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Ecuador ROLE OF GOVERNMENT
The Constitution reserves to the state the sole right to
exploit natural resources and to create and maintain the basic
national economic infrastructure. The central government
traditionally handled this responsibility through a decentralized
approach to economic development. Over the decades, the government
formed numerous autonomous or independent agencies in an ad hoc
fashion to perform public services or develop natural resources.
Some of these independent enterprises became large and powerful and
functioned largely beyond government control or monitoring.
Mismanagement and inefficiencies characterized many independent
agencies. PETROECUADOR, for example, the largest and perhaps most
important state-owned enterprise, which was responsible for much of
Ecuador's petroleum production and refining, was not required to
pay dividends or to meet established performance standards. Because
it had no control over oil-generated income, PETROECUADOR lacked
the incentive to keep production costs down or to improve
efficiency. The Ecuadorian Institute of Electrification (Instituto
Ecuatoriano de Electrificación--Inecel), which was founded in 1961
under the auspices of the Ministry of Energy and Mines, was unable
to coordinate its major departments, or to set the rates charged to
electricity consumers. As a result, Inecel relied on the government
to meet operating costs. The Ecuadorian Institute of
Telecommunications (Instituto Ecuatoriano de Telecomunicaciones--
Ietel), established in 1972 and attached to the Ministry of Public
Works and Communications, suffered from poor internal organization
and weak financial management
(see Natural Resources and Energy
, this ch.).
The government's highly bureaucratic and decentralized approach
to economic development thus served as a disincentive to
entrepreneurs, who were forced to battle an array of regulations
controlling business and commerce. Cumbersome administrative
procedures often resulted in protracted and costly delays in such
fundamental activities as procurement, business registration, and
trade transactions.
Data as of 1989
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