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Squeezing Ecuador

Do U.S. economic policies force Ecuadorians to take extreme action?

December 19, 2005

Do U.S. economic policies force Ecuadorians to take extreme action?

Quito, Ecuador's capital, stretches across a volcanic valley high in the Andes, at an altitude of nine thousand feet.

Residents of this city, which was founded long before Columbus arrived in the Americas, are accustomed to seeing snow on the surrounding peaks, despite the fact that they live just a few miles south of the equator.

The city of Shell, a frontier outpost and military base hacked out of Ecuador's Amazon jungle to service the oil company whose name it bears, is nearly 8,000 feet lower than Quito.

A steaming city, it is inhabited mostly by soldiers, oil workers and the indigenous people from the Shuar and Kichwa tribes who work for them as prostitutes and laborers.

To journey from one city to the other, you must travel a road that is both tortuous and breathtaking. Local people will tell you that during the trip you experience all four seasons in a single day.

Although I have driven this road many times, I never tire of the spectacular scenery. Sheer cliffs, punctuated by cascading waterfalls and brilliant bromeliads, rise up one side. On the other side, the earth drops abruptly into a deep abyss where the Pastaza River, a headwater of the Amazon, snakes its way down the Andes.

The Pastaza carries water from the glaciers of Cotopaxi, one of the world's highest active volcanoes and a deity in the time of the Incas, to the Atlantic Ocean over three thousand miles away.

In 2003, I departed Quito in a Subaru Outback and headed for Shell on a mission that was like no other I had ever accepted. I was hoping to end a war I had helped create.

It is a war that is virtually unknown anywhere outside the country where it is fought. I was on my way to meet with the Shuars, the Kichwas and their neighbors the Achnars, the Zaparos and the Shiwiars — tribes determined to prevent our oil companies from destroying their homes, families and lands, even if it means they must die in the process.

For Ecuadorian tribes, this is a war about the survival of their children and cultures, while for industrialized countries it is about power, money and natural resources. It is one part of the struggle for world domination and the dream of a few greedy men, global empire.

Driving from Quito toward Shell on this sunny day in 2003, I thought back thirty-five years to the first time I arrived in this part of the world. I had read that although Ecuador is only about the size of Nevada.

It has more than 30 active volcanoes, over 15% of the world's bird species and thousands of as-yet-unclassified plants, and it is a land of diverse cultures where nearly as many people speak ancient indigenous languages speak Spanish.

I found it fascinating and certainly exotic. Yet, the words that kept coming to mind back then were pure, untouched and innocent.

Much has changed in 35 years. At the time of my first visit in 1968, Texaco had only just discovered petroleum in Ecuador's Amazon region. Today, oil accounts for nearly half the country's exports.

A trans-Andean pipeline built shortly after my first visit has since leaked over a half million barrels of oil into the fragile rain forest — more than twice the amount spilled by the Exxon Valdez.

Today, a new $1.3 billion, 300-mile pipeline promises to make Ecuador one of the world's top 10 suppliers of oil to the United States.

Vast areas of rain forest have fallen and macaws and jaguars have all but vanished. In addition, three Ecuadorian indigenous cultures have been driven to the verge of collapse, and pristine rivers have been transformed into flaming cesspools.

During this same period, the indigenous cultures began fighting back. For instance, on May 7, 2003, a group of U.S. lawyers representing more than 30,000 indigenous Ecuadorian people filed a $1 billion lawsuit against Chevron Texaco Corp.

The suit asserts that between 1971 and 1992 the oil giant dumped into open holes and rivers over four million gallons per day of toxic wastewater contaminated with oil, heavy metals and carcinogens. It also claims that the company left behind nearly 350 uncovered waste pits that continue to kill both people and animals.

Outside the window of my Outback, great clouds of mist rolled in from the forests and up the Pastaza's canyons. Sweat soaked my shirt, and my stomach began to churn but not just from the intense tropical heat and the serpentine twists in the road.

Knowing the part I had played in destroying this beautiful country was once again taking its toll. Ecuador today is in far worse shape today than the country was before we introduced her to the miracles of modern economics, banking and engineering.

Since 1970, during this period known euphemistically as the Oil Boom, the official poverty level grew from 50 to 70%, under- or unemployment increased from 15 to 70% and public debt increased from $240 million to $16 billion.

Meanwhile, the share of national resources allocated to the poorest segments of the population declined from 20 to 6%.

Unfortunately, Ecuador is not the exception. Many other countries have suffered a similar fate. Third world debt has grown to more than $2.5 trillion, and the cost of servicing it — over $375 billion per year as of 2004 — is more than all third world spending on health and education. And it is 20 times what developing countries receive annually in foreign aid.

Over half the people in the world survive on less than two dollars per day — which is roughly the same amount they received in the early 1970s. Meanwhile, the top 1% of third world households accounts for 70-90% of all private financial wealth and real estate ownership in their country — the actual percentage depends on the specific country.

The Subaru slowed as it meandered through the streets of the beautiful resort town of Baños, famous for the hot baths created by underground volcanic rivers that flow from the highly active Mount Tungurahgua.

Children ran along beside us, waving and trying to sell us gum and cookies. Then we left Baños behind. The spectacular scenery ended abruptly as the Subaru sped out of paradise and into a modern vision of Dante's “Inferno.”

A gigantic monster reared up from the river, a mammoth gray wall. Its dripping concrete was totally out of place, completely unnatural and incompatible with the landscape.

Of course, seeing it there should not have surprised me. I knew all along that it would be waiting in ambush. I had encountered it many times before even so, it made my skin crawl.

That hideous, incongruous wall is a dam that blocks the rushing Pastaza River, diverts its waters through huge tunnels bored into the mountain — and converts the energy to electricity.

This is the 156-megawatt Agoyan hydroelectric project. It fuels the industries that make a handful of Ecuadorian families wealthy, and it has been the source of untold suffering for the farmers and indigenous people who live along the river.

This hydroelectric plant is the reason why the Shuars and Kichwas and their neighbors threaten war against our oil companies.

Ecuador is drowning in foreign debt and must devote an inordinate share of its national budget to paying this off, instead of using its capital to help the millions of its citizens officially classified as dangerously impoverished.

The only way Ecuador can buy down its foreign obligations is by selling its rain forests to the oil companies.

For every $100 of crude taken out of the Ecuadorian rain forests, the oil companies receive $75. Of the remaining $25, three-quarters must go to paying off the foreign debt.

Most of the remainder covers military and other government expenses — which leaves about $2.50 for health, education and programs aimed at helping the poor.

Thus, out of every $100 worth of oil torn from the Amazon, less than $3 goes to the people who need the money most or those whose lives have been so adversely impacted by the dams, the drilling and the pipelines, and who are dying from lack of edible food and potable water.

The subtlety of this modern empire building puts the Roman centurions, the Spanish conquistadors and the 18th and 19th century European colonial powers to shame. We learned from history. Today we do not carry swords. We do not wear armor or clothes that set us apart.

In countries like Ecuador, Nigeria and Indonesia, we dress like local schoolteachers and shop owners. In Washington and Paris, we look like government bureaucrats and bankers.

We appear humble, normal. We visit project sites and stroll through impoverished villages. We profess altruism, talk with local papers about the wonderful humanitarian things we are doing. We cover the conference tables of government committees with our spreadsheets and financial projections, and we lecture at the Harvard Business School about the miracles of macroeconomics.

We are on the record, in the open. Or so we portray ourselves and so are we accepted. It is how the system works. We seldom resort to anything illegal because the system itself is built on subterfuge, and the system is by definition legitimate.

Looking at this dam, I wondered — as I have so often in so many places around the world — when these people would take action — like the Americans against England in the 1770s or Latin Americans against Spain in the early 1800s.

All of those people — millions in Ecuador, billions around the planet — are potential terrorists. Not because they believe in communism or anarchism or are intrinsically evil, but simply because they are desperate.

Adapted with permission of the publisher. From Confessions of an Economic Hit Man, copyright