ECUADOR: Bucaram Woos U.S. Bankers after Populist Campaign

By Farhan Haq Reprint | | Print |

NEW YORK, Aug 6 1996 (IPS) - Abdala Bucaram Ortiz does not become Ecuador’s next president until Saturday, but his visit this week to the United States shows how far he must go to placate U.S. investors worried by his populist campaign.

At one meeting with the banking community Monday hosted by the Council of the Americas, it was not long before one banker asked Bucaram what has become, for the Wall Street community, the all- important question: Will his government be as pro-poor and populist as his campaign rhetoric?

To the cheers and laughter of his audience, Bucaram shrugged and said, “A campaign is a campaign.”

Before his victory over conservative rival Jaime Nebot on Jul 7, Bucaram had worried investors by promising on the campaign trail to renegotiate the country’s foreign debt, to devalue the currency (the sucre) and peg it to the U.S. dollar, and to spend 30 percent of the national budget on education.

Bucaram fared well with such proposals, which helped convince voters that, after years of structural adjustment, 25-percent inflation and deteriorating social services, the nation’s nearly eight million poor (out of 12 million people overall) had a champion. As Bucaram said repeatedly in his campaign’s theme, “the poor come first.”

U.S. bankers got nervous. Questioning Bucaram’s “true policy intentions” and noting his “widely inconsistent promises during the election campaign,” the New York-based Salomon Brothers firm slapped a “mildly negative” rating on Ecuador investments last month. One of Salomon Brothers’ most revealing criticisms of the president-elect was that his “commitment to increase social spending so far remains uncontested.”

Now, as the president-elect made clear here, the task of comforting Wall Street and securing investment for Ecuador begins. To that end, he has kept Roberto Isaias, a conservative financier, as his chief executive adviser, and designated Alvaro Noboa, the president of a large agro-industrial group, to be president of the Monetary Board.

Bucaram has also backed off from all talk of currency devaluation or renegotiation of the debt, which is slightly larger than the country’s 20-billion-dollar gross domestic product. He denied he would tamper with Ecuador’s liberalised economy in the name of social reforms.

“Who would kill the goose that laid the golden eggs knowingly?” he said at the Council of the Americas. “That would be absurd.”

But at the same time, he is sticking to his commitment to social reforms. “You have to place the economy at the service of humanity,” he says. “It should not be possible for a country like Ecuador to have 60 percent of its population poor.”

Wall Street, for the most part, has calmed down. The First Bank of Boston cautiously upgraded its assessment of the Bucaram administration, especially lauding the selection of Isaias.

“I think some of the fears that appeared before his victory were mitigated,” adds Michael Hart, of Salomon Brothers’ Latin America Economic Research branch. “He’s certainly assembling a technically competent economic team.” He says that Bucaram has shown an awareness of the need to finance his ambitious social reform projects, which was not apparent a month ago.

Still, some wonder how Bucaram will both stick to the free- market path and alleviate the lot of the nation’s poorest. The country’s needs are many: One recent World Bank study estimates that 1.5 million people, or one out of every eight Ecuadorans, “cannot meet their nutritional requirements even if they spend everything they have on food.”

“We can level the budget and at the same time do social work,” says Noboa. He claims that the government can easily raise between 200 million and 300 million dollars simply by cracking down on tax evasion and late payment of taxes.

The government also plans to eliminate gas subsidies, except for the poorest sectors, and to sell off key stakes in the state telephone company, ENTEL, and the energy and hydrocarbon industries. Bucaram promised Wall Street that 35 percent of ENTEL’s stock will be sold by the first quarter of 1997.

The incoming government already has some plans for where the proceeds are to go. Noboa says the administration intends to spend 150 million dollars to construct 100,000 low-cost housing units each year.

Not all of those proposals have met with approval here. Hart doubts that a crackdown on tax evaders will yield much revenue. “If it were so easy to make 200 or 300 million dollars that way, the previous government would have done it,” he argues.

He also thinks some of Bucaram’s promises here — including promises to lower interest rates and to double the nation’s yearly GDP growth rate to 6 percent — are only realistic for the distant future.

“I don’t think his ideas were very consistent,” Hart says. “He’s a little bit erratic.”

Other analysts are even less charitable. “He came here with people doubting his rhetoric, and he started talking about humanism and using obscure metaphors (in his speeches),” one banker says. “That’s just not going to work.”

Some bankers confessed to being mystified by the president- elect’s more poetic phrases, such as when he described speculation as “a germ, a virus of the capitalist system.”

Bucaram, the 44-year-old former mayor of Guayaquil, is no stranger to controversy. Dubbed ‘El Loco’ by his critics, Bucaram briefly fled to Panama a decade ago after he was stung with corruption charges. While he was mayor, Bucaram also drew attention for allegedly scolding women on the streets of Guayaquil for dressing improperly.

All of that, however, counts for less with U.S. bankers than whether Bucaram will stick with liberalisation, whatever the social cost.

And the president-elect has been clear about where his campaign promises end: “It is obvious I am not only a populist,” he said here before returning for his inauguration. “It is the great responsibility of the businessmen to take our country forward.”