Release Date: 22-Dec-2008
Standing in Solidarity on Ecuador's Debt
Citizens Groups around the world, including Jubilee Australia, are standing in solidarity with the Government of Ecuador after their bold decision to default on payment of some foreign debt for reasons of illegality and illegitimacy uncovered by the Ecuador's historic Public Debt Audit.
The Final Audit Report presented publicly to the President on 20 November 2008 found that from 1989 onwards, only 14% of all loans taken out were invested in social projects and 86% of the loans contracted were used to pay debts. For the last 30 years, Ecuadorians have spent nearly 70% of their national budget on servicing public debt, causing incalculable damage to the people, whilst benefiting the international creditors and associated parties.
Ecuador’s audit commission and subsequent actions are historic and set a strong precedent for other indebted countries. It is the first time in history that a debt audit has been commissioned at government level; and the first time a government has taken the step to suspend repayments based on the debts’ violation of domestic and international law.
Jubilee Australia supports the right of indebted countries of the South to:
- undertake comprehensive audits;
- take the necessary steps to stop paying debt that is being collected illegitimately by institutions of international credit and other lenders; and
- favour the well-being of millions of families who for years have suffered the consequences of the inhumane policies of structural adjustment imposed by countries and institutions of the North.
Letter from 25 US Development Agencies, Religious Denominations and Communities, and Human Rights Groups on Ecuador’s Debt
December 17, 2008
Members of the US Senate
Members of the US House of Representatives:
Dear Members of Congress:
As the economic crisis spreads globally, Ecuador, like many other countries in South America, is still feeling the effects of a much earlier crisis – the Third World debt crisis which began 30 years ago. Ecuador’s external debt has risen to more than $14 billion today. Ecuador’s debt crisis originated with $3.4 billion in loans contracted by Ecuador under the dictatorship of the Supreme Government Council. Of this, nearly two-thirds was used to finance military expenditures. By now, Ecuador has more than repaid the principal it borrowed plus significant interest and penalties.
As it faces the current global economic crisis, Ecuador’s debt service payments are impacting its economy and the well-being of its population. In 2007, Ecuador paid $1.75 billion in debt service, more than the government spent on health care, social well-being, housing and urban development, and the environment combined. As part of its plan to fight poverty, the Ecuadorian government has made a public commitment to reverse this situation by 2010, seeking to significantly increase its spending on social services. But to meet these commitments, the government must find a way to cut the amount it spends on debt service.
In this context, and in response to calls from Ecuadorian civil society and the global Jubilee debt campaign, the government of Ecuador established the independent Public Debt Audit Commission in July 2007 to examine the origins, nature, and impacts of the country’s sovereign debt. The commission completed a report in September 2008 which documents claims of irregularities and illegitimacy in the contraction of Ecuador’s public debt. On November 20, Ecuadorian President Rafael Correa announced that the government was delaying a payment on its Global bonds, invoking a 30-day grace period allowed in the bond contract. In mid-December, the Ecuadorian government defaulted on these bonds.
As the financial crisis deepens, developing nations will face increasing difficulties in mobilizing the resources they need for economic development. As Ecuador considers it options to address its debt, we urge US policymakers, in crafting their responses, to consider the social impacts of Ecuador’s debt burden and the credible allegations brought forward about the illegitimacy of Ecuador’s debt by the report of its audit commission.
As religious denominations, faith communities and non-governmental organizations who have long analyzed issues of debt and development, specifically:
• We join with our civil society partners in Ecuador in strongly supporting the establishment of the independent Debt Audit Commission in Ecuador. We are encouraged that the government of Ecuador has taken seriously the implications of the conclusions and recommendations expressed by the Ecuadorian Debt Audit Commission.
• We call on policymakers to address the urgent need for new independent international mechanisms to help resolve debt disputes. The audit report documents hundreds of instances of irregularities, and numerous credible allegations of illegitimacy of some of Ecuador’s debt. We believe that Ecuador has a right to bring these claims to an appropriate, independent forum for consideration. But the reality is that there are few independent options for Ecuador to turn to, which forces Ecuador into a corner with no good choices: it can either continue to pay a dubious debt at significant social cost, or default and risk being cut off to private credit. We call on policymakers to address the urgent need for new independent international mechanisms to help resolve debt disputes.
• Finally, we urge US government lending and aid agencies, public international lenders (IMF, World Bank, InterAmerican Development Bank) not to punish Ecuador by withholding assistance or credit for actions it takes based on the findings of its audit.
Action Aid International, USA
American Jewish World Service
Capuchin Franciscan Justice & Peace Office, Milwaukee
Columban Justice, Peace and Integrity of Creation Office
Congregation Justice Committee, Sisters of the Holy Cross, Notre Dame, IN
Ecuador Solidarity Network
Evangelical Lutheran Church in America
Institute for Justice and Democracy in Haiti
Institute for Policy Studies, Global Economy Project
Jubilee Montana Network.
Jubilee USA Network
Leadership Conference of Women Religious
Maryknoll Office of Global Concerns
Oblates of Mary Immaculate, Justice, Peace/Integrity of Creation Office
Presbyterian Church, (USA), Washington Office
Puget Sound Millennium Goal Project
Seton Sisters (NY/MA Sisters of Charity Cluster.)
United Church of Christ, Justice and Witness Ministries
Witness for Peace
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