Ecuador: A pragmatic trade partner?

More than anything else, pragmatism is the dominant theme to Ecuador’s political economy during the presidency of Rafael Correa. While rhetorically Correa has often matched his counterparts like Hugo Chávez and Evo Morales, his actual policies have been far less ideologically driven than those in Venezuela, Bolivia or even Argentina. This pragmatism is illustrated by two recent events; Correa’s trip to Germany to begin negotiating a free trade agreement with the European Union and the controversial auctioning of oil exploration blocks in the southern Amazon. Additionally, despite his vocal opposition to its implementation, Correa has not made a serious effort to abandon the economy’s dollarization and reintroduce a domestic currency.

Free Trade or the People’s Trade?

In April, Rafael Correa visited Europe, where he met with German Chancellor Angela Merkel in Berlin to discuss the negotiation of a free trade agreement (FTA) with the European Union. In comments to the press, Correa emphasized that his government understands the importance of the private sector and that Ecuador is a country that is open to investment. This highlights a number of important factors. For one, simply by announcing with Merkel his intention of negotiating a free trade agreement, Correa is breaking with an ideological tenant of the bad left. When one examines the economic program of ALBA, free trade agreements are specifically rejected in favor of Tratados de comercio de los Pueblos (TCP); trade agreements not based on market forces as much as developing specific productive capacities and focusing on “complementarities” between the participating countries. These trade agreements and traditional free trade agreements are not necessarily mutually exclusive, though the ALBA alternative almost certainly requires a degree of state intervention in trade patterns that free trade agreements attempt to overcome. However, if TCPs are Correa’s ideal type of trade agreement, an FTA with the EU could be viewed as a second best option—since it is extremely unlikely that Ecuador would ever convince the EU to agree to a TCP. A non-ideal means of increasing Ecuador’s access to the world’s largest market is still preferable to the status quo.

Similarly, one sees how Correa plays to different audiences to achieve different goals. Domestically, he may declare that Ecuador is no longer for sale and rail against foreign economic exploitation, but looking abroad Ecuador is open to investment. In practice, he may have squeezed investors too hard early on to satisfy domestic political demands (though without significant expropriations like in Venezuela or Bolivia), but he remains keenly aware that without investment there is no economic growth, and without economic growth he is likely to lose popularity domestically. As such, opening up negotiations for an FTA explicitly indicates an openness to foreign investment—assuming it is done in good faith, of course—yet is more acceptable domestically because it is done in a context of having already taken dramatic steps to “free” the country from foreign exploitation.

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