Ecuador vs. the United States: Will Ecuador Lose, and How Badly?

In early June, Edward Snowden blew the whistle anonymously on the NSA’s snooping on millions of United States citizens. A few days later, he revealed his identity, and he has been on the run since then from those who want him back in the United States.

Snowden reached Russia, apparently on a hastily issued, and unauthorized, safe passage paper from Ecuador. We’ll have to assume that, based on the safe passage paper, Snowden thought that asylum in Ecuador was a safe bet. Little did he know that tit-for-tat, one-upmanship, and backtracking would leave him stranded in Sheremetyevo Airport à la Tom Hanks’s character Viktor Navorski in the movie The Terminal.

During his travel to Russia, the US revoked Snowden’s passport, making it impossible for him to leave the airport and head to an embassy, any embassy, to request asylum.

Then came the pissing match between the United States and Ecuador. US senators demanded that the United States revoke favored nation status to Ecuador’s imports. Rafael Correa, never one to back down from anything, it seems, did them a favor and withdrew from the agreement. At the same time, he offered the US $23 million to provide its government employees human rights training.

As it turns out, it was all for naught, as Correa has now said that Ecuador will not consider an asylum request unless Snowden can reach an Ecuadorian embassy or consulate, or reach Ecuador itself. And that’s something that isn’t likely to ever happen with Snowden unable to leave the Moscow airport.

What remains to be seen is whether the favored nation status will be restored. If it isn’t, will it even matter to Ecuador?

Ecuador’s Exports to the United States

Ecuador’s main exports are oil, flowers, bananas, shrimp, tourism, and chocolate. Oil accounts for over half of the total income from exports.

The biggest importer of oil is China. The way things are going, China may end up with all of Ecuador’s exportable petroleum in the next few years anyway, due to the payment plans worked out for billions of dollars in infrastructure improvements that China has funded.

Russia takes a large proportion of Ecuador’s flower production, with the United States taking most of the rest. So there could be some fallout if flower exports drop by any significant amount, especially since many of the flower producers have a lot of influence in Ecuador.

Most of Ecuador’s shrimp and much of the bananas go to the United States, so there’s likely to be some problems if exports fall due to higher prices there.

Arriba chocolate sales are on the rise (Arriba is known as the finest chocolate in the world, and it’s only produced in Ecuador). Arriba only goes into pricier chocolate products, so price increases aren’t likely to affect sales much. While exports of this chocolate to the US are increasing, most of it still goes to Belgium, France, and Switzerland.

The potential for economic fallout will come with any restrictions the United States puts on its citizens visiting or living in Ecuador. Expats in this country put about US$500 million into the economy every year, most of it from monthly retirement payments (Social Security, Canada Pension Plan, private pension plans, etc.).

Since US citizens make up at least 85 percent of the expats here, any restrictions on bringing money into Ecuador would present a hardship for the country’s housing developers, landlords, and restaurant owners (and their employees), although it would be an even bigger hardship for the US citizens already living here.

Many expats here are supporters of Correa’s stand against the United States, so any attempt to cut off the flow of tourist and expat money to the country will likely result in a loud outcry back in the home country.

Overall, the effect on Ecuador’s economy is likely to be, at worst, manageable. Which is probably why Rafael Correa felt safe pulling out of the agreement in the first place.

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