South America
Ecuador's victorious Correa faces economic trials
By Alonso Soto and Frank Jack Daniel
Apr 27, 2009, 22:36

QUITO (Reuters) - Ecuador's President Rafael Correa has become the OPEC nation's most powerful leader in a generation with an easy re-election victory on Sunday, but must now deal with an economy weakened by shrunken oil revenues.

The left-wing Correa won 52 percent of the vote, with a 24 percentage point lead over his nearest rival, former president Lucio Gutierrez, according to official results based on returns from 70 percent of polling stations.

Correa's party is close to securing an absolute majority in the 124-member assembly, exit polls showed.

In a show of exuberance after his win, Correa on Monday dismissed concerns about the economy, even after Ecuador's foreign exchange reserves dropped by half over the last six months as unemployment has risen and growth has slowed.

"I am very optimistic; to start with 2010 is going to be a great year, and 2009 is going to go very well considering the crisis, he told foreign journalists. "The worst has passed."

Correa, who admitted Ecuador still faces considerable economic uncertainty, said on Sunday that policies including tough import restrictions had protected the economy and jobs.

The result is another victory for the generation of left-wing Andean presidents like Venezuela's Hugo Chavez who are challenging U.S. policies and influence in Latin America.

Correa, who expelled two U.S. diplomats this year and is shutting down a U.S. airbase in Ecuador said on Monday he wanted "respectful" relations with the United States.

Chavez called his ally on Sunday night to congratulate him. Tough-talking Correa shares some of the Venezuelan's charisma and a hard-line approach to opponents and foreign investors.

Correa has not nationalized any industries, but last year defaulted on $3.2 billion in foreign debt, a popular move in Ecuador where many blame big investors for perennial poverty.

"He demonstrated he will defend our sovereignty ... and the economy will improve because he is not giving away our money to pay foreign debt," said hotel concierge Fredy Torres, 46, in the coastal city of Duran.

Correa must now manage national finances eroded by a drop in oil prices that has limited funds available for social programs. A weakening economy could reignite street protests that have subsided since Correa took office two years ago, bringing some stability after a parade of seven presidents in a decade.

AGGRESSIVE STANCE TOWARD INVESTORS

Correa, a U.S.-educated economist, has vowed to maintain a hard line toward investors, heralding tough negotiations to boost state participation in mining and oil deals. He is also pressuring bondholders to sell their paper at steep discounts.

This aggressive stance has already hurt foreign investment, mainly in the key oil industry.

"The current nationalist ... and heterodox policy approach is likely to remain in place," Goldman Sachs analyst Alberto Ramos told clients. "Unless rectified this should lead to growing economic underperformance in the years ahead."

Correa, a former missionary, keeps a photo of the Pope by his desk along with photos of his friends Chavez and Brazilian President Luiz Inacio Lula da Silva.

That mix of Roman Catholic morality and left-wing policies has proven popular but will continue to face opposition from Gutierrez, a former coup leader whose support jumped in the last days of the race.

Gutierrez, a retired colonel, was driven from power by an angry mob in the capital Quito four years ago but is still popular in some regions of Ecuador.

His poll ratings rose in recent weeks as opposition voters realized he was the strongest of the seven candidates who ran against Correa.

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