A relevant point throughout the last years emphasized by the international media is the greater involvement of the indigenous movement in Ecuador’s political life, which is highly favorable given a minority of the population (10%), excluded from the political circle and the progress made by society, now has a greater involvement. The downside of the indigenous involvement in politics is the fact they have been tempted to follow non-democratic paths such as the participation in the coup d’etat that ousted President Jamil Mahuad at the beginning of 2000.

The country endured another serious crisis in 1999 when –due to those political obstacles- it was impossible to find a viable solution to the external shock that hit the country due to the plunge in the oil price and the lack of a different fiscal policy. The country paid the price through freezing deposits and is still trying to recover from that blow. People’s purchasing power is now lower to that of 1998 and although progress was made throughout this year, it is still not enough to regain the levels of 1999.

How was dollarization implemented in the country last year?

In its first stage, the process has had beneficial effects. We adopted dollarization in a sort of ‘hurry’ when the country was on the verge of hyperinflation triggered by the sucre depreciation. The dollarization averted the depreciation and amid the process of dollarizing the economy there were no devaluations but a healthy inflation that brought prices back to the levels of 1998 measured in current dollars.

But we must set our sight on the future and accept the possibility for negative consequences to stem from dollarization if we fail to handle the economy efficiently and allow for fiscal deficits, for instance, thus entailing greater indebtedness, the failure to revamp our economy to optimize our competitiveness and improve the balance of trade or the lack of structural reforms entailing higher capital inflows.

In October next year, presidential and legislative elections will be held. Considering President Gustavo Noboa’s faltering popularity and the continued criticism to his Administration, which are the current politicians that could aspire to become president in 2002?

Ecuador’s electorate has historically been segmented in terms of regions in the sense that we have a coast population –half of the total, similar to the Caribbean population or that of the Venezuelan and Colombian coastlines- and then we have a sierra or Amazonian population comparable to the populations of Bolivia or the interior of Peru. So the country is split into two cultural sources holding different leading parties, none of which obtains the leading electoral position in neither of the two regions.

A permanent struggle has unfolded in the coastline between the Social Christian Party (PSC) led by former President León Febres Cordero, and the Ecuadorian Roldosista Party (PRE) led by former President Abdalá Bucaram, defeated barely six months after taking office at the beginning of 1997. At present, resulting from the lawsuits against Bucaram administration, doubts prevail over his ability to solve that legal problem in time to run for the 2002 presidential election. So everything points to the PSC leading position in the coastline if it launches its own candidate, in which case the candidate would be Febres Cordero who keeps his options open.

In the electoral sector of la sierra the likely candidate is former President Rodrigo Borja from the Democratic Left.

That is to say Borjas and Febres Cordero appear as the likely candidates while polls favor the latter. If Febres Cordero is not candidate, then Alvaro Noboa -a banana sector businessman- who was second in the elections against Mahuad in 1998, should have the first option and perhaps garners the coastline votes and enough votes from the sierra to win. But in Ecuador, over a year after the election, the outlook is still uncertain.

Considering the active involvement of the indigenous community in the Ecuadorian society, who do you think it will support for the candidacy?

Much has been said about the fact it would have its own candidate, even the Miami Herald launched a precandidacy for the presidential elections of one of the indigenous leaders. The one leading the polls seizes only 4% of electoral preferences. Knowing there’s a legislation strongly controlling donations for electoral campaigns, it is very difficult for a candidate who is not in voters’ mind to have the necessary resources to get known countrywide.

I believe the indigenous people, aware of their big political power –as they cam move people and authorities are not willing to repress their uprisings- and little electoral strength will probably seek a vicepresidential candidacy with some of the coastline political leaders as their strength is in the sierra. In this case, they might choose Alvaro Noboa for the vice presidency, which I consider one of their best choices.

What are the economic forecasts for Ecuador?

Basing on a steady price cycle, we estimate the GDP growth between 3.5 and 4% this year, and between 4 and 5% next year. In terms of the GDP value, the growth will be more significant due to the effect of the inflation in a dollarized economy (a situation not understood in many countries, especially in the ‘First World’, but which I am sure it is understood in our region and also in Argentina).

Before the crisis, in 1998 Ecuador has a GDP of around 19 billion dollars and the crisis plunged it to 13 billion. So far, with the impact of inflation we are nearing the past levels and hope to reach for 2002 the figure of 1998, partly due to the boom in production and partly due to the higher prices measured in dollars.

Now, the difficulties of Ecuador are related to the fact that the country’s moratorium prevents it from entering the international financial markets to obtain new credits or reissue bonds since the debt rescheduling cause a depreciation of securities. This situation makes Ecuador vulnerable not only in terms of its fiscal problem but also because it cannot find a way to restructure its near-to-mature debt. So nobody is willing to provide it with new funds to pay past expirations except for multilateral organizations. For those entities to make that disbursement the country must fulfill certain conditions, some of which have been hard to attain due to the political obstacles we have.

Currently, it is estimated the country will grow through the aid from multilateral organizations as long as it complies with the IMF targets. Otherwise, we could face a new setback in the economy.

Another significant element is we have an encouraging horizon by 2003 supposed to give rise to a new oil production building on the infrastructure of a new oil pipeline ready to be laid this quarter. This will double the oil production in the country entailing considerable growth this year, new revenues and an improvement in all rates. Then Ecuador would have the chance to overcomes this hard economic situation without going through terrible problems.

Mining also offers a growth source, is it so?

I am not very optimistic about this point because rumors had it that the country would experience a gold boom but the gold price is low and the price prospects are bleak, especially because the Central Bank is not having gold reserves. The interest now focuses on another sort of metal such as copper, which will surely not be equivalent to oil. What we do have now in mining is a legal framework believed to be clearer than the previous ones and more in line with the requirements of oil companies. Of the two or three laws we have had in the last twenty years, none has ensured potential investors their investment will be safeguarded against any administrative action opposing their interests.

Picturing Ecuador in a regional context, what are the country’s prospects in terms of integration and cooperation with other countries?

Ecuador has traditionally exported farming and oil commodities to international markets. Oil as major item, bananas as traditional item and prawns as the leading export product for the last two decades. Its partners have traditionally been the United States, the European Union and Japan.

The last decade has been characterized by a boom in the Andean market, especially in relation to Colombia, which due to the increase in trade between both nations, basically with industrial or semi-manufactured food hard to be placed in the international market, has become the second major trade partner. Some expect that after the peace reached with Peru, something similar may occur and spur bilateral trade.

No much trade is conducted with the Mercosur and here distances are important since the freight costs are very high. Therefore, the greatest integration in Latin America would be a boost in the trade with Colombia mainly, and Peru secondly.

Regarding the agreements with the United States (FTAA), goals are focused on removing obstacles for the entry of Ecuadorian commodities so the country can be on an equal footing with the competition in Asia or in parts other than the American hemisphere. There’s still the possibility for the country to benefit as a manufacturing or service hub to cover a larger regional area. The current Economy minister thinks dollarization should allow the country to become an international financial hub.

In what way does the armed conflict now hitting Colombia affect you?

It seriously affects us. The Colombian guerrilla incursions in Ecuadorian land as the guerrilla has been used to entering the territory as a refuge.

For the Amazonian sector of the country, the guerrilla has been a major income source for the population sells them food and services. Certain people from that area have even joined the work of the coca plantations of the Colombian Putumayo. This also means that the criminal guerrillamen have hard works, which has increased insecurity and kidnappings.

Within the social framework, there’s a heated debate over what the country should do in this regard because in the previous government Ecuador decided to support the United States giving it the possibility of using an air base to perform flights over the Colombian territory and watch drug-trafficking. Some think that is the right thing to do given with such a serious conflict it is convenient to get nearer to the strongest country to help overcome this situation but others think the opposite as they fear Ecuador should be dragged by the conflict and hit by the consequences. In other words, comparable to what Cambodia was for Vietnam. On that point, the Ecuadorian society is highly divided.

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