Ecuador

Introduction

Figure 1. Administrative Divisions of Ecuador, 1989

AS THE 1980S DREW TO A CLOSE, deep-rooted sociological, geographical, economic, and political features continued to define Ecuador. Despite such post-World War II developments as widespread migration, the growth of import substitution industrialization, and the emergence of an urban middle class, Ecuador remained strongly influenced by its history. Four key themes dominated the historical landscape and remained essential to an understanding of contemporary Ecuador. First, the nation had a highly skewed social structure that could be traced to its colonial past. Second, persistent regional rivalries often determined the outcome of key national issues. Third, the economy continued to be subject to the fortunes of a single commodity. Finally, the political system lacked strong, stable institutions.

Spanish social structures and values took hold most completely in the sixteenth century in the Sierra (Andean highlands). Not coincidentally, the Sierra was also that Ecuadorian region where the Inca conquerors had been most successful fifty years earlier. Spanish officials adapted the prevailing Inca hierarchical social system and established a tripartite, semifeudal structure consisting of small numbers of white elites (both peninsulares--Spanish-born persons residing in the New World--and criollos--persons of pure Spanish descent born in the New World), a somewhat larger group of mestizo artisans, and a large Indian underclass. Since Ecuador lacked the mineral riches found in other Spanish colonies, such as Peru and Mexico, land became the critical commodity. Through the encomienda system, elites received tracts of Sierra land along with the right to extract labor from Indians living on that land. Colonists also adapted the Inca concept of obligatory public service (mita) and required Indians to toil in textile sweatshops scattered through the highlands. Debts incurred through the Spanish mita often transformed what was supposed to be a transitory labor obligation into a peonage system passed across generations.

The successful struggle for independence in the 1820s resulted in the transfer of power from peninsulares to criollos. It did little, however, to change other aspects of the social system, which by then had become dominated by haciendas with a resident Indian labor force. These residents, known as huasipungueros, typically worked the hacienda fields for four days per week in exchange for the right to own a small plot of land (minifundio).

The huasipungo system survived in isolated pockets of the Sierra until finally being abolished by the 1964 Agrarian Reform Law. This law and a successor measure in 1973, however, did not affect the basic distribution of landownership, which remained highly inequitable. In the early 1980s, only 5 percent of all farms exceeded fifty hectares, yet these same farms represented over 55 percent of land under cultivation. By contrast, 80 percent of all farms encompassed fewer than ten hectares and accounted for only 15 percent of farmland.

Until the 1970s, landless Sierra peasants in search of work typically migrated to the Costa (coastal region). At independence, the Costa contained less than 20 percent of the national population. Nonetheless, it represented the most dynamic force in Ecuador's economy. This dynamism was centered in the port city of Guayaquil, which had established itself during the colonial period as an important shipbuilding and trade center.

An intense rivalry between Guayaquil and Quito--the national capital and most important Sierra city--dominated nineteenth- century Ecuadorian politics. By the 1850s, a clear dichotomy had emerged between the Catholic, conservative Sierra and the anticlerical, liberal Costa, with regional leadership in the hands of Gabriel García Moreno and José María Urbina, respectively. García Moreno played a critical role in the late 1850s and early 1860s in pulling Ecuador back from the brink of permanent dissolution. However, during a rule that lasted until his assassination in 1875, García Moreno polarized the religious issue through the enactment of legislation granting broad powers to the Roman Catholic Church. Following a twenty-year transitional period, José Eloy Alfaro Delgado seized power on behalf of Guayaquil Liberals and established a permanent separation of church and state.

The removal of the religious issue from the national agenda did little to alter regional tensions. Costa elites long resented what they perceived to be a transfer of their wealth to the less industrious Sierra. In addition, economic stagnation in the Sierra and dynamism in the Costa combined to produce a massive population shift in the twentieth century. By the early 1980s, the population of Guayaquil easily outdistanced that of Quito. Despite the presence of large squatter communities in both cities, regional rather than class identification remained the most important determinant of voting behavior. For example, a majority of Costa voters supported the second-round presidential candidates from their region in both the 1984 and 1988 elections, even though the political ideologies of these candidates varied widely.

On three separate occasions over the last hundred years, a single export product offered the prospect of a solid financial future. In each case, however, Ecuadorian hopes were dashed by a cruel dose of fiscal reality. Ideal growing conditions north of Guayaquil and the latter's excellent port facilities enabled Ecuador by 1900 to become the world's leading exporter of cocoa. Customs duties from cocoa exports filled government coffers. The cocoa boom also had an important sociological impact as Costa growers sought to attract Sierra peasants through sharecropping and wage-labor arrangements. By the mid-1920s, however, crop disease and competition from other producing nations had devastated Ecuadorian cocoa production. Lowered world demand resulting from the Great Depression dealt a further crushing blow to Ecuador's export effort. From 1928 to 1932, the total value of Ecuadorian exports declined by two-thirds.

Following World War II, Ecuador had a second commodity bonanza, this time in the form of bananas. Taking advantage of crop diseases in Central America and the unleashing of pent-up demands in the United States after the war, the value of Ecuador's banana exports grew tenfold from 1948 to 1952. Once again, customs duties allowed ambitious public works spending. As was the case with cocoa, bananas were grown in the Costa. Besides stimulating the regional economy, the banana boom set off another migration wave from the Sierra. By the mid-1960s, however, Ecuador experienced a substantial drop in the volume and value of banana exports. Economic stagnation once more became the order of the day.

The discovery in 1967 of vast amounts of petroleum in the sparsely populated Oriente (eastern region) created conditions for a third economic boom. Five years later, petroleum began flowing through the 503-kilometer Trans-Ecuadorian Pipeline, bound for foreign industrialized markets. Largely as a result of petroleum exports, Ecuador's foreign exchange earnings climbed eightfold between 1971 and 1974.

Several noteworthy features distinguished the petroleum boom from the earlier cocoa and banana booms. First of all, the locus of economic activity occurred outside of the Costa. Although the Oriente was the actual source of the petroleum wealth and received important infrastructural development, the bulk of the revenues flowed directly to the national treasury in Quito. The government used these revenues to finance an unprecedented level of public spending, creating numerous state enterprises and expanding the scope and activities of previously established national agencies. Government funding also supported industrial growth in Quito. Finally, industrialization and public-sector expansion allowed for the emergence of an urban middle class.

Unfortunately, petroleum proved to be as illusive a treasure as the earlier golden commodities. In the first half of the 1970s, the income from petroleum made possible the purchase of a wide range of imports. When revenues stagnated around 1975, the military government that had assumed power three years earlier resorted to massive foreign borrowing. Between 1976 and 1979, Ecuador's foreign debt increased by over 400 percent. Although the civilian administrations that came to power in 1979 succeeded in slowing the debt growth rate, it still had doubled by 1986 and totalled nearly US$9 billion.

Ecuador was unprepared for the economic calamities that befell it in the 1980s. During that decade, Ecuador experienced two sharp drops in the market price for petroleum, a global recession, a dramatic increase in international interest rates, widespread crop damage resulting from flooding, and an earthquake that severed the oil pipeline for five months and cost the nation US$700 million in lost revenues. In order to qualify for additional loans and renegotiation of scheduled interest payments, Ecuadorian governments adopted various austerity packages that included reductions in public expenditures, currency devaluations, and increases in interest rates. Although necessary, these measures increased unemployment and underemployment nationwide.

Stronger political institutions might have enabled Ecuador to weather its varied economic storms. Unfortunately, national political structures historically exacerbated rather than ameliorated the fiscal picture. Except for a brief period during the 1880s and early 1890s, nineteenth-century Ecuadorian governments were authoritarian rather than democratic. Most of the heads of those governments were forcibly removed from office. Although the Liberal Party held power from 1895 to 1925, those years were hardly a model of stability. For the first half of that period, Alfaro and Leónidas Plaza Gutiérrez waged a bitter rivalry that only ended when the former unsuccessfully staged a coup and was murdered by a government-sponsored mob. In the second half, liberal politicians surrendered key financial decisions to Guayaquil banking interests. The printing of national currency by private banks generated runaway inflation and contributed heavily to the economic chaos of the late 1920s.

On three occasions in the twentieth century--1925, 1963, and 1972--the military seized direct political control. In each case, it was unsuccessful in carrying out espoused socioeconomic reforms. The last period of military rule--1972 to 1979--was both the most ambitious and disappointing of the three. Although one of the motivations for intervention was to prevent civilian politicians from dissipating the new-found petroleum wealth, the military's principal legacy was that of ever-increasing foreign debt obligations.

The 1979 Constitution is the seventeenth such document since independence in 1830. It is both an impressive and hopeful sign that as of December 1989 Ecuador had had democratically elected governments since the inception of this Constitution and two nonviolent transfers of power. Nonetheless, the maturation of Ecuador's political institutions remained open to debate. Ecuador had a staggering number of political parties, most of which had rather shallow roots and were often little more than electoral labels for their leaders. Party identification and ideology remained weak, whereas personalism remained strong.

Perhaps most disturbing was the deteriorating level of political discourse. This was particularly true during the presidency of León Febres Cordero Ribadeneyra (1984-88). Febres Cordero's disdain for the give and take of the democratic process led to his adoption of an authoritarian style that resulted in acrimonious debates with the National Congress and threats of impeachment. In an incident that both typified the tumultuous years of the Febres Cordero administration and painfully exposed the potential threats to the democratic process, paratroop commandos kidnapped the president in 1987 and forced him to honor a congressional amnesty previously granted to Lieutenant General Frank Vargas Pazzos. Febres Cordero had dismissed Vargas as armed forces chief of staff after the latter had accused both the defense minister and an army commander of corruption. Following his dismissal, Vargas attempted two unsuccessful revolts against the government. In the bewildering interplay of Ecuadorian politics, Vargas ran for the presidency in 1988 and received over 12 percent of the vote.

Ecuador thus faced many challenges in the years ahead. Observers believed that it needed to design social structures that would allow a more equitable distribution of income and opportunities. It also needed to identify creative strategies of economic growth. Most important, Ecuador required strong, democratic political leadership.

December 31, 1989
Dennis M. Hanratty

Data as of 1989

Ecuador - TABLE OF CONTENTS