Suturing the Open Veins of Ecuador: Debt, Default and Democracy
In 2008 the Ecuadorian government received a report on the legitimacy of the country's sovereign debt from an international audit commission appointed by Ecuador's current president, Rafael Correa. This concluded that much of the debt was tainted by illegality and illegitimacy and consequently did not merit repayment. Citing the report's findings as justification, the government stopped making interest payments on certain of the country's bonds, but, rather than repudiating them altogether, engineered a successful buyback at a large discount. Having thus reduced Ecuador's external commercial debt burden by about a third, the government is now planning to address multilateral and bilateral loans also adjudged unlawful by the commission.This article examines the robust approach adopted by the Correa administration to tackling Ecuador's public debts, placing it in the context of the country's troubled economic history and contrasting it with previous defaults and debt workouts which largely worked to Ecuador's disadvantage. In doing so, it considers the use which the government has made of the increasingly prominent concepts of odious and illegitimate debt as a means of combating the indebtedness of the South. The conclusion reached is that, regardless of the final position suggested by international law, the realities of international relations are likely to limit the practicality of legal remedies. Nevertheless, the case of Ecuador provides a new chapter in the continuing academic debate regarding unlawful debt.These, of course, are the legal aspects of Ecuador's endeavours to curtail expenditure desperately needed for other purposes. Underlying the legal implications is the reality of an impoverished nation called upon to continue to service or redeem 'debt' that brought no obvious benefit to the overwhelming majority of its people. Debt repayment has promoted impoverishment and also, if indirectly, facilitated devastating environmental degradation.
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Volume (Year): 2 (2009)
Issue (Month): 1 (September)
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- Mathew Bradbury & Matías Vernengo, 2008. "The Limits to Dollarization in Ecuador: Lessons from Argentina," Working Paper Series, Department of Economics, University of Utah 2008_12, University of Utah, Department of Economics.
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