ECONOMY
The Ecuadorian economy is based on petroleum production, manufacturing primarily for the domestic market, and agricultural production for domestic consumption and export. Principal exports are petroleum, bananas, shrimp, flowers, and other primary agricultural products. In 2007, crude and refined petroleum products accounted for 58% of total export earnings. Ecuador is the world's largest exporter of bananas and plantains (about $1.3 billion) and a major exporter of shrimp ($613 million). Exports of nontraditional products such as flowers ($469 million), canned fish ($671 million) and automobiles ($383 million) have grown in recent years (all trade data from 2007).
Ecuador adopted the dollar as its national currency in 2000, following a major banking crisis and recession in 1999. Dollarization led to stability, which helped Ecuador achieve solid economic performance through 2006. Growth averaged 4.6% per year, supported by high oil prices, strong domestic consumer demand, increased non-traditional exports, and growing remittances ($3 billion a year) from Ecuadorians living abroad. Per capita income increased from $1,296 in 2000 to an estimated $3,670 in 2008, while the poverty rate fell from 51% in 2000 to 38% in 2006. In 2007, economic growth slowed, constrained by declining petroleum production and reduced private sector investment, but appeared to recover somewhat in 2008 due to increased government spending and strong domestic demand.
President Correa’s economic policies include higher social spending, increased government control over strategic sectors, and a greater share of natural resource revenues for the state. After two years in office, the overall direction of economic policy is unclear, creating uncertainty for the business community. One example of uncertain direction is debt policy, where the government initially suggested it might default, then honored the debt for almost two years, and then defaulted on some debt issuances but not others. Other examples are still undefined policies for the petroleum and mining sector. An additional source of uncertainty is the new economic provisions in the 2008 constitution, which have not been further defined pending the issuance of implementing laws and regulations. In addition, the government is taking a number of new measures to adjust to falling petroleum revenues, and the full scope and effectiveness of those measures were unknown as of early 2009.
By the end of 2008, it was clear that the global financial crisis and economic downturn led to falling remittances and oil prices for Ecuador. In January 2009, the government invoked the World Trade Organization (WTO) balance of payments safeguard provision to increase tariffs and impose quotas on consumer goods that exceed its WTO bindings. These provisions will be evaluated in the WTO. The government also announced that is cutting or restricting public sector spending, although it did not provide many specifics on how it would do so.
Ecuador is rich in natural resources, with significant oil and mineral reserves, although its mineral sector is largely undeveloped. Oil production is by both government and private companies. The state oil company, which is viewed as inefficient, operates mature oil fields that were developed by private companies in the 1970s. It has assumed the operation of an oil field that was seized from a U.S. oil company when that company’s contract was cancelled in 2006 for alleged contract violations, an action that is being challenged in international arbitration. Starting in 2006, the government, through laws and decrees, has changed the terms of private sector oil contracts and has attempted to renegotiate new contracts with those companies, although as of early 2009 it had not renegotiated any new long-term contracts. The contractual uncertainty has led to a drop in private sector investment in the oil sector. In 2008 (through November), overall oil production had fallen slightly since 2007 and significantly since 2006. State oil company production rose slightly, but private production fell.
The World Economic Forum's Competitiveness Index rated Ecuador 104th out of 134 countries for 2008.
GDP: (2008 preliminary) $52.6 billion; (2007 preliminary) $45.8 billion; (2006) $41.8 billion.
Real annual growth rate: (2008 preliminary) 2.3%; (2007) 2.5%; (2006) 3.9%.
Per capita GDP: (2008) $3,670; (2007) $3,366; (2006) $3,115.
Natural resources: Petroleum, fish, shrimp, timber, gold.
Agriculture, including seafood (6% of GDP in 2008): Products--bananas, seafood, flowers, coffee, cacao, sugar, tropical fruits, palm oil, palm hearts, rice, corn, and livestock.
Oil and mining (26% of GDP in 2008); industry (9% of GDP in 2008): Types--petroleum extraction, food processing, wood products, textiles, chemicals, and pharmaceuticals.
Other major contributors to GDP: Commercial trade (wholesale and retail)--12% (2008); transportation/warehousing-- 7% (2008); construction--10% (2008).
Trade: Exports--$17.6 billion (Jan.-Nov. 2008); $14.3 billion (2007). Types--petroleum, bananas, shrimp, coffee, cut flowers cacao, hemp, wood, fish. Major markets (Jan.-Nov. 2008)--U.S. 46%, Latin America 27%, Andean Community 17%, European Union (EU) 11%, and Asia 3%. Imports--$17.2 billion (Jan.-Nov. 2008); $13.9 billion (2007). Types--industrial materials, fuels and lubricants, nondurable consumer goods, industrial capital goods. Major suppliers (Jan.-Nov. 2008)--Latin America 42%, Andean Community 27%, U.S. 19%, Asia 23%, and EU 8%.
Currency: U.S. dollar.
