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Ecuador's Economy

Ecuador’s economy is based on exports from the agricultural industries, such as bananas and shrimp; money transfers from native employed abroad; and petroleum production, which accounts for 40 percent of export earnings and one-third of the central government budget revenues.

The economy delved into a frightening free-fall in the late 1990s when the nation suffered the natural disasters of El Niño and the eruption of Pichincha volcano, in addition to a sharp decline in world petroleum prices. Poverty worsened (over half the population lived below the poverty level) and the banking system collapsed. Bankers fled the country in 1999 without honoring their clients’ accounts. When the sucre—the nation’s currency—depreciated by about 70 percent in the same decade, then-President Jamil Mahuad made the wildly unpopular announcement that he would adopt the U.S. dollar as the national currency. A military coup in January 2000 ousted Mahuad. With few alternatives to save the struggling economy, Congress went on to approve the adoption of the U.S. dollar in March of that year.

Since then the nation’s economy has been relatively solid. Economic growth reached 7.2 percent in 2008, but dropped to 0.4 percent in 2009 due to the global financial crisis. Soon it rebounded, achieving 6.5 percent growth in 2011. An estimated 28.6 percent of the population still lives below the poverty line (2011).

At the start of Correa's term the President was outspoken about his reluctance to Free Trade Agreement talks with the U.S., and stated that Ecuador will acknowledge its external debt—and only what it deemed to be "legitimate debt"—only after successfully funding domestic social programs. The government implemented income transfers to the poor and announced plans to increase spending on health and education. Talks have resumed between Correa and the European Union over fair trade development, which Correa has publicly stated does not have anything to do with the Free Trade Agreement, and still opposes arriving at any agreement over the official act.

Ever since Ecuador defaulted on its foreign debt back in 2008, it has found itself hard-pressed to receive loans from just about anywhere in the world, anywhere except China. Given how large and resource-hungry China itself is, it was willing to make a deal with Ecuador which has now, nearly 5 years later, handed well over 7 billion to the country, including $1.7 billion to finance 85% of Coca-Codo Sinclair - a hydropower plant to be built by China’s Sinohydro Corp. in Ecuador, which will supply about 75% of the country’s energy needs.

Their deal, however, was not without its severely constricting terms. China has stated that under the agreement, Ecuador is to hand over some 75% of its oil exports to them in addition to paying its debt. The Yasuni-ITT initiative - a project aimed at protecting the Amazon from oil exploitation - was recently scrapped in order to go in to retrieve the bounty of oil reserves present. This is a red flag which some say is Correa's rather disconcerting last resort towards finding a way to pay back its loans to China.

In 2009, Ecuador joined the Alianza Bolivariana para las Américas (ALBA), an alliance of the leftist South American countries that promotes fairer trading and other relationships between nations.

  • Unemployment: 4.1 percent (as of 2012)

  • Underemployment: 44.8 percent (as of 2013)

  • GDP Per Capita: $8,800 (as of 2012)

  • Public debt: 23.3 percent of GDP (as of 2012)

  • Chief agricultural exports: flowers, bananas, coffee, cocoa, rice, potatoes, manioc (yucca / cassava and tapioca), plantains, sugarcane; cattle, sheep, pigs, beef, pork, dairy products; balsa wood; fish, shrimp.

  • Export commodities: petroleum, bananas, cut flowers, shrimp.

  • Main industries: petroleum, food processing, textiles, wood products, chemicals.

Here are some related tips to help plan your trip to Ecuador: Politics, Business Hours and Ecuadorian Taxes.

14 Nov 2013

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