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Published: September 8th 2009
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Rafael Correa on his election poster, talks about this "beautiful revolution." Ecuador is undergoing a revolution—a peaceful one without saber and musket—but a revolution nonetheless.
Correa is a Rhodes' Scholar economist. He taught economics, I believe, at the University of Illinois before returning to Ecuador and entering politics. So the thrust of the Correa revolution is based on what he knows… economics- on changes in the economic system and the redistribution of wealth. Here are a few samples of landmarks along the road of the Correa revolution.
BRINGING MONEY TO ECUADOR
Keeping money in Ecuador so it can be spent in Ecuador, by Ecuadorians, for Ecuadorians, seems to be the first order of business.
One of the things Correa has done to hang on to money is to default on interest when due on a loan from the World Bank.
Another thing has been to borrow money from China. China has loaned Ecuador $1 billion which Ecuador says it will repay with oil. And when the first billion is spent and oil delivered, China is committed to a second loan of $1 billion.
A third thing has been to raise import duties, a whopping 30-35% on selected items. Imported booze now costs 30% more. Tequila from Mexico is $20 per 3/4 of a liter.Cars identical to those assembled in Ecuador, but imported, cost 35% more.(As a nod to the environment, Prius's have no import tax.)
A percentage of the cash, owned by Ecuador banks, but on deposit for reasons of security through diversification in foreign banks, has been ordered to be repatriated.
Suppose you're rich, with money in a bank in Ecuador. And suppose you want to buy Jack and Katie’s house in northern California (Please!). You can do that. You can withdraw your funds from an Ecuadorian bank for use anywhere in the world— but it will cost you a 2% tax to take your money out of the country.
SPENDING MONEY IN ECUADOR
Ecuador's agrarian economy has been dramatically reduced. Hills once light green in color for miles because of the sugar cane planted there have been returned to their natural cover and dark green and brown color. King Banana has long since been deposed. Cocoa, flower and shrimp have saturated the market demand. Deforested lands are being systematically reforested with commercial quality timber, ie. Douglas fir, but the cry of "timber" has yet to be heard.
What's left (besides oil?) Tourists! To facilitate an increase in tourism Ecuador is spending hundreds of millions on a new international airport in Quito, one of Ecuador's two major gateways.
We flew form the Guayaquil airport to the Loja/Catamayo airport and admired its contemporary efficiency and beauty.
New roads now connect the road from Catamayo to Loja, Catamayo to Vilcabamba, and Loja to Vilcabamba. A new road connecting Quito to the Pacific Ocean will, when completed, reduce driving time from 6 to 2 hours. A concrete highway is being poured from Manta south to Salinas, and a four lane highway is being built from Manta north to Bahia. The beautiful Bahia peninsula on the Pacific is being connected by a bridge to San Vicente and the San Vicente airport. The San Vicente airport is destined to be a next major portal of entry. Correa has said that second only to building the new airport in Quito, the San Vicente to Bahia bridge is the most important economic undertaking in Ecuador.
"SHARING THE GOOD TIMES"
Ecuador, approximately the size of Nevada or Colorado, is in the process of being transformed into a tourist playground and expat haven. Guess what tourists and expats bring with them? Money and lots of it. And Correa appears to be intent on distributing it to the 13-million people who live here.
A new national minimum wage has been set at $208.40 a month. The woman, who, with her husband, maintains the grounds and buildings where we live, has, within the past year received an increase in pay from the landed gentry landowner from $25 per month to $208.40 per month. Her husband, who, at age 65 has more capacity for hard labor than anyone I've ever known, is now paid $400 a month, an increase of two times from his prior pay of $200 a month. The price of unleaded gasoline—the kind the people buy - is fixed at $1.48 a gallon. Super gasoline- the kind required for luxury automobiles driven by the rich- has just been increased from $1.64 to $2.00 a gallon.
The growth rate for Ecuador for 2009 was budgeted at 1%. It looks as if it’s going to come in at 2%. Growth rate for 2010 is budgeted at 3.4%. Inflation at 3.5%. Looks like a good year coming.
The national argument for redistribution of wealth— pushing the money down—is that security, peace, and happiness will prevail and the government will remain stable. Some call it socialism; others believe that the redistribution of wealth is not only the right thing to do, but that it will prevent a bloody revolution.
Ecuador looks over to Venezuela and sees the freedoms and successes of the capitalistic free enterprise system being systematically squashed by the heavy hand of autocratic socialism. Ecuador looks across the border at its neighbor Columbia and sees the development of the insurgent movement (called FARC)— sees the threat to the stability of the democratically elected administration—and says "Not here. We’re going to stop it before it starts. We’re going to put our people to work and let them share in the benefits of their work."
And it appears to be working. The landed gentry landowner, whose family still owns thousands of acres in Vilcabamba and Loja says that every taxi driver who makes the trip between Loja and Vilcabamba, gives Correa credit for the road.
Asphalt guarantees votes.
Ecuador has a long—almost 200 year history—of political instability. In one 25-year period, 1925-1948, Ecuador played Presidential musical chairs by seating and unseating 22 presidents. With the growth of the economy and the redistribution of wealth under Correa, my guess is that Ecuador won't be playing Presidential musical chairs again anytime soon.
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