The Andean nation is the second largest Latin American supplier of crude to the US. Incumbent President has recently cancelled the operating contract of Occidental Petroleum.
Rafael Correa, a nationalistic economist that promised to rewrite the country’s oil contracts with foreign companies, leads the Ecuadorian presidential race, with 25.5% support, ahead of October 15 elections. According to the last opinion polls published by the local media, Correa will face his center-left rival Leon Roldos (19.23%) in the runoff as it is improbable that he will obtain the 40% support needed to win in the first round.
Mr. Correa is well ahead of the remaining candidates, the banana magnate Alvaro Boboa and the conservative leader Cynthia Viteri with 7.57%. Polls show that in any runoff between Correa and Roldos, Correa would win, taking 35.87% compared with 32.29% for Roldos.
As the presidential race gathers momentum, the main issue of the political campaign is by far the country’s oil industry, which has a dominant role in the national economy, and could impact the US imports. As Ecuador is the second largest Latin American oil supplier of the United States, the political contest in Quito has attracted the attention of Washington and could become a new chapter in the fight between the White House and the Venezuelan leader Hugo Chavez.
Chavez backs Correa, who has promised to renegotiate the country’s foreign debt, and rewrite oil contracts with foreign companies. Correa was Minister of Economy in the incumbent administration of Alfredo Palacio, which has recently passed a new bill that has risen taxes to oil exports from 20% to 50%.
Ecuador is an oil-rich country but after decades of pro-market policies imposed by the International Monetary Fund, the foreign debt increased to unaffordable levels as poverty jumped to 70% of the population. Therefore, the distribution of the benefits of the oil wealthy is in the center of the debate nowadays.
Months before passing the new oil law, the outgoing president Alfredo Palacio cancelled the operating contract of the US company Occidental Petroleum, which operated oil fields in the north eastern Amazon that produce almost 100,000 barrels of oil per day, about 20% of the country's total output in 2005. The Ecuadorian government alleged that the company did not respected contracts and was causing serious environmental damage in protected areas.
The takeover of Occidental's operations was supported by oil workers unions and indigenous organizations. So far no candidate in Ecuador's forthcoming elections has suggested that they will change the new oil law, and none has indicated that they will reverse the government's decision concerning Occidental Petroleum's contract either.
The representatives of the private oil companies say that they are not prepared to accept the 50/50 partnership stated in the new law, which imitates the one approved by Venezuela under Chavez. They say that as Venezuela offers a more attractive scale economy, the low production of the Ecuadorian wells make drilling uninteresting for them.
Correa has backed the new oil law and, as the champion of the poor masses, has promised to deepen the state control of the industry. Under his rule, the foreign debt would be renegotiated so that more money can be spent on health, education and technological development.
Correa’s platform is almost the same that allowed Alfredo Palacio’s predecessor, colonel Lucio Gutierrez, to win elections in 2003, only to be ousted by a popular rebellion in April 2005 after dramatically shifting to the political right once in power.