State Department funding drag shows in Ecuador
Ecuador is poised for the biggest fiscal drag show in decades.
The United States is pouring about $3 billion a year in aid to the country that is expected to spend a half-billion dollars to reduce its budget deficit. Yet, a year after the president promised an economy that would be “second to none,” he has still got no chance of pulling out the annual $700 million in oil revenue that is crucial to his campaign.
President Rafael Correa has also failed to get a significant boost from U.S. military aid after nine years of failing to make progress in combating the right-wing rebel group, the National Liberation Army.
And even when Ecuador moved to arrest hundreds of high-level gang leaders in 2001, the fight has been largely in vain.
Instead, Mr. Correa’s administration has spent the past year turning over its own resources to debt collection, a costly endeavor that was expected to be cut in half this year. It also has cut state salaries, including the president’s, and privatized some state-owned assets.
A government official said the government was being forced to lay off civil servants, teachers and judges as the government desperately tries to bring down the deficit created by an oil boom. In 2006, Ecuador received about $600 million in export revenue and has been able to pay for social spending and education. In February, it will have $1.3 billion in cash reserves.
“The first thing that we must do is to save the economy so that we don’t need these other measures,” Mr. Correa told reporters in February in an interview that was his first since taking office two months earlier.
The U.S. aid package is the biggest foreign aid program since the United States took control of the war in Vietnam. It is based on the country’s willingness to cut spending to improve its competitiveness.
The aid is supposed to pay for infrastructure projects, education and energy assistance. But critics believe that the government is being overpaid.
Critics say that even though the aid package has largely funded projects that have been completed it hasn’t been fully used, and the money is supposed to be spent on the most important projects.
The problem is the U.S. has left the money with the government to spend according to its own budget priorities. So each project is going to cost less than what was budgeted for it. For example, the administration has only