Ecuador

Ecuadorian President Jamil Mahuad is struggling to fix a flagging economy and is trying to secure assistance from the International Monetary Fund (IMF). In order to receive financial assistance from the IMF, Mahuad is making some drastic changes to appease the IMF. However, these changes are extremely unpopular with the poor, who are the most affected. Ecuador was paralyzed recently when a transportation strike shut down the country. Truckers, taxis, and other drivers refused to work in protest over a gasoline tax increase. Despite the fact that the tax increase was part of a package aimed at satisfying IMF restructuring demands, Mahuad relented on that issue, and things went back to normal -- well, sort of.

This week former Ecuadorian president and current mayor of Guayaquil, Leon Febres Cordero, stepped up the pressure on Mahuad. On July 20 Cordero said that if Mahuad does not "rectify his economic policy [by August 10], we will have to return to the streets, not peacefully, but in the spirit of war." Cordero added that he was not seeking Mahuad's resignation, calling that "an easy way out." Cordero instead demanded that a detailed economic plan be presented that will solve Ecuador's financial woes.

Part of the dispute between Cordero and Mahuad is rooted in the historical rivalry between Guayaquil and Quito. Cordero represents the "costenos" in the coastal region, while Mahuad's support base is with the "serranos" in the highlands around Quito. Cordero demonstrated the support he enjoys from the poorer costenos when his Banco del Progresso was shut down in March, again as part of national economic restructuring efforts. Cordero demanded the government reopen the bank, complaining that several of the banks that were shut down on the coast were forced to do so because much of the public sector's money is kept in serrano banks in the highlands. At one point 120,000 costenos took to the streets to protest the closing of Banco del Progresso. Mahuad finally relented, and the bank was reopened.

Cordero clearly has the backing and support to mount a massive protest if his demands are not met. The threat is real, but the chances of the government presenting a plan to satisfy both the IMF and Cordero by August 10 are unrealistic. The question then becomes why is Cordero making such an unrealistic demand?

Cordero, a populist, was president from 1984-88, and according to the Ecuadorian constitution he is still eligible to be elected to the post again. Cordero's demands come as a direct challenge to Mahuad's presidency, but he isn't seeking his resignation. That is somewhat odd given the fact that only a few weeks ago there were many people clamoring for Mahuad to resign. It is too early for Cordero to begin a presidential campaign, given that Mahuad has three more years in office. However, Ecuador's political climate is tumultuous at best, so it is never too early to put oneself in the spotlight. While there is always a good possibility of social and political upheaval in Ecuador, what we are witnessing is the reemergence of Cordero into the national political arena.

Latin America is shaking off the jitters it inherited from the Asian economic crisis, and we believe it is still poised for major economic growth over the next decade. However, Latin America is not without its share of problems, and growth is threatened in individual countries. A clear case is Colombia, where the long-running guerrilla war appears ready to take a turn for the worse. Honduras and Guatemala, battered by last year's hurricane, are at best starting from a clean slate, economically. Another threat facing multiple Latin American countries is the same one threatening to drag Asia's economies back into decline - - the appeal of quick fixes to economic problems, at the expense of necessary economic restructuring.

Shaken by a plunge in crude oil prices, Venezuela elected a populist, nationalist, former coup leader as president. Despite pre-election fears, President Hugo Chavez has not yet effected substantially detrimental changes to the Venezuelan economy, focusing instead on a constitutional convention that is giving local and international investors more than sufficient jitters. Now Ecuador, struggling to restructure its economy, is seeing the potential reemergence of a populist leader bent on undermining that reform. Latin America will be an economic engine for the coming decade. But there is no guarantee that all Latin American countries will participate equally, or at all, in that growth.