Ecuador
Ecuador has become one of the best performing economies in Latin America. 2003 marked the first year of the Gutierrez government, which included President Gutierrez visiting the United States in February. Driven by oil exports, which have been stimulated by the opening of the new OCP pipeline, Ecuador is set to reduce its USD 14 billion public debt burden.
Area: 110,588 square miles Capital: Quito Government: Republic Population: 13,7 million Language: Spanish, Quechua, indigenous GDP per capita: USD 3,100 Monetary unit: US Dollar Imports: Machinery and equipment, chemicals, raw materials, consumer goods, fuels. Exports: Oil, bananas, cocoa, shrimp, fish, petroleum, coffee, cut flowers
One of Latin America’s best performers
History
Lucio Gutierrez, President
Throughout the 1990s, Ecuador was committed to removing the final barriers to free trade, and setting up a fully functioning free market economy. It joined the World Trade Organization in 1996, and in 1998 the government passed a package of legislation to protect intellectual property rights.
Hit by the devastating El Nino and the pressure on global oil prices, Ecuador decided to adopt the US dollar as its national currency in 2000. This so-called “dollarization” has given it a unique advantage in the region, and makes it especially attractive for investment from North America.
Minister of Economy Mauricio Pozo remarks that 1999 was “the worst financial meltdown in Ecuadorian history,” adding that improvements have come faster than expected. He predicts inflation rates of three to four percent in 2003, and expects growth of up to 4.5 percent.
“The economy is doing well,” says Pozo. “Remittances from emigrants, as well as the favorable prices in the oil sector, have spurred the growth in the last year. We invite all investors to exploit the many opportunities Ecuador has to offer, and trust in the economy as a whole.”
Agriculture accounts for almost 20 percent of GNP. Ecuadorians grow potatoes, corn, barley, rice and wheat for subsistence, and coffee and bananas are the main cash crops. The country’s coastal location has also helped it to develop a thriving seafood industry. Ecuador’s main agricultural exports are bananas, flowers, cocoa, coffee, shrimp and tuna.
Aside from petroleum, Ecuador is developing its industrial sector. Food processing, the metal industry, and the manufacture of wood products are all thriving in Ecuador. The country also has successful textile, chemical and plastics industries. Ecuador’s main trade partners are the United States, as well as Latin American and European Union countries.
Economy
Ecuador has recovered well from a crisis in the banking sector in the late 1990s, and business confidence is once again on the rise. Due to its dependence on exports of oil, bananas and shrimp, Ecuador is very exposed to fluctuations in global market prices. The consequences of the devastating El Nino, and a depressed oil market from 1997-1998, led to intolerable pressure on the economy which caused the banking sector to collapse in 1999.
Subsequently Ecuador defaulted on a number of external loans later that year, and the currency depreciated by 70 percent in 1999. The government decided to “dollarize” the currency in 2000 – adopting the US dollar as its national currency – which helped to stabilize the economy and marked the turning point for recovery.
The financial sector is now one of the strongest in the Ecuadorian economy, both well regulated and liquid. Loan placements are projected to rise by 10 percent in 2004, which would be stimulated still further by a drop in interest rates.
Foreign direct investment rose by 146 percent in the first nine months of 2003, and hopes are high that this trend will continue into 2004.
The economy grew by 5.6 percent in 2001 and 4.2 percent in 2002, although it did not meet the growth target of 3.5 percent forecast by the Ministry of Economy and Finance for 2003. The Ministry has set a target of three percent economic growth for 2004.
