"Sitting on a Sack of Gold": Ecuador's Turn Toward Extractivism

Elissa Dennis, Guest Blogger

Declaring “the world has failed us,” Ecuador’s President Rafael Correa signaled the termination of the Yasuni ITT Initiative in August 2013.

Back in 2007, Correa had presented a challenge to the world community: If governments, companies, international organizations, and individuals pledged a total of $350 million per year for 10 years, equal to half of the forgone revenues from the Ishpingo, Tambococha, and Tiputinti (ITT) wells in the Yasuni National Park, Ecuador would chip in the other half and keep the oil underground indefinitely, as its contribution to halting global climate change. Citing a meager $116 million in pledges, Correa announced the decision instead to move forward with the Plan B that was always in the background: extraction of oil from the Ishpingo, Tambococha and Tiputini fields. The drilling will only impact .1% of the parklands, Correa contends, noting that the estimated value of oil in the targeted area has increased from $7 billion to $18 billion. Despite street demonstrations in Quito and Cuenca and calls for a national referendum, the National Assembly ratified Correa’s action in October 2013.

Correa, a U.S. trained economist, has consistently ridiculed “infantile” environmentalists, and is clearly most comfortable with a pragmatic economic development model of extractivism with equitable distribution of resources. Like his Bolivian counterpart Evo Morales, Correa has run afoul of indigenous communities and the environmental Left through efforts to transform the nation from exploited exporter of raw materials into savvy user of natural resources to fuel economic growth and social programs.

“We can’t be beggars sitting on a sack of gold,” is Correa’s constant refrain.

The 2012 signing of a five-year $1.4 billion contract with the Chinese-owned mining company Ecuacorriente for development of the El Mirador copper mine in the southern Amazon is emblematic of Correa’s approach. While industry analysts cringed at the 52% of revenues slated for taxes and royalties to the state, advocates for the environment and indigenous Amazon community representatives took to the streets in protest at this launch of what the Correa government boasts will be a new era of mining in Ecuador.

Correa’s critics say his government never wholeheartedly supported the Yasuni effort, and point to a growing Chinese political and economic influence. Since Correa’s 2008 move to default on the nation’s IMF debt, China has provided billions of dollars to Ecuador, with oil production pledged as repayment of some of that debt. China is also a key investor in Ecuador’s oil industry, including links to ITT.

Ecuador’s debt situation with China today is more “colonizing” than it was with the US, says University of Cuenca professor Ana Cecilia Salazar, noting a $19 billion debt level in 2011 compared with $14.55 billion in 2004. She sees that as one reflection of a government long on populist rhetoric but short on progressive economic transformation. “We are living an illusion that has generated social backing for the government, but basically a policy of redistribution of wealth doesn’t exist, rather a populist administration based on grants and subsidies that is not true social justice,” she says.

Salazar acknowledges there has been some lessening of poverty during Correa’s tenure, and some marginalized groups have benefited from government programs made possible by the high price of oil. But she notes “there is no change in the dynamics of concentration,” with economic inequality growing, as 40% of the nation’s wealth sits in the hands of 15% of the population. While 27,000 acres of land have been distributed to campesinos, millions of acres have been ceded to mining companies, she says.

Correa’s strategy of moving from neoliberalism to “neokeynesianism,” just creates a mirage of “green capitalism,” Salazar says. With Yasuni, even if the drilling is contained in a small area, it is impossible to not impact the vulnerable megadiverse environment and the communities that have been living there in voluntary isolation. Opening up the area to oil necessitates new highways which expose the region to indiscriminate logging, a problem the government has not been able to control elsewhere in the Amazon region. With the end of the Yasuni initiative, the vision of a post-petroleum Ecuador is fading, Salazar says. “The government model that initially made us dream about overcoming the extractivist economy has disappeared.”

Elissa Dennis is a consultant to nonprofit affordable housing developers with Community Economics, Inc., in Oakland, Calif.

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