April 27, 2009 / 12:43 AM / 10 years ago

Ecuador's victorious Correa faces economic trials

QUITO (Reuters) - President Rafael Correa vowed to radicalize his “revolution” after a re-election victory made him Ecuador’s most powerful leader since it adopted democracy, but he must first deal with shrunken oil revenues and a weak economy.

Ecuador's President Rafael Correa (R) hugs Augusto Barrera, the newly elected mayor of Quito, during a meeting to celebrate Correa's re-election in Quito April 26, 2009. Correa cruised to a re-election victory on Sunday as voters ignored a sputtering economy to make the charismatic socialist the OPEC nation's most powerful leader in a generation. REUTERS/Guillermo Granja

The left-wing Correa won 52 percent of the vote, with a 24 percentage point lead over his nearest rival, former President Lucio Gutierrez, according to official results based on returns from 70 percent of polling stations.

Correa’s party was close to securing an absolute majority in the 124-member assembly, exit polls showed, making it easier for him to pass his proposals to limit the power of media companies and increase regulation of banks and the armed forces.

He quickly vowed to steer his OPEC country on a path toward what he calls “21st Century Socialism” after the first re-election in the 30-year-old democracy of Ecuador, where the last three elected presidents were toppled by unrest.

“More than change direction, it’s about deepening the changes we already started, radicalizing and accelerating them,” he told foreign journalists on Monday.

In a show of exuberance after his win, Correa dismissed concerns about the economy, even though Ecuador’s foreign exchange reserves dropped by half over the last six months, unemployment rose and growth slowed as the global financial crisis cut into vital oil revenues.

“I am very optimistic. To start with, 2010 is going to be a great year, and 2009 is going to go very well considering the crisis,” he said. “The worst has passed.”

Correa, who said Ecuador still faced considerable economic uncertainty, said on Sunday policies such as tough import restrictions had protected the economy and jobs.

He claimed the election as a victory for the generation of left-wing Andean presidents like Venezuela’s Hugo Chavez who challenge U.S. policies and influence in Latin America.

“The triumph is, of course, a slap on the back for the 21st century socialist political project at the national and regional levels,” said the U.S.-trained economist.


Correa, who expelled two U.S. diplomats this year and is shutting down a U.S. airbase in Ecuador, said he wanted “respectful” relations with the United States.

Chavez called his ally on Sunday night to congratulate him. Tough-talking Correa shares some of the Venezuelan’s charisma and a hard-line approach to opponents and foreign investors.

Correa has not nationalized any industries, but last year defaulted on $3.2 billion in foreign debt, a popular move in Ecuador, where many blame big investors for perennial poverty.

“He demonstrated he will defend our sovereignty ... and the economy will improve because he is not giving away our money to pay foreign debt,” said hotel concierge Fredy Torres, 46, in the coastal city of Duran.

Correa must now manage national finances eroded by a drop in oil prices that has limited funds available for social programs. A weakening economy could reignite street protests that subsided when Correa took office two years ago, bringing stability after a parade of seven presidents in a decade.

Correa has vowed to maintain a hard line toward investors, heralding tough negotiations to increase state participation in mining and oil deals. He is pressuring bondholders to sell their paper at steep discounts.

This aggressive stance has already hurt foreign investment, mainly in the oil industry.

“The current nationalist ... and heterodox policy approach is likely to remain in place,” Goldman Sachs analyst Alberto Ramos told clients. “Unless rectified, this should lead to growing economic underperformance in the years ahead.”

Correa, a former missionary, keeps a photo of the Pope by his desk along with pictures of his friends Chavez and Brazilian President Luiz Inacio Lula da Silva.

Slideshow (2 Images)

His mix of Roman Catholic morality and left-wing policies has proven popular, but will continue to face opposition from Gutierrez, a former coup leader whose support jumped in the last days of the race.

Gutierrez, a retired colonel, was driven from power by an angry mob in the capital four years ago, but is still popular in some regions of Ecuador.

Additional reporting by Maria Eugenia Tello; Editing by Eric Walsh and Patrick Markey

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