Subdivisions of Ecuador - Economy

Economy

Ecuador's economy is the eighth largest in Latin America and experienced an average growth of 4.6% between 2000 and 2006. From 2007-2012 Ecuador's GDP grew at an annual average of 4.3 percent, above the average for Latin America and the Caribbean, which is 3.5 percent, according to the United Nations' Economic Commission for Latin American and the Caribbean (ECLAC). Ecuador was able to maintain relatively superior growth during the crisis. In January 2009 the Central Bank of Ecuador (BCE) put the 2010 growth forecast at 6.88%. In 2011 its GDP grew at 7.8 percent and ranked third highest in Latin America, behind Argentina (2nd) and Panama (1st). Between 1999 and 2007, GDP doubled reaching 65,490 million dollars according to BCE. Inflation rate up to January 2008 was located about 1.14%, the highest recorded in the last year, according to Government. 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. Unemployment mean annual rate for 2009 in Ecuador was of 8.5 percent, as the global economic crisis continued to affect the Latin American economies. From this point unemployment rates started a downward trend: 7.6 percent in 2010, 6.0 percent in 2011, and 4.8 percent in 2012.

The extreme poverty rate has declined significantly between 1999 and 2010. In 2001 it was estimated at 40% of the population, while by 2011 the figure dropped to 17.4% of the total population. This is explained to an extent by emigration and economic stability achieved after adopting the U.S. dollar as official means of transaction. However, starting in 2008 with the bad economic performance of the nations where most Ecuadorian emigrants work, the reduction of poverty has been realized through social spending mainly in education and health.

Oil accounts for 40% of exports and contributes to maintaining a positive trade balance. Since the late 1960s, the exploitation of oil increased production and proven reserves are estimated at 6.51 billion barrels as of 2011.

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. This circumstance was due to the fact that imports grew faster than exports. The oil trade balance positive had revenues of $ 3.295 million in 2008, while non-oil was negative amounting to 2.842 million dollars. The trade balance with the United States, Chile, the European Union, Bolivia, Peru, Brazil and Mexico is positive. The trade balance with Argentina, Colombia and Asia is negative.

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. It is also significant the shrimp production, sugar cane, rice, cotton, corn, palm and coffee. The country´s vast resources include large amounts of timber across the country, like eucalyptus and mangroves. Pines and cedars are planted in the region of the Sierra, walnuts and rosemary, and balsa wood, on Guayas River Basin. 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. Industrial production is directed primarily to domestic market. Despite this, there is limited export of products produced or processed industrially. These include canned foods, liquor, jewelry, furniture and more. A minor industrial activity is also concentrated in Cuenca.

Ecuador has negotiated bilateral treaties with other countries, besides belonging to the Andean Community of Nations, and an associate member of Mercosur. It also serves on the World Trade Organization (WTO), in addition to the Interamerican Development Bank (IDB), World Bank, International Monetary Fund (IMF), Corporacion Andina de Fomento (CAF) and other multilateral agencies. In April 2007, Ecuador paid off its debt to the IMF thus ending an era of interventionism of the Agency in the country. 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.

Between 2006 and 2009, the government increased social spending, on social welfare, and education from 2.6% to 5.2% of its GDP. 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. Such policies were expansionary fiscal policies, of access to housing finance, stimulus packs, and limiting the amount of money reserves banks could keep abroad. Ecuadorian government has made huge investments in education and infrastructure throughout the nation, which have improved the lives of the poor.

In 2000 Ecuador changed its currency from the sucre to the US dollar following a banking crisis.

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