Global Insight Perspective

Significance

After midnight today, no further electioneering is permitted, leaving Ecuadorians to choose between 15 competitors seeking to become the country’s next president.

Implications

The election is being fought on the promise of change although none of the contenders is expected to herald in an elusive era of stability for the smallest nation in the Andean region. Ecuador is currently under the leadership of an interim president Alfredo Palacio who is the country’s seventh head of state to serve in only a decade.

Outlook

Serving out a full term is a daunting challenge for the politician Ecuador’s electorate chooses as its next president. Correa’s election is not guaranteed, particularly if the vote goes to a second round as polls predict. If the election is extended, then moderate and right-leaning politicians are expected to unite against him and his radical project to sideline Congress, redesign petroleum contracts, and refuse to revive free-trade talks with the United States

Advantage for the Country Alliance

Rafael Correa and his Country Alliance (AP) held the lead in the ultimate opinion polls of Ecuador’s 15 October vote. Still short of enough support for a first-round victory, the radical leftist contender, who celebrates his personal friendship with Venezuelan President Hugo Chávez, remains the favourite with 30% of support. His closest challenger, banana tycoon Alvaro Noboa, secured 23% followed by former front-runner moderate leftist León Roldós, with 19%. Conservative Social Christian Party (PSC) candidate Cynthia Viteri fell into forth place with voters apparently preferring populist platforms to her pro-business stance. Noboa, best known as Ecuador’s richest man, is pledging to share his billions with the promise of affordable housing, an expanded labour market, and cash credits for vulnerable groups. The man who made his fortune on the back of Ecuador’s banana industry finished a surprise second to an even more unlikely victor Lucio Gutiérrez in 2002. Correa is the dark horse candidate in 2006. He came from a position as rank outsider to oust moderate former vice-president León Roldós from the top spot. This one-time economy minister is no darling of the markets, pledging an economic platform strongly opposed to neo-liberal (free-market) policies, which is modelled on Venezuela’s revolutionary programme for government. Correa’s chances of victory are strongest in the first round, but he will need his array of challengers to split the vote and his own vote-percentage to top the 40% required, with a 10-percentage-point advantage over his closest rival also needed (see Ecuador: 9 October 2006: Ecuador Leans Left in Upcoming Election)

Joining the Axis of Anti-Americanism

Correa’s rhetoric regularly recalls the anti-American sentiment expressed by Venezuela’s President and his regional allies, Communist Cuba and Socialist Bolivia under Evo Morales. Correa promises to end the agreement to allow U.S. anti-drugs officers to stay in the Andean country at the Manta Base. The current arrangement is in place until 2009. Correa’s anti-Americanism extends to the refusal of a free-trade agreement (FTA) with the United States that outgoing President Palacio is trying to revive. Such a deal is of paramount importance with the existing benefits provided under the Andean Trade Preferences and Drug Eradication Act (ATPDEA) set to end before the new Ecuadorian president takes office. Ecuador would be put at an even greater disadvantage to Andean Community (CAN) colleagues, Peru and Colombia, which are awaiting the ratification of a U.S. FTA. Like Chávez, Ecuador’s leading candidate is a strong critic of the CAN, making Ecuador’s exit from the regional body a probable course of action if Correa were to win Sunday’s vote. Investment risks increase for U.S. and other foreign entities, particularly in the energy sector, with the AP contender pledging to revise energy contracts in favour of national interest. During his stint as economy minister, Correa oversaw legislative change to give the state more benefits from high energy prices to the cost of corporations (see Ecuador: 8 September 2005: Energy Companies Face Contract Revision in Ecuador). Meanwhile, his plans to call a Constitutional Assembly to sideline the national Congress, combined with his assault on party politics, place Ecuador’s fragile democracy under further strain. His allegations that rightist politicos are plotting electoral fraud to deny him the presidency also undermines the nation’s democratic institutions in which public faith is already so low. His claims dilute the positive impact of the Organisation of American States’ observation mission that has given its seal of approval to the work of Ecuador’s Supreme Electoral Tribunal (TSE).

Outlook and Implications

Thirteen presidents have served in Ecuador since the restoration of democratic rule in 1979 and the nation has yet to establish a semblance of political stability. In an interview with Agence France-Presse (AFP) newswire, moderate leftist Roldós, who is standing for the Ethics and Democracy Network—Democratic Left (RED-ID) alliance, played on national nervousness at the prospect of another short-lived government. He claimed that a Correa or Noboa presidency would last only “months”, although Roldós asserted that the legislative branch would endure. A Roldós administration represents the most promising prospect of stability, given the ID’s strong national presence and experience in the legislature, and his pragmatic leftism that is more open to alliance-building and pro-business policies. The tide seems to be flowing against the centre-leftist, however, with the latest polls pointing to a second round between Correa and Noboa. Such a scenario would bring a populist president to power again in Ecuador, striking another blow against political parties and congressional politics that provide the basis of a healthy democracy. Investment risks are high as Sunday’s poll approaches, with more of the same political uncertainty on the cards and the prospect of even less business-friendly policies than those promulgated by the caretaker Palacio administration.

Contact: Raul Dary

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raul.dary@globalinsight.com

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