BACK ON TRACK AND OPEN TO INVESTMENT
One of Latin America’s largest exporters of crude oil, Ecuador has returned to the path of growth and stability, and is opening up to the wider involvement of foreign firms

Lucio Gutiérrez Borbua President of Ecuador

Straddling the equator from which it takes its name, and bordered by the Pacific Ocean, Colombia, and Peru, Ecuador is a country of mountains, forests, rich agricultural land, and oil.

Petroleum production is the mainstay of the economy, accounting for approximately 45% of public sector revenue and 50% of export earnings. Foreign oil companies account for approximately half of the oil production, with the rest coming from the state-owned oil company, PetroEcuador. The recently opened Transandean Heavy Oil Pipeline (OCP), built by a private consortium to transport crude from the eastern Amazon region to the coast, is expected to more than double the country’s oil exports.

Ecuador’s economy is back on the path of growth and stability after several difficult years following an economic and financial crisis in 1999. The situation has been transformed since President Lucio Gutiérrez Borbua took charge just over a year ago.

The former army colonel lost no time in winning the backing of the International Monetary Fund (IMF) for a plan designed to stabilize the economy and promote growth. This prompt action has gone a long way toward restoring confidence in the economic management of the country, both at home and abroad.

President Gutiérrez’s objective is to turn Ecuador into a modern and competitive country, and he has pledged to fight poverty, social injustice, corruption, and unemployment. With targets set up to 2007, the government’s economic plan is aimed at promoting sustainable growth and controlling inflation, while addressing priority social needs. Central to its success is the further opening up of the economy, and the oil sector in particular, to private investment.

Rich in biodiversity, Ecuador is a nature lover’s paradise and an ideal destination for ecotourism

“We have three strategies,” explains President Gutiérrez. “The first is a total opening to local and international private investment. The second is to give strong support to our productive sectors, such as oil, tourism, and agriculture. The third is to invest in public works, such as the road infrastructure, housing construction, sanitary works, and tap water.”

A tight rein has been put on government spending; last year’s austerity budget included a public sector wage freeze, and even the President‘s salary was reduced. Subsidies on government services have also been targeted, resulting in fuel and utility hikes.

Structural reforms are being introduced and the public sector shaken up. “We have to make our state companies much more competitive, reduce their size, and make them efficient,” declares President Gutiérrez.
Moves are underway to privatize the electricity and telecommunication sectors as part of the deal with the IMF. Reform of the civil service and customs administration, the tax system, and the labor market are all on the agenda.

Spending on social needs is being increased, however, with extra help for the poor and the elderly, as is investment in the health and education systems. “Investing in health and education is our first priority,” says the President.