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Chavez jinx already working on Ecuador

By Gustavo Coronel | Petroleumworld.com

14.08.05 | Venezuelans talk in low voices of decapitated roosters and dolls being handled in the early hours of the morning by some of the Cuban advisors to Hugo Chavez, experts in voodoo and Caribbean witchcraft. As a geologist I do not believe in those things. I am convinced that the connection between Chavez and misfortune is just a coincidence. Just after he became president Venezuela suffered the worst physical disaster in recent history, when up to 50,000 people died in the landslides that took place in the northern portion of the country. Hussein’s ousting in Iraq came just after Chavez visit. Iran suffered an earthquake after our president paid a brief visit. A deep political crisis shook Spain after the last visit Chavez made to that country. No matter where he goes or what country he pays his attention to, social and political problems and natural disasters seem to follow.

But this is just a coincidence.

The latest coincidence is Ecuador. After Chavez met with President Palacio in Lima, a few weeks ago, to offer him millions of dollars for their debt bonds and technical help to refine the Ecuadorian oil, the Ecuadorian president, who at first could not believe his good luck, seems to be facing a very dangerous political crisis. His Minister of Finance, Rafael Correa, resigned a few days ago, claiming that he had been “pressured” not to pursue negotiations with Venezuela regarding the sale of the $300 million debt bond issue to Chavez. Correa also had been accusing the World Bank of breaking an agreement to supply Ecuador with a $100 million loan and had been (and still is) asking for the ousting of Occidental Petroleum from the country. Palacio claimed that he had to sack Correa because he had failed to keep him informed of all these initiatives and developments. In the showdown that ensued, Correa almost proved to be politically stronger than Palacio and, for a few days, the Palacio government seemed on the brink of collapse. Now, a new Minister of Finance has replaced Correa, only after she agreed to obey the President and not Correa, as she had originally suggested.

I am only concerned about the Ecuadorian connection with Venezuela, since all other matters mentioned above are strictly for Ecuadorians to decide. It now seems that the Ecuadorian bond acquisition by Venezuela was not as orthodox as we thought. The bonds Ecuador would sell to Venezuela would not be a government-to-government transaction. Former Foreign Minister of Ecuador Edgar Teran says that the negotiation Correa was cooking was a New York stock market speculative transaction, with all the risks involved in this type of negotiations.

Teran defined this transaction as “ playing the roulette” since Ecuador, and presumably Venezuela, would be subject to the significant economic uncertainties which are typical of this type of transactions. Current Foreign Minister Parra Gil, who had also been misled by Correa, shares this opinion of Teran. When President Palacio heard about this, he asked Correa for full disclosure (who would not?) and the answer of Correa was to send him the information about the transaction, together with his resignation. Correa immediately claimed that he was being pressured to resign when, it would seem, he was only being asked to report to his boss. However, he preferred to set in motion a political crisis. Many Latin American bureaucrats are like this, very arrogant and “malcriados” (spoiled) since they do not seem to see the difference between doing what they want and professional ethics.

The successor of Correa, Ms. Magdalena Barreiro, seems to face a very complex situation: increasing public expenditures, fiscal deficits, an unbalanced budget, the problems with the IMF, the distrust of international investors, the debt problem, the showdown with Occidental. Many obstacles are in her way. If she yields to the temptation of resorting to a political, rather than to a technocratic, approach to these problems, Ecuador will go, once more, into anarchy.



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