What is now Ecuador formed part of the northern Inca Empire until the Spanish conquest in 1533. Quito became a seat of Spanish colonial government in 1563 and part of the Viceroyalty of New Granada in 1717. The territories of the Viceroyalty - New Granada (Colombia), Venezuela, and Quito - gained their independence between 1819 and 1822 and formed a federation known as Gran Colombia. When Quito withdrew in 1830, the traditional name was changed in favor of the "Republic of the Equator." Between 1904 and 1942, Ecuador lost territories in a series of conflicts with its neighbors. A border war with Peru that flared in 1995 was resolved in 1999. Although Ecuador marked 30 years of civilian governance in 2004, the period was marred by political instability. Protests in Quito contributed to the mid-term ouster of three of Ecuador's last four democratically elected presidents. In late 2008, voters approved a new constitution, Ecuador's 20th since gaining independence. General elections were held in February 2013, and voters reelected President Rafael CORREA.
Western South America, bordering the Pacific Ocean at the Equator, between Colombia and Peru
petroleum, fish, timber, hydropower
Population - distribution
nearly half of the population is concentrated in the interior in the Andean intermontane basins and valleys, with large concentrations also found along the western coastal strip; the rainforests of the east remain sparsely populated
Spanish (Castilian) 93% (official), Quechua 4.1%, other indigenous 0.7%, foreign 2.2%
Guayaquil 2.709 million; QUITO (capital) 1.726 million (2015)
- Conventional long form
- Republic of Ecuador
- Conventional short form
- Local long form
- Republica del Ecuador
- Local short form
- Geographic coordinates
- 0 13 S, 78 30 W
- Time difference
- UTC-5 (same time as Washington, DC, during Standard Time)
has not submitted an ICJ jurisdiction declaration; accepts ICCt jurisdiction
Ecuador is substantially dependent on its petroleum resources, which have accounted for more than half of the country's export earnings and approximately 25% of public sector revenues in recent years.
- External debt stocks
- US$ 27,272,532,000
- Total tax rate (% of commercial profits)
- Real Interest Rate
- Manufacturing, value added (% of GDP)
- Current Account Balance
- US$ 1,413,832,066
- Labor Force, Total
- Employment in Agriculture
- Employment in Industry
- Employment in Services
- Unemployment Rate
- Imports of goods and services
- US$ 19,219,016,000
- Exports of goods and services
- US$ 18,885,476,000
- Total Merchandise Trade
- FDI, net inflows
- US$ 642,658,282
- Commercial Service Exports
- US$ 2,011,124,322
bananas, coffee, cocoa, rice, potatoes, cassava (manioc, tapioca), plantains, sugarcane; cattle, sheep, pigs, beef, pork, dairy products; fish, shrimp; balsa wood
petroleum, food processing, textiles, wood products, chemicals
- petroleum, bananas, cut flowers, shrimp, cacao, coffee, wood, fish
- US 39.5%, Chile 6.2%, Peru 5.1%, Vietnam 4.3%, Colombia 4.3% (2015)
- industrial materials, fuels and lubricants, nondurable consumer goods
- US 27.1%, China 15.3%, Colombia 8.3%, Panama 4.9% (2015)
- Country Risk Rating
- A very uncertain political and economic outlook and a business environment with many troublesome weaknesses can have a significant impact on corporate payment behavior. Corporate default probability is high.
- Business Climate Rating
- The business environment is mediocre. The availability and the reliability of corporate financial information vary widely. Debt collection can sometimes be difficult. The institutional framework has a few troublesome weaknesses. Intercompany transactions run appreciable risks in the unstable, largely inefficient environments rated B.
- Significant mineral, oil, and gas potential
- Almost energy self-sufficient thanks to hydroelectricity
- Tourism potential (flora, fauna, cultural heritage)
- Climatic diversity, enabling numerous types of crop
- Marine wealth: world’s biggest exporter of prawns
- Poorly diversified economy, dependent on oil
- Inadequate infrastructures (roads, dams) and poorly qualified workforce
- History of sovereign default
- Weak private, domestic and foreign investment
- State interventionism
- Credit expensive and still underdeveloped
- Opposition of indigenous populations and ecologists to the development of primary resources
The Ecuadorian economy, largely dependent on public spending from oil revenues, felt the negative impact of falling oil and gas prices and moved into recession in the second semester of 2015. After Venezuela, Ecuador was the country in Latin America the most severely impacted by the fall in crude oil prices. In 2016, activity is expected to suffer again with the persistence of low oil prices and the loss of competitiveness of its non-oil exports, as a result of the strengthening on the US dollar against the Colombian peso and Peruvian sol (main trading partners in the area). The earthquake in early April should deepen further economic recession and would cost 3.3 billion dollars (0.3 % of GDP). The epicenter was located near Pedemales, Ecuador’s center for shrimp farming (world’s biggest exporter), which should curtail aquaculture production. The government’s lack of resources is also likely to lead to a reduction in public investment whilst private investment will also suffer from the decline in the availability of credit as the banks provide funding in priority to the public sector. Household consumption is likely to remain weak, under the effect of rising unemployment, freezing wages and the increasing of some taxes and import restrictions. The slowdown in domestic demand should however lead to a reduction of inflationary pressures in 2016.
Low oil price, responsible for over one-third of budget receipts, forced the government to instigate measures to limit the rise in the public deficit (freeze on public sector wages, higher taxes and duties on imports, cut subsidies). The April earthquake has increased further the State financing needs. The country intends to cover these requirements through additional loans from China, as well as from multilateral institutions (IMF, World Bank). A series of new measures was also announced to finance a part of the rebuilding effort (new receipts estimated at one billion dollars): VAT rate will be increased by 2 percentage points for one year (at 14 %), corporate tax will rise by 3 percentage points (at 25 %), some employees will temporarily pay an addition tax of their income and an additional exceptional contribution on wealth tax. President Correa announced his intention to privatize new assets by end 2016 in order to meets its financing needs. The country could also tap international markets, but only at a higher cost. The public debt is therefore set to reach 38 % of GDP, just below the legal threshold of 40 % provided by the Constitution. The majority is held by China, with loans guaranteed by the granting of mining concessions, oil revenues and future electricity production.
The current account deficit should continue to grow in 2016, as a result of the worsening balance of trade due to lower oil prices and the appreciation of the dollar (Ecuador is a dollarized economy). The trade in petroleum and related products represents almost 50% of the country’s exports and 20% of its imports. Despite the appreciation of the dollar which is making imports cheaper, these should also fall, given the increase in import taxes and duties applied as of March 2015, as well as because of the slowdown in domestic demand. The balance of services will remain in deficit, the costs of freight and services paid to foreign companies will exceed tourist income. The income balance is feeling the impact of the significant capital withdrawals and FDI, which are declining, will not be enough to finance the current account deficit.
The next presidential and parliamentary elections in Ecuador are scheduled for February 2017. The President, Rafael Correa, of the Alianza Pais (PA) party expressed his wish to not be a candidate. Although the Constitutional amendment allowing him to stand as many times as he wants has been voted, the reform will not go into effect until 2021. The likely candidate expected to succeed him seems to be his former vice president, Lenin Moreno. Maintaining the power of the PA is however uncertain because government has to deal with divisions that have emerged within his ruling majority and the decline in the government popularity.
The business climate is likely to remain mediocre despite the adoption of the reforms, tax incentives, aimed at attracting private investment. The lack of recourse to international arbitration courts, State interventionism, as well as the ongoing fall in commodity prices are all reducing the attractiveness of the country.