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ECONOMY & POLITICS
About Ecuador

I’ve grouped these together because they can sometimes be summarized in one word – unstable. Ecuador´s political structure and economy are even more fragile than its geology.
ECONOMY

Modern Ecuador is heavily dependent on the oil industry. This has been the case since the 1970s and shows no sign of altering. It is estimated that about half of the reserves have been extracted. By a strange coincidence Ecuador has also been heavily indebted since the 1970s and that’s not going to change either. Having somewhat burnt their bridges with the international funds, in the last few years Ecuador has turned to China for big loans, some in exchange for oil. Chinese companies are now partners in some lucrative construction projects in Ecuador.

Apart from oil, Ecuador also exports bananas, shrimp, cacao, flowers and fish products. It’s the world leader in banana exports but only because the workers have traditionally been lowly paid. Other countries such as Colombia and Costa Rica have more efficient processes so Ecuador needs to modernize.


The mining sector is considered to have great potential for growth. The current government revoked all mining licenses in 2007, passed a new bill and have since signed several new agreements with national and multinational companies. There has been a lot of concern amongst local communities about proposed mining projects.

There is very little manufacturing in Ecuador. There are some textile businesses and plastics factories, breweries and vehicle assembly plants but they don’t export much. Ecuador doesn’t even have the capacity to refine most of its oil, let alone turn all its cacao into the chocolate that the world craves.

The service industry is also a minor part of the economy. There is little investment activity. The Ecuadorian financial sector suffered a severe crisis at the end of the last century and the banks that survived have proceeded cautiously. As it was already difficult and expensive to get a loan here, the recent problems with banks in Europe and the USA haven’t been replicated here. The two big mobile phone companies are foreign multinationals. Tourism is one area which is growing and is seen to have greater potential.

The current government has been inconsistent in its rhetoric and policies regarding the economy. One moment ministers are declaring the need to attract investment and boost exports, the next they are attacking business leaders as the enemy. It seems that many policies have good intentions which all groups can agree on but are badly structured or communicated, thus reducing their effectiveness. Often it feels like the country takes two steps forward and one step back.

Due to its resources, location and people, Ecuador has the potential to build a sustainable, healthy economy. It requires better education and governance and some important collective decisions about what to “do” with the natural wealth.

POLITICS
Ecuador is a republic. It has been independent since 1830. To me that seems like long enough to throw off the shackles of the colonial past (Incas, Spanish) and build a democracy. However I don’t really think democracy is working here.

The current president is Rafael Correa. He was elected in 2006, backed by a movement called Alianza País. In Ecuador there are lots of parties and movements and they don’t usually bother trying to reach a consensus about anything. One result is that there are always more than 10 presidential candidates. Alianza País was supposed to break the power of the traditional parties and establish a new type of politics based on dialogue. It has achieved the former but has become ever more fragmented itself as the dialogue appears to be more of a monologue – that of Correa.

In 2007 Correa forced the suspension of Congress and new elections were held to form a Constituent Assembly. It set about writing the umpteenth constitution in Ecuador’s history which was approved by a large majority in a referendum. New elections were then held in which Correa was re-elected and a Legislative Assembly was formed. At first a large majority of the representatives were allied to País, but little by little, ruptures have appeared. Nevertheless the movement retains enough control to rubber stamp most of the government’s agenda, which basically means changing all the laws while they have the chance. Even when the assembly modifies the laws, Correa uses his veto and threatens new elections unless the representatives do what he wants.

In my opinion Correa has many good ideas and is determined to achieve a positive change in Ecuador. However he wants to control the citizens - from his ministers down to the poorest citizens – in the style of a Victorian schoolmaster. In this he is only continuing the tradition of the strongman or caudillo figure in Ecuadorian politics. However Correa combines it with an enfant terrible streak – he loves to petulantly complain about anyone or everything that he doesn’t like in the world.



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