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Suturing the Open Veins of Ecuador: Debt, Default and Democracy

Author

Listed:
  • Mansell Wade
  • Openshaw Karen

Abstract

In 2008 the Ecuadorian government received a report on the legitimacy of the country's sovereign debt from an international audit commission appointed by Ecuador's current president, Rafael Correa. This concluded that much of the debt was tainted by illegality and illegitimacy and consequently did not merit repayment. Citing the report's findings as justification, the government stopped making interest payments on certain of the country's bonds, but, rather than repudiating them altogether, engineered a successful buyback at a large discount. Having thus reduced Ecuador's external commercial debt burden by about a third, the government is now planning to address multilateral and bilateral loans also adjudged unlawful by the commission.This article examines the robust approach adopted by the Correa administration to tackling Ecuador's public debts, placing it in the context of the country's troubled economic history and contrasting it with previous defaults and debt workouts which largely worked to Ecuador's disadvantage. In doing so, it considers the use which the government has made of the increasingly prominent concepts of odious and illegitimate debt as a means of combating the indebtedness of the South. The conclusion reached is that, regardless of the final position suggested by international law, the realities of international relations are likely to limit the practicality of legal remedies. Nevertheless, the case of Ecuador provides a new chapter in the continuing academic debate regarding unlawful debt.These, of course, are the legal aspects of Ecuador's endeavours to curtail expenditure desperately needed for other purposes. Underlying the legal implications is the reality of an impoverished nation called upon to continue to service or redeem 'debt' that brought no obvious benefit to the overwhelming majority of its people. Debt repayment has promoted impoverishment and also, if indirectly, facilitated devastating environmental degradation.

Suggested Citation

  • Mansell Wade & Openshaw Karen, 2009. "Suturing the Open Veins of Ecuador: Debt, Default and Democracy," The Law and Development Review, De Gruyter, vol. 2(1), pages 151-191, September.
    • Handle: RePEc:bpj:lawdev:v:2:y:2009:i:1:n:7
    DOI: 10.2202/1943-3867.1038
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    References listed on IDEAS

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    1. Kenneth P. Jameson, 2003. "Dollarization in Latin America: Wave of the Future or Flight to the Past?," Journal of Economic Issues, Taylor & Francis Journals, vol. 37(3), pages 643-663, September.
    2. Wakeman-Linn, John, 1991. "The Market for Developing Country Debt: The Nature and Importance of Its Shortcomings," The World Bank Research Observer, World Bank, vol. 6(2), pages 191-203, July.
    3. Yassaman Saadatmand & Michael Toma, 2008. "IMF-Induced Structural Adjustment Programs and Women in Ecuador," International Advances in Economic Research, Springer;International Atlantic Economic Society, vol. 14(2), pages 181-190, May.
    4. Harvey, David, 2007. "A Brief History of Neoliberalism," OUP Catalogue, Oxford University Press, number 9780199283279.
    5. Mathew Bradbury & Matías Vernengo, 2008. "The Limits to Dollarization in Ecuador: Lessons from Argentina," Working Paper Series, Department of Economics, University of Utah 2008_12, University of Utah, Department of Economics.
    6. Mr. Manmohan Singh, 2003. "Recovery Rates From Distressed Debt: Empirical Evidence From Chapter 11 Filings, International Litigation, and Recent Sovereign Debt Restructurings," IMF Working Papers 2003/161, International Monetary Fund.
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    Cited by:

    1. Tan Celine, 2019. "Beyond the ‘Moments’ of Law and Development: Critical Reflections on Law and Development Scholarship in a Globalized Economy," The Law and Development Review, De Gruyter, vol. 12(2), pages 285-321, June.

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