Economy of Ecuador

Ecuador has substantial oil resources and rich agricultural areas. Because the country exports primary products such as oil, bananas, and shrimp, fluctuations in world market prices can have a substantial domestic impact. Industry is largely oriented to servicing the domestic market. Deteriorating economic performance in 1997-98 culminated in a severe economic and 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 an 7.3% contraction of GDP, annual year-on-year inflation of 52.2% and a 65% devaluation of the national currency in 1999, which helped precipitate an unprecedented default on external loans later that year.

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 removal of Mahuad from office and the elevation of Vice President Gustavo Noboa to the presidency. The adoption of the U.S. dollar as currency, as opposed to pegging a local currency to it, means that the benefits of Seigneurage[?] accrue to the U.S. economy whether or not there is any compensation for this.

The Noboa government confirmed its commitment to dollarize as the centerpiece of its economic recovery strategy. The government also entered into negotiations with the International Monetary Fund (IMF), culminating in the negotiation of a 12-month stand-by arrangement with the Fund. Additional policy initiatives include efforts to reduce the government's fiscal deficit, implement structural reforms to strengthen the banking system and regain access to private capital markets. Buoyed by high oil prices, the Ecuadorian economy experienced a modest recovery in 2000, with GDP rising 1.9%. However, 70% of the population lives below the poverty line, more than double the rate of 5 years ago. Inflation in 2000 remained high at 96.1%, but the rate of inflation continues to fall. Monthly inflation in February 2001 was 2.9%.

Ecuador and the IMF Journalist Greg Palast, of the British Observer, alleges that the International Monetary Fund is attempting an economic coup against the Ecuadoran government. He cites documents which he claims show the IMF is working to force the nation to grant British Petroleum rights to build and own an oil pipeline[?] over the Andes.

See also Unidad de Valor Constante

GDP: purchasing power parity - $54.5 billion (1999 est.)

GDP - real growth rate: -8% (1999 est.)

GDP - per capita: purchasing power parity - $4,300 (1999 est.)

GDP - composition by sector:
agriculture: 14%
industry: 36%
services: 50% (1999 est.)

Population below poverty line: 50% (1999 est.)

Household income or consumption by percentage share:
lowest 10%: 2.3%
highest 10%: 37.6% (1994)

Inflation rate (consumer prices): 59.9% (1999 est.)

Labor force: 4.2 million

Labor force - by occupation: agriculture 30%, industry 25%, services 45% (1999 est.)

Unemployment rate: 12% with widespread underemployment (November 1998 est.)

Budget:
revenues: planned $5.1 billion (not including revenue from potential privatizations)
expenditures: $5.1 billion including capital expenditures of $NA (1999)

Industries: petroleum, food processing, textiles, metal work, paper products, wood products, chemicals, plastics, fishing, lumber

Industrial production growth rate: 2.4% (1997 est.)

Electricity - production: 9.657 billion kWh (1998)

Electricity - production by source:
fossil fuel: 27.96%
hydro: 72.04%

nuclear: 0%
other: 0% (1998)

Electricity - consumption: 8.981 billion kWh (1998)

Electricity - exports: 0 kWh (1998)

Electricity - imports: 0 kWh (1998)

Agriculture - products: bananas, coffee, cocoa, rice, potatoes, manioc (tapioca), plantains, sugarcane; cattle, sheep, pigs, beef, pork, dairy products; balsa wood; fish, shrimp

Exports: $4.1 billion (f.o.b., 1999)

Exports - commodities: petroleum, bananas, shrimp, coffee, cocoa, cut flowers, fish

Exports - partners: United States 39%, Colombia 7%, Italy 6%, Peru 5%, Chile 3% (1998)

Imports: $2.8 billion (c.i.f., 1999)

Imports - commodities: machinery and equipment, raw materials, fuels; consumer goods

Imports - partners: United States 39%, Colombia 11%, Japan 9%, Venezuela 5%, Mexico 3% (1998)

Debt - external: $15.3 billion (1999)

Economic aid - recipient: $695.7 million (1995)

Currency: 1 sucre (S/) = 100 centavos

Exchange rates: sucres (S/) per US$1 - 24,860.7 (January 2000), 11,786.8 (1999), 5,446.6 (1998), 3,988.3 (1997), 3,189.5 (1996), 2,564.5 (1995)

Fiscal year: calendar year

See also : Ecuador