U.S. presence rejuvenates key local industries

HANGING BY A THREAD Ecuador’s textile sector is particularly dependent on the renewal of the ATPA agreement.

Ecuador has strong political and social links with the U.S., on whom it relies for trading and financial support. Its efficient and competitive agricultural market is largely dependent on the U.S., which is the number one client for the country’s exports of natural flowers (70%), shrimp (60%) and bananas (of which Ecuador is the leading world
exporter). Crude oil, coffee, cocoa, sugar, fish, plywood and gold are other important exports to the U.S., and total purchases for 2000 were $1.8 billion, or 38% of the total, and 10% increase from the previous year.
In turn, the U.S. supplies Ecuador with corn, wheat and technical equipment such as generators, turbines, motor vehicles and parts, pumps and domestic appliances. Imports from the U.S. totaled $932 million in 2000, a 1% increase from 1999.

Dollarization has imposed a fiscal discipline previously unknown in Ecuador, helping to reduce inflation and stabilize the general situation. Currently the country is hoping for a renewal and expansion of the Andean Trade Preferences Act (ATPA) to give the reviving economy an added boost. The ATPA, which expired in December 2001, was set up ten years ago to grant preferential duty free access to certain products from Ecuador, Colombia, Bolivia and Peru with the aim of providing alternatives to coca production and restricting the illegal drug market that flourishes in the Andean region. Last November, the U.S. House of Representatives approved an expanded version of the law, planned to last until 2006, which would increase benefits for textile and clothing and add canned tuna–a leading export–to the list of eligible goods. The bill is now due to be passed by the Senate.
One source of dollar income that has suffered badly since the September 11 terrorist attack has been the remittance of private funds from hundreds of thousands of emigrants residing in the U.S. In 2000 an estimated $1.36 billion was sent home, the second most important source of foreign exchange after oil exports. But the 2001 figures are due to show a sharp drop.

The U.S. presence is increasingly felt in various local spheres. On the retail front a number of U.S. franchises are developing in the new Ecuadorian malls, where many North American products are marketed. The sector provides many additional opportunities for investment as U.S. products are very popular, and anything ‘gringo’ is regarded as good. Several U.S. cargo companies, meanwhile, service the two international airports in Quito and Guayaquil, and major carriers include American and Continental.