Economic history of Ecuador
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The economic history of Ecuador covers the development of Ecuador's economy throughout its history, beginning with colonization by the Spanish Empire, through independence and up to the 21st century.
Colonial Ecuador relied on
After the 1950s, Ecuador's economy began experiencing a period of growth. Agriculture's importance in the economy shrunk as the manufacturing and service sector of the economy grew. The discovery of petroleum in the eastern region of the country and natural gas in the Gulf of Guayaquil brought a large growth to government revenue, and rapid economic growth. The economic growth resulted in inflation, and the external debt of the country increased by 15 times in a period of 5 years.
With the fall of oil prices in the 1980s, the economy declined with traditional agricultural products losing market. The damage caused by
The 1987 Ecuador earthquakes destroyed large parts of the Trans-Ecuadorian Pipeline and oil production ceased for sixth months. The economy took a heavy hit as the older agricultural industries could not make up for the lack of petroleum profits. The government raised domestic gas prices by 80% and Ecuador acquired international loans to save the ailing economy. The election of Febres Cordero's rival Rodrigo Borja brought a period of government involvement in the economy. His national economic austerity program did little to help the already declining economy and proved unpopular among the populace resulting in strikes. Borja continued with his anti-inflationary program, but implemented economic liberalization programs to reduce criticism of his policies.
In 1992 the election of
Colonial Ecuador
Colonial Ecuador was governed first by the
1830–1950
Ecuador gained complete independence in 1830, it had a largely rural population of about one-half million. The rural economy came to rely on a system of
During the second half of the nineteenth century, cacao production nearly tripled, and total exports increased tenfold. As a result, the Costa became the country's center of economic activity.
1950–1980
The Ecuadorian economy made great strides after 1950, when annual exports, 90 percent of which were agricultural, were valued at less than US$30 million, and foreign-exchange reserves stood at about US$15 million. Between 1950 and 1970, a slow, steady expansion of nonagricultural activities took place, especially in the construction, utilities, and services sectors. Construction, for example, made up only 3 percent of the GDP in 1950, but it contributed 7.6 percent to the GDP in 1971. Agriculture's annual share of the GDP was 38.8 percent in 1950 compared with a 24.7 percent share in 1971.[1]
The 1960s saw an acceleration and diversification of the
The discovery of new petroleum fields in the Oriente (eastern region) after 1967 transformed the country into a world producer of oil and brought large increases in government revenue beginning in 1972. That year saw the completion of the Trans-Ecuadorian Pipeline, a 503-kilometer-long oil pipeline leading from the Oriente to the port city of Esmeraldas. A refinery also was constructed just south of Esmeraldas. In addition, in 1970 large quantities of natural gas deposits were discovered in the Gulf of Guayaquil. Largely because of petroleum exports, Ecuador's net foreign-exchange earnings climbed from US$43 million in 1971 to over US$350 million in 1974.[1]
The production and export of oil that began in the early 1970s, coupled with dramatic international price increases for petroleum, contributed significantly to unprecedented economic growth.
1980–1990
In the early 1980s, the economy faltered as the international price of petroleum began a gradual decline and the country lost some foreign markets for its traditional agricultural products. Dramatic climatic changes caused by
In March 1983, the government, with an eye toward rescheduling the external debt, introduced several austerity measures, including a second devaluation of the sucre in two years, this time a 21-percent devaluation of the sucre, a 16-percent rise in the commercial interest rate, and a deceleration of government spending. The government's stabilization program, which included new exchange controls and the reduction of fuel and export subsidies, was unpopular domestically, but it enabled Ecuador to successfully negotiate a new debt repayment schedule with the International Monetary Fund, which also proved willing to grant Ecuador an additional US$107 million in financial assistance. The government, after several months of negotiation, also concluded multiyear rescheduling agreements with foreign private banks in December 1984 and with the Paris Club (a financial consortium of Western banks and governments) in April 1985. By successfully refinancing nearly all of the public-sector debt, the government narrowly avoided defaulting on payments, and, for the period 1985–89, the external debt service ratio was reduced from 60 percent of export earnings to a manageable 30 percent. From 1985 until the beginning of 1987, Ecuador paid only the interest on its external debt.[2]
The Ecuadorian economy recovered during 1984, partly as a result of temporary stability in the international price of crude oil and partly because of a rebound in the agricultural sector. By late 1984, the
In 1985 Ecuador withdrew for one year from the
In March 1987, an
During Febres Cordero's last two years in office, his economic team concentrated on implementing monetary reforms, renegotiating the external debt, and encouraging foreign investment. Its efforts were only partially successful. The government failed to hold wages down, and, despite efforts to curtail government spending, public-sector expenditures increased dramatically in 1987 and in the first half of 1988. Ecuador's halting experiment with neoliberal economic measures unofficially came to a close on March 3, 1988, when Febres Cordero announced the end of the free-market foreign-exchange system. Two months later, on May 8, 1988, Febres Cordero's longtime rival,
In contrast to Febres Cordero, Borja advocated an expanded state role in the national economy. During the campaign, he promised to promote industrialization and nontraditional exports and stressed the importance of agrarian reform. Borja, however, inherited a rapidly worsening economy as he assumed office on August 10, 1988; within a month he announced a national economic austerity program that included a sharp devaluation of the sucre, tax increases, new import restrictions, a reduction in public-sector spending, a 100-percent increase in fuel prices, and a 40-percent boost in electricity rates for private households. Borja also opened new negotiations with foreign creditors to whom Ecuador was in arrears for almost US$1 billion. The president, however, refused to lift the suspension of foreign debt payments, imposed by Febres Cordero in 1988, until April 1989.[2]
Borja's austerity policies and the resulting climb in the unemployment rate to 13 percent by the end of 1988, the highest in ten years, spawned strikes by labor unions, public employees, and students. The government, however, continued its anti-inflationary program. Despite government cost-cutting efforts, inflation reached 86 percent in 1988, the highest in the country's history. On the positive side of the economic ledger, GDP expanded by 8 percent in 1988, as petroleum exports returned to pre-earthquake levels.[2]
In an attempt to blunt criticism of his policies, Borja introduced a new package of economic liberalization measures in 1989, including a relaxation of import restrictions, a further devaluation of the official exchange rate to prod exports, and a loosening of banking controls to stimulate the manufacturing sector. About 62 percent of the import items that had been barred since mid-1988 were to be allowed into the country beginning in 1990.[2]
1990–present
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In 1992, Sixto Durán Ballén won his third run for the presidency. His tough macroeconomic adjustment measures were unpopular, but he succeeded in pushing a limited number of modernization initiatives through Congress. In 1996, Abdalá Bucaram, from the populist Ecuadorian Roldosista Party, won the presidency on a platform that promised populist economic and social reforms, but Congress unseated Bucaram in February 1997 on grounds of mental incompetence.
Deteriorating economic performance in 1997-98 culminated in a
On January 9, 2000, the administration of President
US Dollar has been the only official currency of Ecuador since the year 2000.[3]
The Noboa government confirmed its commitment to convert to the dollar as the centerpiece of its economic recovery strategy, successfully completing the transition from sucres to dollars in 2001. Following the completion of a one-year stand-by program with the International Monetary Fund (IMF) in December 2001, Ecuador successfully negotiated a new $205 million stand-by agreement with the IMF in March 2003.
Buoyed by higher oil prices, the Ecuadorian economy experienced a modest recovery in 2000–01, with GDP rising 2.3% in 2000 and 5.4% in 2001. GDP growth leveled off to 3.3% in 2002. Inflation fell from an annual rate of 96.1% in 2000 to an annual rate of 22.4% in 2001.
Data
The following table shows the main economic indicators in 1980–2017. Inflation below 5% is in green.[4]
Year | GDP (in Bil. US$ PPP) |
GDP per capita (in US$ PPP) |
GDP growth (real) |
Inflation rate (in Percent) |
Unemployment (in Percent) |
Government debt (in % of GDP) |
---|---|---|---|---|---|---|
1980 | 26.1 | 3,246 | 4.9 % | 13.0 % | n/a | n/a |
1981 | 29.6 | 3,584 | 3.9 % | 16.4 % | n/a | n/a |
1982 | 31.8 | 3,746 | 1.2 % | 16.3 % | n/a | n/a |
1983 | 32.1 | 3,681 | −2.8 % | 48.4 % | n/a | n/a |
1984 | 34.6 | 3,867 | 4.2 % | 31.2 % | n/a | n/a |
1985 | 37.3 | 4,058 | 4.4 % | 28.0 % | n/a | n/a |
1986 | 39.3 | 4,160 | 3.1 % | 23.0 % | n/a | n/a |
1987 | 37.9 | 3,911 | −6.0 % | 29.5 % | n/a | n/a |
1988 | 43.3 | 4,359 | 10,5 | 58.2 % | 7.0 % | n/a |
1989 | 45.1 | 4,432 | 0.3 % | 76.6 % | 7.9 % | n/a |
1990 | 48.2 | 4,625 | 3.0 % | 48.5 % | 6.1 % | n/a |
1991 | 52.4 | 4,910 | 5.1 % | 48.8 % | 8.5 % | n/a |
1992 | 55.5 | 5,088 | 3.6 % | 54.3 % | 8.9 % | n/a |
1993 | 58.0 | 5,200 | 2.0 % | 45.0 % | 8.3 % | n/a |
1994 | 61.7 | 5,425 | 4.3 % | 27.4 % | 5.7 % | n/a |
1995 | 64.4 | 5,556 | 2.3 % | 22.9 % | 5.4 % | n/a |
1996 | 66.8 | 5,658 | 1.7 % | 24.4 % | 9.0 % | n/a |
1997 | 70.8 | 5,910 | 4.3 % | 30.6 % | 7.8 % | n/a |
1998 | 73.9 | 6,077 | 3.3 % | 36.1 % | 10.2 % | n/a |
1999 | 71.5 | 5,792 | −4.7 % | 52.2 % | 13.1 % | n/a |
2000 | 73.9 | 5,901 | 1.1 % | 96.1 % | 7.6 % | n/a |
2001 | 78.7 | 6,139 | 4.0 % | 37.7 % | 9.6 % | 63.4 % |
2002 | 83.1 | 6,350 | 4.1 % | 12.5 % | 7.8 % | 55.5 % |
2003 | 87.1 | 6,540 | 2.7 % | 7.9 % | 10.2 % | 49.0 % |
2004 | 96.9 | 7,148 | 8.2 % | 2.7 % | 7.2 % | 43.0 % |
2005 | 105.3 | 7,672 | 5.3 % | 2.2 % | 7.1 % | 38.7 % |
2006 | 113.3 | 8,112 | 4.4 % | 3.3 % | 6.7 % | 38.1 % |
2007 | 118.8 | 8,361 | 2.2 % | 2.3 % | 6.9 % | 35.3 % |
2008 | 128.9 | 8,905 | 6.4 % | 8.4 % | 6.0 % | 28.7 % |
2009 | 130.6 | 8,860 | 0.6 % | 5.2 % | 6.5 % | 25.3 % |
2010 | 136.8 | 9,116 | 3.5 % | 3.6 % | 5.0 % | 23.1 % |
2011 | 150.7 | 9,869 | 7.9 % | 4.5 % | 4.2 % | 21.4 % |
2012 | 162.1 | 10,444 | 5.6 % | 5.1 % | 4.1 % | 20.6 % |
2013 | 172.9 | 10,958 | 4.9 % | 2.7 % | 4.2 % | 21.1 % |
2014 | 182.6 | 11,394 | 3.8 % | 3.6 % | 3.8 % | 27.1 % |
2015 | 184.7 | 11,351 | 0.1 % | 4.0 % | 4.8 % | 33.8 % |
2016 | 184.2 | 11,144 | −1.6 % | 1.7 % | 5.2 % | 42.9 % |
2017 | 192.6 | 11,482 | 2.7 % | 0.4 % | 4.6 % | 45.0 % |
Further reading
- Clayton, Lawrence A. Caulkers and Carpenters in a New World: The Shipyards of Colonial Guayaquil. Athens: Ohio University Press 1980.
- Milton, Cynthia E. The Many Meanings of Poverty: Colonialism, Social Compacts, and Assistance in Eighteenth-Century Ecuador. Stanford: Stanford University Press 2007.
References
- ^ LCCN 91009494.
- ^ LCCN 91009494.
- ^ "Ecuador's one and only official currency is the US Dollar". People Places and Thoughts. 24 May 2019.
- ^ "Report for Selected Countries and Subjects". www.imf.org. Retrieved 2018-09-11.