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Ecuador: Beware of Hugo Chavez!

By Gustavo Coronel

08.08.05 | During the last 12 months the regime of Venezuelan president Hugo Chavez, now defined by his leader as “socialist”, has embarked in an intense hemispheric activity aimed at exporting its revolution. Armed with a war chest of some six billion dollars essentially subtracted from the international reserves existing at the Venezuelan Central Bank and without consulting with the Venezuelan nation, Hugo Chavez :

• Has bought half a billion dollars of Argentinean debt;

• Is bailing out the Uruguayan National Airline, cost unknown;

• Is injecting $50 million into PetroCaribe, a regional organization to provide the Caribbean countries with subsidized oil;

• Has donated $50 million to the Andean Community for unspecified social programs;

• Is promoting the creation of PetroSur, an oil organization similar to PetroCaribe for the Southern Cone;

• Has increased the supply of strongly subsidized oil to Cuba from 53,000 barrels per day to 90,000 barrels per day;

• Has sunk $10 million into a Venezuelan-controlled regional TV channel, Telesur;

• Is planning to buy 42 oil tankers from Brazil for some $2 billion;

• Has bought about $2 billion worth of helicopters, tanks, guns and other assorted weapons from Russia.

After this gigantic buying spree is over Hugo Chavez will still have enough millions of dollars left to “invest” in neighboring countries such as Ecuador, as well as other countries in the region. He has stated that he intends to share “the surplus of the Venezuelan oil income with the countries of the hemisphere”. Although these are high sounding, altruistic, words, the future recipients of Chavez’s largesse must be warned that this policy does not represent the will of the Venezuelan people. Not because Venezuelans are a cold - hearted society while Chavez is a compassionate individual, but because such a fundamental policy decision has not been consulted with the Venezuelan nation and because the Venezuelan population is in dire need of those financial resources to solve their own and extreme problems of poverty, ignorance, ill health and neglect of children, elders and indigenous minorities. The Venezuela of Hugo Chavez is, next to Haiti, one of the most run down and worst managed countries in Latin America.

The deviation of national funds badly required domestically to attempt solving the problems of other nations, as legitimate as these problems might be, constitute a significant risk for those countries which engage in deals with Hugo Chavez, no matter how beneficial these deals might look in the short-term. This is so because the political situation in Venezuela is extremely unstable, because the popularity of Chavez depends very heavily on his capacity to keep a policy of handouts to the Venezuelan people and because, after six and a half years of Chavez rule, the structural problems of national poverty in Venezuela remain unsolved.

Now Chavez looks towards Ecuador. In the recent Lima meting of the Andean Community of Nations, Chavez proposed to President Palacio two deals that look highly interesting for Ecuador. One is the refining of Ecuadorian crude oil in Venezuela. The other one is the buying of Ecuadorian debt. The Ecuadorians are naturally attracted to these possibilities. In the case of the crude oil that would be refined in Venezuela, Ecuador could save substantial amounts of money by getting back products from Venezuela instead of having to buy them at high prices in the international market. In the case of the possible bonds sale to Venezuela, Ecuador could diversify its sources of international financing and obtain some favorable terms. In the two cases, however, Ecuadorian leaders would act wisely by looking beyond the short-term apparent benefits of these deals to consider their possible political implications. If they look at the recent activity of the Chavez regime outlined above, it would not be difficult for them to assume that his proposals to Ecuador are part of a strategy for buying political loyalties in the region, rather than the expression of a visionary Bolivarian dream.

Chavez is engaged in a drive for political hemispheric hegemony, in order to impose ideologies that run contrary to the political and economic values that prevail in free societies. Once Ecuador accepts Chavez help, sooner than later payment might be exacted in political terms, as declared recently by Chavez himself to Raul Vargas of Radio Programas del Peru.

This risk is already very much in the minds of Ecuadorian political leadership. In numerous Ecuadorian public reactions to the Chavez proposals the common denominator is one of caution and of concern for the preservation of Ecuadorian national sovereignty. However, some opinions sound very bullish in favor of the Venezuelan proposals and, perhaps, unnecessarily intent in antagonizing international financial organizations. Minister of the Economy Rafael Correa (1) (“El Universo”, Guayaquil, July 24, 2005) has stated that ‘this time we will not negotiate with Wall Street but with friendly countries”. And he adds: “I do not understand why the IMF should be concerned. I could not care less if they are upset at this but it would be bad if they try to pressure us because a sovereign country can advance transactions, as desired, with other sovereign countries. International bureaucrats should not interfere”. Others are less bullish. In an editorial of the “Diario Expreso”, Guayaquil, July 25, 2005, Guillermo Arosemena warns about ‘the new winds of third world nationalism getting nearer (to Ecuador), trying to recreate the 1960’s and 1970’s, decades that brought more poverty to our region. This new movement appeals to an idea of Bolivarian unity, to the unity of the south against the north, a worn out argument…. favored by those who share an inferiority complex in our continent”. It would seem that, in Ecuador, the ideological battle lines are already firmly drawn and that Chavez will not have an easy time trying to sell his political wares to Quito.

The technical aspects related to the proposals are also important: Is the Ecuadorian crude oil compatible with the Venezuelan refineries? Do the Venezuelan refineries have enough capacity to refine the Ecuadorian oil? Venezuelan refineries are having many operational problems lately, due to their poor maintenance and mediocrity of the operational staff. How much will Ecuador pay per barrel of oil refined? What will the yield in products be? In the case of the acquisition of the bonds, I am sure, there will also be many technical questions that should be answered, before the Ecuadorians are satisfied that the deal is legitimate.

The grand Chavez circus or the grand Chavez scheme, whatever you prefer to call it, has now reached Ecuador. As a Venezuelan who has seen first hand the disastrous results of the Chavez regime I can only exclaim: Ecuadorians beware!

(1) Minister Correa, main Chavez ally in the Ecuadorian cabinet, resigned a few days after this article was published, in an obvious power struggle within the government which had to do precisely with the issues mentioned here.

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