Source:
Jubileo 2000 - Red Guayaquil
Wed May 17 2006
Each year the governments currently in office allocate nearly half of their state budget revenues to public debt service, irresponsibly sacrificing both social and infrastructure investment. Citizens have the right to ask for accountability and to audit public debt, in an independent way or in coordination with government. Hugo Arias, from Jubileo 2000, analizes Ecuador's situation, which could be a good Latin American example.
By Hugo Arias Palacios
harias@espol.edu.ec
We are feeling oppressed by an immoral, unfair and unpayable debt
Each year the governments currently in office allocate nearly half of their state budget revenues to public debt service (principal and interests), irresponsibly sacrificing both social investment in education, health, housing, employment and community development, and investment in road, oil, electrical and telecommunications infrastructure, thus causing irreparable economic, social and environmental damage to the country. This is a flagrant violation of the economic, social and environmental rights of Ecuadorian people.
In the last two decades, the state has been granted about $50 billion in foreign loans. How come such a huge debt was entered into and where did such amount of money end up?
Creditors who imposed us unnecessary debts, charging profiteering interests and applying compound interests are jointly responsible for this debt; the governments which participated in debt negotiations and re-negotiations in unfavorable conditions and diverted debt-financed funds by means of corrupt practices are also responsible for it.
Who should audit the public debt?
There are in Ecuador several power structures which have the constitutional obligation to monitor the country’s indebtedness, but in most cases they fail to comply with the law.
- Ecuadorian State, according to article 244 of the Constitution, it is responsible for "ensuring that public indebtedness is compatible with the country’s payment capacity".
- National Congress, according to article 263 of the Constitution, it shall set limits on public indebtedness.
- Central Bank’s Board, according to the same article, it shall inform the President and National Congress about the limit on public indebtedness.
- State General Comptroller, pursuant to article 31 of its Organic Law, it shall audit all international financing granted to state institutions.
- Commission for Civic Control of Corruption (CCCC), is an autonomous juridical entity organized under the public law to act in representation of citizens for the promotion and elimination of corruption and for the reception of claims on allegedly illicit acts in order to investigate them and request they are judged and sanctioned.
Citizen audit
Citizens have the right and obligation to demand accountability and carry out audits and inspections on the public debt either independently or jointly with control bodies.
What are debt audits?
Beyond an exclusively financial and legal concept, public debt auditing is defined "as the monitoring action aimed at reviewing and evaluating the process of negotiation and/or re-negotiation of public indebtedness, the allocation of resources, and the execution of externally financed programs and projects for the purpose of determining their legitimacy, level of transparency, quality, effectiveness and efficiency, taking into account the legal, economic, social, gender, regional and environmental aspects as well as those aspects pertaining to peoples and nationalities".1
Besides, this monitoring action on public debt was not only conceived as a subsequent but also as a preventive action, which may allow to supervise new loans in advance and avoid those credits which fail to contribute to a sustainable human development or whose conditions are harmful to national interests.
Audit aims
a) To determine the lawfulness, legitimacy and relevance of the debt;
b) To determine the debt’s impact on social, regional and gender equity as well as on nationalities;
c) To check environmental damage and determine the ecological debt;
d) To analyze whether the conditions that led to the loan failed to comply with the law, the common good, or were either unfair or dishonest;
e) To determine the efficiency and ethical behavior in the process of debt negotiation and allocation;
f ) To evaluate the Internal Control System of the public debt;
g) To identify the people who are responsible for the negotiation of illegitimate debts or the embezzlement of public funds;
h) To support and encourage enforceability mechanisms aimed at the cancellation of said loans;
i) To evaluate new loans
National Audit Board on Public Debt, a civil society proposal
Several social organizations2 which took part in the elaboration of an audit proposal on the Ecuadorian external debt, coordinated by Jubileo 2000 Guayaquil Network in October 2003, unanimously decided: "To set up a National Audit Board on the External Public Debt, with the participation of those civil society organizations that have the issue of external debt on their agendas and develop surveillance and social control mechanisms on the subject".3
The National Audit Board on Public External Debt should have the following duties:
a) To draw up and propose the National Audit Plan;
b) To define strategies with regards to the access to information, communications, resource management, enforceability, follow-up and monitoring;
c) To establish cooperation agreements with the Commission for Civic Control of Corruption (CCCC) and other public and private institutions;
d) To propose names to set up and participate in an Executive Secretariat and a Technical Secretariat;
e) To define the strategic lines for the whole process;
f) To hold itself accountable to the CCCC and citizens for all the processes being carried out.
Notes:
1 Jubileo 2000, Guayaquil Network. Civil society proposal for the implementation of evaluation and audit processes on the Ecuadorian external public debt, October 2003.
2 CCCC, Oci, Pidhdd Ecuador, Opf, Remte, Acción ecológica, Ildis,Cdes, CONAIE,Red Cántaro del Azuay, Acudir, Contrato social por la educación, UNICEF...
3 The organizations that took part in this first stage represent a fundamental pillar. Additionally, representatives from other key social sectors could be incorporated, such as for example, Universities, the Media, Professional Associations, etc.
This article was first published in the bimonthly newsletter Jubileo 2000 - Red Guayaquil (Ecuador) April, 2006
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