Ecuador: Their Brand is Crisis

Correa, an economist, would make Ecuador the next country to join the "pink tide" of leftist governments that have swept the region over the last eight years.
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Media-Based Fear Campaign is Right's Strategy for Latin American Elections

By Mark Weisbrot

The right in Latin America, allied with
Washington, believes it has discovered a winning formula to prevent the spread
of left/populist governments that have won power in Argentina, Brazil,
Venezuela, Bolivia, and Uruguay and come very close to winning this year in
Peru and Mexico. (In fact, Lopez Obrador may have won in Mexico -
we don't really know since the election was very close and plagued by massive irregularities.)
It's all about fear.

The strategy didn't work in Brazil in
2002, when there actually was a crisis in Brazil's
financial markets at the prospect of a victory by Lula da Silva. He went on to
win by the largest margin in Brazilian history and won re-election on Sunday by
a margin of 61-39 percent. But if a good media campaign can be organized to
scare the hell out of people, it can work, even if there is no basis for the
fears generated. In Rachel Boynton's brilliant 2006 documentary, "Our Brand is Crisis,"
she shows how one of America's most powerful polling and public relations'
firms, Greenberg Quinlan Rosner, used the fear factor to win the 2002 Bolivian
election for right-wing candidacy of Gonzalo Sanchez de Lozada, who fled the
country six months later and is now wanted for corruption and the killing of
dozens of unarmed demonstrators against his government. The title is a quote
from a GQR strategist. (GQR is currently working against Daniel Ortega in
Nicaragua; the election is November 5. The campaign is running TV ads with
corpses from the 1980's war and Ortega in military uniform).

It worked in Mexico and Peru this year,
where the right also added "the Chavez factor," convincing part of the
electorate that a vote for the left was a vote for Venezuela taking over their
country. This shows how important the media fantasies are, because in reality -
whether one loves or hates Chavez - his government hasn't done much to his
neighbors other than loan billions of dollars and sell discounted oil to them,
all with no strings attached. And domestically, the majority of Venezuelans
have received free health care, subsidized food, and increased access to
education - so it's not clear why any voters should be scared of Chavez, even
if he were to become friendly with their government. The new left governments
of South America are all doing pretty well, with Argentina and Venezuela tied
for the fastest growing in the hemisphere, and the Bolivian government of Evo
Morales vastly improving its fiscal situation and beginning to deliver on its
promises as a result of increasing its control over and revenue from natural
gas production.

Now the campaign of billionaire banana
magnate Alvaro Noboa, the richest man in Ecuador,
is counting on the fear factor to beat left economist Rafael Correa, who he
edged out by a 27-23 percent margin in the first round of Ecuadorian
presidential elections on October 15. Much of the international press has
joined in, referring to Correa as an "ally of Chavez," even though he has only
met with the Venezuelan president once. The strategy appears to be working, as
the latest polls show Noboa ahead by 15 percentage points. One reason it may
work is that Ecuador's memory of the 1999 economic crisis, possibly the worst
in its history, is still fresh. But a repeat is unlikely, as the country has
since adopted the dollar as its currency, is running a trade surplus, and is
unlikely to undergo any serious economic dislocation as a result of the
election, no matter who wins.

Below is an article I wrote
for the Los Angeles Times last week that looks at some of these issues
in Ecuador.

For those interested in the economic issues in Latin America and how they are covered, a post I made over at Beat the Press looks at how the Financial Times covers Brazil's major economic choices.

Los Angeles Times - October 27, 2006

Ecuador's Rebellious Presidential Candidate May Have a

By Mark Weisbrot

The presidential election in Ecuador is attracting more
international attention than would normally be directed at this country of 13
million people, the majority of whom are poor. The reason? Rafael Correa, who
came in second in the first round of balloting this month and has a good chance
of winning the runoff on Nov. 26.

Correa, an economist, would make Ecuador
the next country to join the "pink tide" of leftist governments that
have swept the region over the last eight years. His opponent - Alvaro Noboa, a
billionaire banana magnate and the richest person in Ecuador -
strongly backs U.S. policies for the country and the region.

Correa clearly has official Washington
worried. He has denounced the International Monetary Fund and the World Bank
and their economic policy prescriptions, vowed to scrap a proposed
"free-trade" agreement with the United States and proposed getting rid of a U.S.
military base in the country. He has called for collecting more taxes on
foreign corporations - including in Ecuador's important oil sector - and has
not ruled out defaulting on the nation's foreign public debt.

Most reports in the U.S. have viewed Correa's candidacy in ideological terms - he is
depicted as "anti-American" or an "ally of President Hugo
Chavez" of Venezuela - and this "us versus them" framework will likely
predominate in the weeks ahead. But opposing Washington's
policies for his country is not anti-American, and Correa has no alliances with
anyone. And if we look at this election from a Southern Hemisphere vantage
point, Correa's arguments make a lot of sense.

IMF and World Bank economic policies, for example, have
fared badly in Ecuador. From 1980 to 2000, the country's income per person fell by 14% -
about equal to Africa's disastrous performance during this period. Ecuador
was under IMF agreements for most of the years between 1983 and 1995 and
accordingly adopted many of its recommended reforms and policies. And the World
Bank, since Paul Wolfowitz took over, cut off a promised loan in an effort to
make Ecuador use most of its windfall oil revenue to pay off debt rather than
for social spending. So Correa has good reason to see the "Washington consensus"
policies of these institutions as a terrible failure, and many economists and
political leaders in Latin America agree.

In fairness, the country has done better under the most recent IMF accords of
2000 to 2004, with the country pulling out of a severe economic crisis and
restoring reasonable economic growth while bringing inflation down from 96.1%
in 2000 to 3.2% today. Correa has said that he would maintain the most
significant reform of this period: the adoption of the U.S. dollar as the country's
currency - a change that he and many other economists initially opposed.
Correa, who received his doctorate in economics from the University of Illinois
in Urbana, is pragmatic despite his rhetoric.

As for the proposed "free-trade" agreement with the U.S., it has
provoked demonstrations that shut down much of the country for nearly two weeks
in March. Indigenous groups that led the protests wanted to protect farmers
from subsidized U.S. exports. They also astutely pointed out that it did not
make economic sense to make sacrifices for increased access to the U.S. market
when that market was likely to shrink in the near future as the U.S. trade gap
inevitably narrows.

Correa's threat of hard bargaining with international creditors is not as risky
as it may seem. Ecuador is barely eligible to borrow, at even very high
interest rates, on international markets (because of a 1999 default on its
foreign debt). Further, the country is running a trade surplus and therefore
may not need much international borrowing in the near future. And the
government of Venezuela, which has loaned $2.5 billion to Argentina and
hundreds of millions to Bolivia, has previously offered credit to Ecuador.

Ecuador doesn't necessarily need the blessing of the Bush administration or the
financial institutions that it controls, or even the international financial
markets, especially if the conditions that they require would prevent the
government from taking steps to alleviate the crushing poverty that afflicts
the majority of its people. That is Correa's first priority, and as he said of
his own program, "The only thing radical about me is the reality of my

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