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History, Recent Developments

Jamil Mahuad, Mahuad, Lucio Gutierrez, Noboa, Native American groups

In July 1998 Ecuadorians elected a new president. Jamil Mahuad, the mayor of Quito and the presidential candidate of the Popular Democracy Party, took office in August. Mahuad faced a number of difficult economic problems. During the late 1990s Ecuador’s foreign debts increased substantially, while its economy declined as a result of several factors beyond the control of the government. The 1997 and 1998 El Nino severely damaged crops. A drop in world oil prices reduced the national income from petroleum production. In addition, a financial collapse in Asian economies in 1997 caused an economic slowdown in Ecuador and many other Latin American countries. Many of Ecuador’s banks faced collapse due to the economic downturn.

Mahuad announced a series of austerity measures designed to get the nation’s unsteady economy back on its feet. The government eliminated gasoline and electricity subsidies, announced plans to reduce the number of employees in the government agencies, and began plans to sell state-owned companies, including the government-run oil company, to private businesses. Widespread public reaction to the austerity measures led to strikes and public demonstrations. In February 1999, following disturbances in cities across Ecuador, Mahuad reinstated the gasoline subsidy and announced that he would reevaluate his austerity program. The economy continued to worsen, however, with inflation remaining high and the currency, the sucre, losing much of its value. In September 1999 the government failed to make payments on foreign loans.

In January 2000, as the sucre kept declining, opposition parties, labor unions, and Native American groups banded together to demand Mahuad’s resignation. Mahuad announced a plan to replace the sucre with the U.S. dollar with the intent of giving the country a stable currency. Thousands of poor Native Americans marched on Quito to protest, fearing that the adoption of the dollar would make them even poorer.

On January 21, 2000, sympathetic junior military officers led a bloodless coup d’etat, and a three-man junta announced its rule from the Congress building. However, on January 22 the junta turned power over to Vice President Gustavo Noboa Bejarano after the United States threatened to cut aid and the United Nations and the Organization of American States condemned the military coup. That same day the Congress met in a special session at Guayaquil and ratified Noboa’s ascension to the presidency.

Noboa followed through on Mahuad’s currency plan, signing a bill in March 2000 that made the U.S. dollar Ecuador’s official currency. The bill also allowed more foreign investment in Ecuador’s oil, electricity, and telecommunications industries. The International Monetary Fund then announced a $2-billion aid package for Ecuador.

In 2002 Lucio Gutierrez, a former army colonel, won the presidency of Ecuador. Gutierrez was part of the three-man junta that briefly ruled the country after the 2000 coup ousted Mahuad. After serving a few months in jail for his role in the coup, Gutierrez began campaigning for president. He won the support of many indigenous organizations and left-wing political parties. As president-elect, he pledged to fight corruption and help the country’s poor.

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