Public spending fuels Ecuador leader’s popularity
Jan 25, 2012, 6:14 PM
Associated Press
QUITO, Ecuador (AP) – Amparo Martinez’s universe is two small, tidy rooms in a poor Quito neighborhood that she shares with her 83-year-old mother and a severely handicapped daughter.
Her predicament makes holding a job impossible, so the three depend on a $240-a-month government stipend introduced by President Rafael Correa under a program for the disabled.
Martinez adores Correa.
“I hope he’s re-elected many times,” she says.
Correa is regularly assailed by human rights, press freedom and business groups as intemperate, autocratic and intolerant of dissent. Yet he is popular among millions of Ecuadoreans for programs which, like the initiative for the disabled, have improved their lives.
An array of state-funded programs implemented or broadened since Correa’s 2006 election have brought stability to this traditionally unruly South American nation that previously churned through six presidents in 10 years.
A doubling in public spending under Correa adheres to a formula that has also aided the political longevity of his leftist allies Presidents Hugo Chavez of Venezuela, Cristina Fernandez of Argentina and Evo Morales of Bolivia.
But Ecuador devotes a greater share of its economy to public investment than any other nation in Latin America and the Caribbean, spending 10 percent of gross domestic product.
The main strategic ally of this tall, pugnacious U.S.- and European-trained economist has been the high price of oil, currently at $99.50 per barrel, which helped fuel 8.9 percent economic growth last year.
Oil accounts for about a third of government revenues in this OPEC member nation, whose proven oil reserves of 6.5 billion barrels are surpassed in South America only by those of Venezuela and Brazil.
According to Oil and Gas Journal (OGJ), Ecuador held proven oil reserves of 6.51 billion barrels in January 2011 the third largest reserves in South America after Venezuela and Brazil. Ecuador is the fifth-largest producer of oil in South America, producing 486,000 bbl/d of oil in 2010 (almost all of which was crude oil), down from a 2006 peak of 536,000 bbl/d. Data from the first half of 2011 show a rebound in production, which averaged 501,000 bbl/d through June.
Straying from Latin American custom, Correa has also engineered a vertiginous rise in income tax collection, boosting compliance by businesses and professionals. From $4.9 billion in 2007, income tax receipts rose to $8.4 billion last year.
He has exhibited uncanny resolve in coaxing higher numbers into the revenue columns of the balance sheet in a country that made the U.S. dollar its national currency in 2000.
That included rewriting oil extraction contracts with multinationals to radically boost the state’s share of windfall profits. Some multinationals left, others stayed.
The government is now on the verge of reaping more raw material royalties. It is set to shortly sign contracts designed to yield the state $3 billion annually from the mining of gold, copper and other metals.
Correa has been coy on whether he’ll run for re-election in balloting that could come as early as a year from now. If voting were held today, he’d be difficult to beat. Never in five years in office has Correa’s approval rating dipped below 50 percent. It currently stands around 70 percent.
Critics accuse Correa of building castles in the air by creating expectations on the uncertain promise of continued high oil prices. If oil drops below $73 a barrel, they say, his ambitious public spending will need to be curbed.
“It’s not sustainable as an economic model over time,” said Xavier Ordenana, an economist with the Escuela Politecnica del Litoral in Guayaquil. “It can last for some years but not forever.”
Ordenana says the government realizes the private sector must also grow or it risks insolvency. Heavy industry, export-oriented manufacturing and high-tech work remain scarce in Ecuador.
In all, 5 million of Ecuador’s total population of 14 million have personally benefited in some measure from government largesse, researchers at the FLACSO graduate school calculate. Under Correa, the state has built homes for 30,000 families, plowed $8.5 billion into education and $5.3 billion into health care. It has rebuilt or improved nearly 3,400 miles (5,500 kilometers) of roads, nearly two-thirds of Ecuador’s highway system, spending $4.5 billion.
Other programs have zeroed in on helping individuals and families.
The government says the program for the disabled, a flagship Correa initiative, has benefited 300,000 people. They receive medical attention, welfare payments and equipment including wheelchairs. Some have even been given housing. Public wheelchair access is improving.
Another popular program provides a $35 monthly boost to 1.6 million poor people, chiefly homemakers with no other formal income.
“My husband died many years ago but now I have the president as a spouse because he gives me a little money every month,” said Maria Pillajo, a stooped 67-year-old who scrapes by washing clothes and loading baskets in the market of Quito’s poor southern district of El Camal.
“Until poverty is eliminated it’s a good measure,” Correa said of the program when asked about it during a recent meeting with foreign correspondents. The government says the poverty rate stands at 29 percent, down nine percentage points from when Correa took office. Meanwhile, unemployment is officially at 5.1 percent.
It’s not just the poor for whom the government is writing checks.
Some 100,000 middle-class first-time home buyers have received a $5,000 one-time “housing subsidy” grant that enable them to afford down payments.
“The payments have a direct bearing on the president’s image. In political terms, they have the excellent effect of sustaining his political project,” said Simon Pachano, a FLACSO political scientist.
Correa has also plowed millions into education, giving free uniforms to a million students, texts to 3 million and regularly feeding 1.6 million breakfast.
“It’s a great relief because sometimes we just don’t have the money,” said Francisco Carvajal, a 28-year-old father of three who said he earns $750 a month from his job as a construction material sales company.
His children got free uniforms and texts as well as English and computing classes free of charge.
Correa is far from Ecuador’s first populist leader. Yet he has been hounded by none of the accusations of corruption that drove previous presidents from office.
His popularity is anything but universal, however.
In striving for what he and Chavez call “21st-century socialism,” Correa has alienated bankers, industrialists, the Roman Catholic Church and even indigenous groups. Initially backing him, the latter now object to his insistence that the state can extract minerals from their traditional lands without their consent.
Many business leaders are angry with Correa over his chumminess with Iran, fearing that he is distancing Ecuador from Washington, still the country’s top trading partner.
On no adversary has Correa unleashed such bile as on the opposition news media, which he claims “oligarchs” have used to seek to discredit him.
Correa has had a columnist and three directors of the opposition newspaper El Universo successfully prosecuted for criminal defamation. They have been sentenced to three years in prison each and a collective total of $40 million in fines, though the sentence is on appeal.
Human Rights Watch has decried how Correa used a May referendum to obtain a popular mandate for reforms that could “constrain media and influence the appointment and dismissal of judges.”
It also complained that people involved in protests where violence occurs “may be prosecuted on inflated and inappropriate terrorism charges.”
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Associated Press Writer Frank Bajak contributed to this report from Lima, Peru.
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