Last updated June, 2012
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 theEcuador economy was growing from a rate of 3.0% of GDP in 2010 it is up to 7.78% in first quarter of 2012. Gross domestic product is listed at $125 billion in 2011.
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's unemployment rate in the first quarter of 2012 was 4.9%. Although the economy is expanding, GDP growth comes primarily from government spending through infrastructure projects. The labor market is competitive and even skilled workers sometimes experience difficulty finding good employment. Unskilled workers find employment on farms or as owners of small neighborhood stores. Construction employment is very good as new condos, malls and department stores are popping up around the country.
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 somewhat 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.
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 nearly six 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 -$18 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, plus two recent increases in the minimum wage. Land prices are increasing fairly dramatically around the country as the new found wealth of the Ecuadorian populace has increased competion for scarce land resources.
Ecuador 23.9 years
U.S.A. 36.6 years
Ecuador $61.52 Billion
U.S.A $13.06 Trillion
GDP Growth Rate
Ecuador 22% of GDP
U.S.A. 69 % of GDP
The drop drop in oil prices that occurred in 2009 caused Ecuador’s trade deficit to increase. The government took 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. The high oil prices of 2011 again increased net income to the country.
The government in 2011 signed a $2 billion loan with the state-owned China Development Bank, received $1 billion under a two-year forward sale of an oil contract, negotiated $571 million in financing with China's Eximbank for a new hydroelectric project, and announced plans to obtain further Chinese loans in 2012. China has become Ecuador's largest foreign bilateral lender since Quito defaulted in 2008, allowing the government to maintain a high rate of social spending, particularly in the area of infrastructure development.
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 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. From my perspective in 2012, Ecuador has if not a booming economy, an economy that is certainly expanding.
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.