Tuesday 30 September
2008, San José, Costa
Rica
ECUADOR:
Correa May Cancel
Payment of Some
"Illegitimate" Debt
By Kintto Lucas
QUITO (IPS) - The
day after the new
constitution promoted by
his government won 63
percent support in a
referendum, according to
the preliminary returns,
Ecuadorean President
Rafael Correa said
Monday that he may
cancel payment of some
loans, but that the
country would not
default on its foreign
debt.
A committee set up by
the Ecuadorean
government to audit the
country’s public debt
has concluded that the
loans contracted by the
state between 1976 and
2006 benefited the
financial sector and
transnational
corporations, often to
the detriment of the
country’s interests.
The results contained in
the committee’s final
report, announced Friday
by Correa, will be taken
into account in the
centre-left government’s
efforts to restructure
Ecuador’s 13.5-billion
dollar public debt.
According to the report,
the committee, CAIC,
uncovered documents
which demonstrate that
public debt contracted
by previous
administrations from
multilateral lending
institutions, foreign
banks and developed
countries was plagued by
irregularities and
possible corruption, and
was often based on
unfair terms, aspects
that made it
"illegitimate."
The documents show that
the debt was used as an
instrument to extract
economic and
environmental resources
and undermine the
country’s national
sovereignty and
institutions, says the
committee’s report.
The deputy chairman of
the CAIC, Ricardo
Ulcuango, told IPS that
creditors, in alliance
with several previous
administrations, imposed
conditions that had
serious economic, social
and environmental
impacts.
Only 14 percent of the
money from the loans
went into social
projects and services
like expanding the piped
water supply, the power
grid and
telecommunications, or
building roads, while 86
percent merely went
towards paying off
previous debts.
According to Ulcuango,
the process was not
transparent, and the
loans generated
dependence because in
order to service the
foreign debt, the
country was forced to go
deeper and deeper into
debt.
The investigation
revealed the mechanisms
used to contract foreign
loans, the pressure
brought to bear by the
creditors, the
obsequiousness of
government officials and
the reluctance to
establish clauses in the
contracts designed to
protect the country’s
interests, said Ulcuango.
In the 30-year period
studied by the
committee, the Attorney
General’s Office merely
yielded to creditors’
demands and
requirements, rather
than defending the
state, he said.
The CAIC report says
that basic principles of
international law were
violated, such as
contractual equilibrium,
good faith, the ban on
usury, and environmental
law, as well as
international
conventions and domestic
legislation.
The aim of the
investigation was to
show, by means of
classified documents,
the mechanisms used by
creditors, and
demonstrate that the
process of indebtedness
was similar to that of
other countries.
The decision not to pay
off certain debts is
exclusively up to
President Correa, who
will decide what is
best, in accordance with
Ecuador's ability to
pay, political
considerations, and the
support that he could
obtain in whatever
action he settles on,
says the report.
Argentine expert
Alejandro Olmos,
chairman of the CAIC
committee, told the
Ecuadorinmediato.com
on-line publication that
the foreign advisers
hired by previous
administrations for loan
negotiations played a
key role in favour of
creditors.
"There is a law firm
that was contracted by
the Central Bank of
Ecuador in 1993, a firm
of lawyers -- I would
say criminals -- that
was simultaneously
advising Ecuador,
Argentina and Uruguay
throughout the entire
Brady Plan
negotiations," and which
received a payment of
750,000 dollars prior to
being hired, for which
no explanation was
provided, said Olmos.
"Not a single piece of
paper was found that
vouches for the payment,
and they were paid again
later too," he added.
The Cleary Gottlieb
Steen & Hamilton
international law firm
"represented Ecuador
from 1993 until just a
few months ago" when,
"in response to a
special request to the
president, their
contract was finally
cancelled," he said.
"In Ecuador they didn't
know that those lawyers
were facing charges in
federal court in
Argentina for having
taken part in that
country's huge debt
debacle and fraud," said
Olmos.
The Cleary Gottlieb
lawyers were hired by
the government of Sixto
Durán Ballén (1992-1996)
to advise it in the
negotiations for the
restructuring of the
debt under the Brady
Plan, even though they
were the attorneys for
Citibank, one of
Ecuador's creditors.
The audit of the
country's foreign debt
focused on the process
of contracting and
renegotiating the public
debt, the origin and use
of the funds, and the
implementation of the
programmes and projects
financed with the
domestic and
international credit.
The committee's mandate
was to determine the
legitimacy, legality,
transparency, quality,
efficacy and efficiency
of the debt process,
taking into
consideration legal and
financial aspects and
the impacts in economic,
social and environmental
terms and with regard to
gender issues and the
country's indigenous
people and different
regions.
The committee examined
the loan contracts
between the public
sector and foreign
governments,
multilateral lenders or
foreign and domestic
private banks between
1976 and 2006.
In each one of the
cases, the committee
determined the
technical, economic and
social viability of the
loan, and studied the
financial and commercial
conditions that were
agreed, the
conditionalities, the
uses to which the funds
were put, and the
individuals who arranged
the loan.
In the process, which
got underway in July
2007, the CAIC had
authorisation to study
all of the public
documents that its
members deemed
necessary.
The committee members
complained, however,
that on many occasions
functionaries in the
Economy Ministry and
other bodies threw
hurdles in the way of
their investigation.
Correa said the
information provided by
the CAIC would be
studied, in order to
decide on what measures
to take. He added that
he reserves the right to
renegotiate whatever
portions of the debt he
sees as necessary and
suitable, or to refuse
to pay loans considered
"illegitimate." |
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