Quito, Ecuador - Old, New, Rich and Poor

Quito, Ecuador - Old, New, Rich and Poor

The capital city of Ecuador is a flagship for the country's economic stability but it struggles with the conflict between its indigenous heritage and globalization.
Quito, Ecuador, located in the northern part of South America, is nestled in a long, narrow valley between Volcano Pichincha to the west and the precipitous canyon of the river Machángara to the east.

Quito is the capital of Ecuador, a country whose political and economic history has followed the contour of its rugged volcanic topography. Ecuador's history is marked by recessions, political unrest and a revolving door of elected leaders and political coups. The late 1990s was one of the country's most unstable periods due to the hugely fluctuating oil prices, a principle commodity of the Ecuadorian economy. In 1998, Ecuador suffered its most severe economic crisis due to both falling oil prices and its massive foreign debt. Inflation skyrocketed and people's purchasing power shrank dramatically, leading to road blocades and a country-wide strike. When the banks collapsed in 1999, the then President of Ecuador, Jamil Mahuad, decided that the only way to prevent the national currency from continuing on its freefall was to switch over to the dollar. With official dollarization in 2000, the U.S. dollar became the country's legal tender and took over all the former functions of domestic money.

With the national dollarization program and a steady rise in oil prices, the Ecuadorian economy has remained stable. However, the medium to long term sustainability of the economic model of a tied currency is continuously quesitoned by economists. While dollarization helped curb inflation and create stability in the short-term, it has hurt exports and the government's ability to manipulate its own exchange rate. Ecuador's monetary fate now lies with the U.S. Federal Reserve. Pessimistic, educated Ecuadorians remark on the similarities between their government's dollarization program and that of Argentina's in the 1990's, which is largely blamed for the latter country's economic crash in 2001 and 2002.

Ecuador's history is marked by recessions, political unrest and a revolving door of elected leaders and political coups. Fortunately, with the national dollarization program and a steady rise in oil prices, the Ecuadorian economy has stabilized.
The Indigenous Factor

Ecuador's diverse terrain is matched by the diversity of its population, which has added to the country's political turmoil in recent years. According to official numbers, 25 percent of Ecuador's 13 million people are Native Americans, representing 40 indigenous nations, some of which date back to the 1st century AD. Conversely, indigenous groups claim that 45% of Ecuador is indigenous. Regardless of the actual number, the presence of the indigenous in Ecuador - including its capital city Quito - is evident. Every where you turn, the poorer, traditionally dressed indigenous walk side by side with the richer, western-style dressed mestizos (a person of mixed European -namely Spanish - and American Indian ancestry).

Beginning in 1986, the indigenous organized themselves at the national level to exert pressure on the mestizo-dominated political system. They created the La Confederación de Nacionalidades Indígenas del Ecuador (Confederation of the Indigenous Nationalities of Ecuador), known by the acronym CONAIE. CONAIE is the representative body of Ecuador's indigenous organizations and provides the indigenous with a political voice in Quito. CONAIE has helped move indigenous peoples from a marginal position to one of central importance in the Ecuadorian political structure. While some complain that CONAIE is being corrupted through its involvement in Ecuadorian politics, most people recognize the important role that it plays in incorporating the native population into Quito's political machinery.

There is increased political inclusiveness and a renewal of indigenous pride that is palpable in Quito and its outskirts. This has been aided in part by the appointment of indigenous leaders to the national government as a result of CONAIE's efforts. Throughout the city, signage is provided in Spanish and Quichua, the Amerindian language of indigenous Ecuadorians. The luxury hotels and top restaurants now proudly sell indigenous crafts and serve traditional indigenous foods like Cuy (roasted guinea pig), and it is not unusual to see businessmen and women dressed in traditional garb in the big city. This is a change from previous eras where the indigenous populations were marginalized and excluded from mainstream political and economic activities in Quito and beyond.

The City's Blend of Old and New

Before the Spanish colonial conquest, Quito was home to various native tribes including the Quitus from whom the city took its name. Quito served as the Capital of the northern half of the Incan empire in the beginning of the 16th century. In 1533, the Inca General Rumiñahui destroyed Quito so that it would not fall into the hands of the advancing conquistadors. Just a year later, after the Spanish conquered the Inca, the Spanish Lieutenant Sebastián de Benalcázar began rebuilding Quito on the ruins of the Incan city.

Quito stands at an altitude of 2,850 meters (almost twice as high as Denver, Colorado). It is a city of two halves, Old and New. Old Quito boasts the best of Spain's colonial architecture. Despite a 1917 earthquake, the city has the best-preserved, least altered historic center in Latin America. The city of Quito was one of the first cities to be included on the UNESCO Heritage List for its historical and cultural value in 1979. Here, the old colonial buildings, monasteries and churches surrounding the traditional Spanish plaza transport you to a bygone era. While the New City does not benefit from the area's brilliant history, it shines in its own right. With its gleaming high rise office buildings and bustling crowds of business people, New Quito is leading Ecuador into the twenty first century.

The preservation of colonial buildings in the Old City has not impeded the arrival of the future. Even there, modernity rears its head on the ubiquitous billboards of multinational companies, and the numerous international stores and hotels. And just when you think you have a grasp on this amorphous city, you are once again discombobulated by the circulation of the U.S. dollar. There are also nearly a million Ecuadorian emigrants living abroad who share money, technology and modern ideas with family and friends back home. In addition to oil, bananas, shrimp and flowers, Ecuador has proven succesful in exporting its own people, who provide a vital link between Ecuador and the global community.

The Oil Controversy

The presence of international oil companies in the eastern part of the country has frequently caused controversy and prolonged legal battles.
40% of the Ecuadorian government's revenue comes from petroleum, yet the presence of international oil companies in the eastern part of the country has frequently caused controversy and prolonged legal battles. ChevronTexaco, who originally set up operations in Ecuador in 1967 but then left the country about 15 years ago, is facing an ongoing multi-billion-dollar lawsuit led by indigenous groups for the contamination of parts of the Amazon rainforest. Ecuador has also made international headlines lately with its government's controversial move to take over U.S.-owned Occidental Petroleum. The Ecuadorian government took over the company in May 2006 claiming that Occidental breached the original contract that prohibited production outsourcing. Occidental demands international arbitration for what is seen as an unlawful public take-over, and in reaction, the U.S. Government has halted free trade talks with Quito.

Although Ecuador is a relatively small player in the international petroleum market, revenues from its existing Amazon oil reserves are critical in keeping the country's economy afloat. The Ecuadorian government in Quito has a major stake in the business since most of the country's public wages and national debt are paid with oil money. International oil companies are also keen on keeping a foothold in the country due to increasingly volatile global oil politics and the soaring price of oil on the international market. These factors are met by a resistant indigenous population that wishes to protect its way of life in the heretofore pristine Amazon basin, which is now suffering from one of the highest rates of deforestation in the world.

The current big issues the Ecuadorian government faces relate to the countries oil reserves in its eastern rainforest, but the "battle ground" remains Quito (and to some degree Washington). The government in Quito has done well to maintain stability and begin to promote diversity of political representation, but it still needs to manage many competing interests and work toward a balanced development approach that reconciles its indigenous heritage and the demands of being a part of the global economy.

Janie Hulse is a contributing author to Global Envision who has worked extensively with the Latin American region in both the public and private sectors.

To read another Global Envision article on Latin America and oil, see The Axis of Oil: China and Venezuela.

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