THE PINK DOLPHIN: Ecuador in-between oil & Lava
Oil and Lava
WRITTEN BY FREDERICK BERNAS
The destiny of Ecuador, a small country with outsize ambitions, now depends overwhelmingly on a commodity price it cannot control.
On the final day of March 2014, President Rafael Correa was blinking away tears on live television. Extreme close-ups showed the bombastic leader struggling to suppress emotion as he listened to student Daniela Armijo thank him for creating “the hope of a new Ecuador.”
But Armijo was not just any student. And this was not a run-of-the-mill political event. Her speech inaugurated the new “City of Knowledge” at Yachay, described by Correa as “the most important project in the country’s history.”
A billion public petrodollars have gone into the venture. Built around Yachay Tech University, where Armijo was enrolled in the first group of 174 scholars, the comprehensive plan envisions a futuristic post-industrial city–a shining Silicon Valley for South America.
“A new motherland is being born,” Correa preached at Yachay, vowing to “jump into the future” and build a “society of knowledge” that will overcome poverty.
Nothing could be more symbolic of the populist spending spree that has underpinned Correa’s agenda since he became president in 2007. With sky-high oil prices that peaked above $140 per barrel in 2008, he sensed an opportunity to transform Ecuador into a progressive powerhouse fueled by education and innovation.
An ambitious “Citizens’ Revolution” was launched to pull Ecuador into the 21st century at warp speed. The program has more than doubled the state education budget, created jobs, built hospitals, expanded housing credit and established four “mega universities” including Yachay.
But not everything has gone as planned. Ecuador is inching closer to the brink of a failed petrostate. And looming above the turmoil is another potential disaster: The country’s iconic volcano, Cotopaxi, is smoldering for the first time in 139 years.
* * *
Oil pervades all aspects of Ecuadorian life. It sold for about $102 per barrel when Correa addressed the City of Knowledge in March 2014. In December 2015, the price sank to $37. He must now confront the flaws of fickle prosperity. After years of surfing the global commodities boom, the president has been forced to reduce unsustainable public investment, while catching democratic institutions in the crossfire of his quest for modernization, and cloaking his political paradigm with layers of colorful marketing campaigns.
In 2000, Ecuador adopted the US dollar as its currency after a brutal economic crisis. Combined with its deep need for oil, this has created a toxic spiral of dependence: The future of Correa’s Andean petrocracy is irrevocably bound to whims of the global market.
“That’s a very novel way of doing things”
It boils down to supply and demand. Rising oil production has swollen the marketplace, leading to a 14-year low price of less than $28 per barrel earlier this month. And it may sink even further. The US nearly doubled production in recent years, while Iran is set to start pumping again after crippling economic sanctions were lifted.
Fellow petrostates like Nigeria, Russia, Brazil, and Ecuador’s Andean neighbor, Venezuela (another country to champion heavy social spending) have been engulfed by economic distress. Frequent tales of woe from Caracas speak of basic items like milk in short supply. The crisis there also caused a political earthquake: President Nicolás Maduro’s ruling socialist party was trounced at congressional elections in December.
Could Ecuador be next?
A flare spits flame into the sky near an oil field in the Ecuadorean Amazon. Photo: Frederick Bernas
From the Yachay pipe dream to Lago Agrio, a backwater drilling town buried in the Amazon jungle, to dreary slums in the gritty metropolis of Guayaquil and the most notorious ghetto in Ecuador, this story follows a petrodollar trail of truth, taking in people and places touched by Correa’s revolutionary vision.
Prizing Ecuador’s economy away from oil is a key objective of the grand Yachay design. Executives insist their budget will not be touched, despite cuts to other areas. “The risk is high,” admits Hector Rodríguez, CEO of Yachay EP, “but the only way of escaping oil dependence is to break that cycle by giving money to entrepreneurs and scientists.”
Less than two years after Correa’s inaugural address, deals have been inked with the likes of Microsoft, Cisco, IBM, and Siemens, lured by a special economic zone offering juicy tax incentives. China’s EXIM bank has laid down a $260 million credit line. Oil companies including Halliburton will conduct hydrocarbon research and create cutting-edge curricula to train the next generation of chemical engineers.
Many buildings at Yachay are still under construction. The city is expected to be fully functional in 2045. Photo: Frederick Bernas
The inaugural university class has been joined by a fresh batch. About 800 students currently attend Yachay Tech, which has hired teaching staff from institutions across the globe. A community college is also up and running, with a mix of traditional and technological programs like carpentry and biotech.
“We are dreaming high,” says Ricardo Silva, rector of the 17 de Julio Institute, watching laborers wire the roof of a 4G telecommunications lab. “This is a township, but it’s not run by a mayor. It’s a corporate-managed city. That’s a very novel way of doing things,” he states.
“The roots have taken ground,” Silva continues. “It’s amazing. Three years ago, this was all grassland. There was nothing here.”
Across a dirt road from Silva’s technical institute, the doors of a solitary ochre bungalow have been padlocked from outside. A couple of dogs nap on its front porch, but the interior is bare; limp cables hang pitifully from the ceiling. On a faraway hill, a massive Yachay sign looms over a lush valley dotted with building sites. What looked from a distance like fertile fields actually contain parched bean plants or malnourished maize.
Yolanda Morillo’s abandoned home lies across the road from Yachay’s technical institute. Photo: Frederick Bernas
“I lived in my house for 35 years. We had tomatoes, carrots, avocadoes, peppers, cattle. I left everything. My project is dead,” laments Yolanda Morillo, sitting in a cluttered ground-floor apartment in Urcuquí, minutes from the Yachay complex. The 73-year-old farmer has short silver hair, a furrowed brow, and hallowed hands that betray the nature of her trade.
In October 2011, the authorities sent Yolanda an eviction notice: Three months to pack up and leave her 10-hectare (0.04mil²) property, located on prime real estate at the center of Correa’s emblematic enterprise.
“I tried to find lawyers, but nobody would accept the job,” she recalls. “They said it was impossible to resist the government, but I had to fight to get a fair price for my land.”
That search was eventually successful, and Yolanda’s case has been crawling through Ecuador’s legal system since January 2012. She says a chance meeting with Correa himself spurred hope for a compromise: “The president was scared by my anxiety and started talking and talking. He said he would help if I calmed down. They offered to give me land somewhere else in exchange.”
“It’s too much land and too much money”
But it was not to be. In April this year, a judge ordered Yolanda to accept an offer she claimed meets just half the property’s value, which she used to buy a smaller plot further away–the only affordable option.
The City of Knowledge appropriated 18.5 square miles in total, displacing dozens more families and eliminating hundreds of jobs. In Urcuquí, many workers complain that promised government programs to fill the employment void have not materialized.
“I’ve sent my resume to Yachay many times, but they tell me all positions are taken,” says Edison Peña, 45, who lives with his wife and three children in the Mercedes area. “It feels like the whole thing is fraud and lies.”
“We used to have permanent work, all year round,” adds community leader Manuel Quimbiamba. He estimates that roughly half the 500 farm laborers in his neighborhood are struggling to get by. “Now, the only jobs you can find are by contract,” he continues. “It needs to be more stable.”
René Ramírez, Ecuador’s minister for higher education, science, technology and innovation, and a major force behind Yachay, could not be reached for comment.
Yolanda Morillo at her apartment in Urcuquí, where she tries to keep a low profile. Photo: Frederick Bernas
Yachay Tech has also brushed with controversy. In July, its rector was fired after he allegedly complained about making the same salary as directors in California, who rarely set foot on campus.
“Someone who earns $16,300 per month from the government should have the decency to live in Ecuador,” Fernando Albericio, a world-renowned chemist, told a local news portal. “I was honest with them, and they sacked me.”
“Yachay is a good project, but so badly planned,” sighs Yolanda. “They are not involving the community. It’s too much land and too much money.”
Yolanda describes going through an “emotional crisis like a spinning roulette wheel.” Her grey eyes glisten. “These years I have lost all my strength. I feel sick, mentally and psychologically. I have nothing.”
* * *
On the October 31, 2015, edition of “Citizen Link,” a live broadcast every Saturday, Correa presented Ecuador’s 2016 budget to his people. It felt like the former professor was giving an algebra lesson to the nation, scribbling squiggly red lines on PowerPoint slides to illustrate production and income.
“Economics is like a game of Chinese spinning plates,” he grinned, going over next year’s forecast of a 2.5 percent budget deficit. “But don’t worry! It’s perfectly manageable based on oil at $35 per barrel.”
President Correa’s weekly TV shows regularly run between 3-4 hours. Photo: Frederick Bernas
Mega-projects like Yachay became a personal obsession for the president, who has lavished petrodollars on more universities and a pacific refinery that has been plagued with problems.
“Oil today is like bananas, coco and coffee in past times,” explains Alberto Acosta, an economist who briefly served as energy minister in 2007. “It is fundamental to Ecuador.”
But Correa’s government was “unable to spy the gradual weakening of the international market, and has not overcome oil dependence–or even suggested an alternative,” Acosta writes in a recent paper. “In fact, they’ve been consolidating this dependency by expanding frontiers and looking for the last available reserves.”
Acosta says Correa has failed to diversify national industries, citing data that suggests oil represented 52 percent of total exports in 2007 and just one percent less in 2014. Pumping charges levied by foreign extractors mean that, with such a low global price, it’s almost impossible for the government to profit from sales. At the same time, agreements with countries like China have pledged away future production before the barrels are even filled.
Meanwhile, Correa has created a redistributory leftist state fueled by rampant, resource-hungry capitalism, uttering proclamations such as, “I don’t like oil or mining, but I like them more than poverty and misery,” to publicly reconcile his image with this striking separation between ideology and economy.
A crucial element of his marketing strategy is the Secretariat of Buen Vivir (“good living”), which is named after an eponymous national plan first published in 2009. On paper, it serves as a de facto ministry of thought, designed to imbue the government with high ideals that upend traditional notions of development.
“Economics is one thing, internal happiness is another,” says Freddy Ehlers, the Minister of Good Living. An ebullient ex-journalist who cast aside impartiality to back Correa’s first presidential campaign, Ehlers talks in abstract terms about his mission to “redefine what progress means,” with an emphasis on wellbeing instead of wealth.
At a meeting with foreign journalists in October, Ehlers and a panel of advisors struggled to articulate their message, spouting about “The System” and screening a garish video of the department’s cheesy theme song. When asked what concrete changes had been achieved with a $12 million budget, they cited a TV series about Buen Vivir and a “nutrition traffic lights” labeling scheme for nationally-produced foods.
“I’m not quite sure what he does,” Santiago Rojas, a baby-faced lawyer from the minister’s legal team, admitted of his boss, “but he has a lot of meetings–and he meditates.”
Buen Vivir is everywhere in Ecuador. It embellishes a national network of infant care centers. Correa’s speeches are peppered with the good living mantra, despite the fact it essentially signifies an open culture war against his own economic doctrine.
Freddy Ehlers (center) addresses a meeting with international journalists in October 2015. Photo: Frederick Bernas
“This government is pure propaganda and hypocrisy,” says Alberto Acosta, who ran for president in 2013. “It’s like a driver who indicates he’s going left but turns right. Correa is one of the biggest capitalists in Ecuador.”
In late November, the president averted a constitutional showdown by vowing not to stand in 2017 elections. It was perhaps a shrewd move to avoid shouldering responsibility for Ecuador’s impending economic malaise. But he opened the door to a presidential return in 2021: The proposed amendment that removes term limits was approved by Congress in December.
“In underdeveloped countries like ours, the continuity of successful projects like our revolution is fundamental,” Correa tweeted to nearly 2.5 million followers.
Gustavo López Ospina
Pieter Jan Brouwer
Assistant: Emilia Romero
The Amazon Pink Dolphin’s Voice is associated with the International Environmental Mission, a grass roots citizens movement created by Chilean Senator Juan Pablo Letelier.
SELVA Vida Sin Fronteras acknowledges Kevin Schafer’s important contribution towards protecting the highly endangered Amazon pink fresh water dolphin. Title photographs of our “The Amazon Pink Dolphin’s Voice” were taken by Mr. Schafer.