Ecuador's Presidential Elections: A Reformist Illusion?
The rise of Rafael Correa, a radical national-populist candidate, in Ecuador's presidential race has caused international concern at many levels. Ecuador's voters are turning to Rafael Correa in the hope that an outsider will be able to deliver stable economic progress and reduce social disparities and poverty-goals that the political establishment has so far failed to achieve.
* Correa's radical agenda aims to rewrite the Constitution, increase the executive branch's power, suspend free market talks with the United States, and default on Ecuador's $11 billion foreign debt should negotiations to refinance it fail. If implemented, these policies are likely to reduce near-term foreign investment and economic output.
* If elected, Rafael Correa might join a national-populist bloc led by Venezuela in order to maintain his proposed political model. Such an alliance could offer significant short-term support to Ecuador-as long as oil prices remain strong and Caracas's priorities do not change. For longer-term sustainability, Ecuador could seek investment from rising global powers such as China and India to replace diminishing foreign private investment.
* In the short and medium terms Correa's policies will likely deepen the structural problems that have plagued Ecuador's hydrocarbon sector, as he proposes revising oil contracts; increasing government participation, royalties, and taxes; and strengthening Petroecuador by giving it a controlling role along the entire hydrocarbon value chain.
