Ecuador’s new president targets foreign debt relief

Declaring that “inhuman and cruel globalization” has failed his country, leftist economist Rafael Correa took office Monday with a promise to shift his nation toward socialism and to renegotiate the nation’s $10.2-billion foreign debt.

The 43-year-old Correa, who received his doctorate at the University of Illinois, became Ecuador’s eighth president in 11 years. He was one of six leftist Latin American leaders to win office or be reelected in little more than a year.

In the campaign that culminated in his November victory, Correa pledged to overhaul a political system that most here view as corrupt, fragmented and hopelessly inefficient.

At times, Correa employed the anti-U.S. rhetoric favored by his ally, Venezuelan President Hugo Chavez, promising not to sign a free-trade agreement with the United States or to extend the U.S. lease on an air base in western Ecuador used by surveillance planes to monitor drug traffickers.

Although he made conciliatory gestures after the election, including meeting with U.S. Ambassador Linda Jewell here, Correa used the term “empire” to refer to the United States during a speech at an indigenous ceremony Sunday, before Monday’s official inauguration.

Correa took the oath of office at the newly restored National Congress building as 17 heads of state looked on, including Chavez, Iran’s Mahmoud Ahmadinejad, Nicaragua’s Daniel Ortega and Bolivia’s Evo Morales. The highest-ranking U.S. official present was U.S. Commerce Secretary Carlos M. Gutierrez.

Hours later, he delivered on one of his campaign promises by signing a decree requesting that the electoral tribunal organize a national plebiscite on March 18 to “approve or reject” a constitutional assembly.

An assembly to rewrite the constitution is the critical first step of his reform plan, because Correa has no party allies in the legislature to help enact his agenda. The assembly would have to be approved by the sitting Congress, which in effect would be putting itself out of a job.

“Whether it’s by consensus, a deal or through popular pressure, my expectation is that Correa will get his constitutional assembly this year,” said Adrian Bonilla, a political scientist at a Quito think tank known by its Spanish initials FLACSO. “It’s why he won the election.”

Bonilla said he doubted that Correa would use such an assembly to concentrate as much power in his hands as Chavez. “Venezuela is different. Here, we are more heterogenous, more fragmented. I don’t think Correa would succeed in what Chavez did,” Bonilla said.

Correa said he would immediately begin negotiations to alleviate “the insupportable weight” of Ecuador’s external debt.

Fear that Ecuador would default on its debt, which it has done three times in the last quarter-century, has sent the value of its bond prices plummeting 20% since Correa won in November.

“It looks like he is going to play hardball,” said Gianfranco Bertozzi, an emerging-markets bond specialist at Lehman Bros. investment bank in New York. “Bondholders are bracing for some kind of renegotiation, but what it means is still up in the air.”

Bertozzi said that 15 Wall Street firms holding billions of dollars in Ecuadorean debt would meet with Correa’s new finance minister, Ricardo Patino, in Quito this week to find out how Correa plans to proceed with the renegotiation.

Within the next month, Correa will probably announce a comprehensive plan, Bertozzi said.

Correa is also expected to push legislation to make foreign oil companies turn over majority interests in their oil fields, taking a cue from Chavez.

Legal analyst Diego Delgado of Quito said Correa might also take Chavez’s lead in reversing the privatization of some utilities, including telephone, power and water companies.

Economist Maria de la Paz Velan of Multiplica consultants said Correa was inheriting a reasonably healthy economy growing at a 4% annual rate, with low inflation of 2.8%.

The economy got a $1.1-billion boost from the confiscation of Occidental Petroleum’s oil field in May and a new hydrocarbon tax that together bumped up Ecuador’s total 2006 oil revenue to about $3.8 billion, she said.

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chris.kraul@latimes.com