Members of Mujeres Amazónicas, an Indigenous environmental rights collective, march in Quito, Ecuador. Photo courtesy Mujeres Amazónicas/Instagram.
On April 22, Ecuadorian President Daniel Noboa held a public referendum on 11 proposals, most of which concerned the country’s collapsing security situation.
Since Ecuador turned away from socialist-oriented policies in 2017, it has seen a shocking rise in poverty, violence, and armed gang activity.
Following coordinated gang attacks in January 2024, Noboa asserted that Ecuador is involved in a state of “internal armed conflict” and vowed to take the fight to narcotraffickers and criminal organizations. April’s referendum was intended to give his security services more leeway in their campaign to combat gang violence and drug trafficking.
Tucked inside the referendum was a question that had nothing to do with security. It was Question D: “Do you agree that the Ecuadorian State recognizes international arbitration as a method to resolve disputes in terms of investment, contractual or commercial?”
In a victory for the country’s social movements, 65 percent of voters rejected a return to international arbitration.
Since 2008, Ecuador has spurned investor-state dispute settlement, or ISDS, a provision that allows private companies to sue countries for alleged violations of trade agreements. In practice, this means companies can sue states if their profits are put at risk by government policies, laws or practices. Had Question D been approved, Ecuador likely would have revised its constitution to allow international arbitration—something that Canadian officials have been pursuing in ongoing free trade negotiations with the Ecuadorian government.
Ecuador’s experience of ISDS was extremely costly. Since 1986, the government has been forced to pay a total of US$10 billion for alleged breaches of its obligations to foreign investors. As the International Institute for Sustainable Development explains:
In 2007, left-wing President Rafael Correa held a referendum on convening a Constituent Assembly to rewrite Ecuador’s constitution. Eighty-two percent of voters approved. The new constitution—one of the most progressive in the world at the time—passed into law in September 2008 with 64 percent of the vote.
In 2010, Ecuador left the International Centre for Settlement of Investment Disputes (ICSID), a Washington-based arbitration institution. Meanwhile, the 2012 ruling in favour of Occidental spurred Correa to begin terminating all of Ecuador’s bilateral investment treaties.
Ecuador’s opposition to international arbitration is bigger than Correa. As noted, the majority of the population approved the 2008 constitution, including Article 422, which prohibits “international treaties in which the State cedes sovereign jurisdiction to international arbitration bodies.” The Ecuadorian left, and most of the population, recognize international arbitration as a process tipped in favour of private companies, with rulings frequently depriving states of massive sums of public money.
?? Very, very proud of Ecuador and of our people for having voted against the return of investor-state dispute settlement mechanisms (ISDS) in yesterdays’s referendum.
A few words of context:
This is the second time that the Ecuadorian people say No to ISDS and its…
Since Correa’s successor, Lenín Moreno, assumed power in 2017, the Ecuadorian government has turned sharply toward the right. The people have paid the price in the form of plummeting social and economic indicators and a startling escalation of the homicide rate: from 5.8 per 100,000 to 46, an eightfold increase and one of the highest homicide rates in Latin America.
Moreno’s successors—first banker Guillermo Lasso, now banana fortune heir Daniel Noboa—have continued his debilitating economic policies. Furthermore, both administrations have attempted to reverse Correa’s ban on international arbitration, much to the delight of foreign investors.
In June 2021, the Lasso government rejoined the ICSID. David Malpass, President of the World Bank Group and Chair of the ICSID Administrative Council, welcomed the policy shift. He praised Ecuador for “cultivating a competitive business environment,” adding, “I congratulate the Government of Ecuador on taking this important step and its renewed focus on private sector investment.”
However, article 422 remained an obstacle to those political forces in Ecuador that are keen on promoting the interests of foreign companies. As Investment Treaty News indicated when Lasso rejoined the ICSID: “…observers note that the Court must still render a judgement on Article 422 before the country can sign new IIAs [International Investment Agreements] and fully reintegrate into the investment protection regime.”
Had Question D received a Yes vote, the country would have begun “reintegrating into the investment protection regime,” i.e., willingly reducing the state’s ability to protect itself from the greed of foreign investors. However, the proposal was rejected – as was a second labour-related question that would have allowed labour contracts based on hourly work.
As Luciana Ghiotto explains, the refutation of Question D means that “Foreign investors will have to file lawsuits in Ecuadorian national courts, not international arbitration tribunals, just like any Ecuadorian citizen, any small or large national company, and any community affected by extractivism.”
The other nine questions, all security-related, passed with majority Yes votes. These results illustrate that Ecuadorians want the state to reassert its dominance over armed criminal groups. When it comes to deregulating labour and putting the country at the mercy of foreign investors, however, the Ecuadorian public disapproves.
There is one group that is definitely not pleased with the rejection of Question D: the Canadian mining industry.
While courting international investment, President Noboa took some time to appeal to the Canadian mining industry. On March 4, he spoke at the 2024 convention of the Prospectors and Developers Association of Canada (PDAC), an annual event that promotes Canadian mining interests globally. March 4 was “Ecuador Day” at PDAC, and Noboa used the opportunity to promote his country as a “mining destination” to Canadian investors.
While in Canada, Noboa also paid a visit to Prime Minister Justin Trudeau, where the two leaders welcomed “the imminent launch of negotiations toward a Canada-Ecuador free trade agreement.”
Within these negotiations, Canadian officials have pushed the Ecuadorian government to once again embrace international arbitration, despite the fact that international arbitration is unconstitutional in Ecuador.
The Canadian mining sector would have welcomed a return to ISDS mechanisms. Canadian mining investments in Ecuador are valued at $1.8 billion, with Canada’s trade commissioner noting that Canadian companies are “leading investors” in Ecuador’s mineral sector.
Shortly after Noboa’s visits to PDAC and Ottawa, the Ecuadorian government released a new prior consultation manual for mining investments. As Mining.com explains, the manual “highlights that the results of the prior, free and informed consultation process are not binding, which means that the [Ecuadorian] government could choose to greenlight projects even without the consent of the affected communities.”
The Ecuadorian government being able to greenlight mining projects without the consent of locals would be a boon to Canadian mining companies, whose activities often face stiff popular resistance in Ecuador.
Had Question D been approved, Ecuador would have only looked more alluring to Canadian mining companies. No need for local consent and companies can sue the Ecuadorian state at investor-friendly international tribunals? It sounds like a Canadian mining company’s dream.
But Ecuadorians voted down Question D, putting a roadblock in the way of the Ecuadorian right’s efforts to completely dismantle the legacy of correísmo.
Ecuador is in a state of crisis right now. The hollowing-out of Correa’s socialist-oriented economic policies has caused poverty and criminal violence to spike. The public reviled Moreno and Lasso during their presidencies, while the Noboa government faces the difficult task of maintaining its legitimacy amid armed conflict and a grim economic situation.
In an effort to bolster his “tough on crime” image for the domestic audience, Noboa ordered the invasion of the Mexican embassy on April 5 to arrest former vice president Jorge Glas (Mexico had granted Glas asylum due to the political nature of his persecution).
The embassy raid ignited a conflagration in Latin America. Mexico severed diplomatic relations with Ecuador. Nicaragua and Venezuela condemned Ecuador’s actions and, in solidarity with Mexico, broke ties with Noboa’s government. Honduras recalled its charge d’affaires. Even Argentina, governed by the far-right Javier Milei, condemned the embassy raid.
Security is obviously the number one issue in Ecuadorians’ minds, but if Noboa wants to maintain his legitimacy, he needs to make Ecuador safer—as Correa did—instead of persecuting political opponents.
Ecuadorians may want Noboa’s government to ensure their safety, but if the results of Questions D and E are any indication, they do not trust his neoliberal agenda. That’s bad news for Canadian mining companies.
Owen Schalk is a writer from rural Manitoba. He is the author of Canada in Afghanistan: A story of military, diplomatic, political and media failure, 2003-2023 and the co-author of Canada’s Long Fight Against Democracy with Yves Engler.
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