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Glossary -- Ecuador
- fiscal year (FY)
- Calendar year.
- gross domestic product (GDP)
- A measure of the total value of goods and services produced by
the domestic economy during a given period, usually one year.
Obtained by adding the value contributed by each sector of the
economy in the form of profits, compensation to employees, and
depreciation (consumption of capital). The income arising from
investments and possessions owned abroad is not included, only
domestic production. Hence, the use of the word domestic
to distinguish GDP from GNP (q.v.).
- gross national product (GNP)
- Total market value of all final goods and services produced by
an economy during a year. Obtained by adding GDP (q.v.)
and the income received from abroad by residents less payments
remitted abroad to nonresidents.
- import substitution
- An economic development strategy that emphasizes the growth of
domestic industries, often by import protection using tariff and
nontariff measures. Proponents favor the export of industrial goods
over primary products.
- International Monetary Fund
(IMF)
- Established along with the World Bank (q.v.) in 1945,
the IMF is a specialized agency affiliated with the United Nations
that takes responsibility for stabilizing international exchange
rates and payments. The main business of the IMF is the provision
of loans to its members when they experience balance-of-payments
difficulties. These loans often carry conditions that require
substantial internal economic adjustments by the recipients.
- sucre (S/)
- The national currency. From 1971 to 1981, the sucre was pegged
to the United States dollar at S/25=US$1. Because this rate
overvalued the sucre and dampened exports, the government allowed
a steady devaluation of the currency throughout the first half of
the 1980s. By 1985, the official exchange rate averaged S/69=US$1.
In August 1986, President León Febres Cordero Ribadeneyra (1984-88)
transferred all private sector transactions to the higher free
market rate and determined to close the gap between that rate and
the official intervention rate through regular currency
adjustments. The official rate averaged S/123=US$1 in 1986 and
S/170=US$1 in 1987. Responding to growing external indebtedness,
capital flight, and rising inflation, the free market rate climbed
to S/400=US$1 by March 1988. In response, Febres Cordero
established a controlled rate for imports and exports and limited
movement to within 10 percent of the prevailing official rate of
S/250=US$1. As was the case in the early 1980s, the severely
overvalued official currency (the free market rate climbed to
S/550=US41 by July 1988) hindered export activity. Upon assuming
the presidency in August 1988, Rodrigo Borja Cevallos (1988- )
devalued the controlled rate to S/390=US$1 and adopted a program to
further devalue the currency by 30 percent per year. In May 1989,
Borja accelerated this program to nearly 40 percent per year.
Consequently, the official rate averaged S/526=US$1 and had closed
to within 6 percent of the free market rate.
- terms of trade
- Number of units that must be given up for one unit of goods
received by each party (e.g., nation) to a transaction. The terms
of trade are said to move in favor of the party that gives up fewer
units of goods than it did previously for one unit of goods
received, and against the party that gives up more units of goods
for one unit of goods received. In international economics, the
concept of "terms of trade" plays an important role in evaluating
relationships between nations.
- World Bank
- Informal name used to designate a group of three affiliated international
institutions: the International Bank for Reconstruction and Development (IBRD),
the International Development Association (IDA), and the International Finance
Corporation (IFC). The IBRD, established in 1945, has the primary purpose
of providing loans to developing countries for productive projects. The IDA,
a legally separate loan fund but administered by the staff of the IBRD, was
set up in 1960 to furnish credits to the poorest developing countries on much
easier terms than those of conventional IBRD loans. The IFC, founded in 1956,
supplements the activities of the IBRD through loans and assistance specifically
designed to encourage the growth of productive private enterprises in the
less developed countries. The president and certain senior officers of the
IBRD hold the same positions in the IFC. The three institutions are owned
by the governments of the countries that subscribe their capital. To participate
in the World Bank group, member states must first belong to the International
Monetary Fund (IMF--q.v.).
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