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Ecuador Economy
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Updated Jan 7, 2009 The Ecuador economy is the subject of much debate in the world press. For good reason, the strength of a nation’s economy results in the happiness of its people. Economic data can measure output in dollar terms, but it takes an insider’s viewpoint to measure happiness. The Ecuador Economy is sustained by production of approximately 500,000 barrels of oil per day, a growing tourism industry, inflows of capital sent by Ecuadorians abroad, and the export of agricultural products such as bananas, coffee, fish, and sugarcane. Although the  Ecuador economy is not booming, growth is
sustained at approximately 3.0% of GDP per year, and is project to continue at that rate into 2009. Daily Life in Ecuador
Ecuador’s growing consumer culture and middle class can be seen in daily life. New malls across the country are packed. Credit, although expensive, is available in the form of credit cards, auto loans, and mortgages. Construction projects are booming in cities across the country. This development is coming from Ecuador’s growing middle class. Ecuador has an unemployment rate of approximately 10%. Although the economy is expanding, GDP growth comes primarily from government spending. The labor market is extremely competitive and even skilled workers experience difficulty finding good employment. Unskilled workers find employment on farms or as owners of small neighborhood stores. The poor labor market has resulted in a disgruntled working class. U.S. Dollar in Ecuador
The currency of Ecuador is the United States dollar. After a financial crisis in 1999, the Ecuadorian government adopted the dollar. While the dollar has helped Ecuador to maintain moderate inflation, economic growth is limited as the government lacks monetary policy controls necessary to maintain competitiveness in the marketplace. Ecuadorians are happy that inflation is under control. The trade-off is that locally produced goods are more expensive than they might be with an Ecuadorian (or regional) currency. A goal of President Rafael Correa is to institute a regional currency for the Andean region. As an economist with a Ph. D. from the University of Illinois at Urbana-Champaign, Dr. Correa is Ecuador’s best chance to implement such ambitious changes. However, for the time being, Correa is strongly stating his support for the dollarization program in Ecuador, and says he has no intention of changing the Ecuadorian currency in a unilateral move. Inflation for 2009 is projected to run at a rate of 9%, approximately the same rate as 2008. So far, having lived here for two years, we have not seen our living standard changed dramatically due to price increases. We have noticed some food inflation. We purchase all of our fruits and vegetables for around $15 per week, and when we first arrived, it generally cost $12. Building costs have increased some, particularly due to the significant increase in the cost of iron re-bar and cement. |
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Ecuador Compared to the United
States (2006)
Median Age
Ecuador 23.9 years U.S.A. 36.6 years GDP (PPP) Ecuador $61.52 Billion U.S.A $13.06 Trillion |
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GDP
Growth
Rate  Ecuador 4.1% U.S.A. 2.9% Inflation Ecuador 3.3% U.S.A. 3.2% Public Debt Ecuador 33% of GDP U.S.A. 64.7 % of GDP Trade Deficit Ecuador -0.8% USA -5.4% The recent drop in oil prices is causing the Ecuador’s trade deficit to increase. The government is taking steps to limit imports to stabilize the growing trade deficit. The government since Correa came into office has been spending more money on social programs as part of its plan to move the economy toward 21st Century Socialism. However, with the drop in oil prices, plans are in process to decrease public spending. The fiscal deficit is expected to widen to around $1.5 Billion by the end of 2009. What will change with 21st Century Socialism?
Governments in Latin America have been unstable for a long time. Correa has been proposing a plan of 21st Century Socialism. See our story on 21st Century Socialism here. The meaning of the word socialism is very different than the common use of the term in the U.S. While it does mean that the people of Ecuador may share a collective ownership of some means of production, specifically this government wants more state participation in energy and mining, what it means at a deeper level is that the people have a more direct control over the activities of government. Participatory Democracy is a movement that is sweeping Ecuador. More money from the country’s resources will stay in Ecuador to improve education, health care, and infrastructure. This is good for anyone living in Ecuador. The Changes of Rafael Correa
The people of Latin America are currently embracing free market principals in their daily life. I hear very little talk of “Socialism” on the streets. On the contrary, I see a prosperous free market and an active democracy. Ecuadorian President Rafael Correa speaks of radical change and Socialism as a means of communicating with citizens that feel cheated by past administrations and multinational corporations. The upcoming changes in Ecuador will support democracy and the Ecuador economy by reducing corruption and allocating national resources where they are needed most. |
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Back to top » Data taken from www.economist.com and CIA The World Factbook Return to Ecuador Revealed from Ecuador Economy Return to Information on Ecuador |
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