Hot spots: Ecuador. (International Insight).

Rather predictably after his strong showing in the first round of the presidential elections on October 20, the cashiered Army colonel and avowed banner bearer for the poor, Lucio Edwin Gutierrez, had no difficulty winning the run-off on November 24. He wound up with about 54 percent of the ballots cast, against his opponent Alvaro Noboa's 46 percent (no relation of the incumbent President Gustavo Noboa), and will take office on January 15. He emerged triumphant in large part because, during the course of his campaign, he moved the party he created, the January 21 Patriotic Society (reminiscent of the putsch in which he participated to overthrow the government of President Mahuad in 2000), more and more to the center of the economic policy spectrum.

He has been benefiting from the notion among local and international investors that the economic reality prevailing in Ecuador today will leave him no room for far-left experiments. He has been strengthening this notion by reassuring all and sundry that his government will preserve the greenback as the dollarized economy's principal legal tender, that the country will service its local and foreign debt under his stewardship, and that he will work with the outgoing administration of Pres. Gustavo Noboa to start negotiations with the International Monetary Fund.

Ecuador urgently needs a new agreement with the IMF, a pact that the Washington organization has not wanted to sign with the departing Noboa, mainly because of the latter's refusal (and political inability) to accept the fiscal belt-tightening and other austerity measures demanded by the Fund. Additional oil revenues from a new pipeline under construction will not start flowing into government coffers until late next year, and the country will need help in paying some USD 2 billion in foreign debt principal (USD 750 million) and interest in 2003. While an IMF stand-by or other accommodation would provide only a fraction of the needed amount, it would be instrumental in allowing Quito to tap credits from a variety of other sources.

Gutierrez was so successful in convincing his audiences of investors and financiers on a pre-election trip to New York and Washington of his determination to push for punctilious foreign debt service, balanced budgets, legal reforms, and measures to attract venture capital, that the price of the government's 2030 global bonds, which serves as one of the yardsticks of country risk and had plunged by 13 percent after the candidate's first-round victory, rebounded by 26 percent. At home, his success was in large part attributable to a phenomenon that currently sweeps virtually all of Latin America, namely broad popular discontent with the corruption, the nepotism, the influence peddling and the special-interest-favoring attitudes of the traditional political parties.

Tempting though it is to take Mr. Gutierrez' pro-IMF, pro-reform and pro-business pronouncements at face value, one should not lose sight of the fact that--although politically inexperienced--he is a highly intelligent man who has a keen sense for what his audiences like to hear. He has, after all, railed frequently against any intervention in Ecuador by ...