Ecuador Calls foreign Debt 'Illegal,' Defaults on Payments

Daniel Denvir
December 15, 200
Daniel Denvir (daniel.denvir [at]gmail.com) is an independent journalist from the United States in Quito, Ecuador and a 2008 recipient of NACLA's Samuel Chavkin Investigative Journalism Grant. He is the Editor-in-Chief at www.caterwaulquarter
d reluctantly blogs at www.glocalcircus.blogspot.com.
The default totals $9.937 billion, 19 percent of the country's GDP.

President Rafael Correa declared on Friday that Ecuador would not make a $30.6 million interest payment on $510 million in bonds due in 2012, calling the debt illegal.

The default on the Global Bonus 2012 bonds means that Ecuador is also defaulting on Global 2015 and 2030 bonds. The default totals $9.937 billion, 19 percent of the country’s GDP. Ecuador has assembled a legal team to fight expected lawsuits and hopes to use the default as leverage to renegotiate the debts.

Civil society organizations have long criticized foreign debt as a means of exploiting impoverished countries in Latin America, Africa and Asia. The anti-debt organization Jubilee USA says “countries are paying debt service to wealthy nations and institutions at the expense of providing these basic services to their citizens.” In addition, lending institutions often use indebtedness to force cuts in social spending and impose business friendly economic policies.

The Confederation of Ecuadorian Kichwas (ECUARUNARI), the powerful Andean branch of the country’s indigenous peoples movement, has long called the foreign debt illegal and illegitimate. “We have not acquired any debt. The so-called public debt really belongs to the oligarchy. We the peoples have not acquired anything or been benefited, and thus we owe nothing.”

Mainstream analysts immediately predicted the move would hurt Ecuador economically, cutting off access to international credit from banks and multilateral institutions like the World Bank. Enrique Alvarez, head of research for Latin America Financial Markets at IDEAglobal in New York, told the Associated Press, "They were already sort of headed into isolation. Essentially now they've drawn shut the gate." Critics also say that financial institutions will see Ecuador as risky and may be reluctant to loan to the country’s private sector.

But Mark Weisbrot of the Center for Economic and Policy Research argues that those claims are exaggerated. He says that the government does not currently require foreign funds and that any decision to not lend to Ecuador’s private sector would be purely ideological. "Ecuador doesn't need to borrow right now, especially if they're not paying the debt. They haven't been borrowing on international markets recently."

Osvaldo León of the Latin American Information Agency (ALAI) in Quito says that international banks and businesspeople are defending a corrupt and unjust system. “Of course the establishment is going to come out and protest this. This is going to affect the interests of capital. There’s going to be an offensive from both inside and out.” He charges that business friendly economists and financiers unfairly frame their arguments as scientific and opponents’ views as ideologically driven. “Ecuador has decided on a political response to a political problem. They always want things like this to be seen as a technical issue, a problem that only economists can deal with.”

Although Ecuador currently has the capacity to pay, dropping oil prices and squeezed credit markets are putting President Rafael Correa's plans to boost spending on education and health care in jeopardy. Correa has pledged to prioritize the "social debt" over debt to foreign creditors.

Ecuador is undertaking a diplomatic offensive in an effort to win political support. Correa will be attending a summit in Brazil next week with presidents from throughout Latin American and Caribbean. Ecuador has called on Latin America to forge a united response to foreign debt. Venezuela, Bolivia and Paraguay have recently created debt audit commissions. Ecuador has also asked the United Nations to help develop international norms to regulate the foreign debt market.

But relations between Brazil and Ecuador have been tense since the September expulsion of the Brazilian firm Odebrecht over accused accusations of shoddy work on a hydroelectric plant and contract violations. Most recently, Ecuador filed suit in the International Chamber of Commerce to stop payment on a $286 million debt to The Brazilian National Bank for Economic and Social Development (BNDES), credit that was allotted for Odebrecht’s hydroelectric project. Many activists in Ecuador see Brazil as a regional bully.

Last month, a special debt audit commission released a report charging that much of Ecuador's foreign debt was illegitimate or illegal. The commission found that usurious interest rates were applied for many bonds and that past Ecuadorian governments illegally took other loans on. The report also accused Salomon Smith Barney, now part of Citigroup Inc., of handling the 2000 restructuring without Ecuador's authorization, leading to the application of 10 and 12 percent interest rates. Ecuador's military dictatorship (1974-1979) was the first government to lead the country into indebtedness.

Commercial debt, or debt to private banks, made up 44% of Ecuador's interest payments in 2007, considerably more than the 27% paid to multilateral institutions such as the International Monetary Fund (IMF).


Video on U.S. Workers' Republic Occupation

*Click here to see on YouTube:*

When the workers at Republic Windows and Doors were notified their factory would close in three days, they took matters into their own hands. The union work force seized control of the factory for 6 days to demand the severance they are owed by law. On the sixth day of their occupation, they won all their demands, and showed the world's working class a classic example of people power (something not seen in the USA for decades). This short video from Labor Beat represents a fraction of our overage of this historic event. The full 30-minute episode,* "Workers' Republic,"* will be uploaded soon.

Copyright 2008 Labor Beat. Produced by Labor Beat. Labor Beat is a CAN TV Community Partner. Labor Beat is affiliated with IBEW 1220. Views expressed are those of the producer, not necessarily of IBEW. For info: lduncan@igc.org,www.laborbeat.org. 312-226-3330. For other Labor Beat videos, visit Google Video or YouTube and search "Labor Beat".


Uprising in Greece: Protests, Riots, Strikes

Democracy Now online Radio
December 11, 2008

Protests, riots and clashes with police have overtaken Greece for the sixth straight day since the fatal police shooting of a teenage boy in Athens Saturday night. One day after Wednesday’s massive general strike over pension reform and privatization shut down the country, more than a hundred schools and at least fifteen university campuses remain occupied by student demonstrators. A major rally is expected Friday, and as solidarity protests spread to neighboring Turkey, as well as Germany, Spain, Italy, Russia, Denmark and the Netherlands, dozens of arrests have been made across the continent. We speak to a student activist and writer from Athens.

Guest: Nikos Lountos, Greek activist and writer. He’s with the Socialist Workers Party in Greece and a graduate student in political philosophy at Panteion University in Athens.

Rush Transcript.

AMY GOODMAN: Protests, riots and clashes with police have overtaken Greece for the sixth straight day since the fatal police shooting of a teenage boy in Athens Saturday night. One day after Wednesday’s massive general strike over pension reform and privatization shut down the country, more than a hundred schools and at least fifteen university campuses remain occupied by student demonstrators. A major rally is expected on Friday. And as solidarity protests spread to neighboring Turkey, as well as Germany, Spain, Italy, Russia, Denmark and the Netherlands, dozens of arrests have been made across the continent.

On Wednesday, two police officers involved in Saturday’s shooting were arrested, and one was charged with murder. But anger remains high over the officers’ failure to express remorse at the student’s death. The police officers claim the bullet that killed Alexandros Grigoropoulos was fired in self-defense, and the death was an accident caused by a ricochet.

The unrest this week has been described as the worst since the end of the military dictatorship in 1974 and could cost the already weakened Greek economy an estimated hundreds of millions of dollars. It’s also shaken the country’s conservative government that has a narrow one-person majority in Parliament. The socialist opposition has increased calls for the prime minister to quit and call new elections, ignoring his appeals for national unity.

I’m joined now on the telephone by a student activist and writer from Athens. He’s with the Greek Socialist Workers Party. He’s a graduate student in political philosophy at Panteion University in Athens.

We welcome you to Democracy Now! Can you lay out for us exactly when this all began and how the protests have escalated and what they’re about right now, Nikos Lountos?

NIKOS LOUNTOS: Yes, Amy. I’m very glad to talk with you.

So, we are in the middle of an unprecedented wave of actions now and protests and riots. It all started on Saturday evening at around 9:00 p.m., when a policeman patrolling the Exarcheia neighborhood in Athens shot and murdered in cold blood the fifteen-year-old schoolboy Alexis.

The first response was an attempt to cover up the killing. The police claimed that they had been attacked. But the witnesses all around were too many for this cover-up to happen. So, all the witnesses say that it was a direct shot. So even the government, in just a few hours, had to claim that it will move against the police, trying to calm the anger.

But the anger exploded in the streets. In three, four hours, all the streets around Athens were filled with young people demonstrating against the police brutality. The anti-capitalist left occupied the law school in the center of Athens and turned it into headquarters for action. And on Sunday, there was the first mass demonstration. Thousands of people of every age marched towards the police headquarters and to the parliament. And the next day, on Monday, all this had turned into a real mass movement all around Greece.

What was the most striking was that in literally every neighborhood in every city and town, school students walked out of their school on Monday morning. So you could see kids from eleven to seventeen years old marching in the streets wherever you could be in Greece, tens of thousands of school students, maybe hundreds of thousands, if you add all the cities. So, all around Athens and around Greece, there were colorful demonstration of schoolboys and schoolgirls. Some of them marched to the local police stations and clashed with the police, throwing stones and bottles. And the anger was so really thick that policemen and police officers had to be locked inside their offices, surrounded by thirteen- and fourteen-year-old boys and girls.

The picture was so striking that it produced a domino effect. The trade unions of teachers decided an all-out strike for Tuesday. The union of university lecturers decided a three-day strike. And so, there was the already arranged, you know, the strike you mentioned for Wednesday against the government’s economic policies, so the process was generalizing and still generalizes.

AMY GOODMAN: Nikos Lountos, when you have this kind of mass protest, even with the beginning being something so significant as the killing of a student, it sounds like it’s taken place in like a dry forest when a match is thrown, a lit match, that it has caught on fire something that has been simmering for quite some time. What is that?

NIKOS LOUNTOS: Yeah, that’s true. Everybody in all of this, that even the riots, the big riots—you may have seen the videos—they are a social phenomenon, not just the result of some political incident. There were thousands of angry young people that came out in the streets to clash with the police and smash windows of banks, of five-star hotels and expensive stores. So, that’s true. It was something that waited to happen.

I think it’s a mixture of things. We have a government that’s—a government of the ruling party called New Democracy, a very right-wing government. It has tried to make many attacks on working people and students, especially students. The students were some form of guinea pigs for the government. When it was elected after 2004, they tried—the government tried to privatize universities, which are public in Greece, and put more obstacles for school students to get into university. The financial burden on the poor families if they want their children to be educated is really big in Greece. And the worst is that even if you have a university degree, even if you are a doctor or lawyer, in most cases, young people get a salary below the level of poverty in Greece. So the majority of young people in Greece stay with their families ’til their late twenties, many ’til their thirties, in order to cope with this uncertainty. And so, this mixture, along with the economic crisis and their unstable, weak government, was what was behind all this explosion.

AMY GOODMAN: Nikos Lountos is a Greek activist and writer. Nikos, the protests have been picked up not only in Greece, but around the world. We’re talking about the Netherlands, talking also about Russia and Italy and Spain and Denmark and Germany. What does it mean to the workers and the students in Greece now? How significant is that? Has that changed the nature of the protests back in Greece?

NIKOS LOUNTOS: It’s very good news for us to know that many people around the world are trying to show their solidarity to us. And I think it’s not only solidarity, but I think it’s the same struggle against police brutality, for democracy, against war, against poverty. It’s the same struggle. So it’s really good news for us to hear about that.

I think you should know that the next Thursday will be the next day of action, of general action. Every day will have action, but next Thursday will be a day of general action. The students will be all out. And we’re trying to force the leaders of the trade unions to have a new general strike. So I could propose to people hearing me now that next Thursday would be a good day for solidarity action all around the world, to surround the Greek embassies, the consulates, so generally to get out in the streets and express your solidarity to our fight. And I think workers and students in Greece will really appreciate it.

AMY GOODMAN: What about the issue of civil liberties overall in Greece? Has this been a matter of controversy over time?

NIKOS LOUNTOS: Yeah. This government has a really awful record on civil liberties. It all began during the Olympics of 2004, aided also by the so-called anti-terrorist campaign started by George Bush after 9/11. During the Olympic Games, we had the first cameras in the streets of Athens. And there are now proofs that many phones were tapped illegally at that period, among them the phones of the leaders of the antiwar movement here in Greece, such as the coordinators of the Stop the War Coalition.

And then came the biggest scandal of all. In 2005, tens of Pakistani immigrants were abducted from their homes by unknown men. They were hooded and interrogated and then thrown away after some days in the streets of Athens. The Greek police, along with the British MI5, had organized these illegal abductions in coordination with the then-Pakistani government of Pervez Musharraf.

During the student movements and the workers’ strikes all these years, hundreds of beatings and more police brutality have covered up. Just one month ago, a Pakistani immigrant called Mohammed Ashraf was murdered by riot police in Athens when the police dispersed the crowd of immigrants waiting to apply for a green card. And the immigrants in Greece in general are mainly from regions hit by war—Iraq, Afghanistan, Somalia, Pakistan. And they are treated in awful conditions by the Greek state and police. Many people have died by shells in the borders or in the DMZ, trying to get into Greece and then Europe. So it’s really an awful record for the government on civil liberties.

AMY GOODMAN: Nikos Lountos, finally, as we travel from Sweden to Germany, one of the things we’re looking at is the effect of the US election on the rest of the world. In a moment, we’ll be joined by the editor-in-chief of Der Spiegel, the largest magazine in Europe. When President-elect Obama was elected, their headline was “President of the World.” What is the effect of the election of Barack Obama on people you know in Greece? What has been the reaction?

NIKOS LOUNTOS: Well, you know, all these years we had a slogan here in the antiwar movement and the student movement that George Bush is the number-one terrorist. So, many people were happy when they learned that these will be the final days of George Bush and his Republican hawkish friends like John McCain. But, of course, people in Greece have experienced that having a different government doesn’t always mean that things will be better. If the movement doesn’t put its stamp on the changes, changing only persons will have no meaning. But people have appreciated the change in the US administration as a message of change all over the world.

AMY GOODMAN: Nikos Lountos, I want to thank you very much for being with us, Greek activist and writer. He’s with the Socialist Workers Party in Greece and a graDemocratic Struggleduate student in political philosophy at Panteion University in Athens.


Greece: massive school student attack against police stations all over the country!

Editorial Board of "Marxistiki Foni"
December 10, 2008

On Monday morning we witnessed a phenomenon that we have not seen in Greece since the uprising of December 1944. In every town of Greece a total of about forty thousand school students, young 15-year old teenagers, attacked the police stations. In Athens, Thessalonica, Patras, Larissa, Corfu, Komotini' and in many other towns across the country the attack of the school students pinned down the heavily armed and well-equipped police officers inside their stations simply with the use of small rocks, tomatoes and yoghurts! Without any fear whatsoever, thousands of teenagers gave an example of heroic struggle against police brutality.

The Karamanlis government took immediate measures to close the schools for one day in the name of "mourning for the young student". In reality what he was aiming at was to stop the students from occupying the schools. On Monday night the government met behind closed doors and as the media reported, some ministers went as far as proposing calling in the army to maintain "public order"! The government has officially announced that it has rejected any such suggestions and is insisting on the "democratic road", while at the same time Karamanlis has announced a series of discussions with the opposition political parties with the aim of creating a common front of "national unity".

In spite of the final outcome and the official position taken, these discussions among the government ministers is a serious warning to the workers and the youth of Greece of what can happen if in the next period they do not build a socialist alternative to the present rotten and barbaric bourgeois power.

The government is desperately seeking points of support in society and on the same night, they found a very useful ally among the desperate and semi-lumpen elements who oblige the government with their blind methods. These groups, with about 2000 people in total, mixed with anarchists, hooligan elements and also infiltrated by police provocateurs, in reality destroyed from the very beginning the massive demonstration of 25.000 people on Monday evening which had been called by SYRIZA, the KKE, University Student unions and school teachers. Without any political logic these elements went on the rampage, smashing small shops together with banks, burning "luxury" Mercedes but also scooters, burning kiosks (small newsagents and tobacconists) and ordinary residences, and they also looted shops, stealing mobile phones, watches and other things.

Yesterday, the school students and thousands of people demonstrated all day long in the centre of Athens and after that they attended en masse the funeral of the young Alexandros who had been killed a few days earlier. But the police, not happy at having killed one student, provocatively attacked the demonstrators outside the cemetery. One team of police officers tried to terrorize the demonstrators by shooting many times in the air with live ammunition. All these scenes were broadcast on the TV channels, provoking a new big wave of anti-government feelings throughout Greek society.

The government has tried to exploit this mood of "tension" in society to get today's general strike called off. Karamanlis in fact made an official request to the union leaders to cancel the strike rallies. However, under the pressure of the working class the union leaders have had to reject the government's request. So as we write this short report the working class in Greece is mobilising in yet another general strike, the 10th since the ND formed its government.

The atmosphere in Greek society is electric. The Marxists believe that only the working class in a united class action with the youth, strictly separate from the criminal methods of the lumpen and hooligan elements, can defeat the government and its bosses. All the conditions have been laid for a big victory of the movement and the fall of this government. The forces are gathering whereby a radical transformation of society would be possible. This explains the growth in popularity of all the left parties.

What is missing is a leadership with a clear political perspective, a genuinely socialist perspective for putting an end to the present system which is the cause of growing poverty and with it increasing state violence. The Greek Marxist Tendency is intervening in the movement and raising demands that correspond to the needs of the movement. There is a vacuum on the left and what is required is a clear orientation for the mass left parties of the Greek workers and vanguard youth. The calls must be one for a united front of the left parties, in alliance with the trade unions and youth organisations, whose aim must be to bring down this hated reactionary government and usher in a genuine workers' government based on a programme of expropriation of the capitalist class. That is the only serious answer to the present brutal methods being used by the Greek ruling class.