Ecuador Gets Chavez'd

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

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

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

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

I showed President Palacio the World Bank documents. He knew their terms well. "If we pay that amount of debt," he told me, "we're dead. We have to survive." He argued, with logic, "If we die, who is going to pay them?"

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

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

Given the oil windfall, Palacio sees no need to follow Gutierrez's path to economic asphyxiation. "It is impossible that they condemn us not to have health, not to have education," he told me. He made it clear that handing over 90 percent of his nation's new oil wealth would not stand.

That's not what the Bush Administration wanted to hear. Besides Condi's attack, Palacio got the full "Chávez" treatment from the New York Times, which ran the headline "Ecuador's New Chief Picks Cabinet; Leftist in Economic Post" after Palacio's new finance minister announced Ecuador would put social-services programs first ahead of payments to bondholders. The Times said Palacio's views "ruffled some feathers" (whose, we don't know) and that foreign powers questioned the "legitimacy" of his right to office. Palacio smiled, "They don't say which ones."

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