Progress or Populism in the Andes?

by John Murphy

In a push to secure an extension of the Andean trade preferences for Ecuador, Minister of Internal and External Security Gustavo Larrea is in Washington on a charm offensive this week.  He argues that Ecuador should continue to enjoy duty-free access for its exports to the United States after Dec. 31, when the preferences are slated to lapse.  But concerns about the rule of law in Ecuador pose a real threat to any continuation of these benefits for Ecuador. I explained earlier this week:

The Chamber submitted testimony to the U.S. International Trade Commission for a July 22 hearing on the Andean Trade Preference Act (ATPA), which was first approved in 1991.  The Chamber notes Peru will no longer need the preferences once a bilateral trade agreement is implemented later this year, giving American workers and farmers the same open access to Peru’s markets that Peruvians have enjoyed since 1991.  The Chamber strongly supports extension of ATPA for Colombia pending Congressional approval of a similar accord with Colombia, which remains a top legislative goal for 2008.

But as the Chamber points out in its testimony, "a country may not qualify as a beneficiary if its government expropriates property belonging to a U.S. citizen or corporation or if it takes steps to repudiate or nullify any existing contract or agreement with a U.S. citizen or corporation."  Unfortunately, Ecuador and Bolivia have shown disregard for the rule of law in a number of ways, including these, raising questions about its eligibility to receive ATPA benefits.

Quito also attracted the ire of international media watchdogs earlier this month when the government seized several leading media outlets — including two television stations “watched by about 40 percent of the news audience,” according to the Washington Post.  The Latin Business Chronicle reports that "the government’s representative immediately changed the editorial line of the two stations," leading to protests from the Committee to Protect Journalists and the resignation of a respected finance minister.

Without respect for the rule of law, investment has plummeted in the two countries, even as it has boomed in Colombia and Peru.  Losing these valuable trade preferences is a real possibility.  Minister Larrea would do well to dedicate his efforts to shoring up the rule of law rather than conducting a charm offensive.