The fast approaching February elections will decide whether Ecuador continues on a path of social progress and development or reverts to old patterns of inequality and exploitation, says Ken Livingstone.
THIS has been a big week for Ecuador. The country took on the presidency of the influential G77 and China group of developing countries and has marked 10 years of the Citizens’ Revolution, the name given to the change that has taken place in the country since President Rafael Correa took office on a wave of popular protest following decades of brutal neoliberalism.
Additionally, campaigning got into full swing ahead of elections on February 19 for a new president, the national assembly and a pioneering referendum on the scandal of tax havens.
Why is this important? Well, Ecuador’s path to a thriving, more equal society — in the face of determined right-wing opposition and US intervention — has a lot to teach us on the left.
The extent of Ecuador’s transformation is astounding. President Correa inherited a hugely unequal society with a super-rich elite dominating an economy heavily dependent on the export of oil and commodities to richer countries and reeling from a devastating banking crisis which led to the replacement of their sovereign currency by the dollar.
The crisis was so grave that between 1998 and 2003 close to 2 million people, out of a population of 12 million, left the country in search of a better life.
Huge political turbulence saw seven presidents in 10 years.
Ecuador lacked basic sovereignty — it hosted the US’s largest air base in the region, contracts with multinational oil corporations siphoned out wealth and debt repayments — from illegitimately agreed international loans — overshadowed public spending.
In contrast to this, the achievements of the last decade are a clear example of what can be achieved with the political will to pursue an investment, not cuts, agenda.
I know from my time as mayor and the Greater London Council days that investment in infrastructure can make a massive difference to people’s lives and in Ecuador a strategic national plan to meet basic needs and change the fundamental basis of the economy has produced extraordinary results, with the proportion of GDP going to public investment in services and productive infrastructure tripling.
Poverty is down 30 per cent, inequality has been reduced, access to healthcare is universal. The country is spending a larger proportion of GDP on higher education than any country in the region or the Organisation for Economic Co-operation and Development (OECD) average. And investment means Ecuador is approaching 90 per cent renewable electricity.
So what can we learn? The standard narrative is that advances in Latin America over the last decade were just down to a commodities boom. Ecuador is a clear example of how that is not true. Commodities booms in the past have not given rise to this kind of redistribution, nor the modernisation of essential infrastructure.
A fundamental reason for this is that a new social contract has been enshrined in a new constitution agreed following a referendum. This gave a mandate to set about democratising the economy with bold moves — cancelling a huge proportion of the external debt, renegotiating oil contracts with foreign multinationals, forcing the banks to return a large proportion of their capital to the country and transforming the tax system tripling its revenue — not because of a huge rise in rates, but because of more effective tax collection.
All of these structural changes have been crucial in building resilience because this year Ecuador has been hit by a perfect storm.
In April 2016 a devastating earthquake hit — the cost of reconstruction has been estimated at over 3 per cent of GDP.
Oil and commodity prices hit extraordinary lows-shrinking the national income. And the dollar strengthened, making exports uncompetitive and imports expensive. All of this resulted in Ecuador going into recession after years of impressive growth. But, in contrast to the experience of austerity in much of world, the economy is back in growth now and some of the worst potential effects have been avoided thanks to reforms made to protect the majority rather than punish the poorest.
The challenges facing Ecuador now are the continued stranglehold of the old ruling elite on parts of the economy and their abuse of overseas tax havens — an estimated £24.4 billion, a sum equivalent to a third of Ecuador’s GDP, has been siphoned off — robbery on a grand scale by multinationals and the super-rich.
In response, President Correa has called a groundbreaking referendum, known as the Ethical Pact. People will be asked to decide if politicians and public servants should be barred from holding office if they hold assets in tax havens. Those affected will have a year to repatriate their assets.
The referendum is one of the boldest actions against tax havens since the Panama Papers leak and should be applauded by anyone committed to tax justice and a fairer economy, which of course is the key foundation of the Jeremy Corbyn-led Labour Party here.
So Ecuador now faces a choice between two visions — a continuation of moves towards social and economic fairness, or a return to hardline neoliberalism and domination by a small elite at the behest of the US.
Currently, the governing party’s candidate Lenin Moreno is ahead in the polls, with a series of right-wing candidates trying to close the gap.
The leading opposition candidate Guillermo Lasso has defended his own use of tax havens and pledged to slash taxation and reverse media reform laws that prevent bankers from also being media moguls. Ecuador will therefore be an interesting country to watch for progressives, as we see if US President Donald Trump’s crude hostility to Latin Americans will propel the region into greater unity or strengthen the arm of the elites in their desperate and often undemocratic attempts to return to power.
First published in the Morning Star