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 Copyright 1971 David Parker Hanson 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 stiniulat- ing 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 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 manu- script. Her position in this roll call is not a reflection of tl.e enormous help she has been. Kalamazoo, Michigan February, 1971 IV TABLE OF CONTENTS Pa PC- ACKNOWLEDGEMENTS iii LIST OF TABLES vii LIST OF FIGURES ix ABSTRACT ^ Chapter 1 I. INTRODUCTION 14 II. THE SOCIAL CONTEXT 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 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 1 LIST OF TABLES Table ^^g^ 10 1. Decisions to be Analyzed ^0 2. Scope of Issue Involvement the 3. Employment and Earnings in Sectors of Ecuadorean Economy in 1963 46 47 4. Major Agricultural Products in Ecuador in 1957 48 5. Major Exports for I960 49 6. Industrial Employment by Sectors Exporters 68 7. Exports and Size of Business of the Largest . 8. Exporters Classified by Size and Number for I960 "^^ and 1961 "73 9. Distribution of Businesses by Size 10. Characteristics of Businessmen in Ponce Political Organization '^^^ 215 Cabinet . 11. Characteristics of Businessmen in the Ponce . 220 12. Recruitment to the JUNTA MONETARIA 13. Characteristics of Businessmen in Velasquista Party Positions "^-^4 . 234 14. Relation Between Business and Political Positions . 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 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 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 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 deter- mine 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 business- iTien participated in the camjiaigns, wliile most of tlic people in the cabinets were bupinc s smcn. llowovcr, tlie campaign businessmen often came from tlu- most 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 it was had little success in trying to influence decisions. Therefore concluded that the ihost powerful business groups could generally control decision making through recruitment of their representatives to decision making positions. X 1 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 proc- esses 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, Community Power Structviv e (Chapel Hill: University of North Carolina Press, 1953). ^Hunter, p. 2 34; Mill.s. p. 4. 1 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 cncour- 5 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.