Despite rich resources, Ecuador is a relatively poor country. The country’s economy is highly dependent on a few export goods (oil and bananas) and therefore very sensitive to changes in the world market price of these.
In the 1970s, oil recovery replaced agriculture as the most economically important sector; oil now accounts for half of the country’s export revenue. However, despite the fact that agriculture’s importance for both GDP and employment has decreased, banana exports still represent an important source of income.
The country’s very strong economic upswing during the 1970s was dampened in the 1980s and 1990s. During the 00s, oil revenues have risen and the country’s economy has stabilized somewhat. Rafael Correa, who assumed office in 2007, has implemented increased state involvement in key industries such as the oil and mining industry.
The country has on many occasions been affected by natural disasters; An earthquake in 1987 destroyed the oil lines, and the hot water stream El Niño periodically causes weather disasters that adversely affect both agriculture and fishing.
Agriculture and forestry
Although agricultural products are a declining part of the country’s exports, the agricultural industry is still an important industry. About 9 percent of the area is cultivated. The land is mainly used as haciendas, mainly in the coastal area but also in the highlands, or in very small units (often less than 1 ha) by Native American small farmers in the mountainous regions. This extreme distribution of ownership does not promote a rational agricultural operation, but the attempts at land reform have so far been unsuccessful.
In the western lowland area, La Costa, and up towards the slopes of the Andes, an export-oriented agriculture is conducted with the cultivation of bananas, coffee and cocoa. Ecuador is one of the world’s largest exporters of bananas. Previously, cocoa was the most important export crop, but was overrun by bananas after the Second World War. Some of the crops are now being replaced by oil palm trees, while new banana crops are being taken up in other areas. Other crops in the coastal area are sugar cane and rice, which largely go to domestic consumption.
In central Ecuador’s mountain areas, La Sierra, agriculture is largely conducted for self-catering and for sale on the local market. Mainly, potatoes, maize, wheat and other cereals are grown as well as beans and various vegetables. The soil is of volcanic origin and highly erosion sensitive. Extensive pasture features the large alpine grass steppes, páramos. Dairy management also exists around the larger resorts, mainly Quito.
In the most sparsely populated eastern lowland area, El Oriente, which is mainly covered by tropical rainforest, agriculture has only local importance.
Although almost half of Ecuador’s area is forested, forestry plays little role. The richness of the forests in combination with difficult transport conditions has prevented forest exploitation. However, Ecuador is one of the world’s largest exporters of balsa wood.
The fishing industry has become increasingly important in recent decades. The cold and nutritious Humboldt stream provides rich fishing waters off the coast of Ecuador and around the Galápagos Islands. Mostly, sardines and anchoveta are caught, which are, however, partly used for fishmeal. Furthermore, tuna. To protect fisheries, Ecuador has expanded its economic zone to 200 nautical miles (370 km). In the Bay of Guayaquil, large seafood (shrimp) cultivations are conducted.
Minerals and energy
Apart from some gold, mineral extraction is insignificant. Minor deposits of silver, copper and iron are available. Oil is the country’s most economically important asset. At Santa Elena in the west, oil has been mined since 1917, and there is also a refinery here. Following oil discoveries in 1967 in the northern part of El Oriente, oil pipelines were built to the coast. Oil has subsequently been Ecuador’s most important source of income. The country joined OPEC in 1974. New oil discoveries have later been made both in El Oriente and in the coastal zone and refineries have been built. Furthermore, the country has a partnership with Venezuela that refines Ecuadorian oil. Large deposits of natural gas exist, including in the Gulf of Guayaquil.
The electricity supply, which has been greatly expanded, has largely been based on thermal power plants. However, the country has great water energy resources, especially in the Andes slopes towards the Amazon basin. Large extensions have been planned. East of Cuenca, for example, the Paute project has been realized. The country’s electricity production is now only half based on oil, but the energy supply is drawn with major problems, partly due to lack of maintenance of the hydroelectric power stations.
Since Ecuador became an oil exporting state in 1972, the new revenue has been partially used to promote the country’s industry. However, the strong development of the 1970s ceased during the 1980s, and the industry still plays a relatively limited role in Ecuador, although some recovery took place during the 1990s and 00s. It accounts for just over 20 percent of employment.
Most important is the textile and food industry, which mainly works for the domestic market and includes sugar refineries, mills, breweries and canning factories. Textile manufacturing has always been of great importance in the country. It is partly run in artisanal form and has its main focus in Quito, Ambato (central Ecuador) and Otavalo (northern Ecuador). Other products are shoes, (Panama) hats, ceramics and construction products.
The oil-related industry has the greatest economic significance. A major expansion has been initiated, both by oil refineries and by the petrochemical industry. With the exception of these two sectors, Ecuador’s industries are highly concentrated in Guayaquil and Quito. The government’s various attempts to achieve a more widespread location have not been successful.
For Ecuador’s economy, foreign trade plays a significant role. According to Countryaah, the country’s export goods are often subject to large variations in price levels, which makes financial planning difficult. The export of oil and oil products usually accounts for more than half of export earnings. The rest comes mainly from bananas, coffee and other agricultural products as well as from fish and fishery products. The majority of exports go to the United States. Imports come primarily from the US, China and Colombia and consist of machinery, fuel and chemical products, among others.
As a rule, Ecuador has had a positive trade balance, but after the restructuring program began in 1991 and thus increased imports, the trade balance has deteriorated. Interest and repayments to the rising external debt also take up an increasing share of export earnings. After oil exports, tourism provides the largest inflow of foreign currency.
Ecuador is one of the most popular tourist destinations in South America, and tourism has become one of the country’s most important sources of income. Usually, the country is visited by just over 1 million tourists a year.
If you want to experience Ecuador at all, you should visit both the coastal country and the highlands. The city of Guayaquil is warm and humid; one day, however, it might be enough to experience the atmosphere on the main streets, lined by the banks ‘and trading houses’ turn of the century architecture.
Landslides have now made it impossible for the classic journey by narrow-gauge railway up the mountains to Quito. The cityscape in the central parts of the capital is characterized by lavishly decorated Baroque churches and, above all, by the closed environments of the vast monastery. In the city there are outstanding collections of pre-Columbian arts and crafts.
From Quito you can make interesting excursions. to the market for Native American handicraft in Otavalo, which also provides the opportunity to study the diverse folk life. On the way there, the equator is passed, marked by two monuments, one older, misplaced, and one later with more precise location. To the south you reach a magnificent landscape with large, snow-capped volcanic mountains.
A unique tourist destination is the Galápagos Islands, with giant turtles, large lizards and an interesting bird life; the islands form a national park and the number of visitors is limited for ecological reasons. Since 1978, both the Galápagos Islands and Quito have been included on the UNESCO World Heritage List.