ECUADORS OF PERCEPTION

Ecuador 2013 | DIPLOMACY | YEAR IN REVIEW

Underpinning Ecuador's recovery from the depths of historically its worst crisis has been a radical transformation of the economic, financial, and commercial environment. This has seen a systematic ramping up of strategic national infrastructure to springboard the country's economic prosperity. The government's “National Plan for Living Well," implemented in 2009, pinpointed strategic sectors for development and more efficient utilization of an extensive natural resource base. It also established priority areas for social expenditure, most notably to address social imbalances. President Rafael Correa's administration—in office since January of 2007—has indeed reduced these imbalances. Unemployment among Ecuador's population of 15 million is estimated at 6.2% for 2013, down from a high of 12.05% in April of 2004. Meanwhile, the middle class continues to expand, with the familiar knock-on effect of rising demand for goods and services, thus spurring investment in education and further stimulating economic growth. A more FDI-friendly business environment, too, has energized the private sector. Ecuador's GDP was at $84.53 billion in 2012, with the growth in oil and commodity revenues cushioning the blow from the global financial crisis, the shockwaves of which were felt in 2009.

Underpinning Ecuador's recovery from the depths of historically its worst crisis has been a radical transformation of the economic, financial, and commercial environment. This has seen a systematic ramping up of strategic national infrastructure to springboard the country's economic prosperity. The government's “National Plan for Living Well," implemented in 2009, pinpointed strategic sectors for development and more efficient utilization of an extensive natural resource base. It also established priority areas for social expenditure, most notably to address social imbalances. President Rafael Correa's administration—in office since January of 2007—has indeed reduced these imbalances. Unemployment among Ecuador's population of 15 million is estimated at 6.2% for 2013, down from a high of 12.05% in April of 2004. Meanwhile, the middle class continues to expand, with the familiar knock-on effect of rising demand for goods and services, thus spurring investment in education and further stimulating economic growth. A more FDI-friendly business environment, too, has energized the private sector. Ecuador's GDP was at $84.53 billion in 2012, with the growth in oil and commodity revenues cushioning the blow from the global financial crisis, the shockwaves of which were felt in 2009.

Correa is a believer in diversifying political and economic ties, having done so with Latin America, Europe, and Asia. In particular, China has emerged as a strong investor in the local economy and a backer of several core infrastructure projects.

Since 2000, Ecuador has delivered a stable macroeconomic performance, as the dollarization in that year precipitated strict fiscal discipline. Inflation has remained under control, at 4.16% for 2012, down from 5.41% the previous year, free of the vagaries of past currency devaluations. These improvements have coincided with major advances in port infrastructure along the Ecuadorean coast, and the expansion of the road network into the Amazon region. These strengthen Ecuador's case as an alternative East-West transit route for the Panama Canal, the current capacity of which is set to double by 2015.

Ecuador boasts significant as-yet dormant resources in the mining and oil and gas sectors. After the renegotiation of oil contracts in late 2010, public and private investments in the sector are expected to increase, with production levels set to follow. Ecuador rejoined the Organization of Petroleum Exporting Countries (OPEC) in 2007, sloshing its reserves of 7.2 billion barrels into the membership pool.

Ecuador's mining sector remains underdeveloped, despite the presence of large-scale proven copper and silver reserves, and an estimated $220 billion in mineral reserves at current international prices. Recent legislation has incentivized foreign investment in Ecuador's mineral wealth, and the government has entered into negotiations with multinational mining companies. The Fruta del Norte gold mine, Ecuador's largest deposit, with around 6.72 million ounces of proven and probable reserves of gold as of 2012, awaits confirmation of its foreign partner late in 2013.

Ecuador's energy sector, currently resting on the two main pillars of thermal and hydroelectric power, is undergoing growth and diversification to underpin future economic stability, and currently boasts two major projects. The first is the $12.5 billion Pacific Refinery project, the financing of which is expected to be finalized in late 2013. The project will ultimately end Ecuador's reliance on imported oil derivatives and enable the exporting of refined oil products, fertilizers, and other hydrocarbon precursors. The second is the $2 billion Coca Codo Sinclair hydroelectric power project that envisages the generation of 1,500 MW of electricity, theoretically enough to meet 75% of the country's needs.

Alternative energy sources, such as wind and solar, while embryonic, are being investigated. The government's wind atlas points to 884MW of potential energy nationwide. Meanwhile, future geothermal energy generation is estimated at 1.053GW.

Ecuador has the largest concentration of rivers per square kilometer and is designated as one of only 17 mega-diverse countries in the world by Conservation International. Meanwhile, the Galápagos Islands, a byword for natural selection at work, remains a magnet for eco-tourism. Ecuador's 2008 constitution is committed to protecting the “Rights of Nature," reconfirming the country's status as an eco-tourism hotspot.

Ecuador is blessed with a diverse climate that varies regionally depending on altitude and equatorial proximity. Agribusiness, therefore, is a year-round endeavor. Small wonder then that Ecuador has become one of the world's primary exporters of bananas and plantains, and a major exporter of cocoa. The exports of non-traditional agricultural products, especially cut flowers, have also gained importance over recent years, with infrastructure investments supporting this refrigerated business.

In a climate of political and economic stability, Ecuador's government is focused on social welfare through greater economic diversification. Sustainability in broad brush-strokes, including international trade, seems set to provide the strategic momentum for future growth.