{"id":177779,"date":"2021-01-25T12:00:27","date_gmt":"2021-01-25T12:00:27","guid":{"rendered":"https:\/\/www.transcend.org\/tms\/?p=177779"},"modified":"2021-01-23T06:32:59","modified_gmt":"2021-01-23T06:32:59","slug":"the-u-s-s-idea-of-diplomacy-with-ecuador-is-a-multibillion-dollar-loan-trap","status":"publish","type":"post","link":"https:\/\/www.transcend.org\/tms\/2021\/01\/the-u-s-s-idea-of-diplomacy-with-ecuador-is-a-multibillion-dollar-loan-trap\/","title":{"rendered":"The U.S.\u2019s Idea of Diplomacy with Ecuador Is a Multibillion-Dollar Loan Trap"},"content":{"rendered":"

22 Jan 2021 – <\/em>On January 14, a U.S. government agency decided to pay off part of Ecuador\u2019s debt to China so that the Latin American country could break ties with Chinese telecommunications firms. The U.S. International Development Finance Corporation (DFC), which is funded by the U.S. government, provided Ecuador with a loan of $2.8 billion. The DFC\u2019s head, Adam Boehler, said<\/a> that the large loan goes to Ecuador to \u201crefinance predatory Chinese debt\u201d and to strengthen Ecuador\u2019s alliance with the United States. This move by the DFC is not economic as much as it is political. Ecuador\u2019s development is secondary. What is primary is the U.S. desire to remove Chinese businesses and political influence from Latin America.<\/p>\n

Boehler, a close friend of the Trump family, took over the DFC and has since driven a hard agenda in Latin America against China. The DFC was created by the U.S. Congress\u2019 Better Utilization of Investments Leading to Development Act<\/a> of 2018. Subsequent to this act and the formation of DFC, the U.S. State Department developed<\/a> a project called Am\u00e9rica Crece, or \u201cGrowth in the Americas\u201d; this project\u2019s main goal is to use U.S. government funds\u2014with private assistance\u2014to edge out Chinese business interests from the American hemisphere. Ecuador is the most recent success of the U.S. policy.<\/p>\n

Ecuador\u2019s Debt and the 2021 Presidential Election<\/strong><\/p>\n

During the pandemic, the debt crisis in developing countries has become a serious problem. The total external debt held by developing countries is estimated<\/a> to be $11 trillion. Ecuador\u2019s share<\/a> of this total debt is now roughly $52 billion. In mid-2020, Ecuador\u2019s outgoing president Len\u00edn Moreno tried to raise money through multilateral agencies and China to manage $17 billion of this debt, most of which would have to be paid to service the overall debt. Financial markets, unwilling to buy Ecuadorian bonds, balked; but Moreno offered<\/a> to buy back some bonds in order to raise some capital. Collapsed oil prices that led to cuts in oil subsidies, a hefty loan from the International Monetary Fund at the cost of austerity measures, and mismanagement of the coronavirus pandemic battered Moreno\u2019s legitimacy.<\/p>\n

Ecuadorians will go to the polls on February 7 to elect a new president. Moreno is not running; his approval rating fell through the floor as a result of cascading crises, including evidence<\/a> of grotesque personal corruption, that predate the pandemic. A September 2020 poll<\/a> showed that the left-leaning candidate\u2014Andr\u00e9s Arauz\u2014was ahead of a crowded field with close to 46 percent of the vote, which would allow him to win in the first round. Arauz is an economist who held two ministerial posts in the government of Rafael Correa from 2015 to 2017. He promises to reverse Moreno\u2019s fealty to the United States and his subordination to the International Monetary Fund\u2019s deflationary<\/a> policies.<\/p>\n

The U.S. bid to buy out part of Ecuador\u2019s debt to China and to foreclose Ecuador\u2019s ability to buy Chinese tech products comes during an election season. It appears almost certain that Moreno\u2019s political orientation will be reversed by the next president. For that reason, the hasty deal cut between Quito and Washington will try to lock whoever wins the February 2021 election into a pro-U.S. and anti-China policy. This is a direct interference in the elections in Ecuador.<\/p>\n

U.S. Policy toward China in Latin America<\/strong><\/p>\n

The DFC\u2019s Boehler is unlikely to survive into the administration of Joe Biden. Boehler is a personal friend of the Trump family and brought few actual skills to his job. Biden will likely replace Boehler with a Democratic Party insider. After the deal with Ecuador was announced, Boehler said that this deal and the DFC\u2019s Am\u00e9rica Crece will not be undone by Biden\u2019s team. \u201cThis is not a Democratic priority or a Republican priority,\u201d Boehler said<\/a>. \u201cThis is an American priority.\u201d Biden\u2019s team, Boehler said, sees the Am\u00e9rica Crece instruments as \u201cinnovative.\u201d<\/p>\n

Part of the assault on China by the U.S. government has been to paint its loans to Ecuador as predatory. These loans, the U.S. officials say, create a \u201cdebt trap\u201d and, as Boehler said, they leave Ecuador at the mercy of a \u201csingle authoritarian country.\u201d Evidence for either the \u201cdebt trap\u201d or of Chinese \u201cinfluence\u201d on Ecuador is non-existent. In fact, over the last six months of 2020, Chinese banks have been willing to put loan payments on hold until 2022 (this includes<\/a> a delay on repayment on the $474 million loan to China\u2019s ExIM Bank and on the $417 million loan to the China Development Bank). Ecuador\u2019s Finance Ministry says that\u2014as for now\u2014the plan is for repayment to start in March 2022 and to end by 2029. Len\u00edn Moreno took to Twitter<\/a> to announce these two delays. There were no aggressive measures taken by these two banks nor from any other Chinese financial entity.<\/p>\n

Ecuador took on debt worth around $5 billion from Chinese banks to finance several major infrastructural projects, including the construction of hydroelectric dams. These projects began when oil prices were high. President Correa leveraged oil income to help the transition away from fossil fuels toward renewable energy. The collapse of oil prices, the pressure on the country from the oil giants (particularly Chevron<\/a>), and the political chaos in the country damaged Ecuador\u2019s ability to advance these projects. Chinese banks, over this period, have accommodated the difficulties faced by Ecuador\u2019s government to finance these debts.<\/p>\n

Yet, it is based on the very existence of these loans that the U.S. government has made sinister claims about Chinese influence on Ecuador. It is well worth pointing out that China only holds 10 percent of Ecuador\u2019s total external debt, but it is this debt that has been the focus of attention. It allows the U.S. to prosecute its rivalry with China and at the same time camouflage the real source of indebtedness, namely the IMF loans and loans to Western banks; neither the IMF nor the Western banks have been willing to be as generous about their credits as the Chinese banks.<\/p>\n

Conditions<\/strong><\/p>\n

Chinese banks lent money for the construction projects. These funds came with no conditions. The U.S. government money, on the other hand, came with substantial claims on the government of Ecuador\u2019s policy orientation. Quito has had to sign up for Washington\u2019s \u201cClean Network<\/a>,\u201d a U.S. State Department project to force countries to build telecommunications networks without a Chinese telecom provider involved in them; this particularly applies to the high-speed 5G networks. Ecuador preemptively joined<\/a> the Clean Network in November 2020. This opened the door for the DFC loan to Ecuador.<\/p>\n

The deal with Ecuador is not seen as a one-time arrangement. Boehler said<\/a> that this \u201cnovel model\u201d can be used by other countries to \u201ceject\u201d China from the hemisphere. If Arauz becomes the next president of Ecuador, he will face the challenge of this U.S.-imposed conflict against China as one of the first obstacles to a fresh start for his country. President Moreno and former president Trump have already begun to sabotage the possibility for Arauz to solve the immediate problems of his people.<\/p>\n

_______________________________________________<\/p>\n

This article was produced by <\/em>Globetrotter<\/a>.<\/em><\/p>\n

\"\"<\/a><\/em>Vijay Prashad<\/em> is an Indian historian, editor and journalist. He is a writing fellow and chief correspondent at Globetrotter. He is the chief editor of LeftWord Books<\/a> and the director of Tricontinental: Institute for Social Research<\/a>. He is a senior non-resident fellow at Chongyang Institute for Financial Studies<\/a>, Renmin University of China. He has written more than 20 books, including <\/em>The Darker Nations<\/a> and<\/em> The Poorer Nations<\/a>. His latest book is <\/em>Washington Bullets<\/a>, with an introduction by Evo Morales Ayma.<\/em><\/p>\n","protected":false},"excerpt":{"rendered":"

22 Jan 2021 – The deal with Ecuador is not seen as a one-time arrangement to \u201ceject\u201d China from the hemisphere. If Arauz becomes the next president of Ecuador, he will face the challenge of this U.S.-imposed conflict against China as one of his first obstacles. President Moreno and former president Trump have already begun the sabotage.<\/p>\n","protected":false},"author":4,"featured_media":148202,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[53],"tags":[867,244,803,120,563,942,267,1126,1050,504,541,249,70],"class_list":["post-177779","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-latin-america-and-the-caribbean","tag-anglo-america","tag-china","tag-competition","tag-conflict","tag-debt","tag-ecuador","tag-geopolitics","tag-hegemony","tag-imperialism","tag-international-relations","tag-latin-america-caribbean","tag-trump","tag-usa"],"_links":{"self":[{"href":"https:\/\/www.transcend.org\/tms\/wp-json\/wp\/v2\/posts\/177779","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.transcend.org\/tms\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.transcend.org\/tms\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.transcend.org\/tms\/wp-json\/wp\/v2\/users\/4"}],"replies":[{"embeddable":true,"href":"https:\/\/www.transcend.org\/tms\/wp-json\/wp\/v2\/comments?post=177779"}],"version-history":[{"count":0,"href":"https:\/\/www.transcend.org\/tms\/wp-json\/wp\/v2\/posts\/177779\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/www.transcend.org\/tms\/wp-json\/wp\/v2\/media\/148202"}],"wp:attachment":[{"href":"https:\/\/www.transcend.org\/tms\/wp-json\/wp\/v2\/media?parent=177779"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.transcend.org\/tms\/wp-json\/wp\/v2\/categories?post=177779"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.transcend.org\/tms\/wp-json\/wp\/v2\/tags?post=177779"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}