Ecuador to be US 'ally' in war on terror

news.ft.com By Richard Lapper, Latin America Editor, in New York Published: February 16 2003 20:43 | Last Updated: February 16 2003 20:43

Ecuador will be a "staunch ally" of the US in its struggle against terrorism, drug trafficking and corruption, the country's radical new president told the Financial Times.

Lucio Gutiérrez, (pictured) a left-leaning former army officer who won last November's presidential elections after mobilising support from Ecuador's sizeable indigenous minority population, also promised fierce fiscal austerity and said he would lead efforts to clean up Ecuador's reputation among foreign investors.

"We are very interested in turning the page of errors and mistakes, of not fulfilling agreements, of finishing with this label of Ecuador being one of the most corrupt countries in the world," Mr Gutiérrez said last week during a visit to New York and Washington.

A critic of the US and globalisation in the past, Mr Gutiérrez has been compared to Hugo Chávez, Venezuela's iconoclastic populist leader. Like Mr Chávez, he led a military coup before winning elected office. But in his first few months in government he has proved to be a more pragmatic leader than his Venezuelan counterpart, who is embroiled in a deepening political and economic crisis.

During his visit Mr Gutiérrez met President George W. Bush and the International Monetary Fund, signing a letter of intent for a $200m loan that should unlock a further $300m in credits from the multilateral lending agencies.

He said Ecuadoreans had not been happy when their currency was replaced with the US dollar three years ago. But "dollarisation" was a "legacy" his government had inherited and it would press ahead with economic adjustment and seek to improve competitiveness by investments in education and technology.

The budget envisages a primary surplus (excluding debt interest payments) of 6.4 per cent of GDP, compared with 4 per cent in 2002.

Mr Gutiérrez said his supporters had agreed to back controversial increases in petrol prices and electricity rates. He also said there was broad-based support for a continued US military base in the port city of Manta that is an important part of US operations against drugs trade in the region.

Mr Gutiérrez said it was now important to show results in terms of jobs and investment.

"We have prepared the land. We have sown the seeds, but now we have to harvest. If we don't give people a response . . . we are going to have problems."

Analysts suggest that the absence of a firm congressional majority could prove to be a serious difficulty. According to Ecuador Focus, a Quito-based newsletter, "his political ambitions could soon face some harsh political realities."

Ecuador has agreed to refer a $200m tax dispute with Occidental Petroleum and other foreign oil companies to international arbitration, said Mr Gutiérrez.

The tax dispute arose when tax authorities unilaterally suspended rebates to international oil companies of value added tax in 2001.