The people of Ecuador are rising up to refound their country as a pluri-national homeland for all. This inspiring movement, with Ecuador's indigenous peoples at its heart, is part of the revolution spreading across the Americas, laying the groundwork for a new, fairer, world. Ecuador Rising aims to bring news and analysis of events unfolding in Ecuador to english speakers.

Saturday, December 20, 2008

Combative Correa style heralds more Ecuador shocks

By Alonso Soto

QUITO, Dec 18 (Reuters) - Leftist President Rafael Correa's combative leadership style and growing anti-western tendencies suggest that foreign investors reeling from Ecuador's $3.8 billion debt default this week should brace for more shocks.

Dismissing warnings that a default would wreck the OPEC nation's economy, Correa stunned Wall Street by fulfilling threats to stop paying foreign debts in a declaration of "war" on "monster" bondholders.

According to several current and former officials, Correa often makes impulsive decisions in isolation and is reluctant to listen to dissenting views.

"This government is all about Correa and he has closed all space for debate, leading many of us no choice but to leave," said a close ally who still supports Correa but quit a top post over policy disagreements. "He is ending up alone surrounded only by people who tells him what he wants to hear."

In a country where weak institutions allowed for the ousting of his three elected predecessors, the U.S.-educated economist has emerged as a strong leader, popular for pledging to battle greedy investors and a corrupt political old guard.

An ally of Venezuelan President Hugo Chavez, Correa, 45, has often shocked investors in nearly two years in office with sudden announcements to expand his control over the economy, hiking oil taxes, banning mining exploration and expelling foreign companies.

Now economists wonder what new offensive the nationalist ideologist may unleash. Many fear he could ditch the economy's linkage to the dollar, which has anchored Ecuador's economic stability for years by taming inflation.

Correa has bent the oil, mining, telecommunications, media, building and banking industries to his will and may squeeze further concessions as he seeks to make up for falling oil revenues to redistribute to his poor supporters.

A devout Roman Catholic, Correa says he is only fighting to right decades-old inequalities in the poor Andean nation.

His public displays of temper include kicking a reporter out of his radio show, berating hecklers at his rallies and humiliating a finance minister he was about to fire.

Most aides shy away from criticism, leaving him to make lone decisions without thinking through the consequences, former government officials and political allies said.


Growing up in a working-class family in the coastal city of Guayaquil, Correa won scholarships to elite schools and universities. Even then, he was willing to use his fists as well as his brains.

His brother, Fabricio, said: "He gets angry easily. My mom had to go to school many times because he had been in a fight with someone who was picking on younger students."

Correa, an ex-college professor, exerts tight control over ministers and congressional allies, sometimes forbidding them from speaking to the media and lambasting them in public.

He summarily forced out Finance Minister Fausto Ortiz, a Wall Street favorite, after clashing over the takeover of companies that had debt disputes with the state, witnesses at the meeting said.

Until Monday's default, many investors excused his abrasive style and stuck with their holdings in Ecuador. They lost, while those who had already pulled out avoided being burned by his debt announcement.

Now, with Correa up for re-election in April, Ecuador is only for the hardiest investors.

Ecuador's perceived risk spread calculated by JP Morgan has ballooned to 5,049 points, compared to neighboring Colombia's 509, despite being embroiled in a 40-year civil war.

Local businessmen and economists say Correa might abandon the dollar if his government's reserves of the currency run low because of falling oil prices and limited credit lines.

The dollar, adopted after a banking collapse in the late 1990s, is popular among Ecuadoreans who have enjoyed several years free of economic crisis.

While a professor Correa wrote books criticizing the dollar, but has so far denied any plans to drop the currency.

Still, the default decision showed he is prepared to risk dramatic moves.

"If this (default) costs the country too much then the country has to decide if I should continue as president," he said recently in a radio address to supporters.

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