International multilateral banks and governments often encourage countries to honor the payment of their public foreign debts regardless of how this affects national budget allocations for the implementation of rights such as primary education or a national health system. They argue that countries that do not pay their debts will not be able to continue borrowing, nor will they attract international investment. This argument ignores the fact that, although countries continue to devote large percentages of their budgets to these payments, their indebtedness continues to grow. Moreover, a major portion of new debt is devoted to covering former debts with other international financial institutions. Consequently, most of the money borrowed each year does not go toward improving the living conditions of those who pay the debt and lack services.
In February 2003, the newly elected President of Ecuador, Lucio Gutierrez, signed another agreement with the International Monetary Fund. The country’s twelve million inhabitants understood that this new Letter of Intention meant more indirect taxes, less social investment, the accumulation of new debt, and an explicit guarantee that a large portion of the national budget would be devoted to servicing foreign debt indefinitely.
In Ecuador, the allocation of funds for foreign debt service in the national budget far surpasses that earmarked for education and health. In the 2002 budget, a total of $1.85 billion was allocated for public debt servicing (34 percent), while budgets for education and health totaled $575 million (11 percent) and $297 million (5.5 percent) respectively. Prioritizing the blind payment of foreign debt has meant repeated violations of economic, social, and cultural rights, since the government is forced to divert funds that should otherwise be used to ensure minimum standards and obligations on human rights to which it is bound by the Ecuadorian Constitution and international human rights instruments that Ecuador has ratified.
Since 1997, the Centro de Derechos Económicos y Sociales (CDES), an Ecuadorian NGO, has responded to this trend by documenting and challenging the link between so-called budget constraints, foreign debt servicing, and economic and social rights. Using the human rights framework, we seek to raise awareness and to encourage citizens to speak out against the violations that ensue when the government—often at the urging of international actors—prioritizes foreign debt servicing over social investment. Our actions have included public campaigns and citizen participation in budget allocation and monitoring, as well as legal cases that challenge the government on legal grounds, both nationally and internationally, for not fulfilling its obligations in terms of economic and social rights.
After having exhausted all domestic procedures to challenge human rights violations, including two judicial mechanisms regulated by the Ecuadorian Constitution (acción de amparo y acción de inconstitucionalidad), without having achieved any rulings in our favor, in December 2000, CDES filed a petition on behalf of the National Union of Workers of the Ministry of Health before the Inter-American Commission on Human Rights. This petition argues that, by drastically reducing its national health budget in 1998, the Ecuadorian government has violated its citizens’ right to the progressive realization of the right to health, and has failed to offer any judicial remedies or mechanisms for such violations to be challenged.
The petition claims that the need to guarantee and implement economic and social rights requires governments to prioritize the fundamental rights of the population above other obligations, such as debt service payments or compliance with IMF conditionalities. During the period referred to in this petition, foreign debt servicing was not only protected, but actually increased, while Ecuador was asked to reduce its public health budget substantially and the country suffered a major economic crisis—60 percent of the population fell below the poverty line. The petition asserts that these policies violate the Ecuadorian Constitution, as well as the American Convention. The petition also points out that the policies are discriminatory since the groups most affected by the lack of resources are children, women, and the poor who lack access to adequate health care.
Since international courts have yet to deal extensively with economic and social rights violations, the petition illustrates the various ways in which these rights are judiciable. The petition has been delayed by various circumstances and, while the Commission has not yet admitted the petition, it has been a powerful tool to show both legal practitioners and activists the often-neglected connections between macroeconomic policy and human rights.
CDES has also used the human rights framework to help develop social monitoring mechanisms. In 2001, the Inter-American Platform for Human Rights, Democracy and Development, of which CDES is a member, organized a series of local and national ethical tribunals in Peru, Bolivia, and Ecuador. This led to the “Andean Ethical Tribunal against Foreign Debt,” a regional event in November 2001 in Quito hosted by civil society to promote accountability of state and nonstate actors in massive violations of rights. It brought together a summary of documented cases, the results of local and national public hearings, high profile experts on debt, economic and social rights lawyers, and well-known judges and public figures from each country to identify obvious violations of rights. All cases were built around national legislation and international commitments of the country in question, particularly constitutional provisions regarding economic and social rights.
One of these cases, documented by CDES, shows how the acquisition of four ships by an Ecuadorian private company in 1979–1980, for a total of $56.9 million, later, in 1983, became part of the foreign public debt Ecuador negotiated with the Paris Club and Norway. With all its complexities, this case is relevant because it shows in concrete terms the elements essential for the recognition of illegitimate debts.
These ships were originally bought by a private company with Ecuador as the guarantor. The Norwegian government promoted the sale of these ships to Third World countries as a way of helping Norwegian ship companies avoid bankruptcy. A few years later, the private debtors fell behind in their payments and the government of Ecuador became responsible for this debt. For the past fifteen years, and after seven agreements with the Paris Club, the debt has risen from its initial amount of $13.6 million to $50 million. So far, Ecuador has already paid $26.8 million. To make matters worse, the current location of the ships and their use remain unknown.
This debt has obviously not benefited the people of Ecuador—so much so that civil society in Norway and members of the Norwegian government have admitted that they are ashamed that these loans could have been issued.
On these grounds, CDES requested a final expert opinion from the Commission for the Civil Control of Corruption—by law an autonomous entity in Ecuador in charge of denouncing and monitoring corruption cases in public policies and actions. Its report, made public in November 2002, “requests from the national authorities, through diplomatic channels, the cancellation of all of the obligations contracted between the Norwegian government and Ecuador through the Paris Club, because of their illegitimacy.”
CDES has launched this case in part because it strongly believes that such a clear international precedent could help to ease the burden that illegitimate debts place on national budgets. Although the amount of this debt is tiny in comparison to the country’s total debt-servicing payments, the amount allocated yearly to the payment of this particular debt could be used to pay 42 percent of the country’s vaccination campaign, which would benefit 672,000 children under five—roughly one-third of the population this age. It could also be used to cover the salary of all public teachers in the country for six months. Therefore, this money could significantly contribute to the progressive realization of economic and social rights.
In conclusion, a rights approach to challenging severe and increasingly common foreign debt burdens can highlight the need for states and international actors to prioritize human development instead of getting caught in the vicious cycle of debt accumulation. While Ecuador’s debt is large, these judicial and social approaches can bring progress in the realization of human rights standards and obligations.