By Anthony Faiola
                  Washington Post Foreign Service
                  Wednesday, March 24, 1999; Page A17

                  QUITO, Ecuador—Enrique Guerron, a 36-year-old technician for the
                  state-run oil company, cracked open a warm bottle of beer and clicked
                  mugs with his union buddies. They raucously toasted their greatest victory
                  yet over the free-market zealots who "want to sell out our country and let
                  us all starve."

                  As part of a compromise to end nationwide union strikes that last week
                  paralyzed this country of 12 million, the government backed down from
                  proposals to prepare state-run companies for sale to private investors and
                  to raise gasoline prices sharply.

                  Though President Jamil Mahuad has promised to revisit the privatization
                  measures later this year, his deal with liberal parties and union leaders is
                  viewed by analysts here as a blow to Ecuador's efforts to liberalize its
                  economy. The government's retreat also serves as a warning for Latin
                  America: While the region has largely embraced the free-market model
                  advocated by Washington and the International Monetary Fund, Ecuador's
                  example shows that such changes cannot be taken for granted.

                  "We don't want any part of your [economic] system," said Guerron, who
                  earns $400 a month. "Before we let [Mahuad] sell our lives to foreigners,
                  we'll cause total chaos here -- we'll close this country down."

                  While Chile, Argentina and Peru have moved aggressively to liberalize their
                  economies, other Latin American nations -- including Ecuador, Venezuela,
                  Colombia and Paraguay -- have been far more cautious. Their caution
                  reflects, in part, the growing strength of grass-roots movements opposed
                  to government efforts to reduce the state's role in the economy.

                  Opposition spokesmen here and elsewhere in the region contend that
                  privatization and other free-market reforms have disproportionately
                  benefited foreign companies and the ruling classes at a price of massive
                  layoffs for ordinary citizens. The result, in Ecuador and elsewhere, is
                  increasing and occasionally violent resistance.

                  For the Clinton administration, the success of these reforms is important --
                  not only because American firms are heavily invested in the region but also
                  because of the perceived link between free markets and democracy.

                  Indeed, Washington's concern about the situation in Ecuador -- especially
                  after the collapse of the Brazilian currency, the real, in January -- became
                  apparent last week, when President Clinton called on Mahuad to "continue
                  to work for needed economic reforms and maintain Ecuador's unwavering
                  commitment to democracy."

                  Some analysts argue, however, that even if these nations wanted to move
                  faster, right now they couldn't: The continuing economic crisis in Brazil,
                  Latin America's largest nation, has turned many foreign companies away
                  from a region once considered ripe for investment.

                  "In the short and medium term, I think prospects for more privatizations
                  are very bad in Ecuador, and also in some other Latin American countries
                  such as Venezuela and Colombia," said Gustavo Arteta, a prominent
                  economist in Quito. "It's not just the opposition to privatization. People are
                  not investing down here anymore. When you've got strong opposition and
                  [an] economic crisis . . . what foreign investor is going to say, 'Okay, I
                  want to buy a company there.'?"

                  There is growing resistance to reforms even in Argentina, where the
                  government has privatized most state industries. While free-market reforms
                  there have created a new class of cellular phone-toting business people on
                  the streets of Buenos Aires, they also have fueled unemployment because
                  the private sector has been unable to absorb former state workers. That, in
                  turn, has given birth to groups such as the "Combative Class," which is
                  made up of former Argentine state workers and stages high-profile raids
                  on grocery stores to protest reforms.

                  This month, Ecuador became the center of attention as it erupted in violent
                  strikes that threatened to topple Mahuad after his government hiked
                  gasoline prices and proposed a number of emergency reforms, including
                  preparations to slash the state work force.

                  Ecuador's crisis has been fueled in part by low prices for oil, one of this
                  nation's largest revenue sources, and El Nino-related floods, which caused
                  $2.8 billion in crop damage. But some of the country's problems are
                  self-inflicted.

                  For one thing, economists and political analysts say, weak and corrupt
                  political leadership has hindered the implementation of reforms. Of
                  Ecuador's previous two presidents, one was jailed last week on corruption
                  charges and the other is in exile after having allegedly dipped into state
                  coffers.

                  The few privatizations that have occurred here have not yielded happy
                  results. Economists cite the example of the national airline, Ecuatoriana,
                  which has lost prestige, passengers and routes since being sold off in the
                  early 1990s.

                  Ecuador's wealthy business elite has also fueled cynicism about reforms by
                  calling for privatizations while demanding government intervention to prop
                  up failed banks -- owned mostly by Ecuador's powerful families. In a
                  move to prevent bank failures, the government has frozen -- in whole or
                  part -- most private bank accounts.

                  "How can the government tell a state worker who often can't even save
                  enough money to open a bank account that he should accept privatization
                  for the good of the nation, when at the same time the government is busy
                  bailing out the rich and powerful bank owners?" said Alberto Acosta, a
                  Quito-based political analyst.

                  Many analysts here say the idea of improving competition and efficiency by
                  privatizing key state industries, especially electric utilities and the telephone
                  system, remains broadly popular. But even pro-reform politicians such as
                  Mahuad, a Harvard-educated lawyer and former Quito mayor, have
                  wavered in their commitment.

                  "There is no way we are going to let the same [widespread privatizations]
                  that happened in Chile and Argentina happen here," said Enrique Barros,
                  46, a quality-control supervisor for Ecuador's state-owned oil company,
                  who traveled eight hours by bus from a rural northern province to protest
                  government reforms.

                  "If they privatize and I get fired, what is a 46-year-old oil technician going
                  to do for a living?" he asked. "Find another job? Doing what?"
 

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