Ecuador at the cross-roads, for an integral audit of public indebtedness

Chapter 3: Information and statistics in Ecuador

15 August 2007 by Benoît Bouchat

 Chapter 3: Information and statistics in Ecuador

A. Debts and creditors

  • 1. Loans from other Countries
  • 2. Loans from private credit organisations
  • 3. Loans from multilateral credit organisations

B. Objectives and results

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In this chapter [1], we will first go over all the international debts that Ecuador has contracted during the last thirty years. We will address the following questions. Who are the creditors? How much debt does each creditor hold? How much has been paid back by Ecuador? Then we will attempt to show for what reason these debts were taken on and what results have been attained by the process of becoming indebted.

It is important to understand that the international creditors – States, multilateral credit organisations and banks – have invariably insisted that a sine qua non condition for the loans was that structural adjustment Structural Adjustment Economic policies imposed by the IMF in exchange of new loans or the rescheduling of old loans.

Structural Adjustments policies were enforced in the early 1980 to qualify countries for new loans or for debt rescheduling by the IMF and the World Bank. The requested kind of adjustment aims at ensuring that the country can again service its external debt. Structural adjustment usually combines the following elements : devaluation of the national currency (in order to bring down the prices of exported goods and attract strong currencies), rise in interest rates (in order to attract international capital), reduction of public expenditure (’streamlining’ of public services staff, reduction of budgets devoted to education and the health sector, etc.), massive privatisations, reduction of public subsidies to some companies or products, freezing of salaries (to avoid inflation as a consequence of deflation). These SAPs have not only substantially contributed to higher and higher levels of indebtedness in the affected countries ; they have simultaneously led to higher prices (because of a high VAT rate and of the free market prices) and to a dramatic fall in the income of local populations (as a consequence of rising unemployment and of the dismantling of public services, among other factors).

measures - which were elaborated by the multilateral credit institutions themselves - be applied by the State. These structural adjustment measures disrupted the institutional structure of the country in that it spread out the decision-making and prevented the political authorities from adopting a coherent and firm course of action. The competence for carrying out development projects was diluted - tangled up between the various decision-making bodies, here one national ministry, there a different one, or sometimes local authorities, other times bodies set up by the multilateral institutions themselves – executive agencies - and even in some cases, several of these decision-making entities at the same time. The result being that in the end, no one knows who is responsible to whom, and even on some occasions, no one is even really clear who is responsible for what. In fact the system has become totally opaque and inefficient – a situation which gives considerable power to the agencies which have been set up. Once this system was in place, it became easier for the international creditors to push the policy decisions towards the extraction industry (ore-mining and oil) and intensive farming. Servicing the debt is, then, only the most visible part of the process of transferring wealth towards the Northern countries, a process in which the multilateral companies are invited to join by their own countries, allegedly for the good of Ecuador, whereas in fact, Ecuador has been forced to renounce all real sovereignty, and to over-exploit its natural resources, thus generating considerable profits to the detriment of its own citizens.


Between 1976 and 2006, the total amount of loans incurred by Ecuador was 29 976.5 million USD. Tables 1 and 2 sum up the amounts borrowed, how much was actually transferred by the creditors, and how much was paid back by Ecuador.
The first table gives the government’s main suppliers of hard currency per type of creditor. The multilateral credit organisations are by far the largest creditors in this category, followed by private banks [2]. There is also a non–negligible contribution of government bonds, which have turned out to be a profitable investment, as was shown in Chapter 2.
The second table shows that the country has already paid 35 321.2 million USD in capital and 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. to its creditors. Yet in April 2007, 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. of the external public debt was still 10 341 million USD [3].
The following table is a list of the multilateral credit organisations and banks who have invested in Ecuador’s debt.

Table 1 : Loans taken out by the public sector between 1976 and 2006

Creditors Number of loans amount (in USD millions) %
Multilateral organisations 286 12 500.3 42
Governments 114 4 271.7 14
Private banks 178 7 920.6 26
Government bonds 3 4 069.4 14
Suppliers 90 1 214.5 4
other 1 0 0
TOTAL 672 29 976.5 100

Source : Marcelo Herdoiza Y Cumandá Almeida, “De los creditos contratados por el Estado ecuatoriano”, CEIDEX

Table 2 : Ecuador’s external debt servicing between 1976 and 2006 (in USD millions)

Creditor Amount borrowed Amount disbursed Capital repaid Interest paid Debt service Debt service The sum of the interests and the amortization of the capital borrowed.
Multilateral organisations 12 500.31 10 921.4 7 641.2 4 318 11 959.2
Governments 4 271.65 3 762.4 3 677.4 1 940.9 5 618.3
Private banks 7 920.6 4 845 4 987.4 7 500.7 12 488.1
Government bonds 4 069.37
Suppliers 1 214.53 1 108.7 1 292.9 490.5 1 783.4
other 0 5 338.5 2 275.6 1 196.6 3 472.2
TOTAL 29 976.45 25 976 19 874.5 15 446.7 35 321.2

Source : Marcelo Herdoiza Y Cumandá Almeida, “De los creditos contratados por el Estado ecuatoriano”, CEIDEX


Ecuador’s bilateral debts can be divided into those which have been signed directly with the other country, and those which have been renegotiated within Paris Club Paris Club This group of lender States was founded in 1956 and specializes in dealing with non-payment by developing countries.


Table 3: Bilateral debts in July 2006 (in USD millions)

Country Original agreement Paris Club agreement Total Percentage
Colombia 5.6 0 5.6 0.3
South Korea 8.4 0 8.4 0.4
China 8.4 0 8.4 0.4
Denmark 16 0 16 0.7
Belgium 16.4 0 16.4 0.7
Argentina 20.9 0 20.9 0.9
Canada 1 25.1 26.1 1.2
Norway 0 35.3 35.3 1.6
Germany 16.8 40.8 57.6 2.6
UK 0 102.7 102.7 4.7
USA 57 61.8 118.8 5.4
Israel 0 183.6 183.6 8.3
France 85.9 99.8 185.7 8.4
Brazil 316.8 0 316.8 14.4
Japan 220.3 118.1 338.4 15.4
Italy 66.5 292.9 359.4 16.3
Spain 381.9 20.1 402 18.3
TOTAL 1221.7 980.2 2201.9 100

Source: Hugo Arias Palacios, « Impacto económico, social y ambiental”, CEIDEX

The Paris Club is an informal group of 19 creditor countries (North America, Western Europe, Russia, Japan, Australia) founded in 1956, which deals with the problems of the debtor countries who have difficulties repaying bilateral debts owed to member countries, in such a way as to protect the profits of the creditors. The members can together agree to reschedule repayment of a loan possibly over tens of years at a different rate of interest. They can also decide to cancel part of the debts in question, but this is usually only considered in the case of heavily indebted poor countries Heavily Indebted Poor Countries
In 1996 the IMF and the World Bank launched an initiative aimed at reducing the debt burden for some 41 heavily indebted poor countries (HIPC), whose total debts amount to about 10% of the Third World Debt. The list includes 33 countries in Sub-Saharan Africa.

The idea at the back of the initiative is as follows: a country on the HIPC list can start an SAP programme of twice three years. At the end of the first stage (first three years) IMF experts assess the ’sustainability’ of the country’s debt (from medium term projections of the country’s balance of payments and of the net present value (NPV) of debt to exports ratio.
If the country’s debt is considered “unsustainable”, it is eligible for a second stage of reforms at the end of which its debt is made ’sustainable’ (that it it is given the financial means necessary to pay back the amounts due). Three years after the beginning of the initiative, only four countries had been deemed eligible for a very slight debt relief (Uganda, Bolivia, Burkina Faso, and Mozambique). Confronted with such poor results and with the Jubilee 2000 campaign (which brought in a petition with over 17 million signatures to the G7 meeting in Cologne in June 1999), the G7 (group of 7 most industrialised countries) and international financial institutions launched an enhanced initiative: “sustainability” criteria have been revised (for instance the value of the debt must only amount to 150% of export revenues instead of 200-250% as was the case before), the second stage in the reforms is not fixed any more: an assiduous pupil can anticipate and be granted debt relief earlier, and thirdly some interim relief can be granted after the first three years of reform.

Simultaneously the IMF and the World Bank change their vocabulary : their loans, which so far had been called, “enhanced structural adjustment facilities” (ESAF), are now called “Growth and Poverty Reduction Facilities” (GPRF) while “Structural Adjustment Policies” are now called “Poverty Reduction Strategy Paper”. This paper is drafted by the country requesting assistance with the help of the IMF and the World Bank and the participation of representatives from the civil society.
This enhanced initiative has been largely publicised: the international media announced a 90%, even a 100% cancellation after the Euro-African summit in Cairo (April 2000). Yet on closer examination the HIPC initiative turns out to be yet another delusive manoeuvre which suggests but in no way implements a cancellation of the debt.

List of the 42 Heavily Indebted Poor Countries: Angola, Benin, Bolivia, Burkina Faso, Burundi, Cameroon, Central African Republic, Chad, Comoro Islands, Congo, Ivory Coast, Democratic Republic of Congo, Ethiopia, Gambia, Ghana, Guinea, Guinea-Bissau, Guyana, Honduras, Kenya, Laos, Liberia, Madagascar, Malawi, Mali, Mauritania, Mozambique, Myanmar, Nicaragua, Niger, Rwanda, Sao Tome and Principe, Senegal, Sierra Leone, Somalia, Sudan, Tanzania, Togo, Uganda, Vietnam, Zambia.
(HIPC) - Ecuador is not included in this category - or in the case of strategic allies (like Pakistan in 2001). However, any agreement on rescheduling or cancellation must be preceded by the signing of an agreement with 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.
, which imposes structural adjustment reforms which have dramatic consequences for the poor of the country.
It must be added that rescheduling debts, like issuing state bonds, makes it possible to lose track of the origin of debts, which could have been illegitimate debts, and replace them by new loans which the creditors know will not be contested.
The Ecuadorian debt has been partially rescheduled eight times since 1983. And what has been the result on the indebtedness of the country? Quite disastrous, at least in the first ten years when there were the most rescheduling agreements; later, even if the situation did improve somewhat statistically, the effects of the domination imposed by the debt continued to make themselves cruelly felt.


Which companies have invested in the development of Ecuador? In the list of credit agreements which Ecuador signed with “private” organisations between 1982 and 2006 (appendix 1), there are the following names: ABN-AMRO (111 million USD), BANCO BILBAO VIZCAYA (143), CHASE MB (800), CITIBANK (29). There are also Spanish banks, Latin American banks, and especially Brazilian banks. Some banks are in fact national banks, for example the Bank of Norway [4] (17.5). Also it is to be wondered what is behind mysterious names such as BANCOS (2 516) and CONSORCIO BANCOS (2.38) .
Loans from private credit organisations can be used to finance economic or even social projects. However, very frequently these banks provide loans which are destined to repay other earlier loans.


Loans contracted with the multilateral credit organisations totalled 12 500 million USD, and the amount remaining on this debt today is still 4 188,4 million USD. Table 4 gives the amount each organisation invested in the development of Ecuador.

Table 4: Total amount borrowed from multilateral credit organisations between 1976 et 2006

Creditor Number of loans Amount borrowed (in USD millions) %
• Inter-American Development Bank (IDB) 111 3 804.2 30. 4
• International Bank for Reconstruction and Development (IBRD) 59 2 421.1 19.4
• Corporación andina de fomento (CAF) 101 3 493,5 27.9
• International Fund for Agricultural Development (IFAD) 5 45 0.4
• Fondo Latinoamericano de Reservas (FLAR) 5 1 308.4 10.4
• International Monetary Fund (IMF) 3 1 289.58 10.3
• Santo Domingo accord 1 47.4 0.4
• Others 1 91.2 0.7
TOTAL 286 12 500.3 100

Source : Marcelo Herdoiza Y Cumandá Almeida, “De los creditos contratados por el Estado ecuatoriano”, CEIDEX

Very often, loans from multilateral organisations are linked to a specific development project. This can be building infrastructure, or else structural adjustment projects, such as a massive redundancy programme or wiping off the deficit of a public company just before it is privatised.

The amount loaned covers the greater part of the project, but often the government is required to add its own contribution, usually at a level of 10 to 50% of the total cost. Foreign governments can be associated in a given project by contributing a loan or a donation. But how exactly are these projects carried out?

Over the years, Ecuador’s central government has lost its authority and competence to decentralised structures which are responsible for a given sector, or even sometimes for a specific project. The first obvious drawback of this dispersing of competence is the difficulty of drawing up coherent strategic planning which takes into account all the specificities of the country in order to determine which sectors should have priority for aid. The weakening of the central government means that large development projects (building roads, modernising health care Care Le concept de « care work » (travail de soin) fait référence à un ensemble de pratiques matérielles et psychologiques destinées à apporter une réponse concrète aux besoins des autres et d’une communauté (dont des écosystèmes). On préfère le concept de care à celui de travail « domestique » ou de « reproduction » car il intègre les dimensions émotionnelles et psychologiques (charge mentale, affection, soutien), et il ne se limite pas aux aspects « privés » et gratuit en englobant également les activités rémunérées nécessaires à la reproduction de la vie humaine. , etc.) are managed by decentralised structures which have only a partial view of the whole situation.
The weakening of the government in Ecuador is the direct result of national governments losing their power of decision to the international credit organisations, which since the 1980s, have been organised by the IMF and the great powers. Ecuador has wasted much manpower because of its technicians working without any coherence between the various governmental bodies. Because of this, the country lacks an efficient negotiating team of experienced technicians able to defend the country’s common good against these international credit organisations.
In fact, many projects have been launched without technical, economic, financial, social or ecological feasibility studies being carried out first. The people who imagined these projects did so within the rules of “good management” limited to their own field of responsibility, without any concern whatsoever for the community or the national interest, and with no need to justify resorting to foreign loans. Because of this lack of a general overview of the whole situation, weaknesses in development projects inevitably start to show. The contradictions between the clauses of loan agreements and Ecuadorian legislation come to the fore, generally leading to endless debates and costly legal proceedings. This then holds up the implementation, which leads to increasing costs for the debtor, namely Ecuador.
When the implementation phase does start, the debtor first has to request a “declaration of acceptance of credit in order to proceed with outlays” [5]. At this stage the State is all too frequently represented by people who do not have sufficient knowledge of all the various procedures of the credit organisations. That is why this stage generally takes far too long.
Once the “declaration” has been given, the project can be started. The creditor retains considerable control over the the project owing to the ongoing transfer of money. This mechanism, called “no objections”, is frequently used by the creditor as a means of exerting influence and pressure, on the basis that he, the creditor, has the greatest experience, and can at any time cut off the money.
The multilateral credit organisations oversee the implementation of projects by means of evaluation missions. These missions frequently uncover new elements, which can even be insoluble technical problems. In which case the project has to be modified, which once again takes time. When the deadline, which was fixed at the start of the project, is reached, the credits stop. The State has to start repaying the loan with interest plus a commission for the sum which was made available and not used – and this happens very frequently, in view of the endless delays on development projects in Ecuador. But the consequences of overunning the deadline do not end there, since in order to complete the project, the government has to negotiate a new loan with a new deadline.
Take for example the project to develop the Baeza-Tena road, linking the Andes to the Northern region of the Amazonian forest. The first instalments of the loan arrived on the 28th June 2002 and were supposed to be spread over 36 months up to 28th December 2004. The Ministry of Public Works claimed that the delay was due to technical problems: the road surfacing had to be changed to asphalt; extra work was needed at certain places, for example, for drains; the question arose as to whether or not it was worth improving access to a given bridge since there would probably be a new bridge built shortly; and of course there were delays due to the extreme weather conditions. Basically , the lack of strategic planning at a national level hinders the development of projects which would really be in the country’s interest. It must also be said that many projects which are chosen are badly planned and become extremely costly for the State because of intolerable delays. The root of the problem is the IFI’s hold over the Ecuadorian economy and their demands for a significant withdrawal of the State’s presence in decision-making. Under the influence of the IMF and 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.

, private interests are prioritised while the common good is barely taken into account. In these circumstances it is legitimate to pose the question: what benefit is there for Ecuador and the Ecuadorians in this process of increasing indebtedness? And is it not, at the end of the day, the best possible way to keep the Ecuadorian people to heel and appropriate their wealth?


The information available indicates that only 14% of the amount borrowed between 1989 and 2006 was used in development projects (drinking-water supplies, energy, irrigation, transport, telecommunications, social infrastructure, financial backing for companies). The remaining 86% were used to repay the capital and interests of the external debt. A closer look actually shows that 34% of this already small part was not actually used for the development projects themselves but rather, was used to “reform the financial sector”
Of the incoming international loans between 1989 and 2006, 4.5% was invested in physical infrastructure for the production sector (transports, telecommunications, energy, drinking water supplies, irrigation), 2.2% was used directly for the production sector (aquaculture, agro-industry, tourism, small industry and farming, foreign exchange market) 2.1% was spent on social infrastructures (education, urban development, sanitation, health, rural development) and finally 0.4% financed various reforms (internal security, modernising the State, etc.)
It is thus an understatement to say that the basic sectors, namely health and education, have not received much attention from the international creditors. Fundamental human rights, with access to education and health in the front line, have thus been ignored for years in Ecuador through lack of funds. And this penury was deliberately organised by the government under pressure from the IMF and the World Bank. Indeed, human development projects had to reduce their spending because of budget restrictions which were imposed by the multilateral credit organisations as a prerequisite to obtaining loans, as shown by the following table.
Consequently it is essential to underline the absence of democratic legitimacy in this distribution of resources, centred on the exportation of capital, in a country whose population is poor.

Table 5 : Service of the public debt and social spending in the Chart of Accounts (CA) in USD millions

Year Service of the public debt CA Education and culture Health and community developmt Total spending CA Debt servicing (Part of CA in %) Education and culture (Part of CA in %) Health and community developmt (Part of CA in %) other (Part of CA in %)
1995 1806 590 201 4308 41.9 13.7 4.7 39.7
1996 1630 613 230 4451 36.6 13.8 5.2 44.4
1997 2392 690 191 5290 45.2 13 3.6 38.1
1998 1736 636 207 4385 39.6 14.5 4.7 41.2
1999 1801 525 171 3989 45.1 13.2 4.3 37.4
2000 1680 416 147 4035 41.6 10.3 3.6 44.4
2001 1828 493 189 5489 33.3 9 3.4 54.3
2002 2019 694 259 5506 36.7 12.6 4.7 46
2003 1951 676 310 6188 31.5 10.9 5 52.5
2004 1652 858 371 7323 36.2 11.7 5.1 47
2005 2828 946 423 7915 35.7 12 5.3 47
2006 2980 605 294 6222 47.9 9.7 4.7 37.7

Source : Leonardo Vicuña « Apendice Estadistico » CEIDEX

The actual results of the external investment, their impact on employment and on the living conditions of the inhabitants, are very difficult to evaluate at the present time since there has never been any structure within the country assigned to monitor this aspect. It would seem to be quite essential that such a structure should exist, and it is highly surprising that, among all the demands the multilateral credit organisations are making in view of “good governance”, there is never any mention of careful assessment of the impact of each policy decision, each project, on the economic and socio-cultural development of the country and also of the impact on the environment. In fact we believe that the total absence of such a requirement is indicative of the way the international credit organisations refuse to question their dogmas about development and actually try to hide just how meagre the observable results are, in order to continue plundering Ecuador’s resources and to keep the country down among the assisted states, in subservience to the major international powers.
This is why it is urgent that a full audit should be carried out and those responsible brought to account.

 APPENDIX 1 : Loans from foreign banks between 1982 and 2006 (in USD millions)

Creditor Amount
BANCOS $2.516,00
CITYBANK N. A. $29,23
F.M.O. - HOLANDA $2,75

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This collective work was carried out in July 2007 at the request of AFRODAD ( by a team at the CADTM composed of Benoît Bouchat, Virginie de Romanet, Stéphanie Jacquemont, Cécile Lamarque and Eric Toussaint.

It was revised by Myriam Bourgy, Damien Millet and Renaud Vivien.

The English translation was done by Elizabeth Anne, Vicki Briault, Judith Harris and Christine Pagnoulle.


[1This chapter is based on the report of the Comision Especial de Investigacion de la Deuda Externa del Ecuador (CEIDEX), which was ordered by President Palacios’ government on the 29th March 2006 and published the same year on 9th December.

[2As we will see below, some of the supposedly private banks ore in fact national banks – this is the case for the Bank of Norway and the Bank of Brazil.

[3Patiño Aroca, R. Ministro de Economia y Finanzas “Información al Congreso Nacional”, 16 mai 2007

[4Voir Kjetil G. Abildsnes dans « Why Norway took Creditor Responsibility – the case of the Ship Export campaign ».

[5« déclaratoria de elegibilidad del credito para les desembolsos ».

Other articles in English by Benoît Bouchat (2)

  • Ecuador at the cross-roads, for an integral audit of public indebtedness

    Chapter 5: Renegotiating the debt

    16 August 2007, by Virginie de Romanet , Benoît Bouchat , Stéphanie Jacquemont

  • For an integral audit of public indebtedness

    Ecuador at the cross-roads

    15 August 2007, by Eric Toussaint , Virginie de Romanet , Cécile Lamarque , Benoît Bouchat , Stéphanie Jacquemont



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