At the turn of the last century, things looked dire for the Ecuadorian economy. In 1998, under the leadership of President Jamil Mahuad, the Ecuadorian government devalued its currency, called the sucre. Ecuadorians protested this move, and in 1999 Mahuad was removed from power. That year, Ecuador had one of the worst economies in Latin America. During this banking crisis, the economy shrunk by 5.3 percent.
Mahuad’s vice president and successor, Gustavo Naboa, continued to move Ecuador’s economy toward the dollar, and by 2001 the transition was complete. The stability of the dollar, coupled with the Ecuador’s growing GDP, has allowed Ecuador to enjoy a growing economy since the early 2000s.
Rafael Correa’s Ecuador
President Rafael Correa took office in 2007, and was re-elected in 2013. He is a self-described socialist revolutionary, although critics have noted more than a few authoritarian tendencies. He does not allow freedom in the media, and newspapers have been fined or shut down for not devoting enough of their coverage to the president.
Popular opinion holds that Correa is making the right kind of progress, even if he is domineering and intolerant of dissent. Correa is the first Ecuadorian president in two decades to complete his term. Part of this may be due to his divided competition — in the last election, he ran against seven different opponents.
Under Correa, there has been significant economic growth, which is important, because the stability of Ecuador's government is often linked to the strength of its economy. Poverty has dropped from 45 percent to 25 percent, though this percentage is still high enough that you may see examples of poverty during your trip. Since 2000, Ecuador has experienced an average of four percent annual economic growth, and since the beginning of Correa’s presidency, unemployment has decreased to less than five percent.
Early in the 21st century, Ecuador had one of the lowest levels of foreign debt in South America. But in 2007, Correa defaulted on Ecuador’s 3.2 billion dollars of sovereign debt. As of 2014, the debt amounted to nearly five billion dollars. This move has not noticeably impacted his popularity.
Critics of Correa’s government point out that it’s not just the president’s economic policies that have helped the economy grow. His presidency has coincided with a good market for oil, and those prices have begun to decline. Ecuador’s economy is largely dependent on fluctuating oil prices. In the 1990s, declining oil prices (and a major El Niño disaster) led to a major recession in Ecuador. Because of a recent influx of foreign investors, especially from China, Ecuador has been able to maintain a relatively high level of social spending. Economists speculate that a dip in the price of oil could bring the country’s economic growth to a halt.
Top Ecuadorian Exports
The following commodities account for most of Ecuador’s GDP. Oil has been the largest contributor to Ecuador’s economy since the 1970s, but since the new millenium non-oil commodities have been more serious contributors to the economy.
Ecuador is the smallest member of OPEC. In 1967 oil extraction began in earnest, and in 1971 Ecuador began exporting petroleum. Oil companies, especially Texaco (now owned by Chevron), have been met with strong international criticism for their lack of environmental standards.
In the 1990s, an American activist sued Chevron for failing to clean up oil spills on behalf of the Amazon natives. Chevron eventually won the suit, claiming that it was an Ecuadorian company, Petroecuador, which was responsible for the cleanup. Petroecuador has also faced plenty of criticism for its lack of environmental standards.
Ecuador has a long-term interest in preserving the Amazon. High-end ecolodges are becoming increasingly popular destinations in the Amazon. This lucrative type of ecotourism could provide employment to largely impoverished Ecuadorians living within this region.
Correa has supported building communities near the jungle that offer good housing, Wi-Fi, schools, and health centers. The president has characterized these villages as a sustainable way to improve the lives of Amazon residents, especially those who have had to move as a result of oil drilling. Critics have suggested this move simply makes it easier for oil companies to make inroads to the Amazon.
Ecuador is the world’s top exporter of bananas, with four million metric tons of bananas leaving its shores every year. All by itself, Ecuador grows around 11 percent of the world’s bananas. For many years, bananas were the top non-oil export.
Shrimp recently surpassed bananas as the top non-oil export in Ecuador. In 2013, shrimp exports contributed 2.1 billion dollars to the economy, and Ecuador exported 220,000 tons of these tasty crustaceans.
Ecuador has the tropical climate necessary for growing coffee, yet coffee is a glaring example of Ecuador’s trade deficit. Ecuador exports some of the finest cacao and coffee beans in the world, yet imports nescafé. The government has recently begun to impose restrictions on what type of goods can be imported, particularly when those goods can be made in Ecuador. Hopefully someday soon Ecuadorians will get to enjoy their own coffee beans at affordable prices.
Ecuador’s fertile climate (and wide range of altitudes) makes it easy to cultivate a huge variety of flowers. At the end of 2014, Ecuador finished negotiations for a trade agreement with the European Union, expected to be in full effect by 2016. This is a valuable opportunity for Ecuador – Ecuador has become a major flower exporter, and Europe has one of the best markets for flowers in the world.
In 2009, the Ecuadorian government overhauled mining regulations. These changes limited the amount of profit sharing that could take place in mining companies. Now Ecuadorian mines have established the infrastructure that is necessary to attract foreign investment.
Expats in Ecuador
Ecuador’s housing market has flourished because of one particular foreign commodity: retirees. Business and travel magazines have consistently named Ecuador as one of the top destinations for retiring abroad. This has drawn large numbers of foreigners to invest in the Ecuadorian housing market, which has created a boom in housing prices.
These are the top five reasons typically cited for retirement in Ecuador:
The cost of living is extremely low compared to Europe and North America. Restaurants, groceries, and entertainment are all fairly affordable in Ecuador.
In major cities, Ecuadorian hospitals provide excellent health care.
Ecuador has lovely scenery and ample opportunities for hiking and bird watching. The tropical weather is another plus.
In places like Cuenca, one of the most popular cities for expats, the city’s layout is pedestrian-friendly, making a car unnecessary.
Abundant fresh produce and an active lifestyle help retirees stay healthy.