BOLD MOVES

Ecuador 2013 | DIPLOMACY | REVIEW: DIPLOMACY & POLITICS

On the back of a rare re-election, President Correa is looking to secure new trading partners as well as bring stability, investment, and growth to the country.

In October 2012, a general election was announced, sending the country to the voting booths on February 17, 2013. Eight candidates ran for the presidency in total, with the top three being Lucio Gutiérrez scoring 6.73% of the vote from the Patriotic Society Party (PSP), Guillermo Lasso with 22.68% of the vote from the Creating Opportunities (CREO) party, and the winner, Rafael Correa, with 57.17% of the vote from the PAIS Alliance. Correa will remain in power until the next general election in 2017. The PAIS Alliance is a left-of-center party committed to land reform aimed at giving unproductive land to very low-income workers as a means of earning a living. The President has also increased spending to combat poverty and improve healthcare and education. Correa was the first president in nearly half a century to achieve re-election. Toward the end of 2012, Ecuador's Constitutional Court (ECC) voted in, by a six to three vote, a new democratic code, which resulted in the adoption of the D'Hondt system of voting, and the highest averages system for allocating seats in party-proportional representation.

STRUCTURES

Legislative power is vested equally in the government, the president, 28 ministries, and the parliament, a unicameral National Assembly with 124 deputies distributed in 10 commissions and elected for a four-year period. These groups meet throughout the year, except for a recess in July and December. Before 2007, the National Congress of Ecuador was made up of 100 members. However, it was dissolved on 29 November 2007 by the Ecuadorean Constituent Assembly, due to the dysfunctional nature of the institution. Congress was replaced by today's National Assembly of Ecuador, which operates under the 2008 constitution. According to the new constitution, the National Assembly is to be composed of 15 assembly members elected in national districts, plus two members for each province. However, in provinces where the population exceeds 150,000, an extra assembly member is permitted for each additional 100,000 inhabitants.

The National Court of Justice, composed of 21 judges elected by the Judiciary Council for a nine-year period based on a merit basis, exercises judicial power in the country. The president is elected from among the members of the court for a period of three years. Dr. Carlos Ruiz currently holds the position and represents the judicial branch before the state. Ecuador also has a Constitutional Court that exercises constitutional control of situations where constitutional rights are challenged, as well as provincial courts.

Locally, Ecuador is divided into provinces, cantons (municipalities), and parishes. The executive branch currently includes 38 core cabinet members, including coordinating ministries with inter-governmental responsibility and national secretariats. Provincial leaders, or prefects, councilors, mayors, city councilors, and rural parish boards, are all directly elected and answer to the president or the executive branch. Each one of the provinces has an autonomous provincial council, headed by a prefect, who has only a deciding vote in case of a tied vote. The council, which has jurisdiction throughout the province and a seat in its capital, maintains public services, carries out public works, coordinates municipal activities, and informs the central government of budget expenditures. A municipal council, presided over by a mayor empowered to cast a deciding vote in case of ties, is responsible for the government of each canton.

All provincial and municipal officials are elected for a four-year period. Councils at both levels have functional, financial, and administrative autonomy. Their legislative decisions are issued in the form of ordinances.

OLD FRIENDS

In 1991, the US government enacted the Andean Trade Preference Act (ATPA) with four of the main drug producing countries in South America, Colombia, Peru, Bolivia, and Ecuador. The aim of ATPA was to combat drug trafficking and production in these countries by promoting legitimate activities with tariff free exports on certain productions going to the US. In 2002, the program was renewed under the new name of the Andean Trade Promotion and Drug Eradication Act (ATPDEA) and increased the number of products exempt from 5,600 to 6,300. In 2012, Ecuador's exports to the US totaled $10.62 billion, which represented 45% of the country's total exports, making the US its biggest trading partner. Of that number, $242 million came under the ATPDEA, representing 23% of non-oil exports, with products such as canned tuna, flowers, and broccoli. These three products equate to 90% of exports to the US under the ATPDEA. In 2011, after months of negotiation, the Act was renewed, but only to cover Ecuador until the end of June 2013. This time the Ecuadoreans allowed it to expire without negotiations amid rising concern that they would be pressured into actions by the US in order to keep the Act enabled. The estimated loss to exporters was put at around $26 million a year; therefore, to cushion the blow to these companies, in July 2013, the government passed a law, with 103 votes in favor to one against, to offer exporters $23 million a year in compensation. But while this will come as very welcome news for much of the non-oil sector, it is largely seen as a temporary solution. Organizations such as the Ecuadorean Exporters Federation (Fedexpor) and the National Association of Producers and Exporters of Flowers believe that the lack of preferential trade treatment with the US will ultimately damage the country as neighboring countries, such as Peru and Colombia, export similar products at lower tariffs.

NEW FRIENDS

Now that the preferential tariffs with the US have ended, Ecuador is looking for new trading partners in different regions. In April 2013, Rafael Correa was in Europe on a mission to improve trade relations, which had some degree of success. German Chancellor, Angela Merkel, agreed that a free trade agreement (FTA) between Ecuador and the EU would be beneficial, and both the President and the Chancellor expressed a desire to hammer out an agreement. In a press conference shortly after the meeting, Merkel confirmed that, “Germany supports this agreement before the European Commission."

In March 2012, Correa made the first trip by an Ecuadorean president to Turkey. On this trip, the two countries signed four agreements in the areas of tourism, cooperation, the environment, culture, education, and sports. In 2012, bilateral trade between the two countries stood at around $150 million, with Turkey importing 90% of its bananas from Ecuador. In September 2013, the two countries took matters a step further by signing an agreement that will encourage commerce, investment, and cooperation. In the upcoming months, there will be an exchange of business delegations, and both countries will agree on a roadmap for scientific cooperation. Both have also expressed an interest in cooperating on clean manufacturing, standardized quality in agriculture, and ecosystem management. In addition to this, they have signed a memorandum of understanding (MoU) regarding the cooperation of SMEs from both countries. Flag-carriers Turkish Airlines and Tame will also look to coordinate routes to transport passengers and cargo between Istanbul and Quito allowing a smoother flow of trade.

Ecuador is also considering building closer relations with its neighbors. In July 2013, Correa was looking into the possibility of joining the Southern Common Market (Mercosur) and the Pacific Alliance. However, the President had some concerns with the blocs, as Ecuador has used the US dollar since 2000, which raises question marks about potential inflexibility within the bloc to overcome crises. Ecuador is currently an observer member of the Pacific Alliance, but does feel that joining could be of benefit to the country unless it was allowed to have certain flexibilities in its membership conditions.

LOANS

The government set out a budget of $32.37 billion for 2013, marking a 24% increase on the $26.11 billion set out for 2012, according to the Ministry of Finance. This plan will lead to a $5 billion deficit, which the government said it will fill with loans. The first such loan came in February 2013, amounting to $1.4 billion from China, a key lender to the country, at an interest rate of 7% with a maturity of eight years. Subsequently, in August 2013, Ecuador required a further loan from China, this time at the slightly smaller amount of $1.2 billion. Since Correa came to power, he has accessed over $9 billion worth of loans from China with different methods of payment. One example dates back to 2011, when Ecuador took out a $1 billion loan from state-owned PetroChina and repaid it with crude shipments.

Ecuador will need to be careful to avoid another default, such as the one in 2009. However, if it is able to secure new FTAs, it would likely be able to pursue growth and stability.