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World > South America > Ecuador > Economy (Notes)

Ecuador - Economy (Notes)


ECONOMY
The Ecuadorian economy is based on petroleum production, manufacturing 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 2005, oil accounted for 56% of total export earnings. Ecuador is the world's largest exporter of bananas (about $1.2 billion in 2006) and a major exporter of shrimp ($553 million in 2006). Exports of nontraditional products such as flowers ($416 million in 2006, a three-fold increase in 10 years) and canned fish, including pouch tuna ($495 million in 2006) have grown in recent years.

Ecuador's economic performance has been solid since it adopted the dollar as its national currency in 2000, following a major banking crisis and recession in 1999. Since 2000, growth has averaged over 5% per year. In 2006 economic growth was 4.3%, inflation was 2.9%, and both petroleum and non-petroleum exports expanded. This performance has taken place in spite of the political turbulence, thanks to the stability brought by dollarization, high oil prices, strong domestic demand, and growing remittances (over $2.5 billion a year) from Ecuadorians living abroad. Per capita income has increased from $1,296 in 2000 to an estimated $3,050 in 2006, while the poverty rate fell from 81% in 2000 to 63% in 2004.

Ecuador did not improve its overall competitiveness during this period of economic and export growth. In 2006 it slipped three positions in both the World Bank's Doing Business Index (from 120 to 123) and the World Economic Forum's Competitiveness Index (from 87 to 90), as other nations have moved more aggressively to adapt to globalization.

Though Ecuador has a relative abundance of oil reserves, it has been unable to take full advantage of those resources for its own development. Mismanagement, lack of investment, and corruption in the state-owned oil sector have caused declines in state oil production over the last decade. Overall oil production increased during that period because of growing production by private sector companies, but in 2007 initial projections show that production by both public and private sector companies will fall. Commercial disputes as well as judicial and contractual uncertainties have deterred private oil and other companies from investing in the country. The electricity and telecommunications sectors also have similar significant problems. Ecuador was in the final stages of negotiating a free trade agreement (FTA) with the United States, but that progress stalled with an April 2006 hydrocarbons law mandating revisions in contract terms, and the May 2006 seizure of the assets of Occidental Petroleum, at the time the country's largest U.S. investor. Resolution of the Occidental situation is currently pending international arbitration under the terms of the bilateral investment treaty.

President Correa has announced his opposition to resumption of FTA talks with the U.S., citing concerns that Ecuador is not yet sufficiently competitive, especially in sensitive agriculture sectors. Prior to taking office, he said that the Government of Ecuador would only service its external debt obligations after the funding domestic social priorities; he also said that Ecuador would not pay back 'illegitimate' debt. As of February 2007 the government had met its external debt obligations and announced the creation of a commission to determine the legitimacy of the debt. The government increased income transfers for the poor and announced its intention to increase spending on health and education. It has also announced plans to increase low-cost loans to small businesses in parts of the country that are not well-served by the private banking sector.


Facts at a Glance: Geography - People - Government - Economy - Communications - Transportation - Military - Climate - Current Time - Ranking Positions - US Dollar Exchange Rates
Notes and Commentary: People - Economy - Government and Political Conditions - Historical Highlights - Foreign Relations - Relations with U.S.



Facts at a Glance
Geography
People
Government
Economy
Communications
Transportation
Military
Climate
Current Time
Ranking Positions
US Dollar Exchange Rates


Notes and Commentary
People
Economy
Government and Political Conditions
Historical Highlights
Foreign Relations
Relations with U.S.





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