For some, the hardships of Ecuador’s banking collapse are a distant memory. But the wounds still feel fresh for Geovanny Brito, whose brother took his own life under the heavy burden of economic crisis nearly two decades ago.
Brito's brother became overwhelmed by the predatory system that enslaved his family in debt, leading to a tragedy that was all too common in the wake of Ecuador's 1999 banking crisis.
“What happened to us is terrible," Brito told teleSUR as his eyes turned red and tears ran down his cheeks. "There is no repair, because lives and diseases can’t be repaired with money."
After years of neoliberal financial liberalization giving banks free reign while sending the country spiraling into economic collapse, the government froze bank accounts in 1999 in an attempt to contain the crisis. The events, known simply as the "Bank Holiday," sparked a frenzy, and became a turning point for Ecuador’s economy and the lives of many families.
The government turned its back on the Ecuadorean people, bailing out the banks to protect corporate interests while thousands like Brito and his family became desperate as they saw their savings vanish and debts pile up.
While the most important loss for Brito was losing a member of his own family, adding insult to injury, he also continues to suffer from the consequences of the crisis and a bitter legal battle to rectify years of economic injustices.
“The only thing we ask now is justice,” said Brito. “Justice and nothing more, after so much pain.”
Ever since the Bank Holiday, Brito life doesn’t resemble that of most Ecuadoreans. He is one of nearly 2,000 people known as “debtors of good faith” who have found themselves immersed in astronomical debts since the 1999 crisis.
And the economic woes have far-reaching effects. Brito can’t open a savings account and he can’t have a credit card. For years, getting hired for a job was nearly impossible and he even struggled to register his children in school. The list of challenges goes on — almost everything takes him much longer to do than most people, faced with a series of hurdles linked to his trying economic woes.
Brito’s family had a loan with one of the biggest banks in the country, Filanbanco, for the construction of a building in the capital city of Quito.
As the banking crisis hit, the state claimed the building and left Brito’s mother with a multimillion-dollar debt, which was later passed on to Brito and his brother, who were guarantors on the loan.
“They wanted to take away the house we were living in. It was terrible,” Brito explained. “My brother didn’t know how to handle this situation, and he took his own life — he committed suicide.”
And Brito is far from alone. After March 8, 1999, millions of Ecuadoreans lost everything — their savings, cars, houses. While some managed to get their lives back on track after years of struggle, thousands tried to fight a bureaucratic system only to be dragged deeper into bigger debts and despair, while dire economic hardship compounded challenges like serious physical and mental health problems.
On March 8, 1999, the state froze all bank accounts to try to manage the growing crisis. Intended to last 24 hours, the Bank Holiday went on for five days, sparking panic as Ecuadoreans were unable to access their savings. The frenzy was extended when the government then froze deposits for an entire year to all accounts with more than US$500 or 2 million Ecuadorean sucres, issuing deposit certificates at about 40 to 50 percent of the real value as proof that a person had a specific amount of money in order to complete transactions.
The state later bought back the certificates at 100 percent of their value to bail out the banks, providing huge profits for the bankers at the expense of the citizens.
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When banks went bust like Filanbanco did in 2001, the state took on the debts, and the “debtors of good faith” like Brito were reeled into a financial limbo. They were forced to pay interest on both the principal and interest of their loans, while in some cases payment histories were incomplete, racking up their amounts owing. Over the years, these debtors have paid higher amounts than they originally owed, without their cases being solved despite attempts through audits and litigation.
Despite their willingness to pay their initial debts, these debtors saw their loans cut off and they were denied access to new credit in all financial institutions in the country, while their debts were transferred to their children.
That’s what happened to Francisco del Castillo, whose father’s debt with a bank that shut down dramatically changed his own life.
“I was 19 years old, I couldn’t work anywhere because I had the debt, and I was in this famous central risk system as an undesirable person,” said del Castillo to teleSUR, wringing his hands. “We were pointed out, judged.”
Del Castillo is convinced that his father’s death after a battle with cancer was caused by the pain he endured throughout his life — not only for owing money himself, but also seeing how his son was dragged into the debt.
“I am an orphan of a debtor of good faith,” said del Castillo. “I could tell you so many experiences, — I’ve tried to turn them into positives — but they don’t stop being extremely painful, even more now that Dad is not here.”
Del Castillo's frustration grew as he understood he also couldn’t get married since it would imply that his wife’s savings accounts would be closed, she wouldn’t be able to access credit and would face challenges getting a job — all because she had married a debtor. Such unfair impacts on his personal life, he said, made him feel helpless for years.
“We only ask justice, to allow us to pay what we deserve to pay, we’ve never asked for more or less,” said Del Castillo.
Now, a group of “debtors of good faith” who had credit with private banks that closed their doors is looking to reform the Banking Crisis Closing Law of 1999, which would allow them to pay their debts according to the initial value, without adding higher and compound interest rates, which they slam as “illegitimate debt.”
“We have hope, we can see the light at the end of that long tunnel we have gone through — a long, complex, scary road, with a lot of crying and heartache,” del Castillo said.
According to the president of the Central Bank, Diego Martinez, by calculating the debt based on the initial capital and giving a haircut to the debt racked up with predatory interest rates, this reform would reduce money owed by the debtors by up to 60 percent.
The reform would open the door to a review of interest accumulated over the past 20 years and put a 10-year limit on paying off the debts, while also creating opportunities for debtors to receive credit through the social security system and public banks in order to reintegrate them into the economy. Among the 30,000 affected by banks’ actions during the crisis, it is estimated that 2,000 people in Ecuador are part of this group of debtors.
These debtors believe their request is similar to the direction taken by the Ecuadorean government in 2008, when an audit under then-newly-elected President Rafael Correa declared US$3.8-billion in foreign debt “illegitimate.” Correa described the bondholders as “real monsters,” and the government followed the audit commission’s recommendation to default on the debt.
In 2008, the Commission for the Comprehensive Audit of Public Credit verified that there were irregularities in the negotiations and renegotiations of the debt in the period dating from 1976 to 2006. This commission — made up of experts who had not held positions in private, public or the Central Bank — sought to establish who was responsible for these irregularities. Brito, del Castillo and their fellow debtors are hoping for a similar review of their personal debts.
Aiding in that struggle, former finance minister under the Correa government, Maria Elsa Viteri, is leading the fight against what she calls “the largest crime in the country,” the 1999 banking crisis.
“One of the strongest arguments I worked with in front of the entire world was that the debt went from being a financial problem to a human rights issue,” Viteri told teleSUR.
Viteri says the most important aspect of the law is to educate the population and forbid another banking crisis from happening.
“It was not illegal, because they prepared everything to make it legal, but is illegitimate and immoral,” said Viteri, referring to the fact that in 1998, the Ecuadorean government introduced a law that made the state responsible for private bank debt.
Four years earlier, a 1994 law opened the door for private banks to lend money to their own shareholders and administrators, which — combined with financial liberalization and easy capital flight — helped steer Ecuador toward its historic economic collapse.
“Now, slowly we are starting to remember, what we can’t allow to happen is for the same situation to happen again,” said Viteri. “We can’t allow impunity.”
A total of 28 private financial institutions closed in Ecuador during the crisis after a period of financial deregulation and neoliberal measures had allowed bankers to virtually run the country. Once they went under, all credits and loans from private banks were transferred to the Central Bank.
Meanwhile, at the beginning of 2000, right-wing President Jamil Mahuad dollarized Ecuador’s economy, switching the national currency from the Ecuadorean sucre to the U.S. dollar after months of soaring inflation and devaluation that severely dragged down the sucre.
Ahead of the crisis in January 1999, the sucre's value was at 7,000 to the U.S. dollar. But by the beginning of 2000, it had skyrocketed to nearly 30,000 to the U.S. dollar, while inflation was at 60 percent. People who earned in sucres but had loans in U.S. dollars stood helpless as their debts soared to unmanageable levels, while millions of Ecuadoreans saw their hard-earned savings reduced to pennies overnight.
For Patricia Bastidas, whose dream was to build a hotel in one of the most mega-diverse places in the world, Ecuador’s Galapagos Islands, the crisis meant abandoning her goals in the face of irreparable damage. She worked tirelessly for decades, only to see it all crash down when the crisis hit.
“We lost it all,” said Bastidas. “Not only did I lose my business, my dreams, after 30 years working in Galapagos so that I could finally build that hotel, but also my children lost everything.”
Police raided her house and evicted her family as part of a trial to collect the debt owed on a loan, for which the bank said it had no record of any payment.
She continues to live what she calls a tortuous pilgrimage, requesting information from public and private institutions in Galapagos and in Quito, that will help her rectify her debt.
For Bastidas, the only government to support their struggle has been Correa’s, by proposing a law to resolve their problems to the Economic Development Committee of the National Assembly.
“I ask for justice and for the slogan of the government of President Rafael Correa to prevail, that money can’t be above human beings,” said Bastidas.
In another case, husband and wife Ricardo Ruperti and Ivette Cobo were taken advantage of by a bank that sold them a plot public land that had already been part of a mortgage.
Ruperti said this situation was part of a system in which banks and bankers had the power to control people’s lives, and thus destroy the economic system at the expense of the citizen’s savings. “We had to practically mortgage our soul to get a credit,” he said.
Ruperti says that the next step is to not allow for impunity. He says the bankers that destroyed the country are still “free and enjoying their millions while the honest debtors, debtors of good faith, stayed in this country despite all the horror we’ve lived.”
Several of the people who were victims of this tragic event have publicly rejected that former banker and one of the richest men in the country, Guillermo Lasso, is now seeking to become president.
Lasso has been criticized for being a key player and profiting with more than US$30 million due to speculation during the banking crisis.
The Victims Front of the Banking Crisis warned that if a banker wins the presidency, it will not be long until the country falls into the same financial trouble, but will now affect even more people.
Lasso was one of the bankers who co-signed a law in 1998 that made the Ecuadorean state responsible for private bank debt, which in turn led to the banking crisis under the government of Jamil Mahuad.
Once governor of Guayas and vice president of the Association of Banks during the crisis, Lasso also became Mahuad's minister of finance.
On April 2, Lasso will battle against Lenin Moreno, former vice president in Rafael Correa’s government who leads the polls for the runoff election.
As the country prepares for the historic election, the victims of the banking crisis are continuing to fight for justice.
Despite years of hardship, Ricardo’s wife Cobo, like many victims of the financial collapse, remains resilient and hopeful.
“There are no words to explain what we lived,” said Cobo. “But we will not give up. I tell my daughters If we are capable of reaching this place under these circumstances then we are capable of so much more.”