Ecuador – the American Empire Strikes Back Against China

​The American empire took its eyes off its backyard for a couple of decades, more interested in adventures in the Middle East than anything else, but now has turned its attention back to Latin America.  The United States has chosen a fortuitous time for re-entry into this small Latin American republic as it just elected its first conservative president, Guillermo Lassos, in over 20 years.  Can Lasso play the international interests against one another to the benefit of Ecuador, or is he simply more intent on looting Ecuador?

Ecuador Superimposed on United States Map for Comparison

​Fast social, governmental, and economic facts about Ecuador:

• Ecuador is the 71st largest country in terms of population, with about 17 million people
• The racial composition is diverse with Mestizo (mixed Amerindian and White) 71.9%, Montubio 7.4%, Amerindian 7%, White 6.1%, Afroecuadorian 4.3%, Mulatto 1.9%, and Black 1%.
• Spanish is the official language, with about 93% of people using it as their primary language, with about 4% of people speaking the indigenous language Quechuan.
• Ecuador is deeply Christian, with Roman Catholic 74%, Evangelical 10.4%, Jehovah's Witness 1.2%, other 6.4%, and atheist 7.9%.
• About 65% of the population lives in an urban area.
• The country is a constitutional republic with a civil law system and has 24 provinces.
• Gross domestic product (GDP) in 2020 was about $182 billion (data are in 2017 dollars).
• Natural resources include petroleum, fish, timber, and hydropower.
• Real GDP per capita is $10,300, and once again, data are in 2017 dollars.
• The unemployment rate was about 5.7% in 2019, but Ecuador has a massive recession due to COVID.
• Like many countries there is a top-heavy concentration of wealth and about 25% of the population lives below the poverty line.
• Export partners are the United States 30%, China 13%, Panama 8%, and Chile 7%.
• About 97% of the population has electricity.
• Electricity from hydroelectric plants is about 54% of the total installed capacity.
• About 88% of the population has a mobile telephone.
• Military expenditures are about 2.3% of GDP.
• There is a significant refugee burden as about 500,000 Venezuelans have come to the country fleeing economic hardships.

Chimbarozo, a Volcano, is the Highest Mountain in Ecuador

​Ecuador has a wide variety of climatic conditions due to its mountainous interior and associated highlands.  Climate is tropical along the coast, becoming cooler inland at higher elevations, and tropical in Amazonian jungle lowlands.  With a height of about 20,500 feet, Chimborazo is the highest mountain in Ecuador but only the 39th highest peak in the Andes.  Chimborazo is a double volcano composed of one volcanic edifice on top of another.

Guillermo Lasso, President of Ecuador, Addressing the United Nations

Ecuador just elected a conservative president, Guillermo Lasso, and he took office in May 2021. A perennial office seeker, Lasso parlayed many promises to an electorate consumed by an economic crisis due to COVID.  The 65-year-old defeated left-wing rival Andrés Arauz in an election in April 2021.  Lasso promised to attract more investment to the oil sector and improve the economy through deregulation. Lasso, Ecuador’s first conservative president more than 20 years broke a string of populist leaders.

Clues to Lasso’s character, aside from his accumulation of massive wealth, include his extreme social conservatism; for instance, he opposes abortion even in cases of rape and is a devout adherent to Opus Dei, an orthodox Roman Catholic sect whose most famous adherent is Mel Gibson. In addition, Lasso says he is an enemy of Cuban-style socialism and, of course, appointed a neoliberal cabinet with close ties to the business community. The resultant formal plans feature governmental deregulation.

The International Consortium of Investigative Journalists (ICIJ) won the 2017 Pulitzer Prize for Explanatory Journalism for their work on the Panama Papers investigation. The investigation exposed the ultra-rich and their henchmen who use offshore companies to facilitate bribery, arms deals, tax evasion, financial fraud, and drug trafficking.

The Panama Papers include a great deal of exciting information on Lasso, casting into some doubt his account of his net worth and sources of his actual wealth.  In 2011, before his first presidential campaign, Lasso created GLM Management Trust in Ecuador to hold his assets, which included a 40% share of Corporation MultiBG, the majority owner of Lasso’s former employer.  Lasso had led the bank for 20 years prior to his political career and represented he had come to great wealth through legitimate means.  Third-party sources estimate Lasso’s net worth as much as $50 million. 
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The Pandora Papers show that Lasso has ties to 10 offshore companies and trusts in Panama, South Dakota, and Delaware.  Whether Lasso aspired to the office to loot Ecuador or has pursued office for altruistic reasons is unknown.

International Development Faces Opposition from Indigenous People

​China's Belt and Road Initiative (BRI), which Chinese President Xi launched in 2013, involves the finance and management of infrastructure development projects worldwide.  China has collaborated with more than 100 countries in BRI projects like railways, ports, and highways.  China’s interests in Latin America include natural resource access on favorable terms and diplomatic leverage, particularly in the United Nations, although there are possible military ambitions.

Quintuco Space Center

​A recent Chinese project in Quintuco, Argentina, illustrates this. The Chinese government-financed and built a $50 million satellite-and-space mission control center, including a 50-year, rent-free lease on the land. Since construction, the Chinese military has run the site.  The primary reason for the project is to support China’s planned moon landing. So naturally, such projects trip alarms in Western countries, and the powers of imperialist capitalism are facing off against the international communist conspiracy in another tawdry cold war redux.

Coca Coda Hydroelectric Dam

Ecuador borrowed about $5 billion from China to finance several major infrastructural projects, including hydroelectric dams. These projects began when oil prices were high, but the collapse in world oil prices during COVID caused a financial crisis. 

Mirador Copper Mine

China’s need for copper, at about 12.7 metric tons per year, makes it the world’s largest consumer at 53 percent of global demand. Copper is a strategic metal as it is integral to construction, technology, and energy. China has focused on Latin America because the region holds 20.7 million tons of copper reserves, an amount that is about 70 percent of the copper located in Chinese territory.

China has been making mining investments to alternative sources in Latin America, including Peru, which has 17 million tons in known copper reserves; Bolivia, which has about 0.3 million tons; and Ecuador, which has 3.5 million tons.  Chinese mining operations in Ecuador prompted a great deal of local protest, especially from indigenous peoples, but that did not stop establishing two Chinese-owned copper mines. Ecuador made its first export of 22,000 tons of copper concentrate in early 2020 from the Mirador mining project.  Other Chinese mining projects include a gold mine.
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Extractive industries, including petroleum and mining, are the highest polluting sectors, displace indigenous populations, leave behind little in the way of wealth, and typically leave toxic wastelands and misery behind.

Coca Coda Sinclair Hydroelectric Dam

The Chinese-financed and managed Coca Codo Sinclair hydroelectric facility was Ecuador's most significant energy project. Located in the Amazon Basin, 60 miles east of Ecuador’s capital Quito between the provinces of Napo and Sucumbíos, the dam offers a warning tale. China’s loans require Ecuador to turn over 80% of oil exports for at least five years as payment. In addition, the $1.7 billion loans from the Chinese Export-Import Bank to build the dam alone cost Ecuador $125 million a year in interest payments alone.

​Ecuador contracted over $20 billion in Chinese loans since 2010 and looked for international help to buy that Chinese debt. As a result, in February 2019, Ecuador accepted a $10.2 billion bailout package from international financial institutions, including the International Monetary Fund and the World Bank.

GC Leaders at Meeting that Ratified B3W

To fight back against the BRI and resultant Chinese expansion, the United States and its G7 partners formulated a concept called Build Back Better World: An Affirmative Initiative for Meeting the Tremendous Infrastructure Needs of Low- and Middle-Income Countries, also known as B3W.  B3W will be global and focused on financing various infrastructure projects in low-income countries using lending agencies such as the Development Finance Corporation, USAID, EXIM, the Millennium Challenge Corporation, the United States Trade and Development Agency, and affiliate bodies. 
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During a recent visit to Ecuador, members of the B3W United States delegation met with Lasso and announced a $150 million loan to Banco de la Produción to finance small- and medium-sized enterprises that allege to promote gender equity and inclusion; have been affected by the COVID-19 pandemic, and are enabling green development projects.

The United States party line is to portray China’s loans to developing nations as predatory. According to the script, these loans aim to create a ‘debt trap’ and leave those debtors at the mercy of a ‘single authoritarian country.’  Evidence to support these claims is hard to find.  China only holds 10% of Ecuador’s total external debt, but the United States wishes to make that the focus of attention.

Over the last six months of 2020, China agreed to put loan payments on hold until 2022.  This concession includes delays on repayment of the $474 million loan to China’s ExIM Bank and a $417 million loan to the China Development Bank. However, neither the International Monetary Fund nor other Western banks have been as generous as Chinese funding sources.

Lasso has a mixed record, so his administration's outcome is difficult to predict.  He has significant political opposition both in a Congress dominated by the left and among civil-society groups such as the indigenous movement. Moreover, Ecuador has politically volatile, with progressive and socialist inclinations, so Lasso’s time in office may be short-lived.  Regardless, what Ecuador needs to thrive is the deft management of the competing international interests and careful fostering of the economy towards a more prosperous future.