ALL IS WELL FOR ME HERE IN ECUADOR
Hi there! Lots of bad news coming out of Ecuador, but I want to let you know that things are fine for me. First, for the last couple days there have been protests around Ecuador against the Free Trade Agreement pushed by GWB towards the people of Latin America as well as the deal that Ecuador has with Occidental Petroleum, the largest oil company in Ecuador. Personally, I think signing the free trade agreement now would be a disaster for Ecuador, a country which has had less than 10 patents registered in the last year. Without the research necessary to create products which can compete in an environment of “free trade,” Ecuador will be screwed, I think, in the immediate short term. I am still not sure how I feel about Ecuador’s agreement with Oxy. It’s a major contributor to Ecuador’s coffers simply by the amounts of taxes that they pay each year (I want to say that they are taxed about $1B each year). But, you can’t ignore the environmental devastation that they and other oil companies have wreaked on the Ecuadorean jungle. It would probably be best to re-do the agreement, but absolutely foolhardy to tell them to take a hike, as these protestors would like them to do. Anyway, with regards to these protests, I honestly feel that the international media was completely irresponsible. Yes, there were protests. Yes, there was a “state of emergency” declared. But, the reason for this state of emergency was to give the police and military the right to break up these protests if they got way out of hand. Which, they didn’t. I saw one report which declared that Ecuador was “busting apart at the seams” (Lance sent this along to me). I would honestly like to meet the person who wrote this to kick them in the ass for being overly dramatic. I was in Quito, the capital, for the last 4 days, and at no point did I feel unsafe, nor did I feel like I needed to get the 16 students who just arrived out of Quito. None of the program’s directors from their university felt that way at all, either. It’s not busting apart at the seams, though some half-assed reporter/blogger felt the need to report this. I got back to Cuenca yesterday, and things are quite fine here as well. Someone here in Cuenca dispersed anti-TLC (Free Trade Agreement) literature by using one of those “pamphlet bombs” that was referred to a few months ago in one of my first writings. The “explosive device” is not one that creates damage, it is instead something that shoots pamphlets into the air (perhaps a CO2 cannister) to fall all over people who are in the area. Anyway, the strikes have subsided, all is not “better” for the strikers, but the fact remains, Ecuador is, in general, a nation that protests peacefully. It was much worse 7 years ago when I was here and they froze the banks. When people can’t access their money, they get a little more desparate. That does not exist right now.
The other bit of bad news that ran across the AP wire was a plane crash that happened here in Cuenca about 2 hours after I landed here from Quito. This crash was the first in Cuenca in over 20 years, in spite of the fact that it is a somewhat difficult airport to land in due to the surrounding mountains. The airplane that crashed was a 15 person chartered Cessna, and it crashed because of one of two things: mechanical failure or (this is a rumor going around) a pilot or co-pilot who had been drinking. It got about 500 yards from the end of the runway before it crashed into a storage building for a tire company. Luckily, the workers at the tire company were at lunch. Unfortunately, 5 or 6 people on this Cessna died, but the largely Catholic people of Cuenca are declaring that God must be Cuencano, as about another 20 yards further was the fuel storage building for the tire company which would’ve certainly exploded and caused a much greater disaster.
So, anyway, I am fine, all my students are fine, and I am a bit irritated with the media for their sensational and irresponsible reporting of something that is not nearly as bad as they would lead someone unfamiliar with the situation to believe. Nevertheless, I promise that I will continue to take care of myself and exercise caution! 
I am getting ready to bring myself back to the US next week (arriving on Friday night to Newark Airport around 8:30 on an American Airlines flight from Miami). I expect at least 20-30 people there to receive me, undoubtedly with a marching band and lots of streamers. I will try to upload a few more pictures in the meantime, but the internet has been a bit spotty at work of late, so I may need to wait until I get back to the US before I upload the rest of the pictures.
Have a great weekend, everybody!
March 27th, 2006 17:02
Odie, if Free Trade Agreement was passed would a bunch of US companies bring manufacturing plants to Ecuador and hire the less expensive labor?
The cost of the product to all consumers would be less (due to the lower labor cost) and Ecuador would benefit from the increase in jobs. Anyway, I think that’s the fundamental idea and a more efficient use of resources.
March 27th, 2006 17:02
Odie, if Free Trade Agreement was passed would a bunch of US companies bring manufacturing plants to Ecuador and hire the less expensive labor?
The cost of the product to all consumers would be less (due to the lower labor cost) and Ecuador would benefit from the increase in jobs. Anyway, I think that’s the fundamental idea and a more efficient use of resources.
March 27th, 2006 17:53
I knew you would bite, Phil, and I am glad you felt it important enough to bite twice! Certainly, that’s the fundamental idea of free trade. It’s funny that the only people that are proposing free trade are the “haves” and not really the have-nots. I don’t see the people of Sudan lining up, hoping to start free trade with the US! There are any number of articles citing Mexico’s employment rates since NAFTA was signed. Those with a US slant tend to prop up the US’s job situation. Those that have an international slant are not such a big fan of NAFTA. It sure doesn’t seem that there is any end in sight to the number of illegal immigrants coming to the US from Mexico now, even though NAFTA was supposed to help job rates, right? Some other realities include: 1 — Not too many folks are getting along with the US right now. Following plans by GWB are not going to make you any more popular in the world right now, nor are they guaranteed to make you better. Bush has blown his international standing big time. Things that he is proposing as “good for another country” are being seen as nothing more than imperialism anymore. Nobody digs imperialism. 2 — Realistically, it’s not probable that a bunch of US companies would bring manufacturing plants to Ecuador, as the physical terrain is not necessarily the most “appropriate” for them to move things in and out efficiently.
Probably a better move for a “nothing” country like Ecuador is to wait and see what Venezuela is doing, and wait and perhaps to see what the Chinese are doing. I use the term nothing liberally, of course, to describe the global impact that Ecuador as a country has… Most things that happen here in Ecuador, right now, don’t mean a hill of beans to anyone outside of Ecuador! Anyway, while they are waiting and seeing, they can in the meantime work on beefing up their own education to build their own ideas and innovations. No Ecuadorian Left Behind!
Finally, I really don’t like what the Chinese are doing, to be honest with you, as they are inundating Latin America with discount stores that sell all sorts of shitty products at discount prices. Of course, when these things, most of which have a lifespan of 2 hours, break down, the folks can only purchase those same shitty cheap things to replace them. The Chinese government is underwriting these abysmal products, and laughing all the way to the bank.
March 27th, 2006 20:29
Uggh. Well, first I will agree with you on one thing. “Beefing up their own education to build their own ideas and innovations.” I would totally agree with that sentiment, and I believe education is paramount in building a successful and prosperous society. Everything Ecuador could do (even including some U.S. assistance) in education gets my support.
Next, while I understand GWB is not liked (I’m not his biggest fan either) I don’t think that is a very intellectual way of looking at free trade. To reject it, simply because he is for it, is in my opinion, sort of a cut your nose to spite your face attitude.
Also, I don’t accept the statement, “It’s funny that the only people that are proposing free trade are the “haves” and not really the “have-not’s.” I would tend to think the more educated “have-not’s” would indeed be for free trade. I think the economic analysis would show that the have-nots would benefit MORE than the haves. It would be something like the have-nots are 50% better off and the haves are 10% better off. Both groups are benefitted because it is a more efficient use of resources (meaning World GDP would be higher) But I guess distribution of wealth is really a political question….the economic point is really just that World GDP is higher.
Similarly, I don’t endorse the line of thinking that because Sudan is not lining up to get Free Trade, then it is therefore bad for Sudan or other have-nots. I don’t even know if that’s true, but if it were, I don’t think it would slay the underlying principles and impacts of free trade. I reckon Sudan could be wrong from time to time about things.
As far as the terrain issue, perhaps manufacturing was a poor example. However, a host of other industries would likely be interested in the Ecuadorian market (while small, there is always a profit incentive.) For example, your Chinese crap. Get a U.S. competitor in, that advertises and says “you don’t want this Chinese crap, pay $10 more for our more reliable good.” The consumer is benefiitted by that, and say the sample product is a toaster. You would need Ecuadorian sales people, Ecuadorians would likely be involved in the marketing strategy to their culture, Ecuadorians would be in the commericals, etc. Anyway, perhaps not an ideal example, but I just hope to make a point.
What I believe to be a legitimate concern is that, if not careful, sophisticated US companies could almost become monopolies in Ecuador and monopolies are bad. I think there would need to be proper controls or regulatory bodies to prevent US companies from flexing it’s muscle too much and keeping competitors out. I think monopolies could be a real concern, and precautions would need to be made.
Lastly, while I have not read all the data, I think Mexico’s economy was indeed benefitted from NAFTA. I would point you to this article as an example:
http://www.yaleeconomicreview.com/issues/spring2005/nafta.php
March 27th, 2006 20:57
I don’t have time to fully respond, but I would STRONGLY believe that those who live in a place with access to the US markets are those that stand to benefit however slightly. However, given that Ecuador has more citizens to look out for than just those citizens of Guayaquil, it’s simply ludicrous to think that they would be justified in attempting to sign this Free Trade Agreement. In looking at the successes of the average Mexican, I believe that all that NAFTA did was move the skilled workers north, to gain greater access to the US market (move closer to those haves!). Ecuador, without being fully educated/skilled, is simply not yet set, as a whole, to move forward with a FTA. Once educations are equalized a bit more, a FTA seems like a better idea. Free trade is a wonderful idea, given all things equal. The major production, however, still comes from the US, and serves to bring in all the major money there. Ecuador with its raw materials is left to fight for the scraps.
Take a look at this article:
http://irpshome.ucsd.edu/faculty/gohanson/mexico_wages.pdf
Many of the people migrated to the north. Those who stayed in Mexico earned a little more. The rest kept on going.
March 27th, 2006 21:33
Fair enough. I read your article (not in a super detailed way, but I think I picked up the main conclusions).
I would argue that this is largely where economics and politics cross. I prefer to stick to the economics. I don’t think this article means to say free trade does not increase Total GDP or at all deny the Total Benefits of free trade. In fact it cites to wage convergence and increased GDP (sometimes more gradual than it would like, but still seems to acknowledge the impact) but is focused on where the benefits end up. And that in my opinion, really becomes a political question then.
Presumably in my opinion, there could be a way that the beneficiaries in Guayaquil, could relinquish some of their benefits from free trade to subsidize Cuenca and increase Cuenca’s education to catch up. Seemingly, that would be the best-practice solution in my mind, but that’s starting to be politics and I hate politics.
Also, I’m not so against migrating to better trade areas. Most US cities are on waterways, etc. for that reason. If you want wealth, being accessible to trade is important. Wealth is generated by efficient uses of resources and trade furthers that efficiency.
I don’t think everyone is entitled to live in the mountains or something and feel they should get what everyone who lives in more accessible areas get.
Anyway, I think this is more of a political issue about FTA’s than it is an economic issue about free trade, so I’m fine. I just defend my free trade from an economic standpoint.
March 27th, 2006 21:46
It is undoubtedly a political issue. All things equal, you would think that Free Trade maximizes everyone’s earnings. But, humans get involved, and there is no separating the humans (politics) from economics. Economics are absolutely an idealic science. That said, South America is far from ideal.
Try telling the rest of the folks in the US that you don’t mind the Mexicans (and various other countries — I don’t want to use Mexico and seem like I am using Mexican as a negative term) “migrating” into the US. There are a whole lot of “minutemen” walking around the borders that wouldn’t be such a fan of that statement!
FTAs work perfectly in a vacuum. interstatal “trade” is free, pretty much, and a country can control its own laws. With 200 countries or however many there are, you just can’t implement, justfully, a FTA around the world. They depend on everyone wanting to play fair. Not going to happen.
March 28th, 2006 02:17
For the record, I am all for immigration. But I definitely hear you.
On a more important note, how is Princess Jo Jo Bee doing?