Citation
Political decision making in Ecuador: the influence of business groups

Material Information

Title:
Political decision making in Ecuador: the influence of business groups
Creator:
Hanson, David Parker, 1939-
Place of Publication:
Gainesville, Fla.
Publisher:
University of Florida
Publication Date:
Copyright Date:
1971
Language:
English
Physical Description:
xi, 378 . : illus. ; 28cm.

Subjects

Subjects / Keywords:
National politics ( jstor )
Political ideologies ( jstor )
Political influence ( jstor )
Political interest groups ( jstor )
Political organizations ( jstor )
Political parties ( jstor )
Political power ( jstor )
Political representation ( jstor )
Politicians ( jstor )
Politics ( jstor )
Business and politics -- Ecuador ( lcsh )
Dissertations, Academic -- Political Science -- UF ( lcsh )
Political Science thesis Ph. D ( lcsh )
Politics and government -- Ecuador ( lcsh )
Genre:
non-fiction ( marcgt )

Notes

Thesis:
Thesis--University of Florida.
Bibliography:
Bibliography: leaves 359-377.
Additional Physical Form:
Also available on World Wide Web
General Note:
Manuscript copy.
General Note:
Vita.

Record Information

Source Institution:
University of Florida
Holding Location:
University of Florida
Rights Management:
Copyright [name of dissertation author]. Permission granted to the University of Florida to digitize, archive and distribute this item for non-profit research and educational purposes. Any reuse of this item in excess of fair use or other copyright exemptions requires permission of the copyright holder.
Resource Identifier:
024209501 ( AlephBibNum )
01573364 ( OCLC )
AAP1456 ( NOTIS )

Downloads

This item has the following downloads:


Full Text














POLITICAL DECISION MAKING IN ECUADOR:
THE INFLUENCE OF BUSINESS GROUPS








By

David Parker Hanson


A Dissertation Presented to the Gr.aduate Council
of the University of Florida
in Partial Fulfillmcnt of the Requiremecnts for
the Degree of Doctor of Philosophy

UNIVERSITY OF FLORIDA
1971

























Copyright




1971


David Parker Hanson













ACKNOW' LEDGEI.1 IENTS


It is perhaps unfortunate that "acknowledgements" have become

such a routine part of all dissertations. There should be more

meaningful .a'.'~ to ackno,.'ledge w.. ith gratitude the help and support

of the many people withouthout *.,ho n this dissertation v.'ould never have

bee n v written. Among these people to '..'honm I am deepIly in debt are:

Professor Alfred Diamant, v.hose support and encouragemn-ent helped

make graduate school possible; Professor Manning Dancir, who w.,as

perhaps piarmrily responsible for making graduate school stimulat-

ing and meaningful: and the late Professor Charle-; D. Farris, wvho

beat into obdurate heads the mnea.nings of scholarship and logical

inquiry. To my '..ife, Barbara, I o.we the support, both moral and

financial, that got me through. Professor Ruth MI.lQuov.'n's sensible

councsling and personal interest navigated many of us through the

shoals of graduate training.

The list of people w..'ho participated with me in this dissertation

is almost endless. Professor Tom Page's friendship, support and

guidance have been invaluable for all aspects of the project. Ricardo

and Noella Levy are more than close friends, they have shown me

much of what I have seen of EcuaLdor. Professor Alfredo Pareja

Dic.caniseco helped me form a point of view. about Latin America

1ii







and gave me a gr-at deal of assistance in doing the specific research

for the dissertation. IMr. Mladison Monroe Adamns, Jr. gave me

absolutely invaluable help in the study of the but-inese groups.

Thanks al. go o to Sr. Aleiandro Carrion, Ing. Carlos Rota, and Dr.

Ale-. ndro ''e:g', T.oral, \.-ho leave of their time and provided -nuch of

the information and many of lthe contacts on w.'hich this di:sertation

has been based.

It would be- impossible to thank each of my friends v.'iho helped to

make n-i' stay in Ecuador so enjoyable. Ho'..ever, special mention

must be made to Alicia BEdoya, Jorge D-ique, John Solomon, and

Ed and Mary Andrevs The list of people -..ho gav.e of their time and

patience is sLiogested by the cited inter'.,-ews. Equally as many

people vwho \v.e re of help have not been mentioned. Because of the

press of space, it is impossible to give them all more than a blanket

ackno'.'.ledgement of thankl.c,.

A closimn ackno..:Aledcl ent must be made to Dorothy'. Bow.'ers,

v lo lias pe rforn-'ed ims-ssi.'e labors in editing and ty ping the mnanu-

script. Her position in this roll call is not a vceflection of tle

enormous help she has been.


IKa la mazoo, M ic Ii an
February, 197]











ACKNOWLEDGEMENTS . . . . . .

LIST OF TABLES ..............

LIST OF FIGURES ..............

ABSTRACT . . . . . . . . .. .

Chapter
1. INTRODUCTION ...........

11. THE SOCIAL CONTEXT . . . .

The Land . . . . . . .
The People . . . . . .
The Culture . . . . . .

Il1. BUSINESS GROUPS OF THE COAST

The Economy .........
Business Groups . . . . .
The Pattern of Business Ownership

IV. BUSINESS GROUPS OF THE SIERRA


on the Coast .


Business and the Social Structure of the Sierra
Business Groups of the Sierra . . . . .
Patterns of Business Ov.wnership in the Sierra
The Relation cetveen the Sierra and the Coast

V. THE BUSINESS ASSOCIATIONS . . . . .

VI. THE STRUCTURE AND DYNAMICS OF
GOVERNMENT .................

Introduction . . . . . . . . . .
Parties and Elections . . . . . . .
The Structure and Process of Decision Making
in the Government . . . . . . .

VII. CAMILIO PONCE ENRIQUEZ: JULY, 1959 TO
SEPTEMBER, 1960 . . . . . . . .

Introduction . . . . . . . . . .

v


* iii




. 1
ix









S 14
14



17
S 23

S 45

* 45
S 50
83

S 90


90
91
118
120

124



171

171
171

183


205

205






Clhaptc r

olit c il Silu i ion . . . . . . . .
Jl.ecr-uilt ment tlo 1 h Ponce Aldministration .
Dcciion l l;in Urndor Ponce . . . . .
The1 JUNTA 1.IONl-TAR1A . . . . . .

VII. JOSE M.IAR1.A VELASCO IBAIRA . . . . .

P political Sit tion . . . . . . . .
P olilic l ecrui nt . . . . . . .
Policy Coal.itions and Recruilment to Decision
Making Posi on . . . . . . .
Decision M making . . . . . . . .
Dcci ,ion Making: The Tax on Imported Wheat


Epilogue to Velasco


IX. THE ADMINISTRATION OF CARLOS JULIO
AROSEMENA NONROY . . . . .

Political Situation . . . . . .
ecru t m e t . . . . . . . .
Decision Making. The Law of Industrial
Der- lopnc T ent . . . . . . .
Pecru-itment and Decision makingg for the
JUNTA MONETARIA . . . . .

X. SUMMARY AND CONCLUSIONS . . . .

APPENDIX A . . .. . . . . . ..

APPENDIX B . .. .. ... .. ... .

LIST OF REFERENCES . . . . . . .

BIOGRAPHICAL SKETCH . . . . . . .


P.1 '

2u;
210
217
219

228

228
233

239
246
268
272



275

275
278

291

303

317

338

355

359

378


. . . . . . . .


.
.
.







LIST OF TABLES


Table Page

i. Decisions to be Analyzed . .. .. .. . .. . 10

2. Scope of Issue Involvement . . . . . . .... 10

3. Employment and Earnings in Sectors of the
Ecuadorean Economy in 1963 . . . . . . . 46

4. Major Agricultural Products in Ecuador in 1957 ..... 47

5. Major Exports for 1960. ................. 48

6. Industrial Employment by Sectors . . . . . . 49

7. Exports and Size of Business of the Largest Exporters 68

8. Exporters Classified by Size and Number for 1960
and 1961 . . . . . . . . .. . . . 70

9. Distribution of Businesses by Size . . . . .... 73

10. Characteristics of Businessmen in Ponce Political
Organization . . . . . . . . . . . 212

11. Characteristics of Businessmen in the Ponce Cabinet .. 215

12. Recruitment to the JUNTA MONETARIA . . . ... 220

13. Characteristics of Businessmen in Velasquista
Party Positions . . . . . . . . . . 234

14. Relation Between Business and Political Positions . 234

15. Situations of Businessmen Who Held Central Political
Positions . . . . . . . . . . . . 235

16. Economic and Social Positions of Businessmen in
the FDN . . . .. . . . . .. ...... 288

17. Differences Between Businessmen in the PLR and
the FD N . . . . . . . . . . . . 288







Table Page-

18. Bencfi;s of the 1957 Indu.strial Develop:ne t Law . 293

19. Rccruiiimcnt to Political Positions . ... . . ... 321

20. Specialized clecruitlrnit withinn the Business Community 322

21. The lRelatuion of Political and Economic Positions of
Bus inc -en . . . . . . . . . 323

22. Recruitnii'.it by cuggiuri', BusinuEs s5 S ctor and
Economy ic Position .. ... ..... ... . 325

23. Recruitment and Decision Making . . . . .... 329

24. The Guayaquil Business Empires ......... . 343

25. Significant Independent Groups .............. 353

26. Major Interlocking Group of the Sierra ......... 355

27. Minor Business Chains of the Sierra ........... 357


vi ii











LIST OF FIGURES


Figure Page

1. Distribution of Land and Income in Ecuador . . .. 20

2. il.l ribi:tion of R~pnana Lands in Ecuador .. ..... 53

3. Relations Among Guayaquil Business Empires . . 86





,A'. bstI rct of Di ssc rtatinn 1'Prsenltcc to the
Gr.dlu.:te Council of thl, Univers-ity of Florida in Partial Fulfillment
of the lc quire mcts for thu Dclgrec of Doctor of Philosophy



POLITICAL. DI)ICISION lMAlKlrNG ]N ECUADOR:
THl: INFLUENCE 01' BUSINESS GROUPS

By

David Parker Hanson

June, 1971

Chairman: Dr. O. Ruth McQuo..wn
Major Departinment: Political Science

Tw.o problems were posed for the dissertation. The first was to

determine the extent to which businessmen in Ecuador influenced

political decisions on economic issues betv.'een 1959 and 1962. The

second was to determine the extent to which the political influence of

a businessman v.'as determined by his economic position.

The condition and organization of business was analyzed to deter-

mine the probable political goals of the various groups, and the

patterns of power and dependency among the various groups. It was

determined that a central set of Guayaquil businessmen were quite

powerful because of their control of credit and marl-et conditions.

Banana grov:crs, wheat lfarinmers and other smaller businessmen

.were anioni the most di scontented.

The rec uitrnent of busincssmeln to the political campaigns and

cabinet:; b.:twc.n 1959 anid 19(62 was studied Relati\'cly few business-

mein participltt-d in the camip:iigns, h.lil- mnc,st of the people in thi

'C







caibincts weorc busineii-ssmen. However, the campaign businessmen

often camre from the most powerful economic groups while the cabinet

ministers wvere more likely to be smaller businessmen, A plurality

of businessmen in all positions, came from Guayaquil.

The deccisions made by the government generally favored the

inierests5 of thc, incumbents. Groups not represented in government

had little success in trying to influence decisions. Therefore it was

concluded that the i>nost powerful business groups could generally

control decision making through recruitment of their representatives

to deocision making positions.













CHA. PTER I


INTRODUCTION


Who governs? Dahl's question echoes a problem that hlas been

before political science since the days of Aristotle; what are the

means and e::tent to which private groups can influence public decision

makers. Tw.'o general answers to this question have run through

political theory. The "power elitists" have generally held that

societies are usually run by an informal coalition of the economic,

social, political, and military elites. Decisions that would challenge

the pre-eminence of the "oligarchy" would not be made; the power of
3
the state will be used to defend the positions of the few on top. Outside

groups would only lay claim to state authority on the issues on which

the interests of the oligarchy '.'.'ere not involved. The pattern of elite

rule v.'*ould not be significantly limited by formal constitutional proc-

esses or public debates. It %would be rare for a politician to be


Robert Dahl, V.'ho Governs (New.. Haven: Yale University Press,
1961).

2The classic statement of the elitist position .'was made by C.
Wright MillF., T! P'ow..r Elite (,New York: Oxfkrd University Press,
1957); Floyd l Iillter, Colinmlim:' Puo.'-r Structure (Chapel -lill
University of NoI rth Carolina Press, 1953).

31-unter, p. 23-; M ills, p. .1.

I







clectcd who represented mass interests. Once elected lie would be

either isolated or co-opted. 4

Mainy democratic theorists answer that there is competition withinl

elite circles. Elites who are losing internecine battles wvill be encour-

aged to find mass allics to broaden thcir power base.5 If forced to a

choice, politicians wouldl d rather have mass votes than elite financing,6

As a result, the existence of a social hierarchy is not necessarily

incompatible with a' political system in which lower class groups can

appeal to government to redress their grievances against elites. 7In

evidence for the pluralist arguments is the sharp political conflict in

most demnocracies, the relatively high level of mass supports given to

governme-ints, and the enactment of government programs regulating

busincss- and offering welfare measures for lower class groups

against the opposition of elites.

Ncoelitists question the scope of the issues that arc raised. 9The


4
Mills, pp. 245-247.

5Arnold Rosc, The Power Structurc (Ncew, York: The Oxford
University P--rcss, 1967), .. 102.

6 bi d, p. 2.

7E. E- Schattschneider, The Sem-i-Sovercican People (New York:
1-olt, Rincehart and Vinston, 1960), p. ?-; David Truman, The Govern-
mental Process Ne York: Knopf, 1951), 1). 61.

8Robcrt Dahl, A Preface to Domorralic Theorv (Chicaro: The
University of Chicano Pru-ss, 11)56), pp. 75-81,

back C. Wallkor, "A Critique of the Elitist Thcory o Demnocracy,
Ameicn oliic11Scionce R v w LX, 2 Jiinno,1966), 285-295.







many issues on which the elites are either not involved or are split

can be admitted into politics with ease. How..ever, the issues that arc

central to the interests of the elites will not be raised. As a result,

non-el tes cannot easily appeal to politics for relief against key aspects

of elitc position.0 Thus, for example, the organization of the .Amcri-

can economy around giant semi-private corporations is not questioned

in American political life.

The cla s sificaljon of the democratic Latin American polities into

any of these three models is hazardous. There is a strong intellectual

current in favor of the "power elite" theory.1 Rigid class distinctions

and the strong concentration of wealth in the hands of a few are held in

12
evidence. Substantiating evidence comes from the lack of improve-

13
ment in lov.-er class standards of living,1 and the general ineffectuality


10Schattschneidcr, Chapter 8; Peter Bachrach and .Morton
Barratz, "Decisions and Non-Decisions: An Analytical Franmework, "
American Political Science P.eviev.', LV'LI, 3 (September, 1963),
632-6- 2.

John G'er.assi, The Great Fear (New York: Macmillan, 1963);
Stanislav Aind reski, Parasitism anid Subve.rsion (New York: Pantheon,
1961).

12
Osvaldo Sun,;el, "The Structural Background of Development
Problcnis in Latin America, in Charles T. lNesbet (cd.), Latin
Amc rici. lProl-l ms in Econonmic Dcvelopment (Newv York: The Free
Press, 1969), pP). 3-10.

13
1O.scrr Lwcv.,is, The Clildrern of S; nchezl. (New Y'ork: Random
house, 1961).







of most governments. 14 No one In fact has challenged elite predlomiin-

Z 11 C C

The pliiralist counter-argumient. Nould point to democratic mnodcrn-

izing regimnes ill Mc.ico, 15 Chile, 1 Costa Rica, 17 Venezuela, 18an(]

Uruquay, 1 Most -ovcrnnients have used their power to push industri-

alization and the nouveau- -ichc industrialists at the expense of the

traditional laiided gentry, 20 The power of the industrialists has been

matched by a legal -control over hirincy, firin- and pensions that is

Unheard of in the United States. 21 F'urther evidence is anl expansion of

the electorate which suggest a liberalization not implied by elitist


I'Raymnond Vernon, The Dilemmlia of Mexico's Developmnent
(Camnbridge: I-arvard Universit) 1-ress, 1963); Claudio Velez, ed.,
Obstacles to Change in Latin Amnerica (London: Oxford University
Press, 1965), pp. 45, 135.

1-5L. Vincent Padget t, The Mexican Political Systemn (Boston:
Houghton Mifflin Co. 10,66); Hov.ard Cline, Mexico: Revolution to
Evolution, '19-40 1960 (O.ford Univcr~sity Press, 19.62).

16 Federico Cil, The Political Svstemn of Chile (Bostain: Houghton
T\ifflin Co. 1966).

1Jal-l-es L. Buscy, Notes on Costa Ric-an Democracy (Boulder-
University of Colorado P)res-s, 1967).

)Robcrt Alexander, Venezuelan Democratic Revolution (New
Brunsvwick: Rutners University, Press, 1960D.

)Philflip B. Taylor, Governniont and Politics of Uri viay (New
Orleans: TuLIa.nc Univertsity Prcss, 1960).

2()Charlcq W. Andei-son, Polics and Economic Channge in -Latin
Aniorica (NwYork: Vail Nostrand Reinhold Comnpany, 1967).







viewv.s. Mass u icnleification v.'.ith w.,inning populiil candidates h-is

brought clas.hs conflict directly into the political arena.22

\' e do not ikno.' enough l about political processes in Latin America,'

to conlidentl1y cla-ssify many countries. \We are lacking dati: on the

coIntexts of tlle private c .lit; '.vho would be in a position to press

demands on ltie government. What significant power groups are there

in these societies? From v.'hat pov.'er bases do they operate? What

range of policy alte',-nativ.es-do they represent? Is there in fact any

"virtual representation" of the interests and demands of lov.'er status

groups ?23 The second area on which v.'e are lacking data concerns

the political int,:ractions of the private and public elites. Which

private elites did achieve access to the government? How'c,, To what.

forces and demands did they respond" \Which counter-demands are

ignored? V'hy ?

The traditional literature on Latin America has generally not

responded to any of these points. A depressingly large portion of the

literature ha:s focused on the formal machineries of government and


Z\ 'lasco ibarra is 1an excellent example. See Chapter 8 and
George Bl.nkl:st. n, Ecuadnr" Constltutions and Caudillos (Los Angeles:
University of Califlornia Press, 1951).

23'or a criti'lq ofi political studies in Latin America see:
Willi-rm WVelsh, ";..I lMthodological lProblems in the Study of Political
Lead rship- in Latin America" manuscriptp, University of Iowva,
Dep):.)'lolinLelt of Political Science, Laboratory of Political Research),
p). 2.







has bee(,n conn tosketch it) groups demands ill tern-s of "goodlicss"

or "badncqs" while ignoring the SitUational aspects that shape demnand-,

suporsand events. 24

These considerations promnpted a decision to write a dissertation

on the actual, informal channels of decision making. The! specific

topic chosen %vas the Influence of business groups on economic decision

making in Ecuador between 1959 and 1962. The choice of Ecuador was

dictated by several. cons ide rations. Our knowledge of the political

process in the country is scanty.2 The country is small. Business

and politics are played in only two medium-sized cities. 26 Ecuador

has the reputation of being free and open for study. 27 Superficial

exam-ination suggests a pattern of politics similar to that found in

other Andean countries thirty years ago. 28

Business groups are an ideal subject to study in Ecuador. They

arc most closely related to the political decisions on economic


241bid. p. 21.

;>Thec only full length work on the political processes of the
country is still Blzinksten's.

Z6Echin E. E rick-son, et ?I. Area J-anidbook for Ecuador (Wash-
ington, D. C. : Governmennt Printing Office, 1966), p. Z61.

27vartin C. Neccler, Anatomy of a Coup (I 'Etat. rcuadz-r 1963
(Washington, D. C. Jnstiiute, for tlit Coinparative Study of Politic-l
Sys~terns, 196-1), p. 9.

2_8 WaynI A S I CherCJ, "The Ad iitainof Gal.o la ain"
Ecu do 94819 2: A "tep Toward- tblt" M s the'Sis,
Devar mentof Political Sciencec Un'rst of Florid'&a), 1966, 'P. iii.







development v.'lich i Criiadur needs so b.ldlly. They are reputed to be

quite pov.'i-rful and are more open for study than would be the military

or thie church." There is very little l;nov.'nI about business groups in
30
Latin Aimerica or of ihcir impact on politics.

Tlhe study has been cast loosely around the "participational"

i-nethodology. suitably modified to take into account the neoc-litist cri-

tique.3 Pov.,er is measured by successful attempts at influence, not

by reputation or social position. However, account has to be taken of

who v.ants to exercise influence. Otherwise we could not differentiate

betw.'een unanimity of a satisfied public and the apathy of the discon-

tented v.'ho knov'.' it is useless to try to have policies changed. There-

fore the first task v.'as to skctch in the broad outlines of the economy,


29John Gunther, Tnside South Ame rica (Nev York: Harper and
Row.', 1967), p. -124.

30.
Amoni. the fcv.e are: Mlerle Kling, A MLexican Inlerest Group in
Action (Enicle .'c.-od Cliffs, Pr(ntice-H1all, 1961); Peter Smith, The
Politics of eI.eC f in Argentina (Ne':.- York: Columbia University Press,
1969); V,'illiainm Lopjstro -n Attitudes of an Industrial Pressure Group
in Latin Amnerica: The A.sociacion dc Ind lc.tri il s Mli)eros di bolivia,
1925-19 I 6 (Ithaca: Corncll University Dissc-rtation Series, 19LS);
Car los /.'.sti, Pres.ure CGrc ups and Power Elites in Peruvian Politics
(Ithaca: Corncll University Prcss, 1969).

31The litcra:ture in this area is endless. For a representative
saniple see: Robert/., D.ll, "A Critique of the Ruling Elite Model,
Ain. ri. ..: Politirzl Science l',exic--.v, LII, 2 (June, 193'S), *463-469;
Juin \\'altun, "Sub: .ice and Artifaict: 'The Current Status of Research
on Coinnmi;ty Pover Sti-Lrclturc, Anll-ericin .Tournal of SocioloIv,
LXVI, I (.l irr l, 10.6), 430--17 .; B iij;u in v'Walter, "On lt e Logical
AnalyFsi of l'.v.-cr A; trilution Procedu res, Journal of Politics,
XX'VI, 3 (lNo'.v mber, 196-), 850-866.







to dCterminei the positions of major groups of businessmen in the

econonomy, and to ascertain, insofar as is possible, which groups

could be eNpected to have substantive grievances against the status

quo.

The second part of the study is a descriptive analysis of the chan-

nels through which influence would be exercised. Special emphasis

was given to the organization and dynamics of the business associa-

tions that purport la be major channels of influence. A related con-

cern was witli the decision making process in the government; who

made decisions, to .what types of situational limitations and pressures

did they respond, and v.who was in a position to exercise these checks

on decision making.

The last part reconstructed specific decisions. The goal was to

determine which business groups did have access, and to find out why

and how the mechanisms of government actually operated. These

data provide the basis of a sketch of business interest articulation.

The social and class differences between influentials and non-influ-

entials indicates the extent to which access is restricted to politics.

A comparison betv.ween the range of issues that were raised in politics

to the range of issues that people would like to have raised is also

suggestive of v.whether the neoelitist rc-joinder to the pluralists is

acculirate.

The specific deci .ioins studird all occurred between July, 1959

anrd Auigu:;t, 196(,2. 'l'i-,-r were seve L1rz reasons for selecting this







particular period. Three presidents ield office: Camilio Ponce

Enriqucz, Jou- Maria Velasco Ibarra, and Carlos Julio Arosemena

Monroy. Thi- offers a basis for comparing regime styles. Later

periods would have been unp profitable as a military junta held office

from 1963 to 1966. Post-junta politics: have generally concerned the

fate of junta reforms and the newv. constitution.

Only a fcv.' issues were raised in the three years that involved

businessmen. The author tried to select a set of issues that involved

most of the m-ajor groups and were representative of most on-going

issues. The author also looked for a balance bet'.veen broad issues

32
involving many groups and narrov.'er ones. Table 1 lists the issues

selected. Table 2 classifies them according to the number of groups

involved.

Data on the recruitment of political figures from business posi-

tions c- s ee included as a major tool in the analysis of the channels of

influence. Recruitment is a major means whereby important private

groups obtain sympathetic people in positions of power. Therefore

the direction and levels of recruiltm1ent indicates which groups would

be more likely to exercise muscle and which ones would be likely to

have an unsymp:ithetic receplt ion. 33 Furthermorc recruitment is


32rrnest T. Birth and Stuart D. Johnson, "Commu iity Powv.er
and i Typolo".,:" of Sucial Issues, Social Force.-!, IlXL, 1 (March,
1959), 29-33.

33Lest-.r Sliginaan, "Rec ruitmn.tci in Politics, P. R. 0. D. 1, .1
(Ida r i ,, 19F' ), p. *.







TABLE 1


DEC:;IONS TO EE


ANALY ZFD


Decisi on i
Maker P
Pc


J ulet a I
hloictaria


Pr sidcieit


on ce


Tariff proc action
for local manu-
facturing:
BPit Cri s
Ecutitorianas


Executive


Velasco


Credit
expansion

Devaluation



Inflationary
investment nt

Devaluation


Arosc menal

Tariff protec-
tion for local
industry:
EPISA



Industrial
Development
Law

Repeal of tax
on imported
wheat


Congre ss


Packing the
Junta Monetaria


Tax on
imported wheat




TABLE 2

SCOPE OF ISSUE INVOLVEMENT


Manly groups involved Few' groups involved


Inflationary investment

Credit exp]anFion

Devaluation

Packing the J unta Lot n tnria


Tariff protection for
Baterias Ecuatorianas

Tariff protection for EPISA

Tr: on wheat imports

Wheat tax repeal


IJndu strial DeveNlopment Lniw




1

frequently an efficient explanation of decision making. "Self-interest"

is a powerful motive, especially in a Latin culture that plays do.'.'n

tlie implcrtince of over-reaching loyalties. 1.lore indirect channels of

influence w.'ere looked for only when the events and outcomes did not

point to a "self -intere st" interpretation.

This is a very broad range of data to research. Some classes of

information were relatively well grounded. Data on the organization

of the economy and.on the social and economic positions of major

economic groups were derived from government statistics and develop-

mental studies. The names of political figures were taken from

governmental archives and newspaper articles and advertisements.

Informationn o ownership patterns and business backgrounds of poli-

tical elites was derived fror the World Trade Directory Reports of

the Department of Commerce and from the membership lists and

trade publications of the business groups. These data are probably

accurate although incomplete. It is likely that a more complete

analysis would reveal additional branches of the business empires

and nmay uncover additional relations with politicians that have gone

unrecorded. Ilo.wever, the major conclusions vould probably stand.

The data on the political interestE of business groups are some-

what shakier--being based on extrapolations from the reported situa-

tions anid the intervic v.s wilh some silty business and political leaders.

However, tli.'ri was no systematic sampling of business leaders, nor

wa, there any way of checking their statements as to the programs,








problems and -,upports of third parties. It is quit possibkc that

m1111y demands and programs of lower echedon businessmen never
we eag ea te up 11 th-,clc a of politicians with whom o t


of the interviews were conducted.

The recanlstruction of political processes and events was also

un1even-. Written reports and newspaper accounts were available.

However, the i-any gaps had to be filled in with interviews with pe-

ripheral participants, who hacl their own roles to defend and whose

memory may have dimnmed with the years. Given the Byzantine corn-

plexity of Ecuadorean politics, it would take an almost total aware-

ncss of the political situation to "completely analyze" any decision.

E-ven experienced politicians, close to the inner circles, report that

keeping up with political events and mastering political techniques is

a full-time occupation. Foreign oloscrvers have a difficult til-e gain-

incg, access unless they have "married into the system. 34 Even the

events that do seem well reported may tend to be interpreted by

foreign observers through an entirely different set of cultural values.

The major defense of the dissertation is that a brond survey of

the articulation of business interests, even given its imperfections, is

much more than is noN1w available. Tighter studies can hopefully be


341ntorvitnw with Sr. Jos6 Vincentc Orhlfl'o, form-erly clepu~ty and
advisor to former Prcsid(:nt Carlos Julio Arosemaena Munroy, on
October 16, 11,%8; int,rvicw wvith Dr. Rol.ert Norris, Director of thec
Andean Stu 7cent(-r of the Unjvcersif- of New MeCxico in Quilto, on"
Octobor Z, 1960t




13

built on this one. There wasb also a personal reason for th I broad

api.r .iclh. It v.'. f'lt that th-. author's intellectual development .would

be bc'Lt erv'.'d by having as broad a pe rspective on Ecuadorean society

as possible.













CHAPTER II


T11l1 SOCIAL CONTEXT


The Land

Ecuador straddesc the equator on the western coast of South

America. With an area of approximately 111, 168 square miles, it is

the second smallest country in South America. There are four

major regions of the country: the coastal. plains, the central mountain

region (sierra), the eastern Amazonian region, and the Galapagos

Islands. Only the coast and the sierra are important for national life. 2

Most of the coastal region consists of rolling hills and alleuvial,

plains, The northe-rn regions are fertile and well watered. 3Rainfall

decreases towards the south; the southern coast of Ecuador blends

into the Peruvian desert. The rains in the south tend to he highly


This is a very approxiniate figure. The 1.942 'boundary with Peru
is disputed by Ecuador, The geographical features on which the
boundary is based havoc not beon surveyed in detail. Sco. -L~o Linkc,
Ecuadoar: CouL-trZy of Cnntrasts (London: Oxford University Press,


Zlbid. ,p. 10.

3Luis Albr-rto Lopc-z, Cordovc,, /onas A riolas lEc do
(Qtlito: un N io l P niia h yCoordlinacian )c o nom 1n ca.
1()U]), pp, 1'I -1413 All po e u w tpub~lic'ations will be ise by
principal authuYr wvh('e on is, citcd.
14






sea onal.1 G .iyvaquil, thu o(nly city of any size on the coast, is

located at th. top of the della of the Guayas River.

The bacl.:,ic of the sierra is formed by two gigantic parallel

Aiindcan ridcgs.. Peat :s go up to 20, 57-1 feet (.1Lour nt Chimborazo, the

highest active. v,.lcano in thie world) and the ridges must average

15, 000 feet. The population of the sierra is almost entirely concen-

trated in the inlerrmoitl basins between the ridges. These basins

5
average bclt.-cen 7, 000 and 9, 000 feet in altitude. Q uito, the capital

city, is located in one such basin at a height of more than 9, 000 feet.

Between tlesc basins are the "nudos" or passes, generally over

10, 000 feet.

The sierra lands are relatively unproductive. lMost areas suffer

from severe erosion clue to intensive farmn-ing of the hillsides. Rain-

fall in many of the basins is scarce or irregular. Many areas have

lands deficient in required minerals. Many crops suffer from the

high altituLde and the lack of clearly ma] mrked seasons.

The poverty and geography r.,ike transpc.rl nation and communication

difficult. Of the 6, 500 miles of road in 1960, only 3, 500 vere open all

year. Roads along the coast tend to be more ncnrly adequate. How-


'1bid. p. 172.

5Edwin EC. 1Cri(kson, t :l. Area l-ti:ndboolk for Ecuador ( \'ash-
ing.ton, D. C.: Gov.rnlment lrinitiL' Office, 196(), pi. 78.

t'C.i juLira det 'ricult iir; de la P rimnera Zona, Prini-ip:tles Pro)blh.'-
111"'1 .1'\ i'O- i' III('" l' t j OLt' dtI .; icrr;i 1'.( .tori.lia (Q uilo: C ; -illira de
A r nIt i tll r L l', < l ] riii ;/.uInt, 1 6'8), p 6.







ever, quality is rt-lntive; as of 1968, only a onc-lanc dirt road con-

nccted thw second port of the coast, E-smeraldas, with the rest of Lho

country. 7 Tlhcre is no train -,crvice along the coast.

The dramatic mountains of the sierra form a great barrier to

transportation and ntatioiial interfration. The Pan American H-ighway
8
stretches for 714 mviles from Colombia to Peru. For much of the

way it is a one-lane cobblestone road hugging the sides of the moun-

tains. Frequent landslides, steep grades and an uncomfortably

slippery surface make the cheap and rapid transportation of goods an

impossibility.9 The national. railway system connects from San

Lorenzo, on the northern coast, to Azogues in the sierra, and then to

Gjuayaquil on the coast. The system carried about 500, 000 tons of

goods and 2, 000, 000 people in 1956, 10 Hlowever, maintenance is poor,

and the rails are thought to be unreliable. Transportation from the

coast to the sierra is perhaps even more difficult than within the

sierra. '.here is a good road from Quito to Guayaquil. The railroad


7 This road had been substantially improved to the condition des-
cribed by the time I made the trip in 1968. 1 do not know how much
worse it had been before.

8U. S. Dop,-,rtmi-e nt of Con-nnerce, Inve stment in Ecuiador (Wa sh-
ington, D. C. : Guvcrnmient Printing Office, 1959), p. 9-1.

91bid. The highv,ay is very good bct'ween Qtuito and Latacun~g-.
Howevcr, it tiurnls into dirt ruts, over the difficult ter.rain Outside of
CuCInca.

10 l iI







and the I ) .'.'.'Iy be.l.t c n Cuenca and the coa.s t ;ire both difficult.


The Pe.'opl e


The official population of Ecuador as of November, 1962 v.'as
12
.1, 581, 4176 people. This v.works out to a population density of 43 per-

sons per square n-ile, one of the highest in South America. 13 About

half of the population (2, 363, 000 people) live in the sierra provinces,

virtually all of the remainder live on the coast. The Galapagos and

the Oriente contain less than 1 percent of the total population.

Population density per variable square mile in the coast is low. Less

than one-sixth of the land has been cleared for agricultural use.

Population pressure in the sierra though is very high. Much of the

land is too high and too steep to be useful for agriculture.15

Sixty-four percent of the population is classified as rural.16

Many "urban" families live in small agricultural tov.wns. Only four


I l bid. p. 92.

1Ecucador, Junta ',!acional de Planiifica;ci6 n y Coordinacion Eco-
noei-ica, Divizsidon6 de I:zitadli tic;a y Censo, 11 Ccenso cle Poblaciion \
Primer dce \viend:.'. Re(nzimen Gener.l (Quito 1962).

13Slati.- ic.il .b.ti-r ct for L.aZ1in Americ:t: 19.62 (Los Angeles:
Center for Latin Amrn ric in Studies of the University of California,
1962), Taibl. 5, p. 12.

l1Erickson, 'n t ;11., p. 62.

15Probll .',s Pr u iales . ., p. 60.

1E'L rick l ,, n, e.t al., p. 60.








cities h,-d a population ov(-'] 50, 000 in 1962; Quito (355, 000), Guayaquil

(510, 000), Cuenca (00, 000), and Ambatu (53, 000). 17 The genc-ral

poverty azid lack of communication make the urban areas more pro'inl-

cial than we would expeI~ct from cities in the United States of cornpar-

able s-izcs. Ozily in Quito and Guayaquil are there many members of

the urban and urbane national tipper class. National political and

economic decision making is carried out almost exclusively in these

two cities. 1

According to the 1962 census, 43% of the population over ten is

illiterate. 19 The life expectancy is low at 52 years. However,

longevity is substantially greater in urban areas. The high infant

mortality skews the gross life expectancy downwards. Even so, the

chances of a members~ r of the rural lower class making it to advanced


years after the age of five or so are not great. 20

Per capital income in Ecuador is quite low at $150. cc a year. 21


17Erickson, et al. p. R2.

18Investment in Ecuador, pp. 1 1-12.


II1 Censo ....

zoThe ,irilcr oincc spoke with the owner of the general store in
Tochinque, a sm-all tomn on the noyth coast. He was talking about how,
'"Whcn you h~a%- lived as long as I have. . I asked him for his age,..
"Thirty-ninc,'' hu replied. Thore %-,as general assent that these ad-
vanccd y(:ars constituted thc foundations for great wisdom-. The m-an
appeared to be at ]least sixty.

ZILStimrwtos of incomeI vary widely. This figure was povidCCd by
the ctf conoiiwi.:I of (lie US il i-D mission in Ecuador. See Clarence
Znvki"Eonr:Sclecfcd E"colomic Daltl wIth Con-mmntarv"







'The average 3 income on thel coast is perhaps twice as high as it is on

the sierra. \'ith the available land and favorable climate, thie "co-t:"

22
of pove-rty oii thle cLoist arc pI'rob bly lov.'cr than in the sierra.

Standards of living in the cities are probably somcv.'hat higher. Ilow\-

23
ever, lthe tilemplooymcnt pressure is very high.2

The validity of a mean income figure is largely nullified by the

extrmn-ely unequal distribution of wealth. About half of the popula-

tion is effectively outside of the monetary econorny. Thc net worth

of one big businessman is reputed to be about that of the central

governnment.2" Inequality in income is paralleled by inequality in

land holdings. The distribution of incomes and lands is shown

below in Figure 1.

The inequalities of income distribution result in a highly strati-

fied class system. Mlemrbers of the lower class, defined as agricul-

tural laborers, blue collar v.orkers, and self-employed artisans,

25
make up s1ome 83% of the economically active population


22This vie'.' may reflect my greater familiarity w.'ith the sierra.
Residents of the coast comment favorably at the low level of starva-
tion seen around Quito.

23Erickson, ei al., p. 70.

2.i
2 ntervicv v.*ith Dr. Alcjandro Vega Toral, 1960 deputy from

A:zwuay province and director of the Froeiie Nacional Vela sqtuista in
Cucnca, on Octolj r 18, 1968.

25 i -.s deriv(d from 'Zuvel;is, 3.1, Institllo de l-'tudios
Admini I tr.t iv\ dc- li Uni,\ rsidad Centiral del IEcOI:idur, Salarios
cn el Fl (I-i, ri" A-.\e lus cp lii bre 19(3 (Quilo, 1963), p. 11 9.
..i









F IGUlI : 1


DISTRILLTIO']ON OF L\;D A;:D II;COLE IN ECUADOR


Land distribution


Percentage
of total
cultivated
area


26 73 90 99

Percentage of land holdings


Income distribution


S Percentage
81 of GNP

67







17



95 99


PerlclntLAge of popI)LIntion

Figures d.'ri ve.l fr.a 1I II'r rcr Vl.isc ni., El Cu t i.vo
en 1 I:. i.ad v (Ci.nyv'quil: A.U;:", 1963), p. 18i ;
J.D.V. Siunid.i-.rs, "'M;an-Land L JLatiions in Eculdor,"
hRurlj Sci'l..v XXVI(1) (M:arch, 1961), pp. 57-61.







Therc are great regional variations in the social situations of

lower clash i people. The poor of the sierra are largely "indians"''" in

th it tlh Ly ;adopt ldi-tinct ive dress and identify with local "inldian" com-

27
munities and customs. Thle sierra poor are attached to the land,

either as small landow'.ners or hacienda workers and sharecroppers.

In popular viev.', the sierra indians (and, by extension, all sierra

poor) are dull, sullen, inefficient, possessing a "heart of stone."2

Anthropologists report that indians turn their faces away from the

threatening world of the white man. They tend to be very conserva-

29
tive and slov.w to adopt change.29 Many of the sierra poor are effec-

tively outside of the national economy. Hacienda wage workers

usually receive betv.een five and seven sucres a day.30

The coastal poor are entirely different. Along the northern

coast there are many Negroes. In the central regions many of the


26Linke, ,. 12; Carlos Cisneros, "El Indio: Nadie Hace Nada
por Su Causa," Vistazo, October, 1968, p. 81.

27Beate R. Salz, "TThe Human Element in Industrialization: A
Hypothetical Case Sti dy of Ecuadorean Indiains, Economic D evelop-
ment and Cultur;.l Clhan2e, 1V, 1 (October, 1955), part 2, 126.

28Li,,ln pp. 59-66.

29R' lph RI. Bcals, Comm':nitv in Transition: Nivyo, Ecu.dor
(los Angeles: University of California Press, 1966), pp. 115-117;
Cinneror, pp. 75-87.

30T']is is 25 to 30 cents a day. The rcal purchasing pov.er is
)perliap'- t ice. that: sum-. See, I"Pr-,duct ivity of the Agricultural Sec-
tor in ]l tadc .r, I, conoinic rul1 til' fr lal;in America, VJ, 2 (June,
19(62), 67.







people are former "indians" who have changed their identities to that

of niestizo. The high l.vcel of intermarriage between Negroes and

others is also evident in thle skins of many people on the coast. No
31
major group identify themselves as indians.3

The coastal poor are much more vivacious, outgoing and active

than are their sierra counterparts. This can perhaps be attributed

to the influence of the more open Negro culture, the higher wage

levels and superior social position resulting from the scarcity of

rural labor. The social horizons of the coastal workers are also

expanded through the common patterns of migration. Many of the

people move frequently in response to seasonal employment, the

search for new jobs in the cities or simply for some change and

excitement. 3

Middle class groups: skilled workers, lower level government

employees, and clerical workers make up some 16% of the econom-

ically active population.33 They are uniformly "white" and urban

oriented. Incomes for middle class workers varies between $50. 00

34
and $200. 00 a month.3 While the poor, especially in the sierra,

can be counted as being outside of national life, the middle class


31Linle, p. 58.

32Liiink p. 67; Erickson, et al., p. 113.

33Zuvekis, p. 34.

34S Salnrio en en <1 Ecuador . ., p. 72; Linke, pp. 79-84.






groups are definitely participl.,.ntu- in city life, if not in national life.

Upper clss groups :Lrt. quite v.aried. T Ile influence of irnmi-

grant groups is; Ftrong. The Europeans, gene rally Germnan- v.-lho

came before and after world d \'ar 11 and their dscendants,a re

extremely in-iportanit in Quito commerce. The Lebanese, "TIrcolF"

to the' Ecuadoreins, are coming to dominate banking and textiles

more and more. liow.ever, the total number of immigrants is no

more than 20, 000.35


The Culture3


Cultural shock and the retreat to prejudice rraket the accurate

reporting of foreign culture_ difficult. Therefore the picture pre-

sented belo'. i'-, a comlpoFite, built up of the observations of more

experienced researchers that seem relevant to my understanding of

Ecuador. These generalizations must be taken with caution. They

are related to the most sharply perceived areas of difference and

thus. ignore the la rger areas of similarity betv'een our cLilture and

that of Latin Americans.. 'The follov.'.ing generalizations are true for

sonm-e major group of Ecuadoreans in some positions, however, they

do not inec-cssc, rily represent a balanced viev.. of the country as a


351.rickson, et :il. p. 89; U. S. Department of Labor, Labor La'.v.,
and PrItcltic. iln u:idor (Was,' hlingtn, D. C.: Government Printing
Office., 1963), p. 13.

'3 The lilc li" lure is e.::t niisiv'e. A b:i.ic statement of the concept is
LivenI in Your:', C. Kin'1, '"')ln Concept of Political Culture in Comipara-
live Politics, .lJourn.-l of Politics, XXVI, 2 (June, 196-1), 313.







who Cle.

Thc world vilw of min1ny Ecuadoreans seems colored by ; sense

of class and hierarchy. 'The stations in life are properly ranked.

Inucumbency reflects jntrini sic merit, and not accidents of birth or

fortune. There is a sense of "deserving poor" but limited outrage at

the fact of poverty. The elites, too, view their positions as being

proper, a reflection of their intrinsic merit. Therefore the enor-

moius gulf in status between the national elites and the local middle

class is accepted as a natural reflection of the social order.37

The world is seen as essentially static. There is no natural

direction for change to take. So the social change that does occur

tends to be viewev d with suspicion. This is related to the idea of

"limited good. In a static world, one person's gain must be

another's loss. The idea of all workingg together for a common good
38
is notably lacking.

The world is seen as being neutral, tending towards being hos-

tile. \Vith the view of a static environment, there is relatively little

sense of "mastery of fate. The best the individual can do is to take

advantage of random di:.turbances for which lie is not responsible.39


37K1. 1. Silvert, "An Essay on Social Structure, American
Uin.'r' Sit i Field Staff RepI orts, November 25, 1956; John Gillin,
"''.t h os Componclits in Modern Latin American Culture, American
A i.nthrc poloci! t, LVII (June, 1955) 511; Erickson, et al., p. 106.

38F'rank Tannienlbin, Ten Keys to Latin America (New York:
Knopf, 1 ), 1962) 120.

39Tuniar Jloberto Fillol, Social Factors in Economic Develop-







L tijii. s have a mnuc]h shairpi.er senIsec of tlicir ov.,n unique identity

tl:han A\neric:tns .re used to. Ecuadortc;ns, from president to the

humble-,s f:armecr, sctin to be: aw.rre thai they are masters of their

soul if iiot of tlh world around them. This has tw.o consequences: an

interest in arti:lic c.:pr sc i.on as a demonstration of individuality, and

a tendency to demand autonomy of life and expression wvitlin some

sphere. Great sacrifices will be made to maintain pride in individu-

ality.

Social relations are more personal and more intense than we are

used to in the United States. People v.ant a close circle of friends and

relatives who are aware of the unique individuality of each other.

Individuals who are forced inlo contact with an anonymous public often
1 0
seem surly and unsure of themselves. Latins complain that Ameri-

cans will not mai kc them- selves av.ware of Ihe individuality of the people

wilh v.ihom they are dealing.1

A high premn-ium is placed on loyalty to the primary group.

People who really understand the inner makeup and merits of their


ment: The A-rentinc Case (Cambridge: The MllT Press, 1961), pp.
9-12; SJ.muel Sh!.iiiro, ed., 'lhe Integ.ra;tion, of Man and Society in
Lalinl A\mer-ica (I ondon: Uni,'ersitr' of Notre Dame Press, 1967), p.
5; Gillin, p). 515.

.1010 11. Silver, "On Civil Discourtesy, An-erican Universit"
Field St-iflf ]Wj' rl:., Februa ry 5, 1967.

"i1Ja iro .li ri ,'.;, Aii;.nomla d l- GCringo (Hogfola: Ediciones
T' rcer lu1indo 19(''.), p. 177.







friends would be willing to accept and understand their actions.

People who place loyalties to abstractions over loyalties to their

friends : re worse than damn fo ils; they have betrayed the trust of

others. Theli worse charge Lalins bring against North Americans is
'12
that they cannot be trusted vitall friendship. Ties of loyalty link

social stations together. Subordinates accord their superiors higher

status as long as there is a reciprocal recognition of the subordinate

as a worthy individual.43 Superiors in return gain recognition that

they are in the center of the world for their subordinates.

Latins seem extraordinarily sensitive to dominance and subordi-

nation in inter-personal relations. Leaders emerge and take clear-

cut roles in almost all social situations.44 The person in the center

claims a major share of attention and status by virtue of his superior,

more dominant personality. Subordinates v.'ant to have a leader suf-

ficiently overpowering to justify their own lower positions.
45
There are cultural differences between the sierra and the coast.4

The sierra reflects the hacienda ideal of a stable feudal society.46

Class and status distinctions are much sharper and something


42bid. p. 72.

43Norman E. Vihitten, Jr., Cla ss,Kinship and Power in an Ecua-
dorean Trc..-n (Stanford: Stanford University Press, 1965), pp. 105-106.

4 rick s-on, et al., pp. 232-23-1.

45
4llanksten, p. 28.

4 'Tanlncnbaum, Chapter 5.




27


rcsr enblingl a social a risto racy lih;s elcn rgecl. The influence of tllc

Church is heavy.

lo.os, Quji, ,'os seen guarde'ld in p, rsonal relations. People arc

socially conse rvative and dress tends to be very mnodest.48 Although

people are genc rally quite friendly, fe. are killingg to cornmit thenm-

selves to clo.-e relations c:-:cept after c::tended contacts. Q iLitci'os

als.o seem peaceful. Crimes of violence appear to be relatively infrc-

19
iue nt.

The sie rra business nsmn, with the except ion of the immirigrant

entrepreneurs, seem less innovative and dynamic than their counter-

parts on the coast. Business seems to be a means of achieving a

social position and not a pattern of activity to be valued for its own

sake. The politics of the sierra seems to reflect the aristocratic

ideal. Political recruitrument seems relatively closed. Fev:. "self-

slarters" '...'ho lkck a fainily name break into the- sierra political

50
arenas.



7'Elite circles are not completely closed. Former President
Galo Plaza: is a nev.'.com r to elite circles and yet is influential in
sierra business -lid society.

-18
1 In tlichry the co-ceds at Uni'.-cr.--id Cd Crnlral -mu, t be escortcd

while off campus. Dinc-cs, called 'bonfiri s" to avoid unpleasant
cr.ILnnotationr-, usually end by 10:00 P. Nl.

.19
J'lii. o bs rvati'on is .i scd on the relativ-e sense of personal
Uli-re; felt in Quito amd Guayaquil.

50, in illi is nut al.'. i s ruei. The p)rcs, nt mayor of Quito,
J i.-in.. Del C;st illo, cCn.I sL fIrom a p)or family of the nullthern prov-
inl ce S.







The oupen rcumirL-nercii l c:ociely of Ecuador is located on the coast

where there is a1 rcelIitively higi l evel of economic development and

social mobility. Col.tc7ios trnd to be open and spontaneous in per-

son:l1 relations. Individuals will make no pretense of friendship if

they do not like someone. People may commit themselves to ex-

tended adventures on the basis of casual contacts. Women on the

coast seem free and open to friendships. The people on the coast

also seem more anomic and violent. The level of criminal violence

in Guayaquil seems very high.5

The businessmen of the coast are the most progressive and

aggressive group of entrepreneurs in the country. They seem the

most receptive to new ideas and new investments. Many managers

seem to regard business as a game worthy of its own reward. As a

result, the successful businessmen have assembled personal empires

and have at times merged these into multi-family combines that have

major impact on the economy.

Coastal politics also reflect these traits. A much wider circle

of people staes to be drawn into the political arena than would be found

in the sierra. Radical populist movements are all stronger on the

coar.t. Political movements center around charisma, stressing the


Suggestive of the ;,amo.isphiere of violence are the fortifications
llat surround the offices of the leading newspaper, E1 Universo.
Guards are bci(k cd up by clhin link cagcs around a ll offices and entry
is conutrolled tlhrou11 ;h double steel door,;. There is nothing compar-
able in Quito.

52
Erickson, ,1 al., p. 319.







personal rel.ition bctv.'en lea adc r and his follo.c.,rs. Political vio-

lence nain pov.er confront ation- aire com mnOn on the con.st.5

These cultirr;,l dlffc rence s are both a result of and a reinforce-

lment for the lov., level of integration in Ecuador. The geographic

isolation of rma ny areas and the differences in outlook all contribute

to a very high level of regionalism. In Guayaquil, the provincial

flag is seen more often than the national flag. The slogan, "For an

independent Guayaquil" (Pro Guayiaqluil In.dependiente) appears on the

doors of the largest bank and on the desks of countless office v.orkers.

Regionalism is a fict of life in the other areas of the country too.

Clubs formed by residents of Quito and Guayaquil v.'ho have "immi-

grated" from oilier provinces are quite active.

Regionalism is not a recurring political issue. Most people are

willing to accept a common political framev.ork while considering the
54
citizens of other regions to be somewhat deviant.54 Regionalism can,

though, provide the common loyalties for thel construction of large


5-Tlhe students of Lav.al Bora High School (colec io normal) in
Guavacq'il severely burned tw..o p.'-liceir;-e v.'ith napalm bombs during a
dem-onl .ratioin in Guayaquil in 1968. The police had broken iup an
attempt it made by tlhe students to place a plaque on city hall that conm-
nmemor;'tedd a similar incident of the previous year. Such incidents
ar e tlint ucollCO'I'011n.

51
Sr. Alfj'c-do Pa .i- Die.::canscco reported that the coastal busi-
In'SSllen 11 '.'.(li-r en(lrc sll tic about thel possibilities of buying into
.illrr.i cu'p ni as a imiL:.tis of healing the regional split. Ho c'v.-c kr,
th all r) it ri l ,'.'vcl ly of Ihe pro'()] s.,l points to the sta.c of the gulf bc -
tIVwccI thle. tl'.v( r i--j'.n,,i litier'.'i i. '.'itlh Sr. '.lfrcdo P'a l (reja Dic zcan i co),
a; sfi sl;i a m i n:!t;er (.,I lle' I,.- ,n'r. I'fjul.ir arnd former m eiber of the
J.liit .l lM :rii~ on No(venil; r I, 1 08.






55
coalitions oin mnIjor political issues.55 Regional competLition for the

benefits of politics also limited the possibilities of projects in any

56
one aren.

The patitrns of buisiiness activity can be clearly traced to the

culture. In a hierarchical world, the businessmen see themselves as

being unique and a bit superior to the rest of the groups in the society.

They are the chief guardians of the economic fabric of the society,

57
the only groups responsible for the conduct of the economy. Fre-

quently they demand freedom from governmental restraint,58 while

also asking that they be the only group to participate in governmental

decision making that affects them. This is far from the ideal of

laissez-faire capitalism, as businessmen actively seek governmental

credits and protection.5


5 Erickson, et al., pp. 261, 318.

56Congress almost rejected an advantageous loan for a needed
bridge over the Guayas River because the funds would not be divided
equally between the other provinces. See Ecuador, Congress, Diario
de Debates: Sessiones cn Pleno: Agosto, 1959 (Quito: Archivo
Legislative, 1960).

57
For an example, see "Mhanifesto, Revista de la Carnara de
Comrnercio de CGuavaquil, XXXI, July 31, 1959, p. 5; Rafacl Dillon
Valdiz, "Duvclaracion dr la Camara de Industriales de Guayaquil,"
El Colnercio (Quito), November 10, 1968, p. 3.

58Dillon Vald>cz, p. 3.

59
Protection has bee(n dcnimandl-d Iby almost all groups. For an
xtireme ex;ii,] le,, tlh drycrlc,.ners association demanded lax incen-
tivj\s aild ]ro'cc t ion from "disloyal" competition. SLe "So Nos Con-
sidera Indus rii: Solo )Pa -lra Cobrar Imiipuestos, El Conmercio,
October 5, 1968, p. 15.







Bu iinr--.. activity :lso rcflL-cts the coniserv.at ivc emphasis on

being inlsti.d of doing, and the Latin demand for autonomy. Latiin

busines:-i. en se tm .-athe to take risks, to engage in cntrepreneuriA.l
60
activity. Stability is valued over growth. Competition is not '.';aluI cl.

It has been alleged that Latin businessmen generally prefer to raise

prices as high as possible instead of expanding the market through

price citts. In a market v.lhere prices are informally fixed, busi-

ness is based on c.-;lablishing personal loyalties with the clients.

Autonomy and the privacy of in-group loyalties make speculation

a valued form of investment. The attitude of South American business-

men could be compared to that of a riverboat gambler vwho is willing

to sink all to fleece the sucker on a sure thing. 2 Banks, for

example, will often finance a market-cornering operation but not a

market -producing operation.63

Business organization and decision making tend to be inefficient.

Businessmen seem reluctant to accept inno'.atlion, preferring the stabil-

ity of establishedicc practices. Stores seem drab, with little use made


60Scmnuur Martin Lipset and Aldo Solari, eds. Elites in Latin
America (Ne' .- York: O:xford University, Press, 1960), p. 15.

61\V'nd.ell C. Gordon, The( Political Economr', of Latin America
(New York: Columi bia University Press, 1965), pp. 58-59; Fillol,
p. 5S.

2F' l-r' de \Vris and Josc Mcdinii Elclil.'arlrfa, eds. Social
A p. 'r i l'( i c.nrnic Ciin.. in l.:in .iAm eri t: Vol. I (lelgium:
UN 3-SCO, I6v 3), p. 9/.

C63 ;ox io j,. S.




3





tendency to con celltra te all Pow er in the ha-nds of top management. 65

Dynamnic businessm-en work incredibly hard. Sr. Luis Naboa Naranjt,,

the largest banana exporter in Ecuador, runs his business almost

single-handed, 6 Most businessmen understandably pr-efer the role

of gentleman, so decisions related to innovations are not made.

Businessmen usually try to keep the firm within the family. The

"Iheir apparent'' is Irequcntly started off at the top. Occasionally, a

business will be started specifically for the purpose of givingtenx

generation business experience. 67 Staffing of subordinate- positions

is generally based on family ties. Some feel that highly qualified

applicants would be rejected for subordinate positions. If good

people arc content with lowv pay and the lack of opportunities, it is

only because they arc either tapping the till or planning a- palace coup. 6

641Interviewv with Mr. John J. Snyder, Labor Attach to the Ame -ri-
can Embassy in Ecuador on October 15, 11968,

65 pset and Solari, p. 16; Fillol, pp. 24-26,

66Intcerview% with Mr. W/ilfred Griswvold, personal pilot to Sr.
Nob-oa, on October 28, 1968.

67 Comercit) Inmnortaciora S. A. was stIarted by Giz-.vanni Mlalniati
Par-oci to give his so xporiellc2 .ind omlh to do, Thiere are,
other exa-l s s lL U. S, Dcpartmn-ct of Commn-erce, World
Trade Dr to rtC m rc lIror dra(date uinknlown).

68In 2-rv i c% %. Jih NAr. CGri (Ioi. Th:'s hiac been partly su-tbstan-
titc y e -01,1ojc~ain,e;)(C~ yofs ce a
lil ig,(01-1ny f rtlc f r ua ,lva c s






Th chr ic-:l incfficienc'y in.ay a lso be ri- lated to the concern for

"inner light" on i.he p t of th,- top m:tnagers. It is reported lthat

ma jor d'-cisi
done Io see ihow tih. decision consequcnc's would affect the company.

The desire for status, feelings of like and dislike, and geneei-al

dreams are allowed to replace objective analyses of profit and loss

69
situations.

Labor relations are patterned on the paternalistic ideal. The

company is regarded as a family and the workers should be grateful

and loyal to their superiors. Making demands against the top man-

agement is equivalent to "disloyalty" and "not knowing their place."

At times the system works impressively .well. Sr. Ricardo

Levy, the gender al manager of Fabrica Sudamericana de Droches S. A.

spends much of his time handling the most intimate problems of his

v.workers. The workers respond enthusiastically in their work and in

support of Sr. Levy and his v.ife.7

When paternalism breaks down, labor-management relations can

be extremely bad. One survey concludes that most businessmen per-

ceive their wv.orkers as being c islhoneist, lazy, incompetent and dis-

respectful.1 Petty thi'.'ery, absenteei sm and union irresponsibility


6CGordon, Clhapter 11.

T0lhii; opinion is based on exteCnded observations 1maide bIy the
anl rner, t al., Thmunity i adhor

Frank L. Turner, c-t al. The A rlisan Communnity in Ecuador 's







are evidently 'rvr prcv-aci It. lHowever, much of this may be attri-

buted 1o Im;ln i .CmIenl'C I at itlds. Many busin esm en subsidizec com-

munist unionCiS in or.l'-r to kep out lAmerican-style unionization. They

vwou o ld rallier deal v.'ith tlhe radicals, .who can be bought off in a strike

and v'ho justify their anger at the workers, than witli the Amierican

organizers who do not. This attitude seems to be based on the desire

to maintain a superior social position over the workers rather than on

a desire to maintain profits v.ith cheap wages. Management has gener-

ally rejected union proposals that guarantee an increase in total

profits through a modernization of work organization and an increase
72
in worker productivity.

Business often seem ambivalent about politics. High status and

visibility are accorded to individual political actors. Most Ecuador-

eans identify with political factions and arc interested in and knowl-

edgeable about political events. Charting the rise and fall of political

personalities, and watching the crunch of power plays in the political

big leagues is as fascinating to businessmen in Ecuador as profess-

ional football seerns to be in the United States. Many businessmen

seek election to put final public approval to a successful private

career. The individual who has served a term in Congress is ele-

vated to a special hiigph status. This fascination with politics has


Moth-rnizinJ Economyn (Menlo Park: Stanford Research Institute, 1963),
p. 10-1; Fillol, p. 7-1,

72Interview wilh M r. Snyder.







prol,'bly helpl-d iprC rvc'C the nIrajesty and legitimacy of political

inl l itul icn s.

Economic rch:malld)l arc- easily politicized. It is coni'. cered

(quite proper to seek political positions or influence for private gain.

There is no concept of "conflict of interest. Political connections

are as much a prerequisite for economic grov.'th as efficiency, pro-

duct quality and cost reduction.

Politics is also seen as dirty and dangerous. Politicians are
75
seen as being unmindful of the needs of the people. Corruption and

inefficiency are frequently cited as major barriers to economic

grov.th. Businessmen also resent the delay and necessity for political

76
pull to get action from government bureaucracies.6 There is also a

general fear that the costs of losing may outweigh the pleasures of

winning open partisan battles. These factors tend to reduce the poli-
77
tical involvements of many bL lsincessnmen.

Authority is often met w..ith overt compliance and covert resis-

tance. Fev. businessmen question the general legitimacy of the


73E>anrlin,2 Privatei Investments for Ecuador's Economic
Grrc.th (W',1:.l.ingtoni, D). C.: Checci and Co., I 61), p. 4.

Inlervic.'. v.-ith Mlir. Madison Mlonroe Adaims, Jr., on March 1, 116S.

)Do in .urn, "Do'. lMelscs del 'Honcorablle' Cong.reso, Epocc
October, 1968, pp. 22-28..

7('E ,) i1 ...P ri ',:it," lInv' stm .nl . p. .

lntri vi,'v."- '.,.ih Sr. ]],'-lg Vorbt--cl-., president of C -rvc.ceria J..-
Vietlri.i S. A. on July ;'. 196 ..





3b

government However, many '.w.ishl to avoid the application of author-

78
ily in situations in which tihy are involved.8 Tax evasions are

79
frequent and open. There are elements, of self-hate in this ambiva-

Incei ahbut politics. Many people couple a strong identification as an

Ecuadorcan with feelings that the political and social orders are not

80
worthy of serious regard.
81
Political roleF are centered around the image of cl caudillo.

Political leaders and their lieutenants have many different motivations

for participating. There are substantial differences in the styles of

different groups. Howvevcr, I was struck by the uniformity with which

certain heroic characteristics were attributed to leaders at all levels.

The impression was very strong that followers must be able to pre-

sent their leader as an authentic caudillo, even if neither the politi-

cian nor the follower has internalized the ideal characteristics of

8;2
this role.2


78
78Shapiro, p. 8.

79Hugo Nlas, "Qui'n Paga Impuestos en El Ecuador, Vistazo,
October, 1968, pp. 12-19.
80
One of the most poignant examples occurred in October, 1959.
A bill giving honorary, citi:.:n' ship to an American philanthropist who
had resided itn E'cuador for many years received wide support in Con-
gre ss. 1lowever, Ihe propvis;.l was allowed to die because no one was
sure [le nh man would accept and pride prevented anyone from asking
himi. See EcuILdo r, ConCg re s, Diario de Deliates, Se nado; S eptiem-
bre 19C,9; Vol. I (Quito: Archivo Legislativo, 1960).

1George I,11 .nkst'ni, Ecuador: Constitutions and Ca udill os (Los
Angels: Univa-rsity of California Pri-wts, 1951), p. 31.

81 was imniressed by the xltLi) to which many sophisticated







Tihe plliCal- le.' d Ir Inu t hiv'le a follo'..'ing loyal to him. His

org;tniit: ltion ii 1 per sot:' l, it is not based on int-r.-vening variables SLucli

as party or orgini :ltional idci ifications. The individual who has not

been ablle to -gain the loyally of a close following deserves no attention

by those on the fringes. The 1.c:lder is combative, powerful, and au-

lonornous. He is supposed to relish political fights. He must be able

to project the image of being able to master the competition through

sheer force of his personality, superior strategy, or weight of organ-

ization. He is also autonomous v.'ithin his organization. His follo.'wers

depend on him for direction, advice, and the benefits of his power.

Divided leadership through Lask specialization is weak.83

The lender is pure. Many want to see their captains as "saviors

of the country. Therefore, his goals should be idealistic and he

should bc personally honest. If he deals in corruption, it is in the

interests of higher goals or to protect the interests of his followers.

Sophisticated politicians w.ho knIov. the v:hecling and dealing in Ecua-

dorean politics insist that their leaders do not participate personally

in these arrangemn cents. The dirty v.ork is done by advisors, either



politicians referred to their particular factional leaders and the oppo-
sitions in almost exactly tlie same term s of lhlroism ;and villiany.
They all s.ecimwd quite .sincere even though the ir evaluations were
apparently quite unrealistic, given thlie Ec liadorcan political context.
Since pol itic .ians do not b)haive as if they r>igardcd leaders as being
eitller all good or all bad, 1 c.iincludtd th-it ilis image is windoww
dre in.Gq ''," that iiuslifi .- :ncld ': blues ),liticil activitiCs that would
utherv'.'i:c not bu (] iti 1, gitiiniate.

'' rickL cl ;L l., p. 320.







out of loyalty tu the chief or, at timn s, basLcr motives.

The l-;eadir should be ai universal manl. The extraordinary indivi-

dual compectcnt to lead a lmov'ilmcnt should also be well-roundcd

intcllctlually. The ideal of the philosopher-king or the renaissance

man, intellectual, valiant and humanistic, is much more appealing in

Latin America than it is in the narrowly specialized culture of the

United States.

The leader should be human. He should be "simpatico" ; warm,

charming and genuinely interested in others. He should be open to

the ideas and wishes of his followers. A constant preoccupation

should be the interests of his follo'.ers.

The ties between leader and follower are warm and emotional.

Many seem to gain a vicarious sense of participation through identifi-

cation with a leader. For active party workers,, the vicarious sense

is reinforced by the possibility of employment.

The close lieutenant gains status through association with the

political leader. An individual who has the confidence of a president

must he exceptional. He also gains power by his claim on the loyalty

of the chief and through control of access to the chief.

These factors can be related to the "arrogantly combative" style

of politics.84 Cooperative efforts and pragmatic bargaining for


'lThis image is consistent with the observations of Colombian
politics in:.dl-c by James L. Payne, 'Patterns of Conflict in Colombia
(New Haven: Y;le University Press, 1968), Chapters 6-8. However,
the social constrmaints on political conflict in lEcuador seem strong
enough to prevent the development of defensivee feuds. "







muituFl :itin sen'i011 rel', tit.'ely infreqluent in Elcuadoreian politics. Poli-

ticians have. .,n inter st in dcemon!lstrati ng their intrinsic majesty as ;,

true c;lu'il lo1. '.my fear that tlljnir follo.'Jing would be sv.-alloved up
85
by competing gro .ps if ;autonomy is not guarded jealously. There

are fewv I rancscending loyalties to serve as common goals in a coopor-

alive c-ffort.
86
Political conflict often resen-bles open battle. Each group

claims that the opposition is hopelessly corrupt and damnable. Open

negotiations are difficult at first, so outcomes are determined by the

results of pov. er plays. This may take the form of mass demonstra-

tions, attacks on the meetings of the opposition, threats of sporadic

violence, or a general strike. Negotiations start v.'hen neither side

can crush the other. Both sides usually can claim a victory. The

"ins" have maintained order or have v.'on the election, the "outs"

have gained the status of a ma-jor competitor .who could force negotia-

tions and have demonstrated a significant force for future battles.8


85Coalitions are form-ned during ple sidential elections. -However,
faclion.-il leaders are quite av.-arT of the necessity of m inta lining a
separate identity. Jll er\-i\cv.'s v.ith Sr. Jorge Luna Yepez, chief party
tacticiwn for ARI l' on Novc lmber 13, 1968, and v.'itli former president
arnd lilerail candidate foi prej- ident in- 1968, Andrc. F'. Cordo'a on
Novem!)ber 29, 196C.

Tlliese conmmcn ls paara llel observations of Peruvian politics
made Iby Ja. mes L. Payne, "]'Pru Thc Politics of Structured Vio-
lencet, '" Joiirn l of Politiics, NN-\'ll, 2 (June, 1965), 362-375.

8 N" r\.i .n D. ilcy, cd. Iat.in A ,m ric a: Politic., EIcouIomics
inld ,l -. .- S .- u'riy (N.\.' Y ork: P r. v-g.r, 1965), p. Sl.







Several clolstr -inLt Lre-p lthi political order from br(; king dolvwn.

Challenlers are careful not tou enter conflicts in which they would riot

put ]up a respect ab c slowing. A major defeat could spell the end of

a political Iclead r and his organization. Political loyalties often

cross-cut friendship and family loyalties. Opponents may bc joined

by a v.cb of social relations that dampen open battles.88 No group is

willing to strain social tics with uncommitted third parties by push-

ing the fight too far. The social support of uncommitted groups

gives combatants a potent reserve against potential attackers. So

leaders are generally careful not to make unnecessary enemies that

may return to haunt.

The pattern of Ecuadorean politics resembles those found in

neighboring republics. Political instability has been apparent.

Ecuador has been governed under 16 different constitutions since inde-

pendencc.89 Only three constitutionally elected presidents have

served a regular term of office since 1924. A total of 31 people have

held the presidential office in this period.90

However, instability has not meant the absence of political norms

and patterns. Participation has always been restricted to a very

small section of the society. At best, fewer than 20% of the people


88\littenli, Chaptler 8.

8 B1an l. stn, p. 8.

90Jbid. A new constitution was written after Blanist'en's book
was publ i slicd.







vote in clection-l. -uFormil control of thc machineries of government

has tended to sitay within a small circle. Many recent presidents, Jo-,,

Maria Velasco, Ai'ndres F. Cordova, Gilo Plaza Lasso, Carlos Julio

.Aroselmiena and, Otto Arosernena among them, have either served

several non-consecutive terms of office or are very closely related

to past president-..

Oligarchy in Ecuador has been tempered by at least a verbal com-

mitmeint to freedom and democracy. Most recent presidents have

justified their control of the office through an appeal to either a popu-

lar mandate or a commitment to reforms v.hich wv'ill make democracy

truly functional in the future. Personal freedoms have also been

generally respected. The coups have generally been run according to

gentlemen's rules. Violence has been kept down and the losers have

been permitted to withdrawaw into exile. Ecuador has had no military

tyrants to compare \vith Melgarejo in Bolivia, Trujillo in the

Dominican RCepblic or even Perez Jimenez in Venezuela.

The themes of personalism, regionalism and the quest for econom-

ic advantage have figured often in the panorama of Ecuadorean political
92.
history. The inidependencc of Ecuador from the federation of Gran

Colombia v.was declared in 1830 by the \'nell-uclan general Juan Jos(

'lore1 ;, vwho ruledl the country y directly or indirectly for the next 15


91 P.><.

92lol: n Ed'.'ii F'i a L.-it i i AAi3.:ri a' A Gcll rral lirlory (New\
York: Mhl cm illun, '19(.9), p. .i.-3.







ycars. National life c::l ended very little past the city limits of Quito.

Guayaquil andc the otl ler coastal areas were generally pcfst holes fit
93
for sn'm ggclers, adventurers and exiles.

The repressive rule of Flores, together with the resentment of the

role played by foreign generals in the country (one of whom was presi-

dent), and the struggle for the spoils of the government coalesced into

a vagurcly nationalist opposition movement. The coalition of dissident

Quiteios and the always troublesome residents of Guayaquil finally

forced Flores from office in 1845. However, the removal of Flores

did not bring peace, rather an intensification of internecine warfare

was the result.

Peace was achieved with the establishment of the reign of Gabriel
94
Garcia Morcno, the former rector of the University of Quito. A

civilian, modest, upright and scholarly, he was the antithesis of

Flores. However, militarism had been exchanged for clerical fanati-

cism. The Church was firmly entrenched, the Jesuits were brought

back and the curses of liberalism and anti-clericalism were combated

by the most strenous means. As a culmination of his religious pro-

gram, Garcia Mhoreno reverently dedicated the country to the Sacred

Heart of Jesus. An attemptt wazs made in 1870 to raise a clerical army

to rescue the Pope after the annexation of the Vatican. The medieval


931bid.

]bid. p. 4?.9.







tiillocracy tli;il GC rcia hiorneno v.as trying to build was brought to an


95
crnioup of mai cilltc'-v.- ldinl youths.95

If the 19thl century had belonged to the conservatives, the 20th

ma rkcd the rise of the liberals. A. prosperity based on the exporta-

Lion of rice and cocoa together with the eradication of yellow'v fever

brought population and economic power to the coast.9 The period

betv. ecn 1875 and 1895 .was characterized by an uneasy truce between

the liberals and the conservatives. However, a scandal in the admin-

istration of Luis Cordero resulted in a civil v.ar betv.'en coast and

sierra v.'hich v.'as '.,'on by the coastal general, Eloy Alfaro. Alfaro

promptly began to cut back the power of the Church and to modernize

the legal and commercial systems of the country to keep up .'ith the

newv prosperity. Although Alfaro \as assassinated by a proclerical

mob in 1912, the presidency wvas firmly held by the coastal liberals

until 1924.

The economic development of Ecuador brought n.e\ groups into

the political process. The military v.-as largely pacified through pro-

fcsF ionalization. Many of the economic elites, v.who apparently' decided

that revolution v.as bid for business, began to support political


95George- ]J. l31;nl'l.'trln, "Ecuador: The Politics of Instability, "
in martinn Nercdltr, Ti1-. Polit il S. \ F -.lms of ;,lin I Alimerica (Prince-
lon: 1). \'an Ios! ra. d, 190-;), ]. 27 1.

F6- 6. (39.






coalitions
and rising literacy brought in the spectre of popullism.

During the depression years there was a brief experiment v.wilth

miliilary rule. During the .war 'years the liberals and radicals united

for a last clc'cion and gave the presidency to Dr. Carlos Arroyo del

Rio. However, the dominant figure of the period has been Dr. Jose

Maria Vclasco Ibarra. Between 1937 and 1968, Vclasco has been

president five times. Only one term has been finished. Three times

98
novw ie has been ousted because of corruption and violence. The

persistence of Velasco's political career can be attributed to the

appeal his brand of populism has for the poor and the marginal busi-

nessnmen. His presidency from 1960 to 1961 is the subject of Chapter

8.






















97 1BlI;nkMtln, p. 277.

98Velasco wLas president at the time this was written.













CHAPTER 11I


BUSINESS GROUPS OF THE COAST


The Economy

The Ecuadorcan economy is specialized in the production and

exportation of a fev. agricultural products. There are a few'. business

groups and the economic relations among groups are relatively simple.

The importance of agriculture in the economy is suggested by Table 3.

Agricultural production is relatively undiversified. Most of the land

is taken up in the cultivation of a relatively f-ic. crops. This is shov.n

by Table 4.

Exports are highly important to the Ecuadorean economy. With

a total gross national product of some fourteen and a half billion

sucres in 1963, exports amounted to about tw'o and a third billion

sucrcs. This is a fairly high ratio of foreign trade to total produc-

tion for a South American country. Since Ecuador has enjoyed a

stable balance of payments in recent decades, these figures accur-

at.ely reflect the importance of international trade.

Virtually all of Ecuador's exports are agricultural goods. The

i-nlporitanl ce of a fe'.' crops is ho ,n by T ble 5.


1h:-culor, L3;nco Cen tria, B3oletTn del ',anco Central 1965
(Quito: 1965), p. 1i,8.
45





a
TABLE 3

EMPLOYMENT ANID EA ]INGS IN SECTORS OF THE
ECUADO1(EAN ECONOMY IN 1963

Sctr Peopl 'o% of Labor Value- % of
Emplovyd Force Added GNP
Agriculture & Fishing 839, 000 56. 5 5202 35. 9

Manufacturing 209, 000 14. 1 2409 16.6
Artisans 179, 000 1,2. 0 1409 9. 6
Industry 30, 000 2.0 1000e 7.0

Commerce 92, 000 6. 2 526 3. 6

Services 240, 000 16. 2 1252 8.6

Construction 48, 000 3.2 526 3. 6

Transportation 42, 000 2. 8 609 4. 2

Finance 8, 000 .6 428 2. 9

Mining 3, 000 2 320 2. 2

Utilities 3, 000 2 181 1. 3
TOTAL 1,48.4, 000 100.0 13, 862 100. 0
aBasic data are taken from Edv.win E. Erickson, et al. Area Handbook
for Ecuador (Washington, D. C. : Government Printing Office, 1966),
p. 329; Clarence Zuvekis, "Ecuador: Selected Economic Data" (Quito:
USAID, 1968), p. 21 (mimcographed).

Erickson, t al. p. 64.

cDue to the complexities of the Ecuadorean exchange system, all local
prices will be given in sucres. An average rate would be close to 20
sucres to the dollar. (Figures in thousands of sucres.)

dcThere are many artisans engaged in cot tagr- manufacturing of shoes,
clothes, stra'.v hats, and the like. The 195'1 i industrial census included
only businesses ciploying 5 or more workers with an annual production
greater than $500. 00 (approx. ) and that had over $600. 00 active capital.
Ecuador: JuInta Nacion:il dr Planificacion y Coordinacioh Economica,
sec Primer Ceo Indusrial: Re suim n de e tcsuiltados (Quito: 1957), p.
v (nliml cograplihd).

CClarence Zuvekis, "Recent Trends in Ecuador's Manufacturing
Stctor" (Quito: USAID, 1968), p. 6 (mimncographed).









TABLE 4

IM.A\JOR AGRICULTURAL PRODUCTS
IN ECUADOR IN 1957a


Product Area Planted in Acres Tons Produced


Cattlcb 2, 950,000 40, 000 head

Barley, oats,
corn 696,000 48,940

Cacao 410,000 8, 139

Bananas 232, 000 73, 000, 000 sten-iF

Coffee 209, 000 8, 900

Wheat 173, 000 8,987

Rice 158, 000 20,000

Potatoes 78, 000 53,420

Cotton 70,000 19, 156

Yuca 48, 000 40, 789

Others 3, 32?., 000 N. A.

TOTA L 8, 316, 000 N. A.

a"Produc cin Agricola Estimativa de la Republica del Ecuador en el
A'ro 1957, El A% ro (Quilo), August-September, 1958, p. 41.

bEcuador, Junta Nnciciinal de Planificaci n y Coordinaci6n Econ6mico,
Bases v Di re-ciivo.s ),-ra I 'rop ramar el Doesarrollo Ecc.n6miica del
EcuA.clor: Toinm. 1 (Quitio, 19]-), pp. 21 1-216.

bhid. p. 127.







TAB LEI 5

MIAJO, EXPORTS FOR 1960c


Conmunodity E>.xort Value % of Total Export V\altue
(in million) (in millions)

Ba n n ,a s 90. 0 60. 3

Cacao 21.4 14.4

Coffee 21. 9 14. 7

Other 15. 7 10. 6
TOTAL 149. 0 100. 0

aStatistical Abstract for Latin America: 1962 (Los Angeles: Center
for Latin American Studies of the University of California, 1962).

bBoleti p. 153. Figures are in dollars.



The unclassified exports include such items as balsa, pyrethrum

flowers, canned tuna, tagua nuts, Panamaa hats, and pharmaceu-

tical herbs. Few of thlse have an exported value of over $2, 000, 000

a year.

The manufacturing sector of the economy is small and simple.

The 1954 census of industry recorded only 1, 085 businesses. Few

intermediate products are bought and sold. Most of these are agri-

cultural goods which pass through relatively few hands. Virtually

all capital goods and processed raw materials are imported.3 (Table 6


2Ccn o Jndustrial. . p. ix.

3Ecu idor, Mini -tr de Tesoro, Anuario de Cornercio Ex:lterior:
1960 (Quito, 1961); .Lilo 1-inke, Ecuador: Couni r of Contra sts
(London: Oxfurd Univ'er .ity Press, 1960), p. 1-17.









TA13LE 6

INDUSTRIAL EMPLOYMENT BY SECTORSa


S .I rI- Workers, En-ploycld of Induti ri;l Total


Te (-tiles,
clothing 9608 31.6

Foodstuffs
Proce sing 7750 25. 5

Automotive,
railroad
maintenance 3897 12. 9

Oil drilling,
refiining 2361 7. 8

Other 6754 22. 2

TOTAL 30, 370 100.0

aCon:;o Industrial . pp. '1-9.

blncludes spinning '.' caving, and dyeing of some imported fibres as
well as the processing of domestic cotton and wool.

Concludes milling, baking, canning, the processing of chocolates, ice
creamis, liquors, etc.

Td his includes the fii brication of bus and train bodies on importccl
trucl classic as '.e1ll as such "heavy" repairs as the regrinding of
crankl .ihaftrf;.







The organiz-Ation of the conmmerice and services sectors reflect

thec simplicity of 11)c economy in wliich they are involved. Substantial

markets exist only for a few commodities, As a result few busincssc,-

can afford toseilienrowly. Economic expansion hs gcnorally


been achieved through diversification.


Business Grozips



Coastal Ac,,riculture

Agriculture is the least developed sector of thq..eFcuadorcan

econom-y. The level of investment and techpology is very low, even

by Latin American standards. 4 The average agricultural worker

produces less than one-fortieth of the value generated by his North

American counterpart. 5 It is not surprising then that the value added

per worker is also low despite the dism-al level of agricultural wages. 6

There arc great regional variations in crops and cultivation

techniques. Coastal I riculture is heavily specialized in bananas,

coffee, cacao, su~gar, ric2,_ and cotton which are the exportable and

''heavily processed" comminoditics. The .close working relations amron-

the exporters, the producers and the processors )iav, becin a factor i
7
encoiirging a relatively hiigh-l-evel1 of dcvelopinent on the coast


4"Productivity of the Agric u1tural Sector in Ecuador, "Economlic
Bulletin for L HIn Americai, VI, 3 (October, 1901), 66-67.

5Ibid. 67.

6b( 1 7







I 1:, n:11 ;I s

Ban.;imnar are the. i.a-cil.lone of the Ecua-dorean economy. Ecuador

i.- the lar,,..st exporter and second largest producer of the fruit in lthi

v.orl d. Th"le development in bananFas has a occurred since 'World War

II. The value of banana exports rose from $7, 000, 000 in 1950 to

$90, 000, 000 in 1960.' This trerenc dous progress has been attributed

to cheap labor, government supports, fertile disease-free lands, and

a favorable climate. Although exports are not expected to grow, in

such a spectacular manner in the future, the long term prospects are

considered excellent.0 Yet the banana growers are one of the most

divided, discontented, and politically aware of all business groups in

Ecuador. They have a common desire for an improvement in the,

sucre price of banana exports and for more go,.crninent investment

in banana growing. l '.'.'ever, there are sharp splits between the

large-scale producers and ltc smaller grov.-ers as to ho'.v these goals

are to be reached.

The ov.wnership of' banana-producing lands is not highly concen-

trated. There are only some 160 plantations held_by the big land-

owners. The largest, Cia. _Bananera Ecuatoc riana (Unitc d Fruit)
_- .- ------------ "- -


Rl-lph J Vatkins, -,:dinr cu-dor' E ports (Ne'. York:
Frederick A. Pracg. r, 1967), p. 10.

91Ecnom ic ulltc in . ., p. 15.1.

1ll,ins J. Lin em.niii, .-\n l\ .is \ l)-rov ccicr'n..s I La:s Export;t-
ci(n .'= d.-1 l:-cl, l ir (Q uiitl Jmnit:I ;' iL jon.il d( I' Il 1.nificaciI'i1 y Coor-
diine ._,in ]'b : ,n, :i'ca l ,','l), p. 0.







cove;1 abu 400nrcs. 11 Some of the, other large plantatinar

the Fronch-mvned Astral (4, 500 acres), Cia. Frutera Stid-Am rc,1

(3, 700 acres), and the Swe dish-owned llacic da Clernentina (- 0

a c res). The production of those largest plantations accounts o

than Z0 percent of the total crop. 12 (Figure 2 shows the dliqtrbto

of landholdings.)

The rn eciurn UXQuc~crs account for about 50 percent of t oa

export volume. Although the smallest peasant producers areb a

the most numerous, they account for only about a third of toa po

cluction and onlv a small fraction of the total volume of expors.1

T.1ie-smjallcst producers are peasants with less than 12acesi

production., They generally grow bananas with family labor a

s idc lL. Lo-subsistence farming and the cultivation of cfe n

cacao. The bananas produced arc rarely exported and are fcunl,

not even harvested.1 These small producers fall outside th cp

of this study.

The medium- planters have between 25 andl :250 acres.Thyac

frequently upwardly mobile mid-dic cls wie"who arc n h


These figures are based on a rough conversion ratof.5
acres to the hectare.

12N'atkins, p, 16; Ietmnsin 1Ecuador, p. 37,

13








FIGULr. 2


D1L.[, Ei 11 (' : OF .\:'.'\:.' L.A:.DS i:. ECU,'DO


Percentage
of total
area
cu t iLva ted
in
bananas


48 88 98


Percentage ot banana landholaings


Figures deriv.'ed tLr.m Ilrrera Vasconez, ]F Cu lt ivo
dcl F. mi n..- en El 'curad r (CuaJ.qu L1: A::II 1963),
p. I.'I ; J.D.V. Srundcrs, ":lan-land r-.1'ILions in
Ecuador," II',hur l So.n iol v, xx'VI(1 (:larch, 1961),pp. 57-61.








process of parlaying a small start into a reasonable planting.15 The

more prosperous planters of this group generally take agriculture

quite seriously. They produce for export and are aware of planting,

cultivating, harvesting and grading techniques. However, the imple-

mentation is often hampered by a lack of capital. The medium

planters are highly vulnerable to market factors.6 They lack the

reserves necessary to weather a bad year, to keep fallow land into

which to expand, and they rarely have the capital needed to change

to the cultivation of coffee or cacao.

The medium-sized plantings cannot be farmed with family labor

alone and cannot support a full-time work crew. Therefore almost

all planters in this group use floating wage laborers on a seasonal

basis.17 Selection, harvesting, grading and transporting of the

bananas to the export docks are very frequently contracted out to pro-

fessional wholesalers. These wholesalers may be either independent

operators or affiliated with one of the export houses.18


15Ecuador, Junta Nacional de Planificaci6n y Coordinaci'n
Economico, Reforn-as de la Estructura de Tenencia de la Tierra y
Expansion de la Frontera: Plan General de Desarrollo EconSmico v
Social: Vol. II (Quito, 1962), pp. 95-96.

1Interview with Sr. Vicente Chang, banana grov.er and owner
of "Hacienda san Luis, on October 27, 1968.
17
Anthony Bottomley, "Planning in an Und-e-rut ilization Econ-
omny: The Case of Ecuador, Social and Economic Studies, XV, 4
(December, 1966), 311.

8Watkins, p. 17.







The owners of the largest plantations (over 250 acres) are sol-

19
idly in Ihe "'.vhite" elite of the upper cl::.ss ..lany of them belong to

the old ari.-tocracy whichc h dominates much of Guayaquil business.

Their style could be described as patrician in that they expect to

receive deference and do not have to compete in the arena for what is

rightfully theirs. Tiei social ties betv.'cen the large lando'.,ners and

the commercial elites reinforce the economic positions of each. The

large landowners could expect to receive favored treatment from the

ba.nklers and the exporters as a result.

These largest estates are wvell capitalized and generally well

managed. The operation of the banana plantings often more closely

resembles industrial agriculture than the classical latifundia model.20

Almost all have a full-time force of agricultural workers and often a

fleet of private spray planes.1 Plantings are often diversified into
22
cacao, coffee, cattle, or rice. As a result, the largest bannan

planters are much less dependent on the yearly success of the one

crop in a competitive market.

The large planters generally select, harvest, grade and ship


19Georg MNiier, "The Jmpact of Vel squisino on the Ecuadorean
Political Sysitem" (Ph. D. dissertation, )epa rimenL of Political
Science, Southern Illinois University, 1966), pp. 1-5.

20United Nations, Econonic Cornmi.ssion for Latin America,
El Des..-irrollo Econinliico d.I' Ecuador ('.lM xico, 1954), p. 59.

21 Produc-tivil . ., p. 70.

22 \\;ilkin., p. 16; In\vert:n1 lnt in 1cn:i'ior, lp. 37.







their production directly to lite e'xporters. Whereas the small and

medium, gro'.wers are p:P,,,....... 'r- s-:tern accept cd for export, the largest
.. .. ..... ...... g.. . . .. . .. .
producers have contracts based on total production, regardless of

quality. The exporter has a very direct interest in helping the large

planltrs improve quality and to reduce the percentage that cannot be

shipped out of the country.

The cultivation of bananas is a highly complex art. It takes a

year for a crop to mature. After the fruit is harvested, the land has

to be cleared and replanted.23 Banana "hands" grow in bunches on

large stems, which may weigh between 50 and 100 pounds. The stems

are picked green and must be placed under refrigeration within 24

hours. Handling and shipping are coordinated so that the stems

approach maturity by the time they are delivered.24 This calls for

the closest cooperation between shipper and planter.

Bananas are extremely susceptible to bruising in shipment.

Bruises that may completely discolor the fruit when it is ripe are

difficult to spot when it is green. Therefore utmost care must be

taken in moving the fruit to the docks for shipment. The exporters

examine the fruit very closely for improper handling.25

The most serious banana disease is sigatol:a, a virus which


23
"El Des.irrollo . ., p. 174.

2.1
I2birl.

ai p. 17.
2-SValinsj,I~ 1. 17.




57

infests thl soil. There is no economical '.vay to prevent or control tliI

disease. Land thrt has become infested must be shifted into other

forms of cult ivatio'n until the disease has died out. As a result,

growers are very inlereC sled in finding ne'.. uninfected lands to which h

they can mo'.'e ini tile event that sizcatoka spreads to their cultivtions.

The larger growers buy up large tracts of unused land and can make

their own improvement s on it. The smaller growers generally have to

wait for the government to open up areas for colonization before they

can afford to move their plantings. The other major plant disease is

mal de Panama, a leaf fungus which can be controlled by oil sprays.2

Profits in bananas can be respectable. Harvested stems are

worth about ten sucres (50 cents) on the farm. The average yield is

about 250 stems per acre. Cultivation costs for the first year are

about $70. 00 and drop dov.,n to $60. 00 for subsequent years. The net

profits come to about $60. 00 an acre.2

The price of a stern of bananas is about 23 sucres at the dock

($1.10). Transportation costsar ar around five sucres and processing,

handling, and taxation costs add another five sucres. Therefore, the

banana growers could dc tli cr own proceC.sing and transporting to earn

the extra three sucres at the risk of not being able to find an immediate


Galo Pla;a and Stacey May, Tih United Fruit Ccrinpany in Latin
America; (Washiintoln, D. C. : The National Plalnning Association, 1958),
p. 169.

2 ]hid., p. 191.








buyer for a hi.ghJly perishable corninodity.2 'The. only major market

for b nana exp:Iort rejects is for cattle feed at ten cents a stem-.

The political interests of the small and the large producers on

exclieige rates are identical. Everyone involved in banana exports

has animmrediatc- interest in increasing the buying power of the

"baiiaa sure. This could be done by a general devaluation, which

would raise the sucre income from all export dollars, or by altering

the ten-s of the rmithiple exchange rate to benefit only bananas.

There is a major split between the small andi the large banana

growers on the issues of regulation of export-buying practices and

on government investment in virgin lands for b)anana grOWCTeS. TheO




a significant fraction of total current demand at any o~ne tim-e. He

also has relatively complete control over the factors of production,

Therefore, the large producer can shop around for th e best possible

contract for his bananas.

The smaller growers do not have these advantages. The organi-

zation and timing of selecting, picking, shipping, packing,, and loadt-

ing for export simply cannot be handled by one itidividuial. Because

the small grower has been 5;o clopendent on e.-po)rters and mniddlemenc

for hianfliing hi,; baiianas, the m dlm nhave become muxch miore

selective, In trading. small lots- of fruit. The m~in-iumn stem wei-lht


?2I,,Jacjw l ias,; "Ura Bainana de Oro M,aizco, Presenii a
T~ma nov erian JuTly 31, pp8.o 18-23.







acc.eptec for e-:l'port hi :i gone up from 30 to 70 pounds since 1950.29

Gro',vers. have also charged that process sors have demanded a frac-

tion of the total production "under the table" as a price for accepting

any of the, frult. : E :..,porters and their middlemen have also refused

good fruit on occ-isjion only to buy it later as cattle feed :nd then

export it to the Latin American market.31

Tlih smaller growers depend on ANIBE for oil spraying of their

fields. Some charge that the exporters have influenced ANBE to

spray the fields of recalcitrant grcw.ers at inconvenient times and
32
even to apply useless w.'ater instead of oil.32 As a result, the smaller

growers in areas in v.hich a single influential buyer handles n-mot of

the bananas are prevented from shopping around for a competitive
33
outlet.

It is not surprising that many smaller banana growers have a

very strong interest in some form of state regulation of the exporters.

Specific suggestions have varied from urging the creation of a state


29J. Champion, L.as Bananeras del Eciudor (Guayaquil: ANBE,
1959), p. 37.
30
Inl ervic.%v v.'ith Sr. Vicente Chang.

31"Jean Le Ro.',e" (Pscodonym), "La Gran Catastrofe del
Banano, JL Callc (Quito), 213, April, 1961, p. 10.

32 .1it wrvicw v.:lth a knowledgeable crop duster v.-ho works for
ANBE; "Jen i Le I;ouge['" ( IPcurdony)m), "El Negocio de la Fumiinga-
cin, La C.lle (Quito), 219, May 12, 1961, p. 26.

I33n .trvie'. v.' ilth Sj-. Alui'jalndro Carric't, editor iand publisher of
]_, Callc, on Novoomb,.-r 12, 196S.







elxporl ing and .shipping line31 lo the formation of indepcndenl coopera-

lives to in;arl.I b1aiian;is abroaid35 to reorganization of AN3BE to

incrcasc the influence of .smallr gro.wers.36 The smaller grove. rs

art' also interested in govcriiment dc-velopmincut of future banana lands.

The sn-allcr grco'.'.'.-rs fear that the large landowners .'ill buy up avail-

able lands when producing fields are infected by sipatoka, thins forcing

the smaller grow'vers out of business.

The political interests of the exporters and the large-scale pro-
.. ......... . -. ..... ........
ducers are often allied. The large producers have an interest in

maintaining .he sucre prices of bananas by restricting lthe...p.,-oduction

of the middle and small gro'.ers. The profits the exporters can

make from the n-edium and small grov.'ers give the large plantation

37
owners a "cushion" ''when negotiating a price for their own crop.

Therefore the large-scale growers are not so opposed to the lack of

influence of the smaller gro,.vcrs in ANDBE. Also the large growers

are not as much in favor of government road building and colonization


3For recent examples see "Intercscs Bananeros: Los Produc-
tores Banancros de Pichincla, El Comercio (Quito), September 24,
1968, p. 9; "La Asemblc.aI Nacional de Delegados de la Fedcracion
Nacional de Bananeros del Ecuador, El Comcrcio (Quito), Septem-
ber 29, 1968, p. 7.

35
3"Piden No Jntcrfecrir en Ncgociones de Pcqucn os Productores
dc Baninas, 1-El Comeri io (Quito), August 11, 1968, p. 28.

36"Ascnmblea Nacional "

I37ntcrviev.w with Sr. Vincente. Chang.







projects iIn u' 1 -.ar r.. b n: a in: lLnds. Thcir ability to build their

ov.in ro.ids p.i\'cs ~in-m an enormous competitive.' advtantage over the

smaller producers in shift lin a'.'.-a from sir atoka-infe stcd areas.


Cacao ;an Co!fee

The economic and political positions of the cacao grov.ers is in

sharp contrast to that of the baanaeros. Cacao is a relatively, "sich"

branch of Ecuadore.n agriculture v.ith low profits and an uncertain

future. However, the problems of the cacao growers do not seem to

have been reflected in their political programs and goals.

At the beginning of the 20th century cacao wvas the prime export

of Ecuador. When v.'orld market prices were 25 cents a pound in 1916,

Ecuador c:;portcd over 40, 000 tons annually, accounting for some 20

39
percent of total world trade in cacao.39 Prices fell to less than ten

cents a pound during the depression and World War II. Annual produc-

tion fell .0o less than 12, 000 tons in 1933 and has gradually recovered
40
to the current production of 33, 000 tons annually.40 Future earnings

are expected to decline gradually as higher quality cacao produced in

Africa enters the worldl d market.4

Some .100, 000 acres are planted inl cacao. It is estimated that


38 ,
intervioev. wi.,th Mr. Joln W. Sn,,der, Labor Attache of the
Amirican m slj;i.- sy in Quilt, on October 15, 196S.

39
\ ;,T kin ., p. 21.

40 l-in[In,, p. (9. Walking, p. 23.







cur1lren production n could Ibe ra- ily Cdounlji'd by recultivating 120, 000

acres that have been abandoned and by improving production techni-

42
quc s.

An acre of cacao produces $120.00 in gross income. Costs

average around $40. 00 an acre. It takes several years for new. plant-

ings to produce. Many farmers are unwilling to invest in cacao,

fearing that the falling world prices will not make it worthwhile.43

Yearly harvests of trees occur in December-January, May-June,

and August-September.44 The beans are allowed to ferment after

picking and then are dried in the sun. Dried beans are sold in small

lots to local representatives of the exporters. Since the beans are a

durable, easily transported commodity, local pricing is generally

based on economic factors and is approximately the same for both

the small farmers and the large producers.

Cacao is gene rallyjy ro1wny by peasant fa rmers. About three-

fifths of the plantings and one-third of total production come from

small plots worked by peasant labor for the free market. Most of

45
the remaining production is held by the large plantation owners.45
............. -. ... ....
Usually the landowner will "lease" a set of trees to i)s peasait

workers for them to farm using family labor. The peasant agrees
.... ." ---


'12]bid., p. 22. 43Ibid., pp. 22, 24.


U. S. Dep- rtment of Commerce, Investment . ., p. 41.

"5"E D DtLsarrollo . ", p. 157.







to sell all the production to the landovwner for a set price. The

16
own c',r Iet-'ps l12c profits from reselling the cacao to the Cexip rters.

The Ecuadorcan gcAernCnent has set up the Emprcesa de Renova-

ciSni de C.c a (cacao renovation enterprise) to promote discasc-

47
re- instant straiins and better cultivation techniques.4 Their efforts

have not been entirely successful. The resistant strains produce a

cacao bean of lowv.er quality and it has been difficult to persuade the

peasants directly responsible for cultivation to adopt better tech-

niques.

Given the market and production situation, it is not surprising

that the uncertain future of cacao has not resulted in widespread

political de-mands for government help. The landlords and middle-

men can recoup their profits by paying a lovwcr price to the peasant

producer. Governn-cnt supports for a price higher than currently

being paid on the world markets would be a financial impossibility.

Government programs to improve the quality of cacao would inevit-

ably involve working with the peasant producer. Such programs

would not be particularly popular. A last strategy for improving the

prospects for cacao would be to change the exchange rates on

exports. Tlhe cacao producers share with the banana grov.ers an

interest in devaluation. However, mi-ost landox.lwners and exporters

are involv'edl in bIoh commodities. Since tih prospects for balnaina


'16 bid. 1- ] id. p. 163.




6-t

are brighter, most people %vould rather spend time and m-oney there

at the e en of cacao.

The peasasnt producers who depend on cacao for much of their

income have alm-ost no impact on the political process. Unlike the

enidiurn and larse banana growers, they lack the time, the skills, the

power and the social standing needed for a hearing. A s a result, the

problems of the cacao growers rarely become political issues.

The situation of the coffee growers is quite similar to that of the

cacao farmers. World. coffee prices have fallen from $70 to $33 a

quintal in less than ten years. 4 Ecuadorean coffee sells below world

prices due to the lack of quality controls. 49 Most of the coffee is

grown by peasants in Manabi province. The few large fa rm~er~s whlo-

could be effective in national politics also cultivate bananas and cacao.

They will probably only invest timec and energy in coffee as long as

the world prices make it worthwhile. Most large coffee growers

seem mo2-e interested in the long term development of bananas.

Attempts have been made to ])cost earnings by improving culti-

vation, processing and grading techniques. The peasants who are

responsible for most of th(! production have not responded to the

proddings, of the I-arge growers, thQ exporters, and the Ecuadorean

government.0 'TlereforQ it is not surprising that few people continue


4,81hid1., 1). 160, 49%atkins, 1). 24.

50U. S. D)onartment of Comme-rce, .nv(,.fnment . rp '61.







to press vocally for further development by the government of coffee

Ia n d s.



Rice

Rice is generally grown by sharecroppers for local and national

consumption. Quality is poor and production costs are high.51 The

landlords are generally not concerned with developing techniques as

long as their lands are being worked in a profitable manner. There-

fore rice production does not seem to have been a political factor.



Sugar

Tv.o major mills, Azucarera Valdez and 'Azucarera San Carlos,

52
grov. and refine virtually all Ecuadorean sugar. Profit levels on

these integrated operations are high, reputedly around 50 percent of

the sale price.3 Since over 50 percent of all production is consumed

domestically, sugar growers enjoy excellent security outside of the

vagarities of the world market. Who gets the U.S. sugar quota

premium has become a political issue in recent years. However, it

v.,as not during the period under study.

Some sugar is grov.'n in the sierra foothills for local moonshine


51V'atkins, pp. 12- 3.

52
Watkins, p. 35; "Reportaje: El Inigciio Valdez, Ci;mnara dc
Inclust ri i1 :-, d(. Gua aq\'i il, Miay-J une, 1968, p. I 1.

53")- stiblCen Cos os y Utilid:irdes on Azicar, El Comercio,
Nov\ ember 11, 1'( p. _5.







(aguI rdic'ni e ). Proc,, -.-.in is. usually on an extremely small scale.

Distillers have be c-u c conc.'rnr.d about the problem; how.-ever, it
54-
hab not bothered the sut ar I 10. n to any extent.


Cattle

Commercial iherds are kept only by the large landov.'ners. Some

peasants have draft animals which may be...,jsed for domcttic consump-

tion. They have not been an important factor in the market. About 60
55
percent of the 1. 5 million head of cattle are on the coast. Most.~f

these are in beef herds.

A good herd of cattle earns about $40 an acre. Many farmers pre-

fer to keep basic herds, despite the low profits, as a hedge against

56
the highly competitive banana business.56 herds, traditionally of very

lowv quality, have been improving rapidly in recent years. Rising

profit ma rins have stimulated an interest in subsidized importation

of purebreds and in the construction of slaughter and chilling
57
hou se s.

Price ceilings .:in retail beef (about 30 cents per pound in 1960)

have probably reduced profits. Some cattlemen feel that a major


54 Watkins, p. 36.

55 p. 61; kings, p. 77. Ibid. 8

Slbid., pp. 79- 0; I'l De1-'arrollo Agro;ccario del "Ecuador
(Quito: C'ml.ara (r Agrit ultur:i dC. 1- l'riunera Zona, 196S), pp. 18-23;
R{cori'nd(] LLi.,'rn- 1 .11.ic,.t ]P. a I: ALrccin FIutrt ia n e l Stctor Ag rope-
cr'ii (QtOilu: C i:,;r.L de Agric-.iltur, dc l;i Primera Zona, 1968),







price incrYcLne S .-ould rducd ce ma rket more thanll; they v.'1ou1ld increase

profit inm rgiin s. T he r, fure price ceilings have not yet become a

ma jor political issue.


The .Ex)o rl r i-

Exporters have long b-c-en involved in Ecua;dorean politics. They

all share three general goals: to increase the sucre price of exports

on the -world market, to reduce the sucre price of comrnodilies

bought for export, and to encourage government investments in export

agriculture.59

Sharp political competition among exporters of similar size is

reduced by the lack of differential specialization. All of the largest

exporters handle many of the same commodities. This is shown by

Table 7.

Political splits occur between the larger and smaller exporters.6

The smaller businessman generally do not have the capital to finance


SugtestFed by Sr. Luis Del Campo Salvador, member of the
board of directors of the Clmara de Ac: ricviltura de la Primera Zona,
in an inter'viLv. held Novemt'lber 15, 1968.

-' imilio Estrada Ycaza, "GoCne sis de la Crisis Economica de
1961, La Calle (Quito), August -4, 1961, pp. 16-17 and continued in
L;, Calle AL.-1ti.tI 11, l961, pp. 11-12; Jorgce \V Villacres M.oscoso,
1]olitica Ecl 'ini '.C Intern iiounnl d'l E .-tIadc. (Guayaquil: Univer-
r.id.-.d do Gu;.- ..quil, 195''), p. 11_: .Il o -'i Lui s G i.:i~ lez A., N lur=stra
Cri i: 1\ Fi ori;:rd Mo .li rio Interni: >iown.1 (Quitlo Editorinal
iumini tiaini, I35 ), pp. ..UT-- Us; Intervicv.- will, M r. Jolhn \'.. Snyder.

Inlc r\iew '.'ll Sr. 1( A.bbd0! Cald roL i, .xecut ive director in
C;1.,'1 for ] id. .il i .-" l la.d''!, on Novi, il-.r 1, IC, 68.






EXPORTS AND SIZD OF J3USI.NE:SS OF T1E LARGEST EXPORTERS


9,10 C, U0 o' I kdro NM tpulns a g s cianio
lilt II bo v c Crk'dit S. A.co f ,
E norm a< s Un aS. A.bnns

-1, 000, 000 N 'e Cia. bananas, caca(

2, 500, 000 Sociodad Ce'leral c rice, coffee

I, 000, 000 Luis A. Nxoboa bananas,
Bonmancra Nohoa S. A. rice



Soo, coo Raid Cai~lzares La Madrid bananas
Fr~utera Chilena-E'cuatoriana S. A.
ExL2_iradora Ecuatoriana-Euronea S.A.

500, 000 UBESA bananas

400, 000 Sociedad Nacional Com-ercials S. A. bananas

250U, UUU) Exa oradoi at i2, Fruat: S. A. bananas

250, 0O0 C. A. Industrial Azua cacao, coffee,

aThe names of exporter s hawe been taken f rom ''Lista de Firmnas, E-xto
tadorcs de Productos Agricolas, '' El Agro (Quito), October -Novemer,
1962, pp. 28-3?-; "Firmias Exportadoras de Productoros Agricolas,"E1
Afrro (Ouito), October -November, 1961, p. 35. Ranking by re-isterc'
capital is baz-ed~ on data found in Guinl Gcneral de. Comerciantes de
Guaggaqil (Guayaquil: Cnimara de Com-ercio de Guayaquj~il, 1963).

bRegjistered capital i-, equivalent to the valuc of stocks ss; by co -
porations but covers all forms- of private u ies r(2zto s Snc
many exporters, particularly SoiddG nrladSr, Noboap, a-re
tlhou1Cht 10 C10pOe d on unregiC1)s10ered forciori capital, registered capital
may not accm~ratcly reflect the relative volklmes of sie s Ho v
it is; the only illoe' Ivailablce

cSoCj 11 t 6 C' J1 c ra n 1to Ie a1 12a Codn co r 1)or at io C ow10vne ICd 1)
Sr. Juan1 ea.1( clCnrl loolrtsa a band is
n av(-6 in hI) II in I n )(I Ie ta e SrZ. N0 r o I r kj Cor t C( tp nbeCtr
Ile d t~yWCn(0 '' -Pll d t()111 11-t1\ 1eso a con" rol o\'(' r r); -1 of ( le lo e

volunw of busI )'11 is 1111(1 1k l ls t al w-o lOd I)( i ndi cate d by Ilis r p
fQI'I k0 ii i ii c c/


V t )..............






] i..1 l i( I thI C otl" It;t s thC, W .bt, in m ii or CLc'l tra.ctb. A .s a

r -iilt th c d, p.nd on 11-.e rInaillC r growv:rs for the bulk of their busi-

n~ss. The sm, al cr exporter-s and thel smaller growers ars r oftc.n

;ill3 c( aiLa;inHL tlic larger procducc rs and export rs in an attempt to

I ncou'. ra'e m ore v.idely ,s}prcad production.

The snma-ller exporters cannot afford to wage extensive political

warfare against the lar-ge, growers and exporters. Because they lack

c.apita-l and econonCii:cs of scale, the overhead can be substantially

higher for the Fmaller exporters. They, depend on the larger ex-

porters to keep purchase prices low. enough for the s-maller buyers

to make a profit. These tw'o goals--cncouraging more widely spread

plantings and maintaining lo'.'. purchase prices--are often mutually

exclusive. This probably has reduced the political effectiveness of

the smaller exportcrs.

Table S cla ssifies the exporters by size and number.



Jnmporters, whnlepalers and retailers

The comierciautes62 have been regarded as one of the imost

63
pot1) t:it groups in Ecuadrori an politics. The Liberal Party has a


6 1]bid.

62Cc.G m rci:ini dre.cribe.- a major businessman engaged in coin-
merce, v','hih i.- nut thi, :i. s- con\v yc.d .by the trinslation of "mer-
I hitt. Tiic re.ore thie spal ti.-.hi termn will be used.

,3i.i.- G .,l.ir;,, 'r /, a-, I--r',im ]Dolitic:( del E c i ul;dor
(C'i:y,, q l' 1].'i i .ra.-l .1 i' ic,,,.., 19(3, ), 32'.; .Itiuin CGliithII r, Itnside
'_iil.h .'ni.ri. ,. ( v.- 'iYorl.: IL rIji r ,iul ]ow'.', 1967), p. 12-I.







TABULE 8

EXPORTERS DECLASSIFIED rY SIZE AND NUMBER
FOR 19'60\ A\D 1961


R(.gister d Cci iail in i Number of Percentlag.c. of Total
ThouS.;llnlCs of Sucres Businesses Registered Capital


Less than 20 9 .5

20 to 49 6 .5

50 to 99 7 J.5

100 to 219 14 7. 0

250 to 499 5 5. 5

Over 500 7 85.0

Unclassified 18

TOTAL 66 100. 0

Figures derived from sources used in Table 7.





firm base of support among the Guayaquil businessmen. The con-

rnercial sectors of the coast have been very well organized through

the CMnmana de Comerrcio de Guayaquil. The status of the cimara is

such that a past president could say that he "treated the government

on the basis of complete equality. "G64 General strikes organized

through thie cr.ivara brought dov.n the Military Junta in 1966 and have

shaken n-iany less fragile vc rIulnlments.


ntler\view with Sr. Ata;hux:lpph;i Chauez Gonzalez, former presi-
dcnt of the C:';im-:ia cdl Coinercio d,- d C ;v:coui..l, on October 30, 1968.




71

1o vc Io.'- r, theIl c :r ii r iit,'s do n lt form a. cohesive political

1..'d Ti lar 1 i r '1 i t, C in. rcia.l hours are L.-ul;a]lly a pa rt of a family-

run econ m)ic empiJi. 'J hle core businesses ha','. often supplied the

r/pl)il.'L, l. c-,tji cts:, rijd ic ,i mirl;:l s fur im porting and rctailing

of'er.'l ionS. .li hoiigh irrt Iall\ no importing business is highly spcci -

aliz.cd, the larger irriporcr. tend to handle capital goods, semi-

finished products (r.I.v materials for associated manufacturing

plants), and luxury items. One has the impression that wholesaling

of "bazaar" and cheap luxury items accounts for a relatively small

portion of their business.65

Although the political inleru sts of larger importers may be danm-

pened by other economic interests, the logic of their situation would

suggest they favor a generally inflationary policy. A rapid expansion

of investment and ian increase in available spending money benefits

the ma iny commodities. in whichh they are interested. The large

busincsf.c .'.vith available capital canl also profit from inflationary

specul :tion.

Tlhe smaller bu sineC smnen aire in a v'ery marginal position. They


65Small luxury imports account for less than 20 percent of the
value of :11 imports. Ecuadcl-r, Mlinistro de Tesoro, .'inuario de
Comncrci.' '-. terior (Quit-, 1961).

66.] liy c-rinjll y -iarc not firmly united on this point. For cvi-

'Ihtnic of in ol'.',.-i' nt of lhe inip l' rr in dce-manids for inflation, sec
Cl11.,1 t 1r 8. IloW, v\'-r, .lr. .lbi-,1 rt G( lla dil'i, .'.m erican business con-
. ,lt.int, -aidl ill :in in,; r\ \'iv. on M.iy .23, 19 .3 llth t m any im porters
I -.'or :,titl i il.- ; b c .-- tum iL ioni for long r::igc gro'.\ ll.




II tI

67
arc mor' geneAit'lly invtlvecd nl\ ill retailing bazaarr" items. 'They

o(cprate in a rowdy id niiar i-lk. on ;I small vullnme and frequently man-
68
a uc0 only a pr .cnrious living despite tmhe hi-h i ma rlhuplS. The general

lac.l; of spcci:-liz;'ation ci s ns more a child of desperation than true

divU:rsification.

The retail "ba::aar" trade has been most vulnerable to the very

wvidcly spread contraband in Ecuador. The smaller businessmen

therefore have been most vocal in demanding a government crack-
69
dov.'n on sm-uggling. Most of the retail sales are made to wage-

earning customers. Since prices seem to rise faster than general

wages in an inflation, the smaller retail merchants are among the

first to be hurt in an inflation. They share a strong political interest

in maintaining price stability.

There v.ere 1700 commercial businessmen affiliated with the

Cmrnara de Con ercio in 1962. The distribution of commercial busi-

nessmen by volume of business is suggested in Table 9.







67These observations; have been based on an explanation of the
siz.s and types of businesses listed in the membership lists of the
C 7mn:Ira di, Con:m rrio de Guliay)aouil.

I ntcrvi\ '.' v.' ith Sr. Abdon Caldero5,.

The be-st :-iample.- a re given in La Inclustria, tlhe official pub-
lication of thi. C: m :ar dlc .3 lndstriales de Pichin tcha. See the editorial
in La ndlust ri_- ,, July, 1959, p. 5.






TABLE 9)

L)ITI;il;'UTIO.N OF BUSINESSES BY SIZE


l i. ilere.d C lpi.-il in Percentage of
'Thou .a.inds f S, res Businesses Siampled


less than 5 9.8

6 to 10 28. 7

11 to 20 18. 4

21 to 50 19.5

51 to 100 8.6

101 to 250 5. 1

251 to 500 5. 7

over 501 4. 0

Total 100. 0

Distribution based on a sample of every tcnth listing in the
Guaia Grieiral d, Comierciantes, excluding all businesses
v.'hose main activity wv.'a clearly not commerce.


Industry

The economic and political interests of the industrialists are per-

haps the mi'ost complex of all sectors of the Ecuadorenn economy. No

olher set of business Tnmr in cc.'enm such a wide range of activities, posi-

tions, ;ind goals. Mtny indIustries are relatively new additions to

(- st;bl ih-.ed "family empires, which further complicates the political

ilt L.re( -tsI of i ndust riial m' u r s. This di ,vcrsily has resultcid in ;

f.,irly hligl I'. l of political coi]i'rltition among industrialists. This







i:.,1 -S..ion is only to pr-',.'idr a g.'rner;l fraine.'urk which seems to

,-c,,L:nt fur so 1-,, m ij('r difft rI.nces.

Over one-ihalf of Ilie nt.. ional indLitI rial production takes pace In
70
(;i-,:iy quil. Virtually all types of national industries, with the cx-

Seplt ion of textil: I ills, caii be found on the coast. A count of the

membership list of the Guayaquil Camriraa de Indlustriales reveals

375 affiliated industries. There are 37 print shops, 37 pharma-

ceutical houses, 35 bakers, and 33 millers. The 25 businesses

involved in metal working arc engaged in wire-drawing, canning,

bottling, and the manufacture of furniture and construction fittings.

Most of the other businesses are engaged in agricultural and food-

stuff processing or in industrial servicing.

Ecuadorean industry has been described as being a classic

example of "imperfect competition. ",72 Many businesses are crowded

into a few fields. Market conditions in each field are established by

the few large industries. This condition can be related to the style of

Ecuadorean business. Investors are conservative, unwilling to break

into ne. fields that lack an established market and available technology.


70Facultad de Ciencias Econonmicas, Guayaquil en Cifras (Guaya-
quil: Univer.sidad de Guayaquil, 1964). (M imeographed)
I -
"Clarificacion dc laI.. Emprcsas Inclustriales de Guayaquil"
(Guayaquil: Cam ira Idc Indust riales de Guayaquil, 196-). (Mimeographed)

"Anlhony BD. tl :nly, "In.pe 'pcrf.ec Cornmpetition in the Industriali-
z;itinn of IEcu.,dor, '" t111 r- .\:n' rican Econol ni: Affairs, XIX (Summer, i |
196r)), 83. 9.1; Cl 'irinc /uv-kis, "LRecent Trcnds in cutwdor's Mann-
f.crturing Secti.jr" (Quito: USA.ID, 1968). (\limeogra1iphed)







]t is conl, idi c r (.1 ..i i' i. alid .S.iLf-r lIo S l up -m a;ll business s s thal will

opierail f.ir uIn(l.r L.ij't 'ilty .iin i o i ct-pt tlI lower profit levels.. It i -

niu .-uri, r .l. Ill t i i ,' i :Jd,,..: ri.il 1l i.ant in I: C'.uII(1 r are ineffi'i cieltlv

sm:i11 I.b \'.'i!rld st.znd.- rds andil operate at 60 percent of capacity or
-7-
l.s.73

This Iiigl l1vel of competition and lov.wer profits have made indus-

trial in.'cst 'rnln s U iiinccessa rily risky. Consequently, investors are

even less willing to break into new fields and much capital is diverted

74
to agricultural mortgages and urban real estate.

There are three major splits among Ecuadorean industrialists;

domestic versus foreign ow.%ned, laree versus small, and domestic-

nrarl:et depelncence versus foreign-marklet dependence. These differ-

ences are frequently reinforcing, and so .'.ill be discussed together.

The larger industries generally are involved in large-scale pro-

cessingi and v.hat passes for "heavy industry. These include brev.'-

ing, canning, milling, etc. Many large industries have foreign coii-

ncctions. The Ecuadorean oil refinery is run by the Burnmiah Oil

Company of England. Dov.' Chern-ical owns 60 percent of LIFE, the

largest piharm'aceutic;.l hioise in thell country. The Ecua dorcan Cor-

poration is an A"niewricLii-run, Paliamas-b.ased holding corporation

which lhas channeled Ecuadorcan capital ineo the largest brewery, a


73 utllluI l'x', "Im ,crflct . ", p. 85.

Int rviC.. '..'ili Sr. ]'.' (1du rd Larra Siac-y, former general
ini. .i ,r >.f li" I,iL Cci ril, on Nouvi'im br .!.), 1968.




76


I I rlyc m a t 4ry, ;II ice 11ousey a ceme t pl t, a largc power plant,

-nd Cverail othcr ktrr;2 citcrpriscs, Howcver, the niujor sugar miill

and the(- larrgeSt Oil ZLId SO:il) J)latS areC purely Ecuadorean. Because

the 1,irgor izidustritlists aftken have access to foreign capital and

skills, their jiadustrics have been quite profitab1c. The average value
75
added per worker for the larger industries in 1962 was $2, 200.

The larger Ecuadorean industrialists are generally members of

the economicc oligarchy'' which dominates commerce and banking.

Their social tics with the economic leaders in other fields gives thern

an almost impregnable social and financial position. The social posi-

tions of the foreign businessmen seem ambiguous. They appear to

move in the best social circles, but are reputed to be "in" but not

"1of" elite society. 7

The majority of the smaller businesses are owned and managed

by Ecuadloreans. 77 Man), have entered into smnal-I scale foodstuff

processing or industrial services. Most of the manufacturers of


75Frank L. Turner, ct -al. The Artisan Commn-unity in Ecuador's
1\o0dernizin" E Coonomy (Mcnlo Park: Stanford Research Institution,
1963), p. 105.

76nterview with Sra. Stisana Ashton Donoso, Amnerican Amnbassy,
in Quito, -encolon ical expert, on Novemaber 6, 1968.

7U. S. Dcp trtim nt of Commnerce, "American Firmi-s, Subsidi-
aric.5 and Affiliaitos: Ecuaclor. 0ifme g ahe) O ly 61 businei sses
ii" Ln l 11,111 of llk.se b on r centy, Tiert

in ,;I~~l)re iiis ep rt'|







importt SullbS'tilt tNl n ;Ir it l. .s such ;is batteries, so:psll Cosi ethics,

records, ,n1il-, etc., fall in tli category. They are the most mar-

gin il of, all indc- tri- l] gruiil].;. They suffer from tlie multiple afflic-

tions of low cali't; 1i:.ation, tIr1,lcr-dlc\lulopcd technology, the threats

of che.' ilp r and l'etlt(r foreign jiniports, and ai market v.ith hiegl income

cl-a-tic i y. i Many smaller industrialists are socially nouveau rice.

Their freqIucnt lack of social status and personal ties with dominant

economic groups adds to their economic disadvantages.79

Not unexpectedly, the larger and smaller industrial groups have

political as well as economic differences. The major families have

solid positions in banking, commerce, and agriculture as well as in

industry. This, togetlier ith their patrician culture, has made them

seem overtly depoliticizedd. They have neither the need nor the

80)
desire to compete in public. Since the larger industrial concerns

are on a solid economic base and offer few possibilities of expansion

in a limited market, many large Ecuadorean industrialists direct


78"Nccsidad de Prorep,gr la Industrial Ecuatoriana, Camlara
de Industrials i le Gua:aquil, Jan iilary-February, 1968, p. 7; Jos6 Luis
Con>.ale::, i\ ie 1 ro Crisis v el F',ondo .lonetario Interrnacion.al (Quito:
Ldiuli. il u Rumiin.lltii, 196il), Clhapters 5 and 6, Ecuadcr, La Industrial
]Kc ortir'.n.': (Qu ito: Junt;a NIacioni l de Planificaciin y Coordillacion
]'coionomico, 195'/'), p. 9.
7'3
lai,.r, pp. 1-5.

10 hIs may Ie ,misl.:ling. Thle elite b'ls.nesssmen are reported
to l'I quite a.l ~ r.. e o .f lthe u lity i.if political influence. Public indiffer-
'.m .' iiay tiCe pu.-: ible only bec.,utie of a lhighl lCvel of pri ate influence.
J l i- ;ill r V.-.I. n '. r able] to d, Itc- in .ii c thi for him self. lIItervic'.'
v i11 Sr. .Alt .iim ro C"arri,.']i, publiilh, r of i-.! Callt., on November 12,
coP 6 ,








tlicir attention tolwardx (hlir otlcr interests.

The foIrciin inlidu sri. lists Cse m apolitical for different reasons.

The radical and highly n-itionalistic unions apparently strike more

freely against foreignn exploit crs" due to the emotional issue involved
82
and their lack of ties with political elites. Large foreign business-

men are also fearful of a hostile government that may restrict or

expropriate their operations. They have found it best to maintain

friendly relations w\lh all factions by avoiding commitments to any one

of them. Foreign investors frequently seek alliances with local cco-

nomic elites as a protection against these forms of raiding.83

The industries that depend on local agricultural products are less

involved in issues of vital interest to the "bazaar" or import substitu-

tion manufacturer. Demands for low tariffs on raw materials and

high tariffs on finished products simply are not of concern to the

"domestic market processors. Since the demand for foodstuffs is

more or less constant, these businessmen are not nearly so concerned

about monetary stability. Many of the agriculture processors have


81Some Ecuadoreans consider the large foreign businessmen to
be a potent pressure group. Ilowever, this was not the balance of
judgmecnt of the people with whom this author talked. See "El Juego
de Poder y los Grupos de Presi6n, Vist;izo (Guayaquil), October,
1968, pp. 35-52.

'"This s s based on personal observations and interviews with
Mr. George Fitch, USAJI) Industrial Officer, on May 17, 1968, and
Sr. RI.fael D13illon V'nldtc-, president of Banco dic Guavquil and
A; !'ia r'r V.t lch .z, on October 29 and 30, 196(8.

83Interview with Mr. Snydc.-r.






c.-t:li.' li. l Id rel t c1 1i '.*..11t thlr lI.irT 1L ..:icl .'. llers Z1 i ; ( do 1not h 1ive to

-11, ',C O flut f,," I t'.C'Irm ll t si,';' .--.

Sn r :ille i d llI I lJ.111. li t t. I.it d c 'u nU Lcl Iini ,re polt ica;lly av:.'ai-

i)ccaiiscO ii."' ar m uJry liIc].., 10 be ]n'.ol'VCd II in i )port Stilbtiittiions.

/S ;-i res l tli'y h111'.ve an iln-lri H.'d.-ite inicrcsL in ma ilintalling protective

tariffs on finished goods .'.hile .eepii n tariffs lov. on needed raw.

mnatcriJal and seml i-fini.ilhed products.. Like the smaller coiner-

cianteq, the smaller industrialists are more aware of the dangers of

inflation. They are alpo very av.are of their marginal social position.

The lRcvista de la Cimara de Indua t rialec'. de Guavalqul has an aggres-

si\e "booster" tone in promotiiig industrialization as an end in itself

and in characterizing industrialists as the major progressive and

venturesome force in the Ecuad-orean econoiny.

Bankers. --Danilkcrs occupy one of the most pov.'erful positions in

Ecuadorean business. Since Ecuador does not have a public excli.an)ge

market, a tlie banks play an inmpo-rtant role in financing and handling

bonds ind stccks as v.'e-ll as in making loans. Approximinately tv'o-

thirds of the foreign exchange coming into the country is handled

through Ilie banks- or their allied money changing houses. The



"Neces.id.ad . "; Gon:',.le;: Chapter 5 and 6, "lleredad
Nrf.i-sta I .ira l, J_,c notin i, C.,1nara. d Indu trial's de Gua yaq il,
Nov nemlbcr-De-c,-ml r, 19l7, ,. 3.



tlI i r.t 1..

uI tc.r.i v, v. jitl ?.ir. . i,' ,.r.






deedneof smarzller fLmiers and comme-irciAl bu sines sme-n on bank

loans to finance harvests and szilcs hizas alrcad been discussed. The

private banks account for appro~xim-ately two-thirds oil all agricultur.lI

conMnInercial, and industrial loans, the remainduer is handled by the

Dance Ccntral and the public Banco Nacional de Fam-ento. 87 Over

twvo-thirds of all private credit is extended by the Guayaquil banks. 8

As a result, the Guayaquil bankers have major impact on the national

economy. The economic power of the bankers is enhanced by the

scarcity of credit. The demand for loans is so high that a "black

market in credit" has developed in which money is offered at illega_lly

high rates of 20 percent or more. 89As a result bankers can be

highly selective about who can receive credit without limiting their

volume of operations.

The political power of the 'bankers is enhanced by their connec-

tions with the Guayaquil "inner elites. The major banks are man-

aged by the prominent families that have extensive holdings in all

other areas of the economy, Another major asset of the bankers is

their command of cxpertise. The banks are the major employers of

economist s and financial technicians outside of the government.

Public planners depend on the bankers for much basic information

87 'B I tI B n o ],
PE LIZcIaOV, Banco Central,B ltnde noC nrldl
YEcuador: 1965 (Quito, 1965), p. 91.

Iiol In I, p 6 5.
89l







..b),iil ec-1'noInic )p rformrlincL. This C-,onsal nt :e change of pVersonnel

:inld inform. Lion beL'tv, n ti ll i b:l)i crs and the government gives the

bI.inkLer hil pre-ti',e in political circles.

Banking style is rational and 'cry conservat i'e. Collateral

rtquiremcntl s are ]hi;ih, bankers usually require clear titles on lands

90
'equal] to t.'ice the lo:ri for agricultural credits. Most loans are

91
made for six months or less. ExceptLions Lo both generalizations

are made to old and solid clients and to members of the family. This

has been considered a sound banking practice; bankers will risk ven-

ture capital to trusted managers v.when it is clearly understood that

they can take over a faltering situation v.ithout having to formally

92
foreclose.

Conservatism is also reflected in the preference for large loans

to established businesses. About half of all credits were placed in

93
less than four percent of all loans. Bankers also tended to avoid

the riskier industrial and agricultural loans. Seventy-tv.'o percent of

all loans v.,cnt to finance commercial transac tions. Both of these

practices placed a s.cvere limit on the private credits available to the

smaller farmers and industrialists, whicl partially explains the


I0 i rvicv v.' iltl 1.M r. Snyder.

91


li tLrv-iw \ v. il I.t r. .1)el miller, American Erlnba.-sy in Quito,
.i:.ff ,c,.nomni.-:t, on April 27, 1968.

,l.,i .ll . p. *'l ibid. p. 63.






interest s of these grotlups in gove rnment financing and investments.

The political propr;ims of the coastal bankers reflect their eco-

nomlic inte rests. Although some bankers accept inonetary stability

;s ai national virtue, niany have been very much attracted to the

95
tillures of inflation 1,ry inve''stmCent. A rapid expansion of the money

supply would stimulate the demand for capital goods and luxury

imports, which w.vould benefit both the large importers and their

bankers. The devaluation which usually follows steady inflation

would raise the sucre income of the exporters, benefiting many areas

of business on the coast at the expense of the sierra.6 Inflation and

devaluation would give great scope for monetary speculation, in

which the bankers would benefit since they have the dollars.

The bankers are frequently opposed to the minimum reserve

requirements which limit the amount of money which can be placed

in profitable loans. A related demand is that the government assist

in maintaining the financial integrity of the banks. It has been sug-

gested that this could be achieved through the government insurance of

bank holdings.9

The role of the public banks (Banco Central and the Banco


95
Documentation for these observations is extensive and complex.
Since the bankers \vwere deeply involved in the devaluation of 1961, the
detailed analysis of their programs and roles will be presented in
Chapter 7.

96fmilio Estrada Ycaza, "Genesis ."

9Docum nation tu be given in Chapter 7.







.;cion.'il : 1i .un..' tc) dccl'.s not 4ce'n to have been attacked by thli

pri'.a:tc b, il., rs. Ti..- volume of business of the Danco Cc(ntral is

cqlite n'"ll il the 1C :' I "nc' N-cioina;l dci Fomento specialize' s in the

higher ris1, r.gricLltu r.i 1 credits. Ml;.ny private bankers seem to have

c-'ltablishcd iu.ieul ,..orkin-. relations w'.ith the public banks and many

bank 'rs are :glad to sec the e:x:pinsion of credit, even under the aegis

98
of a competing public agency.

Political split s among the bankers are kept to a minimum by the

lack of specialization and tle doi-iination of tv.wo major banks. There

99
are 16 banks registered in Guayas Province.99 The largest tv.o,

Banco La Prc.'is.ora and Banco De Descuento, hold 72 percent of all

deposits. These two banks are allied by very strong managerial and

family tics.


The Pattern of Business Ov.'-nership on the Coast


Business ov.'.nership and control tends to be rather centralized on

the coast. Several business families have part or full ownership of a

wide range of buIsinessecs. Tlese individual "empires" are also

joined at r.n.ny points through joint participation in common business

Vcnl res.


91ntervic'.'. with Sr. Alfredo Part.ja Die:canseco, assistant man-
;Iger of tle 1"'. n.., IPo [ la r and former rncmlb: cr of the Junta Monetaria,
,n Nov Im N D1.'c i -" 1 19 8.

Gu i\ rLuil 'n Cifr i- (Gul'yaqjlil: Univcersidd clec Guayaquil,
19 ( ,2 ), p 1. ";.






Thi "interlocking d irccto r;1itc:" lh;ive a strong impact on the poli-

tical, social and ccoflnomnic positions of the "oligarchF. To an cxtenlt,

the power of se-'v ratl individ c l bti -uinesses tends to be additive. A

combination of mosl of lhe nima jor banks would have a greater effect

on the supply of credit than would any one bank operating alone. A

\.idcr con-bination of most large manufacturing firms would offer a

potent political base for businessmen n advocating protective tariffs.

The social position of the central managers could not but be helped

by the added income from many businesses and the subsequent non-

availability of a business base for social competitors.

However, the range of situations in which power could be applied

may well be reduced by bringing many different businesses together

into one combination. A single manufacturer can easily press for

protective tariffs for an entire segment of the economy. His mancu-

vering room would be significantly reduced if he had to worry about

the effect protective tariffs would have on an import-export company

in which lie was also involved. Managers involved in a wide range of

companies might find their political maneuvering room to be quite

narrow. The only interests they could comfortably defend would be

those that applied to a major portion of their business empire. As a

result, the owners of large business empires could be expected to

have a rather weak interest in defending the interests of a business

sector, whilc hI'in' v.\'ery active e ,and lpowc'rful in the defense of cither

tilh' spEcific bI.Mu inles ni'eeds of thlcir spt cifie companies or the defend se







..f I li c tir "It, ii : t l .. "

T'i- hIt eel of inlt(f r.tiL n I Of ie several business empit, r s would

;.1-.o have :in i ff.t un the political and economic positions of the

u-iness le,i(- rs. Tihe formation of a closed "inner circle" through a

hi t,li level of inite r;,tion of Liisine.s cinpires would be expect ed to

facilitate cooperation in promoting a "business candidate" and the

dampening out of personal conflicts in tile political wars. Lower

levels of integration would probably result in a greater tendency for

the business leaders to break down into separate factions.

These considerations suggest that we should be looking for three

factors when examining the pattern of business ownership: the extent

that the rnajor businesses in one field have been brought under one

management, the range of businesses included within the empires,

and the cx.tent that the businessmen involved have been highly inte-

grated through many points of shared business contact and family

relations. Although no indices have been developed, the situation of

the Giiayaciiil business leaders with respect to these factors can be

estimated through an ex>:i in nation of Figure 3 below. A breal:dowv'n

of the listed groups by participants- is given in Appendix A.

T']ie central set of associated groups clearly occupies a very

po'.w.'erful position '.vilhin Itic coastal economy. The potential for

pu.'cr partly dlependscl on fihe r accretion. Fifty-five industries are

inliludled ill ih' gr'ipj) '.whIchl is some I J percent of tile coa,;tal total.

T'lie pO-rcnl.*,; of larger plants is probably eve-n higher. .I so





YIG ,U 1 1E 3

RE-LATIONS AMONG GUAYAOUIT, BUSINESS EIMPIRES




.nw ce 8 Con-m-lercial





The Banking Circle
Ivan ufacturing 5
Commnerce 10
Fin since 5


The Val airinos
Manufacturing 6
Commerce ?
Finance I
# 1


Luis A. Noboa - -Estrada Ycaza

Commn-erce 8Commercc 15
/ 9Finance 5
#- 15


Her beIrto Orces Mcndoza
Manufacturing I
Commrerce 4

Finance3





Ec 'oran CoL. ep ocVle- a ns y Bigas
Mauatuig7 Manufzictuirine 20 IManufacturing' 2
Comre 4 Commerlce 25 Commerce 4
-1 Fnn e3 -7
11 3 1


ll= um"bcr of aF. oci-ted u n s me

One' 1;n(, is dralwn bwtwcen ( mpire, for- each person who participates
inhu ftl;( ultit oined. Figu 3 ,,, ba.scd u1poll data prcelented, in
AnnondsA,







iiilcludi d I icn t LC'i' ipingi arc;1(- 22 :large ( comm( racial firm s and II Ilarge

fin;in i:.l firm-. 'hC comlhin(l d ecncmOnlic v.'cight of these businesses

is im pres ivc.

The potential forr po.'-r has also boon aided by the compl .l.nen-

tarity of the powers of the pa rticipants. The combine includes the

managers c.f thi- five leading coastal banks, La Previsora, Banico de

Descuentc., Banico de Guavagiqil, Sociedad General and Banco Terra-

torial. Also includ.c-d are the major exporters w.'ho control much of

the foreign exchange in the country and the managers of the insurance

companies v.-ho make many of the long term investments. The coor-

dinataed use of the financial po.v.ers c.f the inner elites would have a
100
major impact on the Ecuadorcan economy.

Several factors mitigate against the coordination of all members

of the "inner elite" --the interlocking groups. One factor is sheer

size. Many other businessmenn, in addition to the 79 listed, partici-

pate iln running tlic associated businesses. It v.'ould be difficult to

assume that all would be 'willing to cooperate on a common project

except in special circumsnltances.


l0Many Ecuadorean observers feel that the economic position of
thie Guayacq il oligarchy m il:s them one of the inost powerful of all
political] groups. T'he succCCes of the 1966 general strike in bringing
dow'.n the nmililt: -y julnta is ciited as an O:xa p] :le of v.'hat (iLe elites can
do. Similar vi '.s of tlie lp '.'r-rs of Ith. b!us.inessrnlc- i are expressed in
lRfa l] GO.tl;r.a :-.. .ri;.;,ig., .l ;qU,: 1i l-Pi 13l ic a tdel cunadc. r (Guay'mquil:
d]ilt-ri.:l .All r- d-. 1963), 33; "l` ,.a.- Fa- m ilias Ilan Contrcl .i(i
L..%! Ec',.no i ,i l. -'p(ic Coli'niall, 'lI Comcnercic, Septcmi'er 29,
1968, p. 1.






A sccondl futclor is tht! coiipc-siticon o~f ilh sub-groups wvithin l

n o inerlokig st. All of the sub-crowps, contain both corninr -

cat 1-11d mnictilfactur ill, busimes.,-s. The diversification of an cipm c

into several type of businesses mnak-es it improbable Oiat grand cozli

tions could be assenmb~ed to defend the interests of only one sector

It is more probable, that the businessmen would rise to defend onlyth

101
specific interests that affected their specific businesses.

The high level of integration of the sub-groups would probably

result in two effects. Given the emphasis on primary group 1oa~

in Ecuador and the high degree of overlapping business associain

Compounded by family loyalties, it would be expected that them -

bers of the sub-aroups would work very closely together. Hoevr

the construction of larger coalitions would be dampened byth aco

tight integration am-onry the sub-aroups. Sub-groups. scee tob

joined at only a relatively few places by a few busine~snsen lohv

associations wvith several groups. The Guayaquil "oligarchy em

to be composed of mnany mnore or less overlapping groups, each r-

mng to scrambile for a place at the expense of the others. The cinci

tion is controlled by ties of friendship, station, anid family, a da


03Perhaps the idea of conflict mnanancn-init thiroufli fa-cr iito
Of Col,, P(I -;]I, Co'litionssho'.16 bo e amillci as --upp oniwntto th
11101L' t'rld-io!111 Vi W Oft]-JQ impo tanc(- ofdcimm agpieqaton i







.'t:.'.1.: lLs tlhatl i ', .- ll 1 l -i\'vc a I coinOil ilt rest in m eC tiic g c ha ll [en


tu t 1, lt arPr b .i %E s.s v.orl'-d.


102
Au e :;:n plc of tin.- "'l~-n*i 2no tc-Ocl.elcr'" of the GuayaqCuil busi-
nl.;s ,ii ,)i is the c'lo e coo- pe'raltiCon beLtv.'. c n Sr. I.larc'o and Sr. Dillon,
inLnn of .tl1usl :i-t ithi tic:il 'vi'v.'s of business responsibility. The
g.n-r;tal vie.' of thlc, relations .111on011g Gu,)a uil buslinessimcn is con-
Ci -it.ilt v.-ilh ili,- .iiions of ?.ir. Johi, Snydcr and llio:-e expressed by
Sr. r:c. AbIlA n C'.Ild riTn, dir,.ctor of the Partlido ]ilieral Radical of
Cul-y I- on NIcv.'IIl t r 1 1, 19(8; ;and llth inI c. i-'i." .'. ith Sr. R] Ifacl
1illn V\'aldrz, preo idc n(i ,f ic ti an( o tie Guayaluil, on October 29,
1%96.




Full Text

PAGE 1

POLITICAL DECISION MAKING IN ECUADOR: THE INFLUENCE OF BUSINESS GROUPS By David Parker Hanson A Dissertation Presented to the Graduate Council of the University of Florida in Partial Fulfillment of the Requirements for the Degree of Doctor of Philosophy UNIVERSITY OF FLORIDA 1971

PAGE 2

Copyright 1971 David Parker Hanson

PAGE 3

ACKNOWLEDGEMENTS It is perhaps uiafortunate that "acknowledgements" have become such a routine part of all dissertations. There should be more meaningful ways to acknowledge with gratitude the help and support of the many people without whom this dissertation would never have been written. Among these people to whom I am deeply in debt are: Professor Alfred Diamant, whose support and encouragement helped make graduate school possible; Professor Manning Dauer, who was perhaps primarily responsible for making graduate school stiniulating and meaningful; and the late Professor Charles D. Farris, v/ho beat into obdurate heads the meanings of scholarship and logical inquiry. To my wife, Barbara, I owe the support, both moral and financial, that got me through. Professor Ruth McQuown's sensible counseling and personal interest navigated inany of us through the shoals of graduate training. The list of people who participated with me in this dissertaition is alinost endless. Professor Tom Page's friendship, support and guidance have been invaluable for all aspects of the project. Ricardo and Noella Levy are more than close friends, they have shown me much of what I have seen of Ecuador. Professor Alfredo Pareja Diezcanseco helped me form a point of view about Latin America iii

PAGE 4

and gave me a great deal of assistance in doing the specific research for the dissertation. Mr. Madison Monroe Adams, Jr. gave me absolutely invaluable help in the study of the business groups. Thanks also go to Sr. Alejandro Carrion, Ing. Carlos Rota, and Dr. Alejandro Vega Toral, who gave of their time and provided much of the information and many of the contacts on which this dissertation has been based. It would be iiTipossible to thank each of my friends who helped to make my stay in Ecuador so enjoyable. However, special inention must be made to Alicia Bedoya, Jorge Duque, John Solomon, and Ed and Mary Andrews. The list of people who gave of their time and patience is suggested by the cited interviews. Equally as many people who were of help have not been nnentioned. Because of the press of space, it is impossible to give them all more than a blanket acknowledgement of thanks. A closing acknowledgement must be made to Dorothy Bowers, who has perforined inassive labors in edithig and typing the manuscript. Her position in this roll call is not a reflection of tl.e enormous help she has been. Kalamazoo, Michigan February, 1971 IV

PAGE 5

TABLE OF CONTENTS Pa PCACKNOWLEDGEMENTS iii LIST OF TABLES vii LIST OF FIGURES ix ABSTRACT ^ Chapter I. INTRODUCTION 1 II. THE SOCIAL CONTEXT 14 The Land 14 The People 1'' The Culture 23 III. BUSINESS GROUPS OF THE COAST 45 The Econoiny 45 Business Groups 50 The Pattern of Business Ownership on the Coast ... 83 IV. BUSINESS GROUPS OF THE SIERRA 90 Business and the Social Structure of the Sierra ... 90 Business Groups of the Sierra 91 Patterns of Business Ownership in the Sierra .... 118 The Relation Between the SierrJi and the Coast .... 120 V. THE BUSINESS ASSOCIATIONS 124 VI. THE STRUCTURE AND DYNAMICS OF GOVERNMENT I'^l Introduction I'l Parties and Elections l'''! The Structure and Process of Decision Making in the Government 1°^ VII. CAMILIO PONCE ENRIQUE Z: JULY, 1959 TO SEPTEMBER, I960 205 Introduction 205 .V

PAGE 6

Chapter Pnp ».' Political Situnlion 205 Rfcruitment lo tlic Ponce Administrrttion 2J0 Decision Making Under Ponce 217 The JUNTA MONETARIA 219 VIII. JOSE MARIA VELASCO IBARRA 228 Political Situation 228 Politicp.l Rccruitinent 233 Policy Coalitions and Recruitment to Decision Making Positions 239 Decision Making 246 Decision Making: The Tax on Imported Wheat .... 268 Epilogue to Velasco 272 IX. THE ADMINISTRATION OF CARLOS JULIO AROSEMENA MONROY 275 Political Situation 275 Recrviitment 278 Decision Making: The Law of Industrial Development 291 Recruitment and Decision Making for the JUNTA MONETARIA 308 X. SUMMARY AND CONCLUSIONS 317 APPENDIX A . 338 APPENDIX B V 355 LIST OF REFERENCES 359 BIOCRAPJ-IICAL SKETCH 378 VI

PAGE 7

LIST OF TABLES Table ^^g^ 1. Decisions to be Analyzed 10 2. Scope of Issue Involvement ^0 3. Employment and Earnings in Sectors of the Ecuadorean Economy in 1963 46 4. Major Agricultural Products in Ecuador in 1957 47 5. Major Exports for I960 48 6. Industrial Employment by Sectors 49 7. Exports and Size of Business of the Largest Exporters . 68 8. Exporters Classified by Size and Number for I960 and 1961 "^^ 9. Distribution of Businesses by Size "73 10. Characteristics of Businessmen in Ponce Political Organization '^^^ 11. Characteristics of Businessmen in the Ponce Cabinet . . 215 12. Recruitment to the JUNTA MONETARIA 220 13. Characteristics of Businessmen in Velasquista Party Positions "^-^4 14. Relation Between Business and Political Positions . . . 234 15. Situations of Businessmen Who Held Central Political Positions ^^^ 16. Economic and Social Positions of Businessmen in the FDN 2S^ 17. Differences Between Businessmen in the PLR and the FDN 2^^ VI 1

PAGE 8

Table Page 18. Benefit J^ of llic 1957 Iiidvislrjal Development Law 293 19. Recruitment to Political Positions 3Z1 20. Specialized Recruitment Within the Business Community . 322 21. The Relation of Political and Economic Positions of Businessmen 323 22. RecruitiJiunl by Region, Business Sector and Economic Position 325 23. Recruitment and Decision Making 329 24. The Guayaquil Business Empires ' • 343 25. Significant Independent Groups 353 26. Major Interlocking Group of the Sierra 355 27. Minor Business Chains of the Sierra 357 Vlll

PAGE 9

LIST OF FIGURES Figure P?ige 1. Distribution of Land and Income in Ecuador 20 ?., Dislribntion of Ranana Lands in Ecuador 53 3. Relations Among Guayaquil Business Empires 86 IX

PAGE 10

AbstiTict of Dissertation Presented to tlie Graduate Council of the University of Florida in Partial Fulfillment of the Requirements for tlie Degree of Doctor of Philosophy POLITICAL DECISION MAKING IN ECUADOR: THE INFLUENCE OF BUSINESS GROUPS By David Parker Hanson June, 1971 Chairinan: Dr. O. Ruth McQuown Major Departinent: Political Science Two problems were posed for the dissertation. The first was to determine the extent to which businessmen in Ecuador influenced political decisions on econoinic issues between 1959 and 1962. The second was to determine the extent to which the political influence of a businessman was deterinined by his econoiriic position. The condition and organization of business was analyzed to determine the probable political goals of the various groups, and the patterns of power and dependency among tlie various groups. It was determined that a central set of Guayaquil businessmen were quite powerful because of their control of credit ai^d market conditions. Banana growers, wheat fiirmcrs and other snialler businessmen were among tlie inost discontented. The recruitment of businessmen to tlie political campaigns and cabinets between 1959 and 1962 was studied. Relatively few businessiTien participated in the camjiaigns, wliile most of tlic people in the

PAGE 11

cabinets were bupinc s smcn. llowovcr, tlie campaign businessmen often came from tlumost powerful economic groups while the cabinet ministers were more likely to be smaller businessmen. A plurality of businessmen in all positions came from Guayaquil. The decisions made by the government generally favored the interestr. of the incumbents. Groups not represented in government had little success in trying to influence decisions. Therefore it was concluded that the ihost powerful business groups could generally control decision making through recruitment of their representatives to decision making positions. X 1

PAGE 12

CHAPTER I INTRODUCTION Who govcrjis? Dahl's question echoes a problem that has been before political science since the days of Aristotle; what are the means and extent to which private groups can influence public decision makers. Two general answers to this question have run through political theory. The "power elitists" have generally held that societies are usually run by an informal coalition of the economic, 2 social, political, and military elites. Decisions that would challenge the pre-enninence of the "oligarchy" wovild not be made; the power of 3 the state will be used to defend the positions of the few on top. Outside groups would only lay claim to state authority on the issues on which the interests of the oligarchy were not involved. The pattern of elite rule would not be significantly limited by formal constitutional processes or public debates. It would be rare for a politician to be Robert Dahl, V/ho Govern s (New Haven: Yale University Press, 1961). 2 The classic statement of the elitist position was made by C. Wriplit Mills, Tlie Power Elite (New York: Oxford University Press, 1957); Floyd Hunter, Co mmunity Power Structviv e (Chapel Hill: University of North Carolina Press, 1953). ^Hunter, p. 2 34; Mill.s. p. 4. 1

PAGE 13

elected who represented mass interests. Once elected he would be 4 either isolated or co-opted. Many democratic tlicorists answer that there is competition within elite circles. Elites who are losing internecine battles will be cncour5 aged to find mass allies to broaden their power base. If forced to a choice, politicians would rather have mass votes than elite financing." As a result, the existence of a social hierarchy is not necessarily incompatible with a" political system in which lower class groups can 7 appeal to government to redress their grievances against elites. In evidence for the pluralist arguments is the sharp political conflict in most democracies, the relatively high level of mass supports given to governments, and the enactment of government programs regulating business and offering welfare measures for lower class groups against the opposition of elites. 9 Neoclitists question the scope of the issues that arc raised. The 4 Mills, pp. 245-247. ^Arnold Rose, Tlie Power Structure (New York: The Oxford University Press, 1967), p. 102. ^Ibid. , p. 2. "^E. E. Schattschneidcr, The SemiSovereign Peo} >le (New York: Holt, Rinehart and Winston, I960), p. 2; David Truman, The Governmental Process (New York: Knopf, 1951), p. 61. ^Robert Dahl, A P reface to Democratic Theory (Chicago: The University of Chicago Press, 1956), pp. 75-81. 9jack C. Wallu-r, "A Critique of the Elitist Theory of Democracy, American Politicnl Science Re\'jcw, LX, 2 (June, 1 966), 285-295.

PAGE 14

many issues on whicli the elites arc either not involved or arc split can be admitted into politics with ease. Hov/ever, the issues that arccentral to the interests of the elites will not be raised. As a result, non-elites cannot easily appeal to politics for relief against key aspects of elite position. Thus, for example, the organization of the American economy around giant semi-private corporations is not questioned in American political life. The clas sificajjon of the democratic Latin American polities into any of these three niodels is hazardous. There is a strong intellectual current in favor of the "power elite" theory. Rigid cl?iss distinctions and the strong concentration of wealth in the hands of a few are held in 12 evidence. Substantiating evidence comes from the lack of improve13 ment in lower class standards of living, and the general ineff ectuality •^^Schattschneider, Chapter 8; Peter Bachrach and Morton Barratz, "Decisions and Non-Decisions: An Analytical Framework, " A merican Political Science Review , LVII, 3 (September, 1963), 632-642. John Gcrassi, The Great Fear (New York: Macmillan, 1963); Stanisla.v Andrcski, Parasitism and Subversion (New York: Pantlieon, 1961). 12 Osvaldo Sunkel, "The Structural Background of Development Problems in Latin Anierica, " in Charles T. Nesbet (ed. ), Latin A merica: Problems in Economic Development (New York: The Free Press, 1969), pp. 3 4 0. 13 Oscar Lewis, The Oiildren of Sanchez (New York: Random House, 1961).

PAGE 15

14 of most govc-rnmcnts. No one in fact has chaUenged elite predominance. The jiluralist counter-argument would point to democratic modern15 16 17 ^8 izing regimes in Mexico, Chile, Costa Rica, Venezuela, and Uruquay.^^ Most governments have used their power to push industrialization and the nouve_a_u .-iche industrialists at the expense of the 20 traditionial landed gentry. The power of the industrialists has been matched by a legal -control over hiring, firing and pensions that is 2 1 unheard of in the United States. Further evidence is an expansion of the electorate which suggest a liberalization not implied by elitist ^"^Raymond Vernon, The Dilemma of Mexico's Development (Cambridge: Harvard University Press, 1963); Claudio Velez, ed, , Obstacl es to Chan g e in Latin America (London: Oxford University Press, 1965), pp. 45, 135. ^^L. Vincent Padgett, The Me x ican Political System (Boston: Houghton Mifflin Co. , 1966); Howard Cline, Mexico: Revolution to Evolution, 19 40 I960 (Oxford University Press, 19-62). ^^Federico Gil, The Political System of Chi le (Boston: Houghton Mifflin Co. , 1966). ^"^James L. Busey, No tes on Costa Rican Democracy (Boulder: University of Colorado Press, 1967). ^^Robert Alexander, Venezuelan Democratic Revolution (New Brunswick: Rutgers University Press, 1969). ^ ^Phillip B. Taylor, G overnnicnt and Politics of Uru jiaiay (New Orleans: Tulane University Press, I960). ^^Charlis \V . Anderson, Pol2tj_cs_aiid Econ omic Cha ng e in Latin America (:
PAGE 16

views. Mass idcnlification with winning populist candidates h-is 22 brought class conflict directly into the political arena. We do not know enough about political processes in Latin America to confidently classify many countries. We are lacking data on the contexts of the private elites who would be in a position to press demands on the government. What significant power groups are there in these societies? From v.'hat power bases do they operate? What range of policy altel-natives do they represent? Is there in fact any "virtual representation" of the interests and demands of lower status 2 "^ groups? The second area on which we are lacking data concerns the political interactions of the private and public elites. Which private elites did achieve access to the governinent? How? To what forces and demands did they respond? Which counter-demands are ignored? Why? The traditional literature on Latin America has generally not responded to any of these points. A deprcssingly large portion of the literature has focused on the formal machineries of government and Velasco Ibarra is an excellent example. See Chapter 8 and George BUmksten, Ecua do r: Cons ti tutions and Caudillos (Los Angeles; University of California Press, 1951 ). 'For a critique of political studies in Latin America sec: William Welsh, "Methodological Problems in the Study of Political Leadership in Latin America" (manuscript, University of Iowa, Department of I'olitical Science, Laboratory of Political Research), p. 2.

PAGE 17

has been content to sketch in group dcniands in terms of "goodness" or "badness" while ignoriiic; the situational aspects that shape demand.-, supports, and events. These considerations prompted a decision to write a dissertation on the actual, informal channels of decision making. The specific topic chosen was the influence of business groups on economic decision making in Ecuador between 1959 and 1962. The choice of Ecuador was dictated by several considerations. Our knowledge of the political process in the country is scanty. The country is small. Business . . . 26 „ , and politics are played in only two medium -sized cities. i^cuador 27 has the reputation of being free and open for study. Superficial examination suggests a pattern of politics similar to that found in 28 other Andean countries thirty years ago. Business groups are an ideal subject to study in Ecuador. They are most closely related to the political decisions on economic 24 Ibid. , p. 21, ^^The only full length work on the political processes of the country is still Blanksten's. 2'^Edwin E. Erickson, et al_. , Area Handbook for Ecuador (\yashington, D. C. : Government Printing Office, 1966), p. 261. 2'^Martin C. Needier, Anatomy of a Coup d 'Etat: Ecuador 1963 (Washington, D. C. : Institute for the Comparative Study of Political Systems, 1961), p. 9. 28wayne A. Selchcr, "The Administration of Galo Plaza in Ecuador, 1948-1952: A Step Towards Stability" (Master's thesis. Department of Political Science, University of Florida), 1966, .p. iii.

PAGE 18

dcvclopnicnl wliicli Ecuador needs so badly. They are reputed to be quite powerful and are more open for study than would be llic military or the church. There is very little known about business groups in 30 Latin America or of their impact on politics. The study has been cast loosely around the "parlicipational" methodology suitably modified to talce intcj account the neoelitist cri31 ticjue. Power is measured by successful attempts at influence, not by reputation or social position. However, account has to be taken of who wants to exercise influence. Otherwise we could not differentiate between unanimity of a satisfied public and the apathy of the discontented who know it is useless to try to have policies changed. Therefore the first task was to sketch in the broad outlines of the economy, John Gunther, Inside South America (New York: Harper and 30 Among the few arc: Merle Kling, A Mexican Literest Group in Row, 1967), p. 424 30. ,1 ( Among the ft Action (Englewood Cliffs, Prentice-Hall, 1961); Peter Smith, The Politics of Beef in A rgentina (New York: Columbia University Press, 1969); William Lopstrom , Attitudes of an Industrial Pressure Group in Latin America: Tlie Aso ciacion do Industriales Mineros de Bolivia, I925-I936 (Ithaca: Cornell University Dissertation Series, 1968); Carlos Astiz, Pressure Groups and Power Elites in Peruvian Politics (Ithaca: Cornell University Press, 1969). 3 1 The literature in this area is endless. For a representative sample see: Robert A . Dahl, "A Critique of the Ruling Elite Model, " American Political Scie n ce Review , LII, 2 (June, 1938), 463-469; John Walton, ''Subtlance and Artifact: The Current Status of Research on Co)i;m\niity Power Structure," Ame rican Journal o f Sc )ciology , LXVI, ] (March, M66), 430-439; Benjamin Waller. "On the Logical Analysis of Power AttribiUion Procedures," Journal of Politics, XXVI, 3 (November, 196-]), 850-866.

PAGE 19

to determine llic position?; of major groups of businessmen in the economy, and to ascertain, insofar as is possible, whicli nroups could be expected to liavc substantive grievances against the status quo. The second part of tlie study is a descriptive analysis of the channels tlirough wliich influence would be exercised. Special emphasis was given to the organization and dynamics of the business associations that purport to: be major channels of influence. A related concern was with the decision making process in the government; who made decisions, to what types of situational limitations and pressures did they respond, and who was in a position to exercise these checks on decision making. The lasc part reconstructed specific decisions. The goal was to determine which business groups did have access, and to find out why and how the mechanisms of government actually operated. These data provide the basis of a sketch of business interest articulation. The social and class differences between influentials and non-influcntials indicates the extent to v/hicli access is restricted to politics. A comparison Ijetween the range of issues that were raised in politics to tlie range of issues that people would like to have raised is also suggestive of wlicthcr the neoelitisL rejoinder to the pluralists is accurate. The specific deciiuons studied all occurred between July, 1959 and Auguf.t, 1962. Tlicro were several reasons for selecting this

PAGE 20

9 particular period. Three presidents held office: Camilio Ponce P'nriqviez, Jose Maria Velasco Ibarra, and Carlos Julio Arosemena Mouroy. This offers a basis for comparing regime styles. Later periods would have been unprofitable as a military junta held office from 1963 to 1966. Post -junta politics have generally concerned the fate of junta reforms and the new constitution. Only a few issues were raised in the three years that involved businessincn. The. author tried to select a set of issues that involved most of the major groups and were representative of most on-going issues. The author also looked for a balance between broad issues 32 involving many groups and narrower ones. Table 1 lists the issues selected. Table 2 classifies them according to the number of groups involved. Data on the recruitment of political figures from business positions v^i-e included as a major tool in the analysis of the channels of infhience. Recruitment is a major means whereby important private groups obtain sympathetic people in positions of power. Therefore the direction and levels of recruitment indicates which grovips would be more likely to exercise muscle and which ones would be likely to 33 have an unsympathetic reception. Furthermore recruitment is •^Ernest T. Barth and Stuart D. Johnson, "Community Power and a Typology of Social Issues, " Social Force s, IIXL, 1 (March, 1959), 29-33. ^^Lcster Seligman, "Recruitmenl in Politics, " P. R. O. D . , I, 4 (March, 19S8), ]). 4.

PAGE 21

](' Decision Maker TABLE 1 DECLSIONS TO BE ANALYZED Pre side nt Ponce Velasco Aro scmena Junta Monclaria Executive Congress Tariff prelection Credit for local manuexpansion facturing: Bateri? s Devaluation Ecuatorianas Inflationary investment Devaluation Packing the Junta Monetaria Tax on imported wheat Tariff protection for local industry: EPISA Industrial Development Law Repeal of tax on imported wheat TABLE 2 SCOPE OF ISSUE INVOLVEMENT Many groups involved Few groups involved Inflationary investment Credit expansion Devaluation Packing the Junta Mon e taria Industrial Development Law Tariff protection for Baterias Ecuatorianas Tariff protection for EPISA Tax on wheat imports Wlieat tax repeal

PAGE 22

]] frequently an efficient explanation of decision making. "Self-interest" is a powerful motive, especially in a Latin culture that plays down the iiiTportance of over-reaching loyalties. More indirect channels of influence were looked for only when the events and outcomes did not point to a "self-interest" interpretation. This is a very broad range of data to research. Soine classes of information were relatively well grounded. Data on the organization of the economy and. on the social and economic positions of major economic groups were derived from government statistics and developmental studies. The names of political figures were taken from governmental archives and newspaper articles and advertisements. Information on ownership patterns and business backgrounds of political elites was derived from the World Trade Directory Reports of the Department of Commerce and from the membership lists and trade publications of the business groups. These data are probably accurate although incomplete. It is likely that a miore complete analysis would reveal additional branches of tlie business empires and may uncover additional relations with politicians that have gone unrecorded. However, the major conclusions would probably stand. Tlie data on tlie political interests of business groups are somewhat shakierr-lveing based on extrapolations from the reported situations and the interviev/s wifh some sixty business and political leaders. However, there was no systematic sampling of business leaders, nor war, there any way of checking their statements as to the programs,

PAGE 23

12 problems and supports of third parlies. It is quite possible that many demands and programs of lower echelon businessmen never were aggregated up to the middle range of politicians with whom most of the interviews were conducted. The recon.-truction of political processes and events was also uneven. Written reports and newspaper accounts were available. However, the many gaps had to be filled in with interviews with peripheral participants who had their own roles to defend and whose memory may have dimmed with the years. Given the Byzantine complexity of Ecuadorean politics, it wovild take an almost total awareness of the political situation to "completely analyze" any decision. Even experienced politicians, close to the inner circles, report that keeping up with political events and mastering political techniques is a full-time occupation. Foreign observers have a difficult time gain34 ing access unless they have "married into the system. " Even the events that do seem well reported may tend to be interpreted by foreign observers through an entirely different set of cultural values. The major defense of the dissertation is that a broad survey of the articulation of business interests, even given its imperfections, is much more than is now available. Tighter studies can hopefully be ^'^Intcrvicw with Sr. Jose Vinccnte Ortuno, formerly deputy and advisor to former President Carlos Julio Arosemena Monroy, on October 16, 1968; interview with Dr. Robert Norris, Director of the Andean Studios Center of the University of New Mexico in Quito, on October 24, 1968.

PAGE 24

13 built on this one. There was also a personal reason for the broad api>roach. It was felt that the author's intellectual develo])i"nent would be best served by having as broad a perspective on Ecuadorean society as possible.

PAGE 25

CHAPTER II THE SOCIAL CONTEXT The Land Ecuador straddles the equator on the western coast of South America. With an area of approximately 111,168 square miles, it is the second smallest country in South America. There are four major regions of the country: the coastal plains, the central mountain region (sierra), the eastern Amazonian region, and the Galapagos 2 Islands. Only the coast and the sierra are important for national life. Most of the coastal region consists of rolling hills and alleuvial 3 plains. The northern regions are fertile and well watered. Rainfall decreases towards the south; the southern coast of Ecuador blends into the Peruvian desert. The rains in the south tend to be highly ^This is a very approximate figure. The 1942 boundary with Peru is disputed by Ecuador. The geographical features on v/hich the boundary is based have not been surveyed in detail. Sec Lilo Linkc, Ecuador: Country of Contrasts (London: Oxford University Press, I960), p. 3. ^Ibid^. , p. 10. , ^Luis Alberto Lopez Cordovez, Zonas Agricolas d el Ecuador (Quito: Junta Nacional de Planificacion y Coordinacion l-'lconomica , 1961), pp. 141-143. All government publications will be listed by principal auth'^r where one is cited. 14

PAGE 26

IS scar.onal. Guayaquil, Ihc only city of any size on the coast, is located at the top of the delta of the Cuayas River. The bacldxiiie of llie sierra is formed by two gigantic parallel Andean ridges. Peaks go up to 20, 574 feet (Mount Cliimborazo, the highest active volcano in the world) and the ridges inust average 15, 000 feet. Tlie population of the sierra is almost entirely concentrated in the intermont basins between the ridges. These basins 5 average between 7, 000 and 9, 000 feet in altitude. Quito, the capital city, is located in one such basin at a height of more than 9, 000 feet. Betv/een these basins are the "nudos" or passes, generally over 10, 000 feet. The sierra lands are relatively unproductive. Most areas suffer from severe erosion due to intensive fanning of the hillsides. Rainfall in many of the basins is scarce or irregular. Many areas have lands deficient in required ininerals. Many crops suffer from the high altitude and the lack of clearly marked seasons. The poverty and geography make transportation and communication difficult. Of the 6, 500 miles of road in I960, only 3, 500 were open all year. Roads along the coast tend to be inore nearly adequate. How"^ Ibid. , p. 172. 5 Edwin E. Erickson, ct al. , Are a Handbook for Ecuado r (Washjngton, D. C. : Government Printing Office, 1966), p. 78. Camara de Agricultura de la Priniera Zona, P rincipalcs Proble mas At'.r o-n oinof^r aficos de la S ierra E cuatoriana (Quito: Cainara de Agricultura de la Priniera Zona, 1968) > p. 6.

PAGE 27

16 ever, qualily is nlative; as uf 1968, only a one-lane dirt road connected the second ]>ort of the coast, Esnieraldas, with the rest of the country. There is no train service along the coast. The dramatic mountains of the sierra form a great barrier to transportation and national integration. The Pan American Highway 8 stretches for 714 miles from Colombia to Peru. For much of the way it is a one-lane cobblestone road hugging the sides of the mountains. Frequent landslides, steep grades and an uncomfortably slippery surface make the cheap and rapid transportation of goods an impossibility.^ The national railway system connects from San Lorenzo, on the northern coast, to Azogues in the sierra, and then to Guayaquil on the coast. The system carried about 500,000 tons of goods and 2, 000, 000 people in 1956. However, maintenance is poor, and the rails are thought to be unreliable. Transportation from the coast to the sierra is perhaps even more difficult than within the sierra. There is a good road from Quito to Guayaquil. The railroad '''This road had been substantially improved to the condition described by the time I made the trip in 1968. I do not know how much worse it had been before. U.S. Department of Commerce, Investm e nt in Ecuador (Washington, D. C. : Government Printing Office, 1959), p. 94. ^Ibid. The hij^hv/ay is very good between Quito and Latacunga. Howevc'rT it turns into dirt ruts over the difficult terrain outside of Cuenca. ^°lbid. , p. 93.

PAGE 28

and llic liigliway belwotn Cucnca and tlic coast are bolh difficult. Thf People The official population of Ecuador as of November, 1962 was 12 4, 581, 476 people. This works out to a population density of 43 pcr13 sons per square mile, one of the highest in South America. About half of the population (2, 363, 000 people) live in the sierra provinces, virtually all of the remainder live on the coast. The Galapagos and the Oriente contain less than 1 percent of the total population. Population density per ariable square mile in the coast is low. Less than onesixth of the land has been cleared for agricultural use. Population pressure in the sierra though is very high. Much of the 15 land is too high and too steep to be useful for agriculture. Sixty-four percent of the population is classified as rural. Many "urban" families live in small agricultural towns. Only four ^ hbid. , p. 92. Ecuador, Junta Nacional de Planificacion y Coordinacion Economica, Division de EstadTstica y Censo, IT Censo de Poblacion y Primer do Viviendcr : Resumen Genera l (Quito: 1962). ^^ Statistical Abs t ract for Latin America: 1962 (Los Angeles: Center for Latin American Studies of llic University of California, 1962), Table 5. p. 12. Erickson, £t aj,. , p. 62. ^^Problem as Princi ji ales . . ., p. 60. •'"Ejjckson, et al., p. 60.

PAGE 29

18 cities had a popuhition over 50,000 in 1962; Quito (355,000), Guayaquil 17 (510,000), Cuf-nca (60, 000), and Ambalo ( 53, 000). Thegcnc-ral poverty and lark of communication make the urban areas more provincial than we would expect from cities in the United States of comparable sizes. Only in Quito and Guayaquil are there many members of the urban and urbane national upper class. National political and economic decision making is carried out almost exclusively in these 18 two cities. • According to the 1962 census, 43% of the population over ten is illiterate. The life expectancy is low at 52 years. However, longevity is substantially greater in urban areas. The high infant mortality skews the gross life expectancy downwards. Even so, the chances of a member of the rural lower class making it to advanced 20 years after the age of five or so are not great. 21 Per capita inconie in Ecuador is quite low at $150. 00 a year. ^^Erickson, et al. , p. 62. Investment in Ecuador , pp. 11-12. ^^ 11 Gen so .... ^^The writer once spoke with the owner of the general store in Tochinque, a small town on the north coast. He was talking about how, "V/hen you have lived as long as I have. ..." I asked him for his age. "Thirty-nine, " he replied. There was general assent that these advanced years constituted the foundations for great wisdom. The man appeared to be at least sixty. ^^Estimates of income vary widely. This figure was provided by the staff economitt of the US AID mission in Ecuador. See Clarence Zuvekis, "Ecuador: Selected Econoinic Data with Commentary" (Quito: USA ID, 1968), p. 11.

PAGE 30

19 The average income on Uie coast is perhaps twice as high as it is on the sierra. V/itli the available land and favorable climate, the "cost.-" 22 of poverty on the coast are probably lov/er than in the sierra. Standards of living in the cities are probably somewhat higher. How23 ever, the unemployment pressure is very high. The validity of a mean ineonie figure is largely nullified by the extremely unequal distribution of v.'ealth. About half of the population is effectively qvitside of the monetary economy. Tlae net worth of one big businessman is reputed to be about that of the central governnient. Inequality in income is paralleled by inequality in land holdings. The distribution of incomes and lands is shown below in Figure 1. The inequalities of income distribution result in a highly stratified class system. Members of the lower class, defined as agricultural laborers, blue collar worlcers, and self-employed artisans, 25 make up some 83% of the economically active population. This view may reflect my greater familiarity v/ith the sierra. Residents of the coast comment favorably at the low level of starvation seen around Quito. Erickson, £]_ j]_l. . P'''O. Interviev/ with Dr. Alejandro Vega Toral, I960 depiity from Azuay ])rovince and director of the Frente Nacional Velasquista in Cuenca, on October 18, 1968. Figures derived from Zuvekis, 3-1; Instiluto dc Estudios Administ rat ivos dc la Universidad Central del Ecuador, Salarios en el Ecuado r : Agosto-Sept iembre 1963 (Quito, 1963), p. 119.

PAGE 31

20 FIGUUl' 1 DISTRILUTION OF UVJ.D A^;D INCOME IN ECUADOR Land distribution 26 73 90 99 Percentage of land holdings Percentage of total cultivated area Income distribution Percentage of population Percentage 81 of GNP 95 99 Figures d.^rivcd from 11 :rrora Vasconez, El CuJtiv o en El Eci Kidoi: (Guayaquil: ANr.E, 1963), p. 184; J.D.V. Saundors, "Man-Land RcJations in Ecuador," RuraJ SmoIoIo^.v XXVI (1) (;;arcb, 1961), pp. 57-61.

PAGE 32

There arc great regional variations in ihe social situations of ? ( lower class peojjle. The poor of the sierra are largc-ly "indians" ' in that they adopt distinctive dress and identify with local "indian" com27 munitics and customs. Tlie sierra poor are attached to the land, either as small landowners or hacienda workers and sharecroppers. In popular view, the sierra indians (and, by extension, all sierra 28 poor) are dull, sullen, inefficient, possessing a "heart of stone." Anthropologists report that indians turn their faces away from the threatening world of the white man. They tend to be very conserva29 tive and slow to adopt change. Many of the sierra poor are effectively outside of the national economy. Hacienda wage workers 30 usually receive between five and seven sucres a day. The coastal poor are entirely different. Along the northern coast there are many Negroes, In the central regions many of the "Linke, p. 12; Carlos Cisneros, "El Indio: Nadie Hace Nada por Su Causa," Vistazo , October, 1968, p. 81. 2*^Beate R. Salz, "The Human Element in Industrialization: A Hypothetical Case Study of Ecuadorean Indians, " Economic Devclop mcnt and Cultural Chanr;c, IV, 1 (October, 1955), part 2, 126. 28 Linke, pp. 59-66. ^^ Ralph R. Beals, Com munity in T ransi tion: Nayoii, Ecuador (Los Angeles: University of California Press, 1966), pp. 115-117; Cisneros, pp. 75-87. ^^This is 25 to 30 cents a day. The real purchasing power is perhaps twice that sum. Sec, "Productivity of the Agricultural Sector in Ecuador, " Econoinic Bulletin for L-alin America , VI, 2 (June, 1962), 67.

PAGE 33

pc'0]>lc are former "Indians" who have clianged their identities to that of mestizo. T)ic liigli li'vel of intcriT^arriage between Negroes and others is also evident in the skins of many people on the eoast. No 31 major group identify themselves as indians. The coastal poor are much more vivacioiis, outgoing and active than are tlieir sierra counterparts. This can perhaps be attributed to the influence of the more open Negro culture, the higher wage levels and superior social position resulting from the scarcity of rural labor. The social horizons of the coastal workers are also expanded througli the common patterns of migration. Many of the people move frequently in response to seasonal employment, the search for new jobs in the cities or simply for some change and 32 excitement. Middle class groups: skilled v/orkers, lower level government employees, and clerical workers make up some 16% of the econom33 ically active population. They are uniformly "white" and urban oriented. Incomes for middle class workers varies between $50. 00 34 and $200. 00 a month. While the poor, especially in the sierra, can be counted as being outside of national life, the middle class 31 Linke, p. 58, Linke, p. 67; Erickson, ejt al^. , p. 113. ^^Zuvekis, p. 34. ^"^Salarios en el Ecuador . . . , p. 72; Linke, pp. 79-84.

PAGE 34

23 groups arc definitely participants in city life, if not in national life. Upper class groups arc quite varied. Tlie influence of iiniTiigrant groups is strong. The Europeans, generally Germans who came before and after World War II and their descendants, arc extremely important in Quito commerce. The Lebanese, "Tvircos" to the Ecuadoreans, are coming to dominate banking and textiles inore and more. However, the total number of inimigrants is no more than 20, 000.^^ Tlie Culture Cultural shock and the retreat to prejudice make the accurate reporting of foreign cultures difficult. Therefore the picture presented below is a composite, built up of the observations of niore exj^erienced researchers that seem relevant to my understanding of Ecuador. These generalizations inust be taken with caution. They are related to the inost sharply perceived areas of difference and thus ignore the larger areas of similarity between our culture and that of Latin Americans. The following generalizations arc true for some inajor group of Ecuadoreans in some positions; however, they do not necessarily represent a balanced view of the country as a 2-^Erickson, ct aj.. , p. 89; U.S. Department of Labor, Labor Law and Practice in Ecuador (Washington, D. C. : Government Printing Office, 1963), p. 13. The literature is extensive. A basic statement of the concept is given in Young C. Kim, "Tlie Concept of Political Culture in Comparative Politics," .Tournal of Politics, XXVI, 2 (June, 1964), 313.

PAGE 35

24 wliole. The world view of many Ecuadorcans seems colored by a sense of class and hierarchy. Tlic stations in life are properly ranked. Incuinbcncy reflects intrinsic merit, and not accidents of birth or fortune. Tliere is a sense of "deserving poor" but limited outrage at the fact of poverty. The elites, too, view their positions as being proper, a reflection of their intrinsic merit. Therefore the enormous gulf in status between the national elites and the local middle 37 class is accepted as a natural reflection of the social order. The world is seen as essentially static. There is no natural direction for change to take. So the social change that does occur tends to be viewed with suspicion. This is related to the idea of "limited good. " In a static world, one person's gain must be another's loss. The idea of all working togetherfor a common good is notably lacking. The world is seen as being neutral, tending towards being hostile. With the view of a static environment, there is relatively little sense of "mastery of fate. " The best the individual can do is to take 39 advantage of random disturbances for which he is not responsible. ^^K. IJ. Silvert, "An Essay on Social Structure, " Amer ican U nijVersity Field Staff R cjwrts, November 25, 1956; John Cillin, "Ethos Components in Modern Latin American Culture, " American Anlhropolop i?.t, LVII (J\inc, 1955) 511; Erickson, £t al^. , p. 106. ^^Frank Tannenbaum, Ten Keys to Latin America (New York: Knopf, 1962), j.. 120. ^*^ToniaF Jvoberlo Fillol, Social Factors in Economic Develop-

PAGE 36

Lalins have a mucli shar])fr sense of tlieir own unique idenlity than Aniericaiip arc used to. Kcuadoreaiis, from presidenf to the humblest farmer, seem to be aware that tliey arc masters of llieir soul if not of llie world around them. Tliis has two consequences: an interest in arlirtic expression as a demonstration of individuality, and a tendency to deinand autonomy of life and expression within sonie sphere. Great sacrifices will be made to maintain pride in individuality. Social relations are more personal and more intense than we are used to in the United States. People want a close circle of friends and relatives who are aware of the unique individuality of each other. Individuals who are forced into contact with an anonymous public often 40 seem surly and unsure of themselves. Latins complain that Americans will not ma];.e themselves aware of the individuality of the people 41 with whom they are dealing. A high premium is placed on loyalty to the primary group. People who really understand the inner niakeup and inerits of their ment: The Arpe ntine Case (Cambridge: The MIT Press, 1961), pp. 9-12; Samuel Shapiro, ed. , The Integration of Man and Society in Latin America (London: University of Notre Dame Press, 1967), p. 5; GiUin, p. 515. '^'^K. II. Silvert, "On Civil Discourtesy. " American University Field Staff Repor ts, February 5, 1967. Jairo Marqucz., Aiia lonii a del Gr ingo (Bogota: Ediciones Tcrcer Mundo, 1966), p. 177.

PAGE 37

2 6 friends would be willing to accept and understand their actions. People wlio place loyaltic-s to abstractions over loyalties to their friends arc worse tlian damn fools; they liave betrayed tlie trust of others. The worse charge Latins bring against North Americans is 42 ^. that they cannot be trusted with friendship. Ties of loyally link social stations togetlier. Subordinates accord their superiors higher status as long as there is a reciprocal recognition of the subordinate 43 as a worthy individual. Superiors in return gain recognition that they are in the center of the world for their subordinates. Latins seein extraordinarily sensitive to dominance and subordination in inter-personal relations. Leaders emerge and take clear44 cut roles in almost all social situations. The person in the center claims a niajor share of attention and status by virtue of his superior, more dominant personality. Subordinates want to have a leader sufficiently overpowering to justify their own lower positions, 45 There are cultural differences between the sierra and the coast. 46 The sierra reflects the hacienda ideal of a stable feudal society. Class and status distinctions are much sharper and something ^^ Ibid. , p. 72. ^Norman E. Wliitten, Jr. , Class, Kinship and Power in an Ec uadorean Town (Stanford: Stanford University Press, 1965), pp. 105-106. 44 Erickson, £j_ cil. , pp. 232-234. Blankstcn, p. 28. ''^Tannenbainn, Chapter 5.

PAGE 38

27 resembling a i^ocjal aristocracy lias emerged. The influence of llie Clnirch is licavy. Mosl Qujt cn'os seein guarded in personal relations. People are 48 socially conservative and dress tends to be very niodest. Althougli people are generally quite friendly, few are willing to commit themselves to close relations except after extended contacts. Quitc-nos also seem peaceful. Crimes of violence appear to be relatively infre49 quent. The sierra businessmen, with the exception of the innmigrant entrepreneurs, seem less innovative and dynamic than their counterparts on the coast. Business seems to be a means of achieving a social position and not a pattern of activity to be valued for its own sake. The politics of the sierra seems to reflect the aristocratic ideal. Political recruitment seems relatively closed. Few "selfstarters" who lack a family name break into tlie sierra political 50 arenas. '^'^Elite circles are not completely closed. Former President Calo Plaza is a newcomer to elite circles and yet is influential in sierra business and society. In theory the co-eds at Univ c rsidad Ce ntral must be escorted while off campus. Dances, called "bonfires" to avoid unpleasant connotations, usually end by 10:00 P.M. Tliis observation is based on tlic relative sense of personal tlireat fell in Quito and Guayaquil. ^'^Agaiii tliJ.s is not always true. The present mayor of Quito, Jaime Del Castillo, comes from a poor family of the nortbern provinces.

PAGE 39

28 Tlie ojicMi ctJiuincrci.tl rociely of Ecuador is located on tlac coast whore there is a relatively hi^h level of econoinic development and social mobility. Cos t en o s tend to be open and spontaneous in personal relations. Individuals will make no pretense of friendship if they do not like soineone. People may commit themselves to extended adventures on the basis of casual contacts. Woi-nen on the coast seem free and open to friendships. The people on the coast also seem more anomic and violent. The level of criminal violence in Guayaquil seems very high. The businessinen of the coast are the most progressive and aggressive group of entrepreneurs in the country. They seem the most receptive to new ideas and new investnients. Many managers seem to regard business as a game worthy of its own reward. As a resvilt, the successful businessmen have assembled personal empires and have at times merged these into multi-family combines that have major impacts on the economy. Coastal politics also reflect these traits. A much wider circle of people seems to be drawn into the political arena than would be found in the .'iierra. Radical populist movements are all stronger on the coast." Political movenncnts center around charisina, stressing the 5] Suggestive of the atmosphere of violence arc the fortifications that surround the offices of the leading newspaper, El Universo. Guards are bac:k(-d up by chain link cages around iH.ll offices and entry is controlled Ihrouoh double steel doors. There is nothing coinparable in Quito. 52 Erickson, £' ill. 1^. 319.

PAGE 40

personal relation between a leader and his followers. Political vio53 lencc and power confrontations are common on the coast. These cultural differences are both a result of and a reinforcement for tlie low level of integration in Ecuador. The geographic isolation of many areas and the differences in outlook all contribute to a very high level of regionalism. In Guayaquil, the provincial flag is seen more often than the national flag. The slogan, "For an independent Guayaquil" ( Pro Guayaquil Independiente ) appears on the doors of the largest bank and on the desks of countless office workers. Regionalism is a fact of life in the other areas of the country too. Clubs formed by residents of Quito and Guayaquil who have "immigrated" from other provinces are quite active. Regionalism is not a recurring political issue. Most people are willing to accept a common political framework while considering the 54 citizens of other regions to be somewhat deviant. Regionalism can, though, provide the common loyalties for the construction of large ^Thc students of Laval Borja High School (co legio nor mal) in Guayaquil severely burned two policemen with napalm bombs during a demonstration in Guayaquil in 1968. The police had broken up an attempt made by the students to place a plaque on city hall that conimemorated a similar incident of the previous year. Such incidents arc not uncommon. 54 Sr. Alfredo Pareja Diozcanseco reported that the coastal businessmen v/erc enthusiastic about the possibilities of buying into sierra companies as a means of healing the regional split. However, the a]i])arent novelty of tJie proiios.il points to the size of the gulf between the two regions. Interview witli Sr. Alfredo Pareja Diezcanseco, assistant manager of the iJan co P opular and former member of the Junta X'louela ria, on November Zl, 1968.

PAGE 41

30 coalitions on major polilical issuis. Regional competition for tlie benefits of politics also limited the possibilities of projects in any 56 one area. The patterns of business activity can be clearly traced to the culture. In a hierarchical world, the businessmen see themselves as being unique and a bit superior to the rest of the groups in the society. They are the chief guardians of the economic fabric of the society, 57 the only groups responsible for the conduct of the economy. Fre5R quently they demand freedom from governmental restraint, while also asking that they be the only group to participate in governmental decision making that affects them. This is far from the ideal of laissez-faire capitalism, as businessmen actively seek governmental 59 credits and protection. 55 Ericlcson, ej^ al_. , pp. 261, 318. 56 Congress almost rejected an advantageous loan for a needed bridge over the Guayas River because the funds would not be divided equally between the other provinces. See Ecuador, Congress, Diario de Debates: Sessiones en Pleno: Agosto, 1959 (Quito: Archivo Lsgislativo, I960). 57 ^ For an example, see "Manifesto, " Revista de la Camara de Comer cio d e Guayaquil, XXXI, July 31, 1959, p. 5; Rafael Dillon Valdez, "Declaracion de la Camara dc Industriales de Guayaquil, " E l Comercj o (Quito), November 10, 1968, p. 3. ^^Dillon Valdez, p. 3. 59 Protection has b(;en deinanded by almost all groups. For an extreme example, the drycleaners association demanded tax incenti\'es and j^rolection from "disloyal" competition. See "Sc Nos Considera Industria Solo Para Cobrar Jinjniestos, " El Come re io , October 5, I96H, p. 15.

PAGE 42

Business activity also reflects the conservative empliasis on being instead of doing, and tlie Latin demand for autonomy. Latin businessmen seem loathe to tal;e risks, to engage in entrepreneurial 60 ^ activity. Stability is valued over growth. Coinpetition is not valued. It has been alleged that Latin businessmen generally prefer to raise prices as high as possible instead of expanding the market through price cuts. In a market where prices arc inforinally fixed, business is based on establishing personal loyalties with the clients. Autonomy and the primacy of in-group loyalties make speculation a valued form of investment. The attitude of South Ainerican businessmen could be compared to that of a riverboat gambler who is willing to sink all to fleece the sucker on a sure thing. Banks, for example, will often finance a market-cornering operation but not a market-producing operation. Business organization and decision making tend to be inefficient. Businessmen sccin reluctant to accept innovation, prefering the stability of established practices. Stores seem drab, with little use made Seymour Martin Lipset and Aldo Solari, eds. , Elite s in Latin America (New York: Oxford University Press, I960), p. 15. Wendell C. Gordon, The Political Economy of Latin A mcrj_c_a. (New York: Columbia University Press, 1965), pp. 58-59; Fillol, p. 58. Egbert do Vries and Jose Medina Echevarri;i, eds. , Soc ial Aspects of Economic Ch angein Latin Anicri ca: Vol. I (Belgium: UNESCO, 196T), pV 192. ' Gordon, j). 8.

PAGE 43

32 of advcrlisijig or sales. Cost accounting foimany firms is a relatively new technique. Technical inefficiency may be related to the 65 tendency to concentrate all power in the hands of top management. Dynamic businessmen work incredibly hard. Sr. Luis Nnboa Naranja, the largest b«nana exporter in Ecuador, runs his business almost single-lianded. Most businessmen understandably prefer the role of gentleman, so decisions related to innovations are not made. Businessmen usvially try to keep the firm within the family. The "heir apparent" is frequently started off at the top. Occasionally, a business will be started specifically for the purpose of giving the next generation business experience. Staffing of subordinate positions is generally based on family ties. Some feel that highly qualified applicants would be rejected for subordinate positions. K good people are content with low pay and the lack of opportunities, it is 68 only because they are either tapping the till or planning a palace coup. Interview with Mr. John J. Snyder, Labor Attache to the American Embassy in Ecuador on October 15, 1968. 65 Lipset and Solari, p. 16; Fillol, pp. 24-26. Interview witli Mr. Wilfred Griswold, personal pilot to Sr. Noboa, on October 28, 1968. Conie rcial Importadora S. A. was started by Giavanni Malnati Parodi to give his son experience and something to do. There are other examples as will. U.S. Department of Commerce, World Trade Directory Rep or t; Comercial Importadora (date unknown). Interview with Mr. Cri.-wold. This has been partly substantiated by personal observation^ , especially of Sociedad General, the' holding coiniiany for the operations of Sr. J\ian X. Marcos.

PAGE 44

3S Tcchiucal intffioicncy may also be rc:lnted to the concern for "inner ]i>;ht" on tlie part of tlie top managers. It is reported that major decisionsare fn-cjuenlly made intuitively. Research is then done to sec liow the decision consequences would affect tlie company. The desire for status, feelings of like and dislike, and general dreanis are allowed to replace objective analyses of profit and loss ., ,. 69 situations. Labor relations are patterned on llie paternalistic ideal. The company is regarded as a family and the workers should be grateful and loyal to their superiors. Making demands against the top management is equivalent to "disloyalty" and "not knowing their place. " At times the system works impressively well. Sr. Ricardo Levy, the general manager of Fabrica Sudamericana de Broches S.A . , spends much of his tiine handling the most intimate problems of his workers. The workers respond enthusiastically in their work and in 70 support of Sr. Levy and his wife. When paternalism breaks down, labor-inanagement relations can be extremely bad. One survey concludes that most businessmen perceive their workers as being dishonest, lazy, incompetent and dis71 respectful. Petty thievery, absenteeism and union irresponsibility "'Gordon, Chapter 11. 70 This oi-)inion is based on cxtendc-d observations made by the author. '''^ Frank L. Turner, et al. , The Artisan Community in Ecuador's

PAGE 45

arc evidently vt-ry prevalent. However, much of this may be attributed to manap.eiiient attitudes. Many businessmen subsidize coninuuiisl unions in order to keep out Anierican-style unionization. Tliey v.ould ratlicr deal v.itli tlic radicals, v.-ho can be bought off in a strike and who justify tlieir anger at the workers, than with the American organizers who do not. This attitude secnas to be based on the desire to maintain a superior social position over the workers rather than on a desire to maintainprofits with cheap wages. Management has generally rejected union proposals that guarantee an increase in total profits through a modernization of work organization and an increase in worker productivity. Business often seem ambivalent about politics. High status and visibility are accorded to individual political actors. Most Ecuadoreans identify with political factions and arc interested in and knowledgeable about political events. Charting the rise and fall of political personalities, and watching the crunch of power plays in the political big leagues is as fascinating to businessmen in Ecuador as professional football seems to be in the United States. Many businessmen seek election to ])ut final public approval to a successful private career. The individual who has served a term in Congress is elevated to a special high status. This fascination with politics has Modernizing^ Economy (Menlo Park: Stanford Research Institute, 1963), p. rd4y"3-'iliol7~p7 74. 72 Interview willi Mr. Snyder.

PAGE 46

prob;ibly liclpc-d jircpcrvc llie majesty and legitimacy of political in.';t itulions. 73 Economic dcii:iands arc easily politicized. It is considered quite proper to seek political positions or influence for private gain. 74 There is no concept of "conflict of interest. " Political connections are as much a prerequisite for economic growth as efficiency, product quality and cost redviction. Politics is also seen as dirty and dangerous. Politicians are 75 ^ seen as being unmindful of the needs of the people. Corruption and inefficiency are frequently cited as major barriers to economic growth. BusinessiTien also resent the delay and necessity for political pull to get action from government bureaucracies. There is also a general fear that the costs of losing may outweigh the pleasures of winning open jsartisan battles. These factors tend to reduce the poli77 tical involvements of many businessinen. Authority is often met with overt compliance and covert resistance. Few businessmen question the general legitimacy of the 7 ^ Ex pandin g Private I nvestments for Ecuad o r's Economic Growth (Washington, D. C. : Checci and Co. , 196]), p. 4. 74 Interview with Mr. Madison Monroe Adams, Jr. , on March 1, lvo8. Dominguen, "Dos Meses del 'Honorable' Congreso," Epoca, October. 1968, pp. 22-28. 7 ft Expand in;?; Privat e Inv estme nt . . . , p. 4. 7 7 't* Interview with Sj-. Ilclge Vorbeck, presidc-nt of Cervcceria I^a Victoria S. A. , on July /9, 196S.

PAGE 47

36 govcrmncnl. However, many wish to avoid the application of author78 ity in sitvialionL; in whicli tlu y are involved. Tax evasions arc 79 frequent and open. Tliere are elements of self-liatc in this ambivalence about politics. Many people couple a strong identification as an Ecviadorean witli feelings that the political and social orders are not 80 worthy of serious rcfgard. 81 Political roles are centered around the image of el caudillo . Political leaders and their lieutenants have many different inotivations for participating. There are substantial differences in the styles of different groups. However, I was struck by the uniformity with which certain lieroic characteristics were attributed to leaders at all levels. The impression was very strong that followers must be able to present their leader as an autlientic caudillo , even if neither the politician nor the follower has internalized the ideal characteristics of this role. Shapiro, p. 8. 79 ^ Hugo Mas, "Quien Paga Impuestos en El Ecuador, " Vistazo , October, 1968, pp. 12-19. 80 One of the most poignant examples occurred in October, 1959. A bill giving honorary citizenship to an American philanthropist who had resided in Ecuador for many years received wide support in Congress. However, the proposal was allowed to die because no one was sure the man would accept and pride prevented anyone froni asking him. See Ecuador, Congrcr.s, Diario de Deb ates , Senado; Scptiem bre 19S9; Vol. I. (Quito: Arehivo Legislativo, I960). 8 ] George Bhmksten, Ec uador: Const ituti ons and Caudillos (Los Angeles: Univc;rsity of California Press, 1951), p. 34. 8? '1 was im])repsed by tlio extent to whirh many sophisticated

PAGE 48

37 Tlic jKilitical leader must li.ivc a following loyal to him. His orgeinization is ]:)ersonal, it is not based on intervening variables snc b as party or organiz.ttional identifications. The individual wlio lias not been abKto gain the loyalty of a close following deserves no attention by those on the fringes. The leader is coj-nbative, powerful, and autonomous. He is supposed to relish political fights. He must be able to project the image of being able to master the competition through sheer force of his personality, superior strategy, or weight of organization. He is also autonomous within his organization. His followers depend on him for direction, advice, and the benefits of his power. Divided leadership through task specialization is weak. The leader is pure. Many want to see their captains as "saviors of the country. " Therefore, his goals should be idealistic and he should be personally honest. If he deals in corruption, it is in the interests of higher goals or to protect the interests of his followers. Sophisticiited politicians who know the wheeling and dealing in Ecuadorean politics insist that their leaders do not participate personally in tliesc arrangements. The dirty work is done by advisors, either politicians referred to their particular factional leaders and the oppositions in almost exactly the same terms of heroism and villiany. Tliey all seemed quite sincere even though their evaluations were apparently quite unrealistic, given the Ecuadorean political context. Since jwliticians do not behave as if they regarded leaders as being either all good or all bad, I concluded that this image is "window dressing" that justifies and ei>ables political activities that would olherwi.<=:e nut be quite legitimate. 8 ^ "^K rick sun, et al., p. 320.

PAGE 49

3H out of loyally to llic chiil' or, at times, baser motives. The leader should be a universal man. The extraordinary individual competent to lead a movement should also be well-rounded intellectually. The ideal of the philosopher-kinp or the renaissance man, intellectual, valiant and humanistic, is much more appealing in Latin America than it is in the narrowly specialized cvilture of the United States. The leader should be human. He should be "simpatico" ; warm, t charining and genuinely interested in others. He should be open to the ideas and wishes of his followers. A constant preoccupation should be the interests of his followers. The ties between leader and follower are warm and eniotional . Many seem to gain a vicarious sense of participation through identification with a leader. For active party workers,, the vicarious sense is reinforced by the possibility of employment. The close lieutenant gains status through association with the political leader. An individual who has the confidence of a president must be exceptional. He also gains power by his claim on the loyalty of the chief and through control of access to the chief. These factors can be related to the "arrogantly combative" style 84 of politics. Cooperative efforts and pragmatic bargaining for 84 Tliis imaore is consistent with the observations of Colombian politics made by James L. Payne, Patterns o f Conflict in Colonibia (Now Haven: Yale University Press, 1968), Chapters 6-8. However, the social constraints on political conflict in Ecuador seem strong enough to prevent the development of "defensive feuds. "

PAGE 50

39 inutual pain sroin relatively infrequent in Ecuadorean politics. Politicians hax'c an interest in demonstrating their intrinsic majesty as a true cau dillo . Many fear that tlieir following would be swallowed u]^ by competing groups if autonomy is not guarded jealously. There are few transcending loyalties to serve as common goals in a cooperative effort. 86 Political conflict often resembles open battle. Each group claims that the opposition is hopelessly corrupt and damnable. Open negotiations are difficult at first, so outcomes are determined by the results of power plays. This may take the form of mass demonstrations, attacks on the nieetings of the opposition, threats of sporadic violence, or a general strike. Negotiations start when neither side can crush the other. Both sides usually can claim a victory. The "ins" have maintained order or have won the election, the "outs" have gained the statxis of a major competitor who could force negotia87 tions and have demonstrated a significant force for future battles. o c Coalitions are formed during presidential elections. However, factional leaders arc quite aware of the necessity of maintaining a separate identity. Inlcr\-icws v/ith Sr. Jorge Luna Yepez, chief party tactician for ARNE on November 13, 1968, and witli former president and liberal candidate for president in 1968, Andres F. Cordova on November 29, 1968. 86 These comments parallel observations of Peruvian politics made by James 1^. Payiie, "Peru: The Politics of Structured Violence, " £ourmii]_orj]^l_ij2C£, XXVII, 2 (June, 1965), 362-375. ^ '^Norman IVtiley, ed. , Latin America: Politics, Economics and Ho nns] -)]iere Security (New York: Praegcr, 1965), p. 81.

PAGE 51

40 Several const !•• iiils lu/e]) the politicil order from breaking clown. Challengers are careful not tu enter conflicts in which they would not ]5ut up a respcclal.>le showing. A major defeat could spell the end of a political leader and his organization. Political loyalties often cross-cut friendship and family loyalties. Opponents may be joined 88 by a web of social relations that dampen open battles. No group is willing to strain, social ties with uncommitted third parties by pushing the fight too far. The social support of uncommitted groups gives combatants a potent reserve against potential attackers. So leaders are generally careful not to make unnecessary enemies that may return to haunt. The pattern of Ecuadorean politics resenables those found in neighboring republics. Political instability has been apparent. Ecuador has been governed under 16 different constitutions since inde8Q pendence. Only three constitutionally elected presidents have served a regular term of office since 1924. A total of 31 people have 90 held the presidential office in this period. However, instability has not meant the absence of political norms and patterns. Participation has always been restricted to a very small section of the society. At best, fewer than 20% of the j^eople ^^Whitten, Chaj^ler 8. ^^Blankstcn, p. 8. 90 Ibicl. A new constitution was written after Blanksten's book was publi slied.

PAGE 52

'11 vote in elections. Formal control of the machineries of govcrniTienl has teiided to stay within a small circle. Many recent presidents, Jo.se Maria Velasco, Andres F, Cordova, Galo Plaza Lasso, Carlos Julio Aroscmena and Otto Aroscmcna ainong them, have either served several nonconsecutive terms of office or are very closely related to past presidents. Oligarchy in Ecuador has been tempered by at least a verbal commitment to freedom and democracy. Most recent presidents have justified their control of the office through an appeal to either a popular mandate or a coninaitment to reforms which will make democracy truly functional in the future. Personal freedoms have also been generally respected. The coups have generally been run according to gentlemen's rules. Violence has been kept down and the losers have been permitted to withdraw into exile. Ecuador has had no military tyrants to compare with Melgarejo in Bolivia, Trujillo in the Dominican Republic or even Perez Jimenez in Venezuela. The themes of personalism, regionalism and the quest for economic advantage have figured often in the panora:na of Ecuadorean political 92 . ^ history. The independence of Ecuador from the federation of Gran Colombia was declared in 1830 by the Venezuelan general Juan Jose Florcs, who ruled the country directly or indirectly for the next 15 91 Ibid. °^Jolin Edwin Fagg, Latin Ame rica: A General History {New York: Macmillan, 1969), p. 'IZ3.

PAGE 53

42 years. Nalion;il life cxft-ndcd very little past the city limits of Quito, Guayaquil and the otlier coastal areas were generally pest holes fit 93 for sniugglers, adventurers and exiles. The repressive rule of Flores, togetlier with the resentment of the role jjlayed by foreign generals in tlic country (one of whoin was prcsidcjit), and the struggle for the spoils of the government coalesced into a vaguely nationalist opposition movement. The coalition of dissident Quit en OS and the always troublesome residents of Guayaquil finally forced Flores from office in 1845. However, the removal of Flores did not bring peace, rather an intensification of internecine warfare was the resvilt. Peace was achieved with tlie establishment of the reign of Gabriel 94 Garcia Moreno, the former rector of the University of Quito. A civilian, inodest, upright and scholarly, he was the antithesis of Flores. However, militarisni had been exchanged for clerical fanaticism. The Church v/as firmly entrenched, the Jesuits were brought back and the curses of liberalism and anti-clericalism were combated by the most strenous means. As a culmination of his religious program, Garcia Moreno reverently dedicated the country to the Sacred Heart of Jesus. An attempt was made in 1870 to raise a clerical army to rescue the Pope after the annexation of the; Vatican. The medieval 93]bid. 9^1 ^ Ibid. , p. 429.

PAGE 54

autocracy that Garcia Moreno was trying to build was brought to an end when [he president wos hacked to pieces on tlic palace steps by a grou]:) of inacliele-wieldiiig youths. If the 19lh century had belonged to the conservatives, the 20th mar];cd tlie rise of the liberals, A prosperity based on the exportation of rice and cocoa together with the eradication of yellow fever 96 brought population and econoinic power to the coast. The period betVv'cen 1875 and 1895 was characterized by an uneasy truce between the liberals and the conservatives. However, a scandal in the administration of Luis Cordero resulted in a civil war between coast and sierra which was won by the coastal general, Eloy Alfaro. Alfaro promptly began to cut back the power of the Church and to modernize the legal and commercial systems of the country to keep up with the new prosperity. Although Alfaro was assassinated by a proclerical inob in 1912, the presidency was firmly held by the coastal liberals until 1924. The economic development of Ecuador brought new groups into the political process. The military was largely pacified through professionalization. Many of the economic elites, who apparently decided that revolution was bad for business, began to support political " George I. Blankstcn, "Ecuador: The Politics of Instability, " in Martin Needier, T he Political Sy .sle ms of Latin Amer i ca (Princeton: D. Van Nostrand, 196'j), j). 274. "^^Fagg, p. 639.

PAGE 55

4-] coalitions and more orcK-rly changes in government. Urbanization 97 and rising literacy brouglit in the spectre of populism. Duritig the depression years there was a brief experiment with inilitary rule. During the war years the liberals and radicals united for a last deletion and gave tlie presidency to Dr. Carlos Arroyo del Rio. However, the dominant figure of the period has been Dr. Jose Maria Velasco Ibarra. Between 1937 and 1968, Velasco has been president five times. Only one term has been finished. Three tinaes 98 now he hjis been ousted because of corruption and violence. The persistence of Velasco's political career can be attributed to the appeal his brand of populism has for the poor and the marginal businessmen. His presidency from I960 to 1961 is the subject of Chapter 8. ^'^Blanksten, p. 277. 98 Velasco was president at the time lliis was written.

PAGE 56

CHAPTER lU BUSINESS GROUPS OF THE COAST Tlie Econoniy The Ecuadorean economy is specialized in Ihe production and exportation of a few agricultural products. There are a few business groups and the econoniic relations among groups are relatively simple. The importance of agriculture in the econoiny is suggested by Table 3. Agricultural production is relatively undiversified. Most of the land is taken up in the cultivation of a relatively few crops. This is shown by Tabic 4. Exports are higlily important to the Ecuadorean economy. With a total gross national product of some fourteen and a half billion sucres in 1963, exports amounted to about two and a third billion sucres. This is a fairly high ratio of foreign trade to total production for a South American country. Since Ecuador has enjoyed a stable balance of payments in recent decades, these figures accurat.ely reflect the importance of international trade. Virtually all of Ecuador's exports are agricultural goods. The importance of a few crops is shown by T^lblc 5. Ecuador, Banco Central, BolctTn del Banco Central : 1965 (Quito: 1965), p. 148. 45

PAGE 57

TABLE 3^^ EMPLOYMENT AND EARNINGS IN SECTORS OF THE ECUADOREAN ECONOMY IN 1963 Sector 46 People'^

PAGE 58

47 TABLE 4 MAJOR AGRICULTURAL PRODUCTS IN ECUADOR IN 1957^ Product Area Planted in Acres Tons Produced Cattle Barley, oats, corn Cacao Bananas Coffee Wheat Rice Potatoes Cotton Yuca Others TOTAL 2, 950, 000 696, 000 410,000 232, 000 209, 000 173,000 158, 000 78, 000 70, 000 48, 000 3, 322, 000 8, 346, 000 40,000 head 48, 940 8. 139 73, 000, 000 stems 8, 900 8,987 20, 000 53,420 19, 156 40, 789 N. A. N. A. ^"Produccion Agricola Estimativa de la Republica del Ecuador en el Ano 1957, " El Ap;ro (Quito), August-Scptcinbcr, 1958, p. 41. Ecuador, Junta Nacional de Planificacion y Coordinacion Economico, Bases y Direct iv o s para P'ropramar el DosarroUo Econornica del Ecuador: To"moT(Quito, 1958), pp. 211-216. 'Ibid. , p. 12 7.

PAGE 59

48 TABLE 5 MAJOR EXPORTS FOR 1960^ Commodity FJxport Value % of Tol:-.l Exijort Value (in millionp) (in millions) Bananas 90.0 60.3 Cacao 21.4 14. 4 . Coffee 21.9 . 14.7 Oth e r 15. 7 ^1^,6 TOTAL 149.0 100.0 ^Statistical Abs tract for Latin America: 1962 (Los Angeles: Center for Latin American Studies of the University of California, 1962). Boletin .... p. 153. Figures are in dollars. The unclassified exports include such items as balsa, pyrethruni flowers, canned tuna, tagua nuts, "panama hats, " and pharmaceutical herbs. Few of these have an exported value of over $2, 000, 000 a year. The manufacturing s ector of the eco nom y is small and simpl e. 2 ^ The 1954 census of industry recorded only 1, 085 businesses. Few intermediate products are bought and sold. Most of these are agricultural goods which pass through relatively few hands. Virtually 3 all capital goods and processed raw materials are imported. (Table 6) 2 Ce nso Industi'ial . . . , p. ix. ^Ecuador, Ministvo de Tesoro, A nuario d o Comercio Exterior : j_9C>^ (Quito, 1961); Lilo Linke, Ecuado r: Cou ntr y of Contrnsts (London: Oxford Univcrt.ity Press, 1960), p. 147.

PAGE 60

4V TABLE 6 INDUSTRIAL EMPLOYMENT BY SECTORS^ Sector Workers Employed % of Industrial Total Textiles, clothing 9608 31.6 Foodstuff Processing 7750 25.5 Automotive, railroad maintenance 3897 12. 9 Oil drilling, refining 2361 7. 8 Other 6754 22. 2 TOTAL 30,370 100.0 ^ Censo Industrial . . ., pp. 4-9. Includes spinning, weaving, and dyeing of some imported fibres as well as the processing of domestic cotton and wool. Includes milling, baking, canning, the processing of chocolates, ice creams, liquors, etc. This includes the fabrication of bus and train bodies on imported truck chassis as well as such "heavy" repairs as the regrinding of crankshafts.

PAGE 61

50 The organi/.ntion of llie commerce and services sectors reflect the simplicity of llie economy in which they are involved. Substantial marliets exist only for a few commodities. As a result few businesses can afford to specialize narrowly. Economic expansion has generally been achieved llirough diversification. Business Croup s Coastal Agriculture Agriculture is the least developed sector of the Ecuadorean economy. The level of investment and technology is very low, even by Latin American standards. The average agricultural worker produces less than one-fortieth of the value generated by his North American counterpart. It is not surprising then that the value added per worker is also low despite the dismal level of agricultural wages. There arc great regional variations in crops and cultivation tech ni que s . Co a stal agriculture is hea vily specialized in ^bananas , coffee, cacao, sugar, rice, and cotton which are the ex-portable and^ "heavily processed" commodities. The close worldng relati ons amo ng the exporters, tlie producers and the processors haw been a factor in 7 encouraging a relatively liigh level of development on the_coast. '^"Productivity of tlie Agricultural Sector in Ecuador, " Economic Bulletin for Latin America, VI, 3 (October, 1961), 66-67. ^ Ibid. , p. 67. ^^bid. ''Jbid.

PAGE 62

Bananas Banaiiar. arc the backbone of tlie Ecuadorcan economy. Ecuador is tlie larfu.'sl exporter and second largest producer of the fruit in the o world, T)ie develo)3ment in bananas has occurred since World War II. The value of banana exports rose from $7, 000, 000 in 1950 to Q $90, 000, 000 in I960. This treniendous progress has been attributed to cheap labor, government supports, fertile disease-free lands, and a favorable climate. Although exports are not expected to grow in such a spectacular manner in the future, the long term prospects are considered excellent. Yet the banana growers are one of the most divided, discontented, and politically aware of all business groups in Ecuador. They have a cominon desire for an improvement in th(^ Sucre price of banana exports and for more governnrient investment in banana growing. However, there are sharp splits between the large-scale producers and the smaller growers as to how these goals are to be reached. The ov.-nership of banana-producing lands is not highly concentrated. There are only some 160 plantation_s _ held by th e big landowners. The largest, Cia_.,J3ananera Ecuatoriana ( United Fruit ) Ralph J. Watkins, Expnr.dinp Ecuador's Exports (New York: Frederick A. Pracgar, 1967), p. 10. "Econom ic Btill elin . . . , p. 154. ^'^llans J. Linneman. Analy^i is v Provccciones dc Las Exportacionc'S del lilcuador (Quito: Junta Nacional dc Planificaciun y Coor dincion i^conomica , 1'A'>1), j). 60.

PAGE 63

S2 covers about 4, SOO acres. S(.)me of Ihc other large plantations ar e the French-owned Astral (4, 500 acres), Cia. Frutera SudA merican a (3, 700 acres), and the Swedish-owned Hacienda Clemen t i na ( 2, 500 acres). Tlie production of these largest plantations accounts for less 12 tlian 20 percent of tlie total crop. (Figure 2 shows the distribution of landholdings. ) The medium producers account for about 50 percent of the total export volume. Although the smallest peasant producers are by far the most nuinerous, they account for only about a third of total pro13 duction and only a small fraction of the total volume of exports. Tlie_5mallest producers are__peasants with less than 12 acres in production. They generally grow bananas with family labor as a sideline to subsistence farming and the cultivation of coffee and cacao. The bananas produced are rarely exported and are frequently 14 not even harvested. These small producers fall ovitside the scope of this study. The medinn-i planters have between 25 aiid 250 acres. They are frequently upwardly mobile middle class "wlnites" who are in the Tliese figures are based on a rough conversion rate of 2. 5 acres to the hectare. 12 Walkins, p. 16; Investments in Ecuado r, p. 37. Ihid. 14 Watkins, pp. 15-16.

PAGE 64

FIGURK 2 DlSTRinUTlON OF DAN'AKA L/\::DS I:, ECUADOR 53 Percsntage of total area cultivated in bananas 48 88 98 Percentage ot banana landhoidings Figures derived trom llerrora Vasconez, CI Cultivo del r..-inano en El i'l r undor (Guayaquil: ANDE, 1963), p. 18''* ; J.D.V. Saunders, "Man-Land Relations in Ecuador," RuraJ Soriologv . XXVI(l) (Marcli, 1961), pp. 57-61.

PAGE 65

54 15 process of parlaying a small start into a reasonable planting. The more prosperous planters of this group generally take agriculture quite seriously. They produce for export and are aware of planting, cultivating, harvesting and grading techniques. However, the implementation is often hampered by a lack of capital. The medium planters are highly vulnerable to market factors. They lack the reserves necessary to weather a bad year, to keep fallow land into which to expand, and they rarely have the capital needed to change to the cultivation of coffee or cacao. The mediumsized plantings cannot be farmed with family labor alone and cannot support a full-time work crew. Therefore almost all planters in this group use floating wage laborers on a seasonal 17 basis. Selection, harvesting, grading and transporting of the bananas to the export docks are very frequently contracted out to professional wholesalers. These wholesalers may be either independent 1 8 operators or affiliated with one of the export houses. 15 r " Ecuador, Junta Nacional de Planificacion y Coordinacion Economico, Reformas de la Estructura de Tenencia de la Tierra y Expansion de la Frontera: Plan General de Desarrollo Econoniico y Social: Vol. II (Quito, 1962), pp. 95-96. Interview with Sr. Vicente Chang, banana grower and owner of "Hacienda san Luis, " on October Z7, 1968. 17 Anthony Bottomley, "Planning in an Und e. rut ilization Economy: The Case of Ecuador, " Social and Economic Studies, XV, 4 (December, 1966), 311. ^^Watkins, p. 17.

PAGE 66

55 Tlic owners of the largest plantations (over 250 acres) are sol19 idly in the "wliite" elite of the upper cl-.ss. Many of them belong to the old aristocracy which dominates much of Guayaquil business. Their style coiild be described as patrician in that they expect to receive deference and do not have to conipete in the arena for what is rightfully theirs. The social ties between the large landowners and the commercial elites reinforce the economic positions of each. The large landowners could expect to receive favored treatment from the bankers and the exporters as a result. These largest estates are well capitalized and generally well managed. The operation of the banana plantings often more closely 20 resembles industrial agriculture than the classical latifundia model. Almost all have a full-time force of agricultural workers and often a 2 1 fleet of private spray planes. Plantings are often diversified into 22 cacao, coffee, cattle, or rice. As a result, the largest banana planters are much less dependent on the yearly success of the one crop in a competitive niarket. The large planters generally select, harvest, grade and ship ^^Georg Maier, "The Impact of Vel?squismo on the Ecuadorean Political System" (Ph. D. dissertation, Department of Political Science, Southern Illinois University, 1966), pp. 1-5. ^^United Nations, Economic Coinmission for Latin America, El DcsarroUo Ero no mico del Ecuador (Mexico, 1954), p. 59. ^^Producti vity . . . , p. 70, ^^Watkjns, p. 16; Inveslmont in Ecuado r, p. 37.

PAGE 67

56 their produclion dirccLly to the exporters. Whereas the small and medium growers arc paid pvr stem accepted for export, the largest producers have cojitracts based on^total production, regardless of qviality. The exporter has a very direct interest in helping the large planters improve quality and to reduce the percentage that cannot be shipped out of the country. The cultivation of bananas is a highly complex art. It takes a year for a crop to mature. After the fruit is harvested, the land has to be cleared and replanted. ' Banana "hands" grow in bunches on large stems, which may weigh between 50 and 100 pounds. The stems are picked green and must be placed under refrigeration within 24 hours. Handling and shipping are coordinated so that the stems approach maturity by the time they are delivered. This calls for the closest cooperation between shipper and planter. Bananas are extremely susceptible to bruising in shipment. Bruises that may completely discolor the fruit when it is ripe are difficult to spot when it is green. Therefore utmost care must be taken in moving the fruit to the docks for shipment. The exporters examine the fruit very closely for improper handling.^ The iTiost serious banana disease is sigatoka, a virus which ^^"El Dcs.irrollo . . . , " p. 174. Ibid. ^^Watkins, p. 17.

PAGE 68

5 7 infests the soil. Tlierc is no economical way to prevent or control llio disease. Land llial has become infested must be shifted into other forms of ciillivation until the disease has died out. As a result, growers are very interested in finding new uninfected lands to which they can move in the event that sigatoka spreads to their cultivations. The larger growers buy up large tracts of unused land and can make their own iinprovemcnts on it. The smaller growers generally have to wait for the government to open up areas for colonization before they can afford to move their plantings. The other inajor plant disease is mal de Panama, a leaf fungus which can be controlled by oil sprays. Profits in bananas can be respectable. Harvested stems are worth about ten sucres (50 cents) on the farm. The average yield is about 250 stems per acre. Cultivation costs for the first year are about $70. 00 and drop down to $60. 00 for subsequent years. The net 27 profits come to about $60. 00 an acre. The price of a stern of bananas is about 23 sucres at the dock ($1. 10). Transportation costs are around five sucres and processing, handling, and taxation costs add another five sucres. Therefore, the banana growers could do their own processing and transporting to earn the extra three sucres at the risk of not being able to find an immediate ? ( Galo Pla/.a and Stacey May, The United Fruit Company in Lat in AnTcrjca (Washington, D. C. : Tlic National Planning Association, 1958), ^"^Ihid. , p. 194.

PAGE 69

58 28 buyer for a hiplily perishable cominodily. The only major market for banana export rejects is for cattle feed at ten cents a stem, Tlie political interests of the small and the large producers on exchange rates are identical. Everyone involved in banana exports has an immediate interest in increasing the buying power of the "banana sucre. " This could be done by a general devaluation, which would raise the sucre income from all export dollars, or by altering the terms of the milltiple exchange rate to benefit only bananas. There is a major split between the small and the large banana growers on the issues of regulation of export-buying practices and on government investment in virgin lands for banana growers. The large producer can meet the exporter on equal terms. He can deliver a significant fraction of total current demand at any one time. He also has relatively complete control over the factors of production. Therefore, the large producer can shop around for the best possible contract for his bananas. The smaller growers do not have these advantages. The organization and timing of selecting, picking, shipping, packing, and loading for export simply cannot be handled by one individual. Because the small grower has been so dependent on exporters and middlemen for liandling his bananas, the middlemen have become much more selective in grading small lots of fruit. The miniinum stem weight Jaqucs Klias, "Una Banana de Oro Majzco, " Prescncia Latinoaniericana, July 31, l'/'6S, pp. 18-23.

PAGE 70

5^' accepted for cxj^orL has gone up from 30 to 70 pounds since 1950. ^ Growers have also cliargod tliat processors have demanded a fraction of tlic total production "under the table" as a price for accepting 30 any of tlie fruit. E>;porters and their middlemen have also refused good fruit on occasion only to buy it later as cattle feed and then 31 export it to the Latin American market. Th? smaller growers depend on ANBE for oil spraying of their fields. Some charge that the exporters have influenced ANBE to spray the fields of recalcitrant growers at inconvenient times and 32 even to apply useless water instead of oil. As a result, the smaller growers in areas in v.'hich a single influential buyer handles most of the bananas are prevented from shopping around for a competitive 33 outlet. It is not surprising that many smaller banana growers have a very strong interest in some form of state regulation of the exporters. Specific suggestions have varied from urging the creation of a state J. Chanipion, Las Bananeras del Ecuador (Cviayaquil: ANBE, 1959), p. 37. 30 Interview with Sr. Vicente Chang. ^^"Jcan Le Rouge" (Pseudonym), "La Gran Catastrofc del Banano, " La Calle (Quito), 213, April, 1961, p. 10. Interview with a knowledgeable crop duster who works for ANBE ; "Jean Le Uougc" (Pseudonym), "El Ncgocio dc la Fumingacion, " La C alle (Quito), 219. May 12, 1961, p. 26. Interview v.-ilh Sr. Alejandro Carrion, editor and publisher of La Calle, on November 12, 1968.

PAGE 71

60 34 cxporling and sliipping line to the formalioii of indcpoidcnt coopci-a35 lives lo in:irl;et bananas abroad to reorganization of ANBE to increase the influeiice of smaller growers. The smaller growers are also interested in government development of future banana lands. The smaller growers fear that the large landowners will buy up available lands when producing fields are infected by sigatoka . thus forcing the smaller growers out of business. The political interest s of the exporters and the large-scale producers are often allied. The large producers have an interest in maintaining the sucre prices of banajias by restricting the production of the middle and small growers. The profits the exporters can make from the medium and sinall growers give the large plantation 37 owners a "cushion" when negotiating a price for their own crop. Therefore the large-scale growers arc not so oi^posed to the lack of influence of the smaller growers in ANBE . Also the large growers are not as much in favor of government road building and colonization 34 For recent examples see "Intercses Bananeros: Los Productorcs Bananeros de Pichincha, " El Comercio (Quito), September 24, 1968, p. 9; "La Asemblca Nacional de Delegados de la Federacion Nacional de Bananeros del Ecuador, " El Comercio (Quito), September 29, 1968, p. 7. 35 ^ "Piden No Interferir oi Negociones de Pequenos Productores de Bananas, " El Comercio (Quito), August 11, 1968, p. 28. "Asemblca Nacional ..." 37 Interview witli Sr. Vincentc Chang.

PAGE 72

61 38 projects in uiKlcarcd banana lands. Their ability to build their own roads gives them an enormous competitive advantage over the smaller producers in shifting away from sigatoka-infested areas. Cacao and Coffee The economic and political positions of the cacao growers is in sharp contrast to that of the bananeros. Cacao is a relatively "sick" branch of Ecuadorean agriculture with low profits and an uncertain future. However, the problems of the cacao growers do not seem to have been reflected in their political progranis and goals. At the beginning of the 20th century cacao was the prime export of Ecuador. When world market prices were 25 cents a pound in 1916, Ecuador exported over 40, 000 tons annually, accounting for soine 20 39 percent of total world trade in cacao. Prices fell to less than ten cents a pound during the depression and World War II. Annual production fell to less than 12, 000 tons in 1933 and has gradually recovered 40 to the current production of 33, 000 tons annually. Future earnings are expected to decline gradually as higher quality cacao produced in 41 Africa enters the world market. Some 400, 000 acres are planted in cacao. It is estimated that 38 '' Interview with Mr. John W. Snyder, Labor Attache of the American Enibassy in Quito, on October 15, 1968. ^^Watkins, p. 21. 40 41 Einncman, p. 69. Watkins, p. 23.

PAGE 73

62 curi-L-nl production could \)c easily doubled by recultivating 120,000 acres that have been abandoned and by improving production techni42 ques. An acre of cacao produces $120. 00 in gross income. Costs average around $40. 00 an acre. It takes several years for new plantings to produce. Many farmers are unwilling to invest in cacao, fearing that the falling world prices will not inake it worthwhile. Yearly harvests of trees occur in December-January, May-June, 44 and August-September. The beans are allowed to ferment after picking and then are dried in the sun. Dried beans are sold in small lots to local representatives of the exporters. Since the beans are a durable, easily transported commodity, local pricing is generally based on economic factors and is approximately the same for both the small farmers and the large producers. Cacao is generally grq \yn by peasant farniers. About threefifths of the plantings and one-third of total production come from ^mall plots worked by peasant labor for the free market. Most of 45 the remaining production is held by the large planta tion ow ners. UsuallY _the_ landowner ^will "lease" a set of trees to his jjeasant workers for them to farm using family labor. The peasant agrees ''''Ibid. , p. 22. ^^Ibid. , pp. 22, 24. U.S. Department of Commerce, Investmen t . . . , p. 41 '^^"El D.sarrollo . . . ", p. 157.

PAGE 74

6:) lo sell all the ])z-ocluction to Iho landowner for a set price. The 46 owner keeps Ihc profits from reselling the cacao to the exporters. Tlie Kcuadorean government has set up the Emprcsa de Renova cion dc Cario (cacao renovation enterprise) to promote diseasc47 resistant strains and better cultivation techniques. Their efforts have not been entirely successful. The resistant strains produce a cacao bean of lower quality and it has been difficult to persuade the peasants directly rvsponsible for cultivation to adopt better techniques. Given the market and production situation, it is not surprising that the uncertain future of cacao has not resulted in widespread political demands for governn-ient help. The landlords and middlemen can recoup their profits by paying a lower price to the peasant produc er. Government supports for a price higher than currently being paid on the world markets would be a financial iinpossibility. Government programs to iinprove the quality of cacao would inevitably involve working with the peasant producer. Such programs would not be particularly popular. A last strategy for improving the prospects for cacao would be to change the exchange rates on exports. The cacao producers share with the banana growers an interest in devaluation. However, most landowners and exporters arc involved in both conimoditics. Since tlic prospects for bananas

PAGE 75

61 arc brighter, most people would rallier spend time and money there at the cxpcn.'^c of cacao. The peasant producers who depend on cacao for much of their income have almost no impact on the political process. Unlike the medium and large banana growers, they lack the time, the skills, the power and the social standing needed for a hearing. Asa result, the Iproblems of the cacao growers rarely become political issues. The situation of the coffee growers is quite similar to that of the cacao farmers. World coffee prices have fallen from $70 to $33 a quintal in less than ten years. '^^ Ecuadorean coffee sells below world 49 prices due to the lack of quality controls. Most of the coffee is groY.'u by peasants in ManabT province. The few large farmers who could be effective in national politics also cultivate bananas andjcacao. They will probably only invest time and energy in coffee as long as the world prices make it worthwhile. Most large coffee growers seem more interested in the long term development of bananas. Attempts have been made to boost earnings by improving cultivation, processing and grading techniques. The peasants who are responsible for most of the production have not responded to the proddings of the large growers, the exporters, and the Ecuadorean government. Therefore it is not surprising that few people continue ^8 lbid. , p. ISO. ^^Walkins, p. 24. ^^U. S. Department of Commerce, Investment . . . , p. "61,

PAGE 76

65 lo press vocally for furllier development by tlic government of coffee lands. Rice Rice is generally grown by sharecroppers for local and national 51 consumption. Quality is poor and production costs are high. The landlords are generally not concerned with developing techniques as long as their lands are being worked in a profitable manner. Therefore rice production does not seem to have been a political factor. Sugar Two inajor mills, Azucarera Valdez and Azucarera San Carlos , 52 grow and refine virtually all Ecuadorean sugar. Profit levels on these integrated operations are high, reputedly around 50 percent of 53 the sale price. Since over 50 percent of all production is consuined domestically, sugar grov/crs enjoy excellent security outside of the vagarities of the world niarket. Who gets the U. S. svxgar quota premium has become a political issue in recent years. However, it was not during the period under study. Some sugar is grov/n in the sierra foothills for local moonshine ^UVatkins, pp. 4Z-43. ^^Watkins, p. 35; "Reportaje: El Ingcnio Valdez, " Camara dc Industrial e s de Guayaquil, May-June, 1968, p. 41. 53 "Establecen Costos y Utilidades en Azucar, " El Comcrc io, November 11, 1968, p. 5.

PAGE 77

66 (agurirdicntc ) . Proc rising is usually on an cxlrcniely sni.ill scale. Distillrrs have become concerned about the problem; however, it 54 has not bothered tlie sugar men to any extent. Catt le Comniercial herds are kept only by the large landowners. Soinc peasants have draft aniinals v\'hich may be used for domestic consumptio n. They have not been an importajit factor in the market. About 60 55 percent of the 1. 5 million head of cattle are on the coast. Most of these are in beef herds. A good herd of cattle earns about $40 an acre. Many fanners prefer to keep basic herds, despite the low profits, as a hedge against 56 the highly competitive banana business. Herds, traditionally of very low quality, have been improving rapidly in recent years. Rising profit margins have stimula.tcd an interest in subsidized iniportation of purebreds and in the construction of slaughter and chilling 57 houses. Price ceilings on retail beef (about 30 cents per pound in I960) have probably reduced profits. Some cattlemen feel that a major ^'^Watkins, p. 36. Saunders, p. 61; ^Vatkins, p. 77, Ibid. , p. 81. 57 Ibi d. , pp. 79-SO; El Desarrollo Aaropcca rio del E cuador (Quito: Camara de Agricullura de la Primcra Zona, 1968), pp. 18-23; Recoincnd iciones li.iF.icas P..r a la Accion Futura en cl Sect or Apr ope c aric ) (Quito: CainruM do AoriciUur.: de la Primera Zona, 1968), p. 11.

PAGE 78

67 price increase would reduce markets more than they would increase profit margins, Thcri-furc price ceilings have not yet become a major political issue. The Exporters Exporters have long been involved in Ecu£idorean politics. They all share three general goals: to increase the sucre price of exports on the world market, to reduce the sucre price of commodities bought for export, and to encourage govermnent investments in export 59 agriculture. Sharp political competition among exporters of similar size is reduced by the lack of differential specialization. All of the largest exporters handle many of the sainc coinmodities. This is shown by Table 7. Political splits occur between the larger and smaller exporters. The smaller businessmen generally do not have the capital to finance CO Suggested by Sr. Luis Del Campo Salvador, member of the board of directors of the Camara de A gricultura de la Primera Zona , in an interview lield November 15, 1968. -^^Emilio Estrada Ycaza, "Genesis de la Crisis Economica de 1961," La Calle (Quito), August 4, 1961, pp. 16-17 and continued in La Calle, August 11, 1961, pp. 11-12; Jorge W . Villacres Moscoso, Politica Economica In tern acional del Ec u ado r (Guayaquil: Universjdad de Guayaquil, 195V), ]:>. 115; Jose Luis Gon/.alez A. , Nuestra Cr isi s y El Fon do Monot .i rio Intern a cional (Quito: Editorial Rumi'nahui, 1959), pp. 207-2U8; Interview with Mr. John W . Snyder. Interview with Sr. Ec. Abdon Calderon, executive director in Gii.iyas for P;;rt ido L ibe ral Radic al, on November 1, 1968.

PAGE 79

T.Ar.LE 7 ]:X]-ORTS AXD SI71-: OF BUSINESS O]'"' THE LARGEST EXI^ORTERS a Kro. C a p • 1 a 1 " ^^lliLl'lLl'ii Kxj jort s 9, 100, OOU l\.-dro Ma^^jjons y Bip,as cacao, Intc-rr::mb io y Crrditu S . A. cof f r l, Exporlaclo rcs Unicios S. A. bananas 4, 000, 000 G race y Ci a. bananas, cacao 2, 500, 000 Socicdad General rice, coffee 1,000,000 Luis A. Noboa bananas, Baiianera Noboa S. A. rice 1,000,000 Standard Fruit of Ecuador, S. A . bananas 800, 000 Ra.ul Canizares La Madrid bananas Frutera ChilenaEcuatoriana S. A . E>:j)orl adora Ecu a toriana-Europca S. A. 500, 000 UBESA bananas 400, 000 Sor:'eda.d Nacional Con:iercials S. A . bananas 250, 000 Exportadora do Frutas S. A. bananas 250, 000 C. A. Industrial Azua cacao, coffee The names of exporter s ha\e been taken from "Lista de Firmas Exportadorcs de Productos Agricolas, " El Agro (Quito), October-November, 1962, pp. 28-32; "Firmas Exportadoras de Productores AgrTcolas, " El Agro (Quito), October-November, 1961, p. 35. Ranking by registered capital is based on data found in Guia General de Comerciantes de Guayaquil (Guayaquil: Camara de Comercio de Guayaquil, 1963). Registered capital is equivalent to the value of stocks issued by corporations but covers all forms of private bvisiness organizations. Since many exporters, particularly Soriedad General and Sr. Noboa, are thought to depend ow unregistered foreign capital, registered capital may not acc\iralely reflect tlie relative volumes of business. However, it is the only index available. Soei ed.'d Generil seems to be a general liolding corporation o\vned by Sr. Juan X. Marcos. Sc^cied.ul Gen eral also operates as a bank and is Jn\olved in shij-)j)ing and real estate. Sr. Marcos is rejiorled to be tremendously wealihy and to liavi' personal control over much of tlic lower level public adminisl rat ion of Guayaquil. However the p ;l:)liely declared volume of business is muih less than would be indicated by liis reputed fortune. See Hu;.m> M,.s, "Quien Pa^-.a Iiujniestos en El Ecuador, " Vi>-.la/,o (Guay.iquil), October, K'o^. pp. 12-1').

PAGE 80

69 1 ii-'-'.f li.irvcst f; or the contacts to obtain major contracts. As a rc.-ult lliiy df poid on th.e .smaller growers for the bulk of their businoj^s. The smaller cxpoi-ters and tl:c smaller growers arc often allied against llio larger producers and exporters in an attempt to (.ncoiirage more widely spread production. The smaller exporters cannot afford to wage extensive political warfare against the large growers and exporters. Because they lack capital and economies of scale, the overhead can be substantially higher for the smaller exporters. They depend on the larger exporters to keep purchase prices low enough for the smaller buyers to make a profit. These two goals-encouraging more widely spread plantings and maintaining low purchase prices-are often mutually exclusive. This probably has reduced the political effectiveness of the smaller exporters. Table 8 classifies the exporters by size and number. Importers, wholesalers and retailers The comerci antes have been regarded as one of the most potent groups in Ecuadorean politics. The Liberal Party has a ^hbid. ° Comor ciante describes a major businessman engaged in commerce, whicli is not the sense convc>yed by the translation of "mcrcliant. " Therefore the Spanish terin will be used. 'Kaf.iel Gjlaraza '^ riza 'ja, E scMiima Polit ica del Ecuador (Guayaquil: I'^ditoral Alboradji , 1963), p. 3?-; John Gunthor, Inside Sou tli An uTi( .1 (New York: Ilarjjcr .\\u\ ]\ow, 1967), p. 424.

PAGE 81

lO TABL1-: 8 EXPORTERS CLASSIFIED BY SIZE AND NUMBER FOR I960 AND 1961''"' Registered Cnpital in Number of Percentage of Total Tliousands of Sucres Businesses Registered Capital Less than 20 9 .5 20 to 49 6 .5 50 to 99 7 1.5 100 to 249 14 7. 250 to 499 5 5. 5 Over 500 7 85. Unclassified 18 TOTAL 66 100.0 Figures derived from sources used in Table 7. firm base of support among the Guayaquil businessmen. The coinnicrcial sectors of the coast have been very well organized through the Camara de Comcrcio de Guayaquil. The status of the caniara is sucli that a past president could say tliat he "treated the government on the basis of complete equality. " General strikes organized through llie ca mar a brought down the Military Junta in 1966 and have shaken many less fragile governments. Interview wi'Ji Sr. Alaluialj^ha Cluivex, Gonzalez, former president of the Caniara de Comcrcio de Guavaduil, on October 30, 1968.

PAGE 82

llowivcr, ihc comc-Tc-J Mnlfs do not form a cohesive political body. The larj^er conimi. re.ial houEcs arc usually a part of a familyrun economic empire. 1 he core businesses have often supplied the capital, Die contacts, and the markets for iniporling and retailing operations. Altliougli virtually no importing business is highly specialized, the larger importers tend to handle capital goods, semifinished products (raw materials for associated manufacturing plants), and luxury items. One has the inapression that wholesaling of "bazaar" and cheap luxury items accounts for a relatively small portion of their business. Although the political interests of larger importers may be dampened by other econonaic interests, the logic of their situation would suggest they favor a generally inflationary policy. A rapid expansion of investment and an increase in available spending money benefits the many commodities in which they are interested. The large businesses with available capital can also profit from inflationary speculation. The smaller businessmen are in a very marginal position. They 65 Small luxury imports account for less than 20 percent of the value of all imjiorts. Ecuador, Ministro de Tesoro, Anuario dc Comercio Exte rior (Quito, 1961). Tluy certainly are not firmly united on this point. For evidence of invoU'emcnt c>f the inijiorters in demands for inflation, see Clia])ler 8. llowcvt-r, Mr. Alljcrt Gcllardin, American business conbult.int, said in an inler\iew on May 23, 1968 that many importers f.ivor staliilily as the best condition for long range growth.

PAGE 83

i\Yc inorc gem.!-, illy involved in ri-t.nling "bazaar" items. They operate in a c rowded market on a small volume and frequently man68 ^, at,'C only a jjret arious living despite the high markups. The general lack of specialization seems more a child of desperation than true diversification. The retail "bazaar" trade has been most vulnerable to the very widely spread contraband in Ecuador. The smaller businessmen therefore have been most vocal in demanding a government crack"69 dov/n on smuggling. Most of the retail sales are made to wageearning custoiTvers. Since prices seem to rise faster than general wages in an inflation, the smaller retail merchants are among the first to be hurt in an inflation. They share a strong political interest in maintaining price stability. There were 1700 commercial businessmen affiliated with the Camara de Comercio in 1962. The distribution of conimercial businessmen by volume of business is suggested in Table 9. These observations have been based on an explanation of the sizes and tyj'cs of businesses listed in the membership lists of the Camara de Comercio de Guayaquil . Interviev/ with Sr. Abdoii CaldoroTi. 69 The best exam]:)lcs are given in La I ndust ria, the official publication of the Camara de I ndustrialos de Pichincha . Sec the editorial in La Indvisl ria, July, 1959, p. 5.

PAGE 84

73 TABLE 9 DISTKIliUTION OF BUSINESSES BY SIZE' Rcgislrrcd Capilal in Percentage of Thousands of Su.cres Businesses Sampled less than 5 6 to 10 11 to 20 21 to 50 51 to 100 101 to 250 251 to 590 over 501 9.

PAGE 85

tlJM ii:-.sion is only to ])r(ividc a general fratnc-work whicli seems to ,n.-c(.'iint for some major dif rcrcmcs. Over one-half of the national indu.^trial production takes place in Guayaquil. Virtually all types of national industries, with the exception of textile mills, can be found on the coast. A count of the menibership list of the Guayaquil Ca mara de Industrialcs reveals 71 375 affiliatc;d industries. There are 37 print shops, 37 pharmaceutical houses, 35 bakers, and 33 millers. The 25 businesses involved in metal working are engaged in wire-drawing, canning, bottling, and the nianufacture of furniture and construction fittings. Most of the otlicr businesses are engaged in agricultural and foodstuff processing or in industrial servicing. Ecuadorean industry lias been described as being a classic 72 example of "imperfect competition. " Many businesses are crowded into a few fields. Market conditions in each field are established by the few large ind\istrics. Tliis condition can be related to the style of Ecuadorean business. Investors are conservative, unwilling to break into new fields that lack an established market and available technology '^'^Facultad de Ciencias Economicas, Guayac|uil en Cifras (Guayaquil: Univcrsidad de Guayaquil, 1964). (Mimeographed) 71 "Clasificacion de las Empresas Industrialcs de Guayaquil" (Guayaquil: Camirade Industrialcs de Guayaquil, 1964). (Mimeographed) 72 Anthony D6tlo;"nK'y, "Inipcrfc-ct Comjx-tition in the Industrialix.aljon of EcvKulor, " InterAm erican Econ onrc A ffa irs, XIX (Summer, 196")), 83-91; Cl.in lu e Zuvekis, "Recent Trends in Ecuador's Manufacturing Sector" (Quito: USAID, 1968). (Mimeographed)

PAGE 86

7^ Jl is contijck-rrd easier and safer to set vij) sinall businessi^s lliat will Ojicratc far under eajiacity and lo accept the lower profit levels. It j .no tiurprise tlial niott indu:;trial plants in Ecuador arc inefficiently small by world standards and operate at 60 percent of capacity or less. This high level of competition and lower profits have made industrial investiTi ent s unnecessarily risky. Consequently, investors are even less willing to break into new fields and much capital is diverted 74 to agricultural mortgages and urban real estate. There are three major splits among Ecuadorean industrialists; domestic versus foreign owned, large versus small, and domesticmarket dependence versus foreign-market dependence. These differences are freqviently reinforcing, and so will be discussed together. The larger industries generally are involved in large-scale processing and what passes for "heavy industry. " These include brewing, canning, milling, etc. Many large industries have foreign connections. The Ecuadorean oil refinery is run by the Burmah Oil Company of England. Dow Chemical owns 60 percent of LIFE, the largest pharmaceutical house in the country. The Ecuadorean Corporation is an American-run, Bahamas-based holding corporation \shich has chaiineled Ecuadorean capital into the largest brewery, a "^-^l^olloiiiley, "Imperfect . . . ", p. 85. 'interview with Sr. Eduardo Larrea Slacc-y, former general m.inagtr of the Ijanco Ci'utral, on November ?A), 1968.

PAGE 87

7(. larjje malti^ry, an icf liousc, a cenuMit jjlanl, a large power plant, and .several oilier large enlerpri tu-s. However, the major sugar mills and the largest oil and .soap ],)lants arc purely Ecuadorcan. Because the larger indu slrialisls often have access to foreign capital and skills, their induflries have been quite profitable. The average value 75 added per worker for the larger industries in 1962 was $2,200. The larger Ecuadorcan industrialists arc generally members of the "economic oligarchy" which doniinates commerce and banking. Their social tics with the economic leaders in other fields gives them an almost impregnable social and financial position. The social positions of the foreign businessmen seem ainbiguous. They appear to move in the best social circles, but are reputed to be "in" but not "of" elite society. "^^ The inajority of the smaller businesses are owned and managed 77 by Ecuadoreans. Many have entered into small scale foodstuff processing or industrial services. Most of the manufacturers of 75 Frank L. Turner, H al. , The Artisan C o mmunity in Ecu ador's Moderniz ing Ec on omy (Menlo Park: Stanford Research Institution, 1963), p. 105. Interview with Sra. Susana Ashton Donoso, American Ainbassy in Quito, geneological exjjert, on November 6, 1968. 77 U. S. , Dejiarlmont of Commerce, "American Firms, Subsidiaries and Affiliates: Ecuador. " (Mimeographed) Only 61 businesses arc listed and many of those have been established recently. There are many Euro])eans in Ecuadorcan business. However, it is reported that \cry few have maintained foreign commercial ties.

PAGE 88

V V import subplili;li(iii .j r tiilL-s, such as batteries, soajjs, cosmetics, records, nails, etc. , fall in (liis category. Tliey are the most marginal of all ii^idustrial groups. They suffer from tlic multiple afflictions of low ca])itali^.ation, under-developed technology, the threats of cheapiT ar,d better foreign imports, and a market with high income 78 elasticity. Many smaller industrialists are socially nouveau riche . Their frequent lack of social status and personal ties with dominant economic groups adds to their economic disadvantages. " Not unexpectedly, the larger and smaller industrial groups have political as well as economic differences. The major families have solid positions in banking, commerce, and agriculture as well as in industry. This, together with their patrician culture, has made them sceni overtly "depoliticized. " They have neither the need nor the desire to compete in public. Since the larger industrial concerns are on a solid economic base and offer few possibilities of expansion in a limited market, many large Ecuadorean industrialists direct 7ft '' "Necesidad de Protcger la Lidustiial Ecuatoriana, " Cainara d c Ind us triales dc Guayaqui l, January-February, 1968, p. 7; Jose Luis Gonzalez, Nuestro Crisi s y el Fondo Monctario Intcrnacional (Quito: Editorial Ruinihaluii, 196U), Chapters 5 and 6; Ecuador, La Industrial F_c!:lill£Jli:lDiL(Q^^^'^"Ji-"'l^ Nacional dc Planificacion y Coordinacion Econoniico, 1957), p. 9. 79 Maier, j^p. 1-5. 80 This may be mislc.iding. The elite businessmen are reported to be quilc< aware of the utility of political influence. Public indifference may be possible only because of a higli level of private influence. Die author wa.; ne\er al)l<.' to delermine this for himself. Interview with S]-. Ali-jandro Carrion, publisher of La Cglle , on November 12, 1968.

PAGE 89

78 their atlcnlion towards their other interests. 81 The foreij.;;! iiuluEtriil ists seem apolitical for different reasons. The radical and highly nationalistic unions apparently strike more freely against "foreign ex])loiters" due lo the emotional issue involved and their lack of ties with political elites. Large foreign businessmen are also fearful of a hostile government that niay restrict or expropriate their operations. They have found it best to maintain friendly relations with all factions by avoiding commitments to any one of them. Foreign investors frequently seek alliances with local eco83 nomic elites as a protection against these forms of raiding. The industries that depend on local agricultural products are less involved in issues of vital interest to the "bazaar" or iinport substitution manufacturer. Demands for low tariffs on raw materials and high tariffs on finished products simply are not of concern to the "domestic market processors. " Since the demand for foodstuffs is more or less constant, these businessinen are not nearly so concerned about monetary stability. Many of the agriculture processors have "^Some Ecuadorcans consider the large foreign businessmen to be a potent pressure group. However, this was not the balance of judgment of the pcoj^le with whom this autlior talked. See "El Juego do Podcr y los Grupos de Presion, " Vistay.o (Guayaquil), October, 1968. pp. 35-52. 82 This is based on personal observations and interviews with Mr. George Fitch, USAID Industrial Officer, on May 17, 1968, and Sr. Rafael DilU)ii Yn\dcy, president of R anco de Guayaquil and A/.ue arera \'.ilde'z , on October 29 and 30, 1968. "Interview witli Mr. Snydt r.

PAGE 90

T) c'slablishcd rcl tions willi tluI'lrgc lanclowm-rs and do not have lo comjjcle fur government au;ii)i.)rL:s. Smaller indu:: ( ri.ilisls tend to be r:uich more politically aware becanse they are moj-e lil;e]y to be involved in import substitutions. As a result, they have an immediate interest in iiiaintaining protective tariffs on finished goods while keeping tariffs low on needed raw 84 materials and seini-f inished products. Like the smaller comer ciantes , the smaller industrialists are more aware of the dangers of inflation. They are also very aware of their marginal social position. The Revista de la Camara de I ndustriales de Guayaquil has an aggressive "booster" tone in promoting industrialization as an end in itself and in characterizing industrialists as the major progressive and venturesome force in the Ecuador ean economy. Ba nke rs. --Banlccrs occupy one of the most powerful positions in Ecuadorean business. Since Ecuador does not have a public exchange o c market, the banks play an important role in financing and handling bonds and stocks as well as in making lojms. Approximately twothirds of the foreign exchange coming into the country is handled 86 tlirough tlie banks or their allied money changing houses. The "Neccsidad . . . "; Gonzalez, Chapter 5 and 6; "Hcredad Nefasta Para la Economfa, " Camara de Induf triales de Guayaquil , Novcmber-DccembcM', 1967, p. 3. or: _ • ' The Comisioii N'acion.t! ciValor'es ha.tried to fill this role in Ihi jx'ist. Interview with Mr. Snyder.

PAGE 91

(K'jxnclcncc of smaller farmers and commercial businessmen on banls. loans to finance harvests and sales has already been discussed. The private banks account for a];iproximately two-thirds of all agricultural, commercial, and industrial loans, the remainder is handled by the 87 B anco Central and the public Banco Nacional de Fomento . Over O Q two-thirds of all private credit is extended by the Guayaquil banks. As a result, the Guayaquil bankers have major impact on the national economy. The economic power of the bankers is enhanced by the scarcity of credit. The demand for loans is so high that a "black market in credit" has developed in which nnoney is offered at illegally 89 high rates of 20 percent or more. As a result bankers can be highly selective about who can receive credit without limiting their volume of operations. The political power of the bankers is enhanced by their connections with the Guayaquil "inner elites. " The major banks are managed by the prominent families that have extensive holdings in all other areas of the economy. Another major asset of the bankers is their command of expertise. The ba:ils;s are the inajor employers of economists and financial technicians outside of the government. Public planners depend on the bankers for much basic information 87 Ecuador, Banco Central, BoletTn d e l Banco Central d el Ecuador: 1965 (Quito, 1965), p. 91. ~ 88 ^ Bol etin . . . , p. 65. 89 Interview with Mr. Snyder.

PAGE 92

.iljout economic jiorform mcc. This conslanl cxcliangc of personnel and information bctwrcn Uie banJvcrs and the government gives the l).inkert; high preisligc in political circles. Banking style is rational and very conservative. Collateral requirements are higli, bankers usually require clear titles on lands 90 equal to twice the loan for agricultural credits. Most loans are 91 made for six months or less. Exceptions to both generalizations are made to old and solid clients and to members of the family. This has been considered a sound banking practice; bankers will risk venture capital to trusted managers when it is clearly understood that they can take over a faltering situation without having to formally 92 foreclose. Conservatism is also reflected in the preference for large loans to establislied businesses. About half of all credits were placed in 93 less than four percent of all loans. Bankers also tended to avoid tlie riskier industrial and agricultural loans. Seventy-two percent of 94 all loans went to finance conimercial transactions. Both of these practices placed a severe limit on the private credits available to the smaller farmers and industrialists, wliicli partially explains the 90 Interview with Mr. Snyder. 91 Dolet m . . . , p. 65. Jnlervicw with Mr. Joel IMller, Anicrican Embassy in Quito, Staff Economist, on April 27, 1968. 93 ^ 94 Holelin . ... p. 68. Ibid. , p. 63.

PAGE 93

HZ interests of these groups in government financing and investments. The iiolilical jirograms of tlic coastal bankers reflect their economic interests. Altliougli some bankers accept monetary stability as a national virtue, many have been very niuch attracted to the 95 allures of inflationary investment. A rapid expansion of the money sui^ply would stimulate the demand for capital goods and luxury imports, which would benefit both the large importers and their bankers. The devaluation which usually follows steady inflation would raise the sucre income of the exporters, benefiting many areas 96 of business on the coast at the expense of the sierra. Inflation and devaluation would give great scope for monetary speculation, in which the bankers would benefit since they have the dollars. The bankers are frequently opposed to the nainimum reserve requirements v/hich limit the amount of inoney which can be placed in profitable loans. A related demand is that the government assist in maintaining the financial integrity of the banks. It has been suggested tliat this coiild be achieved through the govcrnnient insurance of 97 bank holdings. The role of the public banks ( Banco Central and the Banco 95 " Docinnentation for these observations is extensive and complex. Since the bankers were deeply involved in the devaluation of 1961, the detailed analysis of their programs and roles will be presented in Chapter 7. ' Emilio Estrada Ycaza, "Genesis ..." 97 Documentatit)!! to be given in Chapter 7.

PAGE 94

Na cion al cliI'luij^cnj^^) docs not scein to liavc been attacked by the private b inkers. The volmnc of business of the Banco Central is qviitc small and tlic B^-nco Naci onal de Fomento specializes in the higher risl; a<^:ricullural credits. Many private bankers seem to haveestablished useful working relations with the public banks and many bankers are glad to see the expansion of credit, even under the aegis 98 of a competing public agency. Political splits among the bankers are kept to a minimum by the lack of specialization and the doniination of two major banks. There 99 are 16 banks registered in Guayas Province. The largest two, Banco La Prcvisora and Banco De Descuento , hold 72 percent of all deposits. These two banks are allied by very strong managerial and family ties. The Pattern of Business Ownership on the Coast Business ownership and control tends to be rather centralized on the coast. Several business families have part or full ownership of a wide range of businesses. These individual "empires" are also joined at many points througli joint participation in common business ventures. 98 Interview witli Sr. Alfredo Pareja Diezcanseco, assistant manager of tlie Banc o P o])ular and foriner mc-mber of the Junta Monetaria , on NovombL"r Z\ ,~T96s7 ~ 99 Cua y. C[ uil en Cifras (Cuayaquil: Univcrsidad de Guayaquil, 1962), p. 129,

PAGE 95

8J The "inl('rlo(.kJn<; dirccloralc .-" have a strong impact on the political, social aTul ccoiioinic positions of the "oligarchs. " To an extent, tlic power of several individual businesses lends to be additive. A coiTibinalion of most of the major banks would have a greater effect on the supply of credit than would any one bank operating alone. A wider combination of most large manufacturing firms would offer a potent political base for businessmen advocating protective tariffs'. The social position of the central inanagers could not but be helped by the added income from many businesses and the subsequent nonavailability of a business base for social competitors. However, the range of situations in which power could be applied may well be reduced by bringing many different businesses together into one combination. A single manufacturer can easily press for protective tariffs for an entire segment of the economy. His maneuvering room would be significantly reduced if he had to worry about the effect protective tariffs would have on an import-export company in which he was also involved. Managers involved in a wide range of companies might find tlicir ]:)olitical maneuvering rooni to be quite narrow. The only interests tliey could comfortably defend would be those that applied to a major portion of their business empire. Asa result, the owners of large business empires could be expected to have a rather weak interest in defending tlie interests of a business sector, while being v(;ry active and |)0\verful in the defense of eitlier tlu' specific business needs of their specific companies or the defense

PAGE 96

of the entire "bvuiness cl.is.s." The level of inlet; ral i^ui of llie several business empires would also have an effect on tlupolitical and economic positions of the business leaders. The formation of a closed "inner circle" through a high level of iule;;ration of business empires would be expected to facilitate cooperation in promoting a "business candidate" and the dampening out of personal conflicts in the political wars. Lower levels of integration v.'ould probably result in a greater tendency for the business leaders to break down into separate factions. These considerations suggest that we should be looking for three factors when examining the pattern of business ownership: the extent that the major businesses in one field have been brought under one nianagement, the range of businesses included within the empires, and the extent that the businessmen involved have been highly integrated through many points of shared business contact and family relations. Although no indices have been developed, the situation of the Guayaquil business leaders with respect to these factors can be estimated through an examination of Figure 3 below. A breakdown of the listed groups by participants is given in Appendix A. The central set of associated groups clearly occupies a very powerful position within llie coastal economy. The potential for power partly dej^ends on sheer accretion. Fifty-five industries are included in Ihr group wJiicli is some 14 percent of the coastal total. 'J'he j->i'rcenlage of larger ]>lanls is ])r(.)bably even higher. Also

PAGE 97

86 I'^iGL'i;)': 3 RELATIONS AMONG GUAYAQUIL BUSINESS EMPIRES" E nrigxic Maulmc Goitk.'^ M.iiiuf.ictxirin}.', 5 Conimcrcf 8 Midi a 2 Financial 1 6 Lui s A. Nobo a • Manufacturing Commerce il 9 5 8 Manula during Z Commercial 4 // 4 ho Bankinc^ Circle Manufacturing 5 Commerce 10 Finance 5 it 17 Estrada Ycaza Manvxfa during 6 Commerce 15 Finance 5 # 15 Heribcrto Orces Mendoza Manufacturing 1 Commerce 4 Finance 3 il 1 Manufacturing 6 Commerce 2 Finance 1 # 11 F c u a do re a n C or jx_Manufacturing 7 Commerce 4 // 1 Serpiio Perez Valdcz ; Manufacturing 20 Commerce 25 Finance 3 il 2.1 Maspons y Bigas Manufacturing 2 Commerce 4 // 7 // r. number of associated businessmen One line is drawn between emigres for each person who participates in l)i.tli of the units joined. Figure 3 is based upon data presented in Appi-ndix A,

PAGE 98

8 7 iiuhulc-d in llugrouping arc2Z large coninic rcial firms and 1] largtfinancial firms. Tlie coiriViincd oconomic weight of these businesses is impressive. The potential for power has also been aided by the comple nentarity of Ihe powers of the participants. The coinbine includes the managers of tlic five leading coastal banks, La Previsora , Banco de Descu ento , Banco de Guayaquil , Sociedad General and Banco Terratorial . Also included are the major exporters who control much of the foreign exchange in the country and the managers of the insurance companies who make many of the long term investments. The coordinated use of the financial pov/ers of the inner elites would have a 100 major imipact on the Ecuadorean economy. Several factors mitigate against the coordination of all members of the "inner elite" --the interlocking groups. One factor is sheer size. Many other businessmen, in addition to the 79 listed, participate in running the associated businesses. It would be difficult to assume that all would be willing to cooperate on a common project except in special circumstances. ^Many Ecuadorean observers feel that the economic position of the Guayaquil oligarchy makes them one of the most powerful of all political groups. The success of the 1966 general strike in bringing down tlie milit.'. ly junta is cited as an example of what tlie elites can do. Siinilar views of the powers of tlu; businessmen are exin-essed in Rafael Galaraza Ari?,aga, 3'Jsqvii nia Po lit ica del Ecuador (Guayaquil: Iil^JL9£iiiLA!Jl'^^^"i'f'''» 1963), p. 33; "Pocas Familias Han Contrtl ado Ea Economla desde Epoca Colonial, " J CI Comcrcio , September 29, 1968, p. 1.

PAGE 99

8.S A srcond factor is llii" com)H)siljc)n of llio sub-groups within the iT.ajor iiilcrloiliiii;:; ^,c\. All of the sub-c,r()Uj)S contain both commercial and innnufaclurin;:; businesses. The diversification of an cm])irc into several type? of businesses makes it improbable tliat grand coalitions could be asscmbU-d to defend tlie interests of only one sector. It is niore probable that the businessinen wovild rise to defend only the specific interests tliat affected tlioir specific businesses. The high level of integration of the sub-groups would probably result in two effects. Given the emphasis on priinary group loyalty in Ecuador and the high degree of overlapping business associations compoxnided by faniily loyalties, it would be expected that the members of the sub-groups would work very closely together. However, the construction of larger coalitions would be dampened by the lack of tight integration among the sub-groups. Sub-groups seem to be joined at only a relatively few places by a few businessmen who have associations with several groups. The Guayaquil "oligarchy" seenis to be composed of many more or less overlapping groups, each trying to scramble for a place at the expense of the others. The coinpetilion is controlled by ties of friendship, station, and family, and an Perh;ipK the idea of conflict inanagejTient through fractionation of competing coalitions shovild be exaniined as a supplement to the more traditional view of the importance of demand aggregation in cojiflict resolution.

PAGE 100

h'l awareness lli.it tlicy all liive a commoji interest in meeting challenges 11)2 to the larg(>r business world. 102 An c.xaniple of Die "hanging together" of the Guayaquil business men is the close cooperation between Sr, Marcos and Sr. Dillon, men of almost; antithetical views of business responsibility. The general view of the relations among Guayaquil businessmen is consistent with the opinions of Mr. John Snyder and those expressed by Sr. lie. Abdon Calderon, director of the Partido Liberal Radical of Guayas, on November 1, 1968; and the interview with Sr. Rafael Dilhjn Valdez, jiresidcnt uf the Banco dc Guayaquil, on October 29, 1968.

PAGE 101

CHAPTER IV BUSINESS CROUPS OF TPIE SIERRA Pusincs.q and the Social Structure of the Sierra The nature of business in the sierra is quite different from that of business on the coast. Some of the major cultural differences have been discussed in Chapter 2, These are reinforced by differences in family style and in other aspects of social organization. Some of these differences will be discussed below in the general comments on agriculture. The level of development in the sierra is much less than it is on 2 the coast. Per capita income is about half as great. Wage levels of 3 unskilled urban workers are only half that offered in Guayaquil. The difference in wages paid to agricultural workers is even more extreme. The rate of economic growth in the sierra is also about Edwin E. Erickson, e_t al. , A rea Han db ook for Ecu ador (Washington, D. C. : Government Printing Office, 1966), pp. 107-108, 120. 2 Lilo Liiike, Ecuad or: Country of Contrasts (London: The Oxford University Pre^s, I960), p. 9. ^Ecuador, Salari os e n cl Ecuador: Agoslo-Septiem br e 1963 , p. 27. Manual workers were ]xiid 395 sucrcs per month in Quito and 730 sueres pelmonlli in Guayaquil. 90

PAGE 102

iT.ilf t)f tli.il of 1 1nc'o.ir.l. 'J'lio (.'conotiiif dcvcloinnciit. is ]arg(.:ly confined to \.hc iTKijor ri7-]).Ln center of Quito. Thi: cliaracli-r of tlie siciTa labor force has been affected by tlu' processes of po)ii;lation change. Wjiile the coast has a very rapidly growing population due to the continual immigration of young, 4 upwardly mobile workers from the sierra, the sierra population increase has been a result of the explosive birth rate of the poorest 5 group of sierra rurfil workers. The children of the rural poor do not make good candidates for skilled working positions. Business Croups of the Sierra Sierra Agriculture The conditions of sierra agriculture are quite different froin those of the coast. Unlike the coast, population pressure in the sier ra is very high. Each family requires about 60 acres in cultij/^tlon for a decent standard of living. Because of rural over£opula Hans Linn em an, The Economic R egions of Ecuador (Quito: Junta Nacional do Planificacio'n y Coordinacion Econo"mico, I960), p. 29. 5 ^ Camara de Agricullura dc la Priniera Zona, Prin cipalcs Prob lemns AgroDimograficos dc la Sierra Ecuatoriana (Quito: Camara de Agricullura do la Primera Zona, 19b^>). p. ^Beale R. Snlx, "Tlie Human Element in Liduslrialization: A Hypothetical Case Study of Ecuadorcau Indians, " Economic D evclo]: )ment and Cu ltural Cliangc, IV, I (October, 1955), Part II, 1-264. 7 Principal or Problerna ^• . . ., p. 10.

PAGE 103

lion, tlic average farming f.nnily nc tually lias between seven and . 8 , twenty -five acres to fa nil in nijost provinces of the sierra. There are very few areas lliat could be opened u]) for new cultivation. Some 20 percent of the Lmd now being tilled should be held fallow to ease a very serious erosion problem. Tlie rapid increase of the sierra population will result in even greater land pressure in coming years. ° Population pressure is aggravated by the ext ra mc_ ine quality in land holding. Almost half of all sierra agricultural lands are in holdings larger than 1, 200 acres. L^ls s. than 4 percent is held in what_cauld be called "family farms. ' By co mpari son, 20 percent of all lands on the coast are in family farms. The larger farms do not use their lands efficiently. Less than 20 percent of all la nds in hol dings larger than 1, 200 acres arc being cultivated. A compounding factor is the difference in fertility between the larger and the smaller holdings. The large farms are almost always in the well-watered, flat, and fertile bottom valley lands, while the small landowners have their plots on the sid es of the miountains where the fertility is less 8 '' • '^ Ecuador, Junta Nacional de Planificacion y Coordinacion Economico, Re forma a la Eet ructura de la Ti err a y Expansion de la Frontera A oricola (Quito, 1961), Table 11-16, p. 44. ° Princi]iales Pr o blemas . . . , p. 22. Refo rm a a la E f;tr uctvira de la Tierra . . . , p. 50. J. D. V. Saundi-rs;, "Man-Land Relations in Ecuador, " Rural Sociology, XXVI, 1 (March, 1961), Table II, 62.

PAGE 104

9 -J Ilirin a fourth as imu h 12 Tlic small farniors generally cxi^t almost completely outside of f "-the money economy. They exist on what little they can raise on their 13 plots and only rarely have any appreciable surplus to sell. There\ I fore only the larger laiidowners fall into the definition of "businessmen" used for tliis study. There are regional differences in the pattern of landholdings. The latifundias are generally found in the northern sierra between Quito and Tulcan and in the south around Cuenca. The central region i 14 [ around Ambato is largely broken up into many small holdings. It is in this area that the very poorest of the sierra farmers are to be found. There are zdso differences between the coast and the sierra in [the pattern of rural labor. Most of the agricultural workers in the sierra are more or less permanent residents of the farms in which they work. Some 85, 000 families are either sharecroppers ( hxias ipon geros ) or tenant farmers ( yanapcros ). Very few rent or squat. Only 2 percent of all sierra rural labor depend on wages for tlic bulk of tluir income. This is in sharp contrast to the coast, 12 Fr i nc i ].•> .'> 1 c s Proble m ;i s . . . , p. 10, JbHl. H Linneir.-iii, jj. 29. 1 5 Jveformas a la E.'-.lrurtura , Table II15, p. 42.

PAGE 105

9-1 \ where nvcr half of Ihc 7-ural workei's ch-pend on wages and wliere there is a hi;,;h level of seasonal migrations from area to area. Sierra farnicrs liave generally concentrated on raising temperate 1 crops for doinestic consumption. Cereals have been a major product. ' The small farmers have grown barley for their own use and the larger estates have grown a great deal of corn and wheat. A few "truck farms" produce some fruits. Most of the vegetables are raised by the sharecroppers and the smaller farmers. Almost all of the sierra produce is consumed within the region. Pyrethium is the only sierra export crop and it is raised on a minor scale. The larger farms generally follow the classic latifundia model. The basic idea is to develop a self-sufficient estate that produces ^g enough surplus income to allow the landlord to live in urban comfort. Ideally, the latif^mdia should be an almost self-contained unit, requiring very little investment or ongoing supervision by the landowner. Self-sufficiency is enhanced by binding the people to the land through sharccropping arrangements and debt bondage. Latifundias are traditionally inefficient. Agricultural production per worker is lowest in the Ecuadorean sierra. It is far below even the Latin American average and between one -tenth and one-fortieth of Erickso)!, £i il|_. P347. ^\lh}A' PP350-351. 'Frank Tanncnbaum, Ten Ke ys to Latin America (New York: Alfred A. Knoiif and Co. , 1962), Chapter 5.

PAGE 106

the oul;)u( prr rnun of North Ameriian agr icul lure ' ' Tliis extremely low efficiency can be rel.ited to (he \-cry low le\-els of capital investments. Cctivllal inputs run about 7 percent of the value produced, whicli is less than one-fiftli of the investments made in Norlli American agriculture. Very little use is made of selected seeds, fertilizers, or 20 irrigation. Less than one -third of all large farms had any form of mechanization in 1954. Efficiency is also cut by the lack of skilled and energetic labor. Many indians si.xffer from diseases and malnutrition. Almost all of them reject the more efficient work patterns of 21 the "white" world. The absentee landlord gives little supervision and the huasipongeros have little incentive to spend their free time 22 improving someone else's lands. The demand for self-sufficiency has resulted in an uneconomical level of diversification rather than specialization in areas of comparative advantage. The system of agricultural marketing used in the sierra is equally inefficient. Unlike the coastal farmers, who have more or less direct commercial ties with the exporters and processors of their products, the sierra farmer sells his produce through an endless net of small ^"Productivity of the Agricultural Sector in Ecuador, " Eco nomic Bulletin for Latin America , VI, 2 (October, 1961), 67-70. ^^Erickson, et aj.. , pp. 345-3-U;. ^^Salz, i>p. Ill, 190. ^^Antliony ]3i)ttomley, "Agricultural Ein])loyment Policies in Developing Countries: Tlic Cjse of Ecuador, " Liter-American Eco nomic Affairs. XIX, ! (Spring, 1966), 56-57.

PAGE 107

liiidclli'mc'ii who f,h:]^ i^in.iU lot.< a sliorl di ^-.lanccfc^r a hi<;li markup. Kftail salos arc made in smsll ciuaiit ilic-s in open air markets that 24 lack sufficient rcf ri!^er;tt ion or slor.ige cquii)mcni. Tliis system is alinost perfectly designed to insure a maximum level of spoilage and highest prices consistent with a miiumum profit for the producers and intermediaries who handle the highly perishable produce. For some, the latifundia is a way of life that legitimates membership in the small elite of old, rich, and landed first families. A whole cluster of social attitudes accompany these positions. The latifundista traditionalist often feels a sense of responsible command beyond his lands and indians that includes the society over which the elites proudly reign. The traditionalist may provide a mininnum of stability and security for the people and things in his care; however, he is not lil^ely to feel responsible to produce wealth or to distribute it except to the few who rule the land. Other progressive landowners, probably a minority, have felt a responsibility towards a greater Ecuador and have tried to modernize their lands. Many have been shifting to modern methods of cultivation and more efficient crops. They want to invest, to produce, and to profit as fast and as much as they can. The political interests of the sierra agriculturalists can be ^^ Pr in c i pa 1 c s P r obi em a s . . . , p. 2 3. "Produce for La ]'-a vori ta, Quito's largest "supermarket, " is purchased in the oj)cn markets.

PAGE 108

97 cla,';sjficcl in tlirrc wdyt;. All fanners arc more cir less unilod on one set of issues. Aln-ic)Sl evcryoiu' is inti-rcstcd to some dcproe in 25 gaining more j^rivaUand government credits for agriculture, in reducing tax loads on la)-id and produce,"^" in gaining highc-r ]:)riccs for all agricultural commodities, and in achieving government-financed 27 improvement 5J in the antiquated marketing system. Landowners are also united in the drive to keep the prices of imported agricultural capital goods down. In this they are united with the comerciantes against tariffs or industrial protection for local production of these . , 28 materials. A second set of issues tends to differentiate between the "progressive" and the "traditionalist" landowners. The traditionalists tend to see politics as a means of maintaining social stability, even at the expense of economic developinent. They bitterly resist land reforms that would increase the power and standing of the peasant at the expense of the landowner. Profit increases are sought through government guarantees of wages aiid prices and not through technological or -^Camara de Agricultura de la Primera Zona, Recommenda c iones Basicas para la Accion Futura en el Sector Agrop e cario (Quito: Camara de Agricultura de la Primera Zona, 19(^^S), pp. 9-10. Prin cip ales Problemas . . . , p. 20. ^'Camara de Agricultura de la Primera Zona, El De s arrollo Agropecnrio del Ecuador (Quito: Camara de Agricultura de la Primera Zona, 1968), p. 13; I'-'ri ncipale s Problemas . . . , p. 23. 28 EI D e: .'r rollo Agr(\ner ario . . . , ]">. 17; Recommcndacioncs Bar.icas . . . , p. 1 ) .

PAGE 109

social clianm'. In fad, Die v.liolc jjri'ccss of industrial i/alion that 29 bi'inj^s ill iincvil I nrf a bulirjv;hl ring that would be u.-od for only one week out of the yc.-ar hut would have high ornamental and status meaning.

PAGE 110

fioii liavc opjiosod llic clicaji inipoj-l ition of capital goods fur fear of 32 UiL! fjiiaiiCi il inl I'l-rlly of llic ^overnnicnl; t'-.ey liavc opposed introduclion of iv.w <^c-ed typc
PAGE 111

shcc-j) for llu'ir wool ,uu1 selling il nion.or K-ss directly to the textile mills. 'Il-.ey lia\-c coo]:)e rated closely with the millov, ner s in impro\-ing the quality of local wool. Their success is directly tied to the conditions of woolc^n textile jiroduction in Ecuador. Therefore, the economic situations and the politiceil interests of the sheep raisers and of the textile i-nanufacturers will be discussed together later on. The cattle raisers of tlic sierra have interests and problems similar to those of the cattlemen of the coast. One difference is the 35 greater interest in dairy herding in the sierra. The sierra cattlemen have become involved in disputes over government regulation of adulterated milk, credits for dairies, and minimum prices for milk. However, few of these issues have involved v/idely contested national political decisions. The wheat grov/ers Wheat is the major sierra crop to be handled through national distribution systems. One hundred and thirty thousand acres of wheat were planted in 1959. Annual production had increased froin 37 25, 000 tons to 70, 000 tons between 1952 and 1963. One factor in 35 " Ralph J. V/alki ns. Ex panding Ecuador's Expor ts (New York: Frederick A. Praeger, 1967), p. 77 "Produccion Estimativa de los Principalcs Prodiictos Agricolas, " E] A gro (Quito), July-September, I960, p. 30. 37 U.S. ]3e;)arlinent of Coi-nmerce, In\cstnient in E cu ador (Washington, D. C. : Governniejit Printin;; Office, 1959), p. 45; Erickson, cA_ al. , ]). 3-17.

PAGE 112

tlie expansion of wheat Ins bi'cn the deliberate govcrni-ncnl policy to end dependence on imported flour and grains. However, domestic production was 50, 000 tons short of nitional consumption in the early 1960's.^^ Another reason for the increased production has been the willingness of tlie producers to accept innovation. Klost wheat is grown on rather large farins by upwardly mobile white and mestizo iniddle class farmers. They have been progressive; 80 percent of all wheat is threshed by machine and growers have paid unusual attention to fertili39 ation, seed selection, and mechanization. Production per acre has z 40 increased 140 percent since 1945. However, yields are still low by world standards; each acre of wheat produces 1, 300 pounds of grain as 41 compared to 2, 100 pounds in Colombia. Ecuadorean wheat tends to be of low quality. This is partly due to the conditions of cultivation. The available wheats are not suited 42 for the high altitude and lack of clearly differentiated seasons. Much research has to be done on fertilizer needs. The result has been the production of a hard grain that will not hold the water needed for baking high quality bread. '^-^ ^ft 40 ^" ibid. , p. 349. Ibid. ^'^Ibid. , pp. 348-349. "^^''Productivity . . . , " p. 69. InlerxJew with Dr. Edward .Andrews, Staff Plant Pathologist for the l-'AO mission to Ecuador, on November 14, 1968. "ibid.

PAGE 113

102 There iirc also cU-ficiciu i (^;in the li.uidling of wheat. Many farmers lack storage facilities for kec-])inp grain clean and dry. Tlic public facilities liave been inadequate and poorly controlled. As a result, a large fraction of otherwise good wheat has often become 4 4 rotten and dirty. Ecuadorean wheat is also expensive. The official price per quintal (105 pounds) of good quality wheat during the harvest is 110 sucres. The price of the superior Ainerican imported wheat is 54 45 sucres (before taxes) at port of entry. It is not surprising that the bakers would rather use the cleaner, cheaper, and more suitable imported wheat. These factors have resulted in a constant battle of the wheat growers and their government sponsors against the importers and the bakers. Past administrative solutions have favored the wheat growers. The Concision Nac ional De Trigo (National Wheat Commission) was set up in 194 9 to stabilize the domestic market, to promote the production of national wheat, and to administer the price support pro46 grams. Under the lav.', the sierra bakers must use up 70 percent of all '^'^ Investnient in Ecuador , p. 45. Interview with Sr. Rafael Chai Director of the C oDiiy^ion Ka ci on' . l de Triqo , on November 6, 1968 Ecuador, Decreto Ley of Nover Registvo Oficial of December 21, 1949 Interview with Sr. Rafael Chambers Matamoros, Executive Ecuador, Decreto Ley of November 7, 1949, published in

PAGE 114

103 local wlu'.it and thecon^lal bal;irs must consume the remaining 30 percent. 'JliC CNT surveys wheat acreage in November to determine production for the following year. RecomnicMidations on how much wheat should be allov/ed to be in-sported are sent to the Minister of Development who issues import permits and establishes import 47 quotas for tlie sierra and coastal millers and bakers. Another facet of the price stabilization program has been the stiff import tariff on v/licat. This has been set to make the price of imported wheat 5 percent more than the price of domestic wheat on the coast. Coastal users of domestic wheat are offered a rebate to increase the price differential even further. These arrangements have not worked well. Two importers, Sr. Luis A. Noboa and Sr. Francisco Illescas Barrera, have controlled 48 90 percent of all wheat imports. It is reported that a substantial 49 amount of wheat has been imported illegally. Since domestic prices are high and illegally introduced wheat avoids all taxes, the smuggled wheat can be sold for a very high niarkup and still undercut prices on the legitimate market. Both the importers and the bakers benefit. Wheat has been imported in bulk. Tonnage is estimated by the 47 Interview with Sr. Chambers. Interview with Sr. Alejandro Vega Toral, Executive Director of the P'rente Nacio n.il Velasquif^a for Cuenca, on October 18, 1968. ^liifevview willi Sr. Luis Del Campo Salvador, member of the Board of Directors of the Cii-na ra de Agricu lt ura de la Primera Zoji_;i, on Novi-mber 15, 1968.

PAGE 115

]01 fU)\v of wbr.-it lliroiH.h .1 chute aiul not by an actual bag count. Flow nicterp liavc been jjrovidid by the in-i;:)ortcrs themselves. Customs inspector^; j^aul $'10 a month are not likely to have the sophistication, zeal, or political muscle to chi'llenge the accuracy of flow meters certified by very iniportant importers. The possibilities of underestimating the actual amount of wheat imported under these circum50 stances are great. The millers do not care whose wheal they grind. However, they are caught between one major set of suppliers (the importers) and their , , 51 best custoniers (the bakers), both of whom want the imported wheat. All three groups juggle the figures reported to the government to account for the unusually high consumption of imported wheat. The result has been consistently low estimates of national consumption, resulting in lower production of national wheat and a continual need to import more when local supplies run out. Growers who insist on "over-producing" wheat find they cannot sell it despite apparent limits on the importation of foreign wheat. Wheal growers have other topics for discontent. A government 52 corporation, EDIAIGE, was set up to develop adequate storage Ibid. Interview with Dr. Gonzalo Gordova G. , member of the Board of Directors of the C.imara do Apricult ura de la Primera Zona between 1956 and 195S, on Novenibcr 23, 1968. 52 Edifiri os y A"! iTu-i rencs Gc ner ilc-s; general buildings and wareliouses.

PAGE 116

lor. facilities for v.lu'.it. Klcmbcr ship o7i the governing board was split between the two jnijjorters and the representatives of the miiny wheat growers, willi the Minister of Developinent holding the balance of 53 power. The growers liave charged that facilities have been built to benefit the importers and that the corporation has generally been 54 inefficient and not responsive to the needs of agriculture. Wheat growers are also unhappy about the price of fertilizers in Ecuador. A local plant, Fertilizantes Ecuatorianas S. A . ( FERTIZA ), produces fertilizers locally. However, inefficient operation and tariff protection have resulted in very high prices. Reputable authorities have stated that farmers would have to spend about half of their gross income on fertilizers to obtain the inaximuna yield from the 55 infertile sierra soils. Wheat growers feci a credit pinch. Less than 2 percent of all private credits go to the sierra agriculturists and only a small fraction of this amount is extended to the wheat growers. Since loan periods are short and interest levels are high, the wheat growers have diffi53 Interview witli Sr. Chambers. ^^"Peter The Wolf" (pseudonym), "EDIALGE: Primera Presa de la Rosea, " La C alle (Quito). June 3, 1961, p. 10;"Mortensen Hace de las Suyas con El Trigo, " La Calle (Quito), July 30, I960, p. 4; Erickson, £_l a_L , p. 424. Interview witli D]-. Andres F. Cordova, former president and member of the Fiuard of Dinctors of llie Cainara de Agric\iltura de la Primera Zr>na, on November 29, 1968.

PAGE 117

106 ciilly fmannnL; c-.ii)ilul ini]3rovc'menl s. Thosf cc>ncli( ii.)ns lia\'i.> led to many political demands from the wlical farmers. Their deiiiand lor more government credit to finance agricultural imjirovemcnt s is generally shared by the other farmers. Tlie wheat farnicrs also laavc a special interest in promoting clieapcr fertilizer prices, either tlirough ending tariff protection for the local fertilizer plant or through tlic encouragement of competing producers 57 of fertilizers. Both demands have been strongly fought by the managers of the existing fertilizer plant. The wheat farmers have also been very interested in seeking wider markets and better prices for their crops. They have wanted to lift the price controls on bread to allow for an increase in the sale prices of wheat and flour, and they have been very interested in obtaining a larger share of the domestic market for doniestic production. One root cause of the political malaise of the wheat farmers has been the feeling that tlic government has not been pro-wheat or even pro-agriculture. Many of the problems of the wheat farmers could be helped by more energetic use of existing adininistrative machinery. Ecuador, Jvmla Nacional de Planificacion y Coordinacioii EconcTmica, Bases y Di recl ivns para Pro gra mar el Desarrollo EconcTmico del Ecuador: Tomo 3 (Quito: Jimta Nacional dc Planificacion y Coordinacion Economico, 1961), Part IV, 57 Interview with Sr. Ch;'.)-nbcr s. Interview willi Sr. Del Camj^o.

PAGE 118

together with ;i more intelligenl and stable development policy for local \vlio:il production. Many of the above dcniands would probably be somewhat moderated if the wheat farmers felt that they could receive a more sympathetic hearing froin the government decision 59 makers. The Comme r cial Sector The merchants of Quito and Guayaquil are involved in the same types of bvisiness. Parallels in their economic and political situations end there. A major difference is the result of the inland location of Quito. Few businessmen in the sierra are involved in either importing or exporting. Most of the Quito retailers buy wholesale from the Guayaquil importers. The cominercial market in Quito is much smaller than that of Guayaquil. The sierra standard of living is lower and Quito has only half the number of inhabitants of Guayaquil. Some of the sierra market is supplied by the businessmen of Cuenca and Ambato, while the supremacy of Guayaquil on the coast is unchallenged. A large fraction of commercial business in Quito is trade in household and personal goods and light luxury items. The demand for capital goods is lower in the sierra than on the coast. A 59 /" Interview v.ith Dr. Gonzalo Gordova G. Camara de Comercio de Quito, Guia Co incr cial de Quito (Quito: li^dilorial Santo Domingo, 1967).

PAGE 119

r(.'S])(.;ctabk' fr.iction of agricultural su]Ji:)lie.s arc iiTiported tlirough llic I 'i a n CO Nnci"n .?l do P'om cnto or the ac,ricullural centers. Much of the remaining buL-iness in capital goods and heavy luxury items is conducted directly through tlie Guayaquil importers. Because of this emphasis on light consumer itc:ns, contraband cuts into the legitimate Quito market even more than it does in Guayaquil. The contraband market in Quito, located one block from the police station, is l^rge and well organized. In the past, the sucre volume of the contraband market has been estimated to be as great as the legitimate market in similar types of goods. Legitimate business has also been hurt in past years by competition from illegal sales through the "grey markets" of the police and military cominissaries. The major coinerciantes of Quito are generally in a more competitive and less organized situation than are their counterparts in Guayaquil. Trade seems to be somewhat more evenly spread around among competing independent houses. Ethnic differences also split the Quito trading community. GermanJewish names such as Abrahamson, Stadlcr, Kywi, Anhauser, Nussbaum, Katz, and Interview with Sr. Jaime Caldcron P. , staff engineer for Come rcial Kywi in Qviito, on October 2Z, 1968. This statement is also supported by a simple inspection of the Quito commercial district; most of the import houses are branches of the Guayaquil firms. '"La Lab.ir de los Scna.dores Fvuicionalcs por el Comercio en la Legislature," Co m t r ci o E c u a t o r i a. no, 106, July -September, I960, p. 5.

PAGE 120

10? Ilorvatli doniiiialc Iradf in harcKvarc, crystal, china, and td cctronict::. Trade in pL-t j'oUnim and fertilizers is dominated by the Gi'mian com})anics oi lloesc I'.t-Kt'TO and Max Mueller C. A. Automobile imports are dominal(;d by the Guayaquil importers and an American of Ecuadorcan descent, Mario Cabeza dc Vaca. The German bvisiness community has generally kept apart from the mainstream of tlie Quito elite social life. However, many foreign coiYierciantes have started to invest in industry and are beginning to marry into established families. So the social positions of the Jev/ish businessmen in Quito may become more integrated in the future. Tliese observations on the divisions within the Quito business coiTimunity are supported by the data on the ownership of sierra businesses which are presented in Appendix B. The Quito commiercial businessmen share relatively few political interests with their counterparts in Guayaquil. Although both favor higher profits and market expansion, they generally seek different means to tlicsc ends. Unlike the Guayaquil businessmen, the Quito 63 „. . merchants arc almost uniformly against inflation. Rising prices and the falling real incomes of the salaried and wage workers would cut markets more than speculation and increased capital investments could increase it. The Quitt) merchants are more in favor of industrial dcvelopmcjit \ "]:)e^ lararion, " Cnmcrcio Ecuatoriano, Jidy -September, 196(), p. 7.

PAGE 121

1 ] I) and protective tariffs tlian are their Guayaquil counterparts. Since tlierc is almost no export marlvct to expand, increased purchasing power in the sierra is moj-c dependent on local industrial development. Since the Quito merchants do relatively little importing of their own, they are more willing to sell domestic products as long as the price and quality remain competitive. There is also the hope that domestic competition will improve the position of the Quito retailers with respect to the Guayaquil importers. Bankers There are fewer bankers in the sierra than on the coast. Only six banks are based in Quito and they extend less than a third of all 64 private credit. The sierra banks are more closely involved with agriculture than are the coastal banks. This conclusion is suggested by the lower level of industrial and commercial development in the sierra and the great fraction of all sierra credits extended in the rural provinces. One bank, the Banco de Pichincha , dominates the field in the sierra. The directors are associated v/ith the major landowning families. However, they do not have the ties with the commercial elites that the coastal bankers have. The style of sierra banking is strongly conservative. Banking ^'^ Ecuador, Banco Central, Boletin del B r.n co Central del Ecua dor: HKy""^ (Quito, 1V65), p. 65,

PAGE 122

J J J and credit prat tires seem moi-e ortlvadox in tlic sierra than on the coast. Sierra bankers secni to tal;e tlicir social roles mcu-c seriously. Tlic inanager of tlic leading Ban co d e Pichincl'.a , Jaiine Acosla Soberon, is tlionglil of as a public figure with public responsibilities. Sierra banking leaders strongly favor a stable money policy. Liflalion hurts the agricultural interests of the bankers and the banking institutions of the sierra might not be strong enough to ride out a severe financial panic. Bankers also object to devaluations that would danaage the sierra economy for which they feel responsible. The sierra bankers are therefore more inclined to cooperate with the government regulation of private credit and banking practices. Alliances have been formed in the past between the sierra bankers and the B anco Central against the coastal bankers. The ind\istriab'sts Industry is less developed and less efficient in the sierra than it is on the coast. Although almost as many people are einployed in Quito as in Guayaquil, the value of industrial production in Quito is 65 Interview willi Sra. Susana Ashton Donoso, U.S. Embassy in Quito, social autliority, on Nox-ember 6, 1968. 66 Interview witli Sr. Lduardo Larrea Staccy, former General Manager of the Banco Cen t raj, on November 20, 196S. Ibid.

PAGE 123

] J .'. less tli.Di )ialf of lh,i( ;n Guiy.i cjuil . Tlic sierra industrial sector is hi<;hly 5.j)0(.i.ili".cd in li'XtiKs. l,css llian 10 percent of the industrial Nvorki'.;:-, force is eni))lciyod in "foodstuffs, " as coinpared with 27 percent on the coast. Fifty -two percent of all Quito industrial workers arc employed in the textile industry. Textiles account for less than 4 percent of employment on the coast. Threads and dyes make up about half of all raw material imports to sierra industry. No single item has anywhere near such a position on the coast. Sierra industrialists have relatively close ties with the comer ciantes and are frequently drawn from the same immigrant groups. A simple classification of the names of the managers of the 454 industries affiliated v/ith the Ca'mara de Industriales de Pichincha suggests that some 36 percent have a foreign background. A brief examination of the Cuayacjuil industrial directory reveals only a few scattered foreign names. Therefore the social position of most Quito industrialists is probably weaker than that of the Guayaquil group. Although some "established" ijnmigranl fainilies have married into a sierra social position, many have stayed within the active Quito German ., 70 comm»in:ty. Ecuador, Divisio'ii de Censos y EstadTsticos, Primer Ccnso In dus trial (Quito: Junta Nacional de Planificacion y Coordinacion Economico, ig""'! ), pp. 80-83. 69 ' Camara de Industriales de Pichincha, Boda s de Plata (Quito: Camara de Industriales de 1-^ichincha, 1961), pp. 51-85. 70 Interview with M rs. IKlen Wulf, Assistant Commercial Attache of the U.S. Embassy in Quito and long-time resident in Quito,

PAGE 124

] 1 The jiolititril inlcrcsls of tlicPicliinclia indu strialisl s are similar lo ihosc cjf tlic smaller Guayaquil manufacturers. Bolh groups abhor iiiflalinn. Boili liavc an ainbif^uous position on tariffs; they w^nt low tariffs on imported rav.materials but higli protection against llic 71 finished prodmts. Some degree of commercial protection is given by the "intrinsic tariff" of the costs of importation and transportation to the sierra. The range of tariff interests is much narrower. Almost all attention is focused on textiles. T he textile manufacturers The textile industry is one of the oldest in Ecuador. The first mills were built during the 1920's. Only six out of 24 mills currently 72 in operation were built after World War II. The first mills were located in the sierra to take advantage of cheap labor, a favorable cliinate, and the available domestic market. The more recently constructed mills were also located in the sierra to take advantage of the existing j-narketing arrangements and the pool of skilled labor. The textile manvifacturers have higher status within the sierra elite society than do the other manufacturing groups. The two on April 26, 1968; and interviews with Sr. Ricardo Levy,, General Manager of Fa brica d e Broo hes Sudan-.erica' on many occasions. Sr. Levey is an Ecuador can of Ceriiian parentage. LuiJ-. Roman Perez, "Dice Kl Presideiite dc la Camara de IndustriaU-e de Pichincha, " ]Indusiria, XXXVIII (May, 1961), 3; La InduMr ia, XXXXIII (May, 1962"), 16. '"UNI'X'LA, Fl Desarrollo Econo mica do Ecuador (Mexico: Unitrd Nations, 1951)7 p. ^'H-

PAGE 125

1 ] largest corporations arc controlled by established landed families. Lorenzo Tons, nianagor of L a Industrie Algodonera, married into tlio Cordcro family, and members of the Mcna Caamano family are major stockholders in La In t c r n a c i o n a 1 . Tjie major woolen mill, Fabrica Chillo-Jijo n S. A. , is run by Manuel Jijon Camanb y Flore s, a member of the most aristocratic of all sierra families. Another landed family, the Pinto Davilas, owns seven mills. Only two mills are owned by an immigrant faniily, the Dassums. One mill, Textiles Nacionales S. A. , is partly owned by Ainerican interests. The textile industry has been a typically Ecuadorean example of imperfect competition. Two mills, La Jnternacional S. A. and La Industria Algodonera S. A. , produce about 45 percent of all textiles. The rest of the market is divided up among the 20 remaining factories. 73 The average textile naill operated at 40 percent of capacity in 1959. Ecuadoreaii textile mills are very inefficient. The early inills wore based on a laboi'-intensive technology so the investment per 74 worker is far below the Latin American average. The newer mills are loo small to be efficient. The miniinuni size for efficient operation on the world market is around 10, 000 spindles per mill. Most textile plants in Ecuador have between 1,400 and 2, 500 spindles for 7 ^ Antliony Bottomlcy, "Imperfect Competition in the Industrialization of Ecuador, " Into r-A m crican Economic Affairs , XIX, 1 (Sum incr, 1965), 85; El Dcsarrollo Eo>n oi niro . . . , p. 119. 74 BotloniKy, "Im]K'rfi.'ct Competition . . , ", p. 89.

PAGE 126

] ]S spinning. As a result, (he output per man is 57 pci-ccnt of tlie Latiii American average and tlic output per loom is between 10 and 20 percent of tlie world standard. The Ecuadorean textile industry lias not been adequately financed. Although profits arc reported to be high, less than 14 percent of net earnings are reinvested in the plant. External credits have also been lacking. Most loans mature in less than a year and carry high interest charges. These are not suitable for financing a long range program of modernization. The textile manufacturers also have problems with raw materials. All synthetic fibers have to be imported and only half of all cotton and 75 less than 20 percent of all wool is produced locally. This dependence on imported cotton and wool is dangerous for the manufacturers. Several tinies in the past tariffs have been raised on cotton imports to guarantee the consumption of local cotton. These tariffs are rarely lifted during poor harvests. Local cotton and wool are of poor quality. The coastal cotton producers are generally peasants who are not familiar with seed selection and proper cultivation techniques. Asa result, Ecuadorean 76 cotton is weak, has a short fiber, and doesn't dye properly. Most of the sheep have traditionally been raised by peasants who do their ^^Erickson, £t a2. , p. 390; Investment in Ecuador , p. 78. "^^'Investment in Ecuador, pp. 76-77.

PAGE 127

1 ](, own spinning and weaving. Moi^l of lliu flocks have been hkicIc up of crjcjllo rtrains Ihat jjrtjducc fioor wool. Large landowners have takcMi up sheep raising and have been trying to improve the breed. But the practice of selling dirty, wet and uncardcd wool to middle in en for sliipmciit to the factory has driven down prices. The lack of grading in the field has impeded an awareness for the necessity of quality controls. Asa result, domestic wool has been inferior to the imported 77 dirty, ungraded discards of foreign producers. The textile naanufacturers have been working with the wool and cotton producers in an attempt to raise the quality of local fibers. The Association of Textile Manufacturers of Ecuador ( Asociacion de Industriales Textiles de Ecuador) has sponsored the organization of the National Sheej:) Raisers Association ( Asociacion Nacion'tl de Crianderos de Ovejas ) and has underv.ritten the efforts of those organ78 izations in imi^roving cultivation techniques. Ecuadorean textiles are expensive and of poor quality. Most of 79 the cotton prints arc not color fast and are unevenly dyed. Fabrics are weak and arc offered in a narrow selection of unimaginative colors and patterns. The market for domestic cloth is maintained behind a stiff tariff wall. However, contraband from Colombia accounts for "^"^Ibjd^, p. 78. Hmj. ; int(r\-i(-w with Pr. Alfonso Mosquera Arco, SecretaryTreasurer of ARCt), on November 26, 1968. '^'^Plan do Dc-sarrollo .... p. 107.

PAGE 128

] ] Pq 2"i to 30 percent of tlie jnarl;el. AUliough ih.ij market for textiles is expanding, more people arc beginning to j^refer the hij.',lier qualify imjjorlcd n .itcrials. As a result, the Xational Planning Board forecasts only a moderate and irregular expansion of the domestic tcxtiK. , 81 industry. The textile manufacturers are ambivalent on government regulation of the industry. They want to keep tariffs high on textile imports 82 wliile having a low tariff on imported raw materials. Textile manufacturers have also asked for inore government credits and benefits 83 for industrial expansion. However, the established manufacturers have also asked the government to deny tax and tariff benefits to recently established mills in order to restrict competition in an 84 already crowded field. The textile manufacturers, along with almost all other Ecuadorean nnanufacturers, have been vocal in defense of a stable currency.'-'-' ^•^'ibid. , p. 107. ^^Ibid. , Table n-17, p. 50. Ecuador, Junta Nacional de PlanificacicCi y Coordinacion Economico, La Industria Ecuatoriana: 195 0-193') (Quito: Junta Nacional de Planificacion y Coordinacion Econoiiiico), pp. 10-11. (Mimeographed). 83 La Lidust ria (Quito), January, 1959, p. 3. 84 Interview with Sr. Ing. Julio UUoa, staff engineer for CENDES, on May 2S, 1968. ^^"Documentos para la Mistoria Lidustrial del Pais, " La Industria (January, 1961), p. 4.

PAGE 129

J 1 .s Pa tterns of Huyi ncs y Ownt-rf hi]i i n the Sierra Joint owncrslii]! of bi:sine s fcs is less common in the sierra tlian F t it is on tlio coast. Tliis substantially restricts the possibilities of developing the interlocking business empires that were found on the coast. In fact, only one small set of "interlocking directorates" appears. It is presented in Appendix B. Several other empires have been built by individual businessmen. The major one is headed by Sr. Pinto Davila and includes eight spinning, weaving, and clothing mulls. However, none of these businesses are "large" and no outside businessman with other resources has -' 87 apparently been in\ olved in the Pinto Davila chain. An "oligarchy" of "inner elites" does not eniergc from these few groups of businessmen. Although the largest group includes the managers of the largest airline, the largest sierra bank, the largest textile mill, and the largest pharmaceutical manufacturing house, the managers involved do not seem to be extraordinarily important to either sierra business or politics. Only the bank and the textile niills are in a position to exercise significant economic power over other Ecuadorean businesses. Only 10 percent of all sierra "large manufacturing" businesses arc included in the group. The percentages of l'])o data fur the business chains was taken from the card file on businessmen discussed in Appendix A, Cam.ira (.\c Lulust riali-s de Pichincha, "Bodas ..."

PAGE 130

J r.' nuijor comniir cial houses included aro far less. Therefore it seems doubtful that the group lias gained mucli power by sheer weiglit of accretion. Neither dues thecliain svcni particularly well intcgratecl. None of the businessmen included have inore than one business in common. There is no evidence of family ties among the businessm e n . A comparison of the inajor with the minor chains reveals an interesting tendency towards differentiation by ethnic group. All of the minor gi oup businessmen seem to have European names. The two apparent exceptions also are in the sierra minority. The Ribadenieras were originally Jewish and the Plaza Lassos, despite their political successes, are very much nouveau riche to the sierra aristocracy. A few Italians are associated with LIFE and Domogas in the main chain. However, these tv/o businesses were unique in having either government sponsorship or foreign financing. The high technical requirements for managing LIFE would also seem to call for foreign expertise. If the apparent tendency towards ethnic specialization is not a random occurrence, then the probable economic and political power of the sierra businessmen would seem to be even less than their economic pc) sit ion would suggest.

PAGE 131

]2(' The Kt'l.-it ji'ii ]'-c t\vi-cn [V.c Sicir-t and [h v Coa5^.l Tlie ccononiii^ tics bctwcni the sierra and the coast are weak. The low level of trade is supgeslcd by largo regional differences in prices. The price of domestic wheat on the coast is two and a half times the price in tlie northern sierra, and rice is one and a half 88 tiines more expensive in Quito than it is on the coast. Consequently each region has been forced to be more or less self-sufficient and would rather import than depend on the other region for foodstuffs. Divisions on political policies can be classified in two ways. The previous chapter concentrated on rivalries within the coastal business community. However, the differences in situation and organization that divide the coastal and the sierra economies promote regional differences in political views. In many cases, the two types of splits are mutually coiTiplicating. Intra-regional rivalries are hampered by the necessity for preserving a common front against the other sector of the country. The great regional differences can also be dampened by the inability of cither side to marshall all their forces. Several major political issues divide sierra and coastal business groups. As was pointed out in the last cluiptcr, many coastal bankers, importers, and ex-]-)ortcrs favor inflation and devaluation. Almost all

PAGE 132

121 bu5;incss groups in the sierra strongly favor a stable money jjolicy wiih no alteration in exchange rates. A devaluation would raise the price of imports and would increase the sucre income of the exporters. This 89 would have the effect of shifting money from the sierra to the coast. Regional conflicts also take place over tariff levels. The Guayaquil comerciantrs have an interest in inaintaining low tariffs on all imports. They are joined at times by other businessmen who would like to stimulate general demand through increasing the purchasing power of the mass of people with the cheaper iinported goods. The Quito comerciantes do not care that much about tariff levels and the sierra industrialists are very much afraid of competition from the ovitside. The major sierra group with enthusiasna for lower tariffs arc the agriculturists, and their interest covers only capital goods 90 for agriculture. Another regional conflict is over the importation of flour and textiles. The Guayaquil businessinen and consumers would far rather use the cheaper and higher quality^ imported goods. No group on tljc coast has an interest in defending local production of these materials. Several issues have only a regional impact. The employers of the sierra cannot find allies on the coast in their fight against higher "v. E. Estrada, El Momento Economico en el Ecuador (Guaya^ quil: Imprinta La Reforma, 1950), pp. 7-10. '^Interview with Sr. Ramiro Cabeza de Vaca, former 2:)residcnt of the Camar," de Comercio de Quito and president of Distribuidora V olkswagen , on November 25, 1968.

PAGE 133

lc>2 minimum wage?. The wage level on tlio coast has already been bid far above any sierra minimum and the Guayaquil businessmen arc not • 91 interested in ma);:ng unnecessary enemies. Land reform is another regional issue. Although the distribution of land is unequal in both regions, the two problems of overcrowding and the latifundia exist mainly in the sierra. Sierra land reform would bring many acres into useful production, would greatly improve the standards of living of the rural poor, and would sharply cut into the social and political base of one of the most conservative of all Ecuadorean elites. These considerations make sierra land reform a potent human issue. Land reform is not such a vital factor in the coastal areas. Although organized "invasions" of squatters have taken place, these have occurred mainly when medium-sized landowners have locally taken up the most accessible banana lands. Organized squatting has also frequently been directed against the smaller banana growers who have been isolated from power. Given the abundant supply of free land and the relatively high level of rural wages that are paid on the coast, the demand for general land reform has not been a potent issue on the coast. Therefore the coastal planters have not ^^Interview with Sr. Jose Torres, President of the Camara de la A gricuUu ra do la Se gu nda Zo na, on October 29, 1968. ^'^'T'cligro ! Livasion d? Prupied.id Privada, " Epoca I, 3 (October, 1968), 40.

PAGE 134

bfon particxilarly sympathetic to tlic conservatism of the sierralanded elites on tlie land reform issue. Anollier issue promoting interregional rivalry has been the economic dependence of llie Oviito businessinen on the Guayaquil importers. The q uite no s are interested in buying from the Guayaquil businessmen at the lowest possible price while the coastal importers would like to sell at the highest feasible price. There is also a fear among the Quito business cominunity that the Guayaquil merchants 93 could use their economic power for regional advantage. These regional differences in political interests are mutually reinforcing. Sierra businessmen interested in opposing minimum wages and land reform can work comfortably with the businessmen who are interested in inonetary stability. Although a consensus on a wide range of issues is harder to achieve on the coast, the combination of bankers, exporters and importers of capital goods can unite on many issues opposed by most of the sierra. The cultural differences between the sierra and the coast also reinforce the divisions of political interest. As a result, the general banner of regionalism can be used as a rallying cry wliencver major groups on the coast or 94 in the sierra feel tlie other side inay tlireaten their basic interests. " Informc de Labores del Diroclorio dc la Camara de Comercio de Quito en el Ano I960, " Co mercio Ecuatoriano, January-March, 1961, p. 4. 9-1 Erickson, el al. , p. 261.

PAGE 135

CHAPTER V THE BUSINESS ASSOCIATIONS Associations for the advancement and protection of business interests have been organized to cover almost every type of business activity in all major regions of the country. These organizations have frequently led an active and independent social and political life. However, they do not necessarily fit into the classical image of how interest groups operate in the United States. The functioning of the Ecuadorean business associations has been shaped by an entirely different set of social and econonnic circumstances. Business groups in Ecuador will be classified into one of two types. The "service" organizations are organized by businessmen engaged in a specialized branch of business for the purpose of facilitating the achievement of common goals. The camaras , on the other hand, have been organized by the governiTicnt for the purpose of facilitating liaison with broad sectors of the economy. Two criteria have been used in identifying the "service groups. " Tlae translation of tlic v.ord caina ra is "cluamber" winch docs not carry llic imi^licalions of political authority and semi-public status connoted by tlie Spanish term. Therefore the Spanish word will bo used. 124

PAGE 136

IZb They mxi<^-t linvc been listed in the 1963 and 1967 telephone Ijooks for Quito or Guiyaquil, and they must liave a membership drawn from one sector of tlie economy. Tlie organizations included are listed as follows: Quito: As ociacion de Fomento de la Induslria Molinera (AFIM) Members include only grain inill managers Asociacion de Industriales Textiles de Ecuado r (AITE) Represents textile mill managers A sociacion Uolstcin-Frisian de Ecuador (AHFE) Association of the breeders of these types of cattle Asociacion Nacional de Criaderos de Ovejas (ANCO) Association of large sheepherders Associacion de Radiodifusoras de Ecuador (ARE) Association of radio broadcasters and radio station managers Guayaquil: Asociacion de Ejecutivos de Ventas (AEU) Association of importers Asociac ion d e Ganaderos de Litoral (AGL) Association of coastal cattlemen Asociac ion de Exportadores de Cacao y Cafe del Ecuador (AECCE) Association of coffee and cocoa exporters 2 Existence in 1963 and 1967 was made a condition for inclusion in this classification for two reasons. First, many associations were organized as "fronts" for groups during a particular political campaign. Tl\ey were disbanded as soon as the crisis was over. Ad hoc organizations of this type were not important froin 1959 to 1962 and are not an «nduring part of the Ecuadorcan political scene. Furthermore, it was difficult enougli to obtain information on existing organizations witliout having; to do further research on associations that had disbanded years ago.

PAGE 137

126 Asoci.'icinn Pcsqur r.'i del Erundo r (APE) Assoi.ial ii>n of Ecviidorcaii fishing fleet Ccmi.tr.i de Com]-)ania s dc S cguro do Ecuador (CCSE) Chamber of Eeuadorean insurance association Cal^nara Oficial Espanol a do Com ercio (COEC) Official Spanish chamber of commerce There is not much data available on the service organizations. No one answered telephone or office inquiries at the Asociacion de Fomento de la Industria Molinera for over two weeks. The Asociacion Hoi stein Frisian dc Ecuador and the Asociacion de Ganadcros 3 de Literal were radically reorganized between 1961 and 1968. Requests for information were refused in a few cases. Therefore the analysis of the service associations is based on direct observations in only a fev.' cases. Generalizations are based on an analysis of the reports of other observers and the author's ov/n knowledge of the political situation. Several service organizations draw members froin areas in which many small businessmen sell to a common, highly competitive market. The AITE, ANCO, AHFE, ARE, and ACL are of this type. The service organizations facilitate market coordination. For example, the members of AITE share information on market condi^The Ai-'ocia cion dc Ganadcros del L it oral was re-formed into a corporation for the purpose of managing tlie Guayaquil slaughterhouse^ and the Asociaci6'n H olstein Frisian dc Eciiador became the Agociacio n do Introductore s de Ganad is Mayores . Interview with Sr. Jose Torres, president of the Cama ra dj^ Ap ricultur a do la So gunda Zona , on October 29, 1968.

PAGE 138

]27 4 tions, pricing ]>olicicf;, and business decisions. The ARIC is a trading center fur information on progra niining, audience responses, recej:)lion conditions, and frequency usage. Tlic sheephcrders use ANCO as a forum for exchanging inf orn-.ation on sales, prices and 6 livestock-raising techniques. Presumably this was also true for AHFE and AGL. The organizational requireinents for serving as a center for business coordination are ininimal. It is only important that the meinbers have both the opportunity and the desire for interaction. It would be expected that as people found an association to be valuable as a source of market information, intra-group rivalries that might break group cohesion would be suppressed. The service organizations also act as "agents of development. Most of the associations have a full-time staff engaged in solving common membership problems. The role of AITE in sponsoring the development of FANCA and ANCO in promoting cheaper, more stable supplies of higher quality textile fibers has already been noted. ANCO is both a partner and a client of AITE in the effort to develop improved grading schemes, to introduce better strains of sheep, and '^Interview with Sr. Rafael Borja. Interview with Mr. David Glcason, President of Radio Nucle o, on May 23, 196S. Intfr\ii.'w with Sr. Alfonso Mosquera Arco, Secretary -Trcas iirer of tinA sociacic Tn Nacion r l de Criaderc;s de Ovojas , on November 26, 196K^

PAGE 139

1 zy •7 to upgradeherding te (.linicjiics. Tlic AHFE and AGL performed simil.ir funclioiis for the c itlUindustry. The scrvici; organizations have generally maintained close relations with tlic government planners. The national planning agencies depend on the service organizations to provide information and sta8 tistics on market conditions and the business operations of members. 9 Many agencies under the Ministro de Fomcnto have worked closely with the association bureacracies in coordinating and planning development programs. Association representatives participate in decision 11 making and can exercise at least an informal veto over plans. The members of the associations also have the benefit of advance information on government eiiorts. However, the development of close relations with the government has apparently been at the expense of public participation in politics. At no time was it found that these service organizations entered into 7 Ibid. , interview with Sr. Rafael Borja. ^Ibid. ^Republica de Ecuador, Ministro de Fomento, Informe a la Nacion: 1959 (Quito, 1959). 10 Decreto P'liocutivo 419 of March 13, 1962 in Registro Oficial 123 of April 1, 1962. Interview with Sr. Jvafacl Borja. 12., . -

PAGE 140

public debate, cither on a partisan or a non-parti f;an basis. Neither did political observers attribute any political influence to these service organizations. The non-political nature of the service associations can be attributed to several factors. It would be difficult to maintain close contact with the professional bureaucracy if the organizational leadership were overtly participating in public politics. The expert power of the organizations would not be helped with affiliations with the politics of the regime. However, open hostility to the regiine in 14 power would make cooperation very difficult. Another factor depends on the function of the organizations as business coordinators. The interaction among members can best be maintained when the rnenabers are not split on debates over politics. Therefore only the policies of immediate common interest will be 15 easily raised for discussion among the ineinbers. However, the path to public political power is not closed by the overt non-involvement of the service organizations. Members of the service organizations are also members of their camaras . Participation in camara activities can bring political power and personal 13 '^ Interview with Sr. Alejandro Carrion, editor-publisher of La Calle, on November 12, 1968. Interview with Mr. Madison Monroe Adams, Commercial Attache to the American Jilmbaspy, on March 1, 1968. 15 Interview v.-illi Dr. Getirg Maier, Professor of Political Science at Soutlu-rn Illinois Univtr sity , on August 20, 1968.

PAGE 141

J. 50 exposure. Conrcrncd lnij;inf.' smen liavif ri.;qu<,Titly visod llie support of a service organiz.il ion as a basis for iiifhuMicing the appropriate rantar a. As a rcsiill, the SLr\-ice organizations have tended lobocon^e )nstilutionc'ili>:cd ]5ressnrc groups within the larger camara organizations. Tliis pl^enom:::x3i v.ill be discussed at length below. The ])olitical ]Dositions of the service organizations also affects the internal organization. The importance of the organization staff in the relation between the association and the governnient is very great. The apolitical nature of the public life of the service organizations has tended to reduce tlie participation of the members. Therefore the staffs of the service organizations have become more or less autonomous. A few of the service organizations have taken a political role. The Asociacion de Ex portadores dc Cacao y Cafe de Ecuador , The Asocia citS n de Ej e cutivos and the Camara de Companias de Segur o de Ecu ador probably all fit into this class. The managers of the larger businesses affiliated with these organizations are all members of tlie Guayaquil "inner elite. " As such they are very powerful and very visible in the business and political worlds. The associated businesses are generally strong, stable and are highly affected by liilc rview wilh Sr. Jost^ Torres; interview with Sr. Mauricio Yepcz, Secretary General of the Camara de Industriales de Picliincha, on November 26, 1968. ] 7 Intel's iew v.'itli Dr. Maier.

PAGE 142

povcrni-ncnt rc\r;uhilion. Regulation is direct ly applied to tlie insurance conipanier-;. The large i!n;:>ortcry and exporters are equally affected by the indirect regulation of quotas and monetary policy. One iinajor f".nction of these organizations is to act as a smokescreen for the members. The names of organization spokesmen appeared in relevant public debates fairly frequently. The "public relations" function of the political organization seemed much more developed than it was for most service organizations. The organization meinbers may not want to becoine publicly involved in political questions for a variety of reasons. Asa general rule, the elites 18 prefer to remain out of the public eye. The patrician attitudes of some elites make justifying ac1:ions or argviing for policies in public very distasteful. Public responses to the members niay also be embarrassing. The fact that a spoke sinan is a member of the "oligarchy" will tend to polarize many audiences. Politians may fear that an association with the "oligarchs" may alienate many leftists 19 and provide ammunition for political enemies. The political organizations provide a more nearly neutral front for the legitimate demands of the group members. Group spokesmen can assume the air of impartial expertise and avoid all mention of the "Edwin E. Erickson, £t £! i Area Handb ook for Ecuador (Wash' ington, D, C. : Government l-"'rinting Office, 19o6), p. 261 'hiter\ie\v with Sr. Kafael Dillon Valdcz, President of the r>a nco do Gu -'yaq uil, on October 27, 196S.

PAGE 143

political, soci.il :ini\ economic posit ion. = of the persons tiny are rcpro scnling. A hired stat"f can al.-o attend on a daily basis to all the details of political issues and j^ublic relations campaigns. The functions of the more political organizations influence their ?0 operation. Organizational activity is intermittent. " It reaches a peak during political campaigns but remains at a very low level between crises. The organization staffs have almost no institutionalized bases of power. The authority of the political organizations depends on the degree the members are willing to back them up with 21 their own political and economic muscle. As a result, the role of the organizational staffs in deciding internal policies is apparently nainor. A few service organizations have official roles to fulfill. One example is the Asociacion de Fomento de la Industria Molinera . The AFIKl elects a representative of the milling industry to the board of EDIALGE, the state-run grainery. The association also has the nominal role of officially promoting the interests of the millers in conflicts between the wheat growers and the importers, together with the bakers. 20 No one answered the telephone during the week the author attempted to gain informatio-i on these organizations. 2 1 Interview with Mr. Peter Mitcliell, representative of the Confedrratitui of Drilirili Industrie's, on O^i.^ber 16, 1968; interview with Mr. Madison Adams; inter\-;vv.with Mr. John Snyder, Labor Attache to the American EmlKissy, on October 15, 196S.

PAGE 144

133 However, the org.inizatk)!! does nol play an effective role. The millers are also cauglit in regional splits. Tl^.e coastal millers are allied witli the importers: while the sierra millers inaintain a more inde])endt.'nt position. Coastal representatives do not even bother to 22 show up for AFIfvI meetings. The sierra representatives to EDIALCE are elected through AFIM, while the coastal millers decide^ on their representative through informal bargaining. Both elections are apparently based on the relative economic positions and social status of the contestants as tempered by past obligations and future promises. -* The effectiveness of AFIM in public politics has also been affected. Most of the major mills are located on the coast. The sierra mill owners lack effective business allies. Therefore the defection of the coastal millers has made the AFDvl more or less ineffective. The result is a low level of institutional activity. The offices were apparently closed for the several weeks in which the author attempted to gain information on the organization. However, people in the next office reported that a clerk was usually there a few times a week to read and answer the mail. The continued existence of AFIM seems to be a result of the legal position of the Iiiterview with Sr. Luis Del Canipo Salvador, member of the board of the CaVmi_ra_dc^\g ricuItura de la P riniora Zona on November 15, 1968; interview with Sr. Antonio Teran Salazar. Interview with V)r. Ccor',:^ Maier; interview with Mr. Adams.

PAGE 145

organization, and not to any activities of the organizational members. Some service associations neitlicr coordinitc business aclivitic-s nor act as political intermediaries. They ran^e from the "booster" type of self-improvement organizations, sucli as the Camara Junior y A de Comercio anO. the Club Rotary or tlie Club de Ejecutivos , ' to tlie non-profit development foundations and major service organizations ^ 25 like the Fundacion Ecuatoriana de Dcsarrollo and the COFIEC. Officially sponsored groups, such as the Comite de Informacion y C ontactos Exter no, occupy a position mid-way between tliat of an organ of the governnient and a free association. However, none of these groups seemed to have any political or economic impact on business and will not be discussed further in this dissertation. The second major type of business association in Ecuador is the caii-iara.^" These organizations are made up of all businessmen in wide areas of the economy. The cainaras have a rather substantial legal and political position. Membership is mandatory and the cainaras are given the power to elect several representatives to many official policy-making bodies. ^^Intervicv.' with Sr. Rafael Borja, Executive Secretary for the Asociacion de Industriales Textiles de Ecuador , on October 14, 196? Interview with Sr. Antonio Tcran Salazar, Executive Secretary of the Asociacio n Na rional de Empresarios , on Xoveinber 14, 1968. The term is eqviivalent to our "chamber. " The ca"m ara leaders liave been discus.sed in Chapter 1 as being potential public participants in ICcuadorean politics.

PAGE 146

These facturt^ liavc given the c.ima rp.s an important role in the political pz-ocrss. The size and powers of the camaras have given wide baeking and substantial visibility. The leaders of caniaras arc ge)-ierally assunied lo be legitimate representatives of the business interests in thciir areas. Carnara leaders arc almost inevitably brought into the political process. However, the size of the memberships and the range of interests represented have frequently created problems in tJie internal organization of the camaras . The camaras were formed under the direction of the government, a coinmon practice in Latin America. The Camaras de Industriales were organized in August, 1936. The Camaras de Comercio , the last 27 to be formed, v/as started two years later. The camaras are considered to be "decentralized agencies" of the government. Their formal status is that of a "legal body formed for public ends with private rights. " In actual practice, the autonomy of the camaras from the government is almost complete. The several carnara s of Quito and Guayaquil are all at the apex of systems of local business organization. Local organization is weakest for the industrialists. Virtually all important industry in Ecuador is located in the provinces of Pichincha (Quito) and Guayas 'Decrcto Supremo 24 of February 10, l'^37, published in Regi stro O'^iejal 271 of August 22, 1936; Decreto Supremo 5 of January 5, l".'3iS, published in Regi:. t r o Oficial 61 of January 8, 1938.

PAGE 147

1 .• 28 (Cmaynquil) witli only minor industriorlocaU'd in Cucnca. Since the nalioiial f itlrr.Uion of camaras d o inc Ui st ri-"iU -s has bcui^ rendc-iu-c! iinpolcnt l")y regional rivalries, only the Quito and Guayaquil organizations arc iinijorlant for our purposes. The camaras de zigricultura are more effectively organized on t;n.local, provincial, and regional levels. There are two types of members of these organizations. One official representative from each "lower order" agricultural organization goes to the provincial and regional camaras . All centers in a province are represented in the provincial camara and all provincial camaras send delegates to the appropriate regional body. There were two regional camaras . The Caniara de la Agricnltura de la Priinera Zone , which is located in Quito, includes all of the sierra provinces, and the Camara dc la Agricultura de la Scgunda Zona , with headquarters in Guayaquil, 29 represents all of the coastal organizations. Some of the provincial and regional can:iaras also have direct members. There were 78 direct members to the Camara dc la Agricultura de la Primera Zona, ^"Ecuador, Jiuita Nacional de Planificacion y Coordinacioii E c o n o )-n i c a , Primer Cc iis o Industrial: Resumcn dc Resu Itados , Quito, 1957, pp. 78-91; Erickson, £l ah , p. 374. •^Ecuador, Inslitulo dc Estudios Administrativos, Manual de Gobieriio (Quito, Institute de E studios Administrativos, 1962), p. 210. A third regional c am.'. r a was formed after 1961. Ty] ewrilten meinbcrslnp list taken from the files of the cainara.

PAGE 148

] v; but Uic coastal c.'imnra is mrule up exclu5^ively of provincial repre. ,• 31 sent alive s. Under tlie law, mcmbcrsliip in a camara de comcrcio is mandatory for all retail and wlioleFale busincssinen of all provincial and cantonal seats of governnient. Membership is obligatory for all traders Vvith a registered capital of more than 5, 000 sucres (about $250). However, this is not rigidly enforced. Almost all of the members of tlie camaras dc comercio outside of Quito and Guayaquil are very sinall businessmen who are involved with, at best, the provincial economy. Only the camaras de comercio of Quito and Guayaquil norinally have an inipact on national life. The many camaras de comercio are informally joined in a national federation which apparently exists only on paper and will not be discussed here. There are no other associational ties among them. The cai-naras are charged with the duties of aiding business development, engaging in some internal self-policing and of assisting in relations between businessmen and the government. The several statements of forinal duties reveal interesting differences; the Interview with Sr. Jose Torres, President of the Caniara de ApricuHura de la Scgunda Zona , on October 29, 1968. This varies slightly with the location of the camara . See Manua l de Gob i erno . J -J The businest-men of Cuenca have occasionally been active in leadiiig ri'voltb^ a<.v!inf;t tlic authority of Quito. They were apparently involved in tlie couii tliat ovi.'r:hrew Vcla.sco in 1961. However, lliey do not normally j^irl icijjate ;•! political deci.-ion making.

PAGE 149

ra mar a s do la a r;r icu 11ura arc conccTiud witli aggressively represent ing the ])lanl(;rs against tingoviTninciit, while llic camara de incl u.trialos sliould assist Die government and police members in trade di .^ piUcs. Tlie directors of the calrin ras no longer feci strong ties to tlie legal niceties of the camara charters in their daily conduct so these differences are mostly of historical interest. A much more important aspect of the legal and constitutional positions of the camaras is with respect to the election of the functional senators. Under the 1946 Constitution, the major interest blocs have direct representation in the Senate. There were 12 functional senators, representing public education, private education, the armed forces, and the press and cultural establishments of the nation, together with sierra and coastal representatives for agriculture, labor, cominerce 3A and industry. The six functional senators for business are elected by electoral colleges made up of representatives from the appropriate camaras. Each delegate carries as niany votes as his cainara has members. The votes of the provincial camara de la agricultura menibcrs are weighted according to the total nuinber of affiliated farmers at the canton and province level. Cainara members also elect representatives to several adminManual de Gobierno , j). 210. ^^Ibich , p. 301. ConslituriiMi Polilica de Ecuador; 1946, Section II, Part 42.

PAGE 150

13' 37 islralive boarcU-. As of 1959, the camaras de la acriciiltura elected representatives lo the Comision Nacional de Tri go, the Banco Nacional d e Foinento, tlie Comision Nacional dc Valocrs , the Consejo Sup erior dc la Agricultur a, and to the Jurado de Aduanas . There were four business representatives to the Junta Monetaria , two representing the banks of the coast and the sierra, and two representing the caiTiaras de industriales , comercio and agricultura of both 38 regions. Having representatives who directly participated in the operation of these bodies allowed the camara leaders to keep in touch with political conditions at several levels of government. However, the position of the camaras in the national political situation was equally in'iportant in determining how influential the camara s would be 39 in the formation of government policy. Only the camaras de la agricultura receive direct state support; 5 percent of all rural property taxes are assigned to theiTi. The cainaras de comercio and industriales are financed by membership 40 dues. Mandatory membership and available legal sanctions for The government has been reorganized several times since 1962. Passages plirased in the past tense refer to matters that may not still be valid. 38 This was changed slightly in I960. See Chapter 8. ^Rafael Chambers Matamoros, the Executive Director of the Comi sion Na cion al de Tri go, reports that both the comision and the camara do la agricultura fall from political influence when the national political decision makers cool to tlie camara leaders. Interview witli Sr. C'jiambcrs on November u, 196S. Es tatutos V Riizlameul os de La Camara de Industriales de Pichincha (Quito, 1967), p. 18.

PAGE 151

140 levying chu-s provide the caiTi."tr;i s with adequate financing. Tlicrc arc some differences in tlie public positions and internal processes of the r.cveral caniaras. One major factor contributing to these differences is the difference in the interests and cohesion of the meinbers. There arc relatively few differences aiTiong the functioning members of the coastal camara dc la aqricultura . The indirect membership results in a balancing of the demands of the several groups at the provincial camara level before they are expressed in the regional organization. A potentially major internal split between the larger and smaller agriculturists is dampened by the strong upper class bias of the effective members. The more huinble members do not have access to information on camara politics and policies and cannot go easily to Guayaquil or the provincial capitals to press their interests. Only the higher status members generally have continued access to camara decision making. However, the poorer members can petition for camara help in solving local agri41 cultural or political problems not involving the larger planters. The camara de la agricultura of the coast has not become involved in the problems of tlic smaller banana growers. Conflict between the growers and the exporters was generally articulated through the Asociacion Nacional de Bananeros Ecuatorianos. The influence of Tlic smaller Jiiiddle class agriculturists have formed tlieir own interest f.rcmjjs in recent years, apparently to avoid dependence on the cania ras. The l-'ederacion Nacional de Cooperativos Danancros is one such example.

PAGE 152

l-l) the larger planters in thecamira has not given the camn ra leaders any incertive to jni.'^h. for a change of the status quo. Because the sierra social system is more highly stratified, tlie ujiner class bias of tlie effective members of tlie Cc-fmara de la Agr ic ultura de la Prjmera Zona is even more pronounced. However, there has been a split between the traditional and the progressive meiTibcrs of the camara , especially with respect to such issues as land reform and agricultural developnient. All members who are interested in development look for government credits to help improve farming techniques and to develop rural marketing facilities. The progressive members are more inclined to depend on self-help and to direct inore of the state aid to the snialler farmers. Several of the other agricultural interest groups form "internal pressure groups" in the camara . Twenty percent of the members 43 directly affiliated with the sierra camara are also meinbers of ANCO. The offices of the A1C1\I (formerly tlie AHFE) are in the same building with the camara . There is free passage between the offices of the two organizations. -^ 44 The Camara de Industrial cs de Pichincha had 445 meinbers. Taken from tlie typewritten membership lists in the files of the Asoc iaci on Na rional de Cri:t ioros de Ovcjas and the Camarei de Agri cu ltura (.Ic la l-'rimer a Z ona . 44 / Camara de Indvu^t riales de Picliincha, Bodas de Plata (Quito: Tallares Grai'ieos Minerva, 1961), j^j^. 51-85.

PAGE 153

]-J2 45 Virtually all tlu> members were legitimate industries. TItc range nf interests rejircscnted lias bce;i suggested in Chapter 4. Although affiliation is registered usually in th.e name of a manager, it is accorded to individual industries. Therefore busine ssmen who control several industries, the Pinto Davilas for example, carry a proportionately greater weight in camara affairs. Members are classified according to size of registered capital. However, a very informal classification according to business interest is provided by membership in the sectarian service organizations. 46 Twenty percent of the camara members also belong to AITE. They form a major block and wield substantial influence over camara politics.'*''' Although the members of AFIM may form another block, they do not seem to have exercised as much visible influence over camara politics. There were 223 members of the Camara de Industrialcs de Guaya quil. "^^ The range of businesses included is very wide*, the members "^^Only ATESA, an air taxi service, did not seem to be a legitimate inf''ustry. Datamx; taken from mimeographed membership list in the files of the Asociacjon do Industriales Textiles de Ecuador . ^^Gencrally one major news itcni or feature article on AITE was run in each issue of La Industrja, the house organ of the Camara dc Industrialcs de Pi ch inch a . This was not true for any other industrial a ssociation. '^^Thc source is the mimcograplied membership list from the files of the C.rmara do l2Hhi?i^i^!li:„^ fL^^^^uax^iCiuiJ, dated 1965. Most of the members who affiliated between 19o2 and 1963 were li.-ted at the end of a so])arato apjic-ndix.

PAGE 154

J -13 are engaged in evcrylliing from managing restaurants to running 49 -^ hotels and airlines. The C,-i.mara dtI ndustr-.alcs is broken down into M sub-associations, eacli representing a particular branch of 50 industry. Meinbc'r ship is through the appropriate sub-group. The non-industrial businesses are all dumped into their own residual ca.tegory, where their diverse interests inorc or less cancel out. The two camaras de coniercio differ widely in the range of interests held by members and in the extent that informal relations provide cohesion for camara membership. The members of the Camara de Comercio de Quito , who are almost all retail inerchants or representatives of service organization (such as bankers and the owners of dry cleaning establishments) are not divided by great differences in business interests. As has been pointed out in Chapter 4, though, the Quito businessmen are not highly integrated. Few have ties of overlapping ownership and the larger businessmen do not have sufficient econoinic power to keep the others in their orbits. The factors for both dissension and cohesion are much greater for the members of the Camara de Comercio de Guayaquil. Businessmen from all sectors of the coastal economy, from manufacturing to A plausible reason for this diversity could be that many business men v/ould rather participate in the smaller Ca mara do Indnstriales than be swamjied in tlie very much larger and elite -dominated Camara de Comercio de Gunvaouil. Interview wi'.]; Sr. IIui-u Cliavc?,, Secretary General of the Cama ra de Jm 'iisl r iah-s d e Guayaqu il on October 30, 196S.

PAGE 155

J-i! finance to service to .ip,r icull are, iirc affiliated witli tlie c a mar a . As a ri'sult, ib.tre is a pre it divcreuty ol' interest among the members. Some groups of members can be foiuid to su]>part almost any position 51 ^ on national issues. Tlie extent and power of the interlocking elites of Guayaquil serve to give some coliesion to the micmbers. The few central busii-iessmen control the votes of several hundred affiliated businesses, which gives theni substantial direct influence over camara voting. Perhaps more important is the economic position of the inner elites. The smaller merchants, the importers, and the businessinen looking for investment capital are all within the economic orbit of the bankers and large importers and exporters. Although this dependence is not overtly important in the daily life of the cannara , there is little question as to which side the smaller members will ^ 52 support if the camara leaders become seriously split. The formal procedures for elections in the camaras vary. The camaras de comercio and the camaras de la agricultura all have direct elections by all members for the offices of the presidency, vice presidency and the seats on the camara boards. The periods of office are all two years. The Camara de Comercio de Quito and both of the camaras de la arricultura have eleven men on the boards of 51 Interview with Sr. Atahualpha Chavez Gonzalez, former President of the Camara de Comercio de Guayaqu il, on October 30, 1968. 52 ^ Interview willi Mr. Jolm J. Snyder, Labor Attaclie at the AmcM-ican Embassy in Quito on October 15, 1"68.

PAGE 156

]-} directors." Tlioro arc twenty directors elected in the Cfmara de Comercio de Guay .i qnil. Elections lo tlie boards of the c ti^ n aras de industriales are somewhat different. Each sub-group of tlie Camara de Jndustrialcs de Guayaquil elects one iriember to the board of directors.^ The president and vice-president arc elected by the board from within their own ranks. The representatives on the board of directors of the Camara de Industriales de Pichincha are elected by various classes of members. The three largest classes elect three representatives in common, two representatives are elected by the three mediumsized groups of industrialists, and the four ranks of the smallest businessmen elect two representatives in common. The elections of the president and vice-president are held among all members of -' 55 the board of the camara . Elections in all of the cainaras are overtly non-political. The style strongly rescinbles "local notable" politics. Voters apparently choose on the basis of the relative perceived status of the candidates within the camara and in termis of their own personal relations with 53. 32.

PAGE 157

J-16 thesevor.il candidil f s. ^" Ucpulation is based on commercial success, business style, p.itA parlicip ition in canvii'a affairs, and possession of the necessary di-nity, force and charisma required of an effective b\isiness representative. Almost all observers slated that most camara voters did not decide on the basis of external political factors (even tliough the political relations between the camara leaders and the ruling politicians would determine much of the political effectiveness of the calnara in coming years) and that disputes 57 over internal policies were, in general, not a major factor. The camara elites politick among themselves for office positions. Many small sets of notables often form coalitions for office. Payinents and profits in these games seenri to be visibility and status within the cainara elites and agreements for supports in future elecC Q tions. The competition often dies down before the formal announcements of candidacies. The many underdogs would rather negotiate a 59 'settlement than face a graceless defeat. Although formal camara leadership is more or less kept within a sub-group of elites, new faces are always entering this "inner circle, " either through the Interview with Kir. Peter Mitcliell; interview witli Sr. Rafael Dillon Valdcz; interview with Sr. Atahualpha Chavez Gonzalez; interview with Professor Georg Maier. ^"''interview witli Sr. Rafael Dillon Valdez. hiterview with Sr. Hugo Chavez; interview with Mr. Peter Mitchell. S-^Ibid.

PAGE 158

] 1 7 bargaining jjrocess; or tlirinii;li the sponsorship of retiring leaders. Hcird-fouglil (.-Urclion contcslfcfor individual scats do occur, gonerally \vl:en tl:e camara lendcrsliin is rcl:Ltivcly WL-ak or divided. However, it is rare for competing slates to contest camara elections. Campaigns for camar a office are long and expensive. Even "shoe-in" candidates will campaign intensively in order to develop the status and visibility coinmensurate with their future offices. Candidates take out full-page advertisements presenting their qualifications, programs and declarations of support from other camara notables. Campaign organizations engage in extensive telephone drives and " 62 leaflet mailings to camara members. It is rare for candidates to directly attaclc their opponents. Needless political enmity could dam age future business and personal relations. As a result, losers are given the change to merge back into the camara elites with public grace. Although tlie candidates are generally large businessmen, the election outcomes are usually controlled by the medium to smaller 64 businessmen. The smallest businessmen often drop out from Interview with Sr. Atahualpha Cliavez Gonzalez. Ibid. / 9 Undated conversations with Sr. Ricardo Levy, general manager of tlie Fa brica Sudam c ricana dc Broches . "Interview witli Proft.-ssor Gcorg Maicr. Interview willi Sr. Ali-j.mdro Carrion, publislier of La Calle, on November 12, 1968.

PAGE 159

J -18 effective particiiMlioii since llicy have ncitlicr (he lime nor the status tu be a force in cam ara politics. Tlic larger businessmen lack the votes. However, in the Camara de Comercio de Guayaquil they can force voting througl: an exercise of their economic povv-er. The elections of the functional senators are closely involved with the elections to camara office. The same non-political, local notable style of politics prevails. However, the candidates themselves may have introduced political considerations in their decisions to run. Some candidates, seeking final public approval for a successful private business career, may not be politically motivated. Many businessmen recognize that having political connections with leading politicians can be very good for business. A few functional senators have used their offices to switch from business to a political career. Functional senatorial candidates have to take into account national political complexities in order to implement any of these goals. The leaders of the Quito and Guayaquil camaras are very influential in the elections for the functional senators. Most of the "local notables" are affiliated with these camaras . Alinost all of the big businessmen belong to the big city ciamaras . Members of these caniaras have the greatest national exposure. Influentials in the outlying cities rarely are known much beyond their own cama ras. The leaders of the Quito and Guayacjuil c amaras can usually exercise 65 " Intervit'w w illi Sr. Ricnrdo Lev), on June 2, 1968; interview with l^roft'ssor Gei.>r<' Maier.

PAGE 160

I •] V substantial iMfl'icncc ovr-r which candid itcs will receive thfir block 66 of vote s. The fovorcd candidates do not always coine from the big city camaras . Considerations of fairness and political harmony will ofliu cause the regional c: mara leaders to throw their weight behind candidates from tlic smaller c amaras . It is almost axiomatic that when the niain candidate is from the big city, the ticket will be balanced by 67 having the alternate froin the outlying districts. There is generally a consensus that the introduction of partisan politics within the camara could have disastrous effects on camara unity and on the relations of the camara to unfriendly political figures. However, voters may weigh political considerations in making their choices. It is difficult for a candidate to be completely pure politically. Past participants in camara politics have inevitably inade associations with national figures. Voters should also realize that the family ties, home town location, personal associations and sympathies will all influence the extent that a particular candidate would 68 be able to worl^ effectively with certain politicians. Policy formation of the cainara s can perhaps be best thought of Interview with Sr. Rafael Dillon Valdez; interview with Sr. Atahualpha Chavez Gonzales; interview with Sr. Mauricio Yepez, Secretary General of the C.-iina ra de Ind ustr i ales de Pieliincha , on November 26, 1968. / -j Interview with Sr. Khiuricio Ye])ez. ^^Ibid.

PAGE 161

J 50 iis occurring on tlircc different hvcli^. The lowest level in\'olves Ihr rel;itic>n l)elween tlxcam.tra st
PAGE 162

credit clubs. ISl 70 The cainarn s v.ill oflcn help individual members with tlieir relations with the government. Usually a member can obtain help when hiF. problem is either C);iC of a mix-up in "red tajjc" or when he has a case worth defending in principle, the outconie of wliich could also affect other businessniei:i. How much support the cainaras are willing to give the members will depend on the level of political opposition involved. A camai'a iriay argue a case for a member before the Junta Monetaria but not try to fight a highly specific tax increase that is 71 pushed by a strong president. The leaders of the camara s also reflect concerns for business conditions and public policy to the members. These public policies of the camaras are "non-political. " Issues that may divide camara members are played down. For example, the Camara de Comer cio de Quito was concerned in 1959 about control of contraband, the establishment of a customs house in Quito, the elimination of payments of anticipated taxes, the regulation of the armed forces commissaries, and in representing the interest of the Quito inerchants who imported 72 — itenas through the Guayaquil port. However, the camaras took no Bc)th services were offered by the Camara de C om er cio dc Quito. 71 . Inter\-iew with Mr. David Gleason, owner and manager of Ra dio Nuc leo on May 23, 1968. 72 "Aclivid ides di'l D] rectorio, " Comercio Ecuatoria no, JulySeptember, 19:'9, pp. 16-19.

PAGE 163

specific public jjusjiions on the very sen.-ilive issues of dcvalualion, tariff reform.'-', land reform :ind reorganization of the J unta M oi ietaria . There is a fair auiount of popular j^arlicipation in tlic establishment of the narrow-gauge public policies of the camaras. The Camara ck" Conierci o do Q\'.:to established several committees to study many 73 areas of business problems. Although the members of these coin74 mittees seena to have been drawn from the camara elites, their deliberations and thci-r recommendations were public knowledge. The Camara de Indust r iales de Pichincha has established several functional committees to serve in a permanent advisory capacity to the c amara leaders. Many people outside of the leadership circle are drawn into the workings of these comnaittees. Camara leaders may guide the v/ider political orientations of the organization through control of the house publications. The journal of the Caniara de Comer cio de Guayaquil seemed to contain niany articles and interviews favorable to the Velasco regime at a time when the policies of the regime were favorable to the financial and comniercial elites but not /. 75 necessarily favorable to the c amar a rank and file. A second level of activity is the relation between the camara llcunion de Ejecutivos de las Camaras de Comercio del Ecuador, " Comercio Ecuatoriano , October-December, 1959, p. 9. 74 Most of the members were members or had been members of the directory of llie c amaras . '-'hitcrvicw v.iili Professor Georg Maier; "Mcnsajc del Presidents, " Revisi a d e ] :i C.ni iara d e Comercio de Guaya quil, No. 37, July 31, IVbU, p. 3.

PAGE 164

]53 leaders and tingovernment bureiincr
PAGE 165

Tlic J iinln Mon rla ria lias substantial control over the trade and monetary policies of the government. Most of the battles between tlie advocates of free trade; and the industrialists interested in ]:>rotective tariffs are fouglit here. As a result, it has become of vital concern to the businessmen that they cultivate amiable relations with the majority of tlie board and v/ith the manager of the Banco Central who is quite influential in board deliberations. The c am a r a s h'ave substantial services to offer the government agencies which smooth the path towards cooperation. Many of the government agencies are quite dependent on the camaras for information about business conditions and activities. The government agencies would be planning and administering in a vacuum without the cooperation of the camara staffs in data collection. The camaras also work closely with the Ministro de Fomento and, at times, the Junta Nacional de Planificacion in the administration of development programs. The role of the ANCO in running developinent programs for the inprovement of wool production under contract to the minister of development has already been discussed. The Camaras de la Agricultura have been involved in similar programs on a wider scale. The camaras offer a different type of service to the agencies when they run political interference for jointly sponsored programs. The cai n ara s have been ableto develop wider contacts with more overtly partisan politician::, tliat have been very useful in promoting technical programs. Tin; jjlanning agencies both lad; a significant clientele

PAGE 166

15 from which to speak cind also run the risk of comjjromising llicir ongoing })Ositions if tln^y enter too deeply into partisan politics. The relation between tlie ^^gencies and the camaras is also cased by the interchange of perponnel between tJic government and private business. Both sides arc competing for the same small group of trained people. Businessnien are interested in working with people who can cut red tape and the government planners want senior staff personnel who have skills that can only be gained through practical experience. The government experts are generally ready to take advantage of business opportunities that come up in the course of 77 their government service. The powers and the programs of the camaras appear to be significantly altered through their relations with the bureaucratic agencies. The cainara members gain a considerable advantage through their access to government planners. The camara leaders can offer the services of ad\'ance information on government planning and administrative decisions and can use their good offices to help camara members who are having difficulties with the government. Since these services would not otherwise be generally available to private businessmen, the relation between the camaras and the government strengthens the position of the camara leaders with respect 77 This is partly based on conversations with Sr. Oscar Loor, who seemed to have followed this career pattern. Interview witli Ec. Oscar I.oor, former staff economist of CENDES and curreiilly an investment and management counselor, on November 21, 1968.

PAGE 167

136 lo llic mt-mbcrs. The rcL'itions with llie planners also guide and limit the positions taken by the c^imara s in public politics. It secnis that the government agencies have a substantial imjitct on camara thinking and policy planning. Although, llie government agencies are dependent on the c ain a r a for basic data, tlie c amaras are equally dependent on the government for the finished analyses. The political presentations made by the camaras on the inapact of economic policies probably reflect the influence of government thinking. Asa result, the camaras would seem to be influenced by the bureaucratic agencies when charting their own role in Ecuadorean politics. The importance of having smooth working relations with the governinent planners has an impact on the range of political involvements of the camaras . It v/ould be difficult to maintain a close working relation v/ith the planners if open political warfare broke out betv/een the regime in pov/er and the cainaras . Therefoz'c the camaras wovild be encouraged to not take openly partisan stands unless it were necessary. The third level of political involvement is between the camaras and the national politicians. The camaras rarely take overtly political stands. The few ]jolicy preferences expressed in public are usually couch.cd as statements of the interests of camara members that are presented for dispassionate consideration. Although camara spokcsmc I'l may attack policy jDropo^^als out of principle or rally to the "interests of the nation, " they will rarely explicitly align them-

PAGE 168

151 selves wilh tlic positions of a politician or a regime. The political iinpact of the c ainar.is can be vubslantial at times. Every governinent is concerned about the possibilities of a general strike if the relations between Die camaras eind the government become too strained. Al the very least, tlic public participation of the camaras will introduce new actors to political dialogues. Therefore n:iuch of the influence of the camaras appears in the actions of politicians v/ho 78 are trying to head off anticipated problems. Several factors determine the political reactions of the camara leaders. Sonne of the most significant elements are the political interests of the cannara members. The economic and political circumstances of the inajor camaras members will guide camara partic:ipation. The camaras must act, at least on a symbolic level, during economic crises. The camaras are also quick to defend any slurs by the government on the symbolic positions of the camara members in 79 national life or to threats to sensitive areas of business interests. Interview with Mrs. Helen Wulf, Assistant Comercial Attache of the American Embassy in Quito, on April 26, 1968; interview with Mr. Joel Biller, staff economist for the American Embassy in Quito on April 27, 1968; interview wilh Mr. Albert Gel ardin, financial consultant to American businesses in Ecuador, on May 23, 1968. 79 This is a partial interpretation of an event tliat occurred in 1968. President Velasco, who was not backed by the Guayaquil commercial elites, called for private businessmen to assume responsibility in national public development. Around the same time tlie government took slejTS to split llic U. S. sugar quota premiuin between the government and the sugar exporters instead of giving it all to tlie exporters, Tlic combination of llu-se two relatively small incidents touched off an emotional camjiaign defending the riglUs of business autonomy. Sr.

PAGE 169

158 Not all cain nra members are equally influential in determining camar a policies. It is reported that many large landowners have effective control over local public administration in many rural areas. This lias carried over into an effective veto over camara policies for 80 their areas. The commercial elites of Guayaquil are also quite powerful in their c amara policies. Their interests differ from those held by most of the rank and file members. The Guayaquil elites have not been shy in the past to use their economic power to force camara compliance to the desired ends. A second set of factors involves the relation between the camara leaders and the functional senators. Generally, they work closely o-i together. Both represent the same sets of constituents, both are recruited from tlie same set of high-status businessmen. A senator who cannot count on the cooperation of his camaras will have a hard time claiming to speak for his sector of the economy. Camara Rafael Dillon Valdez, the current president of the Camara de Indus trial e s de Guayaquil, made an emotional and widely publicized speech promising "death before intervention. " As Sr. Dillon explained to me later, this stand was taken "on principle" defending against the "slur on the business community. " Undated conversations with Mr. Madison Adams, Jr. , former Conimercial Attache to the American Embassy in Quito; undated conversations with Sr. Alfredo Pareja Diezcanseco. 8 1 Interview with Mr. George Fitch, Chief of Industrial Section of tlie USAID Mission to Ecuador, on May 17, 1968; interview with Sr. Carlos Rota, President of Socicdad Radio Tecnico , on October 15, 1968.

PAGE 170

leaders who do nol have the confidence of the senator have lost a major voice in government. Tlicre arc several factors that pull tlic senators and the c;nnara leaders in different directions. Politically motivated senators will be seclcing a wider range of contacts and will participate in programs not relevant to caniara considerations. Outside political groups will generally try to co-opt even non-political senators. They arc vaUied not only for the votes they control, but 82 also for their roles as front men for business interests. The informal rules of the game in Ecuadorean politics imply that groups affected by a policy niust at least seem to be a party to the decisions. Politicians want to briJig in the functional senators both to avoid public opposition from within the Senate and to help mobilize the camara leadership behind the presidential or party progranis, Cainara leaders are not always happy about being brought into political coali83 tions and political strategies they did not help form. A last set of factors is the political and personal relations between the camara leaders and the presidential decision niakers. The camara op Interview with I-^rofesior Georg Maier; interview with Mr. Madison Adams, Jr. Camara leaders can also compromise the political positions of the functional senators. President Arosemena wanted to eliminate the tax on imported wlicat, a move that was o]5poscd by a majority of agriculturists. However, he fovmd a member of tlie board of directors of the Cam ara de A gric ultura dc la P rimera Zona who would support a temporary tax relief for tlie millers, who wi-re having problems wilh striking en)i)loyees. He used this to cut the ground out froin under tlie functional senator who tried to organize an opposition to the move in the Congress. Sec Chapter 9.

PAGE 171

16(1 IcicUu-s usually have channels to Ihe prebidency that bypass the functional scnaU)7-s. One route is throu;^h recruitment of businessmen into the cabinet. The public position, the lack of partisan ties and the business positions of past c -.mara leaders make many of them ideal candidates for cabinet positions. Once in the cabinet, manyretain their former business loyalties. Thus the leaders of the CaiT iara dc Comercio de Quito attributed their political successes in 1959 to the appoint:;;ient of a former cainara president, Luis Gomez Izquierdo, as minister of the treasury. Recruitment from the c^iaras may have become institutionalized. It is reported that the ministers of agriculture in recent years have been named by the carnara de la as^ricultura most favorable to the regime in power, sub• 85 ject to the vetos of the camara in the other region. During periods of political and economic calm, the camara s and the presidential decision makers have relatively little need for each other. Favored _carnaras_ would receive more symbolic recognition and perhaps an inside track to administrative planning. However, during periods of tension, the presidential politicians may seek more open political supports from powerful ca'maras . Legislation strongly favoring the interests of the ca^mara members (but not necessarily harming the interests of other caniaras ) is often the price for an 8'^"Acti\'id,ides del Directorio, " Comercio Ecuatoriano, July September, 1939, pp. 16-19. ^^Interview with l^rofessor Ceorg Maier.

PAGE 172

alliance. Tlusc programs f\embiM21, 1968.

PAGE 173

16^ 89 comorc ifin tos and traditional landowners on tlic society. Tlie caina ras dv la agriru ltvira art; much less visible on all levels of politics. As a pressure group tlic c amaras suffer from the problems of effectively coordinating members spread all over the countryside. As a furtlier handicap, national Ecuadorean politics is strongly slanted towards the urban areas. Even planters who come to the city 90 often becoiTie involved in city politics. Few political figures effectively represent rural concerns in public. The general political iinpact of the agriculturalists can be very great. Being a landowner still carries great prestige, especially in the sierra. Many very prominent public figures come froin elite families who have held family lands for centuries. As a result, proposals attacking elite agricultural interests seem to become dissipated, bogged down in a inorass of detail and revision. Agencies sponsoring land reforms and rural development end up "working very closely" with the large landholders whose positions they are supposed to be 91 undermining. The agricultural development banks are relatively well financed and have come under the control of the large landowners out of public sight. The whole concern of agriculturalist policies has been to slow the pjice of urban development, which can be done without 'Interview with Ec. Manuel Naranjo Toro, former Minister of the Treasury, on October 17, 1968. Interview with Sr. Luis Del Camjio Salvador. 9ilbid,

PAGE 174

16^•^ . 92 ever having tlic ca marn s iMiU-r into j^olilii ,'il discussions. The worlzinn; relations among the several rama ra s are generally rather poor. Only the Cama ra de Comercio dc Quito and the Camara de la A gric ultura de la Primcra Zona (sierra) have formed a well93 establislied alliance. The two groups have shared interests in stable nioney, free trade and favor local agricultural development over industrialization. The planters are wary of wage increases that usually accompany industrialization. Both the agriculturalists and the conierciantes dislike price increases that are caused by protective tariffs. The coinerciantes feel that most of the sierra buying 94 power is earned through agriculture. Close personal relations between the leaders of the two canaaras are facilitated by geographic laroximity and shared memberships. Many comerciantes also own farms. Some 20 percent of the members directly affiliated with the Camara de Agricultura de la Primcra Zona / 95 are also niembers of the Camara de Comercio de Quito. "interview with Sr. Lie. Conzalo Cordova G. , son of former president Andres F. Cordova and member of the Board of Directors of the Camara dc Agricultura dc la Primera Zona , on Novenaber 25, 196S. Interview with Sr. L\ns Del Canipo Salvador; Ecuador, Diario de Deb ates; Camara de Scn ado; September, I960, p. 4 2. 9^Inlerview with Sr. Atahualpha Cliavez Gonzalez. "^Camara de Comercio de Quito, Gu ki Co)-nerc ia l de Qu ito (Quito: Ediiuri.'il Santo Domijigo . 1967), tyin-written membersliip list of the Cama ra de A fp-icu llura de la Primera Zona taken from tlic files of the camara.

PAGE 175

161 Tlic camar as ckindustrial's of Quito and Guayaquil have formed a much looser alliance. Industrialists of the coast and the sierra have much in connnon. Industrialists seeking business expansion inust tliink in terms of national markets and national development. As a result, the; industrialists tend to share political and economic views to a greater extent than do the comerciantes and farmers who think in terms of the interests of their regions. Tlie relations among the other camaras are not close. The break between the camaras de comercio and the camaras de industriales is a result of their lack of connmon interest on tariffs, monetary policies and development priorities. The relations between the camaras 96 de la agricultura of the sierra and of the coast are equally bad. The sierra farmers are worried about wage increases, land reform and price controls on fertilizers. The coastal farmers, who have been faced with wage levels bid far above the minimum levels, are not concerned with minimuin wage increases. Neither do they care much about fertilizers and land reforms since they have almost limitless areas of cheap fertile lands awaiting cultivation. The progressive coastal farmers are not sympathetic to the other problems faced by the inefficient feudal sierra landowners. Tlic camara s de comercio of Quito and Guayaquil also have few interests in common. The coastal camara is generally dominated by ^"Interview with Sr. Luis Del Campo Salvador; interview with Sr. Jorc^Torre s.

PAGE 176

J 6^1 the large exporter?, importers and financiers. The split wiUiin the camara between Ihc dominant leaders and the smaller retail shopkeepers is usually papered over. Mowcver, it is a basis for open conflicts between the sierra and the coastal comcrciantes . The com crciantcs in botl:i regions look for local econoinic development to increase their own markets. Not only does this cause conflicts over development priorities, it also is a basis for disagreement on how to expand the economy since the wealth of the two areas is based on dif... 97 ferent types of activities. The leaders of every camara have institutional interests in preserving separate political identities. The camara elites are generally concerned with maintaining power and status within their organization. The leaders of the relatively low status organizations, such as the Ca^-nara de Comcrcio de Quito , would not be enthusiastic about being ovcrshadov/ed by the higlier status elites of Guayaquil. Neither is it in keeping with the character of the leaders of Guayaquil business to 98 share public participation in a program with "outsiders. " Every set of ca mara leaders carefully cultivates its own political connections to promote its • own programs and business interests. Political and personal antagonisms are kept carefully under 'Interview with Sr. Atahualpha Chavez Gonzalez. Interview with Mr. Bill Gcsclnviend, regional director for tlic Peace Corj).;, on October 28, 1968. I received the same impression in converr.ations with n)cmbcrs of tlic Guayaquil elites.

PAGE 177

16C control. Since the different ra maras generally operate in different spheres of politics and are concerned witli different programs, there arc relatively few areas in wliich open competition will break out. There is a spirit of "live and let live. "^^ Political antagonisms arc bad for business relations. The calViaras are most powerful when they can operate behind the scenes. Open disagreements may bring in new combatants with unforeseen consequences. Far more than the special issues under debate would be endangered by open breaks among the leaders of the business community. Political circumstances can also force political alliances among otherwise distant camaras . Most of the alliances are along regional lines. The camaras of the sierra will pull together if the leaders fear that the coastal elites have been able to monopolize political power to an unacceptable degree. However, public cooperation seems more symbolic than programmatic. Even on issues of common interest, the several sierra camaras have seemed interested in keeping sufficient political distance among themselves to allow for the possibilities of a separate peace. 99 ^ The best illustration was given in a series of letters between two £nn2:-x^^ on the extent of opposition to a tariff change. Unfortunately, the citation cannot be more complete. i or example, the interests of most of (he c?unaras were being threatened in 1961 by the devaluation and inflationary money policy of the Velasco government. However, the only cooperation they could manage was to issue a sternly worded but very vague statement calling for a return of "a climate of business confidence, " and for "assurances that bvi.sincss interests could be guarded, " One inter-

PAGE 178

16V The Asoriarion Nacinnal do Bananoros Ecuator i anos is an entity half way belwceii an independent business association and a politically captive arm of tlie government. The nnenibcrs of ANBE arc the banana growers, whose interests the organization is charged with promoting. However, ANBE also has become an agent of the government in the promotion and regulation of the vital banana industry. One result has been that the conflicts ainong the banana growers has carried over into the manner in which the government administers its role in the association, and the functioning of the association has become severely warped by national political factors. The national association is the peak organization of a system of provincial and cantonal associations. The members of the canton boards are directly elected by tlie local banana growers. The local banana growers also have direct nnenibership in the national assembly ( Asemblea General ) of ANBE. Three of the five members of the provincial boards ( Junta Provincial ) are elected by the cantonal boards and three are noininated by the national board of directors of ANBE (the Junta Directiva ). The national board of directors is made up of the minister of development, one representative of the national development bank ( Banco Nacional de Foincnto ), one from the Camara do la Agricultura de la Segun d a Zona , one from each of the provincial prctation is thai each camara was lioping for separate negotiations. to guard itii nwn interests, and no one wanted to be tarred willi the faihires of the otliers.

PAGE 179

168 boards, and one rcjjrcscnling the director of agriculture. ANBE has two legal responsibilities. It is charged with acting as the political agent of the banana growers in the defense of their interests. This would assume some degree of organizational independence and effective internal processes. The second task has been to act as an agent of the government in the development and regulation of the banana industry. ANBE is legally charged with helping the government expand plantings, maintain quality, improve production, and stabilize domestic prices. It is also supposed to seek new ways in which bananas can be used in domiestic manufacturing and processing. The major administrative responsibility of ANBE has been to 103 administer the national campaign against banana diseases. It is in this role that ANBE has become involved with the politics of spraying that were discussed in Chapter 3. Political power within ANBE is nominally split between the 104 national board and the general assembly. The Board has been responsible for making all "administrative" decisions, but the assembly has had the power to reject the budget and to review board •"^ -^Ecuador, Instituto de Estudios Administrativos, Manual de de Gobicrno (Quito: Imprinta Nacional, 1957), p. 203. Docrcto do Emcreoncia No. 30 in Registro Oficial 864 dated July 9, 1955. ^^•^ Dfc rrto_ 1 .(gisl ativo dated December 7, 195 7, published in Reg istro Oficial 382 of December 9, 1957. ^Q^Manual de Gobjerno, p. 203.

PAGE 180

1 69 105 policies. The board, lioldiiig the power of initiation and administration, has been quite d(jminant. Since the government appoints a majority of the board mernljers, ANBE politics have become influenced by the national political sitviation. Hard data on the decision process v.'ithin ANBE ai^ not available. However, fragmentary evidence suggests that the large planters have been able to use their positions as financial angels to the political parties to control ANBE activities. The regime of Camilio Ponce was generally based in the sierra, and the policies of ANBE were 107 relatively more favorable towards the smaller planter. However, personnel and policies were altered with the victory of Jose Maria Velasco Ibarra who owed a large financial and political debt to the Guayaquil comerciantes and their allies among the large banana 108 growers. It was at this point that the systematic deprivation of the smaller producers in favor of the large banana growers became most pronounced. This also is the reason that the smaller banana growers have demanded that ANBE be scrapped in favor of a more truly Decreto de Emerg encia No.l , p. 30. ^'^"Interview with Mr. V/ilfrcd Grisv/old, spray pilot for ANBE, on October 28, 1968. ^'^'^"Jean Le Rouge" (Pseudonym), "La Gran Catastrofe del Banano, " La Cal le ?.13, April 8, 1961, p. 11. ^^^"Jean Lt> Rou':;c " (]\^eudonyin), "Rcpucslo al Sr. Ento^'logo, La Calle 215, April Zl, 1961, p. 28.

PAGE 181

171) autonomous business association that could defend the inlcrests of a 109 majority of tlu' banancros . "intcx-vicw witli Sr, Alciand]-o Carrion.

PAGE 182

CHAPTER VI THE STRUCTURE AND DYNAMICS OF GOVERNMENT Introduction Only those political factors that seen^ relevant for the understanding of tlie influence of business groups on economic decisions will be discussed in this chapter. As a result, the view to be presented is out of balance. Institutions and processes that are important to an overall understanding of politics may have been left out as being irrelevant to this narrower concern. There are two further caveats concerning this analysis; some aspects of the political analysis are dated. The 1946 constitution was in force during the period under study. However, the 1966 constitution now in force has some inriportant changes. A second caution is to repeat a warning stated in the introduction: the generalizations given here are not "facts. " They arc more or less coherently related sets of assumptions backed up by preliminary data which can be used to organize hypotheses for later and more detailed studies. Parties and Elec t i on_s Parlies and elections are major com])oncnls in the social backdrop for [;ovcrnnK'ntal politics. Parties and elections will be 171

PAGE 183

] 7. examined from ihrtc perspectives: how parties serve to sort participants according to attitudes and goals; how the nature of party operations tends to reward some types of political activities and penalize others-, and how party operations tend to suggest certain tools for managing the national political situations. Direct national elections were held for president, vice-president, senators and deputies. Deputies were elected at two-year intervals, the other offices were filled every four years. Two senators were elected from each of the 15 sierra and coastal provinces. The 1 Galapagos and the oriente regions were represented by four senators. One deputy was elected from each province for every 50, 000 people in the population. The miniinum representation was two deputies. Deputies were elected on the list system of proportional representation. Candidates ran on a slate. One candidate on a slate was elected for every 50, 000 votes received for the ticket. Therefore a candidate's chances for election were determined by the popularity 2 of his slate and his position on the slate. Twelve senators represented functional groups. Representatives from the coast and the sierra were elected by labor, industry, commerce and agriculture. The armed forces, public education, private education, and tlie press and cultural establishments were represented Ecuador, Constitucion Polilica dc la Republica del Ecuador: 1946, section II, article -12; section III, article 47. Conplitucion . . ., section III, article 47.

PAGE 184

173 by one senator apiece. The elections of the business representatives have already been discussed in the previous chapter. The other func3 tional senators were elected in approximately similar ways. All male literates over 18 and literate women over 21 could 4 vote. The electorate was small; 800, 000 votes were cast ovit of a population of over 4, 000, 000 in the I960 presidential elections. The literacy requirement also gave the electorate a strongly urban bias because the level of literacy drops rapidly outside of the major cities. Elections have been reputed to be fairly honest. It is probable that local fraud and pressures were important. However, these are difficult to manage on a national level. Although presidential election results have been altered by fraud, it is highly unlikely that any candidate who did not have a major political following could be im5 posed through ballot manipulation. Although data ra-e lacking, the impression is strong that the electorate was deeply divided and the voters tended to be quite cynical about political parties. It is easy to point to possible causes. The differences in regional cultures and social organizations would break -"Ecuador, Instiluto de Estudios \dministrativos, Manual de Gobierno (Quito: Imprinta Nacional, 195 7), p. 11. Constitucion . . . , section I, article 17. -Alfredo I^iruja Diezcanseco, "Teoria y Practica del Conductor Conducido, " Combat t-, XX (January -February, 1962), 13. Alfredo Pareja Diezcanseco, "Democracia o Demagogia en el Ecuador, " Combil'e, XV (MarcliApril, 1961). 22.

PAGE 185

17down common lies (o national political symbols and institutions. Class tensions were strong; members of the urban lower classes were frustrated by low standards of living, the lack of institutionalized routes for social mobility, the lack of the jnyth of progress, and the lack of Icgiliinated lower middle class social positions. Many national elites and menibers of the rural iniddle class "establishment" seenied to fear urban lower class life styles and the resentinent of the poor and tried to keep the old social system that 7 supported those privileged with status. Although most parties had a regional base of strength, most politicians have reported that few voters identified with a party. Most were attracted by the symbols of the party leaders, and by pressures g of local elites and personal advantage. Most of the activists were attracted by the proniise of status and jobs. Many in the electorate were swayed by social relations to the political elites or the lack of 9 a local political opposition. Political parties were reportedly seen as being completely corrupt and self-serving. A part of the personal ^Ibid. , p. 21. g Interview with Dr. Alejandro Vega Toral, director of Federac ion Nacioual Velasc unsta for Cuenca and deputy to the 1968 Congress, on October 18, 1968. 9 Interview with Dr. Vega Toral; this finding is also suggested by the high degree of unanimity in voting in many areas. A spread of at least three to one was registered between the leading and second place candiciiles in 30 jjercent of all parishes in the I960 election. Data courtesy of Professor 'Diomas Page, director of tlie Latin Amcr ican Data Bank, Uni\-ersity of Florida.

PAGE 186

ITS appeal to jiiiiny candidates v.'as tliat they stand for a personiil, definite alternative to tlie morass of faceless and nameless party politicians of the opposition. Ecu.dorcan politics has been a fertile field for the many sniall, temporary parties and party coalitions that sprout up in time for the election harvests. Several major national parties have endured, although these have been beset by personal feuds and factionalism. Two parties on thejright have been the principal spokesmen for the high-status groups favoring conservative politics. The Partido Conservador and the Movimiento Social Cristiano have both been supported by a coalition of the church and the landed aristocracy. Support is stroiigest in the sierra where the people have always been highly conservative and the "friends and neighbors" effect seems to have been powerful. However, the established commercial elites of the coast have been reported to be conservatives in spirit if not always in politics. The conservatives tried to present an image of stability and achievement V^ased on tlie rule of the elites who inlierited the rich historical and cultural tradition of tlie Spanish nobility. A sense of mission was based on an attitude of noblesse oblig e. The natural nobility has an obligation to save the country from the turbulence Intervit'w willi Sr. Alejandro Carrion, piiblisher of La Callc , on November 12, 1968. Intcrvit'w with 1 can Embassy in Quito, on October 15, 1968 Intervit'w with Mr. John Snyder, Labor Attache at the Ameri-

PAGE 187

176 of (he ignoi-.iiil ]Joj")ulists and the urban nouvcau ri clic . Progress wcnilcl be a gift from thohc wlio are best suited to run the country. 1 2 The historical hero of the right is Garcia Moreno. The politicians of the right have shown a preference for stable money, free trade, an absence of land or social reform and a trickledown theory of social development. Right wing political figures have frequently been drawn froni the best ranks of the sierra aristocracy. The several factio»al leaders of the right have fallen out at times. However, unity has been generally forced through a common fear of the left and a common basis of elite support, as well as through social and personal ties. There is only one major middle left party, the Partido Liberal Radical . However, they have been frequently joined with the moderate wing of the Peirtido Socialista Ecuatoriana . These parties appealed mainly to the urban middle class professional types and the commercial classes. The party programs strongly valued orderly reform within the existing frainework. Favored symbols were secularism, education, expertise, development through planning, opportunity based on incrit and not family ties, and change from the feudal past. Ploy Alfaro was the hero of the moderate left and the administration of Galo Plaza was often held up as a political model. The images of the moderate politicians were somewhat marred by the Interview with Pc. Abdon Calderon, Executive Director of the Partido Li beral Ra dica l for Guayas, on November 1, 1968.

PAGE 188

17: 13 lack of loncretc proposals for rcforii;. It v.uuld seem that the moderates may have been trying to join together too many diverse groups and diverse politicians to be able to present a consensus on reform. Also on the left v.ere the populist parties. The major organized party has been the Conrcntracion de Fuerzas Populares , which is a major power v/ithin Guayaquil but weak outside of Guayas province. The sporadic Velasquista organizations deserve to be ranked as quasi-parties. Velasco has been central to Ecuadorean politics for over 30 years and during this time the same people and same appeals . . 14 have been presented by his organizations. The populists have appealed to the many discontented and anomic members of the urban poor. Party elites have been drawn from upwardly mobile groups who apparently seek to parlay political success into economic and social status. Mixed in have been many populist reformers who have been disillusioned by the dogniatisms of the ideological left and by the lack of alternatives offered by the 15 traditional parties. Parly symbols have generally been radical and violent, highly ^ -^Alfredo Parcja Diezcanscco, "Democracia o Demagogia. . . " Interview witli Sr. Alejandro Carrion. Alfredo Pareja Diezcanscco, "Democracia o Demagogia. . . "; Rodrigti Borja C. , "I'anorania de la Politica Ecuatoriana, " Combat e , XIX (November-December, 1961), 18.

PAGE 189

J 7o tinged with Ihc spirit of "niachisn-io. " Election contests were depicted as historical events. The electorate was seen as an cleinental force; that would sweep away the vij^per classes in a cleansing and revolxitionary change. Party followers are given the chance to vicariously participate in the good life through an identification with their candidates as well as to act as immediate agents in the downfall of those responsible for all current and past miseries. Election violence was prevalent. In national politics, the world of the populists began and ended v/ith the figure of Jose Maria Velasco Ibarra. Almost all of the parties were controlled by small groups of activists. They are reported to have been motivated by desire for personal status, visibility, or personal, political or business 17 rewards. "Public service" appeared to be an undervalued incentive. Party organizjitions were generally based on coalitions of politicians, each of whom had personal organizations and foUowings. Politicians contributed these political properties to the common efforts in return for specific rewards or promises of future benefits. National elections were generally contested by coalitions of parties. No one party was strong enough to win the fruits of victory needed to pay off elites and active followers. Factionalism further Alfredo Pareja Diezcanseco, "Teoria y Practica del Conductor . . . ". 17 This observation parallels the report made by Jaines L. Payne, Pntl ci-i is of Conflict in Colombia (New Haven: Yale University Press, 196^.), Cliapler 2.

PAGE 190

]7 reduced parly slrcngth. Coalition formation was the result of more 18 or less rational bargaining by elites. Each leader tried to inaximize his returns 011 his political capital. The trick was to avoid established parties where there was little room for newcomers by forniing competing coalitions strong enough to win some of the fruits of office. Many of the defectors of the established parties seemed to drift to the left, reflecting perhaps the possibilities of the organizational chaos and the voter appeal of the populists. Provincial party organizations and slates were strongly influenced by national party politicians who try to increase their own political capital by co-opting local leaders as necessary. Finances were a critical consideration for party elites. Political campaigns have become quite expensive in recent years. Some money came from the candidates. Some funds came through party dues. The conservatives would count on some contributions from the sierra elites while the liberals could depend on the urban small businessmen. However, almost all parties needed contributions from the Guayaquil business elites to adequately finance a national 20 campaign. Most of the Guayaquil businessmen looked upon their donations Interview with Ec. Abdon Calderon. Interview v/ilh Sr. Alejandro Carrio'i-i. Interview v/itli Sr. Alejaiidro Carrion; interview witli Sr. Alejandro Vega Toral.

PAGE 191

180 as proper business iiivc slnuiits. They demanded tlie riglit to make it back, willi iiilercst, through control of government programs and policies. Funds were slow in coming until the political analysts got a general idea as to who was probably going to win. The leading candidates were approached witli a business proposition; so much in return for the right to name a certain minister or to dictate certain policies once in office. Even honest politicians found it hard to refuse such an offer if it meant that the funds, and probably the elec21 tion, would go to unscrupulous opponents. The businessnien ran some risks in this aspect of politics. A miscalculation about the outcome would leave the contributors facing 22 a hostile government. Politicians seemed to have long memories and long lives in Ecuador, so there was the added danger of political opponents coming to the presidency at a later date. Asa result the industrialists tended to leave partisan politics to the comcrciantes , who are less dependent on official good will and have more of their 23 assets in potentially liquid capital. Ibid. 22 This occurred in the 1968 presidential campaign. "^'Smart money" backed Dr. Andres F. Cordova against Velasco. Velasco won an unjirecendented fiftii term and promptly began attacks on private control of the American sugar quota premium and otlier aspects of business practices. Political observers felt the govcrninent pressure was in retaliation for the lack of election support. 23 '' Interview with Sr. llelge Vorbcck, president of Ccrvcceria La Victoria , on July 29, 1968.

PAGE 192

Party dynamics and characlerislic s of the electorate placed sharp demands and limitations on presidential decision making. Political calculations centered around the necessity to appear as a "strong" president. Political leaders knew that their support among the party elites was based on an ability to offer more benefits for allegiance than their opponents. Presidential charisma, a necessary basis for popular support, required that the national leader always appear to be in complete control of the situation, that he has been able to leave his opponents divided and impotent. "Weak" presidents who allowed the opposition to become vocal, organized and politically powerful soon found that all tlie troops have deserted to the camp of the coming political leaders. Politicians who feared they might have changed sides too late often tried to buy the good graces of the new national leaders by heaping total opposition on the heads of the departing politicians. As a result, a subtle shift from political strength to weakness often marked the start of a violent slide into political impotence and a possible coup. A basis fur presidential strength was personal dominance. However, this was coinbined with the proper liberality with the favors of state on key political supporters and rutliless actions against political opponents. Favors of patronage and contracts were often necessities 2-1 Interview with Sr. Alejandro Vega Toral; this discussion parallels analyses of James I.. Payne, "Peru: The Politics of Structured Violence, " ^JoarrTial_oMV^^ XXVIl (2)(,Time,1965), 362-374; Payne Patterns of Conflict in Colombia.

PAGE 193

J 8^ 25 for the regime. The second key was to keep political opponents disorganized. Presidents could not advocate policies antagonistic to elite groups too strenuously. An alienated elite clique could form an untouchable base for political opponents. However, the president gained some maneuvering room from the caution of the private elite groups. The costs of an unsuccessful opposition to the president could be high. It was almost impossible for a president to develop a program pleasing to all those groups whose support was important. Party lines generally did not divide elites along lines of political interests. Velasco was supported by marginal elites and the urban poor. The conservatives were 'joined by the sierra feudal landed elites and some of the Guayaquil commercial leaders. Coalitions this diverse could not be joined easily behind concrete programs. The split between leaders and followers was even sharper. National political elites, even those in the populist organizations, had a vested interest in the status quo. Few favored new taxes or many reforms. Yet mass support, even for many conservative candidates, was largely based on the promise of reform. Politicians 25 Interview with Ec. Manuel Naranjo Toro, former minister of treasury under Carlos Julio Arosemena Monroy, on October 17, 1968. 2 6 o • • 1 , oimUar observations have been made elsewhere in Latin America. See Norman Bailey, ed. , Latin A m erica: Politics, Economics and Hem isphere Security (New York: Praegor, 1965), p. 81; Payne, Cliapter 8.

PAGE 194

183 usually had t.o .substitute rhetoric for reality of change. It is probable that any president who pushed for reform with vigor would have been ousted within the month. The increasing transparency of the political language has probably contributed to the popular emoinie, cynicism and readiness to abandon politicians in trouble. The Structure and Process of Decision Making in the Government The process of government decision making was a conflictual one. Policy was determined by competition among several independent political groups all of whom contributed to some aspect of decision making. The leaders of the several groups had different political styles, different political and social interests, and different resources with which to influence the final outcomes. The changes in outconnes could be attributed to shifts in political conditions that alter the balances among the groups. The legal organization set the framework for the political competition within the governinent. Ecuador was governed through a unitary government organized along the lines of the American presidential system. There were several legal differences. The major change from the American system was the greatly increased power of (he president and the autonomous regulatory agencies. The president was tlie major j^olilical force in the Ecuadorean political system. Other, more or less independent, political decision

PAGE 195

]8I makers tailored Ihcir strategics arovmd him. The president had two complementary sources of power. One was his position in the political arena, Tlie other was his legal powers over the operation of government. The successful president was above all else the caudillo in republican dress. It has been pointed out before that men who can successfully wield great power could be the centers of at least public adulation. The president had the podium to emit this aura of majestyover the entire country. Many people, mired in hopelessness by a static world, seemed to turn to the president as the one symbol of benevolence in authority. The poor could also vicariously participate in the life of grandeur and power through an identification with the chief magistrate since few other political figures are usually visible. An historical tradition of power had also been built up around the office of president in the land where coups and dictators have been comnion phenomena. One legal base of power of the president has been control of the cabinet. Under the 1946 constitution there were nine cabinet positions: defense, education, public works, government, social welfare, development (Fomcnto), treasury and economy. An assistant minister acts as a deputy and alternate to the regular minister. Cabinet 27 G e o r g e 1 M r:n Ivs ten, Ertin dor: Const it u t ions an d Caudillos ( L o < Angeles: University of California Press, 1951), p. 34.

PAGE 196

]8" ministoiT, were legally rcspoiibible for all action taken by tlie bureaucracies under Ihcir control. Ministers must countersign all legislation and rules passed that affect their domains. Congress can force 29 the removal of any minister through a vote of censure. However, this has not resulted in a move towards British cabinet politics. Presidents have had free power of appointinent and removal of cabinet officers. Most presidents have respected certain political 30 traditions. A balance was maintained between ministers from the coast and from the sierra. The miinister of defense must be acceptable to the ranking generals. The minister of social welfare has often been a socialist and the minister of foreign affairs has usually been a conservative. Within these limitations, the styles of cabinet selection played an important role in determining the tone of presidential decision making. There were three major factors in making appointments; first, was the candidate personally loyal and reliable? This was of utmost innportance in a culture of personalism. Second; did the candidate have the necessary political and personal affiliations? Cabinet positions have usually been used to weld togellier the coalitions of presidential support. Presidents liave had to juggle appointments from various cliques to maxiinize their support. Major ^" Consti tuci on Po l ilica . . . , section IV^, article 109. J'lanlcslen, ]:>. 98.

PAGE 197

186 contributors to the campaign were also recompensed through the ... 31 right to name a minister. The third factor was whether the minister is expendable. Many presidents have frequently used their cabinet ministers as sacrificial lambs when the political situation deteriorates. Blame for unpopular conditions or progranis could often be displaced onto the shoulders of the fallen minister even though the new appointment did not usually result in a 'change of situation. The ministries of economy and government have been particularly prone to this type of turnover. Therefore the candidates for these jobs were usually people sufficiently v/ell known to be held popularly accountable yet not so strong as to be able to cause discontent upon dismissal. 32 Expertise was not usually a major job qualification. The politically appointed ministers have frequently been reliant on instructions froin the president or the senior members of their staffs. Many times the assistant minister was selected to act as a qualified back-up for a minister whovvSsnot particularly capable. The nature of recruitmicnt often tells nnuch about the style of decision making. The cabinet ministers were among the chief arcliitects of the presidential programs. Ministers who have been o 1 Interview with Sr. Alejandro Carrion; interview witli Sr. Alejandro Vega Toral. 32 Interview with Professor Georg Maier, Professor of Political Science, Southern Illinois University, on August 20, 1968; interview witli Sr. Alejandro Carrion.

PAGE 198

187 brought in to expand tlic basis for presidential support have often been in a position to jnish certain programs as a price for continued collaboration. "Weak" presidents found that they must curry the favor of so many independent political groups that they were not in a position to develop their own political prograin. Many of their ministers were "mortgaged out" to groups with other interests. When these situations arose, the nature of the presidential political coalition was a major factor in determining cabinet recruitment, and presidential decision making was largely determined by the interests of the cabinet members appointed. "Strong" presidents were in a much better position to doininate their cabinets. The limitations placed on their policies were determined by other factors. One route through the legislative process was controlled by congress. The politics of congressional-presidential relations has been substantially influenced by the organization and process within congress. The congress was legally required to be in session for 60 days starting August 10. The session could be extended another 30 days by a majority vote. The president could call the congress into an extraordinary session at will. However, only the issues enumer33 ated in the enabling decrees could be discussed by congress. The legislative process was relatively direct. Bills could be introduced by the president, the cabinet ministers, or members of Constilucion Politira

PAGE 199

]8R congress. The Comii^ion do la Mesa was responsible for scheduling newly introduced bills onto llie floor for the first reading, Tlie first reading presented tlie text of the bills without any substantive debates, A vote was taken on the legislative priority to be assigned. After the first reading the bill was referred by the Comision de la Mesa to the appropriate legislative comnriittee. In the I960 session, the senate was organized into twelve committees (including the Comision de la Mesa ). .Areas of specialization went from foreign relations, government and religion to economy, commerce and banking and to finances and public administration. The Camara de Diputados was divided up into fourteen coinmittees. Each committee was further divided into subcommittees. Congressmen were assigned to committees by the Comision de la Me sa on the basis of interest and political balance. Seniority was apparently not an important factor. The only time a serious consideration was given to the contents of bills was when they were in committee. Committee meinbers generally examined the bills closely to sec how they would affect private groups v.'ith which they were affiliated. Since there was a strong minority representation on the more important committees of congressmen who had very definite personal interests in the types of bills being reviewed, relatively little weight could be given to factors Ecuador, Labor de Congr eso Nacionnl de I960 (Quito, Imprenla Nacional, 1961), pp. 1Z-Z2. 35 Interview witli Sr. Alejandro Carrion.

PAGE 200

189 of abstract "public intc-rest" in coinmittcc deliberations. Consequently, representatives of groups affected by legislation have playc-d 36 a very important role in the drafting and passage of bills. Bills went back to the floor with the committee reports. Floor debates and votes were generally determined by the committee reports, the political and personal influence of the authors of the conimittee reports, and above all, by presidential interest and polltical power. The floor debates were limited largely to " politiqucria . . exhibitions of eloquence without substance. Congressnien in debate were much more interested in using the occasion to promote themselves to national attention rather than to consider the substantive issues, which were much less potent politically. Congressmen were primarily interested in the substance of tax bills and public works which could benefit their districts. Legislative roles taken by Ecuadorean congressinen would seem to differ from those acted ovit by their North American counterparts. A inajor concern in political activities was the desire for personal status and position rather than interest in prograins. Congressmen looked for control over local patronage and jobs and for the control of political resources for their local organizations. It would seem that more general constituency demands were given only symbolic 3*^Ib[d, Georj', Maier, "Tlie Imjiact of Vcla.';quismo on the Ecuadorean Polilical System" ()''li.D. dissertation, Dej)arlmcnt of Political Science, Soulliern Illinois University, 1966).

PAGE 201

190 representation. The "rules of tlie ganie" followed the seune pattern. Politicking for personal advantage was Icgitiinatc. Congress seems to have been orgaiiized into f.mZiU cliques for mutual advancement. Given the wide range of personal loyalties and political sympathies represented, it is not surprising that cliques only generally followed the party lines. However, congressional discipline could be enforced by a strong president. Wider alliances along party lines would tend to be formed if the president was in a position to effectively use his power to enforce them. Despite the liinited attention to the substance of legislation, presidents were usually quite interested in the deliberations of congress. Congressmen were the most visible independent political figures. Their reactions to the presidential programs were a major factor in determining presidential strength. A hostile congress could redvice a president to legislative impotence and pave the way for a coup. A friendly congress made the relations between the president and marginal political supporters niuch easier. The president had several legal and political bases of power to use in his relations with congress. Presidential vetos could be overridden only by a two-thirds vote of both houses. The veto was of limited usefulness since congress only rarely initiates legislation •3 Q _, Interviews with Sr. Alejandro Carrion and Dr. Alejandro Vega Toral.

PAGE 202

19] and the president hay otlicr tooU" for influencing policy. A congressional revolt would be a sign of a deep-seated presidential weakness not to be r(.)nedicd through a veto. The major political resources of the president were control of the national political situation and control of private benefits for congressmen. The president could dispense highly valued benefits in the form of patronage for congressional supporters, public works, and the use of presidential powers to impede the path of opponents of his congressional friends. The president also had the greatest control over national political events. The initiation of dramatic political moves could cut the ground out from under opponents. Congressional friends could also be catapulted to prominency through the sponsorship of the president. The political influence of the president over congress moved in definite cycles. Newly elected presidents, coming into office with the power to appoint thousands of people to government jobs and with great independence in the dispensation of public works and other political benefits, generally had any bill they wished passed by congress. By the end of the four years, congressmen lost interest in the lame duck president who had few favors to dispense and would soon fall from power. In the last year, congressional opposition was at a high as all ]5oliticians were seeking alliances with the heir 39ibid.

PAGE 203

19a apparent. Sl7-onf; presidents, tliose who kept control of public events and wlio did not owe their election successes to groups not directly beholden to theni, often kept control of congress for two to three years. We?ik presidents, whose election coalition was never very strong and who had lost public ground in office, found the congress 40 ional honeymoon had ended much earlier. A last political strength of the president was his ability to bypass congress coinpletely. The 1946 constitution gave the president the power to issue emergency decrees when the congress is not in session. In theory, there were three checks on this power. Congress had the right to review emergency decrees in the following sessions; the decrees must be approved as being constitutional by the Consejo del Estado , and tax legislation cannot be passed through emergency A 41 decrees. The Consejo del Estado was made up of one representative fronri each branch of congress, the comptroller general, the procurator general, a representative of the arined forces, a representative of the Consejo Nacional dc Economia , the president of the Institute The I96O-I96I ])rcsidcncy of Velasco is a good case in point. Although Velasco had won a stunning election victory, his mismanagement of tlie economy cost him most of liis effective public support. The coup tliat ousted him was not organized by the businessmen who had suffered substantial injury at the hands of Vclasquista mismanagement, but by the congress:-nen who eagerly abandoned the sinking ship of state. '^^Constilucion PoHtica . . ., Title UI, Section IV, Article 53.

PAGE 204

19. Nacional dc Pr c vJFion (welfare and social security fund) and two private citizens elected by a joint session of congress. Cabinet 42 ministers had a voice but no vote. The Consejo del Estado reflected the vices of congress. Stron" presidents could force the election of delegates favorable to them. Even uncommitted delegates would be loath to risk the ire of a powerful president. However, weak presidents would constantly face opposition from the conse jo . The smaller consejo v/as probably somewhat easier to dominate than the larger and inore unruly congress. • The second chcck,^ congressional review of presidential decrees, was generally a dead letter. Congressmen generally had little interest in rehashing old history which would provide little political mileage. The prohibition against passing tax bills through emergency decrees was soniewhat more effective. A major influence on presidential decision making came from the advisory agencies. Under the 1946 constitution, all economic bills had to be published with the text of advisory opinions issued by the Consejo Nacional do Economia . Often this was accompanied by the stateiTients of motives froin the ministers under whose authority the legislation would be implemented and by advisory reports drawn up by the Junt; : Nacion al d c Planificacion .. These advisory agencies.. "^^ Cfjnslitucion Po l Hica . . . , Title X, Section 145. Interview with Kc. Oscar Loor, former Executive Director of CEND]i:S, on November 21, 19o8.

PAGE 205

]9I could, in the long run, exi.-rcise more indejjcndent power Ihan Iheir legal ndviFory roles would sugcrest. The core of the advisory groups was the bureaucratic technicians-the middle class professionals who generally enjoyed tenure because of their indispensable expertise. They were responsible for most of the data collection and planning which formed the basis for programmatic evaluations. The style of decision making within the bureaucracies \yas generally professional. A high premium was t placed on expertise. Decision criteria were more or less universalist. Explicitly political considerations were usually rejected, at least in internal planning studies. The bureaucratic technicians usually tried to develop broad policy outlines that could be used to develop, coordinate and evaluate public policies. The bureaucratic technicians usually made no pretense of being ideologically neutral. Planning papers showed a very definite preference for the central coordination of private and public development through the advisory agencies. A premium was placed on economically rational development policies. Also evident was an undercurrent in favor of the economic autonomy of Ecuador. Investments in capital intensive industries to replace imports were favored over possible gains in living conditions through specialization in the areas of economic comparative advantage. Little attention was paid 44 Interview v.'ith Eng. Julio Ulloa, Staff Engineer for CENDES, on May 20, 1968. This observation was also made by many oilier s.

PAGE 206

19: to possible benefits of tlic projected L^llin American Free Trade Area. The technical studies also generally placed a high premium on increasing don:iestic savings, on monetary stability, and on achiev45 ing a balance in international payments. The Junta Nacional de Planificacion y Coordinacion Eco nomico was the most professional agency dominated by the technicians. The technicians were also influential in the Consejo Nacional de Economia and the ministerial agencies involved in economic and social planning. The extent and bases of influence of technical and non-technical groups varied from agency to agency. The following discussion is intended to be only illustrative and not definitive. The major differences between the technicians and the politicians was over the criteria for political decision making. The politicos wanted to be able to give specific policy benefits to specific groups with the goal of enhancing the power and status of the dominant political coalition. The technicians wanted to develop general policies covering relations with many groups on the basis of an abstract concept of public interest. The advisory technicians were rarely in a position to offer overt opposition to presidential programs. The president had llie political 45 ^ Analysis of tecnico ideology based on Edward Wygard, Bases Par a U na P o liti ca de ^'ome nto Industr i al en El Ecuador (Quito: Junta Nacional de Planificacion y Coordinacion Economico, 1962). This documeDt has generally been considered among the inost influential in the de\-eloi)inent of policy.

PAGE 207

1 "6 niuir^clc and legal authority to win favorable pul->lic evaluations on almost any prof^j-aiii he v.'ishcd. However, the advisory agencies, through persuasion and participation, could introduce new rules by which to judge political issues tliat subtlely shifted the tone and balance of many programs. A factor was the control the technicians exercise over the interpretation of data. Politicians had a hard time challenging the conclusions of the technicians in public since they lack both the information and the expertise to know what it would mean. Another weapon was the pattern of institutional organization around on-going programs. Some areas in most agencies have been organized for the technical evaluation and development of programs. Politicians could only cut off the flow of the program by abolishing the technical staffs or by trying to bypass them. However, technical advice would seem to be necessary for many politically neutral programs so it is difficult to abolish or alter the planning agencies. The technicians could gain a more direct access to presidential decision making through the partial co-optation of cabinet ministers to technical standards. Ministers sat on the Junta Nacional de Plan ificacion and the Junta Monc taria to represent political interest in these agencies. However, it is reported that they frequently had been educated into a professional orientation through their continued

PAGE 208

19parlicipation. Tlic advisory agencies also entered directly into presidential calculations through their ability to co-opl or side track political opponents under the guise of technical consultation. The technicians were usually careful to take into account the interests and goals of all affected groups when presenting political programs. Disaffected groups were forced into the difficult position of arguing for special privilege when opposing technical evaluations. This reduced their political effectiveness. In recent years the technicians have gained a powerful ally on some issues from the Alliance for Progress and USAID agencies. North American experts were in a position to work with the planners in the formation of programs and then to apply pressure directly on the president and cabinet. However, friction had apparently developed over differences injilanning goals and ideology and personal resentments over the overwhelming "advisory" role of the North Americans. The Alliance and USAID, of course, were not effective prior to 1962. There were several situational constraints on presidential decision making. One inajor factor has already been mentioned in another context; the necessity of keeping down organized public opposition to the regime. Presidents could not afford to push through Interview willi Dr. Edu.irdo Larrea Slaccy, former General Manager of the B anco Cent ra l, on Nciveniber 20, 1968,

PAGE 209

198 programs which would Sfriously aliciiatc important elite groups. One conimon technique was to bring all of the inajor groups affected by a proposed program into public planning to gain at least the appearances of public commitment. The functional senators can play an important role in this process. Other techniques were to assign "responsibility" for planning in a sensitive area to a "loaded" conference of public officials and private representatives. Another device was to find one merhber of potentially disaffected groups who would be willing to support some form of the desired policy and to give his statements the maximum amount of coverage. Many times this took the forni of covering letters for the legislation when it was published in the Registro Oficial . A second situational restraint was the pressure of financing. Budgets have traditionally been inibalanced. In 1961, the central government took in 1, 564, 505 sucres and spent 2, 349, 351 sucres for 47 a deficit of 784, 846 sucres. Presidents found it very difficult to keep expenditures from rising. The maintenance of political support required the availability of government jobs for patronage, public works available for local political coalitions, and contracts available to placate commercial groups. Congrcssnicn usually resisted taxes on llicir districts, unless the money raised be spent within the district. Not only was the presidential budget imbalanced, it was out of 4 7 -> '' Ecuador, Ban(."o Central, Boletin d el Banco Central: Octu bre-Dociembre, 19 65 (Quito: J
PAGE 210

199 presidential control. Sixty percent of all tax revenues went directly to aulononjous decentralized agencies. Although many of these a^L-ncies register a budgetary surplus, excess monies did not go back to the common pot. As a result, a disproportionately large share of the total budget imbalance was shifted on to the relatively small por48 tion of the budget under direct presidential control. The president had only limited power to shift around items of the budget under his noininal control. One-third of the central budget went to the military. It was not politically expedient for presidents 49 to touch this money. Much of what was left went to necessary state services or for on-going projects. Many fund allocations v/ere supported by politically powerful groups. Major shifts in these areas would invite political disaster. A result was a natural tendency for presidents to take as much money as possible out of politically inspired public works programs started by his predecessors and to constantly push for gradual budgetary increases. A final limitation on presidential decision inaking was his lack 48 United States General Accounting Office, Questionable Aspects of Budget Support Loans Made to the Government of Ecuador (Washington, J). C. : Government Printing Office, 1965). 49 Evidence of the independence of tlie military is given by the following: tlie organization of the Ministro de Defense Nacional is not given in the government organization manual, the expenditures of the military are only ]oublished in one lump sum with :\o breakdowns by co:,ts. Military expenditures are nominally supervised by a board of review. Ap]>arently the majority control of the board is in the hands of the military.

PAGE 211

20U of legal authority in major s])licres of policy. State powers had been delegated to autonomous agencies, usually to take decision making out of presidential hands and to guarantee the on-going influence of politically powerful groups that have vested interests in a certain 50 area. Most of the autonomous agencies operated within relatively small spheres of policy and represented no particular challenge to the powers of the president. Such agencies were represented by the Autorid a d Portuaria de Guayaquil , the several local housing programs, the national lottery, the several road building authorities and the many health campaigns. One autonomous agency, the Banco Central , had been given major powers over monetary policy. The Junta Monetaria , which established policies for the Banco Central, was charged with the responsibility of maintaining the integrity of the sucre and of managing the finances of the government. The Banco Centra l had several legal tools with which to tackle its responsibility. The Banco had exclusive right to print and call in currency. Government accounts were also held in the Banco so credit could not be generated through overdrafts. The Banco , under the direction of the Junta Monetar ia, set the minimum deposits that all private banks maintained witli the Banco as reserves. The Banco Central also had jurisdiction over import-export SOjnterviow with Dr. Carlos Rota, Frcsidcnt of Sociedad Radio Tecnico, on October 15, 1968.

PAGE 212

201 regulation. All currency transactions carried on at the official exchange rates were handled by the Banco . The Banco also issued import and export licenses. A major means of regulating imports was through varying the level of "prior deposits" necessary for licenses. All foreign reserves held by the government were kept by , T> 51 the Banco. The Banco Central could also influence economic conditions through free marke-t operations. The interest rates charged private banks by the Banco Central was a major determinant of the costs of private credits. The Banco could sell foreign exchange on the free market to stabilize the unofficial exchange rates. The Banco could also influence credit policies of the banking industry through its own 52 free market operations. The Junta Monetaria , through the Banco Central, could influence monetary policy through recommendations made to the president. Most of the changes of tariff levels or shifts of items fronn list to list were based on Banco recommendations. Junta recomiTiendations were backed up by the authority of expertise and the backing of the Inter53 national Monetary Fund. 51 -' Ecuador, El Banco Central del Ecuador y Las Politicas Mone taria, Credencia y Cambiaria del Pais ( Quito: Banco Central, undated). 52 Interview with Sr. Eduardo Larrea Slacey, former Manager of the Banco Central on November 20, 1968. 53lbid.

PAGE 213

202 Political coixflicls between the Junta and the president centered on nionetary policy and financing the budget. Presidents who would have liked to promote either an inflationary policy or to finance other programs through increased budgetary deficits were frequently blocked by the Banco and the Junta. Since the government did not do its own banking, deficits have to be financed through loans from the Banco or through the funding of bonds. The limited capacity of the economy to absorb bonds was influenced by the Banco credit policies. The president could only force loans froin an unwilling Banco by passing a bill through congress requiring such a measure. This was cumbersonne and politically embarrassing. The Banco Central was run by the Junta Monetaria . Until I960, the Junta was made up of nine members: the minister of economy, the minister of the treasury, the president of the Instituto Nacional de Prevision, the head of the Social Security fund, two regional representatives from agriculture, commerce and industry, and two regional representatives of the private banks. The ninth member was elected by the others from private life to represent "the public interest. ' The manager of the Banco Central had a voice but no vote. Junta decisions were taken by a majority vote. The manager of the Banco Central was traditionally influential in determining Junta policies. The influence of the manager was based on the strong cornEcuador, Mcmoria del Gcrente General del Banco Central de 1959 (Quito: Banco Central, I960), p. 220.

PAGE 214

203 mitmcnt of 'he staff of the Banco to a stable money policy. The Banco managers often had a basis for evaluating proposals and problems that the voting menibers could not match. Another tool was control over the advisory opinions issued by the staff of the Banco on Junta proposals. The technical competence of the Banco staff has always coinmanded respect even from politicians and businessmen who did not agree with their policies. The managers of the Banco have generally been astute about managing the timing and context of staff reports. Small requests from powerful groups for minor exceptions that would be difficult to refuse individually looked different when presented in a bundle with a stern evaluation of the total costs. Reports were also timed so that the political and economic climates would be advantageous for a "proper" decision. The managers could usually exploit the political deadlock of the Junta. Ministers who nominally represented the point of view of the president were often co-opted into sharing the professional regard for stable money held by the Banco staff. The splits among the private representatives often gave the supporters of the Banco the neces. 55 sary margin. The authority and independence of the Banco was maintained for many years by several factors. Many politicians and businessmen 55 rInterview with Sr. Larrea Stacey.

PAGE 215

204 favored the stable money policy. They knew that few presidents would be able to resist pressures for budget deficits and inflation if they had control of the Banco . The status among the professionals of the staff of the Banco was a further prop. Any take-over of the Banco and Junta would be on behalf of a particular set of political or economic interests. This would violate the cardinal rule of Ecuadorean presidents: never give the opposition an issue around which it can organ. 56 ize. ^^Occasional interview with Mr. Madison Monroe Adams, Jr. , Commercial Attache to the American Embassy in Quito.

PAGE 216

CHAPTER VII CAMILIO PONCE ENRIQUE Z JULY, 1959 TO SEPTEMBER, 196O Introduction The Ponce regime offers a baseline against which the following two administrations can be compared. In some ways, the Ponce regime is the most "normal" of the three. Ponce was the only president elected to office through constitutional means who served out his entire term. Velasco was overthrown in a coup and Arosemena achieved office through a coup. These factors had an influence on their political styles and concerns. The final year of the Ponce regime was a year of almost complete inactivity. Almost no decisions were made by the president. Very few were made by the Junta Monetaria . A comparison of the activities and situations of the later regimes will suggest some of the correlates of political activity. Political Situation Camilio Ponce Enriquez was elected president of Ecuador in July, i960, with the support of the Alianza Popular, a coalition of 205

PAGE 217

206 the Partido Conservador , Ponce's own Movimiento Social Cristiano and several minor parties of the right. Ponce received 185, 335 2 votes out of less than 400, 000 votes cast. His main strength was in the conservative sierra provinces and among the coastal upper classes. It was alleged that Ponce received substantial help from the outgoing regime of Jose Maria Velasco Ibarra in whose cabinet Ponce had been Minister of Government. The first runner-up in the presidential race was Raul Clemente Huerta who received 175, 574 votes and ran on a coalition ticket organized around the Partido 4 Liberal Radical . Ponce was the model oligarch in style of living and ideology. He enjoyed patrician antecedents; the family name is one of the most aristocratic of all in the sierra and the family fortune is still based 5 on landed wealth. His political ideology was firmly based on Christian-conservative principles. The rulers of the model society guard established truth, morality, the church and the upper classes. This can best be achieved through the leadership of the elite groups in the Edwin E. Erickson, e^ al. , Area Handbook for Ecuador (Washington, D. C. : Government Printing Office, 1966), p. 271. New York Times , June 7, 1956, 7:1. ^Ibid. , January 31, 1956, 3:1. ^ Ibid. , June 6, 1956, 12:5. Georg Maier, "The Impact of Velasquisnio on the Ecuadorean Political System" (Ph. D. dissertation, Department of Political Science, Southern Illinois University, 1966), p. 78.

PAGE 218

207 society. In the view of Ponce, this arrangement would result in the trickling down of the benefits of development and order to the more 111 -1 -6 humble strata in the society. However, the political style of Ponce was more in keeping with the rough and tumble traditions of Ecuadorean presidential politics. Observers have suggested that Ponce's main political goal was to 7 achieve and keep power. A major use of power was to perpetuate rule. Ponce had the reputation of using his mastery of political intrigue 8 to beat down any claims made by friends and competitors alike. Ponce was careful not to risk his political position for programmatic ends. John DeWitt, "The Christian Democrats of Latin America: Their Ideology and Political Parties" (Master's Thesis, Department of Political Science, University of Florida, 1967), p. 56. 7 Interview with Sr. Alejandro Vega Toral, former director of the FNV for Cuenca and 1968 deputy to the national congress, on October 18, 1969. g The relations between Ponce and Velasco illustrate this well. Ponce had been a very able minister of government for Velasco from 195Z to 1956. Another minister, Manuel Araujo Hidalgo, persuaded Velasco that the government should back Ponce as the "official candidate" even though he was the leader of an independent political movement. Observers have credited the pressure exerted by Velasco as the major factor that gave Ponce a narrow edge over the liberal candidate for president, Raul Clemente Hucrta. Ponce announced his break with his Velasquista supporters soon after the elections. During a formal official reception. Ponce ordered a large dog to attack Araujo Hidalgo. Poor Araujo could only find refuge in the swimming pool. After the humiliation of Araujo was complete. Ponce fished him out of the water and sent him home. The next week Ponce started to inake a series of strong attacks against the previous regime of Velasco Baarra in which he had been a key minister. Ponce would not tolerate rivals to whom he was obligated.

PAGE 219

208 Ponce's political position in the last year of his presidency could be described as a state of incipient weakness. His popular support had never been high. He was a minority president who had won office through a possibly fraudulent election. The popular mood had evidently drifted to the left, further weakening his position. His political supporters were well aware that he would not have the largesse of state to distribute past September, I960. Many former allies v/ere looking for other bandwagons onto which they could climb. Ponce's relations with congress were particularly strained. A loan Ponce had obtained from the United States for a badly needed bridge to Guayaquil was almost rejected. Opposition senators, usually eager to spend money, had demanded that the funds be divided evenly among all of the provinces. The apparent intent of this unac9 ceptable demand had been to embarrass Ponce, Ponce had been faced with unusually heavy demands on his government. Dissatisfaction was widespread among businessmen who had been hurt by the recession in the United States. Contraband was running very high which had further hurt the positions of the smaller businessmen. Ponce had also been faced with very serious public insurrections. The officers of a small army garrison in Portoviejo had been lynched by a mob after reports of brutality in Republica del Ecuador, Actas del Congreso Extraordinario de 1959; Cainara del Senado , pp. 5-17. ^^New York Times, May 30, 1959, 5:15.

PAGE 220

209 military discipline. A few weeks later a radical demonstration against the Guayaquil police chief erupted into a very serious riot that cost the lives of hundreds in a week of violence. However, the Ponce regime had several bases for support. He had not alienated the military or the elites in the niajor regions. The combined threats of public anarchy, the radical left , and the return 13 of Velasco Ibarra helped consolidate their backing. Ponce also had an unusually large public works budget with which to play in his last 14 year. He had kept expenditures down in the first years of his regime. The money saved was used to encourage the later support of many political and commercial groups. Ponce's domestic position was also enhanced by the Inter-American conference scheduled to be held in Quito in I960. A military coup would have seriously einbar15 rassed the international standing of the government. No other government on the horizon was as acceptable to the elites as Ponce's. ^ ^"Violence in Three Stages, " Time , 73:41, June 15, 1959. 12 '' Republica del Ecuador, Mensaje que el Excellentisimo Sr . Dr. Don Camilio Ponce Enriquez, Presidente Constitucional de la Republica, Dirige a H.Congreso Nacional (Quito: Tallarcs Graficas Nacionales, 1959), p. 28. ^• ^New York Times , June 7, 1959, 32:3. •''*Republica del Ecuador, Memoriadel Banco Central; 1959 , p. 174. ^^New York Times, June 4, 1959, 1:4.

PAGE 221

210 Recruitment to the Ponce Administration Recruitment was one of the major explanations of political decision inaking discussed in Chapter 1. It was hypothesized that some share of political decision making could be explained by having businessmen in governnnent voting for their ov/n economic self-interest. To test this hypothesis, dataare needed on how many businessmen were in the Ponce regime, which positions they occupied, and from which business groups they were drawn. Businessmen in government will be classified according to their regional background, the size of their business and the types of business they managed. The first two factors are self-explanatory. The third factor is broken down into the classes of "marginal, " "established, " and "inner elite. " "Marginal" businessmen are either people who had tenuous connections to business or who were well connected with businesses that were in financial trouble. "Inner elite" businessmen were associated with the chains of businesses owned by the Guayaquil oligarchy or who had "very large" holdings in sierra business. All others are "established" businessmen. The first level of recruitment to be analyzed is the pattern of office holding in the political campaign supporting Gonzalo Cordero Crespo, the Alianza candidate for president in I960. There were several reasons for not studying the recruitment to the political campaign of 1956. The impetus generated by the 1956 campaign was

PAGE 222

211 largely dissipated by I960. There was no guarantee that the businessmen involved still supported Ponce; however, the businessnnen in the i960 cannpaign were closely tied to the regiiTie since Cordero Crespo was running on Ponce's record. Utilizing the recruitment data for the i960 campaign also makes the data more comparable with the patterns for the other parties. The positions to which recruitment will be studied are the national executive offices of the parties in the conservative coalition, the national executive offices of the campaign, the regional offices for the party and campaign organizations and the congressional candidates fronn Guayas and Pichincha provinces. These were the most important positions. All of the significant businessmen in the political organization behind Cordero Crespo held one of these seats, and comparable data are available for equivalent positions in the other campaign organizations. The overall level of business recruitnnent was low. Out of a total of 144 positions, only 15 were held by businessnien. Since a few businessmen held several positions, there were only IZ individuals in the list. The characteristics of the businesses to which they were affiliated are presented in Table 10 below. 16 Recruitment dataare taken from articles in El Comcrcio from May to September of I960. The names of incumbents of inany more positions were available. The positions selected for analysis were chosen for tlieir evident managerial imi^ortance. They represented the top of tlie organizational hierarchies and were staffed by the nationally known political figures. Few businessmen were recruited to any lower positions.

PAGE 223

212 TABLE 10 CHARACTERISTICS OF BUSINESSMEN IN PONCE POLITICAL ORGANIZATION No. of People Business Characteristic 7 "inner elite" 5 established marginal 3 manufacturing 5 service 1 finance 3 commerce media 7 coast 5 sierra The power of the businessmen may have been out of proportion to their small numerical representation. Four of the seven coastal businessmen were on the directorship of the Partido Conservador of Guayas, where they held all but two seats. One of the Guayaquil business elites ran for a key position in public office under the conservative banner. Joaquin Orrantia Gonzalez was the first candidate for the conservative list for the Camara de Deputados , probably the single position most likely to be elected by the conservatives in the liberal coast. Three other businessmen filled slots on the conservative slates; however, they were all small businessmen in positions not likely to be elected. There is an interesting relation between the regional residence and economic position of the businessmen in the Ponce organization.

PAGE 224

213 Five out of seven businessmen with "large holdings" were from Quito. The president of the Pa rtido Conservador Ecuatoriano , Manuel Jijon Caamano y Flores, ran Fabrica Chillo Jijon , the largest textile mill in Ecuador. He was the scion of one of the richest and most aristo17 cratic sierra families. The other sierra elites were Francisco Pinto Davila (owner of the chain of textile mills), Rafael Febres Cordero (part owner of Ecuatoriana de Aviacion and from an old family), and Luis Tobar Donoso, who was also an owner of Ecuatoriana . The remaining sierra businessman, Gonzalo Ruales, ran Transportes Aereos Orientales, a large airline, but was not affiliated with the "inner circle. " However, out of the seven businessmen froin Guayquil, only two came from the inner circle. They were Joaquin Orrantia Gonzalez, whose fannily ran COMANDATO , Corporacion Automotriz, Orrantia y Estrada Casa de Comercio , Distribuidora de Autos and Fleischma n Ecuatoriana in connection with the Estrada family empire. The other was Gabriel Luque Rohde, who runs La Union insurance company and the Banco Terratorial with other inembers of the Guayaquil inner circle. The remaining businessmen from Guayaquil, Enrique Amador Marquez, Rafael Carbo Noboa, Cesar Eduardo Perez Moscoso, Luis Rigail Roca and Hector Polit Orellana, were all affiliated with independent businesses of medium size and little national importance. 'Georg Maier, p. 3.

PAGE 225

214 All of the sierra businessmen were in the party organization of the Alianza Popular . None ran for office. Most of the coastal businessmen not in the commercial inner circles were candidates for congress and occupied low ranking spots on the slate. These data suggest a pattern. The Ponce government had closest relations with the sierra textile manufacturers and the Guayaquil commercial elites. All of the businessmen from these groups were plugged into the highest levels of party management. Although only the coastal businessmen were represented, they were recruited from the financial heart of the Guayaquil oligarchy. The Orrantias in particular have had the reputation of being the political "front men" for 18 "^ the coastal interests. It would be hard to believe that Joaquin Orrantia would participate if he had not been assured of having substantial influence. The businessmen recruited from outside of the sierra and coastal "inner elite" groups were generally candidates for offices they had little hope of winning. This factor reinforces the impression that the most important business connections of the Ponce regime were with the coastal and sierra elite groups. This analysis would suggest a very conservative government. The major political positions were given to businessmen who would be expected to favor the status quo. Given the major differences between the interests of the coastal elites and the sierra manufacInterview with Mr. Madison Monroe Adams, Jr. , Commercial Attache, United States Embassy in Ecuador, on March 1, 1968.

PAGE 226

215 turers, it would also be expected that the Ponce government would have a difficult time settling on any course of action. The next higher level of recruitment is to the cabinet. The business positions of the businessmen in the cabinet are given in Table 11 below. TABLE 11 CHARACTERISTICS OF BUSINESSMEN IN THE PONCE CABINET Character istics No. of Peo ple Regional Guayaquil 5 location Quito 4 Position inner circle 4 of established '.1 business marginal 4 Type of manufacturing 7 business foodstuffs 6 other 1 commerce 1 finance 1 media The position of businessmen in the Ponce cabinet is surprisingly different from their importance in the political organization. The gross level of business representation is much higher. Nine out of tl irty-two people who had cabinet positions were business types. The

PAGE 227

216 major businessmen in the cabinet held positions that were related to their areas of economic self-interest. Two financiers, Isidro de Icaza Plaza and J. Federico Intriago, held the portfolios for economy. The Minister for Public Works, Sixto Duran Ballen, was an architect and importer of construction materials. Businessmen were also in the financially powerful positions of defense and social welfare. Several businessmen held positions that were not directly related to their own economic interests. However, these ministers were the most marginal businessmen in the cabinet. The Minister for Public Education, Fernando Aspiazu Semenario, was a manager of farms in Guayaquil. The minister and sub-minister for foreign relations were as well known as lawyers as they were as businessmen. There were important differences between the staffing of the cabinet and the campaign organization in the direction as well as the level of business recruitment. Not one businessman in the campaign also held a cabinet position. The cabinet also had a strong over-representation of coastal foodstuff manufacturers. The campaign interests of sierra manufacturing and coastal commerce were relatively under-represented. The major parallel between the campaign and the cabinet staffing was the reliance on "inner elite" businessmen. The central position of the inner elite businessmen in the campaign was

PAGE 228

217 paralleled by Ihe staffing of the key economic portfolios by elite businessmen in the cabinet. In both the campaign and the cabinet, the peripheral positions were held by the peripheral businessmen. A cabinet with this composition would be expected to advocate stable i-noney supply and to go very slowly on the regulation of business elites in favor of the smaller businessmen. There would be little reason to expect that the Ponce government would pick up the demands of either the coastal banana growers or the sierra wheat growers. Cabinet members would not seem to have any preferences for either side of the free trade versus tariff protection issue. It is interesting that these policy preferences are similar to those of the businessnien in the campaign organization despite the substantial differences in the pattern of recruitment. Decision Making Uader Ponce As would be predicted from the pattern of business representation, the political circumstances, and the personal inclinations of Ponce, very little was done in the last year in office. The major decision was to build the new Legislative Palace in Quito. ^ This represented a major investment in the governinent public works program and helped the standing of the regime with the politicians, the contractors, and the construction supply houses. However, it was 19 Hispanic American Repor t. October, 1959, p. 501,

PAGE 229

218 far from the sort of decision listed in the issues of interest to major business factions. A second decision of the Ponce government was to sponsor increased regulation of the tax free imports of the military commissaries. The Quito Camara de Comercio considered this a major political victory. It was the result of private negotiations between former Minister of the Treasury Luis Gomez Izquierdo and the military leaders who were eager to clear up an obvious abuse. Again, this v/as a useful policy that did not split the business community. A last economic decision of the Ponce regime was to veto a bill repealing the payment of business taxes a year in advance on the basis of income projections. These anticipated taxes have long been considered a nuisance by everyone in the business community. The reasons for having it die in the house on orders of the president were that granting credits to cover the year of missing revenues would promote inflation, that the granting of tax relief for businessmen would justifiably result in the demand for tax relief on the part of 22 many other groups and that the bill was poorly drafted. ^^"La Labor de los Senadores Funcionales por el Comercio en la Legislatura de I960," Come rcio Ecuatoriano , No. 106, July, August, September, I960, p. 1. "Reunion de Ejecutivos b las Camaras de Comercio, " Comer cio Ecua t oriano , 103 (October-December, 1959), p. U; "La Labor de Los Senadores Funcionales por El Comercio en La Legislatura, " Comercio Ecuatoriano , 106 (July-September, 19o0), p. 5. ^^"Labores del Presidcnte, " Revista de la Camara dc Comercio de Guayaquil, 37 (January 31, I960), p. 27; La Industria , 26-2, p. 14.

PAGE 230

219 The tax veto probably illustrates how narrow is the margin of success for most Ecuadorean presidents. A repeal of anticipated taxes would have been a needed reforin that would have pleased niost business elites. This program would have been consistent with the attributed interests of the cabinet and political supporters. Tlierefore there is little reason to doubt that fears of popular political reaction and the fiscal position of the government were responsible for the veto. The Junta Monetaria The Junta Monetaria was also relatively quiescent during the last year of the Ponce regime. The only significant policy decision rendered was to give tariff protection to Baterias Ecuatorianas S. A . , the national battery factory. Recruitment is one explanatory factor for understanding the tariff decision. Two aspects of recruitment are of interest: froin where were the businessmen drawn and v/hat was their relation to the president and his cabinet. Both factors arc presented below in Table 12. The pattern of recruitment would suggest that political interests of the president were well represented. Some of the members whose political affiliations have not been determined undoubtedly were not conservatives. However, many of thein, Sr. Alfredo Pareja for example, felt that they had no political ties. Those whose party

PAGE 231

TABLE 12 RECRUITMENT TO THE JUNTA MONETARIA' 220 Member of the Organization Political Junta Represented Affiliation Business Interests Enrique Arizaga Toral Congress Conservative None known Isidro de Icaza Plaza Ministry Banco de Guayaquil of Intercambio Coniercial Economy Conservative Sud America Life Ins. Rafael Febres Cordero Consejo Nacional Economia Conservative Ecuatoriana Julio E spinosa Zaldumbide Institute Nacional de Pre vision Conservative Former President of Banco Provincial of Quito Federico Bravo Basurto Coastal Camaras Landowner Carlos Ponce Martinez Sierra Camaras Conservative EDIALGE Augustin Febres Coastal Cordero Tyler Banlcs Sociedad General Gregorio Ormaza Sierra Eguez Banks Banco de Pichincha Alfredo Pareja Diezcanseco Private Citizen None Republica del Ecuador, Memori adel Cerentc General del Banco Cen tral correspondiente al Ejercicio de 1959 (Quito: Banco Central, I960), p. 220. Sr. Alfredo Pareja Diezcanseco has been associated with banking and commerce. However, he was elected by the other members of the board because they felt sure he would not take sides. Interview with Alfredo Pareja Diezcanseco on November 21, 1968.

PAGE 232

221 identification was listed could, however, be expected to be either representatives of the administration in power or to have close political and personal contacts with the political leaders supporting the me. The banking commiunity was very heavily represented on the Junta Monetaria . Four out of the nine members were from banks. This was a much higher level of recruitmient than was found for either the cabinet o-r the campaign organizations. However, only two of the bankers were from the coast, where the sentiment in favor of inflationary expansion was highest. Since one of theni, Isidro de Icaza Plaza, was also in the cabinet, only the representative from the coastal banks, Augustin Febres Cordero Tyler, remained as a probable spokesman for the coastal financial interests. The balance of the Junta was generally amenable to the traditional stable money policies of the Banco Central. Since the three remaining businessmen represented a diversity of public and private interests, all relatively minor, it would be doubtful if they would push for a consistent set of policies opposed to the goals of the Ponce government. Overall the Junta reflected many of the interests and policy preferences of the regime. The Junta Monetaria was relatively inactive during the last year of the Ponce regime. Most of the decisions taken by the Junta were more or less routine "fine tuning" of the economy. The seasonal changes in credit demand with the various periods of planting and

PAGE 233

22: harvesting were primarily responsible for the relatively slight alterations in the minimum deposits for banks and some exports. Several of the changes in tariff lists and prior deposits for imports were attributed to a concern for sinall shifts in the balance of international payments. Over all, though, the relative quiescence of the Junta reflected a satisfactory state of affairs --the maintenance of stable 23 money and balanced growth without draconian nneasures. The major political decision taken by the Junta was the shift of imported batteries froni List I (vital goods, paid for through foreign exchange at the advantageous official rate) to List II ("luxury" items, bought on foreign exchange from the open market) in order to protect Baterias Ecuatorianas, S. A. Baterias Ecuatorianas, S. A. was started in 1958 by Oswaldo Tamayo Benalcazar. His initial plant for Baterias Ecuatorianas, S. A . was little more than a simple assembly operation. The labor force of some eight inen merely inserted imported plates into imported 24 cases and filled them with imported sulphuric acid. The prospects of the new company were aided by the excellent political and commercial connections enjoyed by Sr. Tamayo. Sr. Tamayo also was formerly Minister of Finance for the Ponce government in 1956. He ^-'"El Banco Central del Ecuador y las Politicas Monetaria, Credencia y Cambiaria del Pais" (Quito: Banco Central), Mimeographed. 24 Interview with Sr. Ramiro Cabeza de Vaca, president of Distribuidores Volkswagen, on November 25, 1968.

PAGE 234

223 was a member of the board of Ecuatoriana de Aviacion in partnership with Luis Tobar Donoso and Rafael Febres Cordero. Sr. Tamayo received tax and some tariff benefits for innported capital goods under the 1957 Lidustrial Development Law. In 1959, Sr. Tamayo applied for tariff protection against imported batteries under Clause 68 of the Industrial Benefit Law which authorized protection against excessive foreign competition. This immediately set off a storiTi between the importers and local manufacturing interests. Sr. Tamayo's argument was that he could not make the factory into anything but an assembly plant until he had first denionstrated that there was a market for Ecviadorean batteries. He argued that there should be a market since he was providing high quality batteries at a connpetitive price and a wide diversity of nnodels. The flaw was that the Ecuadorean public was prejudiced against domestic products due to the past poor performance of some manufacturers. Therefore he was entitled to a 25 percent differential between his price and the price of imports in order to establish his market. Since he would not increase prices, the consumers would not be affected in any way. Therefore opjjosition to Baterias Ecuatorianas, S. A. came from the 2 5 "irresponsible oligarchs. " The autoinobile importers opposed tariff protection for Baterias ^Letter written by Pedro Pinto Guzman, president of the Camara de Industries de Pichincha , and published in El Coinercio on August 3, 1959, p. 1; editorial in Industria Ecuatoriana , November, 1959. p. 11.

PAGE 235

224 Ecuatorianas, S. A . They argued that since there was virtually no "manufacturing" going on in the plant, what Sr. Tamayo wanted in effect was a inonopoly on the right to import batteries, only he would do it in pieces instead of in completed units. It would be difficult for him to manufacture more of the intermediate products since Ecuador had neither a rubber industry, a sulphuric acid industry nor a lead industry that could compete with the imports. Furthermore, it would be very doubtful if he could replace all imports with domestic production. Such a wide variety of vehicles, requiring a wide variety of batteries, were being innported that the local production would have to import a few examples of many different styles of cells and plates, which would be an uneconomical process. Another element of the argument probably influenced the opponents of tariff protection; should local industry get both tax and tariff protection? Should local industry be developed at the expense of the importers? The political battle between the importers and Sr. Tainayo was fought generally before the Junta Monetaria . The Departamento de Investigaciones Economicos of the Banco Central gave an ambivalent report. They were not opposed to the idea of market protection and conceded that the quality of the batteries produced was not bad. However, they were aware that the "factory" was generally a simple 7 A Interview with Sr. Atahualpha Chavez Gonzalez, former president of the Camara de Comercio de Guayaquil , on October 30, 1968.

PAGE 236

225 assembly operation covering piecemeal importation. Therefore tariff protection would be tantamount to conceding to Sr. Tamayo an import monopoly that would have little benefit for the national econ27 omy. Sr. Tamayo started looking for allies when the Banco Central made their report. He gained the backing of the Camara de Lidus triales de Pichincha . On August 3, 1959, Sr. Tamayo published an open letter to the manager of the Banco Central charging that the anticipated refusal was the result of the influence of "las oligarchias de altas importadores en contra de los intereses nacionales. " A subsequent letter from the president of the Camara de Industriales was 2 8 published that supported Sr. Tainayo's arguments. The major impact of the letters was to serve public notice that Baterias Ecuatorianas had won public commitment from the prestigious Camara de Industriales de Pichincha . The Junta voted to recomimend to the president that the importation of batteries be regulated so as to give Baterias Ecuatorianas the desired market protection. There is no information on the course of discussion within the Junta nor on the reasons for the final decision. However, there are several probable motives. A factor favoring the tariff increase is the interest of the Junta 27 Interview with Sr. Cabeza de Vaca. 28 -^ Letter from Pedro Pinto Guzman, president of the Camara de Industriales de Pichincha , in El Comercio , October 3, 1959, p. 1

PAGE 237

226 in conserving foreign exchange. The problems in maintaining the balance of foreign exchange are such that the burden is generally on the importers Lo show why tariffs should not be raised. ' The protectionist bent would naturally be augmented for B aterias Ecuator ianas by the close political and personal relations between Sr. Tamayo and key members of the Ponce regime. Protection in this case could also be consistent with the economic policies of the regime. One consideration was that tax benefits had been granted to Baterias Ecuator ianas . Many tecnicos felt that there was little point in sponsoring development benefits for local manufacturers if they could not be 30 guaranteed a market as well. Perhaps the major reason for granting benefits was that the importers, in opyjosition to the protection, were not able to gain many allies to their arguments. Major Guayaquil financiers had bought 3 1 into the company. The sierra financiers, industrialists and landowners closest to the regime did not care about industrial protection per se as long as it did not raise their own costs. The automobile importers were more or less isolated from any allies that could have 29 "Resumen delas Principales Observaciones de Caracter General al 'Plan General de Desarrollo'" (Quito: Banco Central, undated manuscript, p. 2. Interview with Sr. Economista Manuel Naranjo Toro, former minister of the treasury, on October 15, 1968. 31 World Trade Directory Report on Baterias Ecuatorianas S. A. , date unknown.

PAGE 238

227 carried weight v/ith the Junta or the administration.

PAGE 239

CHAPTER VIII JOSE MARIA VELASCO IBARRA Political Situation Jose Maria Velasco Ibarra has been a major phenomenon of modern Ecuador. He has been president five times between 1934 and 1968. However, he has managed to finish only one term. Three times he has gone out in an orgy of violence and economic and political collapse, only to later be acclaiined president again. The account of his regime from I96O to 1961 will undoubtedly seem bizarre, but it cannot be said to be atypical. It held the distinctive stamp of Ecuadorean politics. An understanding of Velasco 's regime must start with an understanding of Velasco. He has become the modern caudillo and political hero for many low status Ecuadoreans. He is a matchless orator; even sophisticated political opponents have been taken under his spell. He has commented that given a balcony in every town, he would rule Ecuador for life. This is probably close to the truth. ^Alfredo Pareja Diezcanseco, "Teoria y Practica del Conductor Conducidc), " Combat e , XX, 4 (January-February, 196Z), 9-23. George Blanksten, Ecuador: Constitutions and Caudillos (Los Angeles: The University of California Press, 1951), p. 50. 228

PAGE 240

229 Velasco's charisma is based on a lime-tested recipe. He has a tremendous emotional rapport with the masses. He offers himself to them as the embodiment of the Ecuadorean pueblo, the symbol of the restless, all powerful people who will, someday, rise up and smash the oligarchy that is responsible for all of the ills of the country. Velasco also keeps an identifiable enemy in front of the people. He gives them someone to hate and to whona responsibility can be 3 attributed for all personal and national ills. The people cannot see how sophisticated plans and complicated econonnic schemes affect them. Abstract programs do not represent concern for their specific problems. Velasco, however, has put a water fountain, a road, 4 or a school in almost every corner of the coast. He also shows personal concern. An indefatigable cainpaigner, he was the first public figure to visit the small towns where inuch of Ecuador lives. In his presence he shows interest, concern and synapathy for the poor, rather than an emphasis on his dignity and distance from the people. Many people have responded with adulation bordering on worship. There are many homes in which a picture of Velasco stands beside an image of the Virgin. Candles are often lit to both iinages. When out of office, Velasco has sought an alliance with the masses both as a springboard to power and to revenge hiinself on the elites who have "3 'Pareja, p. 21. Occasional conversations with Sr. Alfredo Pareja Diezcanseco.

PAGE 241

230 generally scorned him as a buffoon. As soon as he approaches office, members of the elite community come flocking to his side to get on 5 the inside track to political power. Velasco revels in this attention. He receives the plaudits of those who count as no more than the long delayed recognition of his social and intellectual merits. The often proclaimed plans for revenge and revolution then are shelved as Velasco, in complete trust, turns his administration over to his new 6 allies and comrades. Velasco has generally had three main problenis in office. He is temperamentally unable to understand opposition and criticism. As soon as his administration runs into heavy weather, he lashes out in fury at his critics, thus alienating the moderates who were dubious 7 • • but loyal. His second problem is his total inability to administer. He seems to have no idea of coordinated planning, of financial limitac tions, or of due process. His troubles have been compounded by his third problem: those who have supported Velasco in the past have frequently done so because they wanted to make a bundle of money in Rodrigo Borja C, , "Panorama de la Polrtica Ecuatoriana, " Combate , 19 (2) (November-December, 1961), 16-22. Interview with Professor Georg Maier, Assistant Professor of Political Science, Southern Illinois University, on August 20, 1968. ^Ibid. 8 Interview with Sr. Eduardo Larrea Stacey, former general manager of the Banco Central , on November 20, 1968.

PAGE 242

231 9 a hurry from their government positions. The programs pushed by those near to Velasco have often been personal triumphs but national tragedies. The great trust Velasco places in the transparent scoundrels around him has been explained by his need for status with those who count. Velasco was not rated as a major threat in the I960 presidential elections. He had been in self-imposed exile in Argentina since 1956. The country had enjoyed stable, if not especially progressive, administration for four years. The liberal and moderate socialist candidate was the popular Galo Plaza Lasso, who, while president from 1948 to 1952, had promoted the vast banana industry in Ecuador. Sr. Plaza also had the political benefits of his personal popularity and formidable prestige built up as president and as an international statesman. Galo Plaza 12 was the candidate for all others to beat. The conservative candidate was Gonzalo Cordero Crespo, a personable meinber of the progressive wing of the right. He was running on the good will and administrative record of Ponce. The church was a major ally of the conservatives in the election. Archbishop Q Interview with Professor Maier. Ibid. ^^ Hispanic American Report, 43(6) (August, I960), p. 399. ^^bid. , 43(1) (March, I960), p. 43.

PAGE 243

232 de la Torre of Ecuador made effective use of the threat of excom13 munication for all Catholics who voted for Plaza, Velasco's strategy was to continue campaigning on the time-honored basis of opposition to the "oligarchy. " He most effectively tarred Plaza as a tool of the "yanqais" by pointing to a technical study Plaza had written on the operations of the United Fruit Company in l^atm America. The strategy was successful. After a long campaign marked by violence, Velasco was swept into office by 350, 000 votes, almost as much as the totals received by Cordero Crespo and Plaza combined. This phenomenal upset was matched in the congressional elections where the Velasquistas won a majority in both houses. Velasco entered office with one of the strongest political mandates enjoyed 15 by any Ecuadorean president in recent years. Velasco had carried almost all of the provinces. However, he had run up his tremendous margin of victory in four provinces: 1 fi Pichincha, Guayas, El Oro and Los Rios. These results reflected Velasco's populist base. The two national cities are located in ^-^ Ibid. , 13(4) (June, I960), p. 259. ^^ Ibid. , 3(6). p. 399. ^^Ibid. ""Results of the I960 Presidential Elections in Ecuador" (Xeroxed copy of data loaned by the Latin American Data Bank, University of Florida, undated).

PAGE 244

233 Pichincha and Guayas provinces. El Oro and Los Rios are the heart of the coffee and banana regions which depend substantially on migrant labor. Political Recruitment The major positions within the Velasquists organizations were held by speculation-minded bankers who were marginal members of the Guayaquil elites. The decisions they made catered to the appetites of the Guayaquil bankers for speculation and helped improve their own financial, social and political positions. They apparently did not act to defend the interests of any wider sector of the Ecuadorean business community. Gross recruitment data suggest a rather low level of business 17 influence in the campaign organization. Only 14 out of 107 executive positions within the political organization were held by businessmen. 17 The positions to which recruitment had been considered are: officer in the Frente Nacional Velasquists (FNV), officer in the FNV organization in Pichincha; a candidate for the FNV for the Senate or the Chamber of Deputies, officer in the Frente Nacional Velasquista d c Jndependientes , the Frente Nacion a l Centro-Dcrechista pro Velasco Ibarra and the Union Velasquista Independiente . The proliferation of organizations is partly a result of the great diversity in background, ideology and goals of the groups around Velasco Ibarra. The positions listed were generally held by prominent people, and they were approximately equivalent to the positions analyzed for recruitment in the other canipaign organizations. Data on the recruitment to the positions were generally obtained from articles in El Comercio between March and June of I960. Data on the business holdings of political figures in the Velasquista organizations contained in the master card file on businessmen discussed in Chapter 6.

PAGE 245

2 34 Some of the characteristics of the businessmen in the Velasquista campaign and party organizations are given in Table 13 and Table 14 below. TABLE 13 CHARACTERISTICS OF BUSINESSMEN IN VELASQUISTA PARTY POSITIONS Characteristics No. of people Location of Coast 1 1 business Sierra 3 Type commerce (imjaorters) 5 of financial and service 5 business manufacturing 4 media Financial and inner circle 5 commercial posiestablished 4 tions of business marginal 5 TABLE 14 RELATION BETWEEN BUSINESS AND POLITICAL POSITIONS Political Bvisiness Position Position'"' Inner Circle Other Not in Business Central 5 1 6 Peripheral 4 4 87 '"Central" political positions are the officers of the FNV, officers of the FNV organization in Pichincha, and the senatorial candidates of the coast. These people were most prominent in the later history of the Velasco regime. Other positions in the Velasquista organization have been defined as "peripheral. " Interview with Dr. Jose Vicente Ortufib, former member of the Camara de Diputados , a confidant of former President Carlos Julio Aroscmena Monroy and a leading Quito lawyer, on October 16, 1968.

PAGE 246

235 Table 14 suggests that a majority of the important positions within the Velasquista campaign organization were held by "inner elite" businessmen. The six businessmen who occupied central political positions deserve special mention. They are listed below in Table 15. TABLE 15 SITUATIONS OF BUSINESSMEN WHO HELD CENTRAL POLITICAL POSITIONS Name Political Position Business Position Carlos Julio Arosemena Monroy Eduardo Arosemena Monroy Jose Icaza Roldos Fernando Ponce Luque Vice Presidential candidate President of FNV UVI candidate for Senator from Guayas FNV candidate for Senator from Guayas FNV candidate for Senator froin Guayas Son of founder of La Previsora , Banco de Descuento; inner elite same as above Stockholder of Banco la Previsora ; inner elite Brother is partner with Luis A. Noboa in La Familiar S. A . ; inner elite Nicolas Valdano Raffo Rafael Gomez de la Torre First Deputy candidate for deputy from Guayas FNV candidate for Senator from Pichincha Owned Cia. Chileno Ecuatoriana ; Concreto Ecuatoriana; Industries Quimicas ; Ecuator ianes ; inner elite Owned Indian Comer cial; established bvisinessinan

PAGE 247

236 The major business leaders were from Guayaquil. Rafael de la Torre was the only man from Quito. Most of the Guayaquil businessmen favored inflation and devaluation. Three of them were from the major bank, La Prcvisora . Nicolas Valdado Raffo shared their preference wliich would benefit his investment and building companies. The interests of Fernando Ponce Luque are ill-defined. He apparently participated with Luis A. Noboa in business ventures not listed in the business file. A theme of "elite marginality" runs through much of the business recruitment pattern. Although Carlos Julio Arosemena Tola, the father of Carlos Julio and Eduardo Arosemena Monroy, had started the two banks, he apparently passed on only a few shares of stock to his heirs. Both brothers had made a name for themselves in politics. Eduardo had been the manager of several government banks and funds on the coast. Carlos Julio had been a deputy and later a minister of defense in the 1952-1956 Velasco regime. He apparently had no independent business relations outside of his inheritance from his father. His personal relations with the other inner elites from 1 8 Guayaquil had been very poor for many years. The Ponce Luque s had been political allies of Velasco for many years. Some observers felt that they were using their political successes to boost their Interview with Sr. Rafael Dillon Valdcfz, president of the Banco dc Guayaquil and the Ay.ucarera Vald(?'z , on October 20, 1968.

PAGE 248

237 positions within the inner elites. ^ A parallel phenomenon was the presence of marginal businessmen in peripheral political positions. It is plausible to speculate that businessmen with financial difficulties who took time out to enter politics at a low level might have been motivated by self-interest rather than in the defense of a business sector. Thus the recruitment data for most levels tend to support the idea that the businessmen in Velasco's campaign organizations were generally more interested in promoting their own individual good rather than the interests of a sector of the econoiny. A second channel between Velasco and the speculators of the coastal banking community opened up with the election of Otto Arosemena as commerce senator for the coast. Otto Arosemena, first cousin to Carlos Julio Arosemena Monroy, caine froin a poor but proud branch of the aristocratic Arosemena clan. . Although he had the appetite for elite status and living, he lacked the money. His inconie as the lawyer for La Previsora and as manager of an insurance company was not enough to keep up with the high living coast al elites. Otto Arosemena apparently made a deal with the major specula19 -^ Interview with Dr. Alejandro Carrion, publisher of La Calle , on November 12, 1968. Ibid.

PAGE 249

238 tion-minded bankers of the coast-their backing in the functional election in return for a direct pipeline to Velasco after Arosemena was 2 1 in office. Although several other representatives of La Previsora were already in the Velasquista campaign organization, they were socially and economically "marginals. " The bankers had no guarantee that they would not push their own personal interests instead of the interests of the bankers. Otto Arosemena was to be the official ennissary of the bankers to Velasco. Otto Arosemona's opponent in the election was Atahualpha Chavez Gonzalez, a former president of the Camara de Comercio who enjoyed widespread support. In other circumstances Sr. Chavez would probably have been a sure winner against the relatively unknown Dr. Arosemena. The managers of the Banco La Previsora combed their lists of debtors for the names of members of the camara . Businessmen who owed the bank money or who were likely to borrow in the future were told they were expected to vote for Dr. Arosemena. Two assistant managers of La Previsora were on hand to personally deposit the ballots of debtors in the voting urns. Although the election was close, Sr. Aroseniena won control of the camara votes for func22 tional senator and thus the election. ? 1 Interview with Dr. Eduardo Larrea Stacey. However, Sr. Alejandro Carrion said he was not sure of an alliance. Sr. Rafael Dillon Valde'z, who was probably in the best position to know, declined to answer the question. 22 Interview with Sr. Atahualpha Chave?, Gonzalez, former president of the Camara de Comercio de Guayaquil, on October 30, 1968.

PAGE 250

239 Policy Coalitions and Recruitment to Decision Making Positions Policy making in the Velasco regime was not a result of discrete policy decisions, rather it was a result of a stream of political events in which many different groups participated at different times for a wide variety of reasons. Therefore the emphasis will be on the narrative of the decision making process. The comparisons among the specific phases of the process will be untangled in the last chapter. Events started with the establishment of an alliance between Otto Arosemena and Jose Maria Velasco Ibarra. Velasco had no 23 economic program to offer during the campaign. The Velasquista paper La Na cion presented a very vague draft of areas of concern for the new administration. Velasco wanted to do something about unemployinent, agrarian reform, rural tax reforni, easing of agricultural credit restrictions, and to make banana production iTiore efficient. However, the only means presented were the selection of "technically qualified" incn for the cabinet who v/ould take care of 24 the detailed planning. Velasco also offered a rehash of the "Plan Vial, " a statement of public works priorities first developed in the 23 "^ Interview with Mr. John Snyder, Labor Attache to the American Embassy in Quito, on October 15, 1968. La Nacion (Guayaquil), June 7, I960, p. 1.

PAGE 251

240 25 1952-1956 administration. Velasco wanted three things from an economic plan. First, it had to show he was tackling the probleins of the country in an energetic and orderly manner. Second, it had to have the support of the "people who count, " the Guayaquil financial elites. Third, it had to justify the heavy level of public investments that Velasco wanted to make. The search for a politically viable economic policy started immediately after the election. Velasco organized a series of conferences to discuss economic questions and problems. The first nneet26 ing was held in Guayaquil on June 9. Otto Arosemena Gomez was the first speaker. According to Sr. Arosemena the cominercial sectors of the country were being badly hurt by a recession caused by contraband and lack of circulating money. The Junta Monetaria , which had the responsibility for promoting the proper monetary climate, had come under the influence of foreigners who advocated a sterile policy of absolute stability. As a result there was not enough specie in circulation to move commerce, and this was the root of the problems of the farmer, comerciante and industrialist alike. "Con circulante hay trabajo, con circulante se puede emprender en obras y entonces hay trabajo para los 25 '' Interview v/ith Sr. Alejandro Carrion. ^'^LaCalle, 171 ; June 18, I960), p. 3.

PAGE 252

241 27 diseiTipleados. Y esto es lo que todos piden: trabajo!" Several measures would be necessary lo achieve proper level of money circulation. The first would be to restructure the Junta Monetaria so the government would have a majority and could set public policy. The second would be to invest the minimum balances held by the private banks through the Banco Central . This would put some hundred miillion sucres into circulation and would create a market for governnnent .bonds needed to finance vital construction. Arosemena recognized at this time that the result would be inflation. But it would be an "inflacio'n de ensayo" needed to restore prosperity. This inflation would, by implication, be easily nianaged through restrictions on the same credit measures that caused it. Other measures would be needed to restore the monetary health of the nation. Sr. Arosemena strongly advocated unification of the exchange rates. The system of multiple exchange rates hurt the exporter who sold dollars at the official rate of 15. 15 sucres to the dollar but had to buy dollars at the higher rate of the free market. The multiple exchange rate was maintained, in Sr. Arosemena 's opinion, only due to pressure from the unrealistic foreign technicians of the IMF. Sr. Arosemena also advocated the abolition of the highly unpopular levy of taxes on anticipated income and retroactive tariffs. He asked that Velasco reorganize the budgetary procedure to end the 2'7lbid.

PAGE 253

242 necessity for emergency tariffs to cover large deficits. Three groujss seem to emerge in the discussion among Velasco's advisors about Arosemena's plan. The advisors who were interested in making money out of their political positions backed Arosemena. They probably included Jaime Nebot Velasco, Oswaldo Menendez 28 Gilbert, Galo Garay, Leonardo Stagg and the Ponce Luque brothers. A second group of advisors were most interested in their personal political goals. The politicos , led by Carlos Julio Arosemena, Manuel Araujo Hidalgo and Gonzalo Alameida Urrutia, disliked the speculators as being bad for politics. However, they did not want to jeopardize their relations with Velasco and probably felt they could make political capital out of an economic collapse. A group of conservative manufacturers, led by Ernesto Jouvm Cisneros, tried to get close to Velasco to offset the influence of the first two groups. However, the ties between Velasco and the La Previsora people were too close and Sr. Jouvin soon dropped out of sight. The balance of influence was swung by major Guayaquil bankers intent on speculation. This is suggested by three factors: a committee of Guayaquil bankers was secretly formed to advise and back 29 Velasco on economic problems. Several of these bankers had a reputation for rapacity. It was reported in La Calle that the Guayaquil ^^LaCalle. 156 (March, I960), p. 13; La Calle , 164 (April 30, 1960), p. 5 29 El Telegrafo (Guayaquil), June 10, I960, p. 1,

PAGE 254

243 30 bankers had been "seduced" by an offer to devaluate. The second piece of evidence is that the banlvers moved from public neutrality to more active social approval of Velasco. Fernando Ponce Luque held a private reception in honor of the president-elect, inviting his elite political supporters and personal friends. Several nianagers of La Previsora and Sociedad General were prominent and honored guests. A third indicator was the reaction of the vice -president-elect. In an interview granted to the major Guayaquil paper, El Universo, VicePresident Carlos Julio Arosemena said that most parties were corrupt because they auctioned candidacies among competing groups of campaign contributors. Government executives were equally corrupt because they exploited the moral lapses of legislators to achieve personal political goals. Vice-President Arosem,ena also attacked the functional representatives as being "anti-democratic" and said that a major economic problem was the usury undertaken by banks under 32 political protection. These statements were not directed against opposition presidents or parties. Since they seem to fit into a pattern of later opposition to Velasco, it is believed that they were made in response to the alliance between Velasco and Otto Aroseniena. The pattern of recruitment of businessmen to the Velasco cabinet 30j El Universo (Guayaquil), April 1, I960, pp. 5, 8. ' La Callc, 164, p. 5. 31 •^^ El Universo , June 20, I960, p. 1,

PAGE 255

244 was the most definite sign that an alliance had been made among Velasco, the bankers and the speculation-minded politicians. All of the major ministers were drawn from this narrow circle. Velasco made a phenomenal number of cabinet changes in response to a continually deteriorating political situation. There were 25 incun-ibents for the nine cabinet positions in the 14 months that the Velasco regime was in power. Most of these shifts took place in two ministries. There were 11 ministers of government and four ministers of treasury. No changes were made in public education, development, public works and foreign relations. The remaining three portfolios were changed once. There were only six identifiable businessmen in all of the months of the Velasco cabinet. The key figure was Jose Ceballos Carrion, Minister of Economy from September, I960 to July, 1961. He was the assistant manager of Banco La Previsora . Sr. Ceballos had no other business connections. He was an einployee of Otto Arosemena, who had been moved up to a full seat on the board of directors of the K I 34 bank. The second businessnnan in the original cabinet was Jaime Nebot Velasco who held the portfolio for development during the entire Velasco government. Nebot entered government service with marginal Data on the business relations and holdings of cabinet members have been taken from the master card file. Triemestre Economico (Guayaquil: Banco La Previsora, March, 1961).

PAGE 256

245 bvisincss holdings. He apparently pushed development with skill and vigor. His own private holdings were expanded greatly through his knowledge of where and how the government was going to invest development funds. Carlos Valdano Raffo was Minister for Public Works. He stood to gain from an inflationary investment policy through his ownership of an investnient firm and concrete plant. His holdings have already been listed in Table 15. Some of the businessmen who moved into cabinet positions at a later date were recruited from other government positions. Leonardo Stagg Durkopp replaced Sr. Ceballos after devaluation in July, 1961. He was the president of the Junta Nacional de Planificacion , which played an important advisory role in the development of economic policy while Sr. Ceballos was in office. His appointment represented a lateral shift of an established team meniber rather than the introduction of "new blood. " Sr. Stagg owned two contracting companies, Constructora de Carreteras (CONACA) and Constructora Guayaquil . Both coinpanies were reported to be in a weak position before Sr. Stagg entered politics. Both of them received several substantial 35 government contracts during the Velasco regime. Another later addition to the Velasco cabinet was Enrique Ponce Luque who held the position of Minister of Defense in April and was ^Interview with Sr. Alejandro Carric5h; "Los Doce Hombres del Ano, " La Calle, 252 (Januarys, 1962), p. 4.

PAGE 257

246 Minister of Government from August to September, 1961. Sr. Ponce was a subordinate partner to Luis A. Noboa in Sr. Noboa's banana exporting firm, his importation house, and in La Familiar , the largest sugar mill in Ecuador. It is impossible to know what his economic and political interests were without more data on his relations with Sr. Noboa and the other inner elites. However, it may be significant that Sr. Ponce had been in politics with Velasco for a very long time and that Sr. Noboa was a self-made man within the Guayaquil business coiTiinunity. The only businessman from the sierra was Jorge Acosta Velasco, the son of Jaime Acosta Soberon, who was manager of the Banco de Pichincha. Sr. Acosta was briefly Minister of Government and of the Treasury. However, he was reported to have been estranged from • his father and his connections with the sierra banks was most 36 tenuous. Decision Making The problems of implementing Arosemena's economic policy was attacked in two stages. The first step was to alter the legal context of economic decision making. The Junta Monetaria had long been the chief opposition to Velasco within the government and could be expected to offer stiff resistance to any program of devaluation or ^^Inlerview with Sr. Susana Ashton Donoso, geneological expert of the American Embassy in Quito, on November 6, 1968.

PAGE 258

247 37 inflationary investmenl. Furthermore, the Junta lacked power, had they the will, to authorize the several measures that were intended for use. The first step taken by the Velasco government towards the projected economic policies was to restructure the Junta Monetaria . Otto Arosemcna Gomez drafted and introduced the first miajor admin38 istration proposal in the Senate during the August sessions, Arosemena's sponsorship is suggestive of the position he enjoyed within the Velasco administration. Arosennena's sponsorship also paid political dividends for the government. Opponents of the measure had to argue with the commerce senator on commercial conditions and econoinic policy. The bill, Reformas a la Ley de Regimen Monetaria , was presented as a "reform" of the Junta and Junta practices. The few major proposals of direct interest to the administration were buried within a welter of small changes designed to "give the Junta more 39 flexibility" or to "bring the law in line with current practice. " A major change was to alter the membership of the Junta . The original proposal was to add the ministers of Treasury and Develop37 Interview with Peter Mitchell, Representative of the Confederation of British Industries for Ecuador, on October 16, 1968. 38 See the debates on the reforms of the Ley de Regimen Monetaria, Diario de Debates, Cainara de Senado: Agosto I96 0, p. 47 on. ^^ Ibid. , p. 52.

PAGE 259

248 ment and to take off the member elected by the Instituto Nacional de Prevision. However, tlie representative of the INP was restored in senate debates and the Minister of the Treasury was added to replace the member formerly elected by the board to represent "public interest. ""^^ These changes gave the president and congress the majority over the private members of the Junta . The only significant debate on this proposal took place in the senate. The altera'tion of the membership had been opposed by both the Junta and the Junta Nacional de Planificacion . However, only former members of the Junta Monetaria rose in defense of the established membership. Cesar Alvarez Barba, the sierra commerce senator, demanded that the two new public ministers be replaced by two more representatives from the camaras ; one senator for industry and one for commerce and agriculture from each region. The senators from the south asked that the camaras of Cuenca and Azuay be given their special representation. Similar demands were made for the special representation of workers and artisans. The result was predictable; the opposition to Junta -packing was unprepared to unite on a common counter-proposal and the provisions as written were easily passed by the Velasquista majorities in both houses. A second major change was passed almost without notice. AH of the members of the Junta were to be elected at the same time. They '^'^Ecuador, Diario de Debates, Carnara del Senado: Septiembre , I960, p. 336.

PAGE 260

249 41 previously were elected on staggered terms. This resulted in an immediate change of the entire membership of the Junta . The new elections were to be held when Velasco was at the height of his power. Other inajor reforins altered the legal powers of the Junta . Under the bill, Junta could allow private baixks to liold up to half of their minimum required cash balances in bonds approved by the Comisi6n Nacional de Valores . The free liquidation of the bonds on demand ^ 42 would be guaranteed by the Comision Nacional de Valores . This proposal strongly favored the private banks and the large investors. The banks would be able to make money on their miniinum deposits as well as on the money they loaned out. The bonds would be a preferred form of investinent since they were completely secure as long as the government was sufficiently solvent to effectively back them. The large investors were favored by the creation of a major new source of capital credits. The Velasco regime was favored by the establishment of markets for government bonds that had been difficult to float for several years. However, this proposal was a direct blow to the small businessmen and farmers who depended on bank credit to finance their operations. The money available to private loans would drop if banks would be able to place their investments in guaranteed government ^ hbid. '^^Ibid. , pp. 132-182.

PAGE 261

250 bonds. The proposal also hurt the many snnall businessmen who depended on monetary stability. The regulation of the level of minimum deposits had been a major means of restricting credit and dampening inflationary pressures. Under this proposal, raising the minimu:n deposits would have little effect on total credit volume, since half of the increase in encaje would immediately go for the purchase of bonds. Drastic elevations in encaje would be politically difficult as the credit available to small loans would drop to almost nothing. The provisions for "guaranteed convertability, " which was supposed to provide for monetary security, was an illusion. A government funded on bond sales would not be able to back those very same bonds with "hard currency" on demand. The only recourse for backing deposits would be to print some more money. There was little opposition to this provision in the congressional debates. Supporters of the bill alleged this was a change in the tools available to the Junta and not a change in the policies of the Junta . Opponents of the Junta were already predisposed to side with the authors of the bill. The supporters of the conservative policies of the Junta had a hard time explaining why they felt that the Junta , 43 in which they had so much trust, should not be given this new power. The last major provision of the bill was to increase the rcdis43ibid.

PAGE 262

251 44 count period for Banco Central operations from 270 days to two years The Banco had used their rediscount operations to regulate the short run changes in level of credit interest. However, the national develop ment banks, which had been depleted of capital for years, had come to depend on these short :erm loans to finance their own operations. The development banks provided some 20 percent of all agricultural credits and the farmers felt very strongly that the available loan period was far too short to finance any capital improvements. This section provoked the most controversy in congress. Many small farmers, especially those on the coast, saw this provision as a means of recapitalizing the development banks, and for gaining vital long term agricultural credits. Coastal representatives were consequently slow to attack the measure. Farmers and comerciantes involved in the export trade would have at least a chance to use their dollars to buy on the stable foreign markets even if the credits resulted in a domestic inflation. Other representatives were apparently swayed by the argument that this provision only made legal and fair for all what the Banco Central had been doing for the favored few for years. Opposition to the measure was divided. The representative of sierra agriculture, Marco Tulio Gonzalez, argued strongly that the delights of credit would be more than offset by the pains of the "^^Ibid. , pp. 290-311,

PAGE 263

252 subsequent inflation. Many conservatives argued that the measure would also deprive the Banco Central of a prime weapon for the stabilication of short .erm credit rates. There would be no capital available to make shorl term loans if all was tied up in long term loans. The radical head of the Confederacioii de Trabajadores Ecuatorianos , Telmo Hidalgo, violently opposed the measure in the chamber of deputies on the grounds that the workers would suffer from fixed wage rates in an inflationary situation. The combined opposition was not strong enough to prevent the increase of the rediscount period to 45 two years. A theme that pervaded debates within and outside of congress on the entire bill was the fear of inflation. The supporters of the measure were careful to state that these changes represented a shift in the legal weapons available, not a change in policy of opposing inflation. However, the adininistration spokesmen continually argued that Ecuador would need an increase in the amount of circulating money if prosperity was to be achieved and that this could be done without inflation only if tlie new tools were used with imagination and skill. The Junta Monetaria presumably had neither. The bill passed both houses with only minor changes. Only voice and standing votes were taken in the debates on specific sections and on final passage. The failure of the opponents to slow Ecuador, Diario de Debates, Camara dc Diputados, I960 , Vol. 4, pp. 1156-1160.

PAGE 264

253 passage can be attributed to the lack of consensus around any counterproposal, the general feeling that the new government should be allowed to set policy, the overwhelming power of Velasco as a result of his personal triumph in the presidential elections, and the large Velasquista majorities elected to both houses. The second step of the administration was to recruit members to the Junta that would be in favor of the adniinistration proposals. Leonardo Stagg, Velasco's nominee for president of the Junta Nacional de Planificacion , started attacking the management of the Banco Central . In a sharply worded series of newspaper articles, Stagg questioned the policies and personal qualification of the bank manager, Guillermo Perez Chiriboga. This resulted in a direct confrontation between Sr. Perez and President Velasco. Sr. Perez, either by intent or accident, resigned and Nicolas Fuentes Avellan, the former assistant manager of the bank, was named general manager. Although Sr. Fuentes was quite capable and honest, he lacked the reputation and political skills of the former manager. This inevitably eased the opposition from the Banco staff to Velasco's proposals. Armando E spinel Mcndoza from the Consejo Nacional de Economia, Jose Ycaza Roldos, from the Institute Nacional de Prevision , Juan Emilio Roca Carbo from the coastal banks, and Gregorio Or:naza These articles appeared in El Comercio at irregular intervals during August and September, I960. Interview with Sr. Eduardo Larrea Stacey.

PAGE 265

254 Eguez from the sierra banks were meiTibers of the Junta . Miguel Espinosa Paez represented the sierra camaras . Also on the board 48 were the ministers of economy and development. The pattern of political affiliation on the Junta was more innportant than the pattern of business representation. The Junta had clearly come under the control of the administration with the passage of the reforms and the election of Sr. Arosemena as president of the Junta. The political position of Otto Arosemena was very strong. He personally had been responsible for using the resources of the Banco La Previsora to force his own election. He personally had engineered the reforming of the Junta . An employee of his bank, Sr. Ceballos Carrion, was nanned Minister of Economy. His bank had been influential in the election of the coastal camaras to the Junta. And it was due to his position in the Banco La Previsora that Juan Roca Carbo had been elected as coastal representative of the banks. President Velasco would probably have had a difficult time electing sympathetic people to any of these positions without the aid of Sr. Arosemena. -^ The Junta promptly made decisions which amounted to a major shift from a policy of stable money to one that favored inflationary investment and eventual devaluation. The new Junta removed most 48 Ecuador, Banco Central, Memoria del Gerente General del Banco Central Corrcspondiente del 1'161, Quito: Banco Central, 1962, p. 351. 49 Interview with Dr. Alejandro Carrio'n.

PAGE 266

255 of the controls on credit and importations. All prior deposits were removed for imports, minimum deposits of banks in the Banco Cen tral were placed in bonds, and the interest rates for the bonds was raised from 7 to 10 percent. All of the interest on the minimum 50 deposits was kept by the banks. Parallel with this was the passage through the congress of a bill requiring the Banco Central to loan ten million dollars to the government against the deposits held by the bank. This amount, large as it was for Ecuador, was more than matched by a fifteen million dollar bond issue floated by the central government. With these funds the government promptly embarked on an ambitious, but ill-coordinated, 51 program of development projects and public works. The character of the operation of the Banco Central also was changed. The volume of credit operations increased 30 percent, from 40 million dollars to 55 million dollars. Most of this inoney went to large loans as the total number of operations dropped slightly. The new credit was also kept on the coast. While almost all of the coastal offices registered dramatic increases in the volume of credit extended, there was little increase in credit for the sierra. Similar patterns of credit operations were shown by the private Ecuador, Banco Central, Memoria . . . I960 , pp. 261-264; Enrique Arizaga Toral, "El 'Crack' Monetaria y Sus Responsibilidades, " La Calle , 234 (September 10, 1961), pp. 16-71. 5 1 Interview with Dr. Alejandro Carrion.

PAGE 267

256 banks. ^^ The rapid expansion of credit resulted in a sharp upswing of inflation. The cost of living in I960 increased by 6 percent despite the maintenance of monetary stability for the first half of the 53 year. The demand for imports was responsible for a rise of the 54 price of dollars on the free market fronn 18 sucres to over 22. The foreign reserves held by the Banco Central dropped from 34 million dollars at the start of I960 to 28 million at the end of the 55 year. The combination of price rises, new credit facilities and the fear of a continued drop in foreign exchanges prompted a rapid increase in imports. The total imports of I960 were $100, 310, 360, far above the 1959 total of $86, 695, 358. Almost all of the increase in importations was registered in the final four months of the year. The types of commodities in which importation increases were registered is suggestive of the direction the boom was taking. The importation of manufactured metal goods tripled. Great increases were 52 Ecuador, Banco Central, _El_ Banco Centra l delEcu.-dory J-'JigPo^^ticas Monetaria, Credencia y C ambiaria"del P aTsj Quito : Banco Central, undated, (typewritten manuscript) Tables 3 to 7. 53 U. S. Department of Commerce, Overseas Business Report ; Living Conditions in Ecuador (Washington, D. C. : Government Printing Office, 1963), p. 6. 54 Ecuador, Banco Central, "El Banco Central y La Polflicas . . . ", Table 8. ^^Ibid. . Table 7.

PAGE 268

257 also registered in the importation of cars, furs, wood and paper products, machinery, chemical products and "diverse manufactured goods" (chiefly luxury items). However, there was a drop in the importation of many popular consuinption iteins. Decreases were registered for foodstuffs, gasolines, lubricating oils, clothes, tex56 tiles, glass and cerannics. The initial boom stimulated domestic industry for a while. Industrial employnnent climbed by 10 percent. Dramatic increases were registered between 1959 and I960 in the production of cement and quarried stone. The production of chemicals and textiles also increased. However, the long cerm effect was to shift investments from domestic jsroduction to speculative areas as a hedge against the inflation and a possible devaluation. The shift of credits from agriculture to commerce was partly responsible for the relative stagnation in banana production and the declines in coffee, cotton and 57 animal fats. Monetary stability suffered greatly in the first half of 1961. The foreign reserves of the bank continued to decline. The price of dollars on the free market was bid up to 25 sucres as businessmen tried to shift their resources out of the country froin fear of a possible 56 Ecuador, Banco Central, Memoria del Gerente General del Banco Central Corre spondicnte de al Ejercicio del Aiio de 1965 (Quito: Banco Central, 1966), p. 2 ] Ibid. , "El Banco Central y Las Poloticas . . . " , Tables 2-6.

PAGE 269

258 collapse. The amount of money in circulation actually dropped below the 1959 level, despite the tremendous increase m credits. The central government tended towards bankruptcy for the first time. The debt had been run up from seven hundred million sucres 10 one billion two hundred million sucres in less than a year. The 59 budgetary imbalance had been very heavy. An income of one billion, four hundred million sucres in I960 was far outweighed by expendi60 tures of two billion,one hundred and fifty million sucres. The funds originally provided by the initial loans and bonds were soon eaten up as the situation continued into 1961. Velasco and his advisors started looking around for additional taxes to cover the difference. Between September, I960 and July, 1961, thirty-eight new taxes were created. Almost all of them fell directly on the consu61 mers. There was relatively little opposition by the business community to this rapid deterioration of economic conditions. The camaras of the sierra issued a joint statement that sternly protested the political climate that caused a lack of business confidence in the government. However, no specific recommendations or policy preferences ^^Banco Central, Memoria del . . . 1965 ; La Calle , 233 (August 25. 1961), p. 16. 59 La Calle, 234 (September 10, 1961), pp. 12-13. Memoria del . . . Banco Central: I960. 61 La Calle, 225 (September 17, 1961), p. 12.

PAGE 270

259 were expressed. The statement seemed to have relatively little political inpact and received widest publicity only within the camara 62 house publications. The personal influence of the camara leaders in the government dropped to an all time low. There are several plausible reasons for the lack of political opposition by the sierra camaras to the Velasco regime. The joint statement was not only a reflection of widespread concern, it was also an indication that camara leaders were aware that the government still was more powerful than they were. Velasco could take major reprisals against a single sector of business in retaliation for isolated opposition. A joint statement broadened the base of opposition at the expense of an ability to agree on any alternate policy. The coastal camaras remained silent about the role of the government in the oncoming crisis. The official position of the caTmara de comiercio and industriales seeins to have been that businessinen should look to the government for help for any economic difficulties. Neither was there any evidence that the camara leaders attennpted to have the official policies changed behind the scenes. ^2"Documentos Para la Historia Industrial del PaTs, " La Indus tria , 34 (January 26, 1961), p. 4. "•-'Interview with Dr. Eduardo Larrea. ""^See the report on the speech given by Jaiine Nebot Velasco before the Camara de Comcrcio dc Guayaquil in the Revista de la Cam ara de Comercio de Guayaquil , 51 (March 31, 1961), p. 5; for a criticism of the regime, see "La Crisis Economica, " Revista de la Cam ara de Comcrcio de Guayaquil , 5 5 (July 31, 1961), p. 5.

PAGE 271

260 The political silence of the coastal camaras was probably not due to the power of the banks and Sr. Arosemena. The affluent coastal businessmen who had capital and foreign exchange available to invest could make a substantial profit through imports, investments in construction and real estate, or in speculation on exchange rates. It seenns certain that the key business leaders, those who were most influential within elite circles, must have given at least tacit approval to the economic policies of the government. Sr. Arosemena's use of the Banco La Previsora could only have been arranged with the aid of the other managers and owners. Credit conditions could have been substantially altered by the managers of the three or four other large banks. This is not to say that all of the Guayaquil financial elites were in support of the Velasco regime, only that those privately opposed to it did not choose to enter politics. One more act of the drama was yet to come. Previous chapters have discussed how the coastal exporters would benefit from a devaluation and how the List Two importers favored a unification of the exchange rates. A combination of both measures would have been a major political plum for influential businessmen in sectors of the coastal economy. Devaluation under the conditions that existed in the first months of 1961 would have been of help to those who had 65 Interview witli Mr. John Snyder.

PAGE 272

261 been speculating on the currency. Many sucrcs had been used to purchase dollars at a relatively cheap rate. These dollars could then be converted back into Sucre s after devaluation at a substantial profit. Most businessmen outside of the Guayaquil elites strongly opposed devaluation and unification. Producers and exporters of coffee and cacao had been able to sell much of the foreign exchange earned on the inflated free market. Unification, even at a devalued rate, 66 would reduce their sucre earnings. Maniifacturers and agriculturists who depended on imports would be faced with a serious price 67 rise in the event of devaluation. Almost all of the small businessmen and wage earners who lived on the margin of solvency were very vulnerable to the added burdens of devaluation on top of the already serious inflationary situation. The potency of devaluation as a political issue can be judged by the actions of Velasco's economic advisors in the early days of the regime. Although inflation and devaluation were stated as an explicit goal by Sr. Arosemena in the conferences before the inauguration, and inflationary policies were heavily pushed as soon as the administration was in control of the Junta , administration spokesmen had been very careful to '"Unificacion del Cambio, Mas Desvalorizacion del Sucre, " La Calle , 229 (July 28, 1961), p. 4. The dependence of manufacturing on imported materials is suggested by; Ecuador, Junta Nacional de Planificacion, Anuario de Comercio Exterior (Quito: JNP, 1965).

PAGE 273

262 publically reject an inflationary policy during the debates on the Junta reforms. The possibility of devaluation was explicity rejected 68 by the authors of the administration bill. Although devaluation might not have been politically possible in September, I960, by June of 1961 it was rapidly becoming an economic necessity. The last step prior to devaluation taken by the administration was to sell a large portion of the remaining foreign 69 reserves of the Banco Central on the free market. The public justification of the sale ran something like this: Ecuador was faced with several economic problems in addition to a shortage of foreign exchange. A lack of confidence in the administration's determination to defend the sucre was causing a run on the bank. The rise in prices was caused by a lack of cheap imports. The rise of the price of the dollar on the free market was responsible for both phenomena. Therefore selling dollars from the coffers of the bank would both promote price stability and give confidence in the solvency of the Banco Central . Responsible economists discount this explanation. Businessmen lacked confidence in the government because they were all too aware that the level of foreign exchange was dropping rapidly. Free market sales would not restore faith. The price rises were due to the 68 Ecuador, Congress. Diario de Debates, Camara del Senado: September I960 , pp. 121-122. 69 Mcmoria del . . . Banco Central . . . del 1961 , p. 358.

PAGE 274

263 demand for dollars to send out of the country. The rise of the dollar on the free market exchanges was an indication that the dual exchange rate systenn was operating to shift imports from luxury items to capital goods. The true motives for the sale of dollars probably lay in a power struggle over economic policy that was going on within the Velasco administration. One group, centered around Sr. Otto Arosemena, had been advocating a policy of inflationary investment followed by devaluation that would benefit the importers, exporters, and bankers of Guayaquil. However, these groups stood to lose heavily if the economic situation deteriorated to the point where the Banco Central could no longer finance anything over a bare minimum of imports. The business of the importers would almost cease and the exporters would probably be required to sell all dollars to the bank at a very low rate in order to build the supply of foreign exchange back up to the level of solvency. This group advocated that the government 70 devaluate before the foreign exchange level dropped any further. Another group of Velasquista policy makers, centered around Sr. Leonardo Stagg, the president of the Junta Nacional de Planificacion , were primarily interested in currency speculation. They wanted to have more dollars available for speculation on the free market Interview with Dr. Eduardo Larrea; interview with Sr. Alfredo Pareja Diczcanseco, former inembcr of the Junta Monctaria , on November 21, 1968.

PAGE 275

264 7 1 exchange rate and devaluation. Otto Arosemena resigned from the Junta Monetaria on May 30, 1961. Ceballos Carrion resigned from his position as Minister of the Economy on July 13, 1961 to return to his position in La Previsora . 7? Leonardo Stagg was named the new minister. Complete information is not available on the details of the disagreement between Otto Arosemena and Leonardo Stagg. One possible interpretation of the resignations is that Arosemena left because Velasco had sided with Stagg. However, this seems unlikely in view of the lack of any prior warning of a weakening of Arosemena's position in the administration. An alternate explanation is that Arosemena and Ceballos were quite happy to leave the administration before they were tarred with the upcoming devaluation. The pains of leaving the field to their very uncertain ally, Stagg, and to his dubious economic preferences would be partly balanced by the pleasures of watching him try to save something of his political career out of the coming disasters. The Junta Monetaria decided to sell dollars on the free inarket from April 28, I96I to the end of June, I96I. The sale price was 71 Interview with Dr. Maier. "^^ El Comercio , May 30, I960; Enrique Arizaga Toral, "El Decrcto Trenta y Tres no Existe; Stagg Lo Falsifico'', " La Calle, 229 (July 13, 1962), pp. 4-5.

PAGE 276

265 above the official exchange rate but below the current market rate. In theory anyone could buy the dollars. However, the sale was not widely advertised and it apparently took some persistence to have 73 the appropriate paper work processed. Over ten million dollars was sold. Most of the money went in large transactions. Although the names of the official buyers are available, little can be learned about who benefited. Many banks, especially the Banco de Londres y Montreal , and Banco La Previsora 74 made piirchases on behalf of third parties. The impact of the sales on the resources of the Banco Central was disastrous. Total foreign reserves had fallen to only seven million dollars, down from fortytwo million dollars at the end of Ponce's administration. Devalua75 tion had beconie an absolute necessity. A unification of exchange rates at a devaluated rate of 18 sucres to the dollar for sellers of foreign reserves and 18. 18 for buyers of dollars was ordered by Executive Decree //033 of July 14, 1961. All purchases of dollars were to be made at the new official rate. The free market was almost completely abolished except for relatively minor transactions involving the nnovemcnt of profits in and out of ^Interview with Sr. Ec. Manuel Naranjo Toro, Former Minister of the Treasury, on October 17, 1968. ''*Ecuador, Congreso, Actas del Senado: Congreso Extraordinario do 1961, pp. 17-61. Mcmoria . . . del Banco Central . . . del 1961.

PAGE 277

266 the country. The decree also levied a 5 percent tax on all official exchange transactions. Devaluation provoked a tremendous political storm. Importers and consumers of capital goods and raw materials immediately demsmded compensations to offset the 20 percent rise in prices of 77 List I imports. Hardest hit were the sierra textile manufacturers and the sierra farmers who did not benefit from the rise in sucre price of exports brought about by devaluation. The public political fury was led by the congressmen and opposition politicians; the camaras of the sierra were relatively quiet in public. However, an informal "iinport strike" was organized among the members of the cainara de comercio . The sierra businessmen cut their imports to a bare ininimuiTi in order to bring pressure on the government, which was dependent on revenue tariffs and on the influential Guayaquil businessmen who did the importing. However, the movement soon collapsed. The government agreed to name a commission of businessmen to miake recommendations about compensations. The leaders of the camaras also realized that the government was simply 78 too broke to pay compensations in any case. It is probable that the 7A Decreto Ejecutive 33 in Registro Oficial 264 of July 14, 1961. 77 El Comercio , July 19, 1961, p. 1. 78 Interview with Sr. Ramiro Cabeza de Vaca, president of Cabeza de Vaca Hn os, and former member of the board of the C£mara de C-f)mercio de Quito, on November 29, 1968. .

PAGE 278

267 government was not too displeased at the prospect of a slow down in innportation; it eased the pressures on the Banco Central and helped build up the exchange level a bit. Exchange unification was probably a camouflage for the bitter pill of devaluation and another means of making money for the exporters and speculators. The original proposal for exchange unification resulted in a panic among the producers of coffee and cocoa. They stood to lose a great deal when the lucrative free exchange rates were abolished. The first result was a drop in the domestic price of coffee and cocoa beans. Although the 5 percent tax was soon taken off of exchange transactions on these coinmodities, the 1961 fall crop was harvested and sold to the exporters at a 79 price substantially below that registered a year before. "Exchange unification" was effectively abolished in Decreto Ejccutivo 44 in Registro Oficial 284 of August 9, 1961 through a reestablishment of the free market sales for foreign currency 80 earned by the sale of coffee and cocoa on the world markets. This was done after the crops had been harvested and before any substantial part of it had been exported. The difference between the devaluated domestic price of these crops and the nnore substantial earnings 79 "Lo Que Gana La Rosea, el Pueblo lo Prende, " La Calle, 215 (April 22, 1961), p. 13. 80 Interview with Sr. Eduardo Larrea.

PAGE 279

268 8 1 from the free market exchange sales was kept by the exporters. Decision Making: The Tax on Imported Whea t The economic and political pinch facing the sierra wheat growers has already been described in Chapter 5. One solution that had been advocated for many years was to place an additional tax on the importation of wheat. This would allow the domestic producers to realize an additional profit by raising the price of the major competing source. This was also intended to expand the markets for domestic wheat. The additional price differential between donnestic and imported wheat would give niore incentive for millers to choose domestic suppliers. The major advocates of the wheat tax were the camara de agricultura 82 and the wheat growers. Many economists also supported the projected tax as a means of making the country self-sufficient in wheat 8 ^ production. The wheat growers made little headway under the Ponce regime. Although the regime was generally sympathetic to the interests and SlAbdo'n Calderon, "Yo Acuso el Ministro, " La Calle , 217 (May 5, 1961), p. 5. 82 Interview with Sr. Luis Del Campo Salvador, member of the board of the Camara de la Agricultura del la Primera Zona , on November 15, 1968. o o Interview with Sr. Jorge Luna Yepez, party leader of ARNE, on November 13, 1968; interview with Dr. Jose Vicente Ortuno, fornner nnember of the Camara de Diputados and confidante of Carlos Julio Arosemena, on October 16, 1968.

PAGE 280

269 demands of the sierra aristocracy, the political problems of a tax on wheat imports were too explosive. A significant rise in taxes would have produced a rise in the price of bread which would have been very unpopular politically with the urban workers. It would have laid the administration open to the charge of exploiting the poor 84 in the interests of the rich. The rise in the price of imported wheat was opposed by the wheat importers who did not want their market wheat reduced, and by the bakers who did not like to use the inferior local wheat. Conditions for passage had become much more favorable during the second year of the Velasco regime. Inflation and political vmcertainty made the wheat growers even more anxious for an expansion of their market. The instability also made the demands for an increased tariff on imported wheat easier to justify. The budgetary deficits created by the freehanded policies of Velasco created a tremendous pressure to find additional sources of revenues. The attraction of the extra finances largely offset the political problems resulting from an increase in the price of bread. Furthermore an increase in the price of bread was not difficult to handle politically since all other prices were rising too. "^Interview with Dr. Andre? F. Cordova, former president of Ecuador and former member of the board of the Camnra de la Agri cultura de la Primera Zona , on November 29, 1968. Q C Interview with Sr. Alfredo Faroja Diezcanseco.

PAGE 281

270 The political weaknesses of the Velasco regime made it easier for the wheat growers to raise tlieir demands. Congressional leaders knew they could afford to be more independent. Velasco needed them as much as they needed him. Many politicians were also interested in finding outside allies for support in case the ship of state went down in the expected coup d'etat. Since the major elite support for the Velasco regime came from the coastal financial and commercial speculators, it was logical for politicians to turn to the sierra landowners as a counter-balance. This was especially attractive to the sierra congressmen who had not brought back symbolic victories for their local elites for a long time. A tax on imported wheat was first raised for serious debate publicly when it was included in the 1961 budgetary support law ( Ley de Nivelacio'n de Presupuesto ) which provided for a one cent per kilogram increase in the tariffs on imported wheat. This represented a 10 percent increase over the existing tariff. Support for the measure was strongest among the sierra congressmen who were working informally with the wheat growers through the Camara de Agricultura , and among the Velasquistas who were worried about financing the budget. Public opposition to the tariff increase was led by the two major r. 86 importers of wheat; Luis A. Noboa and Francisco lUescas Barrera. They had the organized backing of a coalition of grainery managers ^^Interview with Sr. Ec. Abdo'n Calderon Munoz, director for the Partido Liberal Radical for Guayas, on November 1, 1968.

PAGE 282

271 and mill and bakery operators. Congressional opposition to the tariff increase was generally found among the coastal delegates who had no political interest in the sierra wheat growers. Some of those who opposed undoubtedly were influenced by the very powerful position of Noboa in the banana industry and within the Guayaquil "inner elites. " Other congressmen were against the measure on principle. The tariff would have hurt regional interests and resulted in an increase in the price of bread to benefit the inefficient elite landowners of the sierra. The wheat tax had been passed in the draft bill approved by the senate in August, 1961. The major conflict over the provision took place in the Chamber of Deputies. Although tlie tax received fairly wide support, the opponents were strong enough to block it on the floor. Supporters of the tax needed the votes of the opponents to pass other unpopular measures of the bill. The threat of a filibuster would have made passage of the entire bill probleinatical. It is also probable that the presence of the anti-wheat leaders had an inhibiting effect on those prepared to break ranks. The tax measure had been defeated in an early vote to strike the appropriate provisions of the bill. As the debate on other less controversial provisions droned on, many congressmen wandered in and out of the channber. At a crucial moment, the chair was passed on to a "pro-wheat" delegate as the leader of the anti-wheat tax faction, Gregorio Orniaza Eguez, left the room. The tax was immediately

PAGE 283

272 rc-introduced for consideration. The floor managers opposing the tax were summoned back to the chamber by troops who sensed defeat, but they arrived too late. The tax had been passed by a voice vote 87 and was written into law. Epilogue to Velasco The sad narrative of the econoinic policy of the Velasco government has been taken from an equally dreary political history. One of the major political failings of the Velasco government was that the relations with political opponents were alnnost completely mishandled. The Velasquista mayor of Guayaquil, Pedro Menendez Gilbert, used police against political opponents while raiding the city treasury. The use of violence drove political opponents to a willingness to resort to violence. The looting of the mayor's home after the coup against Velasco suggests the depth of popular resentment against the 88 regime. Sierra elites never were very much in favor of Velasco. Opposition based on the economic policies of the regime were compounded by the failure of the government to give any symbolic recognition to the sierra. A delegation from Loja called on the president in July, 1961 to protest tax increases, the handling of public works in the Interview with Sr. Alfredo Pareja Diezcanseco; Decreto Legislative #8 in Registro Oficial 89, of December 15, I960. 88"Todo El Mundo Comenta, " La Calle , 245 (November 18, 1961), p. 6.

PAGE 284

273 area, and the conduct of the local police chief. Velasco refused to see them. In October Velasco made plans to visit Cuenca for local festivals. The city fathers asked that the president not come. The president made a point of coming over local opposition. The troops were called out to prevent demonstrations. However, a riot ensued that cost several lives and the president was forced to curtail his trip. The Velasquista regime also suffered from severe internal tensions. The leftists, lead by Araujo Hidalgo and Carlos Julio Arosemena Monroy, had hoped to push the government into a pro-Fidel position. Velasco refused and Araujo was ousted from his position as Minister of Government. Carlos Julio Arosemena moved to 90 . . . , covert opposition to the regime. While public opposition to the regime was building up, he had been cultivating support among congressional leaders for a possible coup. An open break between the president and vice-president apparently took place when Carlos Julio Aroseniena went to Moscow over the express objections of Velasco. At the tinie of the Cuenca riots, Velasco had Carlos Julio Arosennena arrested and jailed for plotting a rebellion. The army quickly stepped in to speed Velasco to exile in Argentina. After a brief discussion between military and congressional leaders, Carlos Julio ^^Ncw York Times, October 18, 1961, p. 1. 90 Hispanic American Report , 13 (12), February, 1961, p. 903.

PAGE 285

91 Arosemena was named president. 91 El Come rcio, November 7, 8, 1961, p. 1. 274

PAGE 286

CHAPTER IX THE ADMINISTRATION OF CARLOS JULIO AROSEMENA MONROY Political Situation President Arosennena achieved power through a military coup. The situational constraints that bound and guided the decisions made during his adpiinistration were quite different from those encountered by the previous two presidents. In one sense he enjoyed wide latitude, especially at the beginning of his regime. He entered office on a wave of popular support. Arosemena, while in "political exile" during the final months of the Velasco goverm-nent, had courted the support of politicians from all parts of the ideological spectrum. He offered himself as the single alternative to Velasco who could maintain constitutional continuity and lead a true coalition government of reconstruction. This approach had great appeal in the post-Velasco years. Many leaders in and out of government would have agreed that the country had been pushed to the brink of ruin by irresponsibility, special privilege and political violence. However, the coalition government also limited the range of political moves open to the president. The lack of partisan support 275

PAGE 287

276 meant that the government could not follow a partisan policy. All groups expected that their voices would be heard equally. This was an extremely difficult feat in a country as fragmented as Ecuador. The president also was faced with the initial lack of any viable alternative to coalition support. No groups of politicians were committed to supporting the regiine in heavy weather. Neither did President Arosemena have the substantial aura of constitutionality given by electoral victory. What the congress had bestowed on him, the congress could take away. Carlos Julio Arosemena Monroy was not temperamentally suited for his political situation. His politics were clearly of the left. His ideological radicalism was probably fed by the tensions between him and the scions of Guayaquil society, into which he had been born and later became estranged. Carlos Julio had the reputation of scrupulovis personal honesty. He could not be bought. His principles were active; he apparently moved with vigor against relatives and supporters in his administration who were teinpted. Carlos Julio is a man of extraordinary intelligence. His capacity to think on his feet is almost legendary. Even dry state documents prepared under his direction sparkle with a brilliant and The following assessnnent of tlie character of President Carlos Julio Arosemena Monroy is based on comments inade by politicians on opposing sides. Particularly useful were talks with Sr. Alejandro Vega Toral, president of the FNV for Cuenca and member of the Chamber of Deputies, on October 18, 1968; and with Dr. Jose Vicente Ortuno, leading Quito lawyer and former member of the Camara de Di5}>utados , on October 16, 1968.

PAGE 288

277 economical analysis. Like many very able men, he seems to have the ability for logical reason through a ruthless elimination of the irrelevant. The darker side of his character begins with his talent and thirst for political intrigue. Even his admirers feel he has been unscrupu2 lous in the pursuit of larger political goals. These talents are combined with a harsh, vindictive cruelty against opponents. In debate, observers say, he may speak words of moderation but his eyes usually flash a bitter hate against those who take opposing views. The most tragic aspect of his character is a problem with alcohol. Carlos Julio Arosemena seems to mix long periods of sobriety with 3 bouts of masochistic dipsomania. Perhaps the best summary of the political career and personal character of Carlos Julio Arosemena was given by "Juan Sin Cielo" (Alejandro Carrion): Little by little it was discovered that he was a pure man, a man who did not desire money. When he described his companions in political adventure as "men eloquent with money" one saw clearly the distance that separated them .... We have the impression that he is a nian of explosive indolence. ^ Ibid. 3 President Arosemena's problems with alcohol are very coinmon knowledge in Ecuador. However, for obvious reasons, specific people will not be cited for references. See Martin C. Needier, Anatomy of a Coup d'Etat; Ecuador, 1968 (Washington, D. C. : Institute for the Comparative Studies of Political Systems, 1964), pp. 1, 14, 16. "Juan Sin Cielo" (Alejandro Carrion), "La Guerra Contra el Vice-Presidente, " La Ca lle 240 (October 14, 1961), p. 7.

PAGE 289

278 incapable of a continuing activity. He explodes like a bomb and later disappears. His comments in interviews with the press or in debate . . . show a man of the highest intelligence; agile, penetrating. Many of his activities demonstrate a singular personal valor. But his disappearances indicate, in turn, an almost pathological irresponsibility and an alarming instability .... He does not look towards the people, he has no communication with reality. He is away, isolated, alone, one can almost say, defenseless. A conflict between the political demands on the administration and the personal goals of Carlos Julio Arosemena was probably inevitable. The conflict first appeared as an attempt to combine the recruitment of a coalition cabinet with the desire to bypass cabinet policy making for personalist radical politics. Due to the peculiar nature of political circumstances, cabinet selection preceded party supports. Therefore order of analysis of recruitment will also be reversed. The pattern of recruitment to the cabinets of Carlos Julio Arosemena will precede and be used to explain the pattern of party organizational supports. Recruitment Three cabinets held office in the Arosemena administration. The first cabinet was forined soon after President Arosemena took office. This was explicitly intended to be a move towards national reconciliation. All major political parties outside of the Velasquistas were represented. The recruitment procedure was simple. ^"Todo El Mundo Comenta, " La Callc ,245 (November 17, 1961), p. 6.

PAGE 290

279 Party leaders nominated candidates. Arosenncna went through the list and picked a representative group from the best the parties had to offer. Virtually all observers have agreed that Arosemena exercised a free hand in this, and that he selected his ministers as much for technical competence as for party balance. The only jarring notes to conservative sensibilities were the presence of left radicals as undersecretary of Prevision Social and as prosecretary of adnriin6 istration. The first problenn faced by the administration was over the policy towards Cuba. Arosemena clearly desired to keep close relations with Fi(3el Castro despite the alleged presence of "Imported 7 agitators. " The anti-communist right and the military pressed openly for a break with Cuba. It is probable that many leftist politicians also opposed maintaining relations that would tend to foster subsidized and competing radical movements. The situation had deteriorated to the point where the Cuenca military garrison revolted in March, 196Z in a demand for a break with Cuba. In response, the cabinet tendered mass resignations, ostensibly to "give the president maneuvering room, " but more probably in order to allow the right to drop out of political participation without moving into a g position of political opposition until the situation cleared. ^ La Calle , 246 (November 24, 1961), p. 5. '' 'Hispanic American Re port. 15 (2), April, 1962, p. 154. ^Ibid. , 15(3), May, 1962, p. 244.

PAGE 291

280 The second cabinet was appointed on April 2, 1962. This cabinet was intended to have the stamp of the political and policy preferences of the president. Although this was too ostensibly a coalition cabinet, the political base was much narrower. The major political prop for the second phase of the Arosemena administration was the Frente Democratico Nacional , the coalition of independents, liberals, and moderate socialists that had supported Galo Plaza in the elections. The right xyas out of the government but not in political opposition to it. The recruitment pattern to the second Arosemena cabinet was more complicated. A s of the Cuenca revolt, the president enjoyed a substantial reserve of political good v/ill. Yet he had no firin political base on which he could draw to support his specific policy goals. At this point, Alfredo Albornoz Sanchez, the general manager of the Banco Popular and a major figure in the sierra, offered himself as an honest broker. He made an agreement with Arosemena to recruit the best possible moderate-left cabinet under the general political sponsorship of the FDN. He asked of the president in return that the government allow five cabinet posts for FDN leaders, that the government cut back the influence of the inilitary in national politics, and that the government break political relations with all dictator° La Calle, 257 (February 9, 1962), p. 5. Hispanic American Report , 15(4), June, 1962, p. 342.

PAGE 292

281 ships, including Fidel Castro's. The last condition was that the jsresident give the cabinet, under the leadership of Alfredo Albornoz, substantial leeway in establishing and implementing broad refornnist programs. Apparently this political deal was consummated, for the government soon broke with Cuba with as much grace as could be mustered. The FDN and the Arosemena administration settled down for a long spell of political housekeeping. Arosemena was not content with reigning without the power to govern. Although he apparently supported the major programs of the cabinet "tecnicos, " he also apparently continued with his passion for 12 radical intrigue. The sweep of his political emotions would impel him towards the preserves previously marked off for his ministers. This situation inevitably pushed towards a confrontation between the "camarilla" (kitchen cabinet in North American parlance) and the regular cabinet. The FDN and the second cabinet lost and their 13 resignations were offered on May 18, 1962. The third cabinet took office with several holdovers froin the ^^ Hispanic American Rep ort , 15 (4), June, 1962, p. 342; interview with Sr. Alejandro Carrion, publisher of La Calle , on November 12, 1968. "La Camarilla: Causa de Todos los Males, " La C alio , 272 (May 25, 1962), p. 4. 12 " Interview with Sr. Ernesto Jouvin Cisneros, former minister of development in the Arosemena cabinet, on October 31, 1968. 13 Hispanic American Re port , 15 (5), July, 1962, p. 437.

PAGE 293

282 FDN experiment. Although the government still professed to have the FDN as a political base, there were relatively few signs of any 14 FDN organization in or out of the government to offer support. The third cabinet was almost entirely based on Arosemena's personal organization and following. By the time of the third cabinet the conservatives, who had won heavily in the June elections, moved to a 15 position of overt opposition to the government. This rather convoluted story of the Arosemena cabinets explains the high level of turnover during the first year of the administration. By gross count, there were 34 ministers and subministers between November, 1^61 and August, 1962. Six ministers had "business connections, " four were businessmen in their own right and two had brothers in business. There were definite differences in the level of business recruitment among the three cabinets. The first cabinet held only two businessmen, Tcodoro Alvarado Olea and Jose Salazar Barragan, who were minister and subminister of economy. The second cabinet contained four businessmen. Alvarado Olea and Salazar Barragan moved over to development, Antonio Mata Martinez came to economy and Roberto Serrano Rolando joined as subminister of public works. Serrano, however, was only involved in business through 14 La Calle , 269 (May 4, 1962), p. 4. "La Camarilla: No Existe Camarilla Alguna, " La Calle, 272 (May 25, 1962), p. 6.

PAGE 294

283 his brother. The third cabinet occasioned the departure of two businessmen, Mata Martinez and Alvarado Olea. Their places were filled by Salazar Barragan who moved up to ininister of development, and by Ernesto Jouvm Cisneros, who was appointed to economy. Jorge Espinosa Correa, brother to businessman Jose Espinosa, came in a s subminister of foreign relations. The businessinen were all in the sensitive ministries of economy, development and foreign relations. The other most important cabinet post, the portfolio of treasury, was continually held by Sr. Ec. Manuel Naranjo Toro, a socialist but ardent promoter of industrial developiVient along the lines of tecnico policy. He would have to be counted as a potential ally of the industrialists. Another index of business influence in the Arosemena administration is suggested by the fact that of the ministers who reniained in some cabinet post from beginning to end, three were businessmen or allied with the businessmen (Sr. Naranjo). These two considerations suggest that business influence in the Arosemena administration could be rated as a probable "high. " Data on the social and economic position of the six businessmen 1 7 in the cabinet are presented below: Interview with Ec. Manuel Naranjo Toro, former minister of the treasury, on October 17, 1968. 1 7 Names of the cabinet nninisters from a list supplied by Sr. Piedra Solis, head of the Archive Biblioteca del Poder Legislative. There are some problems in identifying the business connections of cabinet and political figures. Two figures had names that could

PAGE 295

284 Teodoro Alvarado Olea headed Artes Craficas Senefelder , a large Guayaquil printing shop that published Vistazo , Estadio and Hogar , the major magazines for public events, sports and homemaking. He was an established Guayaquil businessman not directly associated with the "inner elites. " Antonio Mata Martinez ran Cia. General de Industrias , a Guayaquil contracting business. He was also associated with the building contracting firms of Constructors de Maquinaria Agricola e Indus trial and the Corporacion de Maquinaria Agricola e Industrial . Other interests were Aserrad ero San Pedro (saw niill), Proveedora S. A. (exports balsa and bamiboo), and Billord (unknown). He is, therefore, classified as an established Guayaquil industrial contractor with no formal ties to the "inner elites. " Ernesto Jouvin Cisneros ran a major print shop, Imprinta e Litografia "la Reforma, " and two real estate businesses, Inmobiliaria Agricola and Inmiobilaria La Reforma . He was a former president of the Guayaquil Camara de Industriales and would be classified have been the same as the names of people in business. However, there wcxu insufficient data for a complete analysis. A leading liberal, Ernesto Plaza Danin, was listed by the World Trade Directory R eports as having participated in a Colombian neon sign company but later he was reported to have dropped out. Since there is no other supporting citation, he has not been included as a businessman. Several other political figures in the PLR-FDN were listed as businessmen on the basis of firms managed by brothers or other relatives. Since we are looking for the probable "circle of associated, " family holdings are as indicative as personal participation.

PAGE 296

285 as an established industrialist not formally a member of the "inner elites. " Jose'Salazar Barragan ran Agro-Comercial and Sociedad Industrial e Comerc.ial , both iniporters of industrial goods and household goods. The latter organization has the Mercedes-Benz franchise for Ecuador. He is, therefore, an established Guayaquil importer also not formally tied to the "inner elites. " Roberto Serrano Rolando's brother ran a small air cargo business on the coast, Cia. Ecuatoriana de Transportes Aereos . Jorge Espinosa Correa's brother ran two metal-fabricating businesses in Quito. None of these businesses were allied with the "inner elites. " The uniformity of this pattern suggests that the economic policies of the Aroseniena administration would be expected to generally favor the coastal manufacturers. The next step is to determine whether this can be associated with the support offered to the administration by the FDN political organization. Although the P artido Liberal Radical clearly dominated the campaign organization for Galo Plaza, the differences between the PLR and the whole FDN coalition must be kept in mind. Although few businessnnen were ever affiliated with the Socialists, many independents were brought in to back Galo Plaza who were not officially a part of the Liberal Party. It would be expected that 1 o Names takrn from articles that appeared in El Comercio between April and June of I960.

PAGE 297

286 these independents would have been more liable lo leave the FDN organization when the organization shifted political support from the defeated Galo Plaza to the incumbent President Arosemena. The gross level of recruitment of businessmen to the various political positions in the FDN was rather high. A total of 21 businessmen were to be found in the key positions of the party or campaign organizations. Eight more businessmen filled positions of lesser importance. However, there is no particular evidence that any small group of businessmen in the FDN assumed undue importance in the highest circle of party decision mtaking as they apparently did within the Velasquista organization. A closer look at the details of recruitment will make this clear. In addition to the candidates of the FDN for president, senator and deputy fromi Pichincha and Cuayas provinces, the major party posts were the central committee for the Liberal Party in the sierra, the executive bureau of the party on the coast, the FDN campaign committee for Guayas and the Union Civica Independicntes pro Galo Plaza Lasso . There were 81 positions (not counting the candidacies) in these organizations. The 21 businessmen were neatly divided up so as to make up between one-fourth and one-fifth of the total members on each organization. The only committee where the businessmen had a commanding majority was in the Union Civica executive committee where they held four of seven scats. It is probably significant that none of the 21 businessincn held more than one major

PAGE 298

287 position in the organization. The hard core of party professionals who show up repeatedly on all major positions do not include businessnien. That the businessmen in the FDN and PLR do not have a commanding presence is also suggested by the pattern of recruitment to candidacies. The two alternates for the senate from Pichincha for the Liberals were businessmen. The first candidate on the FDN slate for the ' Camara de Diputados from Guayas was also a businessman. However, none of the other positions were filled by inen from the business world. The key positions of senatorial candidates from the coast, where the FDN and PLR were the strongest, were given to people fronn other professions. One major contender for the PLR-FDN presidential candidacy was Teodoro Alvarado Oleas, a leading liberal businessman. He dropped out in favor of Galo Plaza Lasso. Sr. Plaza has business interests in the sierra. However, he has been most widely known as a progressive farmer. The business situations of those connected with organizational positions in the FDN are shown below in Table 16. 1 9 Galo Plaza is best known as the owner of Hacienda Zuleta near Otavalo and of the Hacienda La Avelina, on the road between Quito and Riobamba. Most of his business interests have been involved with selling the dairy products from his lands and as a part owner of an agricultural supply house, SIECA.

PAGE 299

288 TABLE J 6 ECONOMIC AND SOCIAL POSITIONS OF BUSINESSMEN IN THE FDN Type of

PAGE 300

289 Although it is doubtful if these figures have any statistical significance, they can be interpreted in ternis of the relative influence of various business groups in the FDN/PLR campaign organization. Table 16 demonstrates that most of the participating businessmen came from the well-established inedium to large businesses. However, businessmen from four distinct groups were involved. Regional differences indicated that there was joint participation of the sierra manufacturers, the coastal merchants, and the financiers. The differences between the FDN and the PLR indicate that many of the coastal elite comerciantes had been drawn out only for the candidacy of Galo Plaza;' they were not generally involved with PLR politics. Most of the people who just participated in the FDN were engaged in commerce. The balance between manufacturers and merchants in the PLR was thus almost even. These data suggest that the PLR enjoyed support among many well-established businessmen who were generally outside of the "inner elites" of either the sierra or the coast. However, the businessmen did not dominate recruitment to key positions in the PLR, probably because too many diverse groups were included, and possibly because the daily grind of running the party was carried on by people fronn other groups. The figures also suggest that Galo Plaza was able to bring in his own associates, drawn surprisingly enough from tlic best commercial circles of Guayaquil. There is no reason to expect that these people would have stayed in politics when Galo

PAGE 301

290 Plaza left the political scene. These conclusions are generally consistent with several political reports and the author's own impress20 ions. A coniparison of the recruitment patterns to the Arosemena cabinets and to the FDN campaign organizations suggests that the organization that formed around Galo Plaza had indeed largely evapor21 ated by 1962. Only one of the six businessmen in Arosemena's cabinet was active in the campaign. Teodoro Alvarado had been a presidential pre -candidate in competition with Galo Plaza. There is no evidence that any of the other five people took even a minor official role in the campaign or party activities. Also suggestive of there being only a tenuous relation between the economic interests of the FDN leaders and the interests best represented in the Arosemena cabinet is the difference in the sectors from which the businessmen were recruited. The Arosemena cabinet was dominated by coastal manufacturers, the FDN/PLR was dominated by the sierra manufacturers and coastal comerciantes . All of these factors suggest that political organization was based on personal foUowings. Galo Plaza brought in an entirely different 20^ This has been prinnarily based on personal impressions and is consistent with the observations of Mr. John Snyder, Labor Attache for the United States Embassy in Ecuador, interview on October 15, 1968. 21 Edwin E. Erickson, et al. , Area Handbook for Ecuador (Washington, D. C. : Government Printing Office, 1966), p. 274.

PAGE 302

291 group of businessmen than did Carlos Julio Arosennena, and the group that participated in the regular PLR activities was different from either. So one is brought back to the conclusion that analysis of cabinet recruiti-nent suggests that the adininistration of Carlos Julio Arosemena Monroy was probably most influenced by the coastal manufacturers. Decision Making: The Law of Industrial Development The "Ley de Fomento Industrial" of August 8, 1962 marked an important step in the development policy of Ecuador. Although the law shifted the' allocation of only a few resources, it definitely committed the government to a larger development policy that did have an impact on the pattern of most other branches of the economy. This policy was to try to seek relative economic self-sufficiency through the subsidization of local industries that would produce goods otherwise imported. The immediate economic benefits of this policy would be felt only by the relatively small group of industrialists and industrial workers. The potential costs, in the forin of higher prices, higher taxes for subsidies, and the costs to commercial groups of a 22 fall in foreign commerce, were to be borne by everyone else. Camilo Ponce Enriquez had passed the first major development law in June, 1957. Since the law of 1962 was offered as a reforn-\, the ^^Interview with Sr. Atahualpha Chavez Gonzalez, former president of tlie Camara do Comercio de Guayaquil , on October 30, 1968.

PAGE 303

292 23 original law bears some consideration. Under the 1957 law, three categories of industries were defined. Industries in category "A" produced basic goods for industrial use, could promise that their products would substitute for 1 percent of all imports, and used imported raw materials that were less than 15 percent of the value of the final product. Category "B" industries produced goods needed for people but that were not vital for industrial development, and used up to 40 percent of product value on imported materials. All other industries fell in the "C" category. Tax and tariff benefits were extended to the three classes of industries. These are summarized in Table 18 below. Although this program was ostensibly intended to proinote new industries, the major benefits went to previously established business. New industries could only receive the benefits of tariff reductions on imported machinery and raw materials. All of the other benefits would be earned only after a business had been in production long enough to have tax credits for financial losses, re-investments or depreciations. Another provision of the law spread the tax benefits around rather widely; established businesses that would be 23 "Ley de Fomento Industrial Existente" in Enrique Coello Garcia and Antonio Vaca Rulova, Leyes de Ministerio de Fomento (Quito: Editorial ABC, 1961), pp. 23-61. 24 U. S. Department of Commerce, Basic Data on the Economy of Ecuador. OBR 64-74; Ecuador, Centre de DesarroUo, "Lista de las Firmas Acogidas de las Beneficiencias del Ley de Fomento Industrial, " manuscript, 1962.

PAGE 304

TABLE li 293 BENEFITS OF THE 1957 INDUSTRIAL DEVELOPMENT LAW Benefit Industrial Classification A B Tariff reductions on iniported machinery most off most off half off Tax reductions on imported raw materials most off nothing nothing Tax reductions on invested capital; « high figure for "efficient" industries, low figure for all others from 2/3 to 1/2 off over 1st 5 yrs. 1/2 to 1/4 off over 1st 7 yrs. 10% off for 3 yrs. Tax credits for total losses sustained losses for 1st 4 yrs. applied against 10 yrs. of taxes los ses of 4 yrs. applied against 7 yrs. losses of 2 yrs. applied against 5 yrs. Tax credits for profits reinvested in company tax reduction equal to 50% reinvestment tax reduction equal to 35% reinvestment tax reduction equal to 25% reinvestment Period in which new investment can be amortized for depreciation 5 years 5 years 8 years

PAGE 305

294 seriously hurt by competition from industries receiving tax benefits could apply for up to 80 percent of the benefits even though they might not otherwise qualify. Bureaucratic procedures also encouraged granting most of the benefits to established industries. All of the applications had to be submitted to the full inter-ministerial conmmittee for consideration. The factors that determined benefits were not spelled out in the law. Benefits to industries were to be granted only for highly specific imported items or tax payments. As a result, the "red tape" and bureaucratic convolutions that surrounded the granting of benefits were very large. Established businessmen usually had more leisure in which to process applications as well as fewer applications to submit at any one time. The major draft work on the 1962 law was done by administration experts. Most economists in Latin America had accepted a strategy that encouraged national autonomy through the promotion of industrialization. It was only natural that government economists would turn to an analysis of the 1957 law as a part of the developnient of an overall plan for economic expansion of Ecuador. The first studies were done by Ec. Walter Pitarque, an economist from the Banco Central who was "on loan" to the Junta Nacional de 25 Ecuador, Banco Central, Informe del Gerente General del Banco Central Correspondiente al Ejercicio del ArTo 1962 , p. 178

PAGE 306

295 P lanif icacion in the early months of I960, Parallel work was carried on by Ing. Edward Wygard, a UN economist under contract to analyze the development policies of the country. Although both men worked independently, they reached inany of the same conclusions. The 1957 law was considered too cumbersome, didn't provide adequate benefits for new industries, and resulted in a bureaucratic tangle 27 which slowed the pace of industrial development. These critiques were saved from the obscurity of bureaucratic filing cabinets through the sponsorship of two inen. The Velaquista nninister of Development, Jaime Nebot Velasco (no relation), encouraged the Junta Nacional de Planif icacion to see what could be done to amend the defects in the 1957 law. Apparently this was not related to any political factors in the Velasquista administration. Jaime Nebot has the reputation of having been one of the most innovative and capable of all recent ministers of developn:ient. Neither is there any evidence that any one else in the political end of the government took any interest in the project at that time. About the same time, the Alliance for Progress had established the Centro de DesarroUo (CENDES), an independent agency intended to promote the establishment of new industries in areas recommended 26 Interview with Ec. Oscar Loor, former director of the Centro de Dcsarroll o, on November 22, I968. 27 Edward Wygard, p. 71. 28 Interview with Ec. Oscar Loor.

PAGE 307

296 by ^'^^ Junta Nacional dc Planificacion . Nebot Velasco and the director of industries for CENDES, Gerald Walker, jointly sponsored a project for the drafting of a new industrial development bill based on the critiques that had been made of the existing law. Although CENDES brought in businessmen for consulting purposes, the project remained as it started, a tecnico effort.^*^ The second round took the project out of the hands of the government economists and introduced it for serious political discussions. President Arosemena apparently backed the project for several reasons. He favored industrialization as a means for developing Ecuador. Industrialization v/ould also raise new groups into politics that might compete with the relatively corrupt inner circle of politicians. Industrialists, by virtue of their high investments in plant and machinery, are somewhat restrained from practicing the "smash and grab" tactics of some of the marginal businessmen who partici31 pated in the fourth Velasquismo. His ministers often were sympathetic to the experts and could be counted on to support their proposals. This was especially true for the second cabinet, which was specially organized for technical expertise. Arosemena and his ministers also sought to stabilize the regime both by winning the 29lbid, 30 Interview with Sr. Jose Vicente Ortuno. 3 1 Interview with Sr. Helge Vorbeck, President of Cerveceria La Victoria , on July 29, 1968.

PAGE 308

297 support of the industrialists and by creating public confidence that the 32 regime would be progressive in fact as well as rhetoric. All of these objectives were served by reforms of the 1957 Ley de Fomento Industri al. A round of discussions was held between the minister of develop33 ment and interested private and public parties. Most of these groups could have been expected to have a very definite point of view on the project and on the development policy of which it was a part. However, as far as can be determined, no inajor changes were made to the bill. All groups agreed at least not to oppose it. One possible factor was the' relative instability of the regime. Few political leaders were prepared in the early days of 1962 to move into a position of active opposition to the government until the course of state became more definite and as long as the probable alternative was a nnilitary junta. The Junta Monetaria favored the project since it niight save foreign exchange through the developinent of import substitution indus35 tries. However, several reports of the 1962 law later circulated 32 Interview with Sr. Ernesto Jouvin Cisneros. 33 Preainble to Decreto Ejecutivo 47 in Registro Oficial 228 of August 9, 1962; El Comcrcio , July 12, 1968, p. 1. 34 There is no direct evidence on this point; however, it is an assumption that is consistent with both the events of the development of the law and of the conditions of politics during this period. •^-'Inlcrvicw with Sr. Ing. Jaime Calderon P. , Manager of Com crcial Kywi , on October 22, 1968.

PAGE 309

298 withiii the Borneo Central critized the project on the grounds that the approach taken had made econotnic expansion through the Latin American Common Market more difficult because of the commitment to protect local industries. The Camara de Industriales of the coast and sierra also favored the project. They were obviously cominitted to a policy of development through industrialization. Hov/ever, the government experts and the industrialisls had frequently differed on specific measures needed. The industrialists were enthusiastic about the possibility of more benefits for existing industries. They were much cooler to the ' 37 encouragementcfthe establishment of competing industrial firms. The industrialists did not like any conditional benefit provisions. They opposed any time liinits on benefits or any provisions for benefits only for "efficient" industries. Many industrial investors also looked forward to the creation of simple assembly plants to compete with the importation of finished goods. They opposed extending benefits only to the more complex industries which would contribute to national infrastructure. The attitude of the camaras de coniercio is less easy to understand. Although several staff economists of the Camara de Guayaquil Ecuador, Banco Central, "Resumen de las Principales Observaciones de Caracter General al ' Plan General de DesarroUo Economico del Ecuador'. " Manuscript undated. 37 Interview with Sr. Ing. Julio Ulloa, staff engineer for CENDES, on July 12, 1968.

PAGE 310

299 called public attention to the iinplications of aggressively promoting -JO industrialization, and several past presidents of the organization 39 favored the prior development of agriculture, the camaras took 40 very little official notice of the project. The banks may have had an influence on the camara . Bankers anticipated the opening up of new areas for investment as a result of 41 the new law. The comerciantes , on the other hand, apparently did not see that the law would have any major impact on the pattern of economic development of the country. The businessmen were willing to vaguely support "national development" projects, as long as their trade was not ciirectly affected. Few businessmen saw any harm in granting benefits to a branch of the economy that was then alnmost non42 existent. Importsubstitution industries might not have seriously affected the importers. Higher tariffs and local production would just mean that everyone would have to increase his markup to compensate for the smaller volume of business. It would seem to be very difficult to develop a local industry that would eliminate a demand for imported "5 Interview with Sr. Ec. Gonzalo Enderica Espinosa, staff economist of the Camara de Comercio de Guayaquil , on October 31, 1968. ^*^Ibid, 40 Interview with Sr. Ec. Oscar Loor. Interview with Sr. Ing. Jaime Calderon P. '* Interview with Sr. Atahualpha Chavez Gonzalez.

PAGE 311

300 43 goods. The 1962 law retained the three classes of industries defined by the 1957 law. However, sonie of the categories were expanded. "Assembly" plants that could use imported parts up to 80 percent of the final product value, were specifically included in all of the classi44 fications. A new "special" class was defined to include all industries that were both unusually difficult to establish and unusually 45 beneficial to the re§t of the economy. Most of the benefits of the 1957 law were either retained or increased. Provisions for tax and tariff reductions were expanded. Industries in the "special" category were granted total exemption from all national and local taxes and tariffs. Class "A" industries were granted complete exemption from all tariffs and 50 percent exoneration froin taxes. Benefits for the other classes were raised correspondingly. Under the new law, all classes of industries were allowed to apply all reinvestments against current profits for tax 47 purposes if they desired. The depreciation allowances and provisions for protective tariffs were both retained. However, the provision for tariff protection was expanded. Two clauses of the 1957 law were not retained. No distinction ^'Interview with Sr. Ing. Jaime Calderon P. 44 U. S. Dqurtment of Commerce, Industrial Developnnent Law of Ecuador . OBK 62-17, p. 2.

PAGE 312

301 was made in the 1962 law between "efficient" and "other" industries in granting exemptions from local and national taxes. The provisions for granting write-offs of current profit taxes against previous losses were not retained. However, it was explicitly stated that all benefits enjoyed by previously established industries under the old law would 48 be retained under the new classifications. In another major change froni the 195 7 lav/, the administrative provisions of the 1962 law were greatly simplified. The Director General of Industry in the Ministry of Development was made responsible for having the paperwork processed and for collecting the 49 appropriate data once application had been filed. This relieved the applicant from the burden of walking his application through every step of the way. Also of benefit to the applicant was the provision granting categorical benefits to industries. Under the 1957 law, industrialists had to process papers for each new item of machinery desired. Under the 1962 law, all that was needed was to show that the specific requests fell in the general categories for which benefits had been granted. The intent and effect of the new law was to give substantial aid to manufacturing plants in the process of being established. Most of the on-going manufacturing concerns had already been receiving benefits through the 1957 law. Although the established firms were helped 48lbid. , p. 6. '^'^ibid. , p. 3.

PAGE 313

302 by the increase's in allowances granted, the categories were not broadened sufficiently to allow existing plants to petition for a reclassification to a higher status and a substantial increase in benefits. Recently established industrial firms received substantially more benefits from the 1962 law than they could have frc)n:i the 1957 version. The creation of the special class and the inclusion of assembly operations for benefits \\ei'e specifically aimed at encouraging the development of industrial plants in these branches of activity. 50 In 1962 no existing plant could qualify for these provisions. The elimination of provisions covering "specially efficient" operations and write-offs for losses sustained in previous years ended benefits for which recently established plants could not qualify. The greatly streamlined administrative procedures allowed many new industrial entrepreneurs to take full advantage of benefits of the law. That the new law was an efficient instrument for encouraging new industries was shown by the speed with which investors flocked to take advantage of the opportunities opened up. One hundred and twenty-three businesses were classified in the first year of the new law--a very substantial increase over the 83 businesses that received benefits of 51 the 1957 law in the entire five years it was on the books. The new law was evidently a comproiTiise between the experts 50 "Industrias Acogidas a la Clasificacion Industrial" (Quito: CENDES, undated mimeographed manuscript). 5 1 Basic Data on Economy of Ecuador , p. 5.

PAGE 314

303 and the industrialists. The critiques of the 1957 law suggested several reforms that would have the effect of restricting benefits. For the most part these were not included in the 1962 law. The VVygard report suggested that tariff protection for local production only be granted wlien the resulting price rise would be more than offset by 52 the savings in foreign exchange. It also suggested that there be a time limit for tariff protection so as to discourage the creation of r o artificial industries behind a tariff barrier. Wygard also suggested that the provisions granting special benefits for efficient indus54 tries be strengthened rather than eliminated. All of these measures would have put? more economic pressure on industries to modernize. The managers of existing industries were not greatly enthusiastic about the new law since it did not give any major increases in benefits for them, and it had the effect of stimulating the creation of potential competitors in several branches of industry. There are several probable explanations for the comproinise nature of the 1962 law. The aim of industrial encouragement directed attention towards those portions of the old law that were most disadvantageous to the industrialists. Creation of new limitations on benefits would be partially self-defeating. A major goal of the new law was to improve administrative procedures. The inclusion of 52 Edward Wygard, Chapter 5. ^^Ibid. ^^Ibid.

PAGE 315

304 criteria of efficiency and relation between costs and benefits in tariff protection would have marked a return to the company -by -coin pany analysis that was so cumbersome under the old law. The general spirit of the critiques of the 1957 law in these areas was to have been retained through the restructuring of the tariff systems and the creation of JNP guidelines for preferred areas of industrial investment. A last probable explanation was that the project was promoted from the draft report to political reality by the industrialists sitting in cabinet positions. It would be expected that they would cut back on projected li^mitations to benefits. However, there is no evidence that the changes from the draft reports could be accounted for by pressure from businessmen outside of the governnnent. Repeal of the Wheat Tax A tax placed on imported wheat during the Velasco regime had not worked out as well as its supporters had hoped, but had not been as disastrous as the opponents had feared. The major effect was to raise the prices of all wheat sold in the country. This increased the profits made by the local wheat farmers. Part of the additional costs to the bakers • was passed on to the public in the form of higher Rene Garcia, "Una Crisis Aguda, " La Calle , 275 (June 15, 1962), p. 24 56 Interview with Sr. Alejandro Vega Toral.

PAGE 316

305 57 bread prices. Therefore the middlemen were not placed in an unmanageable profit squeeze. The political impact of the increase in the price of bread was not very great. The Velasco regime had mismanaged the econoiny to such an extent that this one additional issue was more or less lost in the confusion. By the time Carlos Julio Arosennena came to power, the additional cost of bread was accepted as a fact of life. The increase in the domestic price of wheat did not result in any C Q increase in local wheat production. Either by design or accident, the local growers kept production down so as to realize the maximum benefit from tfie increase in prices. As a result, the wheat tax did not seriously affect the business of the wheat importers. They continued to supply most of the coastal market. The increase in taxes had the effect of actually increasing the profit margin of any wheat smuggled in. Despite these mixed results, there was increased opposition to the wheat tax by the time of the Arosemena administration. The tecnicos , who had been hoping that the tax would help inake Ecuador self-sufficient in wheat production, were no longer interested in only giving benefits to the comparatively inefficient 59 farmers of the sierra. Ibid . Interview with Dr. Jose Vicente Ortunb. ^Interview with Dr. Jorge Luna Yepez, senior party official in ARNE, on November 13, 1968; interview with Dr. Gonzalo Cordova G. , former member of tlie board of the Camara de la Agricultura de la Primera Zona, on November 25, 1968.

PAGE 317

306 Many other groups not seriously hurt by the tax hoped to achieve new benefits through its repeal. The importers, millers and bakers hoped that they would be able to keep as extra profits any reduction in the costs of wheat. The Arosemena administration was eager to establish its opposition to the econoinic policies of Velasco. Reductions or eliminations of the many unpopular taxes levied by the Velasco government were to be symbolic of the "return to normalcy. " The wheat tax was particularly attractive since it was unpopular with the people on whom it was levied and benefited only the conservative sierra groups who were not political supporters of the president. The removal of a tS.x that hurt the common man to the benefit of the elites also helped the regime establish its radicalreformist credentials in the eyes of the voters. The principal pain of the tax repeal-loss of revenues-was not particularly important since the tax had not been particularly lucrative. The sierra wheat growers were aware that the tax was in danger of repeal. The Camara de Agricultura de la Primera Zona organized several public meetings that were well attended by the sierra social and economic elites. The ostensible purpose of the meetings was to decide on a common policy with respect to such issues as land reform. Interview with Dr. Andres F. Cordova, former president of Ecuador and former niember of the board of the Camara de la Agri cultura de la Primera Zona , on November 29, 1968; interview with Sr. Luis Del Campo Salvador, member of the board of the Camara de la Agricultura de la Primera Zona, on November 15, 1968.

PAGE 318

307 the abolition of sharccropping, and tax and credit policies of the state with respect to agriculture. However, one effect of the meeting was to serve public notice that the landowners were prepared to defend their interests against the government. Therefore the mam political problen:i of the Arosemena administration was how to maneuver the sierra wheat growers into a position where they could not oppose the planned repeal. Hard information on the sequence of events is lacking. However, a plausible reconstruction runs as follows. The wheat mills were having a wave of labor trouble during the summer of 1962. The minister of developnnent started an informal series of discussions among groups involved in the wheat business on how best to relieve the marginally solvent millers from the added burdens of the anticipated wage increases. One proposal that was informally mentioned for consideration was the possibility of tax relief. A vice-president of the Camara de Agricultura de la Primera Zona wrote a private letter to the govern62 ment saying that tax relief could be worth considering. This letter, oficio 794 of July 24, 1962, was picked up by Aurelio Davila Cajas, the president of the Consejo Nacional de Economia , as a demonstration that the camara de agricultura had given its official backing to the specific project of repealing the . 20 centavo/kg. tax on imported ^^"Intereses Agrarios, " La Calle , 254 (January 19, 1962), p. 14; El Comercio, December 19, 1961, p. 1. 62, 'La Marcha del Ticmpo, " La Calle, 281 (July 27, 1962), p. 10.

PAGE 319

308 wheat. The lax was repealed in Decrelo Ejecutivo published in Registro Oficial 2Z6 of August 7, 1962. The reason and justifications given for the repeal were that the milling industry had suffered the twin effects of the general inflation and the specific cost increases that resulted 64 from the original wheat tax. The wheat growers were very unhappy about the repeal but could not attack the executive decree without both directly confronting the president and seeming to repudiate the leadership of the Camara de la Agricultura de la Primera Zona . The sierra wheat growers retained their influence in the unusually independent congress. An attempt was made to have the wheat tax reinstated as a part of the , 65 Budgetary Support Bill of 1962. However, the provisions for the tax were deleted in debate and the repeal of the tax became a dead issue. Recruitment and Decision Making for the Junta Monetaria The Junta Monetaria was donninated by businessmen during the /I -3 Ibid. ; introduction to Decreto Ejecutive 45 published in Regis tro Oficial 226 of August 7, 1962. Ibid. Ecuador, Congress, Actas: Camara de Diputados ; OctubreNovembre 1962, p. 9.

PAGE 320

309 administration of Carlos Julio Arosemena, At the start of the year six out of nine positions on the Junta were held by businessmen. However, there was alinost an even balance among all business groups. The commercial and agricultural interests of the sierra were represented by Miguel Espinosa Paez, a well-known Quito landowner and general comerciante . Sr. Espinosa was elected by the camaras of the sierra. The representative for the sierra banks was Jaime Acosta Velasco, the son of the general manager of the Banco de Pichincha. The representative from congress, Gregorio Ormaza Eguez, was a major stockholder in the very large Quito pharmaceutical firm of LIFE. Three members of the Junt a were affiliated with the coastal business groups. The camaras of the coast had elected the prominent manufacturer, Ernesto Jouvm Cisneros, to the Junta. The business affiliations of Sr. Jouvin have already been discussed in connection with his later role as Minister of Development. Sr. Fernando Manrique Morales, brother to a nnanager of the Banco de Guayaquil , was elected to the Junta by the coastal banks. The Minister of Economy sitting on the Junta was Teodoro Alvarado Olea, the publisher of VISTAZO. His business affiliations have already been analyzed in connection with the recruitment to the cabinet. The only people on the Junta who did not have identifiable business Ecuador, Banco Central, Memoria del Gerente General del Banco Central Correspondiente al Ejercicio del Ano 1962 , p. 475.

PAGE 321

310 connections were Armando E spinel Mendoza, the representative from the Consejo Nacional do Economia , Enrique Arizaga Toral, the Minister of Development, and Jorge Polit Ortiz, the representative from the Institute Nacional de Prevision. The composition of the Junta clianged during the year as a result of the many cabinet shifts of the Arosemena adininistration. One shift gave Ernest Jouvin Cisneros a double role, first as the representative of the coa'stal camaras, and second as the Minister of Developnient. Other shifts brought first Antonio Mata Martinez, a proininent Guayaquil contractor, and then Jose Salazar Barragan to the Junta . The Guayaquil commercial businessmen were the only group that was not directly represented most of the time on the Junta . Sr. Salazar Barragan was the single merchant to sit on the board and he was not appointed until late in May of 1962. However, the banks had substantial interest in commercial activities and only Sr. Orniaza represented a nianufacturing concern that could be in direct competition with imported goods. Given this balance among commercial and industrial groups, it would be expected that factors of political and personal loyalties would play a major role in determing policy choices. Two factors are of interest here. The first is that four of the members of the Junta were holdovers from the Velasco regime. Miguel Espinosa Paez and Ernesto Jouvin Cisneros held the same positions. Armando Espinel

PAGE 322

311 Mendoza represented the camaras of the sierra and Gregorio Ormaza Eguez represented the banks of the sierra. Jaime Acosta Velasco was the brother of Jorge Acosta, one of the last of Velasco's ministers of government. However, it is understood that family relations were somewhat strained so that this may not have implied any mutual influence. The second aspect was the relation between the nnembers of the Junta and President Arosemena. Under nornial circumstances, it would be expected that the selection of delegates representing congress, the INP and the Consejo Nacional de Economia would be greatly influenced by the president. However, a coalition of congressional leaders had put Arosennena in the presidency; therefore it would be expected thjit they would also have very substantial influence over who was named to the Junta , and the president would have correspondingly less control of the election. The major conflict before the Junta Monetaria during the first year of President Arosennena's administration was whether to give tariff protection to EPISA, a local manufacturer of sanitary fixtures. EPISA had been started around 1968 by Gonzalo Hinostrosa. Jaime Nebot Velasco had become an investor in the company. Some 60 percent of the slock was held by the Banco de Gviayaquil . Therefore EPISA received the sponsorship of high elite Guayaquil circles and f)7 U. S. Department of Commerce, World Trade Directory Reports , "Empresa Promotora de Industrias, S. A. "

PAGE 323

312 the political leaders of the fourth Velasquisnio. Although the quality was not too poor, the product made by EPISA did not find a wide market. The major defect of the product was weight. Since facilities for making steel stampings were lacking, the EPISA fixtures were made on imported and obsolete cast-iron bases. The weight of the cast-iron made the fixtures unwieldly to install in any circumstances and a structural embarrassment for many light frame houses. The dependence on obsolete imported bases reduced the range of fixtures offered by EPISA. The types of facilities in demand by modern architects simply were not available. Neither could the 69 company provide for many other more specialized demands. The costs of importing the materials for production also raised the sale 70 prices considerably above the prices charged for imported fixtures. A final barrier to market acceptance was the fact that it was a local company. The attitude that imported goods must be better than local items is widely shared. EPISA was granted a "C" classification under the 1957 industrial 71 development law in I960. However, the benefits granted were not enough to offset the losses due to the liinited market and obsolete 68 Interview with Sr. Eduardo Larrea. 69ibid. ^^ Ibid. 71 "Industrias Acogidas ..."

PAGE 324

313 manxifacturing procedures. Therefore the managers of EPISA applied in 1961 to the Junta Monetaria for tariff protection. They asked for a prohibition on the iinportation of fixtures on the grounds that local production was adequate to fill all national needs. However, any sub72 stantial market protection would have been welcome. It should be noted that EPISA was not eligible for the provisions for tariff protection given in the 195 7 law. The cases for and against tariff increases were argued before the Junta Monetaria . Opposition to the proposed change was organ73 ized by Norberto Kywi, a leading Quito merchant and one of the largest iniporters of hardware in the country. Allied with him were several minor Quito retailers. Building contractors were very interested in the outcome of the case, but did not take an active role. The Cam ara de Comercio evidently took very little interest in the case. The attitude of the Camara de Guayaquil is perhaps explainable by the substantially greater involvement of the leaders in EPISA throvigh the Banco de Guayaquil than in the problems of the one or two major iniporters of sanitary facilities. However, the Camara de Quito apparently felt that it was not worth becoming involved in the conflict since Norberto Kywi was the only sierra merchant who directly imported 72 Letter written by Fernando Robles Zanatta, the manager of EPISA, to the president of the Junta Monetaria, on February 23, 1962, as quoted in a letter written by Sr. Robles to El Comercio on April 1, 1962, p. 15. Interview with Sr. Jaiine Calderon P.

PAGE 325

314 74 these items. Kywi brought representatives from American Standard and other U.S. manufacturers before the Junta as expert witnesses for his case. Kywi argued that EPISA should not be granted tariff protection because they could not provide for national market. The range of styles, colors and prices offered was too limited to fit all building requirements and the weight of the fixtures created engineering problems in many situations. Furthermore, market experience indicated that customers would prefer the imported fixtures over domestic production regardless of the price difference between them. Supporting their arguments was the generally unfavorable report made to the 7 ^ Junta Monetaria by the staff of the Banco Central. EPISA was supported by the Camara de Industriales de Guayaquil in seeking increased protection. The most appealing argument for the Junta Monetaria was that tariff increases would both save foreign exchange and would produce additional revenue. An important psychological factor was that the EPISA had been granted benefits under the Industrial Development Law. Although the company was not directly eligible for provisions for tariff protection under the law, there was a general feeling that there was no point in granting half measures for 74 Jbid. However, Sr. Robles charged in a letter written to El Comercio that the camara had been able to block the tariff increase through Julio Espinosa Zaldumbidc, the president of the Camara de Comercio dc Quito who also sat on the Junta . 75 Interview with Sr. Eduardo Larrea.

PAGE 326

315 industrial encouragement. It would be pointless to give tax benefits if the company were to go out of business through a lack of tariff protection. The association of Jaime Nebot Velasco with the company was also of advantage to EPISA. Nebot had inade a wide reputation as a very astute businessman while in office. Many of the people in the Arosemena cabinet and on the Junta were his personal friends even if they were not hia political allies. Nebot can be presumed to have 7 T had at least privileged access to many of the mennbers of the Junta. The conflict between the importers and EPISA was generally confined to making arguments before the Junta . Neither side enjoyed sufficiently wide support to niobilize for a wider battle. The promoters of EPISA started an abortive newspaper campaign at the time of the unfavorable report of the Banco Central staff, charging that opposition to tariff protection was lead by a "trust" of Guayaquil importers. The charge was apparently not true and the public exchanges 78 soon died down after a few more letters had been written. The Arosemena governnient was not apparently involved except insofar as cabinet ministers sitting on the Junta personally participated in deciding the issue. •7Z Interview with Ec. Manuel Naranjo Toro. 77 Interview witli Sr. Eduardo Larrea. 78 Letter written by Fernando Robles Zanatta, the manager of EPISA, to El Comercio , April!, 1962, p. 15.

PAGE 327

316 The decision of the Junta was that the government should continue to allow the importation of sanitary fi>ctures but that the tariff should be tripled. This resulted in a price rise of a third for the imported fixtures, which allowed EPISA to meet the competition on price. How79 ever, the company soon discontinued production. Even at the higher tariff level EPISA could not supply most of the market. Several production problems were never solved to complete satisfaction and the company soon ran into labor problems. Jaime Nebot Velasco decided to cut his losses and pulled out of the company. Gonzalo Hinostrosa continued on his own. EPISA is still in existence; however, they are 80 no longer manufacturing sanitary fixtures. '"interview with Ing. Jaime Calderon P. 80 Interview with Sr. Eduardo Larrea.

PAGE 328

CHAPTER X SUMMARY AND CONCLUSIONS Who governs? The fragmentary evidence at hand still does not lead to a definite conclusion. However, there are materials at hand with which to assemble preliminary hypotheses. Who governs? The overall picture is elitist. The elites seem to have preferential access to governing positions. Outcomes can be understood in terms of self-interests of the decision makers. However, the lead in political activity seenns to have been taken by the "second echelon" business leaders who are engaged in sharp partisan conflict in business and politics. Alternation of elites is related to changes of governmental policies, and, in some situations, the maintenance of a governmental policy in the face of private demands. The following propositions summarize the evidence leading up to this picture of Ecuadorean politics. Proposition One : There is a sharp concentration of wealth and economic power in the country. The most powerful economic group in the country is the Guayaquil elite business community. As in iTiost Latin American countries, the gross inequalities of income distribution in Ecuador are apparent to even casual obser317

PAGE 329

318 vers. Data on the distribution of land, income and business sizes have been given in previous chapters. Of more immediate concern is the distribution of wealth and economic power within the business community. It was shown that most of the business activity in the country was located in Guayaquil. The dependence of tlie Quito businessmen on the Guayaquil importers was discussed. The sierra wheat farmers and merchants were especially affected. The economic position of the Guayaquil businessmen was enhanced by a strong concentration of economic power. A tracing out of the patterns of ownership revealed a series of overlapping and interlocking business empires. The business combines seemed to have a major position in banking, importexport and mamifacturing. The sierra businessmen were not organized into competing empires. Only fragmentary chains of businesses came to light. They were nowhere nearly as well integrated and did not have anything like the commanding economic position of the Guayaquil business elites. Neither did there seem to be any major link with the Guayaquil businessmen. This concentration of power in a relatively few economic combines is frequently observed in Latin America, Highly diversified Osvaldo Sunkel, "The Structural Background of Developmental Problems in Latin America, " in Charles T. Nisbet, ed, , Latin America: Problems in Economic Developirnrnt (New York: The Free Press, 1969), p. 10,

PAGE 330

319 business groups controlling major portions of the economy have been 2 observed in Mexico, Argentina, Colombia, and Peru. Ecuador does seem to be special in the extent to which foreign and irmnigrant groups have been left out of the dominant Guayaquil groups and in the extent to which the business community has been cohesive and integrated. Proposition Two : The top business elites have relatively few partisan interests to defend; their interests are either in a very narrow le-vel of decision making or in very large issue areas. This statement is implied by the data summarized under Proposition One. The top elites have a very wide and general set of business interests to defend. Therefore they do not usually have a "self-interest" in taking one side of the great issues which traditionally split the business community, such as tariffs, development policy, tax refornns, etc. Their political interests are more likely to come out on very narrow issues of specific benefits to their specific companies or on the very large "class conflict" issues. In Latin Ainerica this pattern is common but not the rule. In many countries the major business groups are sharply specialized and thus have tended to enter ^Frank Brandenberg, "A Contribution to the Theory of Entrepreneurship and Economic Development: The Case of Mexico, " Inter American Economic Affairs , XVI (Winter, 1962), 3-23; Carlos Astiz, Pressure Groups and Power Elites in Peruvian Politics (Ithaca: Cornell University Press, 1969), p. 64; Peter H. Smith, The Politics of Beef in Argentina (New York: Columbia University Press, 1969), p. 39; Robert H. Dix, Colombia: The Political Dimensions of Chann;e (New Haven: Yale University Press, 1967), p. 389.

PAGE 331

strongly into politics on the middle-range issues 320 3 Proposition Throe : The greater the power of a political position over political and economic decision making, the greater the probability of having a businessnnan fill it. We can approximately rank political positions in terms of their iminediate impact on economic policy making as follows: cabinet positions for treasury, development and public works; other cabinet positions; positions on the governing boards of the political campaigns and other positions in the campaigns. The relation between position and level of business recruitment for all regimes is shown in Table 19 below. The evidence supporting Proposition Three is summarized in Table 19. There is, in fact, a very dramatic shift in the level of recruitment from the peripheral campaign positions to the central cabinet positions. Businessmen are virtually absent from the first and dominate the latter. Proposition Four : There is a relation between the economic position of a businessman and the probability that he will be recruited to political positions. Proposition Four (a) : The greater the importance of a political position in one particular sector of the economy, the greater the chance that a businessman from that sector will be recruited to the position. Cabinet positions for public works and development were the 3 For example see, Peter H. Smith, op. cit. ; William Lopstrom, Attitudes of an Industrial Pressure Group in Latin Am erica: The Asociacion de Industriales Minorsos de Bolivia, 19^5-1935 (Itliaca: Cornell University Dissertation Series, 1968); Merle Kling, A Mexican Interest Group in Action (Englewood Cliffs, Prentice-Hall, 1961).

PAGE 332

321 TABLE 19 RECRUITMENT TO POLITICAL POSITIONS RecruitPolitical Position'" Central Campaign Peripheral Peripheral ^^'^^ Cabinet Officer Cabinet Campaign Business 62% (16) 24% (34) 15% (5) 4% (13) Other 38% (10) 76% (106) 85% (29) 9 6%o(226) TOTAL 26 140 34 239 "Central cabinet" positions are: Development, Treasury, Public Works, and Economy. "Campaign officer" positions include the governing boards of the national parties, the governing juntas for the campaigns, the connmittees in charge of Pichincha and Guayas provinces, and the candidates for president, vice president and senator in areas of party strength. most highly specialized. It would be expected that people from contracting and manufacturing would hold these positions. Conversely, it would be expected that the remaining cabinet positions and the campaign positions would not draw frona any one specialized sector of the econoiny. This hypothesis is tested below in Table 20. The basic hypothesis of Proposition Four (a) is substantiated by Table 20. The greater the specialization of a political office, the greater the likelihood that somieone from a specialized sector of business would fill it. Proposition Four (b) : The greater the econo:nic importance of a political position, the greater the likelihood that a businessman from a more powerful economic position will fill it. The same general rankings of the economic importance of

PAGE 333

322 TABLE 20 SPECIALIZED RECRUITMENT WITHIN THE BUSINESS COMMUNITY Business Political Positions ^^^^°^ Public Works Development Other Cabinet Campaign Contracting 3 2 Q Manufacturing 2 6 11 Commerce 1 3 22 Financial 3 g political positions can be used. Cabinet positions on economic decision making come first, followed by other cabinet positions. Officials in the campaign organizations would come next and other campaign positions would come last. The classification of business positions is as follows: "Inner elites" people who manage several major companies within the Guayaquil "interlocking directorate. " "Established businessmen" people who own large established companies outside of the Guayaquil combine. "Marginal businessmen" people who depend on small or medium businesses, or whose businesses are in trouble, or who are dependent on some established business. The relation between the economic strength of businessmen and the positions to which they are recruited is shown in Table 21 below. A curvilinear relation is apparent in Tabic 21. The higher the position, the lower is the recruitment of "marginal" types to

PAGE 334

323 TABLE 21 THE RELATION OF POLITICAL AND ECONOMIC POSITIONS OF BUSINESSMEN Q • Political Position Business Position Cabinet Cabinet Campaign Campaign Economic Other Official Other Inner elite 12 12 4 Established 6 6 9 17 Marginal political office. The converse is not true for the "inner elite" businessmen. There are in fact more inner elite businessmen in the "campaign officer" positions than are in the cabinet or campaign peripheral. The understanding of this phenomenal rests on Propositions Two and Four (a). The key cabinet offices reflect rather sharp splits between sectors of the economy. The top level of economic elites has diversified interests and so would probably not want to participate in specialized decision making. This has the very important implication that policy decisions are niade by the middle-range established businessmen, not necessarily by the top elites. The remaining question is, however, who selects the businessmen for cabinet positions? Is it necessary that established businessmen in the cabinet have the approval of the inner elites in the campaign or is the president free to assemble his own coalitions? It is to this problem

PAGE 335

324 that the next proposition is directed. Proposition Five : Presidents have relatively little latitude in recruiting to campaign officer and cabinet positions. There is more latitude in recruiting to the marginal campaign positions.'* There are three classifications of businessmen for this proposition. The first is a division by region, either sierra or coastal; the second is a classification by economic sector; and the third is a classification by economic strength. The results are presented below in Table 22. Proposition Five represents the "null hypothesis" of no political independence of the party organizations from the business elites. The intent is to see to what extent evidence can be marshalled for or against it. The major evidence in favor of Proposition Five comes from an examination of the campaign staffing patterns. A majority of businessmen in all campaigns came from Guayaquil. This is especially significant in view of the sierra bias of Ponce. The businessmen in commerce were a plurality in all campaigns. The level of "inner elite" representation was much higher for the campaign organizations than for the cabinets in all three presidencies. This suggests that all three groups found it expedient to have a strong representation of the 4 I . Central cabinet" positions are Development, Treasury, Public Works, and Economy. "Campaign officer" positions include the governing juntas of the national parties, the governing committees for the cai-npaigns, the local committees in charge of Pichincha and Guayas provinces, and the candidates for president, vice-president and senator in areas of party strength.

PAGE 336

325 TABLE 22 RECRUITMENT BY REGION, BUSINESS SECTOR AND ECONOMIC POSITION Recruitment

PAGE 337

326 tion. Ponce relied much more heavily on the sierra elites and drew only from a relatively narrow stratum of the Guayaquil commercial inner elites. Velasco's support rested on a coalition of marginal Guayaquil businessmen and speculation-minded elite Guayaquil financiers. The Galo Plaza campaign organization, which provided the nominal political supports for Arosernena's presidency, was split between the regular PLR party organization and the FDN campaign coalition. Business representation in the PLR was relatively low. Most of the businessmen came to support Plaza and the coalition. The campaign coalition was built around the established Guayaquil manufacturers and two major liberal publishers. The inner elite supports were lowest for Arosemena and Plaza among all the political organizations. There seems to be a loose relation between the pattern of elite recruitment to campaign organizations and the staffing of the cabinets. The general tendencies of campaign staffing seem to be accentuated in the cabinets. Velasco relied more heavily on people drawn from banks, and marginal businessmen for his ministers. Arosemena relied even more heavily on the manufacturers in the cabinet than in the campaign. Ponce's cabinet contained a larger proportion of men engaged in sierra commerce than did his campaign. It is presumed that the cabinet staffing decisions were made with the active participation of the inner elites in the campaigns. The probable control exercised by campaign elites on cabinet recruitment

PAGE 338

327 can be inferred from the subordinate economic position of the cabinet businessmen, their relatively higher levels of economic specialization, and the temporal sequence of appointnnents. The campaign businessmen were in office when the decisions to name cabinet officers were made. There was no overlap between cabinet and campaign positions. However, there is no v/ay of knowing whether or not this reflects a consistent pattern qf Ecuadorean politics where campaign politicians do not sit in the cabinet. Velasco was the only president in the study who was supported in office by the same political coalition that he had organized for the election. Arosemena had the support of a coalition that was originally organized by Galo Plaza Lasso, and Ponce's political support had been organized for the 1956 elections. The I960 conservative effort had been organized to support Gonzalo Cordero Crespo. In sumimary, the data on campaign and cabinet recruitinent suggest that all presidents relied heavily on the Guayaquil "inner elites" for campaign backing and that the camipaign officers probably had a major voice in the selection of cabinet officers. However, there was some latitude in selecting which sub-groups within the elite circles would be given preference and with which non-elite groups they would be allied. Proposition Six : The major decisions of each administration can be explained in terms of the cabinet recruitment patterns.

PAGE 339

328 It is assuined that the prime beneficiaries of Ponce's inactivity were the coalition of inner elite manufacturers and comerciantes . Given the balance between manufacturers and merchants, it would have been hard for hiin to have developed a program that would appeal to all of his elite constituents. Velasco's cabinet was made up of elite financiers and speculationminded marginals. The "marginal" contingent was made up of two hustling small businessmen, Leonardo Stagg and Jaime Nebot Velasco, who held the portfolios of Economy and Development. The delegates from the "inner elite" worlds were Jose Ceballos Carrion, from Otto Arosemena's Banco La Previsora , and Jorge Acosta Velasco, from the Banco de Pichincha . Both groups benefited from the major administration policies of inflationary investment and devaluation. The major policy decisions of Carlos Julio Arosemena's administration was the Ley de Fomento Industrial . Industrialists, representing the economic sector that stood to benefit most fronn the law, occupied the posts of Economy (Antonio Mata Martinez, Ernesto Jouvin Cisneros) and Development (Teodoro Alvarado Olea and Jose Salazar Barragan). This apparent relation between cabinet recruitment and adniinistration decision making is sunnmarized below in Table 23. Minor decisions made by the three administrations also reflected the interests of the elite backers. However, situational factors seemed to have played a more iinportant part. Ponce's decision to

PAGE 340

329 TABLE 2 3 RECRUITMENT AND DECISION MAKING Major Decisions of Each Regime Business Recruitment Ponce Velasco Aroseniena (status quo) (speculation) (industrial development) Inner elite manufacturers 4 1 and comerciantes Inner elite financiers 1 4 2 and marginals Established manufacturers 11 4 end the free importation by the military commissaries was in the interests of the elite commercial and manufacturing groups. However, his veto of the bill repealing anticipated taxes was unpopular with elite groups and seems to have been pronnpted by the sheer need for governmental financing. Velasco's decision to devaluate, although it was certainly consistent with the interests of the financial speculators who backed his regiine, was forced by the bankruptcy of the Banco Central and the central government. His tax on imported wheat seems to have also been pushed as much by the need for money as by the demands of his backers.

PAGE 341

330 Financing was not the major motivation for Arosemena's decision to repeal the tax on imported wheat. Rather it seems to have been prompted by the needs of the Guayaquil innporters and bakers and the desire to establish the "reforming" credentials of the administration. However, the decision does not seeni to have been related to the interests of the dominant inanufacturer s who backed the administration. This line of reasoning, which emphasizes the importance of elite groups in recruitment and decision making, does not explain the decisions of the Junta Monetaria or the evident independence of the Banco Central in establishing fiscal policy. Velasco's efforts to pass the reform of the Junta Monetaria is ample evidence that the Junta and the Banco were expected to exercise policy preferences opposed to the goals of the administration. There would have been no reason to go to public effort to cut down the Junta if it was expected to be subservient in any case. There are several factors that seem to be related to the independence of the Junta . First is the policy area in which the members of the Junta have authority. Fiscal policy and stable fiscal management are major requirements for the long run development of almost all areas of the economy. Even a policy of inflationary subsidization of financiers and manufacturers should be competently run if it is to be effective. Many groups would find that a mildly unfavorable policy is better than a rapidly changing policy or no policy at all. It is

PAGE 342

331 doubtful if even the Guayaquil financiers would have welcomed Velasco's policies as a steady diet. The importance of fiscal policy for the businessmen would probably give them a vested interest in accepting a relatively narrow range of policy alternatives. A second factor that seenns related to the Junta autonomy is the complexity of the task of fiscal management. Very few people have the expertise to manage a Central Bank. As a result, outside groups have an interest in 'finding competent inanagers and giving them the authority needed to do the job. Thus the managers of the Banco would be expected to be able to exercise some independent power. Fiscal policies are also at the center of the conflicts among elite sectors of the business world. Tariff levels, interest rates, and import quotas are all of vital interest to most sectors of the economy. As a result, the business community is generally split on almost any policy alternative the Junta could propose. This conflict between sectors of the econoiny would tend to give the Junta and the manager of the Banco Central more inanuevering roonn in establishing policy. The assumption that conflict among competing groups gave the Junta significant latitude in decision making leads to a consideration of what other factors might have been related to decision outcomes. An important factor was the task of the Junta: managing monetary policy and maintaining adequate foreign reserves. This responsibility tended to lead to an acceptance of protective tariffs and an import substitution policy as a means of maintaining the precarious balance

PAGE 343

332 of solvency. It is also plausible to assume that the neutralization of elite pressure groups would increase the importance of personal relations and ties of friendship within the board as determinants of policy. Both factors were probably important in the decisions of the Junta to grant tariff protection to EPISA and Baterias Ecuatorianas . The saving of foreign exchange resulting froi-n decreased importation was mentioned as a factor in favor of protection both times. Both companies were managed by people who had been on the Junta in previous years. Sr, Tamayo Senalcazar, the manager of Baterias Ecuatorianas , served on the Junta while he was Minister of the Treasury in 1956. Jaime Nebot Velasco was on the Junta while he held the portfolio of Development in the Velasco government. Unfortunately no cases were studied where the Junta denied tariff protection and so it cannot be determined whether the absence of personal ties with Junta members would have made a difference. Proposition Seven : the influence of private groups that did not have a member placed in a strategic decision position was minimal. This proposition is implied by Proposition Six; if recruitment accounts for most decision making, then groups not brought in throu^ recruitment would not be influential. The evidence in favor of this proposition seems solid. The major victory of the camaras --thc regulation of the military and police commissaries-was briefly discussed in Chapter 7.

PAGE 344

333 However, two special circumstances seem to have been important. There was no opposition from the military and the project received the backing of the Secretary of the Treasury who was a former president of the Camara de Comercio de Guayaquil . The camaras had less success in other efforts to influence public policy. The closest approach to success was achieved by the Cam ara de Agricultura de la Primera Zona which momentarily won a tax on imported wheat.. Again though there were special factors which eased passage. The Velasco government badly needed any money the tax could raise. The administration was also quite weak and congress was exercising undue independence. This suited the farmers since they could count on the support of all sierra provinces. However, the weakness of the camara was later underscored by their failure to prevent the Arosemena administration froiTi repealing the tax. It could have been expected that an administration as unstable as Arosemena's would have been vulnerable to outside pressures. Other attempts at influence were even less effective. The camaras were not able to prevent Ponce from vetoing the bill repealing anticipated taxes, a measure which had long been pushed by the rank and file of most chambers. The failure to block the veto is especially noteworthy given the close ties between the camaras and the Secretary of the Treasury and the generally close relations between the sierra businessmen and President Ponce. The last serious atteinpt to influence public policy made by the camaras was the

PAGE 345

3 34 commercial stx-ikc organized by the sierra businessmen to obtain devaluation compensations. The inovement collapsed when it became apparent that the government was simply too broke to pay. The inactivity of the camara leaders during the period when the financial and political crises of the Velasco administration were building up is also suggestive of relative impotence. No camara came out in clear opposition to the administration. The closest approach was the joint statement of the sierra business organizations expressing alarm at conditions and implicitly spreading around the risks of opposition. The camaras theiTiselves did not seem to be independent of elite pressures. The Banco La Previsora was reported to have used economic power to secure the election of Otto Arosemena as functional senator for commerce on the coast. There is little in this narrative that would suggest that the rank and file could expect to hold out against elite pressures. Given the relative impotence of the well-established camaras in influencing public policy, it is not surprising that the small businessmen outside of the camaras were also unsuccessful. The small banana growers were vocal in their newspaper campaigns to win a greater regulation of the large growers and the exporters. However, there was no visible motion on behalf of the small growers in politics. Neither did the smaller comerciantes achieve any redress of grievances against the larger importers. There was simply very little

PAGE 346

335 support in politics for the small bvisinessmen who were being hurt by the established and elite businessmen who dominated the political scene. The picture thus far points to an elitist political system. Political conipetition took place within the relatively restricted ranks of the business elites and where issues related to elitesubordinate relations were not raised. It may be worthwhile to point to some factors that may have supported the oligarchies and kept out the nonelite insurgents. The economic position of the elites is clearly important. Otto Arosemena used the power of the banks to bring his opposition within the Ca"mara de Comercio de Guayaquil to heel. It is hard to imagine that the banks would not use their power to reward and punish in other, less visible, ways. The power of the major businessmen in party financing was also reputed to give them a veto over presidential appointments. It was also reported that the Guayaquil elites used their financial power to corruj^t lower levels of governinent. However there is no direct evidence of this. Cultural factors dampen out the enthusiasm of the politicians for the representation of disadvantaged groups. Li Ecuador great emphasis is placed on personal loyalties and a self-expression which sometimes borders on self-aggrandizement. Political leaders drawn from the upper segments of society are not likely to go against their friends to represent the larger segments of their constituency.

PAGE 347

336 The drive foi' self-expression, status and self-aggrandizement can often be manifested as a desire for upward mobility into the charmed 5 circles controlled by the inner elites. The effective representation of the masses would iinpede this desire for acceptance by the elites. The study provides substantial indirect evidence for this line of reasoning. The "program orientation" of the three presidents-the desire to use power to reform or to manage society and not for the aggrandizement of personal position-seems vv'eak. The circle of influentials never seemed to extend far beyond the small group of elites involved in the campaign organizations and the cabinets. Velasco was the only president who could have been expected to have an interest in representing the mass of disadvantaged citizens. However, the reports of his personal motivation, the speed of his alliance with the Guayaquil financiers, and the nature of his subsequent policies all point to a desire for personal power and upward mobility. Political instability also supports a narrow elite domination. Regimes seem to live on a narrow margin of political survival. The "life cycle" of presidential administrations described in Chapter 6 is paralleled by the unstable political history of the country. Given The thesis that status and conflict rest at the roots of the Latin American political process has been discussed by: Charles W. Anderson, Towards a Theory of Latin American Politics (Knoxville, Vanderbilt Occasional Papers, 1965); James L. Payne, Labor and Politics in Peru (New Haven: Yale University Press, 1965); James L. Payne, Patterns of Conflict in Colombia (New Haven: Yale University Press, 1968).

PAGE 348

337 endemic political conflict, few regimes would have the political strength to confront the conditions of elite domination. It probably would not be necessary for elite groups to throw out a hostile regime; denied elite supports, most administrations would collapse from their own weight. There is little evidence that the political difficulties of Ponce, Velasco and Aroseniena were the work of hostile inner elites. This sketch of Ecuadorean politics seems to confound several pluralist arguments. Although no one group of people participated in all or most of the decisions, the evidence pointed to the existence of a "power structure. " Even though there was a substantial level of public political competition during the period under study, there was virtually no representation of mass political interests. This study would suggest that "power" emerged out of economic and social patterns in the larger community and that representation is limited by stiff requirements for effective participation in politics. Perhaps future studies of power and participation should be more concerned with how community organization keeps people out of the political process. "Thomas J. Anton, "Power, Pluralism and Local Politics, " Administrative Science Quarterly , VII, 4 (March, 1963), 425-457.

PAGE 349

APPENDIX A The presentation of the business groupings has been based on a card file of businessmen. Listed in the file are names, types, and sizes of businesses with which each businessman is associated, together with the n^mes of all other managers who are also involved in the businesses. The file has been compiled from the World Trade Directory Reports provided by the American Embassy in Quito, ^ the directory to the Camara de Comercio de Qu ito, the Camara de Industriales de Pichincha ,-^ the Camara de Comercio de Guayaquil ,^ ^nd the Camara de Industriales de Guayas . Information was also gathered from the Quien Es Quien en Guayaquil , the "Quieli Es The World Trade Directory Rep orts are prepared by the Embassy on specific Ecuadorean businesses for use by interested American businessmen. By this time the file covers virtually all major Ecuadorean businesses. 2 ^ Camara de Comercio de Quito, Guia Comercial de Quito (Quito: Editorial Santo Domingo, 1967). 3 ^ Camara de Industriales de Pichincha, Bodas de Plata : 1936/1961 (Quito: Tallares Graficas Minerva, 1961), pp. 51-85. Camara de Comercio de Guayaquil, Guia General de Comerci antes de Guayaquil (Guayaquil: Editorial Orbe, 1964). 5 " Camara de Industriales de Guayaquil, "Clasificacion de las Empresas Industriales do Guayaquil" (Guayaquil, 1964), mimeographed. ^Quicl Sur, 1966), Q uien Es Quien e n Guayaquil (Guayaquil: Ediciones Cruz del 338

PAGE 350

Quien" section of the Ljbro dc 1 i Cuidad de San Francisco de Quito , Q the annual reports of the larger banks, and the lists of names of businessmen frequently published in the newspapers to demonstrate support for a candidate or policy. An effort was made to obtain information accurate as of January, 1962. All sources, except for the Quien Es Quien en Guayaqviil and the Libro de la Cuidad . . . were within two years of that date. The results have not been completely accurate. The World Trade Directory Reports are frequently based on secondary sources, mainly the reports of bankers and "knowledgeable informants. " Clerical errors in the directories were obvious at times. Additional errors have crept in the transcribing. However, checks of the file against new information have usually been successful. Not all businessmen were included in the file. Agriculturists were not included due to a lack of information. Camara de 339 7 7 El Libro de la Cuidad de San Francisco de Quito (Quito: Ediciones Cegan, 1952), pp. 131-393. Banco La Filantropica, Directorio (Guayaquil: Banco La Filantropica, 1964); Sociedad General, "Directorio; 1958-1960" (Guayaquil, 1968, typewritten; Banco de Descuento, Directorio del Banco (Guayaquil: Litografia e Iinprinta La Reforma, 1968); Banco de Guayaquil, Informe Anual (Guayaquil: Banco de Guayaquil, 1962); Banco La Prcvisora, Trimestre Economico (Guayaquil: Banco Le Previsora, 1961). 9 Changes in affiliation or ownership in other sources that were published later could be dated by examining membership numbers or sections on "later additions. "

PAGE 351

340 Agricultura membership is indirect for most farmers. Other sources left too inany gaps, especially for the coast. Businesses are divided into a simple "manufacturing -connmercial sources-media-financial" classification. Financial busines ses are sources of capital, such as banks, insurance companies, and investment connpanies. Construction is classified as a commercial business, due to the interest of builders in free importation of nnaterials and in inflationary investment. Service businesses include such businesses as airlines, dry cleaning establishments, and travel agencies. Businesses listed have been classified as being either "medium" or "large. " A "medium" business is one that has a registered capital of between 100, 000 and 499, 999 sucres reported by the camara guides to the Pichincha industrialists or the Guayas comerciantes or who have a "medium" volume of business listed by the AVTDR. Businesses with more capital or a greater commercial turnover are listed as "large. " Snnaller businesses have not been listed in the file. This This omission will probably not affect the results significantly. Businessmen who participate in large commercial and industrial empires are not likely to sacrifice these interest in favor of the fannily farm to any significant degree. Agriculturists have noted this lack of concern by urban elites for rural problems despite personal farm ownership. Interviews with Sr. Luis Fernando Del Campo Salvador, member of the board of directors of the Camara de AgricuUura de la Primera Zona , on Novennber 13, 1968; Sr. Jose Torres, president of the CeTinara de Agriculture de la Segunda Zona , on October 29, 1968; and Sr. Rafael Chambers Matamoros, executive director of the C omision Nacional de Trigo , on November 6, 1968.

PAGE 352

341 classification will be applied to all sectors of business. Therefore the smallest banks will be classified as "large" while few import houses will be anything but "medium. " An additional classification of "important business" will be used to highlight any firm that is particularly powerful or is very large within its particular classification. This will replace a possible classification of "very large. " Classification of businessmen into family groupings is the most indefinite aspect of*the data presented here. Classification has been based on information in the WTDR's, on the biographical reports of the Embassy unclassified files, and on the reports of "knowledgeable inforinants, " particularly Sra. Susana Ashton Donoso, of the American Embassy. I have also taken advantage of the Spanish system of retaining both the mother's and the father's name. Persons who share one of their two last names and who are also affiliated with the same business groups are presumed to be related. Brothers are classified together in a single set of entries with appropriate notations made to show which one controls what. Listed in the Guayaquil business file are businessmen associated with 399 industries, 220 commercial businesses, and 37 financial institutions. The file includes about 875 businessnnen. Joint ownership of businesses is quite common. Two or niore businessmen are listed as jointly participating for some 230 firms. On the average, there are approximately three businessinen listed for each firm that is not managed by one person exclusively. Multiple ownerships are

PAGE 353

342 common in all areas of the coastal economy. There are several sets of interlocking business groups. Each group seems highly integrated by many overlapping business affiliations compounded by family ties. These sets seem somewhat less tightly bound into one large "super-group" that covers literally hundreds of businessmen and businesses. This central set of "oligarchs" has been resolved into the groups seen in Table 24 below. A note on reading this table may be helpful. The businesses in which a particular person is involved are listed below his name in a column indented to the right. Other businessmen in these firms are listed below the appropriate company, also in a column indented to the right. People listed in columns with more than two horizontal spaces separating them are not jointly involved in the same companies. For example, Sergio E. Perez Valdez, Enrique Baquerizo Valenzuela and Rafael Franco Barba all operate Productos del Mar . However, Sergio E. Perez Valde'z has nothing directly to do with the management of Comercial y Industrial del Pacifico.

PAGE 354

343 TABLE 24 THE GUAYAQUIL BUSINESS EMPIRES Name and Business Type of Business & Size A. Sergio E. Perez Valdez Mecanica Tecnica Produclos del Mar Rafael Franco Barba Comcrcial y Industrial del Pacifico Jose Estrada Guzman Guayaquil Bottling Plant Enrique Baquerizo Valenzuela PHAYGESA Juan Jose Vilaseca Vails Gabriel Vilaseca Soler Industria Jabonera Ecuatoriana Juan Jose Vilcaseca Vails Teneria Vilaseca Soler Juan Jose Vilaseca Vails La Llave IMS A Fabri ca Automatico de Envasos Industria Ecuatoriana de Productos Sanitarios CODINASA Negocios Industriales Reales Auto Imports Xavier Ycaza Suarez Manuel Suarez Pareja Sociedad Nacional Comercial Xavier Ycaza Suarez Manuel Suarez Pareja Equipos Mec a nizados Maquinarias y Vehiculos Perforaciones Unidos Credito Mercantil del Ecuador Sucresores de A. Pillion Valdez Sociedad Tenica Comercial manufact. manufact. connmer. manufact. manufact. manufact. manufact. commer. manufact. manufact. manufact. commer. manufact. commer. medium -medium -large -large -large -large -medium -medium -medium -medium -medium -medium -medium -mediuni manufact. -medium Gustavo Gomez Ycaza Cia. de Intcrcambio y Credito Victor J. Maspons y Bigas (assoc. with group E. ) Mercantil Distribudora Inter-Quimica Cia. Nacional de Mclizas International Balsa Co. comnier.

PAGE 355

344 TABLE 24--Continued Name and Business Type of Business & Size commer. -medium Intercambio Comercial Custave Gomez Ycaza(assoc. with group E) Carlos R. Coello Valdez Cia. Colonial de Credito commer. -large Isidro de Ycaza Plaza Sud America Cia. de Seguros sobre La )^^^ financial-large Cia . Para E l Desarrollo Industrial manufact. -large Guillermos Arosemena Coronel Ecuado r Motors commer. -large ArosemenaHermanos/Financi era del Ecuador Forest L. Yoder (assoc. with group J) Alberto Wright Vallarino (assoc. with group I) Federico Goldbaum (assoc. with group I) Heraclito Weisson I ntersiones Generales commer. -large Banco de Guayaquil financial-large Carlos R. Coello Valdc'z Isidro Ycaza Plaza Edwin Bernett Coronel CIESA commer. -large •large Cesar Monge Serrano Cia. de Cervezas Nacionales manufact. Forest L. Yoder (assoc. with group J) Edmund Valdez Murillo Octavio Roca Carbo (assoc. with group I) Xavier Medina lUingworth Carame l Ltda^. manufact. -medium Servicio Philco commer. small Comercial Importadora J. J. Medina commer. -medium Cia^d_e Sc fiuros Huanicavilca commer. -large Jose Plaza Luque Representaciones y Distribuciones commer. -small Colombia P ictures of Ecuador commer. small Emilio Ginetta Saccone Mercantil Importadora Sucesores de A. Ginett a commer. -medium Rafael Dillon Valde'z Ecuadorean Enterprise commer. small Azucarera Valdez manufact. -large Edmund Valdez Murillo Ingenio San Carlos manufact. -large

PAGE 356

345 TABLE 24--Continued Name and Business Type of Business & Size Augustin Febres Cordero Tyler Emiisiones de Asfa 1 1 o Juan X. Marcos^ Socied;id Agricola e Industrial Augustin Febres Codero Tyler Agro Aereo Corporacjifm Pesquera Banco de Credito Hipotecario Juan X. Aguirre Socicdad General Juan X. Aguirre Exportadora Bananera Noboa Luis A. Noboa Naranja (assoc. with group B ) c B. Luis A. Noboa Naranja Empire Taller Automotriz Cia. Inversionista Guayaquil S. A. San Luis Industria Molinera Industria Continental manufact. -medium manufact. -large conrimer. -large manufact. -medium financial -large financial -large connmer. -large commer. -medium commer. -large manufact. -large manufact. -medium Sr. Marcos is one of the wealthiest men in Ecuador. He is reputed to be Sr. Noboa' s "silent partner, " providing financing and "political protection" but not directly participating in management. Interview with Sr. Ing. Carlos Rota, president of Sociedad Radio Tecnico , on October 15, 1968; Hugo Mas, "Quien Paga Impuestos en el Ecuador", Vistazo , October, 1968, pp. 12-19. The listed assets for Sociedad General are small in comparison with many other Ecuadorean banks. Furthermore, there is not much evidence of business in the main office. However, Sociedad General is reputed to be very important in the coastal comercial world because it holds many long term credits granted to business. It is also possible that the assets of Socicdad General have been significantly understated. Sr. Noboa is a major exporter of bananas. He also picks and ships bananas to the docks for other exporters. Sr. Noboa was reputed to handle some 60 percent of the domestic processing of exported bananas in 1968. However, his share of the market would have been much smaller in 1959-1962.

PAGE 357

346 TABLE 24--Continued Name and Business Type of Business & Size Richard Allendt Industria Plasticas Raul Canizares Rodolfo Cerber Corporacion Ecuatoriana -Europea Raul Canizares Rudolfo Cerber manufact. -medium commer. -medium Cia. Agricola Tropical Hacienda Guaramos Industria Ecuatoriana de Aceites y Grasas manufact. -medium Ultramares Corp. Inversiones y Predico Miguel Macias Burnham Drogueria Latina Luis A. Noboa Naranja Cia . Miguel Macias Burnham Enrique Ponce Luque La Familiar Henry M. Crawford AgroAereo Juan X. Marcos Exportadora Bananera Noboa Miguel Macias Burnliam J. X. Marcos Enrique Ponce Luque Corporacion Automotriz Juan X. Marcos Miguel Macias Burnham Carlos Alberto Aguirre Joaquin Orrantia Gonzalez (assoc. with Estrada Ycaza Empire) C. Banking Circle Rodrigo Ycaza Cornejo La Previsora Banco de Crcdito Kleber Viteri C. Klebcr-Ceballos Cia. commer. -medium cominer. -large commer. -large manufact. -large commer. -large commer. •large Carlos Julio Arosemena Monroy Productos del Ecuador (Eduardo Arosemena) financial-large manufact. -medium

PAGE 358

TABLE 24--Continued 347 Name and Business Type of Business & Size Otto Arosemena Goniez Cia.Ecuatoriana de Seguros Editorial Cervantes Comercial Cervantes Rodrigo Ycaza Candel Embotellado r es Ecuatorianas Reinates y Negocios Banco de Descuento (Gonzalo Ycaza Cornejo) Carlos Julio Arosemena Simon David Zevallos Menendez (assoc. with group G) Ecuafilm Ecuatoriana (a Quito firm) DISTRIBUDORA GENERAL "La Union" Cia. de Seguros Simon Canarte Barbero (has own empire) Gabriel Luque Rohde (assoc. with group G) Banco Terratorial Hugo Suarez Baquerizo Union Tipografico F. L. Goldbaum S. A. Mercantil Financiera del Ecuador Alberto Wright Vallarino (assoc. with Group I) Aroseinena Coronel (assoc. with group J) Jorge Higgins Jaramillo Foto Flash Jose Arosemena Jaraniillo financial -large manufact. -small commer. -medium manufact. -mediuin commer. -small financial -large manufact. -small commer. -medium financial -large financial -large commer. -small commer. -medium commer. -small Sr. Arosemena Gomez was reputed to be of a proud but relatively impoverished branch of the Arosemena clan. In 1959 he was the hired lawyer and an alternate to the board of directors of La Previsora . By 1962, after the success of his political adventures, he was a full member of the board and a powerful person in the Guayaquil business community. ^The father of Carlos Julio Arosemena Monroy, Carlos Julio Arosemena Tola, started both La Previsora and Banco dc Descuento . However, he did not retain holdings and it is unlikely that Carlos Julio Arosemena Monroy has any substantial interest in either bank.

PAGE 359

348 TABLE 24--Continued Name and Businesi Type of Business &; Size SERIA Instituto-Farmo-Biologico Jose Arosemena Jaramillo Victor M. Janer Iniprinta Jancr Cleinente Ycrovi Gomez Internacional Autoinotriz de Comercio Sociedad Fjjianciera y Comercial del Pacifico (assoc. with group B) J. X. Marcos Jose'Rubira Ramos Eduardo Salazar Gomez Clemente Yerovi Iiidaburu Distribuidora "Volvo Jose Rubira Ramos D. The Estrada Ycaza Empire Financiera Comiercial Rafael Jaramillo V, Empresa Ecuatoriana de Inversiones Julio Estrada Ycaza y Cia. Guaya q uil Bottling Plant Distribuidora Agrimotor Cia. In dustrial Financiera ATOMEC Ltda . Heriberto Orces Mendoza (assoc. with group Equipos S. A . Guayaquilena de Inversiones Agrovfa Frutera Ecuatoriana Centro Automotriz coinmer. -small manufact. -medium commer. -medium commer, -large commer. -medium financial -medium Corporacion Automotriz Luis A. Noboa (has own empire, group B) Juan X. Marcos (assoc. with group A) Miquel Macias B. (assoc. with group B) Carlos Aguirre (assoc. with group B) Luis Orrantia Gonzalez Fleischman Ecuatoriana Sociedad Ecuatoriana de Navegacion Cia. Comerci a l y Mandato (C OM AN DA TO ) owned in part by La Previsora (see Banking Circle) financialfinancialmanufact commer. commer. F) commer. financial commer. commer. cominer. commer. -mediuna -medium . -large -large -large -medium Targe -small -small small -large manufact. commer. -large •large

PAGE 360

349 TABLE 24-Continued Name and Business Type of Business & Size Luis Orrantia Gonzalez Estrada-Orrantia Casa de Comercio Luis Orrantia Gonezalez (assoc. with ; Rene Ycaza Lafourge Distribuidora de Autos Rene Ycaza Lafourge Luis Orrantia Gonzalez La Previsora (see Banking Circle) Cia. Industrial y Comercial Confort Gabriel Roldos Garces Laboratorios P^vil Gabriel Roldos Garces Patria Nacional Cia. de Seguros Luis Marcillo Industria Inmobiliaria Luis Castagneto Libreria y Imprinta "Bola de Oro " Simon Pareja Continental Bananera Joaquin Febres Cordero Mendoza Servicio de Transportes El Condor Granja Avicola Azul Hacienda Zoraida Industrial Financiera E. The Maspons Family Circle Luis Fernando Goniez Ycaza Cia. de Intercambio y Credito Pedro Maspons y Camarasa Exportadorcs Unidos S. A. Victor J. Maspons y Bigas Victor J. Maspons y Bigas F^brica de Cementos "Cerro Azul" Santiago/Alberto Maspons Guzman Pedro Maspons Wray La Casa Espanola Roberto Maspons Pifaire Mercantil Importadora Maspons Agencins Mime a Augustin Maspons y Cainarasa commer. -medium [roup B ) commer. -large manufact. -medium manufact. -medium financial -large manufact. -medium manufact. -medium conimer. -medium commer. -medium commer. -medium coinnier. -medium commer. -large commer. -large commer. -medium manufact. -large manufact. -medium connmer. -medium commer. -inedium

PAGE 361

350 TABLE 24--Continued Name and Business Type of Business & Size Heriberto Orces Mendoza (assoc. with group B. Aviles Alfaro Quito Motors D) Construcciones _j;_A ^nevos S. A. Coinercial Anglo-Ecuatoriana Cia. Nacional de Seguro s Sucre Cia. Arccntales Comercial Industrial Aviacion Para Agricultura Atoniec Simon Canarte Barbero S. A. Industrial Comercial Editorial ^ Ecuatoriana Arroceria del Ecuador Tallares Naval Wittinpjj> Cia. AjETi-icola y Industrial del Ecuador Transportes y Servicios MaratiiTios Empresa de Transpor te s Casa Comercial Coleman Francis V. Coleman Cia. Frutera Chileno-Ecuatoriana Editorial Ecua toriana David C. Huerta Radiodufusora "Ondas del Pacifico ' ' Francis V. Coleman Tropical Fruit Company Fra ncis V. Coleman y Cia. Drogueria y Laboratorio C o leman Cia. de Exportaciones y Consumtos La Sambo ronden'a "La Union" Cia. Nacional de Seguros F. L, Goldbaum Simon David Zevallos Menendez Gabriel Luque Rohde H. Enrique Maulme Gomez DIDASA Francisco Pino Mavilme Drogueria Maulme Francisco Pino Maulme Francisco Pino Ycaza commer. -medium commer, -large manufact, -medium commer. -large financial -large commer. -large financial -medium financial-large manufact, manufact. manufact. commer. commer. commer. commer. -medium -medium -medium medium medium medium medium commer. -large media -medium media-small commer. -medium commer. -medium manufact. -inedium commer. -large manufact, -small financial -large commer. -mediunn commer. -large

PAGE 362

351 TABLE 24--Continued Name and Business Type of Business & Size E. Mauline C. A. de Coi-nercio Francisco Pino Maulme Francisco Pino Ycaza Importadora Farnna Francisco Pino Ycaza Planta Reconstructora de Llantas Pino Ycaza y Cia . Banco de Descuento (a part of Banking Circle) Interconiercial S.A. Enrique Maulme Gomez Fernando Gomez Vallarino (assoc. with group I) commer. large commer. -medium manufact. -medium manufact. -large financial -large I. Guillermo Wright Vallarino (assoc. with group A) Sociedad San Luis Agendas Internacionales Jose Julio Montesdioca Productos Ecuatorianos Financiera del Ecuador Forest L. Yoder (has own empire) Arosemena Coronel (assoc. with group C) Federico Goldbaum (assoc. with group C) La Favorita Fabrica de Aceites y Grasas Jabonera Nacional Juan/Gustavo/Luis Vallarino Febres Cordero Octavio Roca Carbo (assoc. with group A) Alberto Vallarino Benites ABASA Cosmeticos del Ecuador Franja Trading Co. Fernando Gomez Vallarino Inter come rcial Enrique Maulme Gomez (assoc. with group H ) Juan Vallarino Duran Ballen Xavier Vallarino Marques de la Plata ALUMAR manufact. -large financial -large commer, -medium manufact. -large inanufact. -large manufact. -small manufact. -small commer. -small commer. -small manufact. -mediuin

PAGE 363

352 TABLE 24--Continued Name and Business J. The Ecuadorean Corporation Cia.de Cervazas NacionaTes Cia. Ecuatoriana de Maltas y Cervezas La Cemento Nacional Mecanica Nacional Automotriz Canteras Nacionales C. A. S an Mi guel Pildora San Miguel Cia. Ininobiliaria Cia. FregorJJica del Guayas Financiera del Ecuador Cia. Agricola-Quimica Type of Business & Size manufact. manufact. manufact. commer. manufact commer. manufact manufact manufact commer. commer. large large -large -inedium -large -large -large -large -medium -medium -medium The Ecuadorean Corporation is an American-owned, Bahamas-based holding company for the companies listed. Most of the stock is owned by a Mr. Norton. Mr. Yoder is the Ecuadorean manager who has married into the family. The Ecuadorean Corporation acts much like a local corporation. Many of the holdings are joint ventures with local capital. Mr. Yoder has probably formed an alliance with the local economic powers in order to gain "political protection. " Interview with Mr. John Snyder, Labor Attache of the American Embassy, on October 15, 1968. A group of Lebanese bankers form the major independent grouping. There are at least eight other minor sets of businessmen who do not control any significant portion of the economy. These groups are listed in Table 25 below.

PAGE 364

353 TABLE 25 SIGNIFICANT INDEPENDENT CROUPS Name and Business Type of Business fit Size The Lebanese Opposition Nahim/Juan/Estefano/Alfredo Isaias Barquet Inversiones S. A. Embotelladora Canada Dry S. A. San Vicente (Quito) Roberto Isaias Dassuin Emilio Isaias C. A. de Comercio Banco La Filantropica '' Roberto Isaias Dassuna Eduardo Anton Diaz Predios Y Comercio S. A. George E. Fayad Pla'sticos Industriales Almacenes Anton Jose Barakat Almacenes Barakat Importadores Nacionales Manuel Fayad Ernesto Raad Comercio General y Industrial Confecciones Robbins Industrias Textiles Fatima Federico Saporiti Ecuatoriana Vcnezolana CE DICA Salon Fortich Jorge Kronfle Gonzalo Noboa Elizalde CADISA CIESA Burchard Von Campe commer. -medium manufact. -large manufact. -large commer. -large financial -large commer. -large manufact, -medium commer. -medium manufact. -mediuiTi commer. -medium commer. -medium manufact. -medium nianufact. -medium conimer. -mediuni commer. -medium commer. -large commer. -small manufact. -medium ' Banco La F ilantropica has been growing very rapidly and is now the largest bank in Ecuador. However, the bulk of its business has been in smaller loans to individuals and to farmers and there have been some fears for the financial stability of the institution.

PAGE 365

354 Minor business groupings are listed as follows: Jaime Nebot Velasco Fernando Robles Zanatta Jacobo Ratinoff Five businesses Carlos Perez Noriega Hugo Gozenbach Orlando Rodriguez Valarizo Seven businesses Francisco Piana Ratta Jose Bruno Cavanna Three businesses Jorge/Eduardo Duran Wauge Jorge Salcedo Salcedo Seven businesses Eduardo Marcillo R. Gonzalo Murraigui Five businesses Leonardo Stagg Enrique Jonaux Four businesses

PAGE 366

APPENDIX B TABLE 26 MAJOR INTERLOCKING GROUP OF THE SIERRA' Name and Business Type of Business & Size B

PAGE 367

TABLE 26--Continued 356 Name and Business Cia. Aerea Ecuatoriana de Avjacion Oswaldo Gonzalez Cabrera Vasconez H. S. A. San Pedro Perez Andrado Chiriboga Perez Perez La Inca Financiera Nacional Lopez Miranda Lalaina Fabrica de Gas Carbonico Zevallos Menendez Febrez Cordero Arteaga Tobar Donoso Illingworth Gonzalez S. Rainirez S. Molestina R. Toinayo B. Baterias Ecuatorianas Juan Stadler ASTAP Ecuadorean Tours Type of Business & Size largest airline largest textile mill manufact. -medium financial -medium manufact. -medium manufact. -medium commer. -medium tourist agencymedium

PAGE 368

357 TABLE 27 MINOR BUSINESS CHAINS OF THE SIERRA Name and Business Ginsberg Omegia Ltda. Gumpel Tubopla.st S. A. CAVASA Zehngut Oso Llantera Nacional Lenk Muller La Quimica Type of Business h. Size manufact. -large manufact. -medium small service cominer. -medium medium service B. Kakabadse Hoescht-Eteco Zeller Nueff Hermigon Centrifugado S. A, commer. -large manufact. -medium C. Ottolenghi Incom S. A. Com in S. A.

PAGE 369

358 Several other empires have been built in the sierra by individual businessmen. The major one is headed by Sr. Pinto Davila and includes eight spinning, weaving, and clothing mills. However, none of these businesses are "large" and no outside businessman with other resources has apparently been involved in the Pinto Davila chain.

PAGE 370

LIST OF REFERENCES Books Alexander, Robert. The Venezuelan Democratic Revolution . NewBrunswick: Rutgers University Press, 1969. Alniond, Gabriel and Coleman, James. The Politics of Developing Areas . Princeton: The Princeton University Press, I960. Anderson, Charles \V. Politics and Econoinic Change in Latin Ameri ca. New York: Van Nostrand Reinhold Co. , 1967. Andreski, Stanislav. Parasitism and Subversion . New York: Pantheon, 1961. Astiz, Carlos. Pressure Groups and Power Elites in Peruvian Politics . Ithaca: Cornell University Press, 1969. Aulesta O. , Alfonso. Economia Ecuatoriana . Mexico: Institute Panamericano de Geografia y Historia, I960. Bailey, Norman (ed.). Latin America: Politics, Economics and Hennisphere Security . New York: Praeger, 1965. Beals, Ralph R. Community in Transition: Nayon, Ecuador . Los Angeles: University of California Press, 1966. Blanksten, George. Ecuador: Constitutions and Caudillos. Los Angeles: University of California Press, 1951. Blanksten, George I. "Ecuador: The Politics of Instability" in Martin Needier. The Political Systems of Latin America . Princeton: D. Van Nostrand, 1964. Brandenberg, Frank. The Making of Modern Mexico . Englewood Cliffe: Prentice-Hall, 1964. Busey, James L. Notes on Costa Rican Democracy . Boulder: The University of Colorado Press, 1967. 359

PAGE 371

360 Camara de la Agricultura de la Primera Zona. El DesarroUo Agro pecario del Ecuador . Quito: Camara de la Agricultura de la Primera Zona, 1968, . Principales Problemas Agro-Demograficos de la Sierra Ecuatoriana. Quito: Camara de la Agricultura de la Primera Zona, 1968. . Recomendaciones Ba'sicas Para la Accion Futura en El Sector Agropecario . Quito: Camara de la Agricultura de la Primera Zona, 1968. Camara de Comercio de Guayaquil. Guia General de Comerciantes de Guayaquil . Guayaquil: Editorial Orbe, 1964. Ca'mara de Comercio de Quito. Guia Comercial de Quito . Quito: Editorial Santo Domingo, 1967. Carn^r^ rip Indnstri^/! pk d'^ Pichincha. Bodas de Plata. Quito: Tallares Graficos Minerva, 1961. . Estatutos y Reglan-ientos de la Camara de Industriales de Pichincha . Quito: Cannara de Industriales de Pichincha, 1967. Cartwright, Duane(ed. ). Studies in Personal Power . Ann Arbor: University of Michigan Press, 1959. Champion, J. Las Bananeras del Ecuador . Guayaquil: Asociacion Nacional de Bananeras del Ecuador, 1959. Cline, Howard. Mexico: Revolution to Evolution, 1940-1960 . London: Oxford University Press, 1962. Cochran, Thomas C, The Puerto Rican Businessman. Philadelphia: The University of Pennsylvania Press, 1959. Dahl, Robert. A Preface to Democratic Theory . Chicago: The University of Chicago Press, 1956. . Who Governs, New Haven: Yale University Press, 1961. Davis, Morris and Weinbaum, Morris. Metropolitan Decision Processes . Chicago: Rand McNally, 1969. Dix, Robert H. Colombia: The Political Dimensions of Change. New Haven: Yale University Press, 1967.

PAGE 372

361 Easton, David. A Framework for Political Analysis . Englewood Cliffs: Prentice-Hall, 1965. Erickson, Edwin, £t, aj^. Area Handbook for Ecuador . Washington, D. C. Government Printing Office, 1966. Estrada, Victor Emilio. El Momento Economico enE 1 Ecuador. Guayaquil: Imprinta La Reforma, 1950. Expanding Private Investments for Ecuador's Econoniic Growth . Washington, D. C. : Checci and Co. , 1961. Fagg, John Edwin. Latin America: A General History . New York: Macmillan, 1969. Fillol, Tomas Roberto. Social Factors in Economic Developnient : The Argentine Case. Cambridge: The MIT Press, 1961. Fluharty, Vernon Lee. The Dance of the Millions . Pittsburgh: The University of Pittsburgh Press, 1957. Galaraza Arizaga, Rafael. Esquima Politica del Ecuador . Guayaquil: Editorial Alborada, 1963. Gerassi, John. The Great Fear . New York: Macmillan, 1963. Gil, Federico. The Political System of Chile . Boston: Houghton Mifflin Co. , 1966. Goinez, Rosend. "Peru: The Politics of Military Guardianship" in Martin Needier. Political Systems of Latin America. New York: Van Nostrand, 1970. Gonzalez, Jose Luis. Nuestro Crisis y El Fo n do Monetario Interna cional . Quito: Editorial Ruminahui, 1959. Gordon, Wendell. The Political Economy of Latin America . New York: Columbia University Press, 1965. Guayaquil en Cifras. Guayaquil: Uuiversidad de Guayaquil, 1962. Gunther, John. Inside South America . New York: Harper and Row, 1967. Herrera, Vasconc z. El Cultivo del Banano en El Ecuador . Guayaquil: Asociacion Nacional de Bananeros Ecuatorianos, 1963.

PAGE 373

362 Hirschman, Albert O, Journeys Toward Progress . New York: Twentieth Century Fund, 1963. Horowitz, Irving Louis, de Castro, Josue and Gerassi, John (eds. ). Radicalism in Latin America . New York: Random House, 1969. Hunter, Floyd. Cominunity Power Structure , Chapel Hill: University of North Carolina Press, 1953. Imaz, Jose Luis de. Los Que Mandan . Buenos Aires: Imprinta Universidad de Buenos Aires, 1964. Instituto de Estudios Administrativos. Manual de Gobie rno. Quito: Institute de Estudios Administrativos, 1962. . Salarios en el Ecuador: Agosto-Scptiembrc 1 963. Quito: Instituto de Estudios Administrativos, 1963. Johnson, John J. Political Change in Latin America. Stanford: Stanford University Press, 1958. Kling, Merle. A Mexican Interest Group in Action. Englewood Cliffs, Prentice-Hall, 1961. Kornhauser, William. The Politics of Mass Society. Clencoe: The Free Press, 1959. LaPalombara, Joseph. Interest Groups in Italian Politics . Princeton: Princeton University Press, 1964. Leff, Nathaniel. Economic Policy Making and Development in Brazil . New York: Wiley, 1968. Lewis, Oscar. The Children of Sanchez. New York: Random House, 1961. El Libro de la Cuidad de San Francisco de Quito . Quito: Ediciones Cegan, 1952. Linke, Lilo. Ecuador: Country of Contrasts . London: Oxford University Press, I960. Linneinan, Hans J. Analysis y Proyecciones de las Exportaciones del Ecuador . Quito: Junta Nacional de Planificacion y Coordinacidn Economica, 1961.

PAGE 374

363 Linneman, Hans J. T he Economic Regions of Ecuado r. Quito: Junta Nacional de Planificacio'n y Coordinacion Economica, I960, Lipset, Seymour Martin, and Solari, Aldo (eds. ), Elites in Latin America. New York: Oxford University Press, I960. Llerma, Jose Alfredo. Ecuador: Perfil de Su Progreso . Quito: Editorial Universitaria, I960. Lopez Cordovez, Luis Alberto. Zonas Agricolas del Ecuador . Quito: Junta Nacional de Planificacion y Coordinacidii Econo'mica, 1961. Lopstrom, William. Attitudes of an Industrial Pressure Group in Latin America: The Asociacion de Industriales Mineros de Bolivia, 1925-1936 . Ithaca: Cornell University Dissertation Series, 1968. Marquez, Jairo. Anatomia del Gringo. Bogota: Ediciones Tercer Mundo, 1966. Mills, C. Wright. The Power Elite . New York: Oxford University Press, 1957. Nagel, Ernest. The Structure of Science. New York: Harcourt, Brace and World, 1961. Needier, Martin C. Anatomy of a Coup d'Etat: Ecuador 1963 . Washington, D. C. : Institute for the Comparative Study of Political Systems, 1964. Padgett, L. Vincent. The Mexican Political System. Boston: Houghton Mifflin and Co. , 1966. Payne, James L. Patterns of Conflict in Colombia . New Haven: The Yale University Press, 1968. Petras, James. Politics and Soc ia l Forces in Chilean Development . Berkeley: The University of California Press, 1969. Plaza Lasso, Galo, and May, Stacey. The United Fruit Company in Latin America . Washington, D. C. : The National Planning Association, 1958. Prestus, Robert. Men at ihe Top . New York: Oxford University Press, 1964.

PAGE 375

364 Price, Waterhouse and Company. Doin^ Business in Ecuador. New York: Price, Waterhouse and Company, 19b0. Quien Es Quien En Guayaq uil. Guayaquil: Ediciones Cruz del Sur, 196b. Riggs, Fred. Administration in Developing Areas . Boston: Houghton Mifflin and Co. , 1964. Rose, Arnold. The Power Structure . New York: The Oxford University Press, 1967. Schattschneider, E. E. The Semi-Sovereign People. New York: Holt, Rhinehart and Winston, I960T Shapiro, Samuel (ed. ). The Integration of Man and Society in Latin America. London: The University of Notre Dame Press, 1967. Smith, Peter. The Politics of Beef in Argentina. New York: Columbia University Press, 1969. Snyder, Richard C. "A Decision Making Approach to the Study of Political Phenomena, " in Roland Young (ed. ). Approaches to the Stud y of Politics . Evanston: Northwestern University Press, 1958. S tatistical Abstract for Latin Ameri ca: 1962. Los Angeles: Center for Latin American Studies of the University of California, 1962. Sunkel, Osvaldo. "The Structural Background of Development Problems in Latin America, " in Charles T. Nesbet (ed. ). Latin A merica: Problems in Economic Developm ent. New York: The Free Press, 1969. Tannenbaum, Frank. T en Keys to Latin Ame rica. New York: Knopf, 1962. Taylor, Phillip B. The Government an d Politics of Uruguay. New Orleans: Tulane University Press, I960. Truman, David. The Governmental Proc ess. New York: Knopf, 19 51. Turner, Frank, e t al . The Artisan Communi ty in Ecuador's Modernizing Economy. Menlo Park: Stanford ResearchTrsriTute, 19b3.

PAGE 376

365 Velez, Claudio (ed.)Obstacles to Change in Latin America . London: Oxford University Press, 1965. Vernon, Raymond. The Dilemma of Mexico's Development . Cambridge: Harvard University Press, 1963. Villacres Moscoso, Jorge W. La Politica Econonnica Internacional del Ecuador . Guayaquil: Universidad de Guayaquil, 1959. Vries, Egbert de, and Medina, Jose (eds. ). Social Aspects of Eco nomic Change in Latin America: Vol. I. Belgiuin: UNESCO, 1963. Wagley, Charles. Social Science Research on Latin America . New York: Coluinbia University Press, 1964. Watkins, Ralph. Expanding Ecuador's Exports . New York: Frederick A. Praeger, 1967. Whitten, Nornian E. , Jr. Class, Kinship and Power in an Ecuadorean Town. Stanford: Stanford University Press, 1965. Wygard, Edward. Bases Para Una Politica de Foinento Industrial en El Ecuador . Quito: Junta Nacional de Planif icacio'n y Coordinacion Economica, 1962. Articles "Actividades del Directorio, " Comercio Ecuatoriano , July-September, 1959. pp. 16-19. Almond, Gabriel. "A Comparative Study of Interest Groups in the Political Process, " Anierican Political Science Review , lII, No. 1 (March 1958), 270-283. Anton, Thomas J. "Power, Pluralism and Local Politics, " A din in istrative Science Quarterly , VII, No. 4 (March, 1963), 425-457. Bachrach, Peter and Barratz, Morton. "Decisions and Non-Decisions: An Analytical Framework, " American Political Science Review , LVII, No. 3 (September, 1963), 634-642. "Two Faces of Power, " American Political Science Review , LVI, No. 4 (December, 1962), 951. Blanksten, George. "Political Groups in Latin America, " American Political Science Review, LII (March, 1959), 106-127.

PAGE 377

366 BonifaTz, Emilio. "Ingresos de Las Clases Socio-Economicas del Ecuador," Bolctin IiTformativo , IX-X (March, 1961), 57-61. Borja C. , Rodrigo. "Panorama de la Politica Ecuatoriana, " Corn bate , XIX (November-December, 1961), 16-22. Bottomley, Anthony. "Agricultural Employment Policies in Developing Countries: The Case of Ecuador, " Inter-American Economic Affairs , XIX, No. 4 (Spring, 1966), 50-57. "Imperfect Competition in the Industrialization of Ecuador," Inter-American Economic Affairs , XIX (Summer, 1965), 83-94. "Planning in an Underutilization Economy: The Case of Ecuador, " Social and Economic Studies , XV, No. 4 (December, 1966), 305-313. Brandenberg, Frank. "A Contribution to the Theory of Entrepreneurship and Economic Development: The Case of Mexico, " Inter American Affairs, XVI (Winter, 1962), 3-23. "Organized Business in Mexico, " Inter-American Eco nomic Affairs , XII, No. 3 (Winter, 1958), 26-50. Cisneros, Carlos. "El Indio: Nadie Hace Nada por su Causa,':' Vistazo, October, 1968, p. 81. Dahl, Robert A. "A Critique of the Ruling Elite Model, " American Political Science Review , LII (June, 1958), 463-469. "Declaracion, " Comercio Ecuatoriano, July-September, I960, p. 3. Dillon Valdez, Rafael, "Declaracion de la Camara de Industriales de Guayaquil, " El Coinercio , Noveinber 10, 1968, p. 3. "Documentos para la Historia Industrial del Pais, " La Industria , January, 1961, p. 4. Dominguen. "Dos Meses de 'Honorable' Congreso, " Epoca, October, 1968, pp. 22-28. Edwards, Harold T. "The Power Structure and Its Communication Behavior in San Jose, Costa Rica, " Journal of Interamerican Studies , IX, No. 2 (June, 1967), 236-247. El Agro . June, 1959 August, 1962.

PAGE 378

367 E] Comcrcio . June, 1959 August, 1962. Elias, Jaques. "Una Banana de Oro Maizco, " Presencia Latino americano , July 31, 1968, pp. 18-23. "El Juego de Poder y Los Grupos de Presion, " Vistazo , October, 1968, pp. 35-52. El Universo . June, 1959 August, 1962. "Estableccn Costos y Utilidades en Azucar," El Comercio , November 11, 1968, p. 5. Estrada Ycaza, Emilio. "Genesis de la Crisis Econon-iica de 1961, " La Calle, August 4, 1961, pp. 16-17; August 11, 1961, pp. 11-12. "Firnias Exportadores de Productos Agricolas, " El Agro , OctoberNovember, 1961, p. 35. Gillin, John. "Ethos Components in Modern Latin American Culture, " American Anthropologist , LVII (1955), 485-500. Greenstein, Fred. "The Changing Pattern of Urban Party Politics, " The Annals , 343 (May, 1964), 8-14. Gregor, A. James. "Political Science and the Uses of Functional Analysis, " American Political Science Review, LXII, No. 2 (June, 1958), 428. Harsanyi, John. "Measurement of Social Power: Opportunity Costs and the Theory of a Two Person Bargaining Game, " Behavioral Sciences , VII, No. 1 (March, 1962), 67-80. "Heredad Nefa sta Para La Econoinia, " Revista de la Camara de Indu s triales de Guayaquil, November-December, 1967, p. 3. Hispanic Amierican Report . October, 1959 October, 1962. "Informe de Labores del Directorio de la CaiTiara de Comercio de Quito en el Ano I960, " Cornercio Ecuatoriano , January-March, 1961, p. 4. "Intereses Bananeros: Los Productores Bananeros de Pichincha, " El Comercio , September 24, 1968, p. 9. Johnson, Stuart D. , "Community Power and a Typology of Social Issues," Social Forces , XXXVIII. Nal(March, 1959), 29-33.

PAGE 379

Kim, Young C. , "The Concept of Political Culture in Comparative Politics, " J ournal of Politics, XXVI, No. 2 (June, 1964), 313. Klapp, Orrin and Padgett, L. Vincent. "Power Structure and Decision Making in a Mexican Border City, " American Journal of S ociolog y. LXV. No. 4 (September, 1965), 400-406. "La Asemblea Nacional de Delegados de la Federacion Nacional de Bananeros del Ecuador, " El Connercio, September 29, 1968, p. 7. "La Labor de los Senadores Funcionales por el Comercio en la Legislatura de I960," Comercio Ecuatoriano , July-August, September, 1960, p. 1. Lauterbach, Albert. "Government and Development: Managerial Attitudes in Latin America, " Journal of Interamerican Studies, II, No. 2 (June, 1959), 201-227"! Le Rouge, Jean. "El Negocio de la Fumigacion, " L a Calle, May 12, 1961, p. 26. . "La Gran Catastrofe del Banano, " La Calle, April, 1961, p. 10. . "Repuesto al Sr. Entologo, " La Calle 215, April 22, 1961, p. 28. Lipman, Aaron. "Social Backgrounds of Bogota Entrepreneurs, " J ournal of Interamerican Studies , VII, No. 2 (June, 1965), 227. "Lista de Firmas Exportadores de Productos Agricolas, " El Agro, October-November, 1961, p. 35. "Lista de Firmas Exportadores de Productos Agricolas, " El Agro, October-November, 1962, pp. 28-32. "Manifesto, " Revista de la Camara de Comercio de Guayaquil, July 31, 1959, p. 5. March, James G. "An Introduction to the Theory and Measurement of Influence, " American Political Science Review, XLIX, No. 2 (June, 1959), 431-451. Mas, Hugo. "Quien Paga Impuestos en el Ecuador, " Vistazo, October, 1968, pp. 12-19. "Mensaje del Presidente, " Revista de la Camara de Comercio de Guayaquil, July 31, I960, p. 3.

PAGE 380

369 Merelman, Richard. "On the Neo-Elitist Critique of Community Power," A merican Political Science Re view, LXII, No. 2 (June, 1968), 451-460. "Necesidad de Proteger la Industria Ecuatoriana, " Camara de Industriales de Guayaquil, JanuaryFebruary, 1968, p. 7. New York Times . May, 1959 August, 1962. Pareja Diezcanseco, Alfredo. "Democracia o Demogogia en el Ecuador, " Combate, XV (March-April, 1961), 22. . "Teoria y Practica del Conductor Conducido, " Combate, XX (January-February, 1962), 13. Payne, James L. "Peru: The Politics of Structured Violence, " Journal of Politics, XXVII (June, 1965), 362-375. Peter the Wolf (pseudonym). "EDIALGE: Primera Presa de la Rosea, " La Calle, June 3, I960, p. 4. "Piden no Interferir en Negociones de Pequenos Productores de Bananas, " El Comerico, August 11, 1968, p. 28. "Pocas Familias Han Controlado la Economia Desde Epoca Colonial, " El Comercio, September 29, 1968, p. 1. "Produccion Agricola Estimativa de la Republica del Ecuador en el Ano 1957, " El Ag ro, August-September, 1958, p. 41. "Produccion Estimativa de los Principales Productor Agricolas, " El Agro (Quito), July-September, I960, p. 30. "Productivity of the Agricultural Sector in Ecuador, " Economic Bulletin for Latin America , VI, No. 2 (October 1961), 67. "Promedios de Precios al Por Mayor de los Principales Productos Agricolas del Pais, " E l Agro , July-September, I960, p. 30. "Reportaje: El Ingenio Valdez, " Camara de Industriales de Guayaquil, May-June, 1968, p. 41. "Reunion de Ejecutivos da las Camaras de Comercio del Ecuador, " Comercio Ecuatoriano , October-December, 1959i p. 9. Salz, Beate R. "The Human Element in Industrialization: A Hypothetical Case Study of the Ecuadorean Indians, " Economic Development and Cultural Change , IV, No. 1, part 2 (October, 1955), 1-264.

PAGE 381

370 Saunders, J. D. V. "Man-Land Relations in Ecuador, " Rural Sociol£gy, XXVI (March, 1961), 57-61. Seligman, Lester. "Recruitment in Politics, " P. R. O. D. , I, No. 4 (A'larch, 1958), 4-16. ~ "Se Nos Considera Industria Solo Para Cobrar Impuestos, " El Coinercio, October 5, 1968, p. 15. Shapley, L. S. and Shubik, Martin, "A Method of Evaluating the Distribution of Power in a Committee System, " American Political Science Review , XLVII, No. 3 (September, 1959), 787^792. Silvert, K. H. "An'Essay on Social Structure, " Amer ican University Field Staff Reports , November 25, 1956. ~ • "On Civil Discourtesy, " American University Field Staff Reports , February 5, 1967. "Violence in Three Stages, " Time, 73 (June 15, 1959), 41. Walker, Jack C. "A Critique of the Elitist Theory of Democracy, " American Poli tical Science Rev iew, LX, No. 2 (June, 1966), 285-295. Walter, Benjamin. "On the Logical Analysis of Power Attribution Procedures, " Journal of Politics, XXVI, No. 3 (November, 1964), 850-8( Walton, John. "Substance and Artifact: The Current Status of Research on Community Power Structure, " American Journal of Sociol ogy.. LXVI, No. l(A/larch, 1966), 430~^439^ Wolf, J. "Evolucion y Estructura del Mercado Bananero, " Boletm Mensual d e FAO. Ill, No. 2 (February, 1959), 141. Official Docume nts Ecuador, Constitucion Politica de la Republica del Ecuador: 1946. Ecuador, Disc ourso Pronuncia do P"^' Fl_SenorDoctor Jose Mara'a Vc lasco Ibarra Ante El Honorable Co'ngr e s o "Naci'onal al As urn i r e l Alando P resid encial el 31 dc Agosto doTv' bO. Quito: Tallares Graficos Nacionales, undated.

PAGE 382

371 Ecuador, Mensaje al H. Congreso Nacional de 1962 del Excellentisimo Scnor Doctor Don Carlos Juli o A roseme na Monroy, Pre si dente Constitucional del Ecuador, Quito: Tallares Graficos Nacionales, undated. Ecuador, Mensaje que el Excellentisimo Senor Doctor Don Camilio Ponse Enriquez, Presidente Constitucional de la Republica, Dirige a H. Congreso Nacional. Quito: Tallares Graficos Nacionales, 1959. Ecuador, Asociacion Nacional de Bananeros Ecuatorianos. El Cultivo del Banano en el Ecuador. Guayaquil: ANBE, 1963. Ecuador, Banco Central. Boletin del Banco Central: OctubreDeciembre, 1965. Quito: Banco Central, 1966. Memoria del Gerente General del Banco Central de 1959. Quito: Banco Central, I960. Memoria del Gerente General del Banco Central Correspondiente al Ejercicio del I960. Quito: Banco Central, 1961. Memoria del Gerente General del Banco Central Correspondiente al Ejercicio del 1961. Quito: Banco Central, 1962. Memoria del Gerente General del Banco Central Correspondiente al Ejercicio del 1962. Quito: Banco Central, 1963. Memoria del Gerente General del Banco Central Corres pondiente al Ejercicio del 1965. Quito: Banco Central, 1966. El Banco Central del Ecuador y Las Politicas Monetaria, Crcdencia y Cambiaria del Pais. Quito: Banco Central, undated. (Mimeographed. ) "Resumen de las Principales Observaciones de Caracter General al 'Plan General de Desarrollo'. " Quito: Banco Central, undated. (Mimeographed. ) Ecuador, Camara de Senado. "Actas de la Camara del Senado: AgostoSeptiembrc, 1959. " ' . "Astas del Congreso Extraordinario de 1959: Camara del Senado. " Diario de Debates: Scpticmbre 1959 : Vol. I. DiaiJode Debates: Scssiones en Pleno: Agosto, 1959.

PAGE 383

372 Ecuador, Junto Nacional de Planificacion y Cooi'dinacion Economica. Bas es y Directiv as para Programar el Desarrollo Economico del Ecuado r: Tomo I, Quito, 1958. . Re formas de la Estruc tu ra de T enencia de la Tierra y Ex]:iansi6n de la Frontera: Plan General de Desarrollo Economico y Social: Vol. II . Quito; 1962. Segundo Censo de Poblacion y Primer de Vivienda: Resumen General. Quite, 1962. . La Industria Ecuatoriana: 1950-1956. Quito, 1957. . Primer Censo Industrial: Resumen de Resultados. Quito, 1957. Ecuador, Ministro de Fomento. Informe a la Nacion: 1959. Ecuador, Ministro de Tesoro. Anuario de Comercio Exterior; I960. United Nations, Economic Commission for Latin America. El Desarrollo Economic o del Ecuador, 1954. U. S. , Department of Commerce, "American Firms, Subsidiaries and Affiliates: Ecuador." Quito, American Embassy, 1968. (Mimeographed. ) . Investment in Ecuador. Washington, D. C. : Government Printing Office, 1959. . World Trade Directory Reports. (Ecuador. ) Washington, D. C. : Government Printing Office. U.S. , Department of Labor. Labor Law and Practice in Ecuador. Washington, D. C. : Government Printing Office, 1963. U.S. , General Accounting Office. Q uestio nable Aspects of Budgetary Support Loans Made to the Government of Ecuador . Washington, D. C. : Government Printing Office, 1965. Universidad de Guayaquil, Facultad dc Ciencias Economicas, Guayaquil en Cifras . Guayaquil: Universidad de Guayaquil, 1964.

PAGE 384

373 Pamphlets Asociacion Revolucionaria Nacionalista Ecuatoriana. Hacia la Revolucion; IX Asemblea Nacional de ARNE . Quito: ARNE, I960. Banco de Descucnto. Informe del Direct ori o del Banco de Descuento . Guayaquil: Imprinta e Litografia La Reforma, 1968. Banco La Filantropica. Directorio . Guayaquil: Banco La Filantropica, 1964. Banco de Guayaquil. Informe Anual. Guayaquil: Banco de Guayaquil, 1961. Banco La Previsors.. Trimestre Economico . Guayaquil: Banco La Previsora, 1961. Fundacion Ecuatoriana de DesarroUo. Fundacion Ecuatoriana de DesarroUo: Zona Norte. Quito: Editorial Colon, no date. Additional Sources Asociacion de Industriales Textiles de Ecuador. Mimeographed List of Members, 1963. Asociacion Nacional de Criaderos de Ovejas. Mimeographed List of Members, 1968. Camara de Agricultura de la Primera Zona. Typewritten List of Members of the Board of Directors for 1961. Camara de Agricultura de la Segunda Zona. Typewritten List of the Members of the Board of Directors for 1959-1962. Camara de Industriales de Guayaquil. "Clasificacion de la Empresas Industriales de Guayaquil, " Guayaquil, 1964. (Mimeographed.) DeWitt, John. "The Christian Democrats of Latin America: Their Ideology and Political Parties. " Master's Thesis, Department of Political Science, University of Florida, 1967. Maier, Georg. "The Impact of Velasquismo on the Ecuadorean Political System. " Ph. D. dissertation, Department of Political Science, Southern Illinois University, 1966.

PAGE 385

3 74 Schrawder, Connee "A Study of Decision Making in Quetzaltanango, Guatemala," (Mimeographed.) Tulane University, 1967. Selcher, Wayne A. "The Administration of Galo Plaza in Ecuador, 1948-1952: A Step Towards Stability. " Master's Thesis, Department of Political Science, University of Florida, 1966. Sociedad General. Typewritten List of the Members of the Board of Directors 1958-1960. Welsh, William. "Methodological Problems in the Study of Political Leadership in Latin America. " University of Iowa, Department of Political Science. (Manuscript. ) Zuvekis, Clarence. "Ecuador: Selected Economic Data with Commentary. " Quito: USAID, I968. (Mimeographed.) "Recent Trends in Ecuador's Manufacturing Sector. " Quito: USAID, 1968. (Mimeographed. ) Interviews Adams, Madison Monroe; Commercial Attache with the United States Embassy in Quito, on March 1, 1968. Andrews, Edward, plant pathologist for UNFAO, irregular conversations. Ashton Donoso, Susana; geneological expert in the United States Embassy in Quito, on November 6, 1968. Biller, Joel; Staff Economist for the United States Embassy in Quito, on April 27, 1968. Borja, Rafael; staff secretary for the Asocacion de Industriales Textiles de Ecuador , on October 14, 1968. Braun, Eugene; Assistant to the Chief of Rural Development Division of USAID, on May 17, I968. Cabeza de Vaca, Ramiro; president of Distribuidora Volkswagen of Quito, on November 25, 1968. Calderon Munoz, Abdon; Guayaquil economist and leader of the Partido Liberal Radical for the coast, on November 1, 1968,

PAGE 386

375 Calderon P. , Jaime; staff engineer for Comercial Kywi in Quito, on October 22, I968. Carrion, Alejandro; Publisher of La Cal le in Quito, on November 12, 1968. Chambers Matamoros, Rafael; Executive Director of the Com is ion Nacional de Trjgo , on November 6, 1968. Chang, Vicente; banana grower in the Santo Domingo de los Colorados area, on October 27, 1968. Chavez, Hugo; Secretary of the Camara de Industriales de Guayaquil , on October 30, 1968. Chavez Gonzalez, Atahualpha; former President of the Camara de Comercio de Guayaquil, on October 30, 1968. Cordova, Andres F. ; former president of Ecuador and leading Quito lawyer, on November 29, 1968. Cordova, Gonzalo; former meinber of the Comision Nacional de Trigo and director of the Camara de Agricultura de la PriiTiera Zona, on November 25, 1968. Del Campo, Luis; nnennber of the board of the Camara de la Agricultura de la Primera Zona and owner of Metalandes S. A . in Quito, on Noveinber 15, 1968. Dillon Valdez, Rafael; president of the B anco de Guayaquil and Cia. Azucarera Valdez , on October 29, 30, 1968. Fitch, George; Chief of the Industrial Section of USAID, on May 17, 1968. Francisco, Alice, field archaeologist from University of California, at Berkeley, irregular conversations. Gelardin, Albert; financial and market consultant, on May 23, 1968. Geschwcjnd. Bill; regional director for the Peace Corps, on October 28, 1968. Gleason, David; president of Radio Nuclcon in Quito, on May 23, 1968. Griswold, Wilfred; spray pilot for Luis A. Noboa, on October 28, 1968.

PAGE 387

376 Jouvi'n Cisneros, Ernesto; president of Imprinta e Litografia La Reforma, former president of the C^rnara de Industriales de Guayaquil, and former minister of development, on October 31, 1968. Larrea Stacey, Eduardo; former general manager of the Banco Centra l, on November 20, 1968. Levy, Ricardo; president of Fabrica de Broches Sudamerica and chief development chemist for INEXA, irregular conversations. Loor, Oscar; president of DesarroUo Ennpresial Cia. Ltda. , and former executive director for CENDES, on November 21, 1968. Luna Yepez, Jorge; political leader of ARNE, on November 13, 1968. Maier, Georg; Associate Professor of Political Science at Southern Illinois University, on August 20, 1968. McPherson, Donald; Staff Agricultural Economist for USAID, on May 17, 1968. Mitchell, Peter; Regional Representative for the Confederation of British Industries, on October 16, 1968. Mosquera Arcos, Alfonso; Secretary for the Asociacion Nacional de Criaderos de Ovejas , on November 26, 1968. Naranjo Toro, Manuel; former minister of treasury and leader of the moderate wing of the Socialist Party, on October 17, 1968. Norris, Robert; Director of Center for Andean Studies of University of New Mexico, on October 24, 1968. Ortuno, Jose Vicente; leading Quito lawyer and former member of the Chamber of Deputies, on October 16, 1968. Pareja Diezcanseco, Alfredo; leading Ecuadorean novelist, historian and intellectual and assistant manager of the Banco Popular in Quito, on November 21, 1968. Partmuss, Ingrid; liaison member for USAID, on May 17, 1968. Penninger, Charles; Commercial Attache for the United States Consulate in Guayaquil, on October 28, 1968.

PAGE 388

377 Ponce Coloma, Jorge; Manager of the Banco de Descucnto in Guayaquil, on October 29, 1968. Rota, Carlos; president of Sociedad Radio Tecnico in Quito, on October 15, 1968. Sanchez, Diego; staff economist for Departamento de Investigaciones Economicos, of the Banco Central , irregular conversations. Snyder, John; Labor Attache for the United States Embassy in Quito, on October 15, 1968. Teran Salazar, Antonio; Executive Director for Asociacion Nacional de Empresarios , on Noveinber 14, 1968. Torres, Jose; President of the Camara de Agricultura de la Scgunda Zona , on October 29, 1968. UUoa, Julio; Staff engineer for CENDES, on May 28, 1968. Vega Toral, Alejandro; member of the Chamber of Deputies from Cuenca and regional leader of the Frente Nacional Velasquista , on October 18, 1968. Vorbeck, Helge; president of Cerveceria La Victoria, on July 29, 1968. Wulf, Helen; assistant Comercial Attache for the United States Embassy in Quito, on April 26, 1968. Yepez, Mauricio; Secretary General of the Camara de Industriales de Pjch.'ncha, on November 26, 1968. Zuvekis, Clarence; Staff economist for USAID, irregular conversations.

PAGE 389

BIOGRAPHICAL SKETCH David Parker Hanson was born on November 9, 1939 in Rheinbeck, New York. He attended high schools in Newark, Delaware and Santurce, Puerto Rico. He attended Haverford College wliere he received a Bachelor of Arts Degree in Political Science. After graduation, he served three years as an officer in the United States Navy. He was awarded the Master of Arts degree in Political Science by the University of Florida in 1966. He is currently an assistant professor of Political Science at Western Michigan University in Kalamazoo, Michigan. David Hanson is married to the former Barbara RuUan of Santurce, Puerto Rico. They have two children, a boy aged five and a girl who is a year and a half old. 378

PAGE 390

I certify that I have read this study and than in my opinion it conforms to acceptable standards of scholarly presentation and is fully adequate, in scope and quality, as a dissertation for the degree of Doctor of Philosophy. (9.(KuXL 7U^.^ 0'. Ruth McQuown, Chairman Associate Professor of Political Science I certify that I have read this study and that in my opinion it conforms to acceptable standards of scholarly presentation and is fully adequate, in scope and quality, as a dissertation for the degree of Doctor of Philosophy. ^^fe^?^^^^ A ^ T.L. Page Assistant Professor of Political Science I certify that I have read this study and that in my opinion it conforms to acceptable standards of scholarly presentation and is fully adequate, in scope and quality, as a dissertation for the degree of Doctor of Philosophy. M.K. bhaw Professor of Psychology This dissertation was submitted to the Dean of the College of Arts and Sciences and to the Graduate Council, and was accepted as partial fulfillmen of the requirements for the degree of Doctor of Phil June 1971 Dean, College Dean, Graduate School