My formation is rooted in liberation theology and the social doctrine of the Catholic church. I was born in Guayaquil in 1963. I studied at the Universidad Católica de Santiago de Guayaquil, where I was a militant in a left group in the economics department. We were the first left movement to win the presidency of the student federation at that university, which was one of the most conservative in the country. This was in a harsh period, under the Febres Cordero administration, a very repressive government of the right.footnote¹ Then I did a year’s voluntary social work in Zumbahua, an indigenous region at an altitude of 3,600 metres, before gaining a bursary to study in Europe. At Louvain, I also took part in student politics, but then I got married and went to the us to study for a doctorate. Although I maintained my left convictions, I was not politically active. Some people who call themselves the radical left say I’m not from the left because I wasn’t active alongside them, but this is arrogance. There are many spaces on the left in which one can be formed and take part, and liberation theology and the social doctrine of the church are one of them.

Every once in a while, on a voluntary basis, I gave advice to Alfredo Palacio, when he was Vice President of the Republic.footnote² I’d never met Palacio, but had made contact with him through a mutual friend, Rubén Barberán, whom I knew from our time as left student activists.footnote³ I wrote some papers for the Vice-President on dollarization and on oil funds, which were well received. When Gutiérrez fell and Palacio assumed the presidency, he nominated me Economics and Finance Minister.

In my short time at the Finance Ministry—around a hundred days—we showed that one didn’t have to do the same as always: submission to the imf and World Bank, paying off the external debt irrespective of the social debts still pending. This created a high level of expectations on the part of the public. When I resigned, there were demonstrations—probably the first in the country in support of a finance minister! I initially planned to return to teaching at the Universidad San Francisco de Quito, but was dismissed just before term started because, the hierarchy said, I was a politician. At this point Ricardo Patiño and a group of collaborators told me that we couldn’t let the expectations that had been raised, the feeling that things could be done differently, end in disappointment.footnote⁴ We travelled across the country and formed a political movement to secure the presidency. For we saw very clearly that in order to change Ecuador, we had to win political power.

During the campaign we were clearly aware that what we were proposing was a revolution, understood as a radical and rapid change in the existing structures of Ecuadorean society, in order to change the bourgeois state into a truly popular one. Faced with the delegitimization of the political class, which no longer represented anyone except itself, we said to ourselves that it was we citizens who had to reveal its inadequacies. So we decided to call it a citizens’ revolution, a revolt of indignant citizens. In that sense we anticipated the recent indignado movement in Europe by five or six years. But the movement was also profoundly Bolivarian, in terms of regional integration. And we are also inspired by Eloy Alfaro’s liberal revolution—the only real revolution to have occurred in this country before ours. This was why Alfaro was assassinated in 1912, in barbaric fashion, because he was really changing the structures of the country at the time.footnote⁵

We were struck a threefold blow by the crisis. In addition to the usual consequences—loss of export markets, reduction of financing and so on—there was a collapse in remittances from emigrants, which is what had sustained the country from the crisis of 1999 to the beginning of my administration. The price of oil also slumped, which struck at another important foundation of the national economy. Despite this, in 2009, while Latin America contracted by 2 per cent, our growth was small—under 1 per cent—but positive. Modesty aside, this was all the more remarkable considering that the economy has been dollarized since 2000, depriving us of one of the key instruments of policy. How was this achieved? Through a combination of technical know-how and a vision of the common good—acting on behalf of our citizens, not on behalf of finance capital. For example, we used to have an autonomous central bank, which is one of the great traps of neoliberalism, so that whichever government is in power, things carry on as before. Thanks to the 2008 Constitution, it is no longer autonomous. We took advantage of the few benefits that a rigid, dollarized system offers, such as not needing reserves to back a national currency. When the central bank was autonomous, it had millions of dollars of national savings—the biggest contributor being social security—which it would send overseas, to Florida. After the bank’s autonomy was taken under democratic control we could bring those reserves back to the country and use them to dynamize the economy. In the case of private banks sending money overseas, we imposed a domestic liquidity coefficient, obliging them to bring that money back. We have also obtained new financing from China. All this meant we could take counter-cyclical measures to mitigate the effects of the crisis. Not only did we not reduce public investment, we increased it. This mix of measures meant that we could grow in 2009; according to cepal, Ecuador was one of the countries that recovered most rapidly from the crisis, and last year was among the three fastest growing economies in Latin America.

Dollarization meant monetary suicide for Ecuador—and not, as in Europe, in order to adopt a common transnational currency; here it was a foreign currency that was adopted. As a consequence, our economic destiny depends to a great extent on whether the monetary policy of the us coincides with our needs. Our great fortune in recent years has been that, on the whole, it has. The weakening of the dollar has been beneficial to us, whereas countries which don’t have the dollar as their currency are experiencing problems: real appreciation, loss of competitiveness in exports. But one has to distinguish between good luck and good policies. Dollarization was a totally mistaken measure. Within that error, we’ve had a degree of fortune.

The cost of the external debt was one of the greatest obstacles to Ecuador’s development. At one time, servicing the debt consumed 40 per cent of the budget, three times what was spent on the social sphere—education, health and so on. The allocation of resources demonstrated who was in charge of the economy: bankers, creditors, international financial institutions. We organized the creation of the Comisión para la Auditoría Integral del Crédito Público (caic); this was the first time such a body had been set up in Latin America on the initiative of a government, as opposed to civil society. The Commission proved beyond any doubt what we already knew: the external debt was immoral, a robbery. For example, the 2012 and 2030 Global Bonds were sold on the secondary market at 30 per cent of their value, but we had to pay them at the full 100 per cent. When it looked at the contracts, the Commission also found a lot of corruption and conflicts of interest. So in December 2008 the caic ruled that this debt was immoral, and we declared a unilateral moratorium on those bonds. This was at a moment when we were in a strong economic position—oil prices were high, exports were growing—which was deliberate. This meant that the value of the debt dropped, and we forced our creditors to negotiate and sell back their bonds in a Dutch auction. We managed to buy back our debt at 32–33 per cent of its value, which meant billions of dollars of savings for the Ecuadorean people, both in capital and in interest payments. This freed up a lot of resources which we could dedicate to the social sphere; now, the situation is reversed from what it was before—we spend three times as much on education, health, housing as on debt service.