AFRODAD
January 1, 2007

Ecuador’s debt can be considered “illegitimate” from various perspectives: ethical, financial, legal and social. The flagrant violation of human, economic, social and ecological rights caused by the debt makes it illegitimate, unjust, immoral and unrepayable. As I preface this case study, it is encouraging to note that one of Ecuador’s creditors, Norway has acknowledged the existence of illegitimate debt in its dealings with Ecuador. The Norwegian Parliament, officially and without euphemism, described this process of indebtedness as “shameful.”

In October 2006 Norway’s Minister of International Development, Erik Solheim, announced that Norway was unilaterally, and without conditions, canceling US$80 million in illegitimate debts owed by five countries and these included Ecuador. Others are Egypt, Peru, Jamaica and Sierra Leone. By so doing Norway’s Government admitted that it’s lending in these particular cases was irresponsible and motivated by domestic concerns, rather than an objective analysis of the development needs of the countries involved. The debacle involved the export of Norwegian ships to developing countries between 1976 and 1980. It exported these ships mainly to secure employment for a domestic ship-building industry in crisis, not because these ships served the development needs of the countries concerned. Thus, the objective of the Campaign of Shipping Exports promoted by the Norwegian government at the end of the decade of the 1970s was to promote the Norwegian shipping industry through the sale of ships to developing countries,  nd at no time was it considered a loan for “development assistance,” but rather a “commercial loan.”

This research paper intends to shed light on Ecuador’s illegitimate debt and to highlight some moments in its political and economic history when decisions were taken that led to the present situation, namely heavy indebtedness, economic and financial dependence, and increasing inequalities. The paper contains an overview of the socio-economic situation in Ecuador and perspectives pertaining to illegitimacy of the country’s debt. From the economic point of view, Ecuador serves as an example of a country that Creditors, private or governmental, eager to obtain financial benefits for the development of their countries, agilely issue credits to countries with low levels of development, without considering their actual ability to pay or the long term limitations they face. Such creditor behaviour marked the beginning of Indebtedness for Ecuador began as early as the 1970s’ oil boom which was marked by the military dictatorship of Guillermo Lara (1972- 1976) and Alfredo Poveda (1976-1979), and later exacerbated by the era of implementing the Bretton woods institutions adjustment programs to the letter in the 1980s.

The illegitimacy framework provides a more encompassing range of arguments for debt cancellation and a solid basis for debt arbitration. This framework is not only based on a critical, holistic and rigorous understanding of historical and current realities around the debt issue, but it is also a perspective that strengthens Southern peoples’ claims that they do not owe these debts and therefore do not have to pay them. The framework also lends a solid support to the claim that, in fact, peoples of the South are the real creditors. Norway’s example to other creditors gives hope to many CSOs that there is light at the end of the tunnel in the debt campaign agenda and mostly importantly is the fact that, it shall not be long before the term “illegitimate debt” becomes acceptable vocabulary at the Paris Club, at the Breton Woods institutions and at the UN level.

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