Ten years ago President Rafael Correa was elected President in Ecuador and, as in many Latin American countries in recent years, there’s been a tremendous shift in the country. He has remained enormously popular throughout his time in office, winning his last two elections in the first round, winning the most recent vote by some 30 points. Now on February 19 the country is holding votes for a new president, the national assembly and a pioneering referendum on the scandal of tax havens.
As we go to press, the progressive candidate Lenin Moreno is leading in opinion polls, although there is great concern at the level of US intervention into the country and media misrepresentation that are no doubt seeking to bring the country back into the US’s orbit. It is incredible to think that in Ecuador’s process of progressive change (known as the citizens’ revolution) – at a time when we are constantly told about the inevitability of cuts and austerity – spending in Ecuador on healthcare and education has doubled.
Upon Correa’s election the rich were forced to pay their taxes for the first time in the country’s history, and as a result government investment initially helped achieve economic growth of 4 per cent year by year. Even with extraordinarily low oil prices, the strong dollar and the devastation of a huge earthquake in April 2016, which pushed the country into recession, the government maintained funding for public services. Crucially, the Ecuadorean government chose to protect those most in need and to continue investing in the economy which is now once again growing again.
As Correa leaves office this year, for the first time in Ecuador’s history, extreme poverty is in single figures at less than 8 per cent, down from 16.5 per cent. Ecuador also has one of the lowest unemployment rates in the continent. Yet prior to 2006 — as part what has been termed the “pink tide” in Latin America — Ecuador was a very unstable country, perhaps one of the most unstable in the region throughout the 1990s and 2000s.
It had seven presidents in 10 years, accompanied by a series of aggressive neoliberal economic packages, with a resulting sharp increase in inequality. This was most clearly illustrated in a major banking crisis in 1999, when as a direct consequence of deregulation about half of the banking system went bust overnight. People’s economic assets were frozen and many never had their assets returned. Indeed, in this period of neoliberal crisis in Ecuador, life got so bad that almost two million people left the country during the period of crisis, out of a population of 13.5m.
So how has such a dramatic change in the situation facing the country arrived, and what can we learn from it? The key point to note is that in contrast to the disastrous neoliberal packages much of the world has seen in recent years, there has also been a strong emphasis on public investment.
In 2006 public investment was little more than 4.2 per cent of GDP. Under Correa it has got close to 16 per cent. This has been a contributor of both growth and redistribution, and interestingly, has not crowded out (but instead complimented) private sector investment. A particularly innovative policy that should receive attention from all progressives internationally has been not allowing companies to pay out dividends on shares until they have paid their workers the living wage.
A similar innovative policy lead is also being taken now by Ecuador on tax havens, as alongside the elections on 19 February, it is set to become the first country in the world to hold a national referendum about tax havens.
Alongside the Presidential and National Assembly elections, the people of Ecuador will be asked: Do you agree that, for those holding a popularly elected office or for public servants, there should be a prohibition on holding assets or capital, of any nature, in tax havens? Politicians and public servants will have a year from the referendum date to repatriate their money or go!
This is a big issue for Ecuador, some $30 billion dollars, a sum equivalent to one third of Ecuador’s GDP, is in tax havens – equivalent to $2,000 for every Ecuadorian citizen.
This is certainly an issue on which we need global action – Oxfam calculates the sum hidden by wealthy individuals in tax havens across the world as 7.6 trillion US dollars, a figure not including the activity in this area of multinational corporations. In short, and a successful referendum on action on tax havens will confirm this, in recent years Ecuador has shown what can be achieved with the political will to put people first by pursuing an agenda that prioritises investment over cuts.
With President Correa leading the regional backlash against Trump’s Presidency in recent weeks, it will be interesting to keep an eye on Ecuador’s votes this month – let’s hope Latin American unity strengthens and we not see a return of the US-backed elites in the region in the years ahead.
For information, there will be a session on Ecuador after the elections with former Labour MP Chris Williamson at the March 11 day school hosted by the Venezuela Solidarity Campaign on Trump’s US and Latin America from 11am-5pm at the ITF, 49-60 Borough Road, London, SE1 1DR. More info and register at bit.ly/TrumpVen