From Ecuador: Good and Evil December 22, 2008
Posted by rogerhollander in Environment.Tags: alfred palacio, amazon, chevron, cofan, condaleezza rice, ecology, Ecuador, Evo Morales, exxon valdez, George Bush, global bonds, Greg Palast, Hugo Chavez, IMF, Latin America, Luiz Inacio Lula da Silva, occidental petroleum, oxy, petroleum, quechua, quito, Rafael Correa, Robert F. Kennedy Jr., roger hollander, texaco, Venezuela, wolfowitz, World Bank
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A Conversation with Ecuador’s New President
by Greg Palast http://www.gregpalast.com/a-quechua-christmas-carol/ (no date)
[Quito] I don’t know what the hell seized me. In the middle of an hour-long interview with the President of Ecuador, I asked him about his father.
I’m not Barbara Walters. It’s not the kind of question I ask.
He hesitated. Then said, “My father was unemployed.”
He paused. Then added, “He took a little drugs to the States… This is called in Spanish a mula [mule]. He passed four years in the states- in a jail.”
He continued. “I’d never talked about my father before.”
Apparently he hadn’t. His staff stood stone silent, eyes widened.
Correa’s dad took that frightening chance in the 1960s, a time when his family, like almost all families in Ecuador, was destitute. Ecuador was the original “banana republic” – and the price of bananas had hit the floor. A million desperate Ecuadorans, probably a tenth of the entire adult population, fled to the USA anyway they could.
“My mother told us he was working in the States.”
His father, released from prison, was deported back to Ecuador. Humiliated, poor, broken, his father, I learned later, committed suicide.
At the end of our formal interview, through a doorway surrounded by paintings of the pale plutocrats who once ruled this difficult land, he took me into his own Oval Office. I asked him about an odd-looking framed note he had on the wall. It was, he said, from his daughter and her grade school class at Christmas time. He translated for me.
“We are writing to remind you that in Ecuador there are a lot of very poor children in the streets and we ask you please to help these children who are cold almost every night.”
It was kind of corny. And kind of sweet. A smart display for a politician.
Or maybe there was something else to it.
Correa is one of the first dark-skinned men to win election to this Quechua and mixed-race nation. Certainly, one of the first from the streets. He’d won a surprise victory over the richest man in Ecuador, the owner of the biggest banana plantation.
Doctor Correa, I should say, with a Ph.D in economics earned in Europe. Professor Correa as he is officially called – who, until not long ago, taught at the University of Illinois.
And Professor Doctor Correa is one tough character. He told George Bush to take the US military base and stick it where the equatorial sun don’t shine. He told the International Monetary Fund and the World Bank, which held Ecuador’s finances by the throat, to go to hell. He ripped up the “agreements” which his predecessors had signed at financial gun point. He told the Miami bond vultures that were charging Ecuador usurious interest, to eat their bonds. He said ‘We are not going to pay off this debt with the hunger of our people. ” Food first, interest later. Much later. And he meant it.
It was a stunning performance. I’d met two years ago with his predecessor, President Alfredo Palacio, a man of good heart, who told me, looking at the secret IMF agreements I showed him, “We cannot pay this level of debt. If we do, we are DEAD. And if we are dead, how can we pay?” Palacio told me that he would explain this to George Bush and Condoleezza Rice and the World Bank, then headed by Paul Wolfowitz. He was sure they would understand. They didn’t. They cut off Ecuador at the knees.
But Ecuador didn’t fall to the floor. Correa, then Economics Minister, secretly went to Hugo Chavez Venezuela’s president and obtained emergency financing. Ecuador survived.
And thrived. But Correa was not done.
Elected President, one of his first acts was to establish a fund for the Ecuadoran refugees in America – to give them loans to return to Ecuador with a little cash and lot of dignity. And there were other dragons to slay. He and Palacio kicked US oil giant Occidental Petroleum out of the country.
Correa STILL wasn’t done.
I’d returned from a very wet visit to the rainforest – by canoe to a Cofan Indian village in the Amazon where there was an epidemic of childhood cancers. The indigenous folk related this to the hundreds of open pits of oil sludge left to them by Texaco Oil, now part of Chevron, and its partners. I met the Cofan’s chief. His three year old son swam in what appeared to be contaminated water then came out vomiting blood and died.
Correa had gone there too, to the rainforest, though probably in something sturdier than a canoe. And President Correa announced that the company that left these filthy pits would pay to clean them up.
But it’s not just any company he was challenging. Chevron’s largest oil tanker was named after a long-serving member of its Board of Directors, the Condoleezza. Our Secretary of State.
The Cofan have sued Condi’s corporation, demanding the oil company clean up the crap it left in the jungle. The cost would be roughly $12 billion. Correa won’t comment on the suit itself, a private legal action. But if there’s a verdict in favor of Ecuador’s citizens, Correa told me, he will make sure Chevron pays up.
Is he kidding? No one has ever made an oil company pay for their slop. Even in the USA, the Exxon Valdez case drags on to its 18th year. Correa is not deterred.
He told me he would create an international tribunal to collect, if necessary. In retaliation, he could hold up payments to US companies who sue Ecuador in US courts.
This is hard core. No one – NO ONE – has made such a threat to Bush and Big Oil and lived to carry it out.
And, in an office tower looking down on Quito, the lawyers for Chevron were not amused. I met with them.
“And it’s the only case of cancer in the world? How many cases of children with cancer do you have in the States?” Rodrigo Perez, Texaco’s top lawyer in Ecuador was chuckling over the legal difficulties the Indians would have in proving their case that Chevron-Texaco caused their kids’ deaths. “If there is somebody with cancer there, [the Cofan parents] must prove [the deaths were] caused by crude or by petroleum industry. And, second, they have to prove that it is OUR crude – which is absolutely impossible.” He laughed again. You have to see this on film to believe it.
The oil company lawyer added, “No one has ever proved scientifically the connection between cancer and crude oil.” Really? You could swim in the stuff and you’d be just fine.
The Cofan had heard this before. When Chevron’s Texaco unit came to their land the the oil men said they could rub the crude oil on their arms and it would cure their ailments. Now Condi’s men had told me that crude oil doesn’t cause cancer. But maybe they are right. I’m no expert. So I called one. Robert F Kennedy Jr., professor of Environmental Law at Pace University, told me that elements of crude oil production – benzene, toluene, and xylene, “are well-known carcinogens.” Kennedy told me he’s seen Chevron-Texaco’s ugly open pits in the Amazon and said that this toxic dumping would mean jail time in the USA.
But it wasn’t as much what the Chevron-Texaco lawyers said that shook me. It was the way they said it. Childhood cancer answered with a chuckle. The Chevron lawyer, a wealthy guy, Jaime Varela, with a blond bouffant hairdo, in the kind of yellow chinos you’d see on country club links, was beside himself with delight at the impossibility of the legal hurdles the Cofan would face. Especially this one: Chevron had pulled all its assets out of Ecuador. The Indians could win, but they wouldn’t get a dime. “What about the chairs in this office?” I asked. Couldn’t the Cofan at least get those? “No,” they laughed, the chairs were held in the name of the law firm.
Well, now they might not be laughing. Correa’s threat to use the power of his Presidency to protect the Indians, should they win, is a shocker. No one could have expected that. And Correa, no fool, knows that confronting Chevron means confronting the full power of the Bush Administration. But to this President, it’s all about justice, fairness. “You [Americans] wouldn’t do this to your own people,” he told me. Oh yes we would, I was thinking to myself, remembering Alaska’s Natives.
Correa’s not unique. He’s the latest of a new breed in Latin America. Lula, President of Brazil, Evo Morales, the first Indian ever elected President of Bolivia, Hugo Chavez of Venezuela. All “Leftists,” as the press tells us. But all have something else in common: they are dark-skinned working-class or poor kids who found themselves leaders of nations of dark-skinned people who had forever been ruled by an elite of bouffant blonds.
When I was in Venezuela, the leaders of the old order liked to refer to Chavez as, “the monkey.” Chavez told me proudly, “I am negro e indio” – Black and Indian, like most Venezuelans. Chavez, as a kid rising in the ranks of the blond-controlled armed forces, undoubtedly had to endure many jeers of “monkey.” Now, all over Latin America, the “monkeys” are in charge.
And they are unlocking the economic cages.
Maybe the mood will drift north. Far above the equator, a nation is ruled by a blond oil company executive. He never made much in oil – but every time he lost his money or his investors’ money, his daddy, another oil man, would give him another oil well. And when, as a rich young man out of Philips Andover Academy, the wayward youth tooted a little blow off the bar, daddy took care of that too. Maybe young George got his powder from some guy up from Ecuador.
I know this is an incredibly simple story. Indians in white hats with their dead kids and oil millionaires in black hats laughing at kiddy cancer and playing musical chairs with oil assets.
But maybe it’s just that simple. Maybe in this world there really is Good and Evil.
Maybe Santa will sort it out for us, tell us who’s been good and who’s been bad. Maybe Lawyer Yellow Pants will wake up on Christmas Eve staring at the ghost of Christmas Future and promise to get the oil sludge out of the Cofan’s drinking water.
Or maybe we’ll have to figure it out ourselves. When I met Chief Emergildo, I was reminded of an evening years back, when I was way the hell in the middle of nowhere in the Prince William Sound, Alaska, in the Chugach Native village of Chenega. I was investigating the damage done by Exxon’s oil. There was oil sludge all over Chenega’s beaches. It was March 1991, and I was in the home of village elder Paul Kompkoff on the island’s shore, watching CNN. We stared in silence as “smart” bombs exploded in Baghdad and Basra.
Then Paul said to me, in that slow, quiet way he had, “Well, I guess we’re all Natives now.”
Well, maybe we are. But we don’t have to be, do we?
Maybe we can take some guidance from this tiny nation at the center of the earth. I listened back through my talk with President Correa. And I can assure his daughter that she didn’t have to worry that her dad would forget about “the poor children who are cold” on the streets of Quito.
Because the Professor Doctor is still one of them.
Fears Rise Over Possible Ecuador Default November 23, 2008
Posted by rogerhollander in Ecuador, Latin America.Tags: default, Ecuador, Ecuador external debt, Ecuador Government, Ecuador history, external debt, global bonds, MarketWatch, Moody, polya lesova, Rafael Correa, roger hollander, S&P
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“La Cruda Realidad” (The Crude Reality), Foto: Lou Dematteis
I regularly receive reports from www.amazoniaporlavida.org, an environmental organization that is waging a campaign to prevent exploitation of petroleum in Ecuador’s ecologically sensitive Yasuni region.
A recent e-mail made reverence to a former U.S. agent, John Perkins, who describes himself as a former “economic hit man,” in a tell-all book.
I found an interesting interview with Perkins on Amy Goodman’s “Democracy Now!” radio program, which sheds light on the problem as seen by today’s Ecuadorian environmental and anti-neoliberal activists.
First, my translation of the “Amazonia por la Vida” Report:
“In the Agenda of the United States and Its Intelligence Services”
When John Perkins was contracted by MAIN (a CIA front) to intervene in the political economy of Indonesia, Ecuador and Panama, he was told that by using macroeconomic statistics, he should be able, for example, to inflate the rate of economic growth in Indonesia from 6% to 19%. In the case of Ecuador, where he served as an economic advisor, he was told that, by manipulating its macroeconomic statistics, he should be able to put the country in debt to the point where they are trapped with the impossibility of repayment.
The CIA succeeded in manipulating Ecuadorian macroeconomic information to the point where in twenty years the country was in bankruptcy and had to over exploit and privatize its [natural] resources in order to deal with the debt.
In defining the statistics and the conditions of work in transnational corporations at that time [the 1970s] Texaco played an essential part. The former agent [Perkins] has revealed how Texaco was able to enter Ecuador via the Instituto Lingüístico de Verano [ILV, Summer Institute of Linguistics, a U.S. evangelical missionary organization, also known as the Wycliffe Bible Translators, with ties to the CIA], with whom he was also associated.
The CIA strategy was to establish the conditions for the re-taking of natural resources after they had been partially nationalized. Texaco, the company most affected, found itself in conflict with [Ecuadorian President] Jaime Roldós, who not only expelled the ILV from the country, but also refused the conditions to which Texaco aspired. After the assisination [of Roldós], [his successor] Oswaldo Hurtado reinstated the ILV and Texaco began its greatest campaign of explorations (John Perkins, “Confessions of an Economic Hitman,” 2004).
(Table)
Evolution of the Total Ecuadorian External Debt (in millions of U.S. Dollars)
CEIDEX (Comisión Especial de Investigación de la Deuda Externa del Ecuador)
www.ceidex.gov.ec/
1970 217
1975 456
1980 3,530
1985 8,703
1990 12,107
1995 13,994
2000 13,717
2006 16,856
From: www.quiendebequien.org
Now to John Perkins:
From the prologue to the “Democracy Now!” interview:
John Perkins, was a former respected member of the international banking community. In his book Confessions of an Economic Hit Man he describes how as a highly paid professional, he helped the U.S. cheat poor countries around the globe out of trillions of dollars by lending them more money than they could possibly repay and then take over their economies.
20 years ago Perkins began writing a book with the working title, “Conscience of an Economic Hit Men.”
Perkins writes, “The book was to be dedicated to the presidents of two countries, men who had been his clients whom I respected and thought of as kindred spirits–Jaime Roldós, president of Ecuador, and Omar Torrijos, president of Panama. Both had just died in fiery crashes. Their deaths were not accidental. They were assassinated because they opposed that fraternity of corporate, government, and banking heads whose goal is global empire. We Economic Hit Men failed to bring Roldós and Torrijos around, and the other type of hit men, the CIA-sanctioned jackals who were always right behind us, stepped in.
John Perkins goes on to write:
“I was persuaded to stop writing that book. I started it four more times during the next twenty years. On each occasion, my decision to begin again was influenced by current world events: the U.S. invasion of Panama in 1980, the first Gulf War, Somalia, and the rise of Osama bin Laden. However, threats or bribes always convinced me to stop.
John Perkins, from an interview with Amy Goodman on “Democracy Now!” November 9, 2004.
… I was initially recruited while I was in business school back in the late sixties by the National Security Agency, the nation’s largest and least understood spy organization; but ultimately I worked for private corporations.
… when the National Security Agency recruited me, they put me through a day of lie detector tests. They found out all my weaknesses and immediately seduced me. They used the strongest drugs in our culture, sex, power and money, to win me over. I come from a very old New England family, Calvinist, steeped in amazingly strong moral values. I think I, you know, I’m a good person overall, and I think my story really shows how this system and these powerful drugs of sex, money and power can seduce people, because I certainly was seduced. And if I hadn’t lived this life as an economic hit man, I think I’d have a hard time believing that anybody does these things
Basically what we were trained to do and what our job is to do is to build up the American empire. To bring—to create situations where as many resources as possible flow into this country, to our corporations, and our government, and in fact we’ve been very successful. We’ve built the largest empire in the history of the world. It’s been done over the last 50 years since World War II with very little military might, actually. It’s only in rare instances like Iraq where the military comes in as a last resort. This empire, unlike any other in the history of the world, has been built primarily through economic manipulation, through cheating, through fraud, through seducing people into our way of life, through the economic hit men. I was very much a part of that.
Well, the company I worked for was a company named Chas. T. Main in Boston, Massachusetts. We were about 2,000 employees, and I became its chief economist. I ended up having fifty people working for me. But my real job was deal-making. It was giving loans to other countries, huge loans, much bigger than they could possibly repay. One of the conditions of the loan—let’s say a $1 billion to a country like Indonesia or Ecuador—and this country would then have to give ninety percent of that loan back to a U.S. company, or U.S. companies, to build the infrastructure—a Halliburton or a Bechtel. These were big ones. Those companies would then go in and build an electrical system or ports or highways, and these would basically serve just a few of the very wealthiest families in those countries. The poor people in those countries would be stuck ultimately with this amazing debt that they couldn’t possibly repay. A country today like Ecuador owes over fifty percent of its national budget just to pay down its debt. And it really can’t do it. So, we literally have them over a barrel. So, when we want more oil, we go to Ecuador and say, “Look, you’re not able to repay your debts, therefore give our oil companies your Amazon rain forest, which are filled with oil.” And today we’re going in and destroying Amazonian rain forests, forcing Ecuador to give them to us because they’ve accumulated all this debt. So we make this big loan, most of it comes back to the United States, the country is left with the debt plus lots of interest, and they basically become our servants, our slaves. It’s an empire. There’s no two ways about it. It’s a huge empire. It’s been extremely successful.
[I worked] … very closely with the World Bank. The World Bank provides most of the money that’s used by economic hit men, it and the I.M.F.
Here is Perkins’ blood chilling account of the alleged assassination of Panama’s Omar Torrijos:
“Omar Torrijos, the President of Panama. Omar Torrijos had signed the Canal Treaty with Carter much—and, you know, it passed our congress by only one vote. It was a highly contended issue. And Torrijos then also went ahead and negotiated with the Japanese to build a sea-level canal. The Japanese wanted to finance and construct a sea-level canal in Panama. Torrijos talked to them about this which very much upset Bechtel Corporation, whose president was George Schultz and senior council was Casper Weinberger. When Carter was thrown out (and that’s an interesting story—how that actually happened), when he lost the election, and Reagan came in and Schultz came in as Secretary of State from Bechtel, and Weinberger came from Bechtel to be Secretary of Defense, they were extremely angry at Torrijos—tried to get him to renegotiate the Canal Treaty and not to talk to the Japanese. He adamantly refused. He was a very principled man. He had his problem, but he was a very principled man. He was an amazing man, Torrijos. And so, he died in a fiery airplane crash, which was connected to a tape recorder with explosives in it, which—I was there. I had been working with him. I knew that we economic hit men had failed. I knew the jackals were closing in on him, and the next thing, his plane exploded with a tape recorder with a bomb in it. There’s no question in my mind that it was C.I.A. sanctioned, and most—many Latin American investigators have come to the same conclusion. Of course, we never heard about that in our country.”
Ecuador’s Debt Default: Exposing a Gap in the Global Financial Architecture December 22, 2008
Posted by rogerhollander in Economic Crisis, Ecuador, Latin America.Tags: default, Ecuador, financial debt, foreign policy, global bonds, jubilee act, neil watkins, predatory lending, Rafael Correa, roger hollander, sarah anderson, social debt, World Bank
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Editor: Emily Schwartz Greco
But this default is different. For the first time in history, the government’s defense isn’t based on an inability to pay. Ecuadorian President Rafael Correa explained rather that he was unwilling to continue to pay debts that are “obviously immoral and illegitimate.”
Like many of the victims of the U.S. subprime mortgage mess, the Ecuadorian people were the targets of predatory lending. In the 1970s, unscrupulous international lenders facilitated some $3 billion in borrowing by Ecuadorian dictators who blew most of the money on the military. After the transition to democracy, the Ecuadorian people got stuck holding the bag.
Over the years, the country has made debt payments that exceed the value of the principal it borrowed, plus significant interest and penalties. But after multiple reschedulings, conversions, and some further borrowing, Ecuador’s debt has risen to more than $10 billion today.
Human Costs
The human costs are staggering. Every dollar sent to international creditors means one dollar less is available for fighting poverty. And in 2007, the Ecuadorian government paid $1.75 billion in debt service, more than it spent on health care, social services, the environment, and housing and urban development combined.
Correa campaigned on a commitment to prioritize the payment of the “social debt” over financial debt. After taking office in 2007, he responded to demands from Ecuadorian civil society and the international Jubilee Network to form an independent commission to investigate the origins, nature, and impacts of the nation’s external debt. While citizens’ groups in other countries have carried out their own debt audits, this was the first time a government had supported such an effort.
The debt audit commission documented hundreds of allegations of irregularity, illegality, and illegitimacy in the contraction of Ecuador’s debt. In the case of the bonds Ecuador has now defaulted on, the commission alleged that they were issued and restructured illegally, violating Ecuador’s domestic laws, U.S. Securities and Exchange Commission regulations, and general principles of international law. The agreement that gave rise to the Global bonds themselves may not be legal under Ecuador’s constitution, which prohibits an individual from incurring debt on behalf of the country.
Commercial debt is the most expensive component of Ecuador’s portfolio, making up only 30% of its total obligations but comprising 44% of the country’s interest payments in 2007.
Correa says he hopes to cut a deal with creditors, much in the way that many U.S. homeowners are seeking to restructure their subprime mortgages. Ecuador’s global bonds are currently valued at $3.8 billion. If negotiations aren’t fruitful, however, the economic repercussions could be severe.
One avenue for the bondholders would be to sue under the U.S.-Ecuador bilateral investment treaty, which went into force in 1997 (long before Correa took office). Arbitration tribunals, such as the World Bank-affiliated International Centre for the Settlement of Investment Disputes (ICSID), handle such cases. Under this system, there is no public accountability, no standard judicial ethics rules, and no appeals process. A group of Italian investors has a pending ICSID claim over about $5.5 billion in bonds that Argentina defaulted on in 2002.
Investors could also sue in New York courts, as the bonds were issued under the laws of that state. Holders of Argentine bonds have also used that tactic.
Financial analysts have also predicted that Ecuador’s default will cut off the country’s access to capital markets and could dim its chances of obtaining a long-term extension of U.S. trade preferences, which will expire in 2008.
While the risks of default are high, Ecuador had only two options: keep paying a dubious and possibly illegal debt at the risk of social unrest, or default and face the wrath of the international markets.
Independent Mechanism
This exposes a gaping hole in the international financial system: the lack of an international, independent mechanism for countries to resolve disputes over potentially illegitimate and/or illegal debt or in the case of bankruptcy. Ecuador may be the first developing country to default during the current crisis, but it’s unlikely to be the last.
As world leaders seek to build a new international financial architecture to respond to the current meltdown and prevent future crises, they should consider a new debt workout mechanism as one key pillar.
A bill pending in the U.S. Congress would be a step forward. The Jubilee Act, which passed the House of Representatives in 2008, would require the Comptroller General to undertake audits of the debt portfolios of previous regimes where there is substantial evidence of odious, onerous, or illegal loans. The legislation also instructs the Secretary of the Treasury to “seek the international adoption of a binding legal framework on new lending that…provides for decisions on irresponsible lending to be made by an entity independent from the creditors; and enables fair opportunities for the people of the affected country to be heard.”
To ensure more responsible and productive lending and borrowing in the future, we need to learn from and redress the errors of the past. Only then can we build the architecture for an international financial system that works for people and the planet.
Neil Watkins, a Foreign Policy In Focus contributor, is the executive director of Jubilee USA Network, and Sarah Anderson, a Foreign Policy In Focus senior analyst, is the director of the Global Economy Project at the Institute for Policy Studies.