
32
REVISTA CHAKIÑAN, 2018, Nº.5, AGOSTO, (18-39)
ISSN 2550-6722
a lack of liquidity in the nancial sector and
resulting in the insolvency of seven banks
including Filanbanco.
The government monetized their bank losses
causing the collapse of the exchange rate an-
chor. In 1999, the Sucre depreciated around
200% and ination was about 90%. Facing
social disintegration and economic catas-
trophe, the government took the decision to
freeze all bank accounts for one year and in
2000 announced the intention to dollarize
the economy (Nazmi 2001:733-734).
During a ten-year period (1996-2006), Ecua-
dorians observed seven dierent leaders oc-
cupying the position of president. However,
none of the leaders can provide any type of
improvement to the Ecuadorian economy or
to the standards of living of their citizens.
Nonetheless, in 2007, Ecuadorians elected
Rafael Correa as their head of state. Correa
was a populist university lecturer, with an
academic background in economics who
did not have links to the traditional politi-
cal parties. This fact caused his popularity to
spread rapidly among the electorate, which
was tired of the traditional representatives
(Jaramillo-Jassir 2012:151-152). In 2007,
once elected, the new administration started
its revolutionary process which substituted
the neoliberal regime policies established
in Ecuador since the 80s with policies fo-
llowing a model of endogenous growth pri-
marily favouring the working class.
To legitimate their actions in the political
and in the legal eld, a referendum, mainly
intended to produce a new constitution that
included all these reforms, was proposed.
The result was approved by an overwhel-
ming majority of 80% of the electorate.
Furthermore, the new constitution project
which proposed a more egalitarian system,
was accepted the following year by 65% of
the electorate (Becker 2011:49-51).
Following the constitutional prescriptions
based on the Sumac Kawsay, an ancient
indigenous belief that proposes an austere,
socialist and ‘good’ way of living, the Ecua-
dorian administration repatriated and mo-
bilized the international monetary reserves
which were previously deposited in foreign
banks, towards public nancial entities and
national banks. The use of national savings
has been condemned as scally irresponsi-
ble, but the new constitution established that
scal policy cannot be divergent from gene-
rating incentives for productive investment.
Between 2007 and 2011, public investment
as a percentage of GDP grew at an average
rate of 11.7%. Correspondingly, social in-
vestment reached 26% of public spending in
2011 (Banco Central del Ecuador 2014). It
has, therefore, been possible for the admi-
nistration to provide absolute coverage for
enrolment in primary, middle schools and
high schools and to eliminate costs for medi-
cal consultation. In addition, the left-winged
agenda proposed a network of social inclu-
sion, the continuation of subsidies in basic
services, and as well a series of programs to
enhance the reduction of poverty and wage
inequality (Ramírez Gallegos 2011:11-12).
Ecuador was not receiving the maximum
utility from such industry; a situation attri-
butable to the fact that 53.7% of oil produc-
tion of that time belonged to private compa-
nies. Furthermore, as was mentioned before,
the type of contract that the state maintained
with the corporations was not protable at
all due to the major income was coming
from renting the land rather than from pro-
duction. This is the reason why, in 2010, the
project of nationalization and renegotiation
of contracts started, following the constitu-
tional guidelines which dictate that strategic
resources belong to Ecuadorians.
By 2012, the private production of oil was
reduced to 25.6%., the activities of compa-
nies like Texaco-Chevron and OXY were
passed to the national oil company of Ecua-
dor, Petro Ecuador. This re-nationalization
of strategic resources allowed the Ecua-
dorian state to maximize benets from the
commodity boom of the last decade (Berrio-
sa Marakb & Morgensternc 2011:675-681).
These series of reforms and the repossession
of strategic resources has provided Correa’s
administration with a considerable increase
in public revenues. As a matter of fact, Ecua-
dorian exportation revenue soared from US$
14,556.2 million in 2007 to US$ 26,067.1