Rafael Correa discusses Ecuador's 'Citizens' Revolution' and answers his left critics

Rafael Correa speaks at a rally in support of his re-election in next year's poll, Quito, November 10.

By Federico Fuentes

November 11, 2012 – Green Left Weekly – While European governments continue to impose policies aimed at making working people pay for a crisis they did not cause, the Ecuadorian government of Rafael Correa has taken a different course.

“Those who are earning too much will be giving more to the poorest of this country”, a November 1 Reuters dispatch quoted Correa as saying. He was announcing a new measure to raise taxes on banks to help fund social security payments.

Ecuador’s banking sector has registered US$349 million in after-tax profits, a November 8 El Telegrafo article said. “The time has arrived to redistribute those profits,” said Correa.

Reuters reported that by lifting the tax rate on bank holdings abroad and applying a new tax on financial services, the government hopes to raise between $200 million and $300 million a year.

The proceeds will fund a rise in the “human development bonus payment” from $35 to $50 a month. About 1.2 million Ecuadorians receive the payment, mainly single mothers and the elderly.

Such a move ― in the opposite direction to the most of the rest of the world ― is largely explained by the fact the Correa government is a result of the kind of protests movements now developing in Europe.

Citizen’s revolution

In an interview published in the September/October issue of New Left Review, Correa said the backdrop to his rise to power was “a citizens’ revolution, a revolt of indignant citizens” against bankers and politicians destroying the country.

“In that sense we anticipated the recent indignado movement in Europe by five or six years,” Correa said.

In 1999, a crisis engulfed Ecuador’s banking sector and the government of the day tried to make the people carry the cost. Then-president Jamil Mahuad was toppled by a popular uprising in 2000. The country’s indigenous movements, spearheading opposition to neoliberalism, played a leading role.

Ecuador’s economic crisis was soon coupled with a political crisis as peoples’ illusions in the traditional parties of government collapsed. “¡Que se vayan todos!” (Out with all of them!) became the rallying cry of Ecuador’s next popular insurrection, which in 2005 toppled president Lucio Gutierrez.

It was in this context that a relatively unknown leftist economist, Correa, was asked to serve as the finance minister for Gutierrez’s replacement, Alfredo Palacio.

Correa recalled: "In my short time at the Finance Ministry ― around a hundred days ― we showed that one didn't have to do the same as always: submission to the IMF and World Bank, paying off the external debt irrespective of the social debts still pending.

“This created a high level of expectations on the part of the public.”

Correa’s resignation due to differences with Palacio was greeted by protests. Perhaps for the first time in history, the protests were not against a finance minister, but in support.

With a group of close collaborators, Correa decided: “We couldn’t let the expectations that had been raised, the feeling that things could be done differently, end in disappointment.

“We travelled across the country and formed a political movement to secure the presidency. For we saw very clearly that in order to change Ecuador, we had to win political power.”

In 2006, Correa ran for president on a campaign that, he said, was “proposing a revolution, understood as a radical and rapid change in the existing structures of Ecuadorean society, in order to change the bourgeois state into a truly popular one”. Correa won in a second round run-off.

Make the bankers pay

One of the first big challenges his government faced was the global economic crisis that hit in 2008.

The crisis was felt in Ecuador through the loss of foreign markets, falling oil prices (the country’s chief export), and a sharp drop in remittances from emigrants, which many Ecuadoreans depended.

Despite this, Ecuador's economy suffered far less than many others. Correa said this was due to "a combination of technical know-how and a vision of the common good ― acting on behalf of our citizens, not finance capital".

“For example,” he said, “we used to have an autonomous central bank, which is one of the great traps of neoliberalism, so that whichever government is in power, things carry on as before”.

“Thanks to the 2008 Constitution, it is no longer autonomous.”

This meant the government could take back its national reserves that were held in overseas banks. Together with new loans from China and obliging private banks to return savings to Ecuador, the government was able to ramp up public investment.

This helped lift Ecuador out of the crisis quicker than any other Latin American country.

The government also enacted other measures to ensure peoples’ needs came before profits. For example, new laws prohibit banks from penalising low-income, first-time home buyers who default on their loans.

The most ambitious move however, which demonstrate how much had begun to change in Ecuador, was the government’s decision to renegotiate its foreign debt.

Correa told NLR: "The cost of the external debt was one of the greatest obstacles to Ecuador's development. At one time, servicing the debt consumed 40 per cent of the budget, three times what was spent on the social sphere ― education, health and so on.

“The allocation of resources demonstrated who was in charge of the economy: bankers, creditors, international financial institutions.”

To turn this around, the government initiated the Committee for an Integral Audit of the Public Debt (CAIC).

“The Commission proved beyond any doubt what we already knew: the external debt was immoral, a robbery. For example, the 2012 and 2030 Global Bonds were sold on the secondary market at 30 per cent of their value, but we had to pay them at the full 100 per cent. When it looked at the contracts, the Commission also found a lot of corruption and conflicts of interest.

“So in December 2008 the CAIC ruled that this debt was immoral, and we declared a unilateral moratorium on those bonds. This was at a moment when we were in a strong economic position ― oil prices were high, exports were growing ― which was deliberate. This meant that the value of the debt dropped, and we forced our creditors to negotiate and sell back their bonds in a Dutch auction.

“We managed to buy back our debt at 32–33 per cent of its value, which meant billions of dollars of savings for the Ecuadorean people, both in capital and in interest payments.

"This freed up a lot of resources which we could dedicate to the social sphere; now, the situation is reversed from what it was before ― we spend three times as much on education, health, housing as on debt service."

Human needs over greed

Correa said: “Now we are reducing inequality, and poverty with it, through a combination of four things.

First, making the rich pay more taxes. We have instituted a much more progressive taxation system, and people now actually pay their taxes ― collection has doubled. “These resources, together with oil revenues and the money saved by reducing the debt burden, can be devoted to education, health and so on.”

The second focus is giving people opportunities by providing free education and healthcare.

“Thirdly, governing the market and improving the labour system.”

Correa said: “The market is a reality that we cannot avoid; but believing the market should allocate everything is a different matter. The market needs to be governed by collective action.

“We are putting an end to forms of exploitation such as subcontracting. We are improving real wages ...

“Around 60–65 per cent of families could afford the basic basket at the start of our mandate, now we’ve reached 93 per cent, the highest in the country’s history.

“We’ve disproved orthodox economic theory, the idea that to generate employment one needs to lower real wages: here the real wage has risen substantially, and we have one of the lowest unemployment rates in the region―just under 5 per cent.

“We’ve also paid attention to the quality of employment, making sure businesses comply with labour laws. While raising wages for labour, we’ve reduced the remuneration for capital.”

The fourth measure, Correa explained, is “distributing adequately our social patrimony”.

Correa said: “We used to give away our oil: before the Palacio government, transnational companies would take the equivalent of 85 out of every 100 barrels and leave us with 15; now we have renegotiated the contracts, the proportions have been reversed.

“Another example: after the economic crisis of 1999–2000, many enterprises which were used as collateral for loans should have ended up in state hands; it was we who finally seized them. In the case of the Isaias Group, owned by the family of the same name, in 2008 we recovered around 200 enterprises.”

The result of these measures has been a marked lowering of poverty and inequality.

This helps explain why, six years after first being elected, Correa looks set to comfortably win presidential elections next March. Recent polls show Correa winning with between 55-60% of the vote.

In distant second is a banker, Guillermo Lasso, with about 15% support.

Ecuador: Correa responds to 'leftist' critics

By Federico Fuentes

November 11, 2012 – Green Left Weekly – Ecuadorian president Rafael Correa counts on a high level of support at home. But internationally, he has been criticed for policies on development, the environment and indigenous peoples.

Tackling these issues in an interview in the September-October issue of New Left Review, Correa raised some important issues for activists in the global North.

Asked about his attitude towards balancing resource exploitation and environmental protection, Correa said: “We cannot lose sight of the fact that the main objective of a country such as Ecuador is to eliminate poverty. And for that we need our natural resources.

“There are people here who seem ready to create more poverty but leave those resources in the ground, or who even see poverty as something folkloric, as if children in the central highlands should keep dying of gastroenteritis and life expectancy should stay at 35.

“That is criminal.”

Criticising what he calls the “infantile left”, Correa said: “It is madness to say no to natural resources, which is what part of the left is proposing ― no to oil, no to mining, no to gas, no to hydroelectric power, no to roads.

“In the classic socialist tradition, I don’t know where Marx, Engels, Lenin, Mao, Ho Chi Minh or Castro said no to mining or natural resources. This is an absurd novelty, but it’s as if it has become a fundamental part of left discourse.

“It is all the more dangerous for coming from people who supposedly speak the same language. With so many restrictions, the left will not be able to offer any viable political projects.”

Correa said: “What we need to do is exploit those resources in the right way.”

Acknowledging that mining and oil extraction has caused major environmental disasters, Correa said: “If we exploit natural resources carefully, it can even benefit the environment, in two ways.

“Firstly, just as wealth harms the environment through energy consumption, so does poverty: I can’t tell a poor family living next to a forest not to cut down the trees. If we reduce poverty, we can conserve the environment.

“Second, there are a series of delusions: that oil destroys the jungle, for example. What does the most damage to the jungle? The expansion of the agrarian frontier. To avoid this we need to create alternative sources of employment and income.”

Such ideas will certainly be seen as controversial within environmentalist circles. But perhaps Correa's most provocative statements were on the question of the global climate change movement.

Correa said: “Some enthusiasts say that with what is happening in Latin America, [global] power relations will be changed from the South. I think this is a mistake: we’re a long way from being able to affect power relations on a global level.

“It is the citizens of the North who are going to change them. This was why there was so much hope raised by the indignado movement [in Spain] and Occupy Wall Street, which were an awakening of the citizens of the First World.

“But only once those citizens have rebelled against the prevailing structures will we descend from rhetoric to actions, so that real commitments can be made to avoid climate change and preserve the only planet we have.”

Indigenous movement

Another area of controversy has been the relationship between Correa’s government and Ecuador’s main indigenous organisation, the Confederation of Indigenous Nationalities of Ecuador (CONAIE).

Correa acknowledges that indigenous peoples have made a great contribution to transforming Ecuador. “This can be seen in the new Constitution in several ways. We now define our republic as a ‘pluri-national’ state, recognising the indigenous communities as fundamental and distinct entities, endowed with distinct rights and status.

“It is also largely thanks to the indigenous communities that nature itself is recognised as a fundamental value in trust to the nation …

“While we insist that we need real development, we do not identify this narrowly with GDP defined in monetary terms, but instead take full account of its costs and consequences at every level, imposing the most stringent controls.”

At the same time, however, Correa said while “some indigenous communities have supported the government, others sometimes opposed it”. He said he hoped “in time such differences will be reconciled”.

Correa gave his opinion on why his government’s relationship with sections of the indigenous movement, in particular CONAIE, have been fraught with conflict.

He pointed to three defining moments in this relationship. The first was during the 2006 election campaign when his party, Alianza Pais (Country Alliance), approached Pachakutik, the electoral arm of CONAIE, to run to a joint slate for president and vice-president.

Correa said: “We did this despite the fact that Pachakutik had been discredited and lost a good deal of support by serving in the 2003–05 government of Lucio Gutierrez …

Despite this, and because we respected the indigenous movements trajectory, we proposed a joint Alianza Pais/Pachakutik ticket for the presidency, headed by whoever would have the best chance of winning the election, to be decided by a national survey on the question ― with the other standing as Vice President.

“They refused, and some were very hostile to us because of this offer. It’s been suggested that, after their experience with Gutierrez, there was opposition in their ranks to supporting any candidate outside their own movement; that might be true, but I think the leadership was also moving farther away from its base, and it knew that working with us would mean opening up the political agenda.”

In the end, Pachakutik ran its own candidate for the 2006 presidential election, winning about 2% of the vote.

Correa said the second moment came in in 2007-08 in relation to the elected Constituent Assembly, charged with drafting a new constitution.

Winning a majority of the seats in the assembly, Country Alliance made clear its support for the indigenous demand of declaring Ecuador a “plurinational” state.

“This did not mean, however, committing ourselves to a fragmentation of the state or an end to national unity. The idea has always been to recognise diversity and difference in order to be more integrated and cohesive as a nation, not so as to make room for any kind of territorial autonomy that weakens the national state.”

Resource control

Another debate in the assembly was whether communities should have to give prior consent before any resource extraction could occur in the area.

Correa argued: “Natural resources are public goods, public property, and we cannot allow small communities, however great their historical legitimacy, to have the last word on their use.”

In the end, “prior consultation” was included in the constitution, which was approved with 63% support in a referendum. Pachakutik supported the new constitution in that poll.

The third moment came after the 2009 elections. Despite forging alliances with different indigenous groups, Country Alliance was unable to come to any agreement with CONAIE or Pachakutik.

These tensions led to a complete breakdown in dialogue.

“In the debates on the water law, the mining law and other bills, it was becoming impossible to debate with Pachakutik. Their view is fundamentalist and strongly influenced by foreign NGOs, who provide a distorted ecological discourse that fails to take into account the great needs of the Ecuadorean people …

“In the case of the water law, we were agreed on 80 per cent of the legislation, but Pachakutik clung to the idea that the state body in charge of running the country’s water supply should be composed only of community representatives ... and water committees.

“What about democratic legitimacy? How can we have a public regulatory body for a sector as important for the country as water without the political presence of the government, of the national state?

“There are conceptual differences here: we are not corporativists; the indigenous leaders often seek to have institutions which they can control, but we go beyond this fragmented view of the state.

The upshot was that Pachakutik, lining up with the right opposition in the Assembly, did not allow the water law to be approved, and today we still have the same law that was passed by the neoliberals in the 1990s ― one that doesn't allow the state to regulate the water sector.

Correa said this was not the only time Pachakutik sided with the right in parliament.

Others include: opposing Ecuador’s entry into the Bolivarian Alliance of the Peoples of Our Americas (ALBA), an anti-imperialist bloc led by Venezuela and Cuba; not supporting the establishment of the sucre as a regional trading currency of ALBA; and abstaining on “a vote condemning the scandalous ruling recently handed down by the ICSID [World Bank dispute tribunal] that Ecuador should pay more than $2.2 billion to Occidental Petroleum”.

Coup

Correa pointed out Pachakutik even supported a coup attempt against his government in 2010. “Finally, during the attempt to destabilise our democracy made on 30 September 2010, the indigenous leadership called on its base to mobilise against the President and his democratic and constitutional mandate.

“It is not easy to have a dialogue in these conditions.”

Despite these differences, Correa maintained: "We have always treated the indigenous movement as equals ― none of this infantilising of indigenous actors or treating them as victims, as NGOs and a certain paternalist left have always done ― which means that I can sometimes be tough with them, as I am with anyone else ...

“The indigenous problem is an issue for Ecuador as a whole, and all public institutions should contribute to solving it, regardless of whether they are run by indigenous people or not.

“From that point of view we have made great strides towards the inclusion of the indigenous in education, universities, health, among other sectors. The largest reductions in poverty we have made have been among the indigenous.

“But there is still much to be done.”

[Federico Fuentes is a Sydney-based Socialist Alliance activist. With Michael Fox and Roger Burbach, Fuentes is the co-author of the forthcoming book, Latin America's Turbulent Transitions: The Future of Twenty-First Century Socialism.]