IFIs Latin American Monitor
Mon Aug 22 2005
The now former Economy Minister of Ecuador, Rafael Correa, submitted his resignation after having carried out an economic policy not aligned with guidelines from multilateral credit institutions and having strongly criticized their requirements. This may probably explain how the story of the most popular Minister in President Palacio’s administration came to an end.
Rafael Correa submitted his resignation as Economy Minister last August 4 (resignation letter) alleging differences with the President over the last decisions in terms of economic policy. Alfredo Palacio accepted his resignation without stating reasons and appointed Government Minister Mauricio Gándara to fill the post first, followed then by Economy Vice-Minister, Magdalena Barreiro.
Based on the latests polls, Correa was the most popular Minister of Palacio’s administration, with a level of credibility of 57.4 per cent, almost 20 points higher than the President himself, whose approval rating barely stood at 38.1 per cent. These figures show the support that Correa’s economic policy aroused among social organizations, the public sector and unions.
Correa, in his 106 days in office, promoted projects that brought controversy both within and beyond Ecuadoran borders. In 2004, he launched the restructuring of an oil stabilization fund, which since its creation had been reserved to debt servicing and as of that time started to divert half of its profits towards social spending. At the same time, upon the denial of credits by international institutions, Correa promoted the sale of $300 million in Ecuadoran bonds to Venezuela. Being strongly critical of credit institutions’ guidelines he tried by all means to diminish Ecuador’s dependence on loans granted by the International Monetary Fund and the World Bank.
One month ago, in rejection to the restructuring of oil revenues, the World Bank decided to cancel a $100 million loan the institution had previously agreed to grant to Ecuador. In response to this denial, Correa sent a letter requesting explanations from the Bank, accusing it before the international media of having violated the commitment and offending the country’s sovereign rights.
According to close collaborators of the former Minister, the Presidency expressed uneasiness about the letter sent to the World Bank. It is also highly probable that the Minister’s attitude towards credit institutions, his handling of the oil issue, and the close relationship established with Venezuela were not well-regarded by the US Embassy and the power groups involved with energy and communication enterprises.
Therefore, upon this critical situation, President Palacio leaves the Economy Minister without political support - maybe giving in to foreign pressure - but puts his own support as head of government at risk.
Sources: Diario El Comerio, El Universo and Agencia Adital
Minister Correa of Ecuador stands firm before IMF and World Bank