Country Brief

General Information

Head of State and Head of Government :       H.E. Mr. Lenin Voltaire Moreno Garcés, President

Capital:                           Quito

Land Area:                       248,360 sq km

Official language (s):        Spanish

Population:                      16.5 million (2016)

Currency:                        United States Dollar

GDP:                               US$ 98 billion (2016)

GDP per Capita:              US$ 5930 (2016)

Overview

The Republic of Ecuador is located on the north-west Pacific coast of South America (including the Galapagos Islands). Ecuador lies on the Equator yet experiences a range of climatic conditions due to the Andes mountain range and Pacific Ocean currents. Ecuador is divided down the middle by the Andes Mountains which include year-round snow-capped peaks and active volcanos, as well as the high mountain valleys where the capital Quito is situated. The eastern third of the country is dominated by the tropical Amazon basin while the western coastal areas range from tropical through to cloud forests as the altitude increases. Ecuador shares its border with Colombia to the north and Peru to the south and east. The name Ecuador means Equator in Spanish.

Ecuador’s population is 16.5 million (2016). The main ethnic groups are mestizo (72%), Montubio (7%), Afroecuadorian (7%), Indigenous (7%) and European (6%). Ninety-two per cent of Ecuadorians identify as being religious, with 80 per cent of those identifying as Catholic and 11 per cent as Christian Evangelical.

Recent Political Developments

Lenin Moreno was sworn in as President of Ecuador on 24 May 2017 in Quito. Moreno served as previous President Rafael Correa’s Vice President from 2007-2013 and then as the United Nations Special Envoy on Disability and Accessibility.

Moreno’s priorities are to promote private sector investment, trim government spending and address corruption.

System of Government

Ecuador is a constitutional republic headed by an elected president, with a unicameral legislature. The president is elected to a four-year term and is able to serve one consecutive term.

The National Assembly is comprised of 137 members who are elected in 24 provincial constituencies for a four-year period. The Constitutional Court replaced the Supreme Court as the highest court in the land under the 2008 constitution.

Foreign Policy

Ecuador is a member of several regional political and economic groupings including the Bolivarian Alliance for the Americas (ALBA), the Organization of American States (OAS), the Rio Group, the Union of South American States (UNASUR), and the Community of Andean Nations (CAN). Ecuador has also made a formal request to join Mercosur (it is currently an associate), and is an observer to the Pacific Alliance (Chile, Colombia, Mexico and Peru).

Ecuador’s relationship with Colombia has steadily improved following a violation of Ecuadorian territory by Colombian government forces in 2008. Colombian government forces launched a military attack against the Colombian guerrilla group, the Revolutionary Armed Forces of Colombia (FARC) inside the Ecuadorian border and Ecuador subsequently broke off diplomatic relations with Colombia. Diplomatic relations were restored in June 2008 and in December 2011, President Correa and Colombia’s President Santos signed a maritime border treaty and a security cooperation agreement during the first bilateral visit by a Colombian president to Ecuador in four years.

The United States is Ecuador’s main trading partner. Ecuador’s relationship with China is growing as China is an important source of finance. Ecuador has signed loan agreements in exchange for oil with China, and has initiated the large-scale copper mining project Ecuacorriente, operated by Chinese firm ECSA. Chinese investments in Ecuador’s energy sector are also expected to grow. Relations with China were upgraded to a ‘comprehensive strategic partnership in November 2016 during a state visit by the Chinese President Xi Jinping.

Economic overview

Ecuador’s economy is dominated by petroleum production and agriculture for domestic consumption and export. Ecuador’s economy contracted by an estimated 2.2 per cent in 2016 on the back of low oil prices, a high American dollar (the Ecuador economy is dollarized) and a 30 per cent cut in capital spending. Real GDP is estimated to contract again in 2017 by 1.6 per cent, and is unlikely to grow much until 2019-21 when stronger oil and mining revenue will make a positive contribution. Ecuador’s preferential trade arrangements with the United States will last until the end of 2017 but Ecuador’s accession to an FTA with Europe is likely to assist exports – Ecuador exports bananas, prawns, coffee and cut flowers.

According to Ecuador’s Planning and Development Secretariat, over 1.5 million Ecuadorians have transitioned out of poverty since 2007. In 2016, unemployment rose to 5.2 per cent, up from 4.3 per cent in 2015. After a period of very high inflation early in the last decade, consumer prices were brought under control and inflation has averaged around four per cent per annum since 2003. In October 2016, consumer prices fell by 0.1 per cent, bringing 12 month inflation to 1.4 per cent.

Ecuador’s oil sector accounts for a sizeable portion of its export income and represents between 30 and 40 per cent of all tax revenues. High oil prices in previous years allowed President Correa’s administration to invest in infrastructure, education and other social projects. The government has limited access to external financing owing to the legacy of a 2008 debt default on US$3.2 billion in global bonds. Increasing Chinese investment, including on major energy projects such as the recently completed USD3.3 billion Codo-Sinclair Hydro-electric project, has helped Ecuador buffer the effects of lower oil prices with Ecuador planning to export electricity to Peru.

Despite its extensive flora, Ecuador has a deficit of around 8,000.35 Tm of dry rubber to meet the demand of domestic industry, such is the deficit  that Ecuador needs to plant approximately 7,884,40 ha-1 to cover the demand for domestic raw material. This is why Ecuador is an interesting market for rubber producing countries, since 70% of the rubber demanded in the country is covered by imports.

Bilateral economic and trade relationships

Exports
Ecuador was the United States’ 43rd largest goods export market in 2016.
U.S. goods exports to Ecuador in 2016 were $4.1 billion, down 28.3% ($1.6 billion) from 2015 but up 52.3% from 2006. The top export categories (2-digit HS) in 2016 were: mineral fuels ($1.9 billion), machinery ($459 million), electrical machinery ($275 million), plastics ($217 million), and food waste, animal feed ($146 million).
U.S. total exports of agricultural products to Ecuador totaled $296 million in 2016. Leading domestic export categories include: soybean meal ($123 million), wheat ($52 million), cotton ($20 million), feeds & fodders nesoi ($19 million), and prepared food ($14 million).

Imports

Ecuador was the United States’ 38th largest supplier of goods imports in 2016.
U.S. goods imports from Ecuador totaled $6.1 billion in 2016, down 18.8% ($1.4 billion) from 2015, and down up 14.6% from 2006.  The top import categories (2-digit HS) in 2016 were: mineral fuels ($3.4 billion), fish and seafood (crustaceans) ($685 million), precious metal and stone (gold) ($634 million), edible fruit & nuts (bananas) ($262 million), and live trees and plants ($243 million).
U.S. imports of agricultural products from Ecuador totaled $1.2 billion in 2016. Leading categories include: bananas and plantains ($457 million), nursery products ($243 million), cocoa beans ($167 million), processed fruit & vegetables ($128 million), and other fresh fruit ($57 million).

Trade Balance

• The U.S. goods trade deficit with Ecuador was $1.9 billion in 2016, a 14.1% increase ($236 million) over 2015.

Bilateral Trade with Sri Lanka

$1·         No data available.

Investment

• U.S. foreign direct investment (FDI) in Ecuador (stock) was $429 million in 2015 (latest data available), a 25.5% decrease from 2014. U.S. direct investment in Ecuador is led by mining, wholesale trade, and manufacturing.
• No data on Ecuador’s FDI in the U.S. are available.
• Sales of services in Ecuador by majority U.S.-owned affiliates were $1.2 billion in 2014 while sales of services in the United States by majority Ecuador-owned firms were $2 million.

Trade and Investment

Opportunities to strengthen bilateral trade and investment ties exist in the energy and mining sectors. Ecuador has implemented an investor-friendly mining regime to take advantage of its good geology. Newcrest has taken a ten per cent stake in Ecuadorian miner Sol Gold and will provide the technology required to develop a world-class copper-gold deposit.

There may also be potential for Sri Lankan companies to invest in telecommunications services and equipment, port infrastructure and information technology (though many of these opportunities will depend on the ongoing privatisation process). Cooperation in agribusiness and tourism could also lead to further business opportunities. The educational services sector holds good potential, and is growing.