Series title: Ecuador: Progress and limits of resistance to the policies of the World Bank, the IMF and other creditors

Ecuador: Resistance against the policies imposed by the World Bank, the IMF and other creditors between 2007 and 2011

Part 2 of the Series

15 April by Eric Toussaint

Ecuador provides an example of a government which officially decided to investigate the process of indebtedness so as to identify illegitimate debt and suspend its repayment. The fact that the government suspended payment of a large part of its commercial debt, only to buy it back at a lower price, showed that it meant to go beyond mere denunciation. Indeed it undertook the unilateral restructuring of part of its external debt and thus won a moral victory over its private creditors, which were mainly banks. In 2007 at the beginning of Rafael Correa’s presidency, the government of Ecuador clashed with the World Bank. In this series of three articles, we began in Part 1 by analyzing the loans granted by the World Bank and the IMF. In this second part, we shall recount the government’s actions mainly regarding the debt audit and the resulting suspension of payment.

 World Bank loans violate fundamental human rights

The loans made by the World Bank World Bank
The World Bank was founded as part of the new international monetary system set up at Bretton Woods in 1944. Its capital is provided by member states’ contributions and loans on the international money markets. It financed public and private projects in Third World and East European countries.

It consists of several closely associated institutions, among which :

1. The International Bank for Reconstruction and Development (IBRD, 189 members in 2017), which provides loans in productive sectors such as farming or energy ;

2. The International Development Association (IDA, 159 members in 1997), which provides less advanced countries with long-term loans (35-40 years) at very low interest (1%) ;

3. The International Finance Corporation (IFC), which provides both loan and equity finance for business ventures in developing countries.

As Third World Debt gets worse, the World Bank (along with the IMF) tends to adopt a macro-economic perspective. For instance, it enforces adjustment policies that are intended to balance heavily indebted countries’ payments. The World Bank advises those countries that have to undergo the IMF’s therapy on such matters as how to reduce budget deficits, round up savings, enduce foreign investors to settle within their borders, or free prices and exchange rates.

, far from being disinterested gestures, are in fact clearly a means of submitting the country, politically and economically, to the international order of the most powerful, “modelling” it to suit their needs and the needs of the local dominant class – in other words to extract maximum profits. This community of interest Interest An amount paid in remuneration of an investment or received by a lender. Interest is calculated on the amount of the capital invested or borrowed, the duration of the operation and the rate that has been set. between local oligarchies and creditors explains why the country’s leaders have so often given in so easily to the Bank’s diktats, if necessary at the cost of the rights of Ecuador’s citizens.

The Bank’s imposition of policies through the programmes it has financed and conditionalities on loans constitute a denial of sovereignty and flagrant interference in the political affairs of the State, and as such are in violation of Article 2, Paragraph 1 of the UN Charter of 1945, which establishes the principle of sovereign equality among States and the right to freely decide economic, social and political regimes. The Bank has also violated the right to development of peoples, set down in the International Covenant on Economic, Social and Cultural Rights of 1966, whose Article 1 states that “All peoples have the right of self-determination. By virtue of that right they freely determine their political status and freely pursue their economic, social and cultural development," as does the Declaration on the Right to Development of 1986.

The permanent representative of the World Bank in Ecuador was declared persona non grata in 2007 and expelled

Unsurprisingly, these policies dictated by the Bank with total contempt for the will of the people have resulted in serious breaches of fundamental human rights such as the right to a sufficient standard of living, to health, to education and to work. That has been met by strong resistance movements, and the World Bank faced setbacks between 2007 and 2011. Its permanent representative in Ecuador, who was declared persona non grata, was expelled from the country. President Rafael Correa and several of his ministers called out the Bank’s actions in no uncertain terms and threatened legal proceedings. With other Latin American countries, Ecuador’s government worked to promote a Bank of the South as an alternative to the World Bank. Ecuador has announced that it will withdraw from ICSID ICSID The International Centre for the Settlement of Investment Disputes (ICSID) is a World Bank arbitration mechanism for resolving disputes that may arise between States and foreign investors. It was established in 1965 when the Washington Convention of that year entered into force.

Contrary to some opinions defending the fact that ICSID mechanism has been widely accepted in the American hemisphere, many States in the region continue to keep their distance: Canada, Cuba, Mexico and Dominican Republic are not party to the Convention. In the case of Mexico, this attitude is rated by specialists as “wise and rebellious”. We must also recall that the following Caribbean States remain outside the ICSID jurisdiction: Antigua and Barbuda, Belize, Dominica (Commonwealth of) and Suriname. In South America, Brazil has not ratified (or even signed) the ICSID convention and the 6th most powerful world economy seems to show no special interest in doing so.

In the case of Costa Rica, access to ICSID system is extremely interesting: Costa Rica signed the ICSID Convention in September, 1981 but didn’t ratify it until 12 years later, in 1993. We read in a memorandum of GCAB (Global Committee of Argentina Bondholders) that Costa Rica`s decision resulted from direct United States pressure due to the Santa Elena expropriation case, which was decided in 2000 :
"In the 1990s, following the expropriation of property owned allegedly by an American investor, Costa Rica refused to submit the dispute to ICSID arbitration. The American investor invoked the Helms Amendment and delayed a $ 175 million loan from the Inter-American Development Bank to Costa Rica. Costa Rica consented to the ICSID proceedings, and the American investor ultimately recovered U.S. $ 16 million”.
, the World Bank tribunal.

 Ecuador: Resistance against the policies imposed by the World Bank, the IMF and other creditors between 2007 and 2011

The author has closely followed the major social struggles that have shaken this country of the Andes. I went to Ecuador for the first time in 1989. I made a second visit in 2000 at the invitation of the Center for Economic and Social Rights (CDES) and at that time I took part in the publication there of a collective work on the issue of illegitimate debt. In the years that followed, I contributed to a campaign aimed at showing that the debt claimed against Ecuador by various creditors was illegitimate. Among other areas we focused on the affair of the fishing boats sold to Ecuador by Norway, which was just one example among others, but it had the advantage of being particularly eloquent. What happened was that whereas the country continued to repay the purchase price of these fishing boats, they had in fact been bought for peanuts by an Ecuadorian capitalist oligarch who was using them to export bananas. That campaign was effective, since in 2006 the Norwegian government decided to waive repayment of the debts related to the purchase of the fishing boats. [1] Starting in 2003, CADTM International, in contact with the staff of Ecuador’s campaign for the cancellation of illegitimate debts (principally the organization called Jubileo 2000 Red Guayaquil), campaigned for recognition of the need to identify those debts that the country needed to repudiate unilaterally by means of a citizen audit. That approach was an alternative to the priority other movements were giving to the creation of an international debt tribunal. [2]

Four commitments made by Correa in 2006: end repayment of illegitimate debt; call a referendum for a constituent assembly; close the USA’s military base and refuse to sign a free trade agreement with them

Ecuador was the place where the approach proposed by the CADTM gained acceptance. Rafael Correa, elected president of Ecuador in November 2006, had campaigned on the basis of four major commitments: to end repayment of illegitimate debt; to call a referendum for a constituent assembly; to close the USA’s Manta military base in Ecuador and to refuse to sign a free trade agreement with the superpower. He made good on all four commitments.

Rafael Correa had gained popularity in 2005 when, as Finance Minister, he came into conflict with the World Bank after he convinced the government that windfall oil revenue should be used for social expenditures rather than for repaying creditors. In July 2005 the government decided to reform the use of petroleum resources. Instead of being used in their entirety for debt repayment, a share Share A unit of ownership interest in a corporation or financial asset, representing one part of the total capital stock. Its owner (a shareholder) is entitled to receive an equal distribution of any profits distributed (a dividend) and to attend shareholder meetings. was set aside for social spending, and in particular to aid the indigenous peoples, who are often given short shrift. The enraged World Bank took revenge by blocking a 100-million-dollar loan it had promised Ecuador. Rafael Correa chose to resign as Minister rather than give in to the World Bank’s demands. A little more than a year after his resignation he was elected to serve as the country’s president.

Four months after the start of his term of office, in April 2007, Ecuador, at the initiative of Rafael Correa, expelled the World Bank’s permanent representative in Quito from the country. Shortly after, the government informed the permanent representation of the IMF IMF
International Monetary Fund
Along with the World Bank, the IMF was founded on the day the Bretton Woods Agreements were signed. Its first mission was to support the new system of standard exchange rates.

When the Bretton Wood fixed rates system came to an end in 1971, the main function of the IMF became that of being both policeman and fireman for global capital: it acts as policeman when it enforces its Structural Adjustment Policies and as fireman when it steps in to help out governments in risk of defaulting on debt repayments.

As for the World Bank, a weighted voting system operates: depending on the amount paid as contribution by each member state. 85% of the votes is required to modify the IMF Charter (which means that the USA with 17,68% % of the votes has a de facto veto on any change).

The institution is dominated by five countries: the United States (16,74%), Japan (6,23%), Germany (5,81%), France (4,29%) and the UK (4,29%).
The other 183 member countries are divided into groups led by one country. The most important one (6,57% of the votes) is led by Belgium. The least important group of countries (1,55% of the votes) is led by Gabon and brings together African countries.
that it would have to leave the facilities it occupied in the central bank Central Bank The establishment which in a given State is in charge of issuing bank notes and controlling the volume of currency and credit. In France, it is the Banque de France which assumes this role under the auspices of the European Central Bank (see ECB) while in the UK it is the Bank of England.

’s buildings and find offices elsewhere. Rafael Correa was also very active in the campaign to create a Bank of the South as an alternative to the World Bank, the IMF and the Inter-American Development Bank. Two leaders of the movement for the cancellation of illegitimate debt held key posts within the government. Ricardo Patiño was Minister of the Economy and Finance [3] and Alberto Acosta was Minister for Energy and Mines before becoming President of the Constituent Assembly in 2008. [4]

Ecuador also announced in July 2009 that it was withdrawing from ICSID, the World Bank tribunal for investment disputes, following the example given by Bolivia in May 2007. Three months later, the government decided to end a series of bilateral investment protection treaties. [5]

Ecuador announced in July 2009 that it was withdrawing from the ICSID, the World Bank tribunal

To deal with the question of public debt, in July 2007 Rafael Correa created the Comisión para la Auditoria Integral de la Deuda Pública (CAIC – Comprehensive Public Credit Audit Commission). From March 2007, Ecuadorian activists of the movement for cancellation of illegitimate debt were associated with the authoring of the draft presidential decree setting up the Commission and in April 2007 I was invited to Quito by the Finance Minister and the anti-illegitimate-debt activists of Red Jubileo 2000 Guayaquil to take part in the preliminary discussions of its content. The Commission, created in July 2007, was made up of twelve members representative of Ecuador’s social movements (leaders of the indigenous movement, feminist militants, and activists with the movement for the cancellation of illegitimate debts), six members of international campaigns for cancellation of illegitimate debts and four delegates of the State (representing the Ministry of Finance, the Comptroller’s Office, the Anti-Corruption Commission and the Public Prosecutors’ office).

The Comprehensive Public Credit Audit Commission (CAIC) included twelve members representing Ecuador’s social movements

I represented the CADTM on the Commission, which worked intensively for 14 months, between July 2007 and September 2008. [6] The other international movements represented were Latindadd, Eurodad, Citizen Debt Audit (Brazil) and Jubilee Germany. Rafael Correa’s idea was to take action to end repayment of a portion of the debt identified as fraudulent and illegitimate. [7] The CAIC’s mandate was to conduct a comprehensive audit of the debts accumulated by Ecuador between 1976 and 2006. The term “comprehensive” is very important because the audit needed to avoid being limited to an accounting analysis of the country’s indebtedness. It was fundamental to measure the human and environmental impact of the policy of indebtedness. For a rapid overview of the evolution of Ecuador’s debt, see the Box on the evolution of public debt in Ecuador between 1970 and 2008.

Box: The evolution of Ecuador’s public debt between 1970 and 2008

Ecuador is one of the many countries that have reimbursed, several times over, debts that were not contracted in the interest of the Nation and its citizens. The loans contracted by Ecuador in fact benefited creditors in the North, multinationals, financial speculators and the local ruling classes.

The different stages of the evolution of indebtedness show the illegitimate nature of the debts claimed against Ecuador. All the following constitute illegitimate debt: debts contracted by military dictatorships during the 1970s and which have continued to bloat under the governments that succeeded them; debts to finance projects that in no way benefit ordinary citizens or for projects that have proven destructive to humans and/or the environment; debts contracted through the corruption of public officials; debts contracted at usurious interest rates Interest rates When A lends money to B, B repays the amount lent by A (the capital) as well as a supplementary sum known as interest, so that A has an interest in agreeing to this financial operation. The interest is determined by the interest rate, which may be high or low. To take a very simple example: if A borrows 100 million dollars for 10 years at a fixed interest rate of 5%, the first year he will repay a tenth of the capital initially borrowed (10 million dollars) plus 5% of the capital owed, i.e. 5 million dollars, that is a total of 15 million dollars. In the second year, he will again repay 10% of the capital borrowed, but the 5% now only applies to the remaining 90 million dollars still due, i.e. 4.5 million dollars, or a total of 14.5 million dollars. And so on, until the tenth year when he will repay the last 10 million dollars, plus 5% of that remaining 10 million dollars, i.e. 0.5 million dollars, giving a total of 10.5 million dollars. Over 10 years, the total amount repaid will come to 127.5 million dollars. The repayment of the capital is not usually made in equal instalments. In the initial years, the repayment concerns mainly the interest, and the proportion of capital repaid increases over the years. In this case, if repayments are stopped, the capital still due is higher…

The nominal interest rate is the rate at which the loan is contracted. The real interest rate is the nominal rate reduced by the rate of inflation.
; private debt converted into public debt; debts stemming from conditionalities imposed by the IMF and the World Bank in violation of Ecuador’s sovereignty and the right to self-determination, of the right of peoples to define their own policies governing commercial development, taxation, spending, energy, and labour legislation, and force drastic reductions in social expenditures and the privatization of strategic sectors; etc.

During the period 1970-2007, despite the fact that State of Ecuador reimbursed 172 times the amount of external public debt as it stood in 1970, [8] the volume of that external public debt was multiplied by a factor of 53.

Between 1970 and 2007, Ecuador reimbursed 172 times the amount of external public debt as it stood in 1970

During that period of 38 years, the balance Balance End of year statement of a company’s assets (what the company possesses) and liabilities (what it owes). In other words, the assets provide information about how the funds collected by the company have been used; and the liabilities, about the origins of those funds. between the loans and repayments of external public debt is clearly negative. The accumulated net negative transfer at Ecuador’s expense is 9 billion dollars.

Between 1982 and 2007, the net transfer to external public debt was negative for 22 years and positive only four years.

Major public-debt creditors

Total public debt as of 30 August 2008 stood at approximately 13 billion dollars (10 billion for external public debt and three billion for internal public debt). Approximately 40% of external public debt is due to banks and financial markets in the form of securities, called Bonos Global (Global bonds); approximately 44% is due to multilateral financial institutions (the World Bank, the Inter-American Development Bank, etc.); approximately 16% consist of country-to-country loans (or bilateral debt), the main creditor countries being Spain, Brazil and Italy.

95% of internal public debt, amounting to approximately 3 billion, consists of securities (bonos AGD).

 Ecuador’s partial victory against creditors of illegitimate debts

Starting in November 2008, Ecuador suspended repayment of a large part of its debt. Concretely, the country ended payment of interest due on the Ecuadorian securities traded on Wall Street that would have come to 3.2 billion dollars. [9] The international financial press raised an enormous stink since Ecuador had dared to refuse to pay when it had the means to do so. Still, in June 2009, the holders of 91% of the bonds in question accepted a proposal to buy them back at 35% of face value.

Starting in November 2008, Ecuador suspended repayment of a large part of its debt

In broad figures, Ecuador repurchased 3.2 billion dollars’ worth of debt while disbursing 900 million dollars, which represents a saving of 2 billion on the capital due, to which are added the savings on the interest that will no longer have to be paid. Rafael Correa declared in his inaugural speech on 10 August 2009 that this “means a gain of more than 300 million dollars annually over the next twenty years – amounts that will go not into the creditors’ portfolios but will go to national development. ” [10] The total amount saved is a little over 7 billion dollars. [11]

The government’s energetic action in the area of debt had two consequences:

  1. It should be emphasized that the debt reduction enabled the government to greatly increase social expenditures over the years 2009–2010–2011, in particular in the areas of health and education, since the State’s resources were able to be sharply refocused on those parts of the budget instead of going up in smoke in the form of debt repayment. The living conditions of the population were significantly improved. In parallel, the legal minimum wage was gradually increased by nearly 100%.
  2. The unilateral suspension of repayment of the debt of course made the creditors extremely unhappy. But despite predictions of chaotic and painful days ahead by the international financial press and the Right, nothing bad happened. Ecuador’s victory over its private foreign creditors was total. What’s more, when the country decided a few years later to issue new debt securities on the financial markets, the investors crowded in to buy them. That is proof that suspension of payment and debt reduction, far from causing catastrophe, in no way prevent holders of big capital from again lending to the country. That is because they are convinced that the country’s situation has improved. [12] It is important keep this phenomenon well in mind in order to counter the narratives predicting catastrophe that are used to convince public authorities and the population of indebted countries that they must continue repaying debt at any cost. It is also important to assert the fact that alternatives to a return to the financial markets do exist. A policy of fiscal justice must enable to finance the State by forcing the wealthiest individuals and the major corporations to pay much higher taxes, which limits recourse to indebtedness on the backs of the public. Unfortunately that is not what the Correa government did. There were no such major tax reforms; the increases in tax collection were achieved mainly through the fight against tax evasion and thanks to growth of the economy.

Even if the government’s actions in the area of debt were beneficial, as we have just seen, it is important to stress the fact that the debt audit commission (CAIC) wanted to go beyond the measures that in fact were taken, and it is regrettable that the government and Rafael Correa did not take that path.

 The debt audit commission (CAIC) wanted to go beyond the measures that were taken

CAIC report available in english and castilian

In its recommendations, [13] the CAIC proposed to end repayment of other very large amounts of debt that correspond to debt claimed by the World Bank, by other multilateral institutions and by bilateral creditors such as Brazil, Japan and European countries. It was also recommended that legal action be brought against the parties, both national and foreign, responsible for illegitimate debt. At that level, based on the work of the CAIC, Ecuador’s Public Prosecutors’ office began examining the responsibility of high civil servants who allegedly committed various crimes when entering into or re-negotiating debt contracts during the 1990s and early the 2000s. However, no strong sentences were handed down and none of the parties guilty of contracting fraudulent debt were jailed since neither the judicial authorities nor the government chose to pursue matters. See the Annex at the end of the article for details of the CAIC’s recommendations of September 2008.

In the end the government followed only one of the Commission’s recommendations. It nevertheless went farther than all the other so-called “progressive” governments of that period. Rafael Correa and also Ricardo Patiño, who successively held several functions in the government and who chaired the CAIC, tried to persuade other heads of state such as Evo Morales, Hugo Chávez and Fernando Lugo to create comprehensive debt audit commissions in their countries. But to no effect. Ecuador remained isolated where the issue of debt was concerned; the other governments of the region (including Venezuela’s and Bolivia’s) continued repayments and did not conduct debt audits.

Only Paraguay, and then only temporarily, tried to launch an audit of its debt with citizen participation at the end of 2008 and early in 2009. It was in that context that I was invited by President Fernando Lugo to participate in the creation of an audit commission on the Ecuadorian model. [14] In Paraguay’s case, the initiative for an international audit with citizen participation was abortive due to pressure from the Brazilian government during Lula’s presidency. It should be noted that major Brazilian corporations are creditors of Paraguay, which they exploit. At a point where he was to sign the presidential decree creating the audit commission, Fernando Lugo finally caved into pressure from Lula and his government, who were protecting the Brazilian creditor companies. Lula, to convince the Paraguayan government to drop the idea of conducting an international audit and challenging the debt claimed by Brazilian companies, made a few marginal concessions and increased the amount paid annually to Paraguay by Brazil for the electricity supplied by the Itaipu dam. [15] Having said that, despite the pressure from Brazil, an audit was nonetheless conducted by the Comptroller’s Office in 2010 and 2011, [16] and I returned to Paraguay at that time at the invitation of President Lugo. But no suspension of payment of the debts identified as illegitimate and odious came about. In June 2012, President Lugo was finally ousted by a “parliamentary coup,” to use the formula that had been used in 2009 in Honduras and was applied to Brazil in 2016 to oust Dilma Rousseff, who succeeded Lula as Brazil’s president in 2010. [17]

 The negative role played by the Brazilian government under Lula

The negative role played by the Brazilian government under Lula’s presidency was not limited to the sabotage of the audit in Paraguay. It also manifested itself in the context of Ecuador’s debt. The Lula government protected the interests of Odebrecht, a very large private Brazilian public-works company.

In September 2008, Rafael Correa and his government decided to expel Odebrecht because the firm was responsible for very serious construction defects in a hydroelectric power plant (the one at San Francisco), with the result that it remained shut down for a long time. Odebrecht, who build public-works projects all over the Latin American continent, are notorious for their policies of bribery, over-billing, non-fulfillment of contracts and environmental deterioration. The firm had the systematic support of the Brazilian State, which lent public monies to governments in the region in exchange for their entrusting large contracts to Odebrecht. Between 2001 and 2016 the company allegedly paid nearly 788 million dollars in bribes in exchange for public-works contracts in ten Latin American countries – Brazil, Argentina, Colombia, the Dominican Republic, Ecuador, Guatemala, Mexico, Panama, Peru and Venezuela –and two African countries, Angola and Mozambique.
In Ecuador’s case, the cost of the San Francisco hydroelectric plant exceeded 600 million dollars. In 2007–2008 the CAIC audited the debts related to the power plant and had concluded that they should be cancelled. Rafael Correa announced he was suspending repayment of the debt to Brazil connected with the project.

By unilaterally expelling Odebrecht from the country and sending the army to take control of the installations, as was done in September 2008, Rafael Correa took very strong sovereign action which led to conflict between Ecuador and Brazil, which is one of the country’s two main bilateral creditors. To signal his discontent and pressure Correa, Lula recalled his ambassador. Finally, Correa caved in to Brasilia’s pressure and agreed to have the case against Odebrecht heard by an arbitration court in Paris. The members of the CAIC were pleased at Odebrecht’s expulsion and the strong measures taken by Correa. But when he announced the decision to seek arbitration in Paris, I immediately understood that the whole affair would not end favourably for Ecuador. When I saw Rafael Correa again, in January 2011 on the occasion of the final meeting of the CAIC, I challenged him on the subject and he answered by using an image. He told me that what had happened was like a fixed football match during which one of the teams throws the match to the point of scoring a goal against its own side. He admitted that he had given in to pressure from the Brazilian government. Also, during that meeting, held at the presidential palace in January 2011, Rafael Correa proposed that, on the basis of the CAIC’s conclusions in 2008, Ecuador challenge the debts whose payment was being demanded by another major creditor. After discussion, it was decided to suspend repayment of the debts held by the World Bank. When the time came to put that decision into practice, the new Finance Minister opposed it, and payments to the Bank continued. Worse still, beginning in 2014, the government negotiated new loans from the World Bank. [18]


The following text is entirely based on the CAIC Report. [19].

1. Suspend debt-servicing payments of specific categories of public external debt (see below).

2. File civil and criminal actions in Ecuador’s courts against those presumed responsible for illegal acts in the indebtedness process, including illicit personal gain, from 1976 to 2006, on the basis of evidence provided by the CAIC and using the doctrine of continuous commission of a crime, which is imprescriptible. That would include representatives of foreign banks reported to have taken part in fraudulent acts.

3. Ask the United Nations General Assembly to request an advisory opinion from the International Court of Justice on two aspects: a) the unilateral decision to raise interest rates which began in the year 1979, and b) the legal standards which regulate international contraction of public debt.

4. Carry out a compulsory survey of present holders of the country’s external and internal public debt paper in order to determine their identities, the acquisition price and the origin of the funds invested in these purchases.

5. Continue with the audit procedure for as yet unaudited loan contracts.

6. Define new policies to finance the State and new policies for the use of the funds, which respect the principles of transparency and accountability in the Nation’s best interests.

7. Establish specific regulations regarding the process of public indebtedness which includes the creation of a centralized level of evaluation and control throughout the cycle of indebtedness. This is of particular importance for the technical and financial viability of projects, due to their high priority, and for the control of work executed.

8. Publish the results of the audit on an international level.


Commercial debt

1. Suspend servicing payments on Global bonds (see Box) using one of two alternative methods:

1.1. A sovereign act declaring the Global bonds null and void, accompanied by immediate suspension of payment. The decision of immediate suspension of payment may be accompanied by legal actions in Ecuador (and/or outside Ecuador) to:

a) Denounce before a court of law all the acts and contracts which regulated the Global bonds, taking into account proof of illegality and illegitimacy as established in the CAIC Report. The Report provides evidence of a series of acts that contravene Ecuadorian law, including acts of collusion and fraud in violation of the Constitution and of principles of Human Rights, having detrimental economic and moral effects on Ecuador;

b) Judge those responsible, both within and outside the country, who took part in the process of setting up and issuing Global bonds 2012, 2030 as well as the ensuing operations; […]

1.2. One member of the Legal Commission suggests the following alternative:
Denounce before the courts of the United States contracts relating to the Brady Plan (see Box in Part 1) followed by contracts relating to Global bonds issued in 2000, to expose the existence of illegal clauses which violate Ecuadorian law and order and also infringe Equity Equity The capital put into an enterprise by the shareholders. Not to be confused with ’hard capital’ or ’unsecured debt’. , which regulates contracts in the United States. At the same time, suspend payment of such securities by depositing the corresponding sums in the State Bank or in a banking institution selected by the President.

This positioning gave rise to debate within the CAIC’s Sub-Commission on commercial debt. Its members considered that the amount in question would thus become an unproductive asset Asset Something belonging to an individual or a business that has value or the power to earn money (FT). The opposite of assets are liabilities, that is the part of the balance sheet reflecting a company’s resources (the capital contributed by the partners, provisions for contingencies and charges, as well as the outstanding debts). and cancel out the attitude of non-payment. The resources issuing from non-payment would not then be able to serve the interests of the country, and the cost of indebtedness would remain unchanged, preventing social and productive investments.

Multilateral debt

1. Study strategies for requiring respect of Human Rights affected by indebtedness within the context of the international system of the United Nations.

2. Request that the Inter-American Court of Human Rights issue a consultative opinion on the consequences of debt on Human Rights.

3. Regarding service of the multilateral loans audited, the following alternatives are recommended:

a. Suspend servicing payment of the nine loans (6 multilateral and 3 bilateral) used for the purchase of collateral Collateral Transferable assets or a guarantee serving as security against the repayment of a loan, should the borrower default. for the Brady bonds and submit them to the process of contesting the Brady Plan which the government of Ecuador could decide to adopt. Suspend servicing payment of the MOSTA and PERTAL loans, which are part of the package purchase of collateral affected by the conditionalities of all the loans contracted in a situation of emergency.

b. A sovereign act by the State of Ecuador unilaterally declaring null and void the 42 multilateral loans audited (including three bilateral ones co-financed with multilateral loans) and suspension of their repayment, with an unpaid balance of approximately 720 million dollars, not including future interest.

Push for a comprehensive audit of the other multilateral loans that were not audited and declare suspension in temporis of their repayment.

c. A sovereign act by the State of Ecuador unilaterally declaring null and void the 17 World Bank loans subject to audit (unpaid balance approximately 355 million dollars, not including future interest) and suspension of their repayment. The World Bank is the institution whose actions are most often called into question, and the one that has interfered most in the country’s internal affairs. In parallel, repayment of the World Bank loans that have not yet been audited could be suspended in temporis so that they can undergo audit.

Bilateral debt

For government-to-government loans

1. Retain legal counsel in each country in order to evaluate the possibility of filing for invalidity and reparations, on the basis of the criteria of illegitimacy and illegality. It needs to be pointed out that the possibility of counter filings exists. That is why it is necessary to have specialists to rely on, people with knowledge and experience of the creditor country’s legislation, to attempt to guarantee that the claims have maximum chances of success.

2. File for invalidity of the loan contract entered into with Italy for the Marcel Laniado de Wind hydroelectric plant, on the basis of the evidence of violations of Ecuadorian and Italian law.

3. In the case of the loan granted by Brazil’s BNDES for the San Francisco hydroelectric project, it is recommended that legal actions be taken to obtain reparations for damages and lost revenue caused by non-compliance with the contract by the construction firm during execution of the works and that the loan contract with the Brazilian bank be declared invalid due to the imposition of contractual conditions that are detrimental to the country.

4. Review the presence of various foreign companies (Odebrecht, Andrade Gutiérrez) who operate in the country as being the result and the consequence of the related aid to ensure better respect for the interests of the nation of Ecuador.

For the Paris Club Paris Club This group of lender States was founded in 1956 and specializes in dealing with non-payment by developing countries.

5. Cease negotiating with the Paris Club, which serves the interests of the creditor countries.

6. Begin bilateral negotiations with the member countries of the Paris Club to obtain partial or total cancellation of debt related to existing bilateral agreements.

In cases where bilateral negotiation would not be positive, another strategy must be used – among other possibilities, request an opinion from the International Court of Justice in The Hague, suspension of payment, etc.

Internal debt

1. Reduce issuances of internal-debt bonds for repayment of external debt in order to avoid high costs on the financial market Financial market The market for long-term capital. It comprises a primary market, where new issues are sold, and a secondary market, where existing securities are traded. Aside from the regulated markets, there are over-the-counter markets which are not required to meet minimum conditions.

2. Formulate a policy of reducing the costs of internal public indebtedness in order to avoid onerous obligations on the budget of the State, both as regards public investment and marketing of bonds.

3. Discontinuation of AGD bonds (Law 98-17) by the Central Bank of Ecuador.

End of Annex
End of Part 2
End of the series

Translated by Snake Arbusto and Vicki Briault


[1“CADTM applauds Norway’s initiative concerning the cancellation of odious debt and calls on all creditor countries to go even further,” published 10 October 2006,

[2The movements which gave priority to setting up an international tribunal were mainly Jubilee Germany, Jubilee Great Britain and Jubilee United States, The discussion about the two major alternative options took place in several venues where different movements campaigning against the debt globally had met and debated the orientations to follow since 1999. This was notably the case at the Dakar Conference held in 2000 on the initiative of the CADTM and Jubilee South. A world meeting in Geneva in June 2003 provided the forum where the two major orientations were most thoroughly debated. The annual meetings of the World Social Forum created in 2001 were generally an opportunity to further these debates and for the most radical organizations, that is the CADTM and Jubilee South, to reach agreement on how to conduct actions of international scope. See :

[4For a brief biography see in Spanish:

[5Later, in 2013, an international audit commission of bilateral investment treaties was set up. An evaluation of that initiative is beyond the scope of this article. The commission’s report was made public in May 2017. A summary can be downloaded at

[6To participate in the work of the Commission, I travelled to Ecuador several times and spent a total of several months in 2007–2008. I did this work on a volunteer basis, for three reasons: to lend the CADTM’s support to the Ecuadorian people’s struggle against illegitimate debts and neoliberal policies, to maintain my complete freedom and to keep the costs of the Commission’s work to a minimum. Only my travel expenses (in economy class) and lodgings were covered by the Commission.

[7The entire final report of the CAIC is on line in Spanish on the CADTM site: The part concerning the external commercial debt of which repayment way partially suspended corresponds to Chapter 2 – Section 1 (pages 14 to 88).

[8According to the World Bank, Ecuador’s public external debt came to 195 million dollars in 1970 (Source: World Bank, Global Development Finance 2007, Washington DC, 2007). According to the Ministry of the Economy and Finance (MEF), external public debt had reached 10 382.2 million dollars by 3 July 2007. That meant that external public debt had been multiplied by 53 between 1970 and July 2007. Over that same period, the Ecuadorian government had reimbursed 33 475 million dollars, that is, 172 times the amount of external public debt in 1970.

[9The Global Bonds labelled “Global 2012 and 2030” represent about 85% of external public debt in the form of securities. The other components of Ecuador’s external public debt are constituted of loans from the World Bank and other multilateral institutions (IMF, Inter-American Bank of Development) and of bilateral loans granted by States (Spain, Japan, Italy, Brazil, etc.).

[10Excerpts from Rafael Correa’s speech are available in Spanish and French at

[11For a synthetic presentation of the audit in Ecuador, see the excerpt from the film Debtocracy devoted to Ecuador: “The Ecuador debt audit: a seven minute summary” Video: The Ecuador debt audit, a seven minute summary:

[12See Éric Toussaint, “Joseph Stiglitz shows that a suspension of debt repayments can be beneficial for a country and its people,” published 20 January 2015,

[13See the Final Report of the Integral Auditing of the Ecuadorian Debt - Executive Summary, See also (in French) Éric Toussaint, “Ecuador : La CAIC a proposé à Rafael Correa de suspendre le paiement de près de la moitié de la dette”, published 25 September 2008,
See also “L’Ecuador à la croisée des chemins”, in CADTM, Les Crimes de la dette, Liège/Paris,174 CADTM/Syllepse, 2007, partie III, p.174-265 (in French).

[14For more about this meeting between President Lugo, his government and Éric Toussaint,and French translations of articles that came out in the Paraguayan opposition press in December 2008, see: ; See also:

[15See commentary on the agreement between Paraguay and Brazil in July 2009: (in French)

[17See Éric Toussaint, “Paraguay (juin 2012) - Honduras (juin 2009) : d’un coup d’État à l’autre”, (in French and Spanish)

[18Alberto Acosta, « Lectura sobre el retorno del Ecuador al Banco Mundial », published 16 December 2014,

[19In Spanish, Comisión para la Auditoría Integral del Crédito Público

Eric Toussaint

is a historian and political scientist who completed his Ph.D. at the universities of Paris VIII and Liège, is the spokesperson of the CADTM International, and sits on the Scientific Council of ATTAC France.
He is the author of Debt System (Haymarket books, Chicago, 2019), Bankocracy (2015); The Life and Crimes of an Exemplary Man (2014); Glance in the Rear View Mirror. Neoliberal Ideology From its Origins to the Present, Haymarket books, Chicago, 2012 (see here), etc.
See his bibliography:
He co-authored World debt figures 2015 with Pierre Gottiniaux, Daniel Munevar and Antonio Sanabria (2015); and with Damien Millet Debt, the IMF, and the World Bank: Sixty Questions, Sixty Answers, Monthly Review Books, New York, 2010. He was the scientific coordinator of the Greek Truth Commission on Public Debt from April 2015 to November 2015.

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