A much-awaited appeal hearing on the case of an Ecuadorian newspaper sued by the country's president was suspended today amid growing charges that President Rafael Correa is squashing free speech in this Andean nation.

The newspaper El Universo faces $40 million in damages and jail time, after they lost a libel suit brought by President Correa.

Correa, who has sued other journalists and created new media laws while greatly expanding the state media apparatus, has defended his moves to put a check on a sensational private industry with a political agenda. But his moves have been condemned by press groups inside the country and out, including American newspapers from coast to coast

“Since Correa took office five years ago, the situation has seriously deteriorated in Ecuador,” says Carlos Lauria, Americas director for the New York-based Committee to Protect Journalists (CPJ).

Correa has drawn similar rebukes from the New York Times and Los Angeles Times in recent days. Perhaps the Washington Post in a Jan. 11 editorial put it most bluntly, blaming Correa for “ the most comprehensive and ruthless assault on free media underway in the Western Hemisphere.”

The libel case was brought by Correa last year after a column in the opposition publication questioned the events of a 2010 police protest that turned deadly, and that Correa has called a coup attempt.

Correa, attempting to address police protesting regarding pay issues, took refuge in a hospital and was finally rescued by the army. The newspaper, however, questioned the events of the army rescue, saying the president ordered authorities to fire on the hospital where there were civilians.

The author of the story, Emilio Palacio, along with the owners of the newspaper, were handed three years in jail. The paper faces an additional $40 million in fines.

Amid international criticism, Ecuador has sought to defend itself. The new ambassador to the US, Nathalie Cely, wrote in an op-ed in the Miami Herald, “To be very clear, no journalist in Ecuador has gone to jail, been kidnapped or paid a significant fine in the five years of the Correa presidency, even though El Universo, the newspaper owned by the Pérez family that these media watchdogs defend, published a scurrilous column about the president and an attempted coup against him that was factually untrue and far beyond any reasonable norm for criticism.”

But this case does not stand alone. Others journalists have been sued, including two investigative reporters who wrote a book called “Big Brother” about the business deals of Correa’s brother.

Tomorrow, the Organization of American States (OAS) meets for a reform vote pushed by Ecuador, to strip the Special Rapporteur for Freedom of Expression of some of her powers. She has been critical of Correa, who, in return, has accused the rapporteur of serving the interests of big media.

A Reporters Without Borders piece condemns the proposed reforms: “Far from being a organizational tweak, the proposed overhaul of the way the Inter-American Commission on Human Rights (IACHR) functions would ratify a disgraceful political offensive by certain member states against one of its components, an important mechanism in the defense of civil liberties in the western hemisphere – the Office of the Special Rapporteur for Freedom of Expression.”

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And earlier this month, Ecuador’s national assembly approved changes to a media law that restricts what journalists can cover about candidates. Correa again defends it on grounds that it prevents major media companies, which often align with powerful candidates, from having too much political sway. But critics say it is to his benefit, as he likely runs for re-election in 2013.

Other countries in Latin America have seen a decline in press freedom in recent years. In Mexico and Central America, for example, drug gangs have greatly reduced freedom of the press. Venezuela’s Hugo Chavez is often singled out for curtailing press freedom, specifically for not renewing licenses of opposition outlets. But in Ecuador, where the state media apparatus has grown from a single radio station when Correa took office five years ago to over 15 today, it is the rate of change that is alarming, media groups say. “The pace at which the climate has deteriorated is really unprecedented,” says Lauria.