Ecuador: Macroeconomic Armageddon??
Starting on January 9, 2000, Ecuador finally proceeded to suffer
governmental disruption from the Crash. The combined impact of a
20% fall in the value of the sucre from Jan. 1, 2000 to Jan. 7,
2000, plus President Jamil Mahuad's declaration of a state of
emergency, led to an attempt to form a government to replace
his government. Whether this procedure can stave
off the worst fears of Ecuador's Armed Forces Chief Carlos Mendoza
Dollarization in Ecuador is a summary of Ecuador's dollarization process.
Ecuador's political travails, including the battle for control
between the Jamil Mahuad (Gustavo Noboa) government and the
December 10, 2004 [BBC]
October 18, 2004 [VOANews]
- After the Assembly (unconstitutionally) voted to remove 27 of the 31 Ecuadorean Supreme Court justices, tear gas was required to convince them to leave.
It appears that they were de facto controlled by the former President Leon Febres Cordero.
September 24, 2003 [Dow Jones Business News]
- Preliminary election returns indicate President Lucio Gutierrez's Patriotic Society Party may fail to win 5% of the vote. Since it did not obtain 5% of the vote in 2002, a second consecutive failure will result in Ecuador's constitution requiring its disbanding.
August 25, 2003 [RigZone]
- Bernardo Tobar, the president of OCP, said that the OCP oil pipeline had been running since
Sept. 5, 2003 at 160,000 to 170,000 barrels/day. This level is expected to continue for the next
four to five months, before going up to 250,000 barrels/day. He estimated that U.S.$6-12 billion
is required to double Ecuador's crude oil output. Currently, no firm forecasts are possible on
when the OCP pipeline will attain its capacity of 450,000 barrels/day.
August 22, 2003 [AP]
- Techint has completed the construction of the crude oil pipeline commissioned by the OCP Ecuador
consortium (Repsol YPF, AEC, Petrobras, Occidental, Perenco, Agip, Techint). Normal operations
are intended to start in Oct. 2003. While the design capacity of the pipeline is 450,000 bpd,
the starting usage is expected to be 200,000 bpd. Construction time was 25 months. Cost was
U.S.$1.4 billion, which is U.S.$300 million above the initial estimate.
August 7, 2003 [VOANews]
- Ecuador's Foreign Minister Patricio Zuquilanda confirmed that Gustavo Noboa would be allowed
safe passage to the Dominican Republic.
August 1, 2003 [AP]
- Ecuador's Patriotic Society party (of which President Lucio Gutierrez is a member) has
ended its political alliance with the Indian political movement Pachakutik over an IMF-required
labor reform bill. The three Pachakutik cabinet ministers are expected to step down
July 29, 2003 [AP]
- Dominican President Hipólito Mejía has directly authorized granting political asylum to
July 17, 2003 [Dow Jones Business News]
- Ecuador's former president Gustavo Noboa has filed for political asylum with the Dominican
July 15, 2003 [Reuters]
- Several international oil companies want Ecuador's Constitutional Tribunal to undo a
an executive decree, issued currently, that undoes another decree issued in Jan. 2003.
This reverses the profit margin on fuel sales from 18% to 15%. The following companies have an
interest in this: Repsol YPF SA (Spanish/Argentine), Royal Dutch/Shell, ExxonMobil, ChevronTexaco,
and Compania General de Combustibles (Argentina). Between them, they control about 50% of
Ecuador's fuel market.
July 10, 2003 [Reuters]
- The IMF has required that Petroecuador collect its bills from electric utilities
more efficiently, for Ecuador to recieve its next disbursement. Ecuador's President Lucio
Gutierrez has issued a corresponding decree requiring electric utilities to pay for thermal
power plant fuel first. This is expected to increase Petroecuador's income by U.S.$200 million
over the next year.
June 26, 2003 [Hoovers]
- Ecuador's state prosecutor Mariana Yepez is investigating whether Noboa's use, of
U.S.$126 million in bonds leftover from the 2000 debt swap, to strengthen two state banks
exceeded the allowable use. It is unclear whether the investigation is objective, or political:
Gustavo Noboa is not on good terms with the Social Christian political party.
June 23, 2003 [Dow Jones Business News]
- World Bank Vice President David de Ferranti said that the achievements, situation, and programs
implemented by Lucio Gutierrez' government were extraordinary. Almost half of the World Bank
loan funds to Ecuador have gone to social projects, including health coverage and education.
The austerity policies implemented include an increase in gasoline prices, a 10% tax on luxury
vehicles, and a 20% pay cut for government officials earning more than U.S.$1,000/month. Lucio's
salary was included in this pay cut.
June 6, 2003 [Dow Jones Business News]
- Foreign companies declined to renew crude oil supply contracts for July at a price of
$4.05 below West Texas Intermediate per barrel. They are currently paying $4.95 below
West Texas Intermediate for Ecuadorean crude oil. About 120,000 barrels per day of 24.5 API
crude oil are involved. Jorge Luis Zapater, head of international commerce at state-owned
Petroecuador, said the government would have to decide what to do next.
April 29, 2003 [Reuters]
- Continued opposition to Ecuador's President Lucio Gutierrez (and his plans for further opening to
the private sector) has resulted in the resignation of PetroEcuador's head Guillermo Rosero,
and the dismissal of Marcelo Roman as the workers' representative at Petroecuador's Administrative Council.
March 25, 2003 [Hoovers]
- As part of a U.S.$205 million IMF deal, Ecuador signed contracts to recover U.S.$392 million in Filanbanco
loans with two companies: Mexico's Thesis Antares Consulting, and Panama's Gomez, Giraldo, &
associates. The intent is to assign similar-looking halves to each firm, and to give each
firm one year to try to recover the loans.
March 22, 2003 [Miami Herald]
- Fitch IBCA has upgraded the long-term outlook on Ecuador's CCC+ long-term foreign debt from
"stable" to "positive", based on the IMF's approval of a U.S.$205 million standby loan.
February 21, 2003 [InterPress]
- Ecuador's Chief Justice Armando Bermeo of Ecuador's Supreme Court has ruled that
Roberto and William Isaías defrauded the government of Ecuador by embezzling U.S.$654 million
in federal bailout funds. He thus directly overruled Ecuador's Attorney General Mariana Yépez,
who had explicitly stated that they had only falsified documents, and that they had not
embezzled government funds. Armando then ordered the trial to proceed against the Isaias
brothers, and 11 other former bank executives of Filanbanco Trust & Banking.
February 20, 2003 [Reuters]
- Two branches of CONAIE (Pachakutik and Ecuarunari) have explicitly distanced themselves
from Lucio Gutierrez, in response to the signing of the IMF letter of intent. It is unclear
whether they have concrete alternative proposals in mind.
January 19, 2003 [VOANews/Reuters]
- Ecuador has signed a letter of intent for a US$200 million IMF program which would
make the country eligible for an additional US$230 million in exceptional financing from
the Inter-American Development Bank and the World Bank. Fitch IBCA is willing to raise Ecuador's long-term foreign sovereign currency rating from
CCC+, provided that Ecuador:
- clears approximately US$150 million in arrears to multilateral and Paris Club creditors.
- obtains congressional approval of the president's budget, which includes a public sector wage
freeze and a US$18/barrel Ecuador oil price assumption.
December 30, 2002 [Hoovers Online]
- President Lucio Gutierrez has decided that Ecuador needs a wartime-style economy to recover.
Declared changes include: 35% rise in the price of gasoline from U.S.$1.12/gallon to U.S.$1.48/gallon;
increased taxes on luxury vehicles; government officials earning more than U.S.$1,000/month are taking
a 20% wage cut with no chance of a pay raise in 2003. One monthly subsidy for the poor was raised
from U.S.$11.50/month to U.S.$15/month. [Then again, Gustavo Noboa gave a 46% increase
to some of this officials in 2002....]
October 25, 2002 [MSNBC]
- Ecuador's National Statistics and Census Institute (INEC) director Carlos Cortez said that
Ecuador's overall inflation for 2002 was 9.35%. The monthly rate for Dec. 2002 was 0.35%, a drop from
Nov. 2002's 0.69%.
October 20, 2002 [MSNBC]
- Lucio Gutierrez has won the run-off election.
October 3, 2002 [AP]
- The presidential candidates in Ecuador's runoff election are Col. Lucio Gutierrez (19.5%)
and banana magnate Alvaro Noboa (17.6%). Alvaro Noboa is not related to Gustavo Noboa; he is
the richest Ecuadorean. Socialist lawmaker Leon Roldos had 15.6% of the vote. This was
announced by Supreme Electoral Tribunal President Carlos Aguinaga, with 88% of the polling
Sept. 4, 2002 [AP]
- Ecuador's Finance Minister Francisco Arosemana announced that Ecuador had pulled out of
talks with the IMF. The talks are intended to be resumed by the new administration in
January 2003. Elections are scheduled for October 20, 2002.
August 28, 2002 [WorldOil]
- Ecuador's Constitutional Tribunal ruled that the Electoral Tribunal did not have conclusive
evidence that Antonio Vargas submitted falsified signatures. It proceeded to overrule the
Electoral Tribunal's denial of presidential candidacy to Vargas.
August 25, 2002 [CNN]
- The earliest estimated possible opening of the OCP oil pipeline is now June 2003.
August 22, 2002 [Dow Jones Business News/WorldOil (August 29th, 2002)]
- Ecuador's state auditor reported on August 23, 2002, that the Finance Ministry,
under former Finance Minister Carlos Julio Emanuel, authorized payments for U.S.$108 million
to local governments in 2002 -- while charging it to the 2001 budget. Ecuador's Supreme
Court followed up on this, today, with a "preventive prison" order for Carlos Julio Emanuel,
as well as his close adviser former Finance Undersecretary Jorge Moran.
August 20, 2002 [MSNBC/Xinhua]
- The multinational consortium that is responsible for 45% of the financing of the U.S.$1.2 billion
OCP (Oleoductos de Crudos Pesados) oil pipeline considers Ecuador in violation of international trade treaties
-- for failure to refund the VAT (value-added tax) since August 2001. This will eventually
cause these companies to reassess whether they wish to continue operations in Ecuador.
This consortium includes: Encana Corp. (Calgary, Canada) [unstable reporting...is Alberta
Energy Co. involved as well, or in place of Encana?], Occidential Petroleum Corp.,
Kerr McGee Corp., Spain's Repsol-YPF SA, Italy's Agip SpA, Argentina's Perez Companc SA, and
Argentina's construction firm Techint.
Encana Corp., in particular, is disputing U.S.$70 million in non-refunded VAT.
The current deadline for completion of this pipeline is July 2003. At prior rates of
construction, the pipeline is at least two months behind schedule...hopefully the recently
hired 2,000 laborers and technicians will remediate this. The OCP is expected to run at about
half capacity [220,000 bbl/day, compared to 450,000 bbl/day] initially, due to a 7% decline in private-sector production.
Repsol has had to reduce production due to its exposure to Argentina, while Perez Companc is
current a takeover target. Brazil's Petrobras is in the process of buying Perez Companc.
Encana still plans to increase production to at least 80,000 bbl/day from its current 50,000
June 24, 2002 [BBC]
- Twelve [Xinhua] or thirteen [MSNBC] candidates are running for Ecuador's Presidency. Gustavo Noboa is
not among them. Candidates include:
To win outright on October 20, 2002, a candidate must obtain 50% of the vote, or 40% of the vote with at least a
10% percentage lead. Otherwise, a runoff between the top two candidates will be held on November 24,
- Banana industry millionaire Alvaro Noboa
- center-left former President Rodrigo Borja [1988-1992]
- former President Osvaldo Hurtado [1981-1984]
- army Col. Lucio Gutierrez [alternative government 2000]
- CONAIE leader Antonio Vargas [alternative government 2000]
- Ecuador's former ambassador to the United States, Ivonne Juez de Baki
- Xavier Neira [center-right Social Christian party]
- Leon Roldos [socialist lawmaker; planning to run as independent]
- Jacobo Bucaram [not Abdala "El Loco" Bucaram] from the Party of Roldosista Ecuatoriano (PRE)
May 10, 2002 [BBC]
- Ecuador's Finance Minister, Carlos Julio Emanuel, proved unable to investigate allegations that
senior Finance Ministry officials took bribes in exchange for access to government funds -- and
resigned. Francisco Arosemena Robles is expected to replace him in that role.
February 27, 2002 [CNN]
- Ecuador's recently passed fiscal reform bill, while it does address the IMF objectives of
limiting public spending and creating an oil stabilization fund, was not drastic enough to
release U.S.$240 million of loans. However, Ecuador's projected GDP growth for 2002 is
4%, and is expecting a new crude oil pipeline project to complete in 2003. The latter is
expected to obviate any need for further IMF aid.
February 24, 2002 [CNN]
- Since the "state of emergency" has actually permitted the
intensification of protests in the provinces of Sucumbios and
Orellana, Gustavo Noboa has ordered the army to restore order in
those provices. One citation from the decree: "The commander of the
army's Amazonas division, Gen. Jorge Mino Vaca, is delegated as the
sole authority to restore order in the area of security."
Petroecuador has noted that 118,000 barrels of oil have been
prevented from reaching market in a timely fashion (worth
approximiately $1.9 million). The oil pipeline is scheduled to go
into production in 2003.
October 11, 2001
- President Gustavo Noboa has decreed a state of emergency in the
Amazon jungle provinces of Sucumbios and Orellana near Columbia's
border -- in response to nonviolent protests by Ecuadorean Indians
that have not only totally shut down the construction of an oil
pipeline, but have also shut down a highway linking Sucumbios with
Quito. The highway shutdown has completely prevented incoming
shipments from Quito (or anywhere else in Ecuador) from arriving
for the past six days. [The distance is only about 113 miles.]
July 19, 2001
- Ecuador's former Economy Minister Jorge Gallardo resigned in
response to the decision of the Attorney General's office to ask
the Supreme Court for his provisional arrest over supposed
financial irregularities when he was the executive president of the
Pacific Bank in 1999-2000. He has no intention of returning to
Ecuador (from negotiations in Washington D.C. with the IMF) until
Ecuador's Supreme Court rules on the validity of the arrest order.
The new Ecuadorean Economy Minister, Carlos J. Emanuel, will be
responsible for impending negotiations with the IMF.
July 17, 2001
- Ecuador's government was reviewing how to liquidate state-owned
Filanbanco, which was closed on July 17, 2001 due to persistent
lack of liquidity. The stage under discussion does not include
non-performing loans (75%) or fixed assets.
May 8, 2001
- 41,000 public employees are expected to join a strike intended
to raise wages to the point where they cover 75% of the "basic
basket" of goods for a family of four [75% of $289/month, i.e. just
over $216/month]. This is stacked on top of another strike in
hospitals, which has shut down non-emergency health care for the
past two weeks [i.e., since July 3, 2001?].
May 7, 2001
- Ecuador's Congress, even with obvious procedural errors, failed
to override Noboa's veto (with the VAT tax increase). However,
Defense Minister Hugo Unda was quoted (regarding with those
Congressmen trying to override the veto) as saying, "They are
playing with fire. ... They are playing with the future of the
country and we have the right to do something so that this doesn't
May 3, 2001
- The IMF has finally reported on the difference the VAT tax
increase would make if it was sustained: a revision of Ecuador's
estimate deficit to between 0.3% and 0.5% of GDP, in contrast to
3.9% of GDP without the VAT tax increase.
April 6, 2001
- A two-point increase in Ecuador's VAT tax slid through
Congress, due to opposition being more vocal than present to
override Noboa's veto: 76 votes against, 11 votes for, 11
abstaining (out of 123). Several legislators slipped out of the
chamber while others abstained. Failure to pass this would have
terminated Ecuador's IMF program. A planned attempt to challenge
the veto on Constitutional grounds may be a desperation move;
naively, precedents do exist for a presidential veto revising a
April 2, 2001
- Leo Goldstein, economist at Salomon Smith Barney, reported that
Ecuador needs IMF support to avoid defaulting on its sovereign debt
within 18 months.
March 29, 2001
- Ecuador's macroeconomy grew at 2.3% for 2000, in contrast to a
7.3% decline for 1999. This was attributed to higher oil prices and
March 26, 2001
- Ecuador's Congress voted 86 to 8 against the tax reform bill
with a VAT increase to 15% from 12%. There are questions as to
whether several possible maneuvers by Noboa will be effective.
March 17, 2001
- The director of Ecuador's Transportation Council, Humberto
Cevallos, reported that a public transportation strike in progress
was intended to freeze bus fares (currently under discussion
between the government and CONAIE) at current levels. Quito's buses
were running on nonstandard routes due to taxis parked on key
intersections; buses were almost unlocatable in Guayaquil.
February 7, 2001
- Finance Minister Jorge Gallardo has commented that if Ecuador's
Congress does not pass a tax reform (this includes an increase in
the VAT [12% to 15%?] and a decrease in the maximum income tax rate
to 20% from 25%), Ecuador would post a fiscal deficit of more than
4.0% of GDP for 2001. IMF representative Jeffrey Franks noted that
without this tax reform, it would be practically impossible for
Ecuador to achieve macroeconomic growth for 2001. It should be
noted that most legislators oppose this tax reform, and are
representing the general population on this.
February 1, 2001
- CONAIE has managed to negotiate a partial rollback on fuel
prices and bus fares, and other points of protest. Due to progess
in negotiations, CONAIE cancelled their support for the Popular
Front's protests the day before [Feb. 6, 2001].
January 31, 2001
- Quito's deputy mayor Efren Cocios freed Antonio Vargas and Luis
Villacis, ruling that their arrest was illegal and
unconstitutional. Negotiations were expected to have some sort of
results within a week or so.
January 30, 2001
- The following organizations have all offered to mediate
negotiations between the Ecuadorean Indians and the Noboa
government: Ecuador's Congress, the Quito Chamber of Commerce, and
the National Association of Municipalities.
January 28, 2001
- Police used tear gas in an attempt to disperse the massive
protests (leftist unions augmented by Ecuadorean Indians). They
also arrested CONAIE's president Antonio Vargas and the Popular
Front's leader Luis Villacis, presumably on charges of attempting
to overthrow the government by organizing these protests.
January 25, 2001
- At least 5,000 Ecuadorean Indians have arrived in Quito to
persuade the government to reduce or repeal a 75% increase in bus
fares and 25% increase in fuel prices to $1/gallon. Several
roadways were blocked.
January 17, 2001
- In Cotopaxi province, about 1,500 Indians tried to block the
Pan-American highway, but were dispersed in a clash with the
military that left 10 Indians and one soldier injured. CONAIE vice
president Ricardo Ulcuango mentioned the possibility of
coordinating a massive march to Quito if the (IMF-required)
economic measures that went into effect in early January 2000 were
January 9, 2001
- Admiral Miguel Saona, chief of Ecuador's High Military Command,
has indicated that the ongoing protests of the price increases
appear to be an attempt to overthrow Ecuador's government -- and
that the march planned for Jan. 21, 2001 will be suppressed.
Antonio Vargas, head of CONAIE, appears willing to see if the
Admiral can make his forces follow up on his comments....
January 4, 2001
- Luis Villacis, president of the union group Popular Front,
announced plans to coordinate a 2,000 to 3,000 person march to the
presidential palace. This is to protest a number of price hikes,
including 25% in the most widely-used gasoline and 75% in local bus
fares. CONAIE's president Antonio Vargas has indicated plans to
coordinate something, starting Jan. 22, 2001, if methods of raising
revenue that do not as directly impact Ecuadoreans are not
implemented. This reversal would directly invalidate Ecuador's
agreement with the IMF.
December 29, 2000
- This was the third day of mildly disruptive protests against
the price increases noted Dec. 29, 2000. However, the bus and taxi
fare increases were reversed by a magistrate -- provoking a
counter-strike by bus and taxi drivers. Only the trolley buses
functioned. However [Jan. 15, 2001], the government will not
recognize this ruling unless it is approved by the Constitutional
December 26, 2000
- Ecuador reported a 91% annual inflation rate for 2000. A
substantial portion of this is due to the sucre collapse before
- Ecuador plans to raise prices on gasoline by 25%, to $1/gallon.
For cooking gas, a 15 kg tank is scheduled to double in price to
$2. Bus and taxi fare increases of more than 50% were approved on
Dec. 28, 2000. This has raised talk of protests by labor, teacher,
student, and peasant groups.
December 18, 2000
- Ecuador's Central Bank General Manager Leopoldo Baez said that
the second largest source of income for 2000 [U.S.$1.205 billion,
increasing from U.S.$1.084 billion for 1999] is money sent home
from relatives working abroad. It is unclear how many Ecuadoreans
have emigrated recently; official figures claim 550,000 for
1995-2000, while at least one private study claims over 1 million
in 1999-2000. In comparison, Ecuador's national budget is
U.S.$4.006 billion. The only income source larger than the above is
December 8, 2000 [CNNfn]
- President Gustavo Noboa named Ecuadorean chief debt negotiator
Jorge Gallardo as finance minister. He replaces Luis Yturralde, who
resigned because his political connections with Guayaquil induced
him to oppose an IMF-backed plan to raise the VAT to 15% from
September 21, 2000
- Gustavo Noboa's privatization law Trolley 2 [passed on August
17, 2000 by default] has been entangled in the Constitutional
Tribunal for the past two weeks in a section-by-section analysis.
The potential for constitutional invalidation of a number of
sections is endangering Ecuador's debt management plans.
September 18, 2000
- CONAIE has resumed discussions with the Noboa government.
September 15, 2000
- Ecuador's President's Office announced today that Ecuador
planned to schedule negotiations with the Paris Club, in April
2001. The intent is an overall renegotiation of debt, with some
September 7, 2000
- CONAIE made a direct proposal to the Paris Club (at Paris) for
a debt-cancellation plan for Ecuador, on the condition that the
debt payments be internationally verifiable as going directly into
social services and infrastructure development. CONAIE indicated
that it would be better to keep the current debt schema than to
cancel the debt with either a lesser standard of verifiability, or
different allocation of freed money. While responding to CONAIE's
proposal is formally impossible, a copy of the proposal is being
distributed to all Paris Club nations.
September 6, 2000
- Gustavo Noboa has determined that contrary to his initial
estimates when talking with the IMF, there is not enough time to
set up the political support required to raise Ecuador's VAT from
12% to 15%. The political requirements for conducting the tax hike
have not been fully determined yet.
September 4, 2000
- Gustavo Noboa believes that Ecuador's dollarization will enable
Ecuador's GDP to grow (inflation-adjusted) by 1.3%. The inflation
rate for the first eight months of 2000 was 71.4%, compared with
the same period in 1999. Please note, however, that in the first
week of January 2000 the sucre fell by 20%, and other details
indicate that much of this inflation was concentrated into the
period before dollarization cut in. Also, Standard and Poor's has
raised Ecuador's sovereign credit rating from C to B-
- Gustavo Noboa considers the governmental instability in January
2000 this year less of a crisis than what happens in the United
States. In his own words (translated?): "We don't have 14-year-olds
who kill their teachers. We don't have thousands of children
assassinated by their mothers in abortions sanctioned by
industrialized countries. Ecuador is going forward." Gustavo Noboa
is substantially correct.
August 29, 2000
- The first day of the CONAIE protest had little visible
August 22, 2000
- Antonio Vargas, president of CONAIE, has announced an
indefinite protest beginning Monday [Sept. 3, 2000]. Note Vargas'
comments on February 2, 2000.
August 16, 2000
- Ecuador's Constitutional Tribunal has ruled, requiring a
re-vote to determine the speaker of Ecuador's legislature. Susana
Gonzales, one of the two speaker-candidates, resigned in less than
an hour (I am unclear whether this is from the speaker position, or
from the legislature outright). Five days too late....
August 15, 2000
- The IMF believes that Ecuador's recession has bottomed out.
However, the lack of international support is endangering Ecuador's
planned bond swap: the deal has clauses, according to Ecuador's
chief debt negotiator Jorge Gallardo, that permit bondholders who
have already agreed to the bond swap to back out if it lacks
August 11, 2000
- I got a contrary report on when the privatization bill would
automatically become law -- August 17th, 2000. This is not
thirty days after it was submitted, as quoted by news sources on
August 7th. Also, the dispute Noboa wants resolved by the
Constitutional Tribunal is fairly serious: the two factions
involved do not recognize each other's legitimacy.
PetroEcuador's union is planning an indefinite work stoppage if
Noboa refuses to recognize a 71 of 123 vote in Congress rejecting
the bill that occurred today.
August 7, 2000
- Ecuador's proposed bond swap is expected to pass by virtue of
extreme coercion. One faction of bondholders has the distinct
perception that Ecuador's bond default was manufactured. I do
not believe this; while Italy had more public debt as a
percentage of GDP than Ecuador [120% or so vs. 100% or so], it must
be admitted that Italy has a fairly substantial black economy.
Japan's national debt has a bizarre composition [practically no
foreign exposure] that makes it unreasonable to compare it to
August 4, 2000
- A dispute between two political parties over which candidate is
speaker of the unicameral legislature has been exploited by Gustavo
Noboa to attempt to force a privatization bill to pass. This bill
was submitted to Congress on July 13, 2000 -- so if it is not
decided on by Ecuador's Congress within 30 days, it automatically
becomes law [in this case, August 13, 2000]. The Presidential
office announced today that until the Constitutional Tribunal rules
on who is actually the speaker of the unicameral legislature, that
it will refuse to recognize any decisions by the legislature.
Ecuador's Consitutional Tribunal is expected to rule in 7-30 days
[that is, August 14 to September 6, 2000].
July 27, 2000
- It has been observed that Ecuador's proposed bond swap is not
drastic enough to solve Ecuador's cash flow problems. Either
progress in privatizations or a new oil pipeline, combined with the
attainment of optimistic macroeconomic assumptions, appears to be
required to prevent a repeat of defaults in the next five year.
Also, average oil prices must be at least $20/barrel.
July 26, 2000
- Ecuador has formally proposed a bond swap: sovereign debt in
exchange for the now-defaulted Ecuadorean Brady and Eurobonds. The
net reduction is 40.6%, substantially higher than the analysts'
estimates of about 50% reduction. The IMF has noted that if this
restructuring does not go through, Ecuador's foreign debt
could hit 180% of GDP by the end of the year 2000.
July 13, 2000
- The Inter-American Development Bank has approved a U.S.$150
million loan to Ecuador to help implement macroeconomic reforms in:
electric power, telecommunications, banking, and the social safety
July 7, 2000
- Ecuador's Supreme Court is investigating Jamil Mahuad's March
1999 freeze of bank accounts. While this was intended to prevent a
bank run, there are concerns that this was a crime against the
state of Ecuador, as well as a violation of constitutional
guarantees. Jamil Mahuad's finance minister at the time, Ana Lucio
Armijos, is also being investigated. Both are believed to be
outside of Ecuador at this time.
June 23, 2000
- It appears that a strike by 14,000 Ecuadorean health workers is
about to end. Not only is the demand for a 50% pay raise to be met,
but also $10 million extra has been pledged for Ecuador's public
June 22, 2000
- 15 teachers have initiated a hunger strike in response to the
arrest of Aracely Moreno. It seems that this is an easy strike,
since these teachers are convinced that $60/month is quite
insufficient to buy food....
June 21, 2000
- Quito's police used tear gas to break up a march of teachers on
the palace. They are striking for U.S.$100/month (as opposed to the
current $50-$60/month). Also, it appears (or are these the same??)
that the Medics college strike is stacking on another doctors'
strike that has lasted for two weeks, and has reduced a number of
state hospitals to emergency cases only. They also arrested the
National Teachers' Union President Aracely Moreno.
June 20, 2000
- Marcelo Silva, president of the Medics College of Guayas,
announced that 32,000 doctors are starting a strike to raise the
basic wage to U.S.$300/month. Initially, outpatient consultation
areas are to be targeted. Radical suggestions to extend it to
emergency wards have been suppressed, initially.
June 16, 2000
- Gustavo Noboa has indicated his intention to start talks with
the striking teachers (now into the sixth week of their
June 15, 2000
- The United Patriotic Front attributed the weakness of this
strike to CONAIE's failure to support it.
June 14, 2000
- CONAIE is conspicuously absent from this strike. Violence broke
out in Guayaquil today: a Citibank branch was hit by an improvised
bomb/grenade, at least one bus driver was attacked, and there were
four people hit by shotgun rounds in clashes with police. It is
definite that the police did not use shotguns, and it is unclear
whether the shotgun casualties were protesters.
June 5, 2000
- Four provinces suffered roadblocks in a protest backing up the
United Patriotic Front's indefinite strike. This is intended to
continue through June 16, 2000.
May 31, 2000
- Ecuador has named, as its new Finance minister, Luis Yturralde.
Before this appointment, he was a resident of Guayaquil. He is a
business consultant and teacher trained as an accountant.
May 29, 2000
- Ecuador's Congress has approved the pardon of those soldiers
involved in the Jan. 21, 2000 events.
May 25, 2000
- A public opinion poll run by the firm Cedatos suggests that
Noboa has pushed the approval rate for his economic reform plan to
May 24, 2000
- Noboa has announced an import tariff reduction of about 50%,
and slightly more than doubling of the minimum wage. The latter
addresses a key fear of dollarization: it partially neutralizes the
mass deflation in January 2000. However, fuel price subsidies will
be reduced, increasing fuel prices from 66% to 99%. [Aviation and
other specialty fuels are 99%, regular gasoline is 66%. However,
domestic-use gas will remain fully subsidized....]
May 15, 2000
- Ecuador's Finance Minister Jorge Guzman for unnamed reasons.
Ecuador's President Gustavo Noboa has already accepted the
resignation. Noboa and Guzman had a serious difference of opinion
over how fast to dollarize [Noboa wanted to do it much more
slowly]. Speculations by Ecuador's Economy Ministry indicated that
the two most plausible replacements were Jorge Gallardo (president
of a private bank) or Pablo Concha (who is with an economic
May 12, 2000
- The Patriotic Front's indefinite general strike [starting
today] is manifesting mostly as extremely slow work. They have been
careful not to disrupt PetroEcuador. Classes were cancelled for 3
million students, however (to put this in perspective, Ecuador's
total population was last cited as between 12 and 13 million).
- This was announced circa May 5, 2000 -- but the Patriotic Front
miserably failed to meet stated objectives on May 1, 2000. CONAIE
measures so far have performed according to announcements.
May 9, 2000
- Gustavo Noboa has maintained a public popularity rating between
45% and 50% since assuming office. This is phenomenally better than
his predecessors, and is making the Patriotic Front's and CONAIE's
maneuvers more problematic.
May 1, 2000
- In implicit response to Gustavo Noboa's request to Congress to
approve a pardon for all military officers involved in the events
of January 21, 2000, the leaders of Ecuador's joint chiefs of
staff, navy, and air force have resigned. These leaders (in
contrast to Carlos Mendoza) considered subverting the parallel
government to be treasonous.
April 26, 2000
- Ecuador's Patriotic Front was unable to organize its
"paralyzing strike" by today. CONAIE was able to get 10,000 Ecuador
Indians into Quito today. 50 were apparently in quasi-permanent
position at the colonial San Francisco church in Quito. Salvador
Quishpe, one Indian protest organizer, said: "We'll stay here until
we get rid of this dollarization pipe dream. We'll stay here to
fight against hunger and misery."
April 25, 2000
- Ecuador's Patriotic Front protests have already started to
cause noticeable disruption. Visible demonstrators were in the
hundreds; at least 13 public buses were hijacked and forced to pull
onto the campus of the Central University.
April 24, 2000
- Antonio Vargas, president of CONAIE, is going to consult with
other Ecuador Indian leaders on the feasibility of a nationwide
uprising. From CONAIE's point of view, "Now the government is
making war against the people."
April 11, 2000
- Ecuador's Patriotic Front confederation of unions announced a
series of protests set to reach maximum intensity on May 1, 2000.
Luis Villacis, head of the Patriotic Front, has declared Ecuador's
letter of intent with the IMF a "letter of slavery against the
Ecuadorean people." In order to call off the protests, the Noboa
government must renege on their deal with the IMF
on most points.
- Negotiations between CONAIE and the Noboa government have
collapsed. Interior Minister Francisco Huerta, the unofficial head
of Noboa's 15-member Cabinet, has resigned as a direct result of
March 22, 2000
- This was the second day of mild protests by Ecuador's National
Farm Security Affiliates Confederation (main roads were blocked,
but there was no resistance to police tearing down the roadblocks).
Cesar Cabrera, the president of the National Farm Security
Affiliates Confederation, said that if Noboa continued with plans
to privatize social security and dollarize Ecuador's economy, he
would have no choice but to do what Mahuad did -- step down.
March 7, 2000
- Defense Minister Hugo Unda has informed Ecuador's military
tribunals that their delays in pushing through proceedings against
those officers who explicitly assisted the "parallel government"
are self-sabotaging. He intends to do everything possible to
accelerate these proceedings 'with due respect for justice'.
March 5, 2000
- Noboa announced that by Mar. 9, 2000, he would announce whether
he would veto minor changes to the dollarization bill: a debt
restructuring clause, an interest-rate change clause, and a change
to the time banks have to recapitalize themselves.
February 29, 2000
- Apparently, the U.S. has had legislation "on the back burner"
that would make "dollarizing" other economies easier. Ecuador's
success -- or failure -- may dramatically affect this legislation's
chances of passing.
February 9, 2000
- It appears that Noboa's dollarization bill for Ecuador is a
very easy pass -- in spite of a 60% disapproval at the level of the
February 6, 2000
- CONAIE and the Noboa government are mutually inconsistent
regarding the plebiscite that CONAIE is considering(?) raising the
- The Noboa government contends that the plebiscite requires
changes to the constitution, thus is unconstitutional. Namely,
dissolving the 123-member Congress and freeing more than one
hundred officers arrested for the events circa Jan. 21, 2000.
- CONAIE says the plebiscite asks about whether the dollarization
of Ecuador's currency should be done, whether state-owned companies
should be privatized, and whether the judiciary should be
- Since there is no objective reason for the Noboa government to
directly contradict CONAIE about the contents of the proposed
plebiscite, I am forced to conclude that at least one side is
deliberately lying about the plebiscite's contents, publicly. This
suggests more problems are in the offing. Cf. Feb. 2, 2000.
- The Noboa government is considering holding discussions with
the Ecuador Indians.
February 2, 2000
- Former Ecuadorean President Abdala Bucaram, also known as "El
Loco" i.e. "The Crazy One", has decided to end his self-imposed
exile from Ecuador after being removed from the presidency in Feb.
1997 for mental incompetence. He was discussing with his political
party, the Roldosista Party, plans for legal and political
rehabilitation. A petition with one million signatures to remove
political(?) charges of corruption is a definite possibility. Of
course, his immediate successor Jamil Mahuad was himself ousted
January 23, 2000
- Vargas (President of CONAIE) made several comments.
- The "parallel government" was close to power on January 21 --
but that is not the primary objective of the "parallel
- The decision to include Ecuador's military was based on the
common goal of the "parallel government", and Ecuador's military,
to avoid bloodshed. There was also probable cause to believe that
Ecuador's military was planning an independent coup, and had indeed
already prepared suitable announcements. The "parallel government"
deemed this unacceptable.
- This may have caused the negotiations on Jan. 20, 2000.
- The Ecuador Indians, as a whole, never were exploited --
rather, they were acting in their collective self-interest. A
number of other social movements, however, sometimes wanted to act
faster than the Ecuador Indians; they did not have much of an
effect, being mostly stopped by police and military forces.
- The "parallel government" did achieve its objective of bringing
down all three government branches, if only for a few hours.
- CONAIE (a dominant faction of the "parallel government") has
granted a 6-month truce with the Noboa government. The "parallel
government" is considering forcing a plebiscite on the Noboa
- Should Mahuad have been removed from the Presidency?
- Should Ecuador maintain monetary sovereignty, or
- Should petroleum, electricity, telecommications, and social
security remain state-controlled? [Presumably, this is four
- If the Noboa government does not enact changes sufficient to
preserve Ecuador, violence could break out. If buying food becomes
impossible, looting and pillaging would be almost inevitable.
January 22, 2000
- Ex-President Jamil Mahuad has made it clear that he was
overthrown by the "parallel government", rather than resigning.
However, Mahuad is explicitly supporting Gustavo Noboa as President
in order to make it politically difficult to justify a military
coup. Ecuador's Congress has decided that what happened was a coup
d'etat that terminated by leaving the position of President vacant.
The local analysts don't immediately trust Congress'
- The "parallel government" refuses to disintegrate itself. I
presume that the Ecuadorian military currently is not part of the
January 21, 2000
- If the local commentators are confused, I should be even more
so. Excuse my physical delay here.... [the story may be Jan. 22,
2000, but I'm finally understanding it Jan. 31, 2000]
- The purpose of Ecuador's military changing alliance was simple:
it gave the military enough control to dissolve the "parallel
government" after mere hours.
- Jamil Mahuad informally abdicated his position as President to
head off a full-blown coup [he was asked to
resign]. The new President is the former Vice President Gustavo
- The military's choice of resignation requests proved to be
carefully calculated: since Congress was left in place, Congress
was able to convene in Guayaquil to formalize the transition of
- Carlos Mendoza has resigned his positions as Defense Minister
and head of the Joint Chiefs of Staff. Telmo Sandoval has replaced
Mendoza as head of the Joint Chiefs of Staff.
- It is unclear what Vargas and Solorzano thought of Carlos
Mendoza's dissolving of the "parallel government". Vargas, however
did indicate that this was acceptable -- and that if the
fundamental problems are not dealt with, the Indians may attempt
something similar again.
January 20, 2000
- Ecuador's military has changed allegiance: they now support the
"parallel government". Details:
- Congress and the Supreme Court were occupied by Ecuador
Indians, Quito citizens, and soldiers. This was shortly followed by
Carlos Mendoza (Chief of the Armed Forces) demanding President
Jamil Mahuad's resignation. Mendoza also demanded the resignation
of Congress and the Supreme Court. Jamil Mahuad initially refused
to resign, then realized that staying where he was had dubious
- Jamil Mahuad flunked a key intelligence test. He correctly
realized that he needed to flee Ecuador by air. However, he
promptly headed for a military airbase....
- The Organization of American States [OAS] (which only has
representatives of the Jamil Mahuad government) has formally
denounced the takeover. Whether further measures are required is
not known yet. It seems that the Jamil Mahuad government
representatives at the OAS are unaware that Carlos Mendoza is
backing the "parallel government", not theirs.
- The "parallel government" has formally created its executive
council: CONAIE leader Vargas, former Supreme Court justice Carlos
Solorzano, and Armed Forces Chief Carlos Mendoza (who seems to
occasionally use delegates).
January 19, 2000
- The leaders of the Ecuador Indians that have made it into Quito
have initiated negotations with Carlos Mendoza. Details are
unclear, but the platform of the "parallel government" includes
improving the efficiency of state-controlled enterprises without
- Ecuador's National Electric Company has joined the "parallel
government". They did not rule out deliberate blackouts in the next
January 18, 2000
- 12,000 Ecuador Indians were reported as camping out in Arbolito
Park. They are not having to live only on their own supplies: local
citizens are helping them. Apparently, the blockade isn't working.
The number of troops deployed to prevent them from arriving has
dropped to 25,000. President Mahuad has named, as a deadline for
passing the laws required for dollarization, Jan. 21, 2000.
January 17, 2000
- 3000 Ecuador Indians have arrived in Quito, in spite of the
30,000 troops deployed to prevent them from arriving.
- Their overt objective is to force President Jamil Mahuad, the
Congress, and the Supreme Court to step down. They will accept a
complete reversal of the explicit Ecuador-destructive policies
currently being implemented by Jamil Mahuad's government.
- The conventional government apparently will refuse to negotiate
at all until the overt objectives are overtly abandoned.
January 16, 2000
- PetroEcuador, the government-controlled oil company, has
augmented its strike against Ecuador's President Jamil Mahuad.
PetroEcuador is now considering a total shutdown of oil transport,
production, and export.
- This, apparently, is retaliation for the arrest of three union
leaders by hooded agents who burglarized the union leaders'
residences, breaking windows and doors to get in.
January 14, 2000
- It seems that the massive Indian protest in Ecuador is building
very slowly -- most areas of Ecuador, including Quito, were totally
January 13, 2000 [MyCNN]
- Ecuador's President Jamil Mahuad has deployed 30,000 military
troops in an attempt to block predicted mass demonstrations by
Ecuador's Indians. These demonstrations are predicted to start
slowly on January 15...but build up until Ecuador is paralyzed. It
was verified in July 1999 that Ecuador's Indians are quite capable
of totally paralyzing Ecuador in this fashion.
- The initial stage of the PetroEcuador strike will remove 4,500
administrative positions, but not affect production. Cutting
production is considered a drastic move, since oil is one of the
few things supporting Ecuador's ravaged economy. However (depending
on circumstances), it is possible that more extreme stages in the
PetroEcuador strike could cut oil production. PetroEcuador is
willing to call off the strike if the Jamil Mahuad government
significantly invests in PetroEcuador.
January 12, 2000
- More details regarding the "parallel government" of Ecuador
- The People's Parliament (apparently, the name for the
legislature of the "parallel government") has representatives from
Ecuadorian Indians, health workers unions, women's and human rights
groups, small retailers, university students, pensioners, and
peasant farmers. The "parallel government" has called for
Ecuador-wide civil disobedience.
- Transport workers have been on strike in Guayaquil since
January 10, 2000. The arrest of four union leaders has had no
effect on this.
- CONAIE President Antonio Vargas is also the vice president of
the "parallel government".
- The initial target date for systematically replacing all of the
functions of Jamil Mahuad's government is apparently in early
February. Due to significant Ecuador Indian influence, I'm certain
this target date is highly flexible.
- Former Supreme Court President Carlos Solorzano Constantine is
drawing up the legal foundations for the "parallel government". It
appears that the "parallel government" intends to keep the internal
political boundaries and constitution of Ecuador (I am more certain
about the first than the second).
January 11, 2000 [MyCNN]
- Steve Hanke (U.S. advocate of currency boards and similar
things) has stated that Ecuador's President Jamil Mahuad's
dollarization plan will work fairly smoothly, provided adequate
political support exists. He was increasingly confident that
President Jamil had the votes to do this.
- Hanke may be making assumptions about the failure of the
"parallel" government initiated on January 9, 2000. The vice
president is His Holiness the Roman Catholic Archbishop....
- Ecuador's Defense Minister Jose Gallardo has resigned,
apparently due to a backfire from his orders to arrest Fernando
Aspiazu, a former bank director.
- In retaliation for Gallardo's unsubstantiated(?) charges of
stealing the country's financial revenue, Aspiazu demanded an
accounting of U.S.$3.1 million that Gallardo raised for Mahuad's
election campaign -- that was not (duly) reported to Ecuador's
supreme election court....
- This is Xinhua stating that the resignation has occurred.
InterPress Service failed to notice that Gallardo had resigned as
of January 13, 2000.
- Ecuador's President Jamil Mahuad's announcement of the
dollarization of Ecuador's currency has provoked an acceleration of
protests: the ones scheduled for January 15, 2000 have been moved
forward to today.
- Apparently (on January 9? 11?), trade unions, professional
organizations, grassroots organizations, business organizations,
church organizations, and the Confederation of Indigenous
Nationalities of Ecuador (CONAIE: represents American Indians)
tried to set up a parallel government in all of Ecuador's
provinces. This verges on civil war. All official members of
political parties are banned from participation in this parallel
- The printing of Ecuadorean sucres has been completely
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