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.