In a dramatic television address on January 9, 2000, Ecuadorian President Jamil Mahuad announced an economic austerity package designed to jolt the nation's economy out of its worst recession since the 1930s. In addition to privatization plans for some government-operated utilities, Mahuad indicated that subsidies on gasoline and heating fuel would also be cut in order to reduce Ecuador's budget crisis and overwhelming foreign debt. Mahuad also declared that the nation's currency, the sucre, would be eased out; in its place, Ecuador would adopt the U.S. dollar as its currency.
In office just seventeen months as Ecuador's fourth president in as many years, Mahuad's public support plummeted in the weeks after he announced his economic plan. After indigenous farmers stormed into Quito, the nation's capital, in protest, Mahuad was overthrown in a military coup on January 21, 2000. An interim government led by General Carlos Mendoza, nationalist military leader Lucio Gutierrez, and indigenous leader Antonio Vargas briefly assumed power before turning over the government to Vice President Álvaro Gustavo Noboa, whose position was quickly ratified by Congress. It was the first military coup in Latin America since 1991.
Jorge Jamil Mahuad Witt was born on July 29, 1949, in Loja, Ecuador, near the border with Peru. Mahuad's paternal side traced its roots to Lebanon while his mother's family originated in Germany. Mahuad attended the Jesuit high school San Gabriel de Quito and continued his education with a degree in political and social science at Pontificia Universidad Católica del Ecuador in 1973. For the next decade, Mahuad worked as an attorney and advisor to several banks in Quito. He also earned a doctorate in law from Pontificia Universidad in 1979. Mahuad married Tatiana Calderón and the couple had one daughter, Paola Mahuad Calderón, before divorcing. Mahuad subsequently had a son, Pedro Jamil Mahuad Romero, while in a relationship with a journalist based in Guayaquil.
Mahuad entered politics as a supporter of the Popular Democracy Party, a coalition group of centrist parties, in 1981. He gained a position as Secretary Minister of Labor and Human Resources under the government of Oswaldo Hurtado Larrea from 1983 to 1984 and was successful in his own bids for public office as a congressional representative from the Pichincha Province in 1986. He served in Ecuador's Congress from 1986 to 1988 and again from 1990 to 1992; in the interim, Mahuad studied at the Kennedy School of Government at Harvard University. He earned a master's degree in public administration from that institution in 1989. In 1992 Mahuad announced his candidacy in the mayoral election for Quito. Running as a technocrat and promising to reform some of the dire social and economic conditions in the nation's capital, Mahuad won the election and subsequently served as mayor until 1998. That year, he prepared to run in Ecuador's presidential election.
At a Glance . . .
Born Jorge Jamil Mahuad Witt on July 29, 1949, in Loja, Ecuador; married Tatiana Calderón (divorced); children: (with Calderón) Paola Mahuad Calderón and (from another relationship) Pedro Jamil Mahuad Romero. Education: Pontificia Universidad Católica del Ecuador, degree in political and social science, 1973, Ph.D. in law, 1979; Harvard University, M.A. in public administration, 1989. Religion: Roman Catholic. Politics: Popular Democracy Party.
Career: Lawyer, 1973-83; Secretary Minister of Labor and Human Resources, 1983-84; Congressional Representative, Pichincha Province, 1986-88, 1990-92; Mayor of Quito, 1992-98; President of Ecuador,1998-00; Academic fellow, Center for Public Leadership at the Kennedy School of Government, Harvard University, 2000–.
Mahuad came of age during a period of prosperity for Ecuador ushered in by the development of oil exports from the Oriente region in the 1970s. On a per capita basis, economic growth reached 11% in 1972 and 22% in 1973. During the 1970s Ecuadorians enjoyed rising literacy rates, increased life expectancy, and better health care standards. While state revenues boomed during this period, Ecuador's military governments, which ruled between 1972 and 1979, siphoned off much of the income for military projects and personnel. The government also increased public payrolls and subsidized energy consumption in the country, further increasing the strain on state coffers. To pay for massive infrastructure developments, consumer subsidies, and an expanding state sector, Ecuador's foreign debt grew from $500 million in 1975 to over $6 billion by 1982. When oil prices dropped after 1981, Ecuador's economy went into a sharp decline. Per capita gross domestic product plunged by 17% between 1982 and 1988, and debt payments took up over a third of state export earnings by 1984. By the mid-1990s Ecuador had the highest per-capita foreign debt in South America.
By the time Mahuad declared his intention to run for the presidency in 1998, conditions had deteriorated even further. Annual inflation was over 60% only about 40% of Ecuadorians had full-time jobs; and the effects of El Niño wreaked havoc on the nation's agricultural production, particularly its flower and banana export sector. The country's political arena was also rocked by the corrupt government of Abdalá Ortiz Bucaram, elected in 1996. After a series of public scandals, Bucaram was removed from office by Congress, which charged him with mental instability. Bucaram fled to Panama and was later charged with stealing $26 million in public funds during his six months as President. Mahuad's opponent in the election of 1998, Álvaro Gustavo Noboa, was Bucaram's anointed successor. Once again running on his reputation as a financial manager, Mahuad emerged victorious in the final round of the election over Noboa with 51.1% of the vote.
Mahuad's election was applauded by most international observers as a return to stability for Ecuador. In his first months in office he signed an historic accord with neighboring Peru that finally put an end to a border dispute that had defied resolution for generations.
While Ecuador and Peru had entered into arbitration under the Protocol of Rio de Janeiro in 1942, armed conflicts had lasted between the countries until 1995. In October of 1998 Mahuad signed the Binational Plan for the Development of the Border Area for Period 2000-2009 with Peruvian President Alberto Fujimori. Under the agreement the two countries declared a reciprocal free navigation zone on the Amazon River in the region and ceded certain disputed territories to one another. When the agreement went into effect in May of 1999 it formally ended over a half-century of hostilities between Ecuador and Peru.
Mahuad also moved ahead on several economic reforms during his first year in office. Among his priorities were increasing state revenue by cracking down on tax evasion; cutting government subsidies on gasoline, heating oil, and electricity; and closing banks that were insolvent instead of propping them up with government assistance. Each of the measures proved unpopular with the public. Although it helped to ease a budget crisis, the elimination of gasoline subsidies caused prices to climb by 60%. Banking reforms forced the closure of nine of the country's 40 banks, including its second-largest bank, Banco del Progreso. In the first six months of 1999 an estimated $167 million was withdrawn from the banks that remained solvent, further crippling the economy. A freeze on bank withdrawals in March of 1999 triggered a two-week general strike across the country.
Another general strike against Mahuad's austerity measures grew in momentum in July of 1999 as the Confederation of Indigenous Nations of Ecuador (CONAIE), led by Antonio Vargas, rallied opposition on the political left. The following month Mahuad announced that Ecuador would default on its foreign debt after negotiations with the International Monetary Fund had failed to reach an agreement on servicing the country's debt. With inflation running at well over 50% for the year and the sucre losing about 40% of its value, Mahuad's finance minister, Ana Lucia Armijos, resigned in late August of 1999. As public protests and a political stalemate blocked Mahuad from pushing through additional austerity measures, he announced his dollarization plan to the country in January of 2000.
Under Mahuad's dollarization plan for the Ecuadorian economy, the value of the sucre would be temporarily fixed at 25,000 to the dollar; after a brief period, the U.S. dollar would be adopted as the official exchange currency for Ecuador. By dollarizing the economy, Mahuad hoped to introduce a measure of stability to Ecuador's economy by linking it directly to the monetary policies of the U.S. Treasury. The policy prevented the government from printing up huge sums of sucres to pay off its debt, which had contributed to inflation in the past; instead, Ecuador would be bound to interest rates set by the U.S. Treasury.
Although Muhuad enjoyed a brief resurgence in popularity after his dollarization declaration in early January, CONAIE brought thousands of its members to Quito to protest the plan in the weeks following the announcement. In conjunction with the military establishment, CONAIE's protests succeeded in ousting Mahuad from office on January 21, 2000.
After a period of uncertainty, General Carlos Mendoza announced that vice president Gustavo Noboa, whom Mahuad had appointed to office after defeating him for the presidency in 1998, would serve as Ecuador's civilian president. A millionaire banana exporter, Noboa quickly gained the support of the business community and announced that most of Mahuad's economic reforms would be implemented.
Mahuad took up residence at the Kennedy School of Government at Harvard University as a fellow with the Project for Justice in Times of Transition. In July of 2000 he was indicted by Ecuador's Congress for his actions in freezing the country's bank assets while serving as president. The dollarization plan officially went into effect on September 12, 2000, and helped to cut inflation by about two-thirds between 2000 and 2001. The banking system gained $600 million in deposits in the nine months after dollarization was implemented, and the country's gross domestic product grew by 2.3% by the end of 2000. Although the country's budget was helped by revenues from rising oil prices in 2001, it remained stymied by its foreign debt and continuing political instability.