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Ecuador Gets Chávez'd | The Nation

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Ecuador Gets Chávez'd

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Palacio seems an unlikely target of US official assaults. He comes off like a cardiologist you'd meet at an AMA convention. That is, in fact, what he is: a heart doctor who practiced in the United States for a decade, a man outside politics, affiliated with no party, brought in by Gutierrez to build a national health program. Hugo Chávez he is not: Palacio is conservative, pro-market, pro-American, but his patient, his nation, is in bad shape.

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Greg Palast
Greg Palast is an economist and financial investigator turned journalist whose series on vulture funds appeared on BBC...

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"Sick people are not going to produce anything," he said.

I knew he'd been taken aback by Rice's blast. Indeed, when an earlier president was removed in a coup, the United States had insisted on the vice president taking office. But, unlike Palacio, that vice president, Gustavo Noboa, was a rightist who was happy to sign off on all World Bank terms, including the devastating decision in January 2000 to make the US dollar Ecuador's official currency. The radical free-market dollarization plan led to collapse of the export market, decimation of payrolls and, for those still working, a halving of real wages.

Palacio told me he "received the explanation from Ms. Condoleezza Rice," who reassured him she did not seek his removal. But reassurance apparently has a price. The morning we met, Palacio announced he would maintain US military bases in Ecuador (not a popular view) and would not object to Plan Colombia, the US war on guerrillas dressed as a war on drugs. As a physician, however, he did question chemical spraying of coca crops.

But on the oil money and bond payout he's holding his ground, and with good reason. When the oil market went bust in the 1980s, so did Ecuador, and its bonds sold at dimes on the dollar. Now Ecuador's debt sells at a full face value, yielding windfall profits to speculators of as much as 500 percent for those who bought cheap.

Palacio doesn't object to paying off the bonds. The problem is that the World Bank and IMF want the principal of the bonds paid down early, a rare and financially suspect demand to make on any nation.

Who are these guys who hold the bonds? "We don't know who they are, and that's terrible," the president told me. What's terrible, says a United Nations expert who cannot be named, is that Palacio does know who they are: the old oligarchs who originally stripped the nation's banks of assets in the 1980s, fled to Miami and now hold a mortgage on the nation. Palacio's plan to move some of the oil money to social services threatens these bondholders' windfall.

A closer look at the Structural Adjustment Program suggests that the World Bank may not be putting Ecuador's interests first. Paragraph III-2 requires electricity rates to rise to double the average price charged in the United States, far above production costs. This is quite a boon to the Ecuadorean electricity suppliers such as Noble Energy of Houston and Duke Power of the Carolinas.

Outside the presidential palace, indigenous women in bowler hats and pigtails chanted, "¡Fuera todos! ¡Fuera todos!" Everyone out. As far as they are concerned, every one of the seven presidents who have entered office in the past nine years has sold them out to the bondholders, to the oil companies, to the World Bank and its austerity punishments. To them, Palacio is just another in a long line of disappointments.

I asked the president what he would do if the World Bank and the Bush Administration nix his request for Ecuador to keep an extra tiny percentage of its oil money. Mindful that no Ecuadorean president since 1996 has served out his term, Palacio told me simply: "There is no way. There is no other way. These people have to listen to us."

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