Introduction - Adventure Guide to Ecuador and the Galapagos Islands - page 31

The Economy
The Ecuadorian economy has historically been dominated
by the agricultural sector, and by the export of a few spe-
cific commodities (cocoa, coffee, and banana). The econ-
omy underwent a significant structural transformation in
the 70s when new discoveries made oil Ecuador's most important ex-
port commodity. The rise in oil exports fueled economic growth, and
was accompanied by a sharp increase in government spending and
employment, which was financed principally by external borrowing
and oil revenues. From 1982 to 1987, the country experienced a slow-
down as the economy was exposed to external shocks that affected
Latin American nations generally throughout this period. The col-
lapse of world oil prices in 1986 reduced Ecuador's oil export revenues
by half. An earthquake inMarch 1987 destroyed a large stretch of the
country's only oil pipeline. Oil now dominates the economy and cre-
ates severe socio-economic and political vulnerability related to the
world oil market, agriculture continues to contribute significantly.
The world's leading banana exporter, Ecuador also produces vast
amounts of cocoa and coffee, as well as increasing amounts of roses
and other flowers, fruits and vegetables. All said, the agricultural sec-
tor now contributes a bit under 20% to the GDP (oil fluctuates around
15%), and is a significant source of the country's employment. Shrimp
farming dominates the fishing industry, anothermajor contributor to
export earnings, though in recent years it has been severely affected
by massive die-offs at shrimp farms. Overall, exports average 35% of
the GDP, which makes the country highly vulnerable to the world
market and external fluctuations.
Tourism is the other major player in Ecuador's economy, ranking
third or fourth in revenue, depending on your source.
The period from 1988 to 1992 was characterized by increasing oil ex-
port prices and reductions in government spending in real terms.
Throughout this period, the government pursued a gradual stabiliza-
tion policy. Despite this, inflation rose sharply, averaging 59.7% an-
nually, notwithstanding intervals of relatively robust economic
growth. In 1992 the government adopted a macroeconomic
stabilization plan, supported by the International Monetary Fund
(IMF). Inflation decreased from 60.2% in 1992 to 31% in 1993 and 25.
4% in 1994; international reserves increased from a low of US$224
million inAugust 1992 toUS$1.2 billion inDecember 1993 andUS$1.
7 billion inDecember 1994. The consolidated non-financial public sec-
tor deficit decreased from 1.2% of GDP for 1992 to 0.1% of GDP for