Ecuador President Rafael Correa is emerging from the shadow of Venezuelan mentor Hugo Chavez as his decision to grant asylum to WikiLeaks’ founder Julian Assange plunges relations with the U.S. to new lows.
While such a tactic may boost his chances of re-election in February, the political gain may spell economic loss for Ecuador, as harboring Assange sparks reprisals from the South American nation’s top trade partner, said Cynthia Arnson, Latin America program director at the Woodrow Wilson International Center for Scholars.
Ecuador’s economy, about the size of Nebraska’s, benefitted from $1.7 billion in duty-free exports to the U.S. last year under the Andean Trade Promotion and Drug Eradication Act. Protecting Assange, who published classified U.S. military cables over the internet, is the latest in a series of conflicts with the U.S., including ties with Iran, which top U.S. lawmakers say justify re-imposing tariffs when the trade preferences expire in July.
“This latest move completely undermines the relationship with the U.S. and virtually guarantees that Ecuador will be removed from the Andean trade preference benefits,” Arnson said in a phone interview from Washington.
A State Department official in Washington, who declined to be named, citing agency policy, said the U.S. relationship with the upper levels of Ecuador’s government is very difficult. The renewal of the trade deal is a Congressional decision, he said.
Antagonizing the U.S.
Assange, 41, took refuge in Ecuador’s embassy in London on June 19 to avert extradition to Sweden, where he faces questioning on allegations of rape and sexual molestation.
Correa, in an April interview with the Australian hacker-activist by video link, welcomed Assange to the “club of the persecuted,” in a nod to the global criticism both have faced. Correa expelled the U.S. ambassador to Quito, Heather Hodges, last year in protest over allegations she made in a classified diplomatic cable released by WikiLeaks that Correa had knowingly appointed a corrupt police chief. He is the only head of state to have expelled a U.S. ambassador over WikiLeaks revelations.
Ecuador’s trade preferences with the U.S., set up in 1991 to promote democracy and fight cocaine trafficking, support about 400,000 jobs in the nation of 14.5 million people, according to the Ecuadorean-American Chamber of Commerce in Quito. The workers who harvest the flowers, shrimp and fresh produce exported under the program would feel the most impact, with 40,000 jobs immediately at risk, Nathalie Cely Ecuador’s ambassador to the U.S., said in a May interview.
The threat of reprisals from the U.S. comes at a difficult time as Ecuador’s biggest refinery is set to shut down for a year in October for repairs. Losing the refinery’s output will force the government to spend more on subsidized fuel imports in the Organization of Petroleum Exporting Countries’ smallest producer. Oil products also accounted for 93 percent of Ecuador’s duty-free exports to the U.S. under the Andean preferences last year, according to a June report from the U.S. Trade Representative’s office.
The shutdown threatens to spark a liquidity crunch for the nation that adopted the U.S. dollar as its official currency 12 years ago, Economic Policy Minister Jeannette Sanchez said in a July interview. Ecuador, which defaulted on $3.2 billion of bonds in 2008 and 2009, sought a $515 million loan from the Latin American Reserve Fund in July to avoid a balance-of-payments crisis.
“That’s the underlying concern,” Daniel Legarda, executive vice president of the Ecuadorean exporters’federation, said in a telephone interview from Quito on Aug. 21.“The sources of liquidity for the economy from the private side are exports, remittances, which are falling, and debt.”