Ecuador: Breaking with Neoliberalism to Strengthen the Market

By Saavedra, Luis Angel | NotiSur - South American Political and Economic Affairs, February 10, 2012 | Go to article overview

Ecuador: Breaking with Neoliberalism to Strengthen the Market


Saavedra, Luis Angel, NotiSur - South American Political and Economic Affairs


Although seemingly a contradiction, Ecuador's political model, defined as a break with neoliberalism, is becoming the best way of guaranteeing the application of the rules of the global market, the surest exploitation of natural resources, and the incorporation of "marginal consumers," who can still be self-sufficient through their agricultural activities and who are a nuisance for the dynamism of the transnational economy.

Dismantling the state

A basic premise of the neoliberal project in Latin America was the downsizing of the state, that is, that the state get rid of its investments and social-services structure, making way for privatizations, and that it reduce its regulatory role in the national economy, letting regulation take place through market dynamics, as the classical theses of mercantile liberalism affirm.

Ecuador came to this process late; it was unable to initiate it with force until the 1990s with the administration of former President Sixto Duran Ballen (1992-1996), and it encountered more problems than progress (NotiSur, Aug. 3, 1995). The domestic economy was not large enough to attract transnational investors who could join the national elites and overcome the opposition of various social sectors. In addition, social mobilization, led by the unions, and the emergence of the indigenous movement also became strong obstacles to privatization. In November 1995, as the last hope for accelerating the privatization process, Duran Ballen called a national referendum in which the Ecuadoran people gave a resounding "no" to the privatization policy (NotiSur, Dec. 1, 1995).

The same was not true with the institutionality of the state and the legislature, where the principal control institutions were dismantled and laws passed that guaranteed private investment without any social responsibility, allowing the creation of countless shell companies to access public and private monies. The fiscal-control and financial oversight agencies ceased to function, and no one could prevent the 1999 financial collapse (NotiSur, Jan. 14, 2000), as the state's institutionality had been undermined in favor of the interests of the large economic-power groups.

With weak state institutions; with permanent political instability, which prevented elected presidents from finishing their terms; with dollarization, which implied turning over monetary policy to the fluctuations of another economy, that of the US; and with a judiciary controlled by the political elites, a radical discourse became necessary, which denounced the effects of dismantling the state and offered to rebuild both the powers of economic control and regulation and its social investment capacity and the strengthening of the judicial systems.

The end of the long neoliberal night?

It is within this political scenario that Rafael Correa's electoral discourse is shaped in 2006. He summarizes neoliberal policy and the need to "reinstitutionalize the state," strengthening the structures of fiscal and financial control, restoring the state's responsibility for social investment, and reforming the justice systems, both in their legal foundation as well as in the configuration of a new judicial court whose independence will be guaranteed. Correa assured the public that his administration, which took office in 2007, would be "the end of the long neoliberal night."

The Correa administration initially augured well for the country, opening the way for writing a new Constitution in 2008, which was regarded as "protectionist," as it broadened rights and established a series of laws to protect them. Similarly, social investment grew at a quicker pace, and reform programs were implemented for schools, hospitals, and the very physical structure of state institutions, many of which went from being tiny offices in shacks to occupying modern office buildings that had been confiscated during the 1999 bank closures and were deteriorating after having been abandoned. …

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