303. Intelligence Note RARN–27, Washington, July 9, 1970.1 2

[Page 1]

RARN–27
DEPARTMENT OF STATE
BUREAU OF INTELLIGENCE AND RESEARCH
INTELLIGENCE NOTE

July 9, 1970
ECUADOR: REFORM PERUVIAN-STYLE?

On June 21, in a well-executed maneuver backed by the military, 77 year-old President Velasco Ibarra assumed extraconstitutional powers as the only means to unblock opposition to his programs. The old caudillo’s future in the Presidential Palace (for the fifth time) is uncertain in light of the past history of his chaotic regimes and the dominant Ecuadorean elite which opposes his recent revenue measures and announced “restructuring.” Yet Velasco is displaying unaccustomed acumen and great determination as he seeks to achieve fiscal and reformist goals.

The takeover. Velasco assumed the “supreme mandate” (1) principally to resolve the “economic crisis” he created earlier this year by publicizing and exaggerating an unusually large but perennial budget deficit; his constitutional alternatives were exhausted when first Congress and subsequently the Supreme Court blocked his revenue-[Page 2]producing measures. Velasco also faced pressure from the military which had urged him to settle the finance issue and to crack down on extremists.

(1) Velasco has taken on legislative powers only. The Supreme Court, civil liberties, and local and provincial government appear largely unaffected. He announced he will step down at the end of his elected term and hand the presidency over to the winner of the June 1972 elections.

The President swiftly dissolved the powerful but do-nothing Congress and replaced the “absurd” 1967 Constitution by the 1946 Charter which accorded greater powers to the executive. Ecuador’s volatile students were put down, at least for the moment, by closing the main universities and abolishing the extremist-led secondary-school student federation. To put the administration’s fiscal house in order, the government has levied new taxes against the wealthier classes, established controls over a money-making but ineffective autonomous agency, and imposed an IMF-approved program of foreign exchange reform. Velasco also declared rent controls, in an obvious attempt to woo mass support.

A mild case of “Lima Fever.” Despite the reported absence of Peruvian-style reformers in the government or military, this regime seems bent on instituting substantial fiscal and social reforms. Jorge Acosta, the influential Defense Minister, announced that a military-led agrarian land reform in the sparsely populated east would take place and spoke approvingly of the Peruvian revolution. Also of significance may be the silence of Ecuador’s two leading 1972 presidential candidates, ex-President Camilo Ponce and popular Guayaquil Mayor Assad Bucaram. Their stance, in contrast to the shrill criticism of other politicians, strongly suggest that both foresee the possibility of regime success [Page 3] and want to be in position later to join the bandwagon.

Modest reforms possible. Velasco and the military probably lack the human and material resources to overturn the “old order” and institute a thoroughgoing modernization program on the Peruvian model. The realization of less ambitious aims lies within their capabilities, however, particularly if Velasco avoids goading labor, business, and students into forging another opposition force -- something that toppled three regimes in the 1960’s. He will also, of course, need to retain the currently enthusiastic support of the armed forces.

Velasco has avoided the sort of radical moves that thrice before led to his ouster. He is conscious of his advanced age and apprehensive over his place in history. This time he may foresake kicking over the traces as he strives to embellish his memory through enactment of at least a modicum of reform.

  1. Source: National Archives, RG 59, Central Files 1970–73, POL 15–1 ECUADOR. Confidential. Drafted by Sonandres and approved by Summ.
  2. After Velasco’s assertion of a supreme mandate, the authors of this note predicted he would institute substantial fiscal and social reforms.