The president of Ecuador, Rafael Correa announced that "we will seek means of not paying illegitimate debt, debt that is corrupt and illegal", after receiving the final report of the Commission for an Integral Audit on Public Credit (CAIC – Spanish acronym) composed of members of civil society and government officials.

Before a large audience, President Correa also announced that it is up to the legal system to punish those guilty of causing external indebtedness: “the weight must be distributed equally among those responsible for acquiring spurious debt securities, with lies and tricks, with blackmail and betrayal; each of them should pay with their property accordingly. " He added that "lenders are no less guilty, those who induced compulsive borrowing, who by wheeling and dealing brought pressure to bear by every means to place their loans and reap juicy commissions." (1)

The undertaking of this debt audit instigated by the Ecuadorian government and with the participation of economists, lawyers and representatives of social organizations both of Ecuador and abroad, is unprecedented in Latin America and perhaps even in the world, noted economist Franklin Canelos, Vice Chairman of the Commission. (2)

The CAIC, for over a year, audited the debt process of Ecuador from 1976 to 2006, a revision that included commercial debt contracted with international private banking; multilateral debt granted by international financial organizations; bilateral debt (mainly with Spain, Brazil and those who make up the Paris Club); domestic debt, and credits provided to the Committee on Developing the Guayas River Basin.

The final report of 172 pages is a thorough technical and legal analysis that shows one of the most sinister faces of three decades of neoliberal policies. Ecuador's foreign debt rose from 240 million in 1970 to 17,400 million in 2007, however this debt, instead of helping to overcome poverty, inequality and backwardness, "has been a tool for plundering of resources and submission to policies imposed by multilateral agencies, on the pretext of managing issues related to obtaining credits," the CAIC reported.

The work of the CAIC met a number of difficulties, as several state agencies as well as the Mayor of Guayaquil, Jaime Nebot, and others refused to provide the information requested. The Argentine lawyer Alejandro Olmos, a member of the Commission, said that after reviewing the files of the Central Bank of Ecuador, he found that the country "was not properly recording its debt, had no control, there was no follow-up and in many cases the same obligation had been paid 2 or 3 times."

The Commission's work demonstrates the illegality, and therefore the illegitimacy of the debt. The "odious" character (3) of foreign debt is noted, having been contracted by a military dictatorship (1972-1979). From 1976 to 1982, loans were granted to Ecuador for 3,424 million dollars, of which 984 were devoted to the Defense budget. The National Defense Junta, which was the biggest beneficiary, refused to provide the Commission with data on the credits received and their destination.

Ecuador's foreign debt has been subjected to successive processes of renegotiation in which fraudulent successive governments accepted inadmissible conditions from creditors, such as contracting new debt to pay old debts, penalties for arrears, high interest rates and “anatocism" (payment of interest on interest), revaluing debt securities that have little worth in the marketplace, according to a member of the CAIC, Hugo Arias. (4). The agreements were drafted by the creditors themselves and included unfair terms like giving up national sovereignty, accepting the dispute settlement in international courts, establishing the primacy of the agreements above the Ecuadorian law and Constitution, and so on.

These conditions were accepted in the Brady Plan for Ecuador (1993) supported by the IMF, in the Adam Plan (pact for the swap from Brady to Global established in 1999) and the exchange of Brady bonds and Eurobonds to Global bonds (2000). In the latter case, the losses for Ecuador were huge. The exchangeable bonds (Brady and Eurobonds) amounting to 6,298 million dollars were priced on the market at 30% (1,575 million), however the bonds were exchanged for Global 2012 and 2030 for an amount of 3,950 million dollars, at interest rates at 12 and 10 percent. Up to August 2008, Ecuador had already paid Global bonds 2,450 million dollars in interest. If non-payment of this illegitimate debt is not declared now, future generations will have to pay off the capital in 2012 and 2030.

The Commission also found that several Ecuadorian governments caved in to the demands of private creditors and were accomplices in irregularities and abuses against the country's economy. For example, in the early nineties, Ecuador had the opportunity to apply the right to prescription of the commercial debt, as provided by the laws of the United States and London for cases of arrears for more than six consecutive years. This would have allowed Ecuador to save nearly 6,992 million dollars of commercial debt. However, on December 9 1992, the Ecuadorian parties, represented by Mario Ribadeneira, Finance Minister Ana Lucia Armijos, General Manager of the Central Bank, and Miriam Mantilla, Consul of Ecuador in New York, signed in the latter city, a unilateral agreement to renounce prescription of the foreign debt. This so-called Tolling Agreement was legalized on the same day by a decree signed by former President of Ecuador, Sixto Durán Ballén, and the Minister of Finance in charge, Sebastian Perez Arteta. It should be noted that for this and other "merits" the economist Ana Lucia Armijos joined the ranks of the IMF staff.

The debt with multilateral agencies deserves a mention. In the period from 1976 to 2006, Ecuador contracted 286 credits with the International Monetary Fund (IMF), World Bank, Inter-American Development Bank, Andean Development Corporation, Latin American Reserve Fund and International Fund for Agricultural Development, amounting to $ 12,500 billion dollars, representing 42% of the public external debt contracted in that period. These appropriations for the role of "development projects" came with conditions that gave rise to "the weakening of the state and its capacity for planning, structural adjustments, deregulation and transfer of responsibilities to the private sector, all of which were detrimental to the interests of the nation, and followed a matrix imposed on countries in the South. This generated political instability and ongoing clashes between government and social groups," says the Commission.

An example that illustrates the illegitimate and fraudulent nature of multilateral debt is a loan of US $ 14 million awarded by the World Bank for "mining development and environmental control" called PRODEMINCA. With this loan, legislation was amended to make it "attractive" to private investment and geochemical information was compiled to locate where the mining deposits were with the aim of handing them over through concessions to the transnational companies. Believe it or not, the people of Ecuador, through public debt, subsidize the penetration of transnational companies to come and take away their natural resources and destroy the environment.

Following the earlier announcement by Finance Minister Elsa Maria Viteri that payment was being deferred for thirty days on the interest of the 2012 Global Bonds, pending presentation of the CAIC report, the scaremonger press warned that dark clouds were threatening the country. But for Alejandro Olmos, "Ecuador in these 25 years has paid much more than they received, that is already an indication of what the Ecuadorian debt is. If the debt is not paid, nothing will happen; in the history of all countries that have not paid their debt, nothing has happened to them."

Notes

1 Final Report of the Audit for download in pdf: http://www.auditoriadeuda.org.ec/images/stories/documentos/informe_final...

2. The CAIC is composed of Ecuadorians: Ricardo Patino, Franklin Canelos, Maria Rosa Anchundia, Hugo Arias, Angel Bonilla, Aurora Donoso, Karina Saenz, Piedad Mancero, Cesar Sacoto, Ricardo Ulcuango and Maria Lucia Fattorelli (Brazil), Gail Hurley , Jurgen Kaiser, Alejandro Olmos (Argentina), Eric Toussaint (Belgium).

3. International law considers "odious debt" as one that has been contracted "without the consent of the population (by a despotic regime) and is used against the interests or welfare of the people, and all this is done with knowledge of the creditors." Illegitimate debt has a broader nature and refers to borrowing "outside the national and international legal framework, in an unfair context that is improper, abusive, lacking in transparency, violating sovereignty and human rights." See: Weber, Gabriela, Qué es la deuda ilegítima, en “Sobre la deuda ilegitima”, Centro de Investigaciones Ciudad (2008), Quito.