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Correa Wins Reelection Bid

By Carlos Macias

Though facing a financially tough 2009, President Rafael Correa won Sunday’s vote. His government unveiled a controversial debt buyback plan a week before the election.

Updated April 27 - Ecuadorians headed to the polls on Sunday for presidential and legislative elections. President Rafael Correa easily won the bid for a second term. The win came as little suprise, as surveys placed him ahead with the 50 percent of the intended votes needed to avoid a runoff election. (Alternately, he needs a minimum of 40 percent of the votes and a 10-point difference after his most immediate opponent). A gloomy financial forecast may account for his decision to hold the election with two years left in his term. Less than a week before the election, Correa unveiled a buyback plan for defaulted sovereign bonds.

Correa’s presidency has represented a period of relative stability for Ecuador. “Seven presidents in the decade following 1997. Three leaders overthrown. A banking and currency collapse. This was Latin America's basket case,” writes Henry Manse for World Politics Review. Correa won his first term in 2006 against entrepreneur Álvaro Noboa of the Partido Renovador Institución Acción Nacional. Noboa is running again, this time in a race for second place against former President Lucio Gutierrez of Sociedad Patriótica. Gutierrez was ousted from office by Ecuador’s Congress in April 2005 and barred from holding public post for two years by electoral authorities.

Ecuador has enjoyed booming economic times since the beginning of Correa’s presidency. The economy expanded continuously for the last nine years and Ecuadorians saw poverty levels drop  from 52 percent in 1999 to 35 percent in 2008. Additionally, social spending went up by 71 percent under Correa’s watch.

Correa opted to run for reelection, despite the fact that two years remain in his term. A new constitution approved in September 2008 would allow him to seek the bid for a second term, whether now or then.

Forecasts by the International Monetary Fund (IMF) could offer a glimpse into why he chose to advance the election date. The IMF estimates that Ecuador’s GDP growth rate will run at negative 2 percent in 2009 and just 1 percent in 2010. This trend is consistent throughout the hemisphere, with only Peru, Uruguay, and Chile expected to post positive growth results this year. In March, Ecuador’s Central Bank reported an overall drop in exports, GDP, and remittances. Correa’s consistently high approval ratings are showing some signs of a downgrade as well. A CEDATOS poll from March 10 found that Correa’s approval rating fell 10 points down to 60 percent in the first three months of 2009.

One week before the election, Correa’s government announced a plan to buy back defaulted sovereign bonds 2012 and 2030. The government offered to pay 30 cents on the dollar, or roughly $900 million for bonds valued at roughly $3.2 billion  Finance Minister Diego Borja assured that the government has the money for the transaction using funds previously allocated to make interest payments. As Goldman Sachs analyst Alberto Ramos explains, Quito might have already repurchased some of the bonds on the sly in the secondary market by taking advantage of dropping bond prices after the default. Vistazo magazine also questioned the proposal, wondering where the money was coming from to pay for the bonds.

Correa believes investors will rally behind his government’s proposal. But the Wall Street Journal and Reuters report that some bondholders will refuse the offer and file lawsuits instead to get full compensation.

To ensure transparency in the elections, more than 200 international observers arrived in Ecuador this. El Universo offers complete coverage. Angus Reid Global Monitor provides a backgrounder on the new constitution and the 2006 presidential election.

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