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Ecuador’s new direction

Alisa Roth Nov 28, 2006

BOB MOON: It took a while for the dust to settle over the run-off to choose a new president in Ecuador. Today officials say the left-leaning Rafael Correa has won with 57 percent of the vote. That may be good news for Mr. Correa. But how his win affects Ecuador and the U.S. is far from clear. Alisa Roth has more.

ALISA ROTH: President-elect Rafael Correa’s landslide victory proves he’s popular with Ecuadorians. But he’s making Americans nervous. He says he’ll end free-trade talks with Washington and rewrite contracts with foreign oil companies so Ecuador gets a bigger take.

He’s also planning not to renew the lease on the U.S.’s only military installation in Latin America.

But what really got investors attention was the suggestion that Ecuador wants more time to pay back its international debts without paying any extra interest. That had investors dumping Ecuador’s bonds.

Alberto Ramos is a senior economist at Goldman Sachs.

ALBERTO RAMOS: Ecuador needs foreign capital to grow. If you go through a forced restructuring of debt, one would expect that foreign direct investment and other capital flows to the economy would dry significantly.

Correa is a close friend of Venezuelan President Hugo Chavez. And Correa’s populist platform also takes an openly anti-American stance.

But Harvard government professor Jeff Frieden says Correa’s proposals may end up hurting Ecuador more than anyone else.

JEFF FRIEDEN: Remittances from Ecuadorians in the United States to Ecuador are significant. Ecuador is a major oil exporter and what the United States does in the world has a big impact on oil prices. And, of course, the Ecuadorian currency is the U.S. dollar. So, the U.S. matters to Ecuador, I would venture to say, a lot more than Ecuador matters to the US.

But the discussion may be moot. Ecuador’s Congress is controlled by the opposition and it will be difficult, if not impossible, for Correa to enact many of his proposed reforms.

In New York, I’m Alisa Roth for Marketplace.

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