ABSTRACT
This chapter explores the differences in austerity policies adopted by two successive democratic governments in Ecuador during the period 1981-1986. Those implemented by President Osvaldo Hurtado in 1982 in response to the moratorium imposed on further private lending as a result of the threatened Mexican default and those implemented by President Leon Febres Cordero beginning in 1984, when declines in the world prices of petroleum compounded Ecuador's existing problem of debt service. Hurtado, a Christian Democrat, was a former university professor whose perception of Ecuador's social and economic problems was decidedly structural. The domestic political implications of Ecuador's recurrent balance-of-payments crises also differed from those in the more advanced countries in the region. The shift in revenue dependence from taxation of the private sector, primarily foreign trade, to the direct receipt of petroleum revenues greatly reduced the ability of Ecuador's economic elites to veto policies that they opposed through their manipulation of public revenues.
