If you care about the Amazon Rainforest, beware Ecuador’s elections.
Andres Arauz wants to follow in Correa’s footsteps. That means mining in protected areas.
A quick history lesson for those who don’t know much about Ecuadorian politics.
In Ecuador’s 2007 elections, Rafael Correa won the presidency, ushering in a ten-year period of relative prosperity and increasingly left-wing politics for the country. The Correa regime — much like the Chavez or Perón regimes — started with good intentions.
Ecuador had come out of generations of shaky democracy, hyperinflation, small coups, and border wars with Peru that left the country dependent on a boom-and bust-cycle of oil prosperity. Just seven years before, the country had abandoned its currency for the US dollar. Correa promised to heal the economy, increase standards of living, and decrease poverty in Ecuador. And he did.
But Correa inherited an oil boom. On the back of a roaring economy fueled by oil exports, Correa borrowed heavily from China to fund social welfare programs, dropping poverty from 36.7% to 22.5% and winning him widespread support. He turned his back on the maxim that natural resource economies should save in boom years to prepare for lean years; much like Chavez, Correa saw a chance to let commodities buy his popularity.
However, at the time, Correa was also an environmentalist. He became particularly famous for the Yasuni ITT Initiative, where he pitched the international community to provide Ecuador with $3.6B in return for not extracting over a billion barrels of oil (20% of Ecuador’s reserve) in Yasuni National Park. Yasuni is one of the top biodiversity hotspots in the world, and the initiative was meant to fund Ecuador’s transition into a green economy that would focus on renewable energies and industries that supported indigenous peoples.
Correa only managed to raise $200M and eventually gave up the initiative. As of 2010, there is active drilling in Yasuni National Park, and the majority of the park and Biosphere Reserve are still available for future concessions.
And following Ecuadorian tradition, the oil economy went bust in 2014. Correa, who had ridden on years of commodities prosperity, saw his popularity plummet. But he had already used his economic and political power to weaken Ecuadorian democracy by expanding term limits, limiting free speech, and forcing television channels to broadcast his presidential statements through emergency decree. He gave up the presidency to a hand-picked successor (Lenin Moreno) three years ago, who was expected to follow his policy but sharply broke from him to return Ecuador to good international standing.
The most important thing to understand here is: Correa’s success in poverty reduction and popularity among the working class was almost wholly dependent on a commodities boom and well-placed rhetoric. He sold oil and took on loans — rather than saving and investing in long term growth — to ingratiate himself with the majority of Ecuadorians. He may have had their economic well-being in mind when he started, but oil got to his head, and he lost his way. Ecuador would have lost its way too if Moreno hadn’t taken the upper hand.
What will happen in the February 7th election?
Andrés Arauz, the current front runner for Ecuador’s elections, wants to follow in Rafael Correa’s footsteps. He is campaigning on a return to populist “Correismo” that was eschewed for three years by Moreno. Correa was even going to run as Arauz’ Vice President until he got caught up in so many corruption and embezzlement cases that it seemed politically damaging. Instead, Correa went on to help officiate Venezuela’s election of Nicolas Maduro for an umpteenth term.
It is critical to note that the two men would inherit very different countries. We should analyze Correa’s final years as President to understand how Arauz might impact both the economy and the environment.
Almost all of Ecuador’s natural resources lie within areas of extremely high biodiversity, unique habitats that protect animals that live only in Ecuador — like the Jocotoco antshrike — or are severely threatened, like the giant otter. Beyond oil in the Amazon, Ecuador has begun tapping into resources of gold and lithium in the Choco (the world’s fastest-disappearing forest habitat) near the border with Colombia. Anecdotally, most Ecuadorians believe this mining to be happening illegally, run by cartels that move minerals across borders. There are potential connections back to the Correa administration in this operation, as well.
Arauz has made clear his interest in exploiting these resources to follow in Correa’s footsteps. However, a quick glance at his platform argues for a green economy, de-petrolization, and indigenous rights — much like his predecessor. He adamantly rejects ‘neoliberalism,’ claiming it is the source of Ecuador’s current financial woes and dependence on natural resource extraction. Yet with over $64B in debt and significant GDP contraction due to the pandemic, it is unclear where this funding will come from — if not from oil and gold.
I can only base this argument on the example that Rafael Correa left. Arauz has not yet won the election, nor had a chance to prove his policies in the market. His public statements paint an optimistic future of an egalitarian, eco-friendly, and value-added economy for Ecuador. So did Correa’s. And I have little doubt that Arauz has a dream of his country looking this way.
But in reality, his current biggest platform position is to raffle away one billion dollars to a million Ecuadorian families ($1000 each) who sign up for his mailing list. Bear in mind that Ecuador is currently seeking loans to support buying enough vaccines for the population due to the $60B+ debt previously mentioned. It is unclear where this capital would come from — there are significant doubts about whether it would materialize at all — but it seems unlikely Ecuador will divorce from mineral exports in the short term.
How can Arauz recreate Correa’s popularity? Double down on mining in biodiversity hotspots.
Let’s go back to the start of Correa’s first term:
- He had a vision and rhetoric focused on creating a more just, equal, and ecological Ecuadorian society. Check.
- He was a political outsider bent on ‘screwing the man’ for the sake of the people. Check.
- He had a massive pad of cash flowing in from oil and mineral exports, sometimes with 10x more income coming in than ever before. Nope.
Populism without prosperity is a dead end. If a populist leader wants to stay in power when the money dries up, they tend toward dictatorship (eyes on Venezuela). And if there is a democracy, the leader gets the boot (Correa, Trump, and many more). Ecuador is a fragile democracy that Correa worked to undermine. Despite his successor’s efforts to reinstate institutions, Ecuador does not have the checks and balances of the US. So Arauz, if he wins, has two options to hold onto his populist power:
1. Give the people money.
It sounds simple, but this is populism at its core. As a final reminder, Ecuador is currently in an intense economic contraction of approximately -11% GDP growth due to the rising debts and the pandemic. The only worse economy in Latin America right now is Argentina. Moreno was able to secure a small loan of $3.5B from the IDB to pay off Asian debts, but it pales in comparison to what the country owes.
So where can that money come from? Digging deeper and further into the Amazon and the Choco. On a recent trip to the Choco myself, a tour guide told us that the stunning forested hills around us were chock-full of gold and all privately owned. There is very little standing in the way of the Ecuadorian government buying up land or incentivizing gold and lithium mining. Chilean mining companies are already lining up in wait for this to happen.
Without this burst of income, Arauz would not be able to provide the economic gains he is promising to his supporters, nor pursue his supposed plan to develop Ecuador with tightly closed borders to protect the national industry. Without natural resources, Ecuador is investing from an empty coffer.
2. Get into power and undermine institutions.
Correa’s rhetoric is still popular enough to potentially land Arauz in office. However, rhetoric alone will not keep him there, especially when the harsh economic reality hits (unless he can dig some funds out of the forest). Furthermore, even if he does follow the Correa mineral boom route, it’s a temporary fix. These resources are finite and Ecuador could easily denude itself and lose the biodiversity that bolsters significant (but badly hurt) tourism.
In that case, Arauz is looking at the Maduro model. Correa already weakened democratic institutions significantly, and Arauz plans to stick exactly to Correa’s methodology, so we can expect little less. It is a scary thought, but he may have to hold onto power artificially if his plans for Ecuadorian flourishing do not materialize. And again, even if they do, and even if he does eventually leave power, the following president will be left in a vacuum of minimal infrastructure and with no natural resources to speak of.
I don’t have proof that Andres Arauz is looking to follow this plan. I am merely following the logical thread of what his mentor, sidekick, advisor, and idol did under similar circumstances. Destroying business investment and competitiveness for the sake of nationalism will leave Ecuador in an economic void, dependent on cycles of commodities prices that create financial and political vulnerability.
It might be extreme to say ‘look at Venezuela’ but…Venezuela is one of the most significant countries in the Amazon and we can do next to nothing to protect or monitor its forests right now. Who knows what is happening there. Andres Arauz is staring down a similar plan for Ecuador. So if you care about the fate of the Amazon, beware this weekend’s elections.
