February 23rd, 2017

Ecuador’s Agricultural and Economic Outlook

Ecuador is a small Latin American country with a total territory of more than 280.000 square kilometers, which is slightly smaller than the state of Nevada. Ecuador has a total population of little over 16 million citizens and is located along South America’s Pacific coast. Likewise, Ecuador is a member of the Andean Community, which brings the country together with Colombia, Peru, and Bolivia into an economic union. Furthermore, the Andean Community has associate members including Argentina, Chile, Uruguay, Brazil, and Paraguay.

With an annual gross domestic product (GDP) of approximately US$180 billion, Ecuador adopted the United States Dollar (USD) as its official currency in 2001. Currently, the Ecuadorian economy is divided into 6% agriculture, 34% manufacturing, and 60% services. However, the agriculture industry utilizes some 30% of the national territory, while another 39% is forested, mainly Amazonian territory. Meanwhile, the Ecuadorian agricultural industry employs up to 28% of the national labor force, while manufacturing employs about 18% and services employ another 54%.

Within the manufacturing industry, Ecuador produces petroleum, textiles, wood products, chemicals, and processed food. Meanwhile, within the agriculture industry, Ecuador’s most important products include bananas, coffee, cocoa, rice, potatoes, cassava, manioc, tapioca, plantains, sugarcane, cattle, sheep, pigs, beef, pork, dairy products, fish, and shrimp. In terms of trade, Ecuador’s most important partners are the United States, Colombia, and China. Similarly, in spite of having signed a recent free trade agreement (FTA) with the European Union, no European country figures amongst Ecuador’s main trading partners. With Ecuador in the midst of a presidential election facing the left-wing establishment against a right-wing opposition candidate, this article explores the status of the agricultural industry in Ecuador.

Ecuador’s Agricultural and Economic Outlook

Highly dependent on oil and international commodity prices, Ecuador’s economy has been burdened by stagnant growth in recent years. In terms of trade, Ecuador imports a substantial amount of food and agricultural products for domestic consumption. During 2016, Ecuador imported some US$300 million worth of food and agricultural goods from the US. Furthermore, this amount has been modest compared to recent years, when agricultural imports have been well above US$300 million.

The median age in Ecuador is well under 30 years and this young-urban consumer class is very open in its preference towards imported food products. However, one of the main challenges to boosting economic development and working class purchasing power in Ecuador is the country’s financial strain. After the Ecuadorian government was shut out from western financial markets during 2008 and 2009 due to the default on the country’s sovereign debt, the national government had to resort to oil-backed loans from Chinese financiers. Since then, Ecuador’s economy has been even more vulnerable to variation in international petroleum prices. As one of two Latin American members of the Organization of Petroleum Exporting Countries (OPEC), alongside Venezuela and other member countries, Ecuador was an active promoter of the 2016 Vienna Agreement to lower global oil output in order to raise international prices and breathe life into their national economies.

(Read more about China’s Growing Presence in Latin America)

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