
revolted. After Lucio fled last month, the nation's congress recognized
the vacancy in Ecuador's Oval Office and filled it with the elected vice
president, in accordance with the Constitution. 

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. 

That's not what the Bush Administration wanted to hear. Besides Condi's
attack, 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 seems an unlikely target of US official assaults. He comes off
like a cardiologist you'd meet at an AMA convention. That is, in fact,
what he is: a heart doctor who practiced in the United States for a
decade, a man outside politics, affiliated with no party, brought in by
Gutierrez to build a national health program. Hugo Chávez he is not:
Palacio is conservative, pro-market, pro-American, but his patient, his
nation, is in bad shape. 

"Sick people are not going to produce anything," he said. 

I knew he'd been taken aback by Rice's blast. Indeed, when an earlier
president was removed for mental incompetence, the United States had
insisted on the vice president taking office. But, unlike Palacio, that
vice president, Gustavo Noboa, was a rightist who was happy to sign off
on all World Bank terms, including the devastating decision in January
2000 to make the US dollar Ecuador's official currency. The radical
free-market dollarization plan led to collapse of the export market,
decimation of payrolls and, for those still working, a halving of real

Palacio told me he "received the explanation from Ms. Condoleezza Rice,"
who reassured him she did not seek his removal. But reassurance
apparently has a price. The morning we met, Palacio announced he would
maintain US military bases in Ecuador (not a popular view) and would not
object to Plan Colombia, the US war on guerrillas dressed as a war on
drugs. As a physician, however, he did question chemical spraying of
coca crops. 

But on the oil money and bond payout he's holding his ground, and with
good reason. When the oil market went bust in the 1980s, so did Ecuador,
and its bonds sold at dimes on the dollar. Now Ecuador's debt sells at a
full face value, yielding windfall profits to speculators of as much as
500 percent for those who bought cheap. 

Palacio doesn't object to paying off the bonds. The problem is that the
World Bank and IMF want the principal of the bonds paid down early, a
rare and financially suspect demand to make on any nation. 

Who are these guys who hold the bonds? "We don't know who they are, and
that's terrible," the president told me. What's terrible, says a United
Nations expert who cannot be named, is that Palacio does know who they
are: the old oligarchs who originally stripped the nation's banks of
assets in the 1980s, fled to Miami and now hold a mortgage on the
nation. Palacio's plan to move some of the oil money to social services
threatens these bondholders' windfall. 

A closer look at the Structural Adjustment Program suggests that the
World Bank may not be putting Ecuador's interests first. Paragraph III-2
requires electricity rates to rise to double the average price charged
in the United States, far above production costs. This is quite a boon
to the Ecuadorean electricity suppliers such as Noble Energy of Houston
and Duke Power of the Carolinas. 

Outside the presidential palace, indigenous women in bowler hats and
pigtails chanted, "¡Fuera todos! ¡Fuera todos!" Everyone out. As far as
they are concerned, every one of the seven presidents who have entered
office in the past nine years has sold them out to the bondholders, to
the oil companies, to the World Bank and its austerity punishments. To
them, Palacio is just another in a long line of disappointments. 

I asked the president what he would do if the World Bank and the Bush
Administration nix his request for Ecuador to keep an extra tiny
percentage of its oil money. Mindful that no Ecuadorean president since
1996 has served out his term, Palacio told me simply: "There is no way.
There is no other way. These people have to listen to us." 

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