Ecuador’s Economic Growth Key to Latin America’s Success
With 3.5 percent GDP growth projected this year, Latin America is the fastest-growing region in the world, according to the International Monetary Fund. That is almost three times the rate of the rest of the world.
Ecuador is a big component of this economic success. While the country has never been a major player in international trade, nor received a lot of attention from foreign investors, Ecuador is poised to become a leader in the economics of the region.
Ecuador’s growth rate since 2000 has been 5.5 percent, second only to Peru (7 percent), whereas Brazil scored a relatively modest 4 percent. According to a study by the United Nations Economic Commission for Latin America and the Caribbean, Ecuador also shines at debt-to-GDP ratio, which is at 24 percent. By comparison, in the United States, the ratio is almost 100 percent.
“Ecuador is ready to compete on the global stage, and go back to financial markets,” said Nathalie Cely, Ecuador’s ambassador to the United States, during a recent presentation in New York.
Cely cited the impressive economic numbers to woo North American and European businessmen to consider long-term investments in Ecuador. After a few years focusing on public investment, which took 12 percent of GDP, and improving the country’s national security, infrastructure, education and human development, Ecuador says it’s now ready to welcome foreign businesses.
Credit rating agencies, which slashed their credit opinions in the wake of the 2008 debt default, have pointed to improvements in Ecuador’s economic conditions.
In June of last year, Standard & Poor’s upgraded Ecuador’s long-term sovereign credit rating to B from B-minus, citing indications of better growth prospects and government revenues on sustained higher levels of investment.
Key opportunities to invest in Ecuador lie in sectors like electricity, hydrocarbons and mining. The National Assembly is expected to soon pass the first round of new reforms to mining laws, which would bring the industry a much-needed boost. According to the World Bank, Ecuador has gold reserves worth $2 billion as of 2011, but mining represents less than one percent of the country’s GDP.
The reforms are welcomed the mining industry, who has had to contend with negative news reports coming late last year that Colombian gangs were using illegal mines in Ecuador to launder money from drug smuggling. Gustavo Iturralde, who at the time headed a government department charged with monitoring illegal fund transfers, said gang members would buy gold, extracted through artisanal methods by the locals, with money from trafficking.
It is estimated that mining contributes to up to 30 percent of the funds of illegal groups such as the Revolutionary Armed Forces of Colombia (FARC). President Rafael Correa was recently quoted as saying that he would not let Ecuador’s security deteriorate to the point that large areas are controlled by illegal gangs.
Another issue that raises concerns about the mining industry is environmental degradation. Ecuador has been making an big effort to highlight sustainability and make every enterprise in the country environmentally conscious.
For over 25 years, Texaco — which merged with Chevron in 2001 — allegedly dumped some 18 billion gallons of toxic wastewater while drilling in the Ecuadorian Amazon. The pollution caused local indigenous people to suffer an epidemic of stomach and mouth cancer, birth defects and spontaneous miscarriages. Despite having been found guilty by Ecuadorian courts, Chevron still proclaims its innocence and has brought its own case against the prosecutors. The company was fined $19 billion by Ecuador in 2011 and has been fighting the verdict ever since.
Cely said the Chevron case looms over every environmental decision made by Ecuadorian officials.
Source: International Business Times