Ecuador
- Total external debt: $17.1 billion
- Total external debt payments: Gives $4.1 billion each year to the rich world in debt payments.
- Population: 13.2 million
- Percentage of adults who can read and write: 91%
- Average life expectancy: 74.7 years
- HIV prevalence: 0.3 %
- Total health spending: 2.2 % of GDP (2004)
- Total spending on debt service payments: 11.4% of GDP
- Annual GDP: $36.5 billion
(Statistics from World Bank, 2005, and UN Human Development Report, 2005)
DROP THE DEBT FAST
Ecuador is the focus of the Drop the Debt Fast on Saturday 26 April. On this day in 2007 the World Bank's representative in the country was expelled.
Background
Ecuador is in South America situated on the Equator and borders Peru, Columbia and the Pacific Ocean. Ecuador has a varied landscape including flat coastal plains, highlands in the central areas-part of the Andes, and vast jungle areas.
Political History
Ecuador was once a part of the ancient Inca Empire, before the Spanish conquest which began in 1533. Quito was an important seat of the Spanish government during the Colonial era. Ecuador joined the Republic of Gran Columbia, and separated from this to become a separate republic in 1830. More recently Ecuador has suffered from political instability, including corruption within the government and a troubled economy. In 2006, President Rafael Correa was elected on a popular left-wing reformist agenda, including pledging to tackle the country’s debt burden. On 26 April 2007, Correa expelled the country’s World Bank representative in a dispute over debt repayment. Correa had demanded that the World Bank explain why it suspended a $100m loan in 2005 while he was economy minister. He says it was in retaliation for his reforms of the country's oil sector. The World Bank says Ecuador violated the terms of the loan by dissolving an oil fund earmarked to pay foreign debt.
Where has the debt come from?
Long years of instability and mismanagement by former regimes, along with irresponsible lending by international creditors, left Ecuador with debts of $17.1 billion. One of President Correa’s election pledges committed the new Government to reduce the country's external debt service burden. In July 2007 Ecuador launched the first government-backed debt audit, to investigate the debts of the country and to determine where there may have been financial irregularities or irresponsible lending. One example of such lending is the Italian financing of a hydroelectric plant program. Italy sold three hydroelectric turbines to Ecuador when only two were needed, and this was despite evidence that the hydropower plant was not viable and had destroyed both the local environment and local communities. The debt audit commission is due to report its findings in July 2008.
Debt cancellation status
Ecuador is officially classed as a lower middle-income country by the World Bank. It is therefore not eligible for the Heavily Indebted Poor Countries initiative or the Multilateral Debt Relief Initiative. Nor is it eligible for additional debt relief from the UK or other bilateral donors.
The New Economics Foundation calculates that Ecuador requires 64% debt cancellation in order for the government to meet the basic needs of its citizens, such as health, education and infrastructure, without taxing those living below an ethical poverty line of $3 a day.
Further information and sources:
Jubilee Research, CADTM
Last updated: April 2008
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