Corporate claims outstrip foreign aid to Ecuador

Countries are now being ordered to pay U.S. corporations more than they’re receiving in U.S. aid.

In October, an arbitral panel under the U.S.-Ecuador investment treaty ruled that Ecuador must pay Occidental Petroleum (a major U.S. multinational) the tidy sum of $1,769,625,000. This was the largest ever investment award at the World Bank’s center (ICSID) that handles these disputes.

Last year, my colleagues Kevin Gallagher and Elen Shrestra noted that:

in 2004, a U.S. investor won an arbitration against Ecuador an claiming an amount of damages that translated to $5.5 and $16 per capita respectively. The claimed damages per capita was equivalent to Ecuadorian aid per capita. Thus, had the U.S. investor been successful in getting the claimed amount, Ecuador payments would have been analogous to transferring aid per capita to the U.S. The award and claim amount relative to government expenditure were 1.92% and 7.5%. The importance of these numbers become clear in the light that Ecuador spends annually around 7% of their government expenditure on health.

The award they refer to is a previous 2004 case by Occidental, where the company claimed at least $201,563,930 (nearly $16 per person among the 13.2 million Ecuadorans at the time) and were ordered to pay about a third of what they requested ($71,533,649, plus interest).

Here’s the more recent case, by the numbers:

• Ecuador has about 14.7 million people, as of 2011.
• The U.S. spent $22.4 million on Ecuador in 2011, which works out to about $1.53 per Ecuadoran.
• Oxy claimed at least  $2,906,200,000 in damages, which would have amounted to$198 per Ecuadoran.
• Oxy got $1,769,625,000, which amounts to $120.66 per person, or 79 times greater than foreign aid per capita to Ecuador. This discrepancy is show in the table below.