Hypothetical Economic Reforms

I'm good with your plan for the most part. But remember Ecuador defaulted on its debt in 2000 and got away with it. They might no be so lucky again.

One thing I would add to you list is education. The level of literacy of average Ecudorans seemed to me to be rather low. They need more investment in better public education, and even moreso in higher education.

On the other hand if you have oodles of towns without even a water supply, its hard to be worried about doctorate degrees.

The article I read in Business Insider talked about the import tariffs Correa put in place to improve manufacturing. Some of the interviewees talked about it Thursday in Quito. Does anyone know when it was put in place and if it helped at all.

My two cents
If he wanted more tourists especially North Americans who might consider retiring on EC's beautiful coast he might look for investors to build decent infrastructure and crack down on some of the scammers out there that give EC a bad name. Maybe improve the judiciary so these scamees  will have some recourse to recover their money. Based on what's happened I would nationalize the whole tourist industry and keep the money in Ecuador's pocket and to the benefit of Ecuadorians. Is this too radical? Would private investors be willing to share profits. Everyone wants the whole pie

Why is it such a hassle out there to get building materials and quality labor. It could be the next Gold Coast and plenty of room for the transplants who want a quiet little place of their own. How did CR and Mexico do it?

GYE may be muggier than Miami and not the favorite destination in EC but there are ways of reducing crime. Not that I like Bloomberg but he did improve the Big Apple's image, reduce crime and got it to be a tourist destination again with a lot of good marketing

Here's my one and final idea....may be worth only two cents...why  on the EC Forum destination page are there only the three biggest cities..unlike many of the other Forums...there's a Loja , Vilacamba thread . What about Cotacacci and Cumbaya   and Porto Veijo and Bahia and Montanita and Malacatos . There are lots of destinations small cities medium size cities...small towns. Or as has been suggested to me that people have found their own little piece of paradise and don't want a lot of other people showing up...not a great attitude  IMO. Even in the States you can still find out of the way locations to suit every taste. and price.

gardener1 wrote:

I'm good with your plan for the most part. But remember Ecuador defaulted on its debt in 2000 and got away with it. They might not be so lucky again.

We're in the dark as to how unlucky that could be.

The present EC administration actually defaulted Ecuador's debts in its second year -- 2008 -- and the Chinese are way too savvy to let it default again without exercising recourse.  It was the second default by EC in under ten years.

China does not currently have direct control over Ecuador's oil wells, reservoirs and pipelines.

Would they be able to take over the system if EC defaults again?

Depends on the terms of the loans.

Reuters looked into this and got stonewalled by PetroChina, the Chinese government's agency in these matters, and ignored by El Supremo's office.

The default-triggered terms of the EC-Chinese oil loans are unknown, according to the international news service.

Which means they could be too onerous to risk triggering.

Source:  Reuters

cccmedia in Quito

Didn't they default US and IMF loans as well?

Anyone please feel free to correct me if I'm wrong, but if memory serves it wasn't exactly a default under Correa. The country had the finances available to pay, but think it was like the 2012 and 2030 bonds that Correa said were illegitimate, and didn't pay. Believe he also bought them back when the global recession hit for like 35 cents on the dollar.

As for the debt to China, defaulting would probably have very nasty consequences. Only a speculation on my part, but tend to go with the analysis that ccc posted in his previous post.

Since this is a totally speculative thread, what are the possible consequences you folks imagine if Ecuador simply refused to honor it's debts to China?

I imagine there would be some sort attempt by China to punish Ecuador economically, but I can't imagine any sort of military intervention by China. Ecuador would not be able to get a loan from anyone anywhere, but perhaps that's a good thing. Force this addict to go cold turkey.

Ask Argentina?

jessekimmerling wrote:

Since this is a totally speculative thread, what are the possible consequences you folks imagine if Ecuador simply refused to honor it's debts to China?

I imagine there would be some sort attempt by China to punish Ecuador economically, but I can't imagine any sort of military intervention by China. Ecuador would not be able to get a loan from anyone anywhere, but perhaps that's a good thing. Force this addict to go cold turkey.

Only complete speculation, but tend to believe most of those loans are tied to Ecuador's natural assetts, imparticularly oil, and that china would wind up taking over the vast majority of production, and profits of oil produced in Ecuador. As history has shown countries usually don't walk away from commoddities like oil willingly, or peacefully. Again, this is only complete speculation.

gardener1 wrote:

Ask Argentina?

I'd rather ask Iceland...

j600rr wrote:

jessekimmerling wrote:

Since this is a totally speculative thread, what are the possible consequences you folks imagine if Ecuador simply refused to honor it's debts to China?

I imagine there would be some sort attempt by China to punish Ecuador economically, but I can't imagine any sort of military intervention by China. Ecuador would not be able to get a loan from anyone anywhere, but perhaps that's a good thing. Force this addict to go cold turkey.

Only complete speculation, but tend to believe most of those loans are tied to Ecuador's natural assetts, imparticularly oil, and that china would wind up taking over the vast majority of production, and profits of oil produced in Ecuador. As history has shown countries usually don't walk away from commoddities like oil willingly, or peacefully. Again, this is only complete speculation.

My opinion, is that there is zero chance that China would use military force to try to control Ecuador's oil assets. China just doesn't have the military reach or political alliances to extend across the pacific. Is it possible, yes, but the blowback would not be worth it.

Don't necessarily consider wikipedia to always be completely accurate, but found this to be interesting if it's true. Is also info from several years ago. So things may have changed since then. Quote below.

In 2013, Chinese money helped cover as much as 61% of the government's financing needs. In exchange, China has claimed nearly 90% of the country's oil shipments over the next few years, most of which it then trades around the world and especially in the United States[19] A new credit line is under negotiation since mid 2014, which would be in addition to $9 billion in financing that Ecuador is seeking from China for the construction of a refinery that will process 200,000 barrels of crude oil a day, as well as a $2 billion loan signed with state oil company Sinopec. Including the credit line, these loans from China are equivalent to about 13.6% of Ecuador's GDP as of 2013.[20] The consequent risk is that Ecuador loses it sovereignty, and when it is forced to drill for oil in its natural and ethnic reserves to repay its debts to China, indigenous peoples' rights are violated and some of the most biodiverse areas in the world are harmed. Critics of the current administration say Ecuador will resemble a wholly owned subsidiary of China, much like many solvency-challenged yet resource-rich countries in sub-Saharan Africa.[21]
President Correa has publicly complained about China's guarantee demands of the loans, calling it “attempts against the sovereignty of Ecuador”.[22] During these public denouncements however, Correa's administration was secretly signing a letter allowing PetroChina to seize assets from any oil companies operating in Ecuador in the event that Ecuador would not pay back its loans to China in full.[23]
Even more worrying is the “Four Party Agreement” from August 2010, signed by PetroEcuador, the Ecuadorian Ministry of Finance, PetroChina and the Chinese Development Bank. Article 15 of that contract has what Analytica Investments calls a “sovereignty immunity waiver” that allows China to seize many of Ecuador's assets if the country fails to repay the loans and requires Ecuador “to irrevocably and unconditionally [waive] any right... to assert any immunity from or in any proceedings... against it or its assets.”[24][25] The clause excludes Ecuador's military equipment, embassies, consulates, natural resources that have not yet been extracted, its archives and cultural heritage, and any property that China would be unable to seize under Ecuadorian law. However, it is unclear what, if any, assets Ecuadorian law would exclude. The Account Management Agreement that PetroEcuador and the Chinese Development Bank signed on the same day has an identical clause

j600rr, this is exactly why I think Ecuador should default, but only after putting into place a manufacturing base that would profit from a weak currency. The terms of the loan are ridiculous. China will throw a fit, but there is no Chance that anyone is going to let China project military power to take oil by force in the western hemisphere. China's enforcement mechanism only works on paper.

jessekimmerling wrote:

j600rr, this is exactly why I think Ecuador should default, but only after putting into place a manufacturing base that would profit from a weak currency. The terms of the loan are ridiculous. China will throw a fit, but there is no Chance that anyone is going to let China project military power to take oil by force in the western hemisphere. China's enforcement mechanism only works on paper.

Guess the no strings attattched loans that people like to say about China isn't really no strings attatched?

I have 2 cents to spend.

At this point in life I tend to focus on quality of life. Anyone who has spent time in the military will tell you that they had a  great deal of time to debate almost everything. Due to the "hurry up and wait", factor. One popular topic was how the U.S. is better than whichever country you just left.

I always felt that a tourist destination should by better by nature than where you live. If I were El Hefe, these are some things I would look into changing;

1. The pollution in Quito can be terrible, I would require that EC meet the Tier 4 emissions standards as the EU does. As a tourist, leaving L.A. smog to arrive in Quito smog is not appealing. You can see many cars on the road that in no way could pass a safety inspection much less, an emissions test. It has to end. 
2. As low as the unemployment may be, there are far to many kids in the streets selling chiclets. Good education must be available to the masses, not just the entitled. While the world needs farmers, I don't feel they should have to sell produce in the streets.
3. While the graffiti can be a form art, I don't feel it should be everywhere. It can grow into an eyesore and has a South Central L.A. feel that does not appeal to many people. Get the unemployed going and clean it up. Enforcement would be helpful to maintain the new look.
4. Trash in the streets is not only an eyesore, but also causes sanitation issues. Again there are far to many unemployed for there to be so much trash at every glance.
5. Manufacturing, I don't feel the way to stimulate manufacturing is to cut off inports. It would be better to provide would be manufacturers with incentives and assistence, to get moving.
6. To loose the rain forrest in the name of money is a fools errand. It cannot be replaced and has a very negative effect on the ecosystem. Loosing one acre to a oil and gas, results in an acre of land that will likely never be useful again. Fracking the land is like shooting battery acid into your veins, and once in the aquifer it travels.
7. I understand that some things have gotten better since 2010, but with all the import taxes, and fees, fees, fees. Where does all that money go?  I have seen new police cars, but no new clinics, or schools.  A system of checks and balances would be employed to monitor this.
8.  A form of Democracy which actually derives it's control of, by, and for the people would be a good system to strive for. Corruption dominates this planet and those who abide by it would need to go.
9. The days of the entitled ruling would be over. Yes, your hard work entitles you to have nice things, but not to control or exercise your will over others.
10. While I agree that no Government should have so much interest in another that it can control it. A healthy relationship can be profitable and be positive for the people. To cut off imports has a direct negative affect on the people. Especially if there is no viable roadmap for the average person to become a producer and leaving only one alternative for the consumer.
11. A country like any household needs to live within its means. To turn over your countries rights to natural resources in my mind can only end in trouble. Once you allow another country to own you, you are no longer a sovereign country.
12. The import taxes that drive up many prices here are insane. Which results in a car only depreciating a mear 1k for each year.... In the city especially, a realistic mass transit system using a clean technology would be perfect. There are systems out there, and all would provide great returns and be environmentally friendly. I have seen several high dollar boondogles around, which prove there is money that can be better spent.

Then again, just my 2 cents   

These are some of the basic things I see, Ecaudor has much to offer and many good people, but it is also rife with corruption. After 22 ýears in the military I have learned many things, blind faith is not a good path to follow, and authority should be questioned and challenged as needed. All that is needed is to look at places like the U.S. and it is clear to all what can happen when a government runs amok un challenged, no longer in the service of the people but of itself.

In my opinion, elections should not made of the entitled or popular candidate, but of people who have a track record to show experience and sound judgement. Their pay and benefits should based on position, and expire upon completion of thier term. Pay raises should be awarded by the people, based on performance, not time in a seat. In the event they no longer act in the people's best interests, they go. Term limits should be the standard, with no life positions.

The law must apply to all, equally and not favor the ones who can afford representation. Sound familiar?

Lately with all the protests I have been thinking about the posible options for the people to replace the current leadership. But who would that be? All the possible candidates I have seen have past issues or an agenda, who would be the best man or woman for Ecuador?

That might have actually been 4 cents. I differentiate between street art and graffiti. Bogota has great street art. Graffiti is the kids and drunks that just scribble some mess on a public wall. I could do without the graffiti, but I'm all for programs that provide space on public walls for talented street artist to work.

I totally agree with you on the manufacturing incentives, and the destructiveness of high import tariffs. It's not just the consumer that gets hit by the import tariffs. You can't set up a factory without importing equipment. Even my wife's little business making children's puzzles got hit with a price increase when the imported glue her supplier was using went up in price.

I don't think Ecuador's oil fields use fracking. Their main problem has been that the oil is located in the jungle, and they didn't make even an attempt to operate in a responsible manner in the past.

Hydraulic fracturing is used on existing wells as the output begins to taper off. As the name implies it further opens the cracks in formations and can link formations together. It is a very violent operation, and sometimes explosives are used as well as the hydraulic fracturing.   

I have seen wells that have been fracked 15 to 20 times since the original well bore was established. So if there are wells, it is pretty safe to assume fracking is going on. It is a very ugly operation, thousands of gallons of water are used along with a laundry list of toxic chemicals, and propant, which is a man made type of sand used to keep the new fractures open.

The problem is, at the end of the procedure only 10% of what was pumped in gets recovered. This is what ensures the land will be dead for some time in the future. Not to mention the fact that the chemicals can now travel throughout the aquifer causing further damage.

I agree that graffiti can be art, and has its place, I just don't think that place is the side of my house. One day I watched from my roof as three teenagers began tagging the walls of a freashly painted park across the street. The police drove by, looked briefly and continued on....  The actions or lack there of from local law enforcement is another topic, one I will refrain from commenting on at this point. I just think it's sad that some people have so little respect for their neighbors.

The whole import thing is really a bad deal for the people, not just foods are affected but medicines and all kinds of things as you pointed out. I really hope a good candidate will be found to lead in the future, I don't want change for my selfish reasons alone, as I can leave any time I like. Ecaudor has a great deal of potential and the people deserve a good life and future for their children.

GMC(SW) wrote:

Hydraulic fracturing is used on existing wells as the output begins to taper off. As the name implies it further opens the cracks in formations and can link formations together. It is a very violent operation, and sometimes explosives are used as well as the hydraulic fracturing.   

I have seen wells that have been fracked 15 to 20 times since the original well bore was established. So if there are wells, it is pretty safe to assume fracking is going on. It is a very ugly operation, thousands of gallons of water are used along with a laundry list of toxic chemicals, and propant, which is a man made type of sand used to keep the new fractures open.

The problem is, at the end of the procedure only 10% of what was pumped in gets recovered. This is what ensures the land will be dead for some time in the future. Not to mention the fact that the chemicals can now travel throughout the aquifer causing further damage.

I agree that graffiti can be art, and has its place, I just don't think that place is the side of my house. One day I watched from my roof as three teenagers began tagging the walls of a freashly painted park across the street. The police drove by, looked briefly and continued on....  The actions or lack there of from local law enforcement is another topic, one I will refrain from commenting on at this point. I just think it's sad that some people have so little respect for their neighbors.

The whole import thing is really a bad deal for the people, not just foods are affected but medicines and all kinds of things as you pointed out. I really hope a good candidate will be found to lead in the future, I don't want change for my selfish reasons alone, as I can leave any time I like. Ecaudor has a great deal of potential and the people deserve a good life and future for their children.

Fracking is used primarily in shale formations. Not all oil fields are fracked. Does Ecuador have shale oil? I don't know, but there's no reason to run about shrieking "Fracking fracking, evil fracking!" without first making at least an attempt to get the facts.

Edit: I did some research, and it is shale oil in the Napo region.

You know what, you are correct...

Now that I have recovered from my temporary cranial rectosis, the process I railed on about is in fact for natural gas. I got more gas today and for some reason lumped gas and oil together!. The oil fields have their own unique problems.

I stand corrected.