FROM BANANA REPUBLIC TO THE NON REPUBLIC

Months ago, I got an interesting book called "From Banana Republic To The Non Republic". Its author was the current president of Ecuador, Rafael Correa Delgado.

"From Banana Republic To The No Republic" is a book with a provocative title, which contains realities, ironies, even skepticism. It, among other things, reviews the disposition of Ecuador to the adjustment of its budget to meet the demands of international agencies in relation to its external debt. It also describes the situation experienced in that country from 1970 to the present, and also focuses on issues concerning Latin America. The abuses mentioned in the book are numerous and blatant, and one more time, reconfirms what has been reported in Latin America during the last 30 years.

It is amazing how many former Latin American presidents and bankers walk freely through the streets of Miami and New York. We can mention the case of the former Ecuadorian president, Jamil Mahuad, that when he destroyed the economy of his country in 1999 with other nefarious characters, found in the United States his best shelter. Moreover, Mahuad is a professor of the very prestigious Harvard University.

It is pathetic that a man, who plunged his country, is accepted for lecturing in the most famous university in the world. With what moral quality a person, who betrayed his people, can teach what democracy and leadership is, and the worst is that he has been a Nobel Peace Prize Nominee.

The Ecuadorian President emphasizes very clearly the destructive policies of social capital that have occurred in the region, when we talk about labor flexibility in nations that lack the capacity or resources to create jobs and do not even have unemployment subsidies (as happens in the EU), or when looking for the easiest, that is, taken as a variable wage adjustment, thereby affecting the low-income families receiving.

Ecuador is one of the five Latin American countries with lower per capita social investment. The average in Latin America is $ 475 per capita, while in Ecuador it only is $ 93. Many analysts say the big problem in poor countries is the lack of quality in social investment, when the truth is that lack of good leaders that play a major role in alleviating absence of social capital, represents a knockout for various economies, making the task of having quality in social investment very difficult.

On the other hand, Correa denounced the lack of investment in sectors like education and health, where in the 90’s; these items were dropped as a percentage of GDP (Gross domestic product) in order to get cash to pay the external debt.

Ecuador had a clear tendency to reduce social spending and in 2002, approved a Fiscal Transparency Act, which earmarked 70% of new oil resources to buy back public debt, shamelessly devoting only 10% of those resources for social investment.

A reality that until now has not been exceeded, is that Latin American countries have the capacity to save and consequently, of domestic investment, but the absence of solid institutions, market imperfections, and mainly due to lack of collective action, has not managed to get the maximum benefit to those savings, on the contrary, the most common is to send out of country the savings for them to serve others, and generating a terrible flight of capital that funds the richest countries, as was the case of Ecuador, that had more than three thousand million mainly in the United States.

Professor Charles Calomiris of Columbia University and member of the Metzler Commission of U.S. Congress (set up to suggest reforms to the IMF and World Bank) said literally to the press that the IMF granted loans to Ecuador, are better understood as "political pressure the Ecuadorian government at a time when the United States wants to ensure the use of military bases in this country to control drug trafficking. Meanwhile, Robert Reich, former secretary of the Clinton administration, said publicly in 1999 that, "at present, U.S. policy is executed by the International Monetary Fund, with some guidance from the Treasury Department .... Here too, Congress has become irrelevant.”

It is no surprise to see as many Latin American governments agree on an almost divine, the new "political role" that many financial institutions have had on the region in recent years. It is an open secret that many presidents, vice presidents and ministers permit that the most delicate decisions of their countries are taken by international organizations.

In 2003, according to figures from the Inter-American Development Bank, Ecuador just destined to 0, 055% of its GDP for research and development, which represented less than one-tenth the Latin American average. Moreover, spending on research and development was Ecuador was second only to Haiti, which shows why Latin America produces slightly from 1.2 to 1.5 of technological development worldwide. With all this, it is not surprising that Ecuador has one of the worst education systems in Latin America at least, although it should be stressed that in the past 2 years have been quite extensive in the area of education, health and development in that country.

The emphasis of Correa is on the lack of motivated and cohesive societies, as well as strong formal institutions and the enormous need that exists to create value and really helps to developing countries. A sad and cruel reality I could find when I was reading the book and with what Correa concludes his work, is that the major crisis that hit Latin America in the neo-liberalism, was not an economic crisis, but a LEADERSHIP CRISIS.

Posted in: Economy and Trade,South America,World Affairs and Government