Ecuador & the Press

Aug 17th, 2007 by Gary A. Scott

An Ecuadorliving.com subscriber sent me this note.

Gary, In case you missed this…

http://www.miamiherald.com/news/americas/venezuela/story/198843.html

This article is about Venezuela giving Ecuador 5 billion dollars for an oil refinery and as is typical painted this out to be bad. My reply may be of value to you.

“Wow! You threw me a curve ball on this one. Thanks though as this is an important concern and I’ll send this reply to all the Ecuador Living subscribers as an update.”

My first impression was that another refinery would be good for Ecuador as well as Western consumers who have been suffering from high gas prices caused in part by lack of refinery capacity. I was thinking wouldn’t it be nice if Chavez did this before he gets tossed.

However in doing a bit of double checking, I came across this. http://wyden.senate.gov/leg_issues/reports/wyden_oil_report.pdf

So I will be looking whether a new refinery will be good or bad for Ecuador and the West. I’ll have to leave that question for the moment.

So let’s look at Chavez, Correa and the rights of the individual instead.

The press and those in power love to paint Chavez as a bad guy and a threat. Bad guy he may be. This I do not know as I am not there. Yet I know the press (and almost every government) loves to create enemies. The bad guys attract readers and cause voters to look outwards when some of their worst enemies are within.

Is Chavez a threat? Not likely.

For those who look beneath the surface can see that he is probably already on the downhill side of popularity. His left wing policies (which have been proven again and again, all over the world, not to work) distort Venezuela ’s economy. He has already been forced to take a series of unpopular economic steps. He has instituted price controls, a sure sign he is losing grip. Remember Dick Nixon and what happened when he tried to do this! The controls failed because they predictably led to hoarding. Now Chavez is trying to nationalize all the stores in the country. That will just force the hording further underground. At least Tricky Dickey had enough sense to know when to stop and let the US dollar fall instead.

Chavez is making the classical error of supporting his failed policy. Evidently he was not a student of Abe Lincoln who said that the best way to get rid of a bad law is to enforce it strictly.

Chavez is making almost as many mistakes as a spender as George Bush. Both should have learned from LBJ that trying to run simultaneous “guns and butter” programs is a sure path to disaster. Yet there he is trying to help the poor in Venezuela plus buy power in Bolivia , Cuba , Ecuador and lots of other places.

He can only spend so much and though he has plenty of oil money, the US government has proven again and again that there is never too much that cannot be spent.

You can see in the Yahoo.com graphs below how much the US dollar has fallen (almost 40%) versus the euro since George Bush was reelected as President.

Then you can see how this was also true of the Bolivar. It was heading steadily down versus the greenback until he decided to bolster the currency mid 2005. Had the US administration tried to defend the dollar in the last four years we would have seen almost unbelievable disorder.

Euro to US Dollar

1 Ecuador Press Ecuador & the Press

2 Ecuador Press Ecuador & the Press

Yet Chavez is trying to do exactly this and Venezuela is not a tiny island like Cuba . He is trying to contain some huge forces that when they erupt will be quite explosive. It will be hard, once his promises to the poor have not been kept, for Chavez to hang on to such a large space and so many people.

Now let’s look at Correa. When I view from here how the US has treated Ecuador it’s little wonder we do not have someone worse. Hopefully the perception of loss in South America will help the US policy makers and administration wake up to the fact that we cannot have fantastic wealth and be surrounded by multitudes that are pitifully poor.

Communications and technology will no longer allow it. The poor can see too much and use technology to express their ire (as we dramatically learned via 911).

Second, Correa is correct when he says the Ecuadorian Congress has not been as honest, transparent and “for the people” as they could or should. This is a country with one of the largest wealth disparities in the world.

US policy and the Ecuadorian system do need to change. Whether Correa is capable of being the one who leads the change or not is beyond me. He is young. He is energetic. He comes from the very poor. He could become a great leader. One the other hand he could be tossed in a year as the past dozen or so Ecuadorian presidents have. He also has the potential to become another Peron.

Yet Correa is not a military man as was Chavez and Peron. (In fact Perón received a strict Catholic education until he was 16 when he entered military school.)

Correa is an economist! He has his MBA from a Belgian university and a Doctorate in economics from University of Chicago . He has worked his way up from nothing. Were this man a new US President, the press would be lauding his rags to riches story.

I am sending out a deeper profile of Correa in the next Ecuador Living update next week.

The press loves to magnify any negative potential and totally ignore anything positive. I recall sitting many years ago with my son on the roof of my mother’s home watching Mt. St. Helen ’s explode. I grew up in Troutdale, Oregon just over the Columbia River from that volcano and happened to visit just as it was going off. This was a truly exciting and wonderful scenic event with no downside for Troutdale except a bit of ash to clean up.

Yet I had friends from around the world write and call as they were concerned. The press made this non event sound like an all mighty disaster.

Correa has talked tough again and again yet when it comes to actions, his acts have most been pretty smart…certainly more sensible than those who are running the US .

To date Correa has made two strong moves that would help home owners. First, he has created a policy based around the idea that “the only way the Ecuadorian people can have greater wealth is to be more productive.” How refreshing. Second, he has created a FHA type program to make it easier for people to get mortgages to buy homes. As far as I can tell so far this is actually a pretty sensible plan.

I have written numerous times that if one is planning to invest a billion or so in some major infrastructure, by all means really check out the political risk. For simple home owners almost every scenario looks good to me so far.

I doubt that those who are looking for a no risk place to live or are hoping to duplicate the US at a third the price, will find what they expect. Those who recognize that there is a real risk the US middle class lifestyle will be destroyed and are seeking realistic alternatives with an open mind should do as you plan, pay the Western press little attention and come for an extended look-see.

Merri and I have lived in three continents and worked in dozens of countries. We have visited 72 nations over the past 40 years. We are in a position to live just about anywhere we choose. Based on our circumstances and everything we have seen, we chose Ecuador . The revolving presidencies, the corrupt politics, the bank crashes, etc. have meant nothing on a day to day basis.

If I had to bet on whether the US or Ecuador will offer a better, freer, safer lifestyle over the next 40 years…I regret to say as a patriotic Citizen of the US that history and my logic suggests Ecuador will offer more.

Lets hope and work towards both being great places to live!

Next message brings more on Correa

Gary

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