Ecuador

Ecuador Independent since its separation from greater Bolivia in 1830, Ecuador's politics have been marked by tension between the conservative landowners of the interior and the more liberal business community of the coastal plain. Their consensus, underpinned by the prosperity of the cocoa boom from the 1870s, collapsed with the decline of cocoa as the country's main export after 1920. There followed a period of political and economic instability, compounded by a military attack by Peru in 1941, which resulted in the loss of almost two-fifths of its territory. Between 1944 and 1972 government alternated between relatively weak military rule and civilian rule, with the charismatic José Maria Velasco Ibarra emerging as the most important figure. Military rule, re-established in 1972, was at first facilitated by a rise in oil prices which increased hard-currency earnings from its newly discovered resources.

The social reforms begun by the military in 1972 remained too modest to change significantly Ecuador's large social imbalances. In 1974, 2.2 per cent of the landholding companies cultivated 50 per cent of the land, while two-thirds of all agricultural ownership was restricted to holdings of twelve acres or less. In fact, by 1976 the majority of the population was worse off than before the oil price boom, and in 1979 the military government was forced to give way to a democratically elected government under a new constitution. Despite continuing economic difficulties and an attempted military coup in 1986, the political situation remained relatively stable. At the same time, large-scale poverty remained (over 40 per cent of the urban population lived in extreme poverty in the early 1990s), and economic stringency measures introduced by the government in 1994 caused such widespread protests as to necessitate a state of emergency.

Internal threats to the fabric of the state and society were complemented by external ones, mainly through a continuing border dispute with Peru over a territory of 131 square miles (340 km²). This flared up into a military conflict in January 1995, but was at least temporarily resolved after a ceasefire on 14 February 1995, and the Peace Treaty of Itamaraty of 17 February 1995, in which the area under dispute became a demilitarized zone. The drop in the price of oil in 1998, coupled with declining prices for banana exports, caused a dramatic economic collapse. Ecuador defaulted on its debts, and, to stave off inflation, adopted the US dollar as its currency in 2000. This policy of deflation, coupled with the introduction of new taxation and lower state spending as dictated by the IMF, increased further the economic hardship experienced by the majority of the population. It led to a sustained political crisis, with ministers unwilling to accept the necessary responsibility for government action. The crisis was compounded by evidence of widespread endemic corruption among members of Congress, government ministers, and three successive Presidents. In June 2002 the finance minister, Julio Emanuel, resigned over the transfer of tens of millions of dollars in bribes, in a case which also implicated the President, Gustavo Noboa.