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Ecuador
Economy
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Updated April 7, 2010
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 the production of approximately
500,000
barrels of oil per day, a growing tourism industry, an influx of
capital
sent by Ecuadorians living 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.
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.
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$8-$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 drop drop in oil prices that occurred in 2009 caused
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.
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.
Data taken from www.economist.com and CIA The World Factbook.
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