Welcome To Washington Mr. Ecuadorian President

Memorandum to the Press
03.05
For Immediate Release
Wednesday, February 12, 2003

Welcome To Washington Mr. Ecuadorian President

- Visiting President Gutierrez will find that one cannot be all things to all people.
- Going back to the Peron presidency in Argentina, Latin American populist presidential candidates, once in office, often turn out to be more responsive to Washington than to their own people.
-Gutierrez must walk that fine line between fulfilling his campaign promises while not alienating the international financial community – no easy task.
- Ultimately, Ecuador’s war against poverty must take precedence over Washington’s war against drugs.

President Gutierrez, in the midst of his current state visit to the U.S., must remember that the people he serves at home are at least as important as those he is addressing in Washington and New York. During his U.S. visit he is seeking new investments, debt relief and access to the $200m IMF line of credit he just signed onto, an enhanced level of bilateral trade and an abatement of poverty that is affecting upwards of 80% of the country’s population. In return, he promised President Bush, National Security Advisor Condelezza Rice and Secretary of State Powell that he would be a loyal ally in the international struggle against terrorism and drug trafficking.

Lucio Gutierrez came to office as an avowed populist. He campaigned on a platform calling for a total mobilization of all of Ecuador’s institutions in the fight against poverty that affects four out of five Ecuadorians, the neglect of the indigenous community, the environmental damage done by foreign oil companies, and the unfair trade and financial policies imposed by the rich nations.

In the short period since he assumed office last month, Gutierrez has not had an adequate opportunity to show his bona fides to the 54% of all of those voting who elected him president last November. But the populace is waiting for him to raise the banner against the inequality and endemic corruption that has characterized contemporary Ecuador, and against which he pledged he would do battle.

At the present time, many of those who spearheaded Gutierrez’s race are increasingly apprehensive that the new president is spending too much time with IMF representatives and officials from foreign oil companies discussing the awarding of oil block concessions to its land-based and offshore prospective deposits, and not enough time to the concerns of the humble strata of Ecuadorian society, who actually elected him.

When Lucio Gutierrez assumed the presidency of Ecuador on January 16, there was a great sense of expectation, particularly among Ecuadorians from more modest backgrounds, who felt that the new president would provide a new start for a country, which for years has suffered the malaise of poor political leadership and economic performance. This optimism seemed reasonable, since the former military colonel, who led a coup against the unpopular presidency of Jamil Mahuad in 2000, presented a forceful plan for reforming the nation. Upon his inauguration he pledged to focus his efforts on – as he repeatedly promised during his campaign – confronting corruption, de-polarizing the judicial system and other institutions, and reducing the fiscal deficit of $2.2 billion inherited from the former government of Gustavo Noboa, as well as tackle the heavy problem of Ecuador’s combined public and private debt of upwards of $15 billion. As Gutierrez’s first month as Ecuador’s top man draws to an end, however, he faces mounting opposition from the very people who helped usher him into the presidency. They are asking if he is abandoning them, just as Henrique Cardoso forsook Brazil’s poor by adopting neoliberal measures.

Unfulfilled Expectations
Many of Gutierrez’s opponents have criticized his economic plan over the past few weeks. The first measure the new president approved was an economic austerity package, based on price hikes, which raised the cost of petrol 56 cents, to US $1.98 a gallon and prices on lower grades from 35 cents to $1.47 a gallon. The measures also included a 10 percent tax on luxury vehicles. Although the measures are expected to bring $600 million to state coffers, nearly a dozen lawmakers from Gutierrez's governing coalition condemned them, while other groups, including labor unions, immediately began collecting signatures to repeal such an increase. Additionally, the measures led to a number of student protests demanding reductions in bus and taxi cab fares, which had increased significantly as a result of the hike in gas prices.

Gutierrez also has come under criticism for rescinding campaign promises to avoid market-oriented policies that his financial advisors drafted in order to successfully secure the $200m IMF loan. By taking tight fiscal steps he was able to achieve a preliminary agreement with that body on February 1. This irritated members of the indigenous movements, a part of the government alliance. Leonidas Iza, the president of the Confederation of Indigenous Nationalities of Ecuador (CONAIE) bitterly observed that the arrangement with the IMF "goes back on" Gutierrez’s campaign promises.

Nepotism and Cronyism
As Gutierrez took time out to organize his new government, critics attacked him for appointing relatives and retired military officers who were close to him to key positions in his administration. But, he lashed back at his critics, vehemently emphasizing that all of the military men who are holding posts in public administration are qualified: "They have my full confidence. They are electronic, commercial and mechanical engineers who hold doctorates and masters degrees." The charges of nepotism mainly spring from the appointment of his brother-in-law, Police Colonel Napoleon Villa – who played an important role during the campaign – as provincial director of Patriotic Society (SP) in the state of Pichincha. Villa also was awarded the position of president of the Solidarity Fund (FS), which brings together several companies that manage state resources, such as the telecommunications and energy companies. His sister Janeth, holds a job that "is ranked as a minister without an official portfolio" – an unpaid post. Additionally, several days ago, Gutierrez named one of his acquaintances, General Octavio Romero to the army’s top post, and Vice Admiral Victor Rosero to head the navy. These positions were filled directly after the officers who initially had been given the posts resigned after only having been two days in office.

Challenges and Future Prospects
Gutierrez, in many cases will have to rebuild some of the country’s basic institutions, especially the armed forces. When he assumed power, 17 senior military officers who had outranked him had resigned their commands rather than serve under him. In most cases, those officers were his superiors when he led the coup – that had been supported by over 5000 indigenous peoples – in 2000, which overthrew the reigning Mahaud government. The resignations of these officials can be attributed to their fear of possible retaliation from their new chief executive.

In spite of a series of unpopular measures and actions, Gutierrez has delivered on some of his campaign promises, namely his pledge to fight against corruption. Part of the austerity package includes cuts in governmental salaries and restrictions on the use of government vehicles by bureaucrats. To prove his commitment to the latter, Gutierrez has even jogged from his home to the presidential palace. Escorted by an entourage of police and bodyguards, he has captured the attention of the public, as crowds cheered him on his run.

On February 11, Gutierrez traveled to Washington, where he met first with President Bush, and then with a series of high-level officials, including the U.S. Treasury Secretary. One of the main issues on Gutierrez’s agenda was the extradition of bankers who fled the country after failing to make good on their promises to repay investors after a number of private bank failures as a result of embezzlement, signifying his resolve to take steps to root out white-collar crime that has angered so many middle-class Ecuadorians.

Gutierrez now will have to face the difficult challenge of maintaining his supporters’ confidence in him. His situation is certainly not unique; populist presidents rarely are able to maintain their previous high level of support once they succumb to the local economic realities and the need to harmonize their policies with IMF prescriptions. To this end, while Gutierrez has to establish a good relationship with the international lending agencies he still must be able to pacify his supporters by demonstrating that his reforms are helping the poor. He may be able to accomplish what few other populist figures have been able to do – to end up where they started, without having to sacrifice their basic convictions and commitments to their supporters.

This analysis was prepared by David Isacovici and Grant M. Nulle, Research Associates at the Council on Hemispheric Affairs. Issued Wednesday, February 12, 2003.

The Council on Hemispheric Affairs, founded in 1975, is an independent, non-profit, non-partisan, tax-exempt research and information organization. It has been described on the Senate floor as being “one of the nation’s most respected bodies of scholars and policy makers.” For more information, please see our web page at www.coha.org; or contact our Washington offices by phone (202) 216-9261, fax (202) 223-6035, or email coha@coha.org.

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