Ecuador’s President Correa Fires his Cousin

By William K. Black

In November 2011, President Correa appointed Pedro Delgado as head of Ecuador’s Central Bank.  The appointment was controversial.  The obvious controversy was that Delgado is Correa’s cousin.  Conservatives claimed that Delgado lacked integrity.  Some progressives shared the concerns about his integrity and saw Delgado as too supportive of Ecuador’s largest banks and bankers.  The recent banking crisis, in which the owners and managers of Ecuador’s four largest banks began a bizarre campaign of threatening to induce a run on their institutions to extort Correa into withdrawing his very sensible program of increasing the banks’ taxes and reforming the bankers’ dangerously perverse executive compensation, provided a test of these concerns by Correa’s supporters about Delgado.  I explained how irresponsible the banking oligarchs’ campaign was in interviews in Ecuador and the U.S. and an article.  I explained the vigorous manner in which U.S. regulators of my era would have acted to end the oligarchs’ efforts to extort the government and people of Ecuador by threatening to cause a banking run.

Delgado was “missing in action” in responding to this self-induced banking crisis.  The crisis occurred while Correa was in Spain trying to wean that nation away from austerity.

The media broke critical stories about Delgado over the course of 2012, but Correa defended him and blamed an unfair media campaign by his critics aimed at Delgado with the hopes of tarring Correa.  Some of Correa’s media critics argued that Correa was providing his cousin with de facto immunity from accountability as Delgado was accused of multiple abuses.

Contemporaneously, a Costa Rican school from which Delgado received his MBA launched an investigation into Delgado’s qualifications to enter the school.  That investigation revealed that Delgado had lied in his application for admission by falsely claiming to have an undergraduate degree in economics from an Ecuadorian university.  Delgado’s fraud became an immediate political issue in Ecuador for Correa.

Correa, however, reacted to the new facts demonstrating Delgado’s lies by promptly forcing his resignation.  The New York Times reported:

“Correa said that a government official traveled this week to Costa Rica to investigate the claims about the fake degree, and once confirmed, ‘we asked for his resignation.’

‘He will have to assume his responsibility and respond before the justice system. Those behaviors aren’t acceptable in our government, everything necessary will have to be investigated,’ Correa told reporters.”

The results are obviously a personal tragedy for Delgado and his family.  Delgado is reported to be attending a son’s wedding in the U.S., so the timing of his disgrace is terrible.  Appointing Delgado to run the Central Bank has embarrassed Correa and caused him personal pain.

The policy results, however, suggest that the personal tragedy may prove a force for good in Ecuador and its neighbors.  The media have shown that honest criticism has great value to a nation.  The Costa Rican school has shown that it enforces its integrity standards regardless of the power of the persons who violate those standards.  Correa has shown that he will hold even relatives accountable when he receives evidence of their misconduct – even if his critics play important roles in gathering and making public that misconduct.

We do not know who Correa will appoint to replace Delgado, but there is a reasonable chance that it will be an official of the greatest integrity and ability who, like Correa, rejects the neo-liberal dogmas that have done so much damage to the world, identifies with the people of Ecuador rather than the banking oligarchs, and has the fire in his or her belly essential to making the revolutionary changes that Correa knows are essential.

Among the matters for which Correa has shown great foresight are the risks inherent in Ecuador’s use of the U.S. dollar as its currency.  Correa knows that it is not now politically possible for Ecuador to restore its full sovereignty by re-adopting a sovereign currency.  The task of the chief central banker of Ecuador is unique because Ecuador uses the dollar as its currency.  These facts make Correa’s initiative to establish the Bank of the South all the more imperative.  Delgado did not oppose the initiative, but he did not pursue it as a priority and the initiative’s momentum was lost.  Correa has an opportunity to make a superb appointment of a Central Bank leader equal to the task of making the revolutionary changes needed in the Ecuadorian economy while consistently demonstrating the greatest competence, integrity, and dedication to the nation and its people.

Correa recognizes that Ecuador and its neighbors need a new, innovative financial architecture.  Most economists are so in thrall to neo-liberal dogmas that they harm rather than help the nation.  They lack the open minds and creativity to think in revolutionary terms and the human skills necessary to work constructively with their counterparts in dozens of other nations.  Correa is an exception to these failings.  He needs to find a kindred spirit among Ecuador’s financial experts to run the Central Bank.

3 responses to “Ecuador’s President Correa Fires his Cousin

  1. Mark Robertson

    Bill Black writes, “Correa knows that it is not now politically possible for Ecuador to restore its full sovereignty by re-adopting a sovereign currency.”

    What does “not now politically possible” mean? Bill Black has mentioned this in his posts before, and I still do not understand why Ecuador cannot re-adopt its own currency, and thereby attain monetary sovereignty. Of the 19 nations south of the U.S. border, 16 have their own currencies. Today, only Ecuador, El Salvador, and Panama use the U.S. dollar.

    Panama has its own currency, the balboa, but uses the U.S. dollar in everyday business transactions. I can understand why Panama does this, since Panama has been a global money-laundering center for almost 100 years. But why Ecuador?

    Because of inflation, and because of pressure from the IMF (i.e. pressure from Washington), Ecuador switched from the sucre to the U.S. dollar on 10 Sep 2000. Washington portrayed this as a brilliant move on the part of then-President Gustavo Noboa (a U.S. and IMF puppet). The corporate media claimed that in 1999 Ecuador’s economy shrunk by a whopping –7.3%. When Ecuador adopted the U.S. dollar, the corporate media claimed that Ecuador’s economy by 2.3% in 2000, 5.6% in 2001, 3.4% in 2002, 2.7% in 2003, and 6.9% in 2004, and 3.9% in 2005.

    Naturally, most of this “growth” was in Ecuador’s financial sector. Meanwhile ordinary Ecuadorians became poorer than ever. Today, Ecuador’s government still has a small amount of say over its fiscal policy, but its monetary policy is dictated by the U.S. Fed. This puts Ecuador at a competitive disadvantage, since Ecuador cannot make its goods cheaper in the worldwide market by devaluing its currency. And since dollarization only benefited Ecuador’s financial sector, it did nothing to address Ecuador’s woeful lack of infrastructure.

    All this was understandable when Ecuador suffered from chronic corruption and instability. But now Ecuador has China and the ALBA nations. I think Correa should dump the dollar. What I don’t understand are the barriers involved.

    Perhaps Bill Black can clarify.

  2. I know we all have to be circumspect when such weighty matters are in motion, but I hope we will have an opportunity to discuss/understand/contextualize, what “revolutionary” means going forward.

    I have the same curiosity, while respecting the same circumspection, regarding just what makes restoring currency sovereignty either less or more “politically possible” from one period to the next.

    An MMT treatment of the Bank-of-the-South / Sucre-trading-currency / ALBA etc. would, I think, be very interesting and useful as well.

    This Latin American post-neo-liberal wave is the most exciting, optimistic process I know of right now. Also, I recently discovered an overtly MMT site operating in Spain. Do we know whether any of these guys are communicating with each other? I harbor this little idea – that some of the energy and inspiration from these quarters might cross back and forth, along with remittances and letters home, and cross-polinate ideas with the immigration-reform movement and other Latino movements over here.

    Wouldn’t that make for an interesting Dia del Trabajo?

  3. –to investigate the claims about the fake degree–

    Surprisingly we in Pakistan were much worried when Higher Education Commission investigated and found quite a few assembly members and bureaucrats having fake degrees. All of them have been disqualified and had to resign.