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Monitoring the impacts of government and corporate behaviour in communities overseas.

Illegitimacy and Illegality confirmed by landmark Ecuadorian Public Debt Audit

Release Date: 26-Sep-2008

“The practical result is to show, on the basis of documentation that until now has been reserved or secret, what were the mechanisms used by the creditors in order to place Ecuador into debt, and to prove how the processes were similar in other countries. That will show to the world what until now has been ignored.”

In July last year the President of Ecuador and his government made history when the sovereign decision was taken to designate a Special Commission, comprised of national and international experts on debt and its impacts, to undertake a Comprehensive Audit of the Public Credit of Ecuador. Mandated with the task of auditing the external and internal debt contracted by the country with international banks, multilateral organisations and the big powers between 1976 and 2006, the Commission yesterday presented its Final Report to President Rafael Correa, confirming the presence of illegitimacy and illegality in Ecuadorian public debt.

Amongst the findings was the discovery that of all loans taken out, only 14% were invested in social projects, while 86% of the loans were used to pay debts. From the 80s onwards, nearly 70% of funds in the national budget were directed to the servicing of the public debt to the detriment of the budget for health, education, nutrition and other social programs.

The Commission’s report substantiates claims that the process of indebtedness has violated fundamental norms of national and international law, as well as international conventions, and confirms allegations of illegitimacy and illegality present in relation to Ecuador’s public debt. “Findings demonstrate that the debt was converted into an instrument used by the international creditors to extract our economic and environmental resources, to damage our sovereignty and contribute to the deinstitutionalisation of the State”.

The release of the report comes just three days before the country votes in a referendum on a new constitution that, if approved, will mean foreign companies operating in the mineral rich country of South America will face harsher terms to extract natural resources, and which will also give the President more legal backing to carry through with his threats to stop paying debts that have been deemed by the Commission as “illegitimate”.

The Ecuadorian Debt Audit reveals officially what debt campaigners and civil society activists from countries of South America, Africa and Asia have been claiming for decades – that public indebtedness has caused incalculable damage to the economies and the peoples of the Global South.

From 9–16 September, 2008, representatives from 50 global and regional networks, including Jubilee Australia, met in Ecuador’s capital Quito, for the First South-North Study and Strategy Meeting of the International Campaign on Illegitimate Debt. At the conclusion of the meeting a statement was released in which the participants from 36 countries made the resolution:

“To support the actions that the President of the Republic, the Government, and the social movements and organisations of Ecuador undertake so as to implement and put into practice in a sovereign manner the conclusions and recommendations that the Audit Commission formulates in its final report, including the possible suspension of payment on all credits which the audit has established and demonstrated to be irregular, illegal, illicit and therefore illegitimate, in accordance with their rights and obligations to defend and promote the human, collective and environmental rights of the population…” (Read the full Resolution of Support for Ecuadorian Debt Audit below) 

Jubilee Australia supports: the right of indebted countries of the South to undertake comprehensive audits; their right to take the necessary steps to stop paying debt that is being collected illegitimately by institutions of international credit and other lenders; and their right to favour the well-being of millions of families who for years have suffered the consequences of the inhumane policies of structural adjustment imposed by countries and institutions of the North.