Eye on the Amazon

Ecuador's Corruption Hangover

Photo credit: Amazon Watch

Ecuadorian President Lenin Moreno took to the airwaves last week in his first national television address of the new year. Although listeners may have been hoping for good news as the nation teeters on the precipice of economic and political crisis, they instead got a sobering announcement of yet another corruption scandal. While such scandals have become routine as the Moreno administration tries to root out a decade of graft under former President Rafael Correa – an effort that so far has landed the vice president in jail and implicated 317 former officials – this one is of particular note for Amazon Watch and our supporters.

That's because President Moreno announced that an audit commissioned by the UN found that roughly half of the $5 billion the state had paid for oil-related infrastructure projects over the last decade was lost to corruption.

Adding insult to injury, not only did $2.5 billion vanish into the pockets of government officials, but much of the work was never even done or was done poorly. State-run Petroecuador estimates that another $650 million is still needed to operationalize, repair, or finish building five projects. And a recent New York Times article revealed extensive cost overruns, corruption, and serious construction problems in a major project, the Coca Coda Sinclair dam built by Chinese-run Sinohydro. A recent audit on that project found 7,648 cracks and the dam only running at half capacity, yet Ecuador is still on the hook to pay back the original loans for its construction.

The revelation of yet more corruption comes on the heels of a desperate hat-passing trip to Beijing by President Moreno in December, who managed to keep the lights on for a little while longer after procuring a $900 million loan from the People's Republic of China. With oil prices low and loan payments coming due, Moreno had little choice but to knock again on the door of its largest creditor. This latest loan brings China's total lending to Ecuador in the last ten years to over $19 billion, which doesn't include direct cash-for-oil payments between China's National Petroleum Company and Petroecuador for roughly $6 billion.

Rafael Correa was supposed to root out the oil-related corruption and debt that had existed in the country since at least the 1970s, when oil production began in the Amazon rainforest. After all, Correa is a self-described leftist and economist who rightly pushed back against the Washington consensus and thumbed his nose at traditional lenders like the World Bank and International Monetary Fund, whose structural adjustment programs had crippled social services and further indebted the country to the U.S. and Club of Paris lenders. These economic hitmen successfully tethered the country's economy to an export-led development model, with western countries reaping more than Ecuador ever did for producing them, and left in its wake legacies of contamination such as Chevron's decades of drilling and dumping.

But Correa needed to finance his "Citizen's Revolution", a massive expansion of public sector spending, and he found a willing partner in China. The irony is that the country is now far more in debt to China than it ever was to traditional lenders, and for failing energy-related infrastructure projects rife with corruption – mega-fracasos ("mega failures") as they're known in Ecuador. President Moreno is still trying to sober up the nation after Correa's decade-long borrowing binge. But the lingering economic hangover just keeps getting worse. And Moreno, who served as vice president under Correa, is having a harder and harder time distancing himself from the scandals as many in his inner circle face corruption charges.

Almost half a century later, drilling continues to push deeper and deeper into indigenous territories and pristine rainforest of one of the most biodiverse places on the planet for new reserves of fossil fuels that the planet can ill afford to burn. And despite efforts to curb corruption, President Moreno is following the same oil-stained playbook that helped get Ecuador into a cycle of debt and dependency. He has green-lighted new drilling in Yasuní National Park and plans to open up areas in the country's roadless southern rainforest, still hoping that Ecuador can drill its way to prosperity.

But indigenous peoples in Ecuador's Amazon have different plans. They are pushing back, winning important victories to limit the expansion of the fossil fuel frontier and implementing solutions to protect their territories, leading the way Ecuador – and the world – needs to go to create a just and sustainable planet.

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