Template for Pakistan? The debt-defying decisions of Ecuador’s Rafael Correa
For weeks, Rafael Correa has featured in the news only in relation to Edward Snowden. But then today, in Pakistan’s Frontier Post of all places, appears a reference to the other time the Ecuadorean president insisted on going his own way, in defiance of accepted norms. “In 2008 he repudiated Ecuador’s national debt of $ 3 billion and announced the country would default and fight creditors in international courts. He succeeded eventually in getting a 60% write off on Ecuador’s debt,” writes Nadeem M Qureshi admiringly.
Mr Qureshi is a Pakistani politician, one of a new breed in South Asia, that talks social media, “micro patriotism” and the need to rewrite the social contract.
It might be honest emotion or just so much humbug.
What is hugely interesting is Mr Qureshi’s admiration for Mr Correa’s debt-defying decision.
Essentially, Mr Qureshi wants Pakistan to go down the Ecuadorean route. President Zardari’s administration has added $20 billion to the $40 billion Pakistan owed in 2008 but the people are worse off, so why should they be required to pay back the money, asks Mr Qureshi. “Is it lawful for a country to refute debt taken on by corrupt politicians? And, are there any precedents for this? The answer to both questions is yes.”
He goes on to detail the concept of ‘odious debt’ established in international law by Alexander Nahum Sack, a Russian professor of law who eventually took American nationality and worked for the US Justice Department. Mr Sack used precedents from the 19th century to buttress his 1927 doctrine. These included the Mexican government’s refusal to pay debts acquired by the emperor Maximilian I, and US rejection, after annexing Cuba, of debts acquired when it was a Spanish colony.
After Jean Claude ‘Baby Doc’ Duvalier’s overthrow in 1986, 66 US senators supported a resolution calling for cancellation of Haiti’s debt on the grounds that the money was misused; half the debt was written off. And Mr Correa repudiated Ecuador’s national debt of $ 3 billion in December 2008, arguing that the bills had been run up by a corrupt and despotic administration. As an economist, the Ecuadorean president probably knows more about Alexander Nahum Sack’s doctrine of odious debt than does Pakistan’s President Zardari. He also probably has more of an appetite for a fight.