The political economy of Ecuador’s external debt default

Abstract

The default of the 2012 and 2030 Global Bonds during the early stages of the Alianza PAIS government in Ecuador is best understood in the context of the social conflicts that characterized the exhaustion of neoliberalism in the country and the struggle between different fractions of capital for the direction of the process of accumulation. The restructuring of external debt and the new wave of public borrowing facilitated a boost in public spending that spurred economic growth and provided a ‘fiscal pacification’ of social unrest and political instability. The movements in public debt have also been a lever for State and geopolitical repositioning that reflects a new moment in the correlation of social forces and hegemony in the world economy. In this new scenario, however, Ecuador has not overcome the structural imbalances and contradictions that underpin its external debt problematic.