[Peace-discuss] WikiLeaks shows US fought Correa on behalf of big business

Wed Oct 1 00:44:21 EDT 2014

  WikiLeaks shows US fought Correa on behalf of big business

Monday, September 29, 2014
By Linda Pearson <https://www.greenleft.org.au/taxonomy/term/4261>
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.

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.

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.

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.

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).

*ICSID*

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.

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.

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%.

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.

According to a July 2009 cable 
<http://wikileaks.org/cable/2009/07/09QUITO579.html>, 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.

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."

Another article stipulates that foreign direct investment should be 
complementary to state investment.

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".

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.

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.

*US opposition*

An October 27 cable <http://wikileaks.org/cable/2009/10/09QUITO905.html> 
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".

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.

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".

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."

In other words, Correa's government had offended the US by asserting 
Ecuadorian sovereignty and rejecting the economic policy dictates of the US.

A later cable <http://wikileaks.org/cable/2009/11/09QUITO973.html> 
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.

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."

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".

*Pharmaceutical companies*

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.

Correa's proposal threatened to cut the profits of US pharmaceutical 
companies in Ecuador, whose patent monopolies allowed them to dictate 
prices.

Correa also announced that the public tender system for medicines would 
be reformed to favour local producers. This was described in a cable 
<http://wikileaks.org/cable/2009/10/09QUITO998.html> as another 
"significant blow to U.S. pharmaceutical companies".

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.

Hodges reported <http://wikileaks.org/cable/2009/10/09QUITO998.html> 
that US companies were "trying, through well placed contacts, to get a 
better idea of President Correa's core objectives".

A week later, another cable 
<http://wikileaks.org/cable/2009/10/09QUITO893.html> 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".

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".

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.

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.

The embassy passed on the information 
<https://wikileaks.org/cable/2010/02/10QUITO75.html> 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".

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.

*Mobile phone manufacturers*

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.

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.

A cable from February 2010 
<http://wikileaks.org/cable/2010/02/10QUITO53.html> 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.

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".

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".

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".

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".

"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."

Since taking office, Correa has doubled spending 
<http://www.theodora.com/wfbcurrent/ecuador/ecuador_economy.html> on 
education, health and public infrastructure.

In rejecting the economic model the US sought to impose on Ecuador, the 
Correa government has significantly cut 
<http://www.worldbank.org/en/country/ecuador/overview> inequality, 
poverty and unemployment. Moreover, Ecuador's economy has grown 
<http://truth-out.org/news/item/14605-ecuador-chooses-stimulus-over-austerity> 
at a rate of two to three times that of the US since the global 
financial crisis of 2008.

[This is part six of a seven-part series 
<https://www.greenleft.org.au/taxonomy/term/5517> based on about 1000 
secret US diplomatic cables published by WikiLeaks, most of which have 
never been reported on before.]

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