Ecuador The Economy
Terra-cotta hunter (Jama-Coaque culture)
AS THE 1980S DREW TO A CLOSE, Ecuador remained a lower middleincome nation with a gross domestic product
(GDP--see Glossary) of
US$9.4 billion, or US$940 per capita. In South America, only Peru,
Bolivia, and Guyana had a lower per capita GDP. Agriculture
(primarily bananas, coffee, and cacao) and fishing were still
important sectors of the economy, together providing 40 percent of
export earnings in 1989. Petroleum, the other major export
commodity, produced 50 percent of export earnings in the same year.
Nevertheless, services, especially trade and financial services,
constituted the fastest-growing economic sector and by the end of
the 1980s employed almost half of the work force. Manufacturing
also played a small but growing role in the economy.
Historically, Ecuador's economy has been characterized by the
dichotomy, and sometimes bitter rivalry, between the large-scale,
export-oriented agricultural enterprises of the Costa (coastal
region) and the smaller farms and businesses of the Sierra (Andean
highlands). Unlike many developing countries that have highly
centralized infrastructures, Ecuador had two banking,
communications, transportation, and trade centers--one in Guayaquil
to handle the country's export trade and the other in Quito to
serve the populace in the Sierra. Manufacturing was divided also,
with Guayaquil leading Quito in output.
The discovery of substantial new petroleum deposits in 1967
spurred economic growth and a shift away from traditional
agriculture to manufacturing and services. The government invested
much of its petroleum revenue in domestic development programs. The
rapid growth years in the 1970s were followed by hardship in the
1980s, however, as petroleum prices fell and the entire economy
slumped.
Two administrations in the 1980s tried different approaches to
restoring the economy. President León Febres Cordero Ribadeneyra
(1984-88) applied free-market principles and deregulation, policies
that initially promoted growth. Wage increases and high inflation,
however, ultimately erased most gains. President Rodrigo Borja
Cevallos (1988- ) replaced the free-market approach with state
intervention and imposed an austerity program. His policies
resulted in new economic growth, but inflation and unemployment
remained at record high levels.
Ecuador's chronically large foreign debt continued to stifle
economic growth. Having borrowed heavily during the boom years of
the 1970s, the government found itself unable to meet its foreign
debt obligations at the end of the 1980s. An earthquake in 1987,
which damaged the country's crude petroleum pipeline, further
curtailed import earnings. Although by 1989 Ecuador had resumed its
foreign debt payments and was again exporting oil, the nation's
economic future remained uncertain.
Data as of 1989
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