Rafael Correa meets with the Mayor of Seville, in Spain. And that’s not all he’s up to over there:
Rafael Correa arrived yesterday afternoon at Pablo de Olavide University in Seville, accompanied by crowds.
He came to tell how Ecuador emerged from its debt crisis or, as he puts it, “the long neoliberal night” that submerged his country in the 1990s: the joint actions of insatiable bankers, corrupt politicians, and governments blindly obedient to the deregulatory formulae of the IMF and World Bank.
It seemed as though he was describing the situation in Spain and Southern Europe, because the description of the process was almost a carbon copy. So as not to provoke diplomatic conflicts, he warned at the outset of the conference that he “did not come to give advice to the government of Spain as to how to get out of the crisis, but to describe what happened” in his own country.
The conference room was crowded with students, and three more auditoriums in which they followed his speech by videoconferencing. Even so, the crowds overflowed the venues.
Outside, on the campus, a great mass of students who had been unable to get in, were yelling as the conference went on: “Bring out Correa!”
Throughout the speech, Correa avoided referring to Spain directly.
The president of Ecuador dated the origin of his country’s economic problems to the 1970s, in the middle of the oil boom. In that period, Ecuador’s economy grew by 10% annually, faster than China at the time. So, when there was an excess in liquid assets, bureaucrats from the IMF and World Bank began to appear in Quito, preaching aggressive indebtedness. The country began to buy compulsively from the exterior, all sorts of goods, and of course, highly expensive armaments as well.
In 1982, Ecuador could not pay its debt, and the situation exploded. Therefore, Correa said, “the financial logic of the IMF, which prioritizes the payment of the debt above all, came into play”. Successive Ecuadorian governments felt they had to go into debt again and again, just to pay the interest, which kept accumulating, on a debt that also kept on growing.
“The objective of the economy became the payment of debts of the state itself, and of the banks, while the population grew poorer,” added Correa, to fervent applause from the students. “It was the same infernal circle in which Greece and Portugal are now,” said Correa, without mentioning the host country of Spain.
In Ecuador, the president emphasized, “the private internal debt of the banks was paid using external loans, but at the cost of indebting the state.” Again, he did not mention Spain. But he recalled that two years ago, during a visit to Portugal, he advised that government of the risk of the same thing happening there.
The next step Ecuador took is well known: “Then came the privatizations, the deregulations, social spending cuts, all preached by the Washington Consensus, the neoliberal bible for Latin America.” (Something similar to what Berlin and Brussels are now preaching for Europe.)
“They imposed laws on us,” said the president, “which they said would spur competitiveness and flexibility at work, the same which were used to exploit the workers.” The students’ applause and enthusiasm grew. “They demonized public spending when it was to pay the teachers, but not when it was for buying weapons.”
In Ecuador, in the year 2000, 16 banks failed.
“So the politicians, who didn’t represent the citizens, but the economic powers, did everything they could to make the people pay for the crisis.” Again Correa took great care not to mention Spain, but the students in the four rooms applauded wildly.
Correa said that shortly before the collapse, the government put i place the Deposit Guarantee Fund, which would not have been a bad idea, if it had only not been to cover the losses of financial entities that failed immediately afterward. “That’s how they socialized the banks’ losses.”
The Ecuadorian president still made no comparisons with Spain.
The seizure of deposits in Ecuador was known as the “corralito”. It was a prohibition on the part of the government to prevent citizens from using the cash they had in the bank. Then came the dollarization, the suicides (“we came to know a new phenomenon — youth suicide”), and the emigration of thousands upon thousands of Ecuadorians. (Some of whom were present at the conference).
Correa openly criticized the independence of the European Central Bank, “which is not doing what is necessary for Europe to emerge from the crisis”.
“The idea that the economy is not political is not founded in serious analysis, and it’s stupid to argue that the technocrats who dictate are making decisions without concrete political interests, as if they were celestial beings who are not contaminated by earthly evil.”
Then Correa addressed the students, and told them: “The international financial bureaucracy, when it makes decisions, isn’t thinking about solving your problems, it’s thinking of the payment of the debt.” And he said it with the elegance of making the subject the international bureaucracy, not local politicians.
But he was more direct in referring to a sign he had seen in Seville this morning, reading: “People without homes and homes without people.”
“If we follow the logic of financial powers, it will come to the worst of all possible worlds, one in which people have no homes, and the banks will have houses they don’t need.”
The evictions are inhumane, Correa said, and “it’s illogical that someone who loses a house by not being able to pay it off still remains indebted for life.”
The president explained that when he came to power in 2007, he took several immediate measures: eliminating the hegemony of the Central Bank, auditing and restructuring the debt, eliminating illegitimate debt, and buying back debt bonds at 35% of their face value. Later he paid off the rest, “to get free from the conditionalities of the IMF, like Brazil or Venezuela.”
Correa finished up by recalling that “I expelled the World Bank mission from Quito, and for six years the international financial bureaucracy hasn’t come back to my country. Now we are better than ever.”
I can well imagine the applause he must have gotten from the Spanish students for that. Half of all young Spaniards are currently out of work thanks to the international financial bureaucracies that El Ecuadorable was referring to. The former poverty of Ecuador, and the validity of Correa’s solutions to the conditions that created it, would not have been lost on them…even though he never mentioned Spain directly.
As for the cancellation of debt by buying back debt bonds for a fraction of their face value, this is a strategy now being used by the Occupy movements of the United States on a smaller scale, to cancel medical debts and help people keep their homes rather than losing them to bankers and debt-collection agencies. How much longer before it becomes a large-scale strategy for governments in Europe and North America?
Or in other words: How much longer before we all elect Ecuadorables of our own?