ECUADOR: PRESIDENT LUCIO GUTIERREZ HAS SHORT HONEYMOON.

After six weeks in office, President Lucio Gutierrez is discovering how difficult it will be to keep the support of his indigenous base while also satisfying the demands of the US and the International Monetary Fund (IMF). Although Gutierrez quickly reached an agreement with the IMF, evidence suggests that he will have a hard time implementing the required reforms. Indigenous organizations have already begun protesting against Gutierrez's economic policies.

During his campaign, Gutierrez criticized his predecessors' rigid adherence to neoliberal principles and promised not to apply adjustment policies that would adversely affect the poorest segment of the population. He promised to reduce the level of poverty from 51% to 38% and the level of indigence from 25% to 10.3%. He also pledged to reduce the infant mortality rate and to cut the number of people without access to health care from 23.2% to 17%.

Almost immediately after taking office, however, Gutierrez increased the price of gasoline by 37%, public transportation by 25%, and electricity rates by 1.5%. He also froze salaries and reduced the budgets of government offices, bringing an angry reaction from supporters who said they had been betrayed.

"It's the same medicine as always, those traditional measures have failed under all the governments, they have not been the solution for overcoming the nation's crisis," said Luis Villacis, president of Frente Popular, which includes campesinos, small merchants, students, union members, and others. "The only thing those measures have done is aggravate the crisis in the poorest sectors."

"The IMF has kidnapped Gutierrez," Villacis added. "The people should rise up to prevent the IMF from continuing to stick its nose in the middle of the Gutierrez government."

The Confederacion de Nacionalidades Indigenas (CONIE) and its political branch, the Movimiento Pluricultural Pachakutik (MPP), which were key in Gutierrez's victory, soon began to make public their displeasure with the president's policies.

MPP leader Miguel Lluco said Economy Minister Mauricio Pozo was making decisions without consulting other members of the alliance. Lluco called for the minister to resign.

Marco Murillo, president of the Consejo de Pueblos y Organizaciones Indigenas Evangelicas de Ecuador (FEINE), said the administration's economic measures would not end the deficit. "We totally reject these measures," said Murillo. "We will call permanent assemblies and if we are ignored, we will call a mobilization. With these measure, we feel that Gutierrez has lied and is betraying the people."

IMF likes Gutierrez's policies

Although facing growing anger at home, Gutierrez was quickly rewarded for his tough economic measures by the IMF. It announced on Jan. 31 that it had reached a preliminary agreement with Ecuador for a US$200 million standby loan aimed at helping plug a US$2.1 billion fiscal hole and avert the risk of a debt default.

"The new Ecuadoran government has been very courageous in its first few days by quickly taking measures to address the difficult fiscal situation and has developed a comprehensive program of far-reaching structural reforms," the Fund's Quito office said in a statement.

"We've reached a preliminary deal with the Fund after 15 or 16 days of government," said Gutierrez. "That's a national record."

Ecuador will receive US$40 million immediately, with four additional tranches of the same amount through March 2004 if the government can pass the legislation the IMF wants. Those measures include an overhaul of the administration of the customs and ports, a comprehensive package of tax reforms, and civil-service reform, which "is aimed at moderately lowering the nominal wage bill in 2004, helping make the economy more sustainable," said a source close to the IMF negotiations. The IMF contends that a 40% increase on public sector wages last year exacerbated the government's financing problems.

President increases public's concerns with US visit

In early February, Gutierrez went to Washington, where he promised to be a trustworthy ally of the US, one that could provide the US a steady supply of oil. During his visit, he met with US President George W. Bush, and, on Feb. 10, he signed the letter of intent with the IMF.

Gutierrez accepted the possibility that Ecuador might participate in "an anti-terrorist naval cordon and in aerial and maritime interdiction efforts" proposed by the Bush administration as part of Plan Colombia.

The MPP criticized Gutierrez's actions in Washington. "It is important to have good relations with all nations and therefore also with the US. But only if it does not mean compromising Ecuador's international policy or giving up strategic posts like the Manta military base" on the Pacific coast, said Deputy Ricardo Ulcuango.

"I do not agree with Ecuador becoming more involved in Plan Colombia, which is deepening the war" in that country, nor an eventual broadening of the agreement regarding the base at Manta because "it will directly involve Ecuador in the Colombian conflict," said Ulcuango.

Gutierrez attempted to clarify his position, saying his complete statement had been that his administration "wants to be the best ally of the US in the battle against corruption, illiteracy, and terrorism."

Nevertheless, Gutierrez returned to Quito to find his Indian allies organizing protests. CONAIE said it was calling a two-day meeting to analyze Gutierrez's economic policies and his behavior in the US. At the end of the meeting, on Feb. 20, CONAIE said it would give Gutierrez a month to correct his economic policies. "If in 30 days the government fails to rectify its performance, we will withdraw our support," said CONAIE president Leonidas Iza, who did not rule out the possibility of a new national "uprising" by the indigenous movement, one of the best organized in Latin America.

The statements by Indian leaders seemed to get Gutierrez's attention. On Feb. 22, the president said they had met to analyze their differences. The president promised to improve social investment, strengthen the Banco Nacional de Fomento (BNF), which channels credits to the agriculture and small-business sectors, and resolve the issue of land titles. He also said he would restructure the Agencia de Garantia de Depositos (AGD), the agency that administers the banks that went bankrupt during the past financial crisis, and restructure the administration of the social security system.

The president said he and the Indian leadership would meet monthly to evaluate progress on the agreements. Despite the statement, many indigenous leaders remained wary.

In an interview in the daily La Hora, Estuardo Remache, president of Ecuarunari, said CONAIE had decided to maintain its alliance with the president, but they called on Gutierrez to correct the direction of his policies. "There is a general uneasiness, not only among the Indians, but throughout the population, with the economic decisions adopted by Gutierrez, especially with the increase in the prices of gasoline, public transportation, and electricity," said Remache.

CONAIE leader Blanca Chancoso said in an interview published in the daily Expreso that the trust people felt in Gutierrez during the campaign and the first days of his government was being undermined by his policies and decisions.

"We are seeing that we are not the government" and that the indigenous sector is a long way from participating in fundamental decisions, she said. "We feel that not even the Indians who are ministers are part of the decisions of the administration." Chancoso said Gutierrez has been aligning himself with the nation's traditional power groups and has betrayed the principles and commitments of the alliance that brought him to power.

Ecuarunari and the MPP are both demanding the removal of Pozo. "Through Pozo, along with his undersecretaries and associates from previous governments, the conditions set by the IMF continue to be imposed on us, and the same neoliberal policies continue to be implemented," read a communique released this month by Ecuarunari.

Meanwhile, the Federacion Nacional de Organizaciones Campesinas, Indigenas y Negras (FENOCIN) and the Coordinadora de Movimientos Sociales (CMS) have filed a motion in the Tribunal Constitutional (TC) asking that the increases in fuel, public transportation, and electricity be declared unconstitutional.

Opposition on all fronts

By early March, evidence was growing that the IMF demands were coming under a increasing pressure.

On Feb. 24, the 120,000 teachers belonging to the Union Nacional de Educadores (UNE) had staged a 72-hour walkout to demand back pay and more money in the budget for education.

The business sector made such strong objections to the decision to reinstate tariffs on hundreds of imported primary materials, capital goods, and inputs that Foreign Trade Minister Ivonne Juez de Baki said the plan would be scrapped.

Following the teachers strike, Gutierrez requested that Congress look at cutting the amount designated in the budget for foreign-debt payment to redirect it toward education.

The bill to reform the customs department is being debated in Congress amid pressure from business and political interests in Guayaquil to scrap the bill's provision to suppress the Corporacion Aduanera Ecuatoriana (CAE). Gutierrez had planned to transfer the Guayaquil-based CAE's functions to the Servicio de Rentas Interno (SRI), based in Quito, to improve tax collection, a demand of the IMF.

Recipients of Instituto Ecuatoriano de Seguridad Social (IESS) benefits opposed the plan to cancel an increase in the pensions planned for June. Business organizations opposed new taxes rumored to be part of reforms the government will send Congress to meet IMF demands.

Former director of the Banco Central del Ecuador Mauricio Davalos, writing in the daily El Comercio, said the measures taken so far, while "understandable" were "recessive." He warned that the proposal to finance part of the 2003 budget with government bonds of up to US$900 million would provoke a jump in interest rates, which he said is counterproductive in trying to reactivate production.

Davos cited a study in the publication Carta Economica, which said that production costs for businesses increased 17.7% in 2002, a level not sustainable in a dollarized economy such as Ecuador's. Davos said the measures taken by Gutierrez could lead to a recession that would make it impossible to meet the tax-collection goals. He also warned that Ecuador could face an economic crisis when the price of oil drops that could bring "an economic landslide" with "serious political and social consequences." [Sources: The Financial Times (London), 01/31/03; Inter Press Service, 02/12/03, 02/21/03; El Nuevo Herald (Miami), 01/21/03, 01/22/03, 02/08/03, 02/11/03, 02/12/03, 02/20/03, 02/22/03; Spanish news service EFE, 01/19/03, 01/20/03, 01/23/03, 02/07/03, 02/10/03, 02/28/03; Notimex, 01/22/03, 02/01/03, 02/16/03, 02/22/03, 03/03/03]