A ‘Madman’ Leaves a Sobering Lesson

Ousted Ecuadorean President Abdala Bucaram, who campaigned under the moniker “El Loco” (The Madman), must be surprised to have been taken at his word. That’s what happened last month when Ecuador’s Congress, in a creative interpretation of the Constitution, removed Bucaram from office for “mental incapacity.” Bucaram’s experience should be a warning to Latin American politicians: Voters are growing less tolerant of candidates who run old-fashioned populist campaigns only to impose, once in office, austerity measures that bring grief to the poor.

Bucaram’s rhetoric during the 1996 presidential contest sent shudders through Ecuador’s political and business establishment. He promised higher wages, subsidized housing, new roads and increased social spending without showing how such measures would be financed. He poked fun at the banking and financial elite, which he called Ecuador’s oligarchy, and quipped that he would teach middle- and upper-class housewives the value of work by forcing them to toil alongside their maids. His vitriol resonated among an electorate that the World Bank classifies as two-thirds poor, and in July of last year, Bucaram swept into office with 56% of the vote. But the virulence of his campaign had polarized the country and alienated politicians, businessmen, journalists and other influential sectors of Ecuadorean society.

Once in power Bucaram changed his stripes. His first moves were designed to assure financial leaders that no major changes from the previous administration were in the offing. Soon afterward, he brought howls of laughter from a New York business audience when, upon being asked if he meant to carry out his campaign pledge of taking from the rich to give to the poor, he answered that “campaigning is one thing and governing is another.” He proposed a series of orthodox economic measures, such as slashing the corporate income tax rate from 25% to 10%, eliminating taxes on bank deposits to encourage savings, privatizing the oil and electricity sectors and increasing subsidized telephone and electricity tariffs, in some cases sixfold. In November, under the tutelage of former Argentine economic minister Domingo Cavallo, Bucaram unveiled an economic package modeled after Argentina’s successful convertibility plan. It envisioned a balanced budget in 1997 (from a 6% of GDP deficit the year before) and a permanently fixed exchange rate of 4,000 sucres to the U.S. dollar fully backed by international reserves.

Bucaram’s about-face followed the pattern set recently by several Latin American presidents who have come into office as champions of state-led growth and economic regulation only to embrace privatization and deregulation once elected. The trend includes Argentina’s Carlos Menem, elected as a Peronist in 1989, who opened the country to foreign investment and dramatically shrunk the role of the state over the objections of the labor unions and the protectionist interests that had voted him into office. Two years later, during the Peruvian presidential campaign, Alberto Fujimori mocked writer Mario Vargas Llosa for seeking to privatize “strategic” national industries. After becoming president, Fujimori quickly embarked upon the most ambitious privatization and economic liberalization program in Latin America.

But Ecuador in 1997 was not Argentina in 1989 or Peru in 1991. Annual inflation in Argentina had topped 5,000% the year Menem was elected, and the ensuing chaos led the outgoing president to resign before the end of his term. Peru’s prices were skyrocketing at the rate of 3,000% per year when Fujimori defeated Vargas Llosa. At the time, their country was also on the verge of collapse as a result of the Shining Path insurgency. By contrast, at Bucaram’s election, Ecuador was not looking into the abyss. In 1996, the price index rose by a modest (by Latin American standards) 25%, the country ran a trade surplus and the GDP grew by nearly 2%. There were no guerrillas operating and no sense of panic. If anything, the country was in a complacent mood, which politicians contributed to by failing to mention during the campaign that radical changes to the economy were necessary.

In the absence of the cathartic experiences that led Argentines and Peruvians to stick with their populist-turned-neoliberal leaders, Bucaram was engulfed by Ecuadoreans’ sense of betrayal. His campaign rhetoric had irreversibly antagonized the middle and upper classes, and after six months, his performance as president had lost him the support of those who had voted him to power. A week before Congress deemed him mentally unfit, a poll found that 61% of adult Ecuadoreans wanted Bucaram out. When a general strike brought 2 million people into the streets, Bucaram’s days were numbered.

Events in tiny Ecuador show the electoral bait-and-switch to be a risky strategy in Latin America. For, while the region’s voters might choose to follow their leaders into fiscal austerity when the alternatives are dire, it would be madness to assume that in normal times voters will any longer tolerate sudden conversions to orthodoxy from erstwhile populists.