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Ecuador's Correa eyes more security, FDI

disclaimer: image is for illustration purposes only
by Staff Writers
Quito, Ecuador (UPI) May 9, 2011
Ecuadorian President Rafael Correa, empowered by a weekend "yes" vote in a referendum, is weighing measures that will boost urban security, contain urban crime and make way for more flows of foreign direct investment.

The outcome of the controversial vote was received with dismay by Correa's critics but lost on international business and investors who see the referendum facilitating the president's entrenchment and promoting greater economic and political stability.

The left-wing populist ally of Venezuelan President Hugo Chavez increased the country's military spending to appease the generals and use more use of the troops in law enforcement duties. Those spending increases will likely continue as Correa broadens his mandate following the referendum.

A fence-mending exercise was also in the cards after Correa angered existing investors in Ecuador by resorting to public quarrels and state seizure of assets. The government's intervention in the private sector left the energy industry shaken and prompted some investors to quit.

Brazil's state-run Petrobras was among companies that pulled out in angry response to Correa's intervention in the oil sector with the aim of forcing investors to relinquish larger shares of profits for his government.

The referendum doesn't add directly to the investors' woes but its outcome means Correa's administration will have greater say in limiting freedoms of both the judiciary and the media.

Critics condemned the outcome but industry analysts said greater government powers over judges and journalists, however controversial, would be liked by investors seeking assurances of security for their capital.

Ecuador is hoping to catch up with economic gains made in neighboring countries, including Brazil, Chile and Peru since the 2008 economic downturn.

In 2009 the country found itself marooned in capital markets after a $3.2 billion debt default. More recently, Correa has moved to reassure investors, with the aim of encouraging investment in hydrocarbons and mining sectors and having more funds at hand for the country's burgeoning military budget.

The 33 nations of Latin America and the Caribbean spent $57.8 billion on their militaries in 2009, the Stockholm International Peace Research Institute said. While still a fraction of the U.S. defense budget the figure reflected a major increase in spending.

Western Hemisphere states minus the United States and Canada increased defense spending by 8 percent in 2009 over the previous year -- and by 42 percent, in constant dollars, in comparison with 2000, Adam Isacson said in a Current History article.

While reliable estimates aren't available for 2010, the growth trend most likely continued, said Isacson, quoted by the Washington Office on Latin America.

Ecuador received as donations military equipment from neighbors, Brazil and Chile, and bought battle aircraft, helicopters and military equipment from China, India, Israel and Russia.

Despite an uneasy relationship with Washington, the United States gifted $1.2 of military equipment to Ecuador's fight against drug smuggling and anti-government border guerrilla groups.

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