Ecuador has the eighth largest economy in Latin America and is largely based on exports of oil, gold and agricultural products, as well as money transfers from the almost one million Ecuadorians living overseas. Ecuador is the world’s largest exporter of bananas, is a major exporter of shrimp and has significant oil reserves.
Ecuador suffered a severe financial crisis in 1999 following several years of declining economic performance precipitated by a number of external factors, including a drop in oil prices, instability in the emerging markets and the El Niño phenomenon. In January 2000 the government adopted the US dollar as their official currency.
Dollarization helped the economy to stabilize and on the back of higher oil prices, remittances and an increase in non-traditional exports, the economy saw an average economic growth rate of 4.6% between 2000 and 2006, reaching 6.4% growth in 2008.
Ecuador defaulted on $3.2 billion of sovereign debt in December 2008, with President Rafael Correa describing the securities as illegal and illegitimate following a report that discovered evidence of criminal violations by the previous governments that sold the debt to overseas investors, buying back most of the debt in 2009 in a reverse auction.
Growth slowed to 1% in 2009, in large part due to the global financial crisis and a fall in oil prices, picking up to 3.3% in 2010. The economy grew by 8% and 5% respectively in 2011 and 2012.
Oil exports account for 40% of Ecuador’s total and is the major contributing factor to its maintenance of a positive trade balance. The exploitation of oil has increased significantly since the industry began expanding in the 1960’s and Ecuador’s reserves are estimated at over four billion barrels.
Ecuador has a large agricultural sector, is the world’s largest exporter of bananas, the eighth largest exporter of cocoa and also has significant exports of flowers, shrimp, sugar cane, coffee, corn, cotton and rice. Ecuador also has vast amounts of timber throughout the country.
Ecuador has negotiated many bilateral and multilateral treaties and is a member of Mercosur, the Andean Community of Nations, the WTO, World Bank, IMF, CAF and the American Development Bank.