Monday, January 26, 2009

Relations between Brazil and Ecuador Normalize

Last month, I wrote about Ecuador defaulting on its loans to Brazil. At the time, I commented that the defaulting, combined with tensions between Brazil and Ecuador over dams Brazilian companies constructed in Ecuador, had created a lose-lose situation for both Brazil and Ecuador; the former was paying financially and had strained relations with one of its "leftist" allies on the continent, while the latter was isolating itself and creating a situation that would cause problems both presently and in the future both in terms of diplomacy and in terms of Ecuador's on infrastructural development.

Apparently, cooler heads have prevailed, though, as a couple of weeks ago (I haven't really had time to get around to this until now) Ecuador has paid back Brazil's BNDES for the funds to build the dams, and, in response, Brazil has sent its ambassador back to Ecuador, thereby reopening normalized relations between the two countries. While Brazil does gain a bit here diplomatically, it's really Ecuador that wins out in resolving this problem. Brazil was one of the few friends and willing foreign creditors able to help out Ecuador as the global economies deal with crisis; had Ecuador continued to alienate itself from Brazil, it would have faced real obstacles in infrastructural development, financial aid, and diplomatic relations in the region. I completely agree with Boz that Ecuador blinked first because it really couldn't afford not to, and this does help Brazil strengthen its position in the region even further. Overall, I think it's a satisfying end to what was a point of contention between the two countries that could have been increasingly damaging (particularly for Ecuador) had it been drawn out further.