Economy of Ecuador

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Economy of Ecuador
World Trade Center Guayaquil
CurrencyUS dollar
calendar year
Trade organizations
Andean Community of Nations, WTO, Unasur, ALADI, Bolivarian Alliance for the Americas, Mercosur(Associate)
Statistics
GDPIncrease$170 billion (PPP) (2014 est.) Increase$84.5 billion (2014 est.)
GDP rank63rd (PPP, 2012 est.)
GDP growth
Increase5.6% (2014)
GDP per capita
Increase$11,160 (2014 est.)
GDP by sector
agriculture: 8.4%; industry: 36.1%; services: 57.5% (2012 est.)
Increase3.41% (1Q 2014)
Population below poverty line
25.55% (2013)
47.9 (2009)
Labor force
6.779 million (December 2012 est.)
Labor force by occupation
agriculture: 27.6%; industry: 18.8%; services: 53.6% (2010)
UnemploymentIncrease4.86% (2014 est.)
Main industries
petroleum, food processing, textiles, wood products, chemicals
External
ExportsDecrease$20.4 billion (2014 est.)
Export goods
Petroleum, bananas, cut flowers, shrimp, cacao, coffee, wood, fish
Main export partners
 United States 37.0%
 Chile 8.1%
 Peru 7.1%
 Colombia 4.6%
 Japan 4.5%
 Russia 4.4% (2012 est.)[1]
ImportsIncrease$23.7 billion (2014 est.)
Import goods
industrial materials, fuels and lubricants, nondurable consumer goods
Main import partners
 United States 28.0%
 China 11.2%
 Colombia 9.3%
 Peru 4.9% (2012 est.)[2]
FDI stock
Increase$113.11 billion (December 31, 2012 est.)
Increase$20.03 billion (December 31, 2012 est.)
Public finances
Decrease18.7% of GDP (2013 est.)
Revenues$15.59 billion (2012 est.)
Expenses$20.10 billion (2012 est.)
Economic aid$209.5 million (2005)
Decrease$2.482 billion (December 31, 2012 est.)
Main data source: CIA World Fact Book
All values, unless otherwise stated, are in US dollars.

The economy of Ecuador is based mostly on exports of oil, bananas, shrimp, gold, other primary agricultural products and money transfers from nearly a million Ecuadorian emigrants employed abroad. In 2002, oil accounted for about one-third of public-sector revenue and 40% of export earnings. Ecuador is the world's largest exporter of bananas ($936.5 million in 2002) and a major exporter of shrimp ($251 million in 2002). Exports of non-traditional products such as flowers ($291 million in 2002) and canned fish ($333 million in 2002) have grown in recent years. Industry is largely oriented to servicing the domestic market.[citation needed]

Economy 1998–2006

Deteriorating economic performance in 1997–98 culminated in a severe financial crisis in 1999. The crisis was precipitated by a number of external shocks, including the El Niño weather phenomenon in 1997, a sharp drop in global oil prices in 1997–98, and international emerging market instability in 1997–98. These factors highlighted the Government of Ecuador's unsustainable economic policy mix of large fiscal deficits and expansionary money policy and resulted in a 7.3% contraction of GDP, annual year-on-year inflation of 52.2%, and a 65% devaluation of the national currency in 1999.

On January 9, 2000, the administration of President Jamil Mahuad announced its intention to adopt the U.S. dollar as the official currency of Ecuador to address the ongoing economic crisis. Subsequent protest led to the 2000 Ecuadorean coup d'état which saw Mahuad's removal from office and the elevation of Vice President Gustavo Noboa to the presidency.

The Noboa government confirmed its commitment to convert to the dollar as the centerpiece of its economic recovery strategy, successfully completing the transition from sucres to dollars in 2001. Following the completion of a one-year stand-by program with the International Monetary Fund (IMF) in December 2001, Ecuador successfully negotiated a new $205 million stand-by agreement with the IMF in March 2003.

Buoyed by higher oil prices, the Ecuadorian economy experienced a modest recovery in 2000–01, with GDP rising 2.3% in 2000 and 5.4% in 2001. GDP growth leveled off to 3.3% in 2002. Although final figures are not yet available, it is expected to fall further, to about 1.7%, for 2003. GDP growth is estimated to recover to over 4% in 2004, due largely to expanded oil exports. Inflation fell from an annual rate of 96.1% in 2000 to an annual rate of 37.7% in 2001; 12.6% for 2002. Despite recent gains, 40% of the population lives below the poverty line, more than double the rate five years ago.[3]

The completion of the second Transandean Oil Pipeline (OCP in Spanish) in 2003 enabled Ecuador to expand oil exports. The OCP will double Ecuador's oil transport capacity.

Current infrastructure development

The industrial sector has had enormous difficulty to emerge significantly. The industrial sector's main problem is the deficit of energy,[4] which the current government has tackled with the improvement of performance on existing hydro plants, and the creation of new ones. Such projects included negotiation of the Coca-Codo hydroplant.[4][5] Incentives of financing, tributary incentives, tariffs, and others will be implemented, that is intended to benefit areas of tourism, foods process, renewable and alternative energies, bioenergies, pharmaceutical and chemical products, biochemical and environmental biomedecine, services, automotive metallurgical industry, footwear, and automotive parts and pieces, among others.[4] A 500 kV transmission line increases national grid strength and electricity trade with Peru and Colombia.[6]

Economy 2007–11

Graphical depiction of Ecuador's product exports in 28 color-coded categories.

Ecuador's economy is the eighth largest in Latin America and experienced an average growth of 4.6% per year between 2000 and 2006.[7] In January 2009, the Central Bank of Ecuador (BCE) put the 2010 growth forecast at 6.88%.[8] GDP doubled between 1999 and 2007, reaching 65,490 million dollars according to BCE.[9] Inflation rate up to January 2008 was located about 1.14%, the highest recorded in the last year, according to Government.[10][11] The monthly unemployment rate remained at about 6 and 8 percent from December 2007 until September 2008, however, it went up to about 9 percent in October and dropped again in November 2008 to 8 percent.[12] An estimated 9 million Ecuadorians have an economic occupation and about 1.01 million inhabitants are in unemployment condition.[13] In 1998, 10% of the richest population had 42.5% of income, while 10% of the poor had only 0.6% of income.[14] The rates of poverty were higher for populations of indigenous, afro-descendents, and rural sectors.[15] During the same year, 7.6% of health spending went to the 20% of the poor, while 20% of the rich population received 38.1% of this expenditure. The extreme poverty rate has declined significantly between 1999 and 2010.[16] In 2001 it was estimated at 40% of the population, while by 2011 the figure dropped to 17.4% of the total population.[17] This is explained largely by emigration and economic stability achieved after adopting the U.S dollar as official means of transaction .[18] Poverty rates were higher for indigenous peoples, Afro-descendants and rural areas, reaching 44% of the Native ancestry population.

Oil accounts for 40% of exports and contributes to maintaining a positive trade balance.[19] Since the late '60s, the exploitation of oil increased production and reserves are estimated at 4.036 million barrels[20]

The overall trade balance for August 2012 was a surplus of almost 390 million dollars for the first six months of 2012, a huge figure compared with that of 2007, which reached only $5.7 million; the surplus had risen by about 425 million compared to 2006.[21] This circumstance was due to the fact that imports grew faster than exports.[22] The oil trade balance positive had revenues of $3.295 million in 2008, while non-oil was negative amounting to 2.842 million dollars.[citation needed] The trade balance with the United States, Chile, the European Union, Bolivia, Peru, Brazil and Mexico is positive.[citation needed] The trade balance with Argentina, Colombia and Asia is negative.[23]

In the agricultural sector, Ecuador is a major exporter of bananas (first place worldwide in production and export), flowers, and the eighth largest producer of cocoa.[citation needed] It is also significant the shrimp production, sugar cane, rice, cotton, corn, palm and coffee.[citation needed] The country's vast resources include large amounts of timber across the country, like eucalyptus and mangroves.[24] Pines and cedars are planted in the region of the Sierra, walnuts and rosemary, and balsa wood, on Guayas River Basin.[citation needed]

The industry is concentrated mainly in Guayaquil, the largest industrial center, and in Quito where in recent years the industry has grown considerably, this city is also the largest business center of the country.[25] Industrial production is directed primarily to domestic market.[citation needed] Despite this, there is limited export of products produced or processed industrially.[citation needed] These include canned foods, liquor, jewelry, furniture and more.[citation needed] A minor industrial activity is also concentrated in Cuenca.[26]

Ecuador has negotiated bilateral treaties with other countries, besides belonging to the Andean Community of Nations,[27] and an associate member of Mercosur.[28] It also belongs to the World Trade Organization (WTO), in addition to the Inter-American Development Bank (IDB), World Bank, International Monetary Fund (IMF), Corporacion Andina de Fomento (CAF) and other multilateral agencies.[29][30][31] In April 2007, Ecuador paid off its debt to the IMF thus ending an era of interventionism of the Agency in the country. [32] The public finance of Ecuador consists of the Central Bank of Ecuador (BCE), the National Development Bank (BNF), the State Bank, the National Finance Corporation, the Ecuadorian Housing Bank (BEV) and the Ecuadorian Educational Loans and Grants.[33]

Between 2006 and 2009, the government increased social spending, on social welfare, and education from 2.6% to 5.2% of its GDP.[34] Starting in 2007 with an economy surpassed by the economic crisis, Ecuador was subject to a number of economic policy reforms by Government that have helped steer the Ecuadorian economy to a sustained, substantial, and focused to achieve financial stability and social policy.[34] [vague] Such policies were expansionary fiscal policies, of access to housing finance, stimulus packs, and limiting the amount of money reserves banks could keep abroad.[34] Ecuadorian government has made huge investments in education and infrastructure throughout the nation, which have improved the lives of the poor.[35]

On December 12, 2008 President Rafael Correa announced that Ecuador would not pay $30.6m in interest to lenders of a $510m loan, claiming that they were monsters.[36] In addition it claimed that $3.8bn in foreign debt negotiated by previous administrations was illegitimate because it was authorised without executive decree.[36] At the time of the announcement, the country had $5.65bn in cash reserves.[36]

See also

References

  1. ^ "Export Partners of Ecuador". CIA World Factbook. 2012. Retrieved July 26, 2013.
  2. ^ "Import Partners of Ecuador". CIA World Factbook. 2012. Retrieved July 26, 2013.
  3. ^ "Ecuador Inflation rate (consumer prices)". Index Mundi. June 30, 2015.
  4. ^ a b c http://eluniverso.com/2010/05/26/1/1356/ecuador-incentivara-14-sectores-economicos.html?p=1354&m=638
  5. ^ "China draws fire on mega loan to Ecuador". www.atimes.com. Asia Times Online. June 26, 2010. Retrieved September 6, 2017.
  6. ^ "Ecuador to export energy to Colombia and Peru through El Inga electrical substation". www.andes.info.ec. January 8, 2016. Retrieved September 6, 2017.
  7. ^ Yahoo! Noticias España – Los titulares de hoy. Es.noticias.yahoo.com (April 20, 2011). Retrieved on 2012-07-26.
  8. ^ El Banco Central de Ecuador sitúa el crecimiento del 2008 en más del 6%. soitu.es (January 16, 2009). Retrieved on 2012-07-26.
  9. ^ Banco Central del Ecuador – Resumen de pib. Bce.fin.ec (July 11, 2012). Retrieved on 2012-07-26.
  10. ^ Ecuador Inflation rate (consumer prices) – Economy. Indexmundi.com (July 26, 2012). Retrieved on 2012-08-21.
  11. ^ Gill, Nathan. (January 6, 2012) Ecuadorian Inflation Accelerated to Three-Year High in 2011. Bloomberg. Retrieved on 2012-08-21.
  12. ^ Ecuador en Cifras. Ecuador en Cifras. Retrieved on 2012-07-26.
  13. ^ Ecuador en Cifras. Ecuador en Cifras. Retrieved on 2012-07-26.
  14. ^ Ecuador : Financiamiento por volumen. Web.worldbank.org. Retrieved on 2012-08-21.
  15. ^ "Index of Poverty". Banco Mundial.
  16. ^ New Paper Examines Ecuador's Success in Emerging from Economic Recession; Reducing Poverty and Unemployment | Press Releases. Cepr.net (May 2, 2012). Retrieved on 2012-08-21.
  17. ^ Rebeca, Ray and Sara, Kozameh. (May 2012) P. 15. [1]. cepr.net
  18. ^ Ecuador. Web.worldbank.org (May 11, 2012). Retrieved on 2012-07-26.
  19. ^ "Ecuador first-half trade surplus rises to $390 mln". Reuters. August 13, 2012.
  20. ^ Expreso Expreso.ec. Retrieved on 2012-07-26.
  21. ^ Usa., Int'L Business Publications, (2015). Ecuador company laws and regulations handbook : strategic information and basic laws. [Place of publication not identified]: Intl Business Pubns Usa. ISBN 1514508753. OCLC 910986831. {{cite book}}: |first= has generic name (help)CS1 maint: extra punctuation (link) CS1 maint: multiple names: authors list (link)
  22. ^ Trade Balance Details | Press Releases. Cepr.net (May 2, 2012). Retrieved on 2012-08-22.
  23. ^ Ecuador: Evolucion de la Balanza Comercial. Banco Central del Ecuador (January–February 2008).
  24. ^ Mapping for Results – Ecuador, Latin America & Caribbean. maps.worldbank.org
  25. ^ Ranking 2010 – Ranking completo. Rankings.americaeconomia.com. Retrieved on 2012-07-26.
  26. ^ Industrias en CUENCA. Guia-cuenca.guiaespana.com.es. Retrieved on 2012-08-21.
  27. ^ South American Community Nations – Andean Community -CAN Archived June 30, 2012, at the Wayback Machine. Comunidadandina.org. Retrieved on 2012-08-21.
  28. ^ Profile: Mercosur – Common Market of the South. BBC News (February 15, 2012). Retrieved on 2012-08-21.
  29. ^ Which are its member countries? aladi.org
  30. ^ UNASUR (South American organization) – Britannica Online Encyclopedia. Britannica.com (May 23, 2008). Retrieved on 2012-08-21.
  31. ^ Union of South American Nations. Internationaldemocracywatch.org. Retrieved on 2012-08-21.
  32. ^ "Public Information Notice: IMF Executive Board Concludes 2007 Article IV Consultation with Ecuador". IMF. Retrieved June 12, 2018.
  33. ^ Ecuador student loan program increases funding for overseas study. Bmimedia.net (January 6, 1990). Retrieved on 2012-08-21.
  34. ^ a b c Ecuador’s Economy Since 2007 | Reports. Cepr.net. Retrieved on 2012-08-21.
  35. ^ América Latina y el Caribe – Ecuador – Datos destacados. Web.worldbank.org (May 17, 2005). Retrieved on 2012-07-26.
  36. ^ a b c Mapstone, (December 13, 2008). Ecuador defaults on sovereign bonds. Financial Times
  • - Ecuador

External links

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