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<h1 class="title"><big><big>WikiLeaks shows US fought Correa on
behalf of big business</big></big></h1>
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<div class="field-item odd"><big><big> <span
class="date-display-single">Monday, September 29, 2014</span>
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<div class="glw-authors"><big><big>By <span
class="glwnews-article-location"><a
href="https://www.greenleft.org.au/taxonomy/term/4261">Linda
Pearson</a></span></big></big></div>
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<div class="field-item odd"><big><big> Cables published by
WikiLeaks show how the US Embassy in Quito colluded with
drugs manufactorers to stop measures pushed by the Correa
government that would adversely affect their profits. </big></big></div>
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<p><big><big>Cables from the first term of Ecuadorian President
Rafael Correa show how the US sought to defend the interests
of US companies in Ecuador, and protect the position of
foreign investors in general. </big></big></p>
<big><big>
</big></big>
<p><big><big>Moves against the power of transnational corporations
by Correa's government, first elected in 2006, were seen as
attempts to increase control over the economy, which the US
government views as the domain of private interests. </big></big></p>
<big><big>
</big></big>
<p><big><big>The US Embassy in Quito therefore tried to influence
Ecuadorian economic policy in conjunction with allies from
other embassies and from within the private sector.</big></big></p>
<big><big>
</big></big>
<p><big><big>In May 2009, Correa announced that Ecuador would
withdraw from the World Bank's investment dispute court, the
International Centre for Settlement of Investment Disputes
(ICSID). </big></big></p>
<big><big>
</big></big>
<p><big><big><strong>ICSID</strong></big></big></p>
<big><big>
</big></big>
<p><big><big>Dominated by Western powers, ICSID provides the means
for transnational corporations to directly challenge, and
often defeat, the policies of elected governments. ICSID had
become deeply resented in Latin America after a series of
cases demonstrated its anti-democratic power. </big></big></p>
<big><big>
</big></big>
<p><big><big>In Argentina, several companies brought ICSID cases
against the government over its decision in 2002 to unpeg the
peso from the US dollar. Even though the decision had been
taken to avoid economic collapse, ICSID ordered Argentina to
pay hundreds of millions of dollars in compensation for loss
of profits resulting from the peso’s depreciation.</big></big></p>
<big><big>
</big></big>
<p><big><big>In Bolivia, the Bechtel Corporation brought an ICSID
claim against the government for US$50 million it claimed had
been lost in relation to the privatisation of water in the
city of Cochabamba. Bechtel subsidiary Aguas del Tunari had
been forced to close in 2000 after mass protests against its
decision to raise water rates by more than 50%.</big></big></p>
<big><big>
</big></big>
<p><big><big>An international campaign was mounted against the
Cochabamba case and in 2005 Bechtel dropped it due to the
ongoing negative publicity. In 2007, Bolivia withdrew from
ICSID.</big></big></p>
<big><big>
</big></big>
<p><big><big>According to <a
href="http://wikileaks.org/cable/2009/07/09QUITO579.html">a
July 2009 cable</a>, Ecuador had claims against it at ICSID
totalling US$10 billion. Many of those cases had been brought
by foreign oil companies challenging the windfall revenue tax
introduced by the former Alfredo Palacio administration.</big></big></p>
<big><big>
</big></big>
<p><big><big>Ecuador’s new constitution reflected popular opposition
to ICSID, stating: “Treaties or international instruments
where the Ecuadorian State yields its sovereign jurisdiction
to international arbitration entities in disputes involving
contracts or trade between the State and natural persons or
legal entities cannot be entered into.”</big></big></p>
<big><big>
</big></big>
<p><big><big>Another article stipulates that foreign direct
investment should be complementary to state investment.</big></big></p>
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</big></big>
<p><big><big>Correa said the withdrawal from ICSID was needed to
liberate Ecuador from “slavery with respect to transnationals,
with respect to Washington, with respect to the World Bank”.</big></big></p>
<big><big>
</big></big>
<p><big><big>Correa also said Ecuador would promote an initiative
among the Union of South American Nations (UNASUR) to abandon
ICSID. In August 2009, foreign minister Fander Falconi
announced that Ecuador would promote the creation of a Latin
American regional centre for arbitration as an alternative to
ICSID.</big></big></p>
<big><big>
</big></big>
<p><big><big>Ecuador’s withdrawal from ICSID was closely tied to the
Correa government’s decision to terminate 17 bilateral
investment treaties, which allowed foreign companies recourse
to ICSID. </big></big></p>
<big><big>
</big></big>
<p><big><big><strong>US opposition</strong></big></big></p>
<big><big>
</big></big>
<p><big><big>An <a
href="http://wikileaks.org/cable/2009/10/09QUITO905.html">October
27 cable</a> reported that Ecuador’s acting foreign
minister, Lautaro Pozo, told US Ambassador Heather Hodges that
the Ecuadorian government wanted to negotiate new investment
treaties that “allow only local or regional dispute
arbitration, and align foreign investment with Ecuador's
national development plan”.</big></big></p>
<big><big>
</big></big>
<p><big><big>The cable shows that the US Embassy regarded the
decision as the latest in a long list of Ecuadorian
transgressions. Under the heading “Bad Timing, Bad Idea”,
Hodges listed the “difficult issues” the two countries had
been dealing with. These included a new pharmaceutical
licensing scheme which threatened the profits of US companies,
and Ecuador’s decision not to renew the lease at Manta air
base.</big></big></p>
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</big></big>
<p><big><big>The cable reported on what appears to have been a tense
meeting between Hodges, Pozo and the foreign ministry's legal
advisor, Marco Albuja. According to the cable, the ambassador
told the Ecuadorians that they “would find it difficult to
explain the decision to Washington”. </big></big></p>
<big><big>
</big></big>
<p><big><big>Under the heading “They Want it Their Way”, Hodges
wrote: “This decision is entirely consistent with the Correa
government's desire to have increasing control over all
resource flows and over the economy writ large.”</big></big></p>
<big><big>
</big></big>
<p><big><big>In other words, Correa’s government had offended the US
by asserting Ecuadorian sovereignty and rejecting the economic
policy dictates of the US.</big></big></p>
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</big></big>
<p><big><big>A <a
href="http://wikileaks.org/cable/2009/11/09QUITO973.html">later
cable</a> reported on a meeting between Falconi, Albuja, and
the ambassadors of the countries whose bilateral investment
treaties were to be terminated, including France, Germany,
Britain and the US.</big></big></p>
<big><big>
</big></big>
<p><big><big>Albuja told the meeting: “From the GoE's [government of
Ecuador] perspective, international arbitration permits legal
challenges to Ecuador's public policies in fora outside
Ecuador's national jurisdiction, contrary to what is permitted
under Ecuador's 2008 Constitution.”</big></big></p>
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</big></big>
<p><big><big>This argument held no sway with the US Embassy. The
cable concluded that while Ecuador was unlikely to reconsider
its decision, “There may be a window of opportunity in which
the USG [US government] and like-minded countries can reason
with the GoE regarding the negative repercussions that are
likely should they follow through with their plan”.</big></big></p>
<big><big>
</big></big>
<p><big><big><strong>Pharmaceutical companies</strong></big></big></p>
<big><big>
</big></big>
<p><big><big>In October 2009, Correa announced that his government
would introduce compulsory licensing for patented
pharmaceutical products. This allows an individual or a
company to use another company’s patent without that company’s
permission, thereby allowing the production of generic
versions of expensive patented drugs.</big></big></p>
<big><big>
</big></big>
<p><big><big>Correa’s proposal threatened to cut the profits of US
pharmaceutical companies in Ecuador, whose patent monopolies
allowed them to dictate prices.</big></big></p>
<big><big>
</big></big>
<p><big><big>Correa also announced that the public tender system for
medicines would be reformed to favour local producers. This
was <a
href="http://wikileaks.org/cable/2009/10/09QUITO998.html">described
in a cable</a> as another “significant blow to U.S.
pharmaceutical companies”.</big></big></p>
<big><big>
</big></big>
<p><big><big>The same cable reported that embassy staff met with
local representatives of US pharmaceutical companies Pfizer,
Merck Sharp and Dohme, Schering-Plough and Wyeth to discuss
Correa’s statements. </big></big></p>
<big><big>
</big></big>
<p><big><big><a
href="http://wikileaks.org/cable/2009/10/09QUITO998.html">Hodges
reported</a> that US companies were “trying, through well
placed contacts, to get a better idea of President Correa's
core objectives”.</big></big></p>
<big><big>
</big></big>
<p><big><big>A week later, <a
href="http://wikileaks.org/cable/2009/10/09QUITO893.html">another
cable</a> reported that the embassy was continuing “to
consult with representatives of U.S. pharmaceutical companies
and have suggested they present President Correa with data
that would help dispel his misperceptions regarding the extent
to which wholesale compulsory licensing will yield a
substantial increase in local production”.</big></big></p>
<big><big>
</big></big>
<p><big><big>According to the cable, the French Embassy had told the
US that European Union countries, which also stood to lose
business in Ecuador under the compulsory licences scheme, were
“calling a meeting next week with representatives of Member
States to devise a common approach”.</big></big></p>
<big><big>
</big></big>
<p><big><big>These machinations failed to stop Correa issuing a
decree on October 23, 2009, allowing for compulsory licensing.
However, the US Embassy continued to work covertly on behalf
of pharmaceutical companies. </big></big></p>
<big><big>
</big></big>
<p><big><big>In February 2010, the embassy was informed by a source
at Ecuador’s Intellectual Property Institute that two
compulsory licence petitions had been made under the decree. </big></big></p>
<big><big>
</big></big>
<p><big><big>The <a
href="https://wikileaks.org/cable/2010/02/10QUITO75.html">embassy
passed on the information</a> to one of the affected
pharmaceutical companies, US firm Abbott Laboratories, but
“asked that they not give attribution to the Embassy when
discussing with GoE officials”.</big></big></p>
<big><big>
</big></big>
<p><big><big>The ambassador also asked Washington to look into
whether Ecuador’s new compulsory licensing regulations were
compliant with the World Trade Organisation's (WTO)
Trade-Related Aspects of Intellectual Property Rights
agreement.</big></big></p>
<big><big>
</big></big>
<p><big><big><strong>Mobile phone manufacturers</strong></big></big></p>
<big><big>
</big></big>
<p><big><big>In the case of tariffs on mobile phone imports, the US
hoped that corporations could directly persuade the Ecuadorian
government to change its policy. The tariffs were imposed by
the Ecuadorian government in January 2009 to cut Ecuador’s
trade deficit. </big></big></p>
<big><big>
</big></big>
<p><big><big>Instead of terminating the tariffs by January 22, 2010,
as the WTO had stipulated, the Ecuadorian government planned
to gradually reduce the safeguards over six months. </big></big></p>
<big><big>
</big></big>
<p><big><big>A <a
href="http://wikileaks.org/cable/2010/02/10QUITO53.html">cable
from February 2010</a> said the US Embassy had hoped that a
visit by “three of the most recognizible companies in the
world” would persuade Ecuador to remove the tariffs. </big></big></p>
<big><big>
</big></big>
<p><big><big>However, the cable reported that representatives from
Apple, RIM (Blackberry) and Nokia concluded their three-day
visit “with the impression that they have limited to no
ability to influence GoE trade and investment decisions”.</big></big></p>
<big><big>
</big></big>
<p><big><big>The cable reported that the US and Canadian embassies
had helped the companies arrange meetings with the Ecuadorian
government, after which the representatives concluded that
their “arguments were not working with government officials
focused on protecting existing local jobs and complying with
President Correa's orders to eliminate Ecuador's [balance of
payment] deficit”.</big></big></p>
<big><big>
</big></big>
<p><big><big>In particular, wrote Hodges, the Apple and RIM reps
“concluded their visit with the impression that stories of how
private individuals and entrepreneurs can get rich writing
applications do not resonate with an openly socialist
government that regularly calls for wealth redistribution and
advocates a much greater government role in the economy”. </big></big></p>
<big><big>
</big></big>
<p><big><big>The ambassador concluded that, instead of “welcoming
these companies with open arms”, Ecuadorian government
officials had demonstrated that “the current government is
short-term focused and lacks the vision necessary to make sure
this country of only 14 million people remains economically
competitive in the coming decades”. </big></big></p>
<big><big>
</big></big>
<p><big><big>“As the companies figured out for themselves, GoE
leaders are not looking to unleash the entrepreneurial spirit
in Ecuador, rather are more interested in leveling society,
protecting what they have, and allowing foreign companies into
Ecuador on their terms.”</big></big></p>
<big><big>
</big></big>
<p><big><big>Since taking office, Correa has <a
href="http://www.theodora.com/wfbcurrent/ecuador/ecuador_economy.html">doubled
spending</a> on education, health and public infrastructure.
</big></big></p>
<big><big>
</big></big>
<p><big><big>In rejecting the economic model the US sought to impose
on Ecuador, the Correa government has <a
href="http://www.worldbank.org/en/country/ecuador/overview">significantly
cut</a> inequality, poverty and unemployment. Moreover, <a
href="http://truth-out.org/news/item/14605-ecuador-chooses-stimulus-over-austerity">Ecuador’s
economy has grown</a> at a rate of two to three times that
of the US since the global financial crisis of 2008.</big></big></p>
<big><big>
</big></big>
<p><big><big>[This is part six of <a
href="https://www.greenleft.org.au/taxonomy/term/5517">a
seven-part series</a> based on about 1000 secret US
diplomatic cables published by WikiLeaks, most of which have
never been reported on before.]</big></big></p>
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