Old Debts

Being heavily in debt, a major holder of our national I.O.U.'s being China, the American public knows that it is being misused, but it's new to the position of debtor. In Latin America this is an old story, with lessons the U.S. might study to its own benefit.

Latin America has a long history of corrupt and indifferent governments, the traditional banana republic being made up of implants from Old Europe who economically, politically, and militarily dominated the indigenous populations who were conquered by the invading Conquistadores.

A history like that makes for schisms that give the ruling class an inclination to look on the populace as basically inferior, and the role of the working class that of support for the rulers. In a tradition of this sort, indebtedness was piled up by the rulers without consideration for the coming generations, especially as rumblings of rebellion grew and inevitable sharing of power arrived. Democracy in Latin America is putting in place the burgeoning population that so long was disserved by its governments.

In Ecuador, yesterday's voting results were again highly favorable for the indigenous population, and the socially progressive forces resoundingly defeated the old line group that has been running up the country's debt.

From Wall Street, the reaction is predictable. Ecuadorian bonds declined.
But among the pessimists who predict that in order to meet the needs of an impoverished people, some predict that the newly elected left-leaning government will honor its debts to keep from upsetting the world's bankers.

JP Morgan said on Monday Ecuador is unlikely to default in 2007 despite pledges of a debt restructuring that Rafael Correa, who leads the vote count of Sunday's presidential elections, made during the campaign.

The bank bucked a wave of negative recommendations on Ecuador's bonds by telling investors to remain "marketweight" on the country's debt. It also said it would be a "better buyer" of the securities if valuations reach the extreme lows seen before the first round of elections.

"Despite the concerning (but still vague) rhetoric on debt restructuring, we do not expect Correa to resort to default in the short term, since oil inflows will allow his administration to install a robust social spending and still service Ecuador's moderate debt burden," JP Morgan wrote in a research note.

It noted that more social spending, and not a debt renegotiation, was the center of the political debate in the run-up to Ecuador's second-round vote. [emphasis added]

"That said, clarity on this front may take time as we await the elaboration of the 2007 budget, and the results from a debt 'audit' being carried out by a commission installed by President Palacio to identify 'illegitimate' debt," JP Morgan added.

Throughout the third world, the legacy of hostile government running up debt for its own interests - that is now left for the rebelling populace to pay - is one the 'civilized' world ignores. JP Morgan is showing a surprisingly intelligent reaction, one that is far ahead of this administration in seeing the responsible character of the socially responsible.

In this neighboring continent, where now the debtridden indigenous population blames our financial realm for visiting the debts on them, it is a sound practice to work with and not against those working classes. The financial realm has much to make up for, from supporting the ruling classes that ran them up, to working to keep those classes in power and to making war on the resurgent popular movements such as the Sandanistas, this country has put itself in a shaky position with the new governments.

There has been a lot of corruption and violence involved in the class struggle, and Sandanistas among others were guilty of much that is totally reprehensible. Unfortunately, in this country the tendency of the majority here has been to condemn the excesses and occasional criminality of the left, and ignore the same by the right wing, 'conservative', element.

While most of us are decent people, we haven't gone the extra mile of becoming informed. The rise of the left in Latin America is the rise of economic and political equality for the working class in that country. It is one we are increasingly part of, as the government here shows its hostility to the interests of the working class - what not so long ago was the 'middle class'.

In Ecuador, today we have yet another new government of the people, by the people and for the people.

Rafael Correa, the leftist nationalist headed to victory in Ecuador's presidential race, already is planning radical changes when he takes office in January.

Such moves would put Correa on a fast track to a confrontation with the country's opposition-controlled Congress -- a body he has referred to as a "sewer" but needs to carry out his reforms.
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With 52.3 percent of the ballots counted, Correa had a 67 percent to 33 percent lead over banana tycoon Alvaro Noboa, Ecuador's Supreme Electoral Tribunal said Monday.
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Correa said his victory "is a clear message to our traditional political class of the profound changes that our citizens want. This country doesn't need being patched up. It needs a new constitution in tune with the times."

A government in the U.S. that favors the very wealthy cannot make a relationship with the emerging left in Latin America and elsewhere. This country badly needs leadership that is socially responsible, and that can relate to the needs of the working class.

In the meantime, the government that we have is helping elect left leaning governments abroad by showing its dissassociation from popular needs, and its repudiation of its own.