by Chris Jochnick
New Internationalist magazine, June 2001
Ecuador's Minister of Energy and Mines recently proclaimed
that this nation of 12 million is on the cusp of a second oil
boom. The Government has set its sights on the southern Amazon
rainforest - 5 million acres of the most biologically diverse
environment in the world - and the estimated 775 million barrels
of oil that lie below it Occidental Petroleum recently announced
that it was planning to drill 47 wells in the remote Eden-Yuturi
area of the Amazon Industry officials have compared the project,
which involves the creation of Ecuador's second transnational
pipeline, to the country's first railway and have marked its construction
as the beginning of a new historical era.
These are familiar promises. When oil was discovered in the
Ecuadorian Amazon 30 years ago, it was heralded as the country's
salvation. The first barrels were paraded through the streets
and placed on public altars. Oil was used to treat arthritis and
hair loss and national TV news programmes ended with gushing oil
towers and the ringing phrase: 'Ecuador: Pais Petrolero!' (Ecuador:
But three billion barrels and $32 billion later, the country
is no better off for its boom. Crippled by debt, wracked by inequality
and political corruption, Ecuador is more oil dependent than ever.
And the oil companies just keep drilling and pumping. What happened
to the dream of oil-fired prosperity?
Let's go back to the beginning: Texaco discovered petroleum
in the Oriente region of eastern Ecuador in 1967. By 1974 the
become the second-largest oil exporter in Latin America. Oil
became the biggest money-spinner in Ecuador's history, accounting
for more than half the country's foreign earnings and approximately
half of the national budget. It also attracted billions of dollars
in foreign loans.
But those figures mask another side of oil. Ecuador's Amazon
covers 32 million acres of near pristine rainforest teeming with
an incredible diversity of plant and animal life. It is also home
to eight distinct indigenous groups with a total population of
200,000. Pre-oil, the Oriente was a neglected frontier, protected
by its inaccessibility. Many native communities survived according
to centuries-old traditions, living on the rainforest's resources,
barely touched by outside influences.
All this changed with the discovery of oil. The government
had neither the resources nor the experience to develop the petroleum.
Instead Texaco was allowed to exploit the region as it saw fit.
The giant US company built a network of roads slicing through
the rainforest and a pipeline running the length of the country
- as well as refineries and hundreds of wells. The government
followed by opening up the region to
settlement as a way of relieving internal land pressures.
Legal title was given to anyone who cleared and farmed the jungle
terrain The result: local communities were devastated, forests
were hacked down, land and rivers fouled by waste oil and toxic
Traditional indigenous groups like the Cofan, the Secoyas
and the Huaorani, once numbering in the tens of thousands, were
reduced to a few hundred each. The Tetete people disappeared completely.
As a government study admitted in the late 1980s, oil development
had placed indigenous groups 'at the edge of extinction as a distinct
For two decades Texaco was the dominant player - pumping 90
per cent of Ecuador's oil and creating an environmental catastrophe
in the process. An estimated four million gallons of heavy metals
a day (including arsenic, benzene and lead) were dumped on to
the land and into rivers and streams. Following a week-long fact-finding
visit with communities in the Oriente, the lawyer and environmental
campaigner Robert Kennedy described what he found: 'Sick and deformed
children, adults and children with skin rashes, headaches, dysentery
and respiratory ailments, cattle dead with their stomachs rotted
out, crops destroyed, animals gone from the forest and fish from
the rivers and streams.'
Recent studies have borne out these observations, finding
an increased incidence of many diseases, widespread malnutrition
and cancer rates four times higher than other parts of Ecuador.
The World Bank has described socio-economic conditions in the
region as 'calamitous'. Poverty levels are close to 90 per cent;
basics like sanitation, potable water and paved roads nonexistent.
The oil companies, including the state-owned Petroecuador, promise
to clean up their act but little changes.
Despite this, the money continues to flow. Texaco alone claims
to have paid $24 billion to the Ecuadorian Government over the
years. Surely the other 12 million Ecuadorians are a lot better
off? You would think so, but in fact the country as a whole has
I fared little better than the Amazon s native people.
With more than half its reserves now depleted Ecuador has
higher levels of poverty, inequality, debt and unemployment than
it did before Texaco arrived and is facing its worst economic
and political crisis of the past 100 years. oily
When oil was first discovered the new country was ill-prepared
to handle the sudden flood of easy money, in part because Ecuador
had yet to one escape its colonial past. When the country was
liberated from Spain in the mid-1800s the economic and political
system was dominated by a handful of powerful families who controlled
the nation's export industries. Semi-feudal social relations still
predominated when oil was discovered - making it inevitable that
the old elite would hang on to the reins of power. As for the
poor: their oil legacy would be 'the dust left by hundreds of
newly imported vehicles' in the words of one commentator.
In the decadent decade of the 1970s oil hiked growth rates
as high as 25 per cent. By 1981 the economy was more than 10 times
its pre-oil size. Public spending ballooned, financed by oil revenues
and by prodigious borrowing. Oil opened the floodgates to foreign
debt, provoking a spiral of indebtedness that has today left the
country with the highest per capita debt in Latin America.
Meanwhile, public spending and subsidies did little to boost
employment or to address poverty or basic welfare. And agriculture
was ignored. The tremendous early oil wealth was quickly soaked
up by military spending, inefficient public projects and massive
subsidies on petroleum products (the government kept the local
price of oil at a third of the outside market value alongside
predictable losses to corruption and capital flight.
When oil prices eventually collapsed and foreign credit dried
up / in the early 1980s the country was hopelessly over-extended.
By 1981, public spending was 20 times 1970 levels and debt servicing
was consuming an ever-larger share of the national budget. So
the cuts began. Throughout the 1980s and the 1990s the government
slashed public services like education, healthcare and social
security. By 1999, the share of the national budget allocated
to health had fallen to less than three per cent, while debt service
skyrocketed to more than fifty per cent.
Thanks in good measure to oil, Ecuador is today one of the
world's most corrupt and stratified countries with one of the
weakest political structures. Oil income has encouraged corruption,
patronage and concentration of wealth And it has also shielded
governments from more accountable decision-making and necessary
democratic reforms With so much of the budget depending on petroleum
exports and foreign loans the government has been immunized from
the close public scrutiny that should have accompanied regressive
tax measures and dubious social policies Even the World Bank,
fully complicit in many of these policies, admits that the burden
[of adjustment] has fallen most heavily on those public services
paramount to fostering economic development (ie education and
agricultural development), whereas the central government bureaucracy
and other powerful interest groups (ie the military) have retained
their relative and even absolute positions'.
Despite the continued benefits of oil, the country has suffered
increasing levels of poverty, inequality and unemployment. Basic
social indicators (maternal and infant mortality, child nutrition,
literacy) have stagnated or gotten worse. Alongside
this social crisis a series of inept and flagrantly corrupt
governments, tied to the old oligarchy, have provoked massive
public outcry and uprisings, leading to six different presidents
in the past five years - and Latin America's first military coup
in a quarter-century.
At the same time, oil has opened the door to powerful foreign
interests - including multinational oil companies (many with revenues
dwarfing Ecuador's GNP) public creditors and Northern governments
with a stake in oil. These are ranged alongside equally dominant
local groups: the national oil industry; a wealthy industrial
sector benefitting from distorted oil policies; the military;
and a powerful class of higher-paid oil employees and their union
- the strongest in Ecuador. Add to that mix an impoverished and
desperate public weaned on promises of oil wealth and the dominant
force of oil begins to take shape.
Reality check Ecuador has an estimated 10 to 20 years of oil
left in the Amazon. At best the income will equal less than a
fifth of the current national debt. The Government's most optimistic
projections leave the country in essentially the same condition:
mired in poverty and debt. As one local commentator quipped recently
in response to the country's inability to gain from the high oil
prices of the past year: 'Things are going so well, they couldn't
Chris Jochnick is co-founder and Legal Director of the Centre
for Social and Economic Rights in Quito.