A strategic commercial hub, the economy of Ecuador has come a long way from the financial crisis it faced. More so with the help of major industries like petroleum, food processing, textiles, wood products and chemicals the economy of Ecuador is on a sound footing at last.
The Ecuadorian economy is mainly based on the petroleum production, exports of bananas, shrimp, and other primary agricultural products and money transfers from nearly a million Ecuadorian emigrants employed abroad. The substantial petroleum resources of Ecuador have accounted for 40% of the country's export earnings and one-fourth of public sector revenues in recent years. It's also the world's largest exporter of bananas and a major exporter of shrimp. Exports of nontraditional products such as canned fish and flowers have also grown in recent years.
Ecuador suffered its worst economic crisis in the late 1990s with the sharp decline of the world petroleum prices, the El Niņo weather phenomenon, a natural disaster and international emerging market instability. The real Gross Domestic Product (GDP) came down by more than 6%, with poverty worsening significantly. The banking system collapsed, and Ecuador failed to pay up on its external debt later that year. These factors highlight the Government of Ecuador's unsustainable economic policy resulting to its decline and later the crisis.
To address the ongoing economic crisis, on 9th January, 2000 the government of President Jamil Mahuad announced its intention to adopt the U.S. dollar as the official currency of Ecuador. This stabilized Ecuador's economy and the growth returned to its pre-crisis levels in the following years. Though Ecuador benefited from higher world petroleum prices, the government of Lucio Gutierrez from 2003 has been able to make little progress on fiscal reforms and reforms of state-owned enterprises. Under a new standby agreement with the IMF, the government is using oil revenues to pay off Ecuador's massive foreign debt.
The economic condition of Ecuador experienced a modest recovery in the year 2000 with the help of high oil prices and the GDP rose to 1.9%. Still 70% of the population was estimated to live below the poverty line that year, which is more than double the rate in the year of 1995. After winning a referendum on Constitutional reform President Correa on April 2008 announced that he no longer intended for the country to make repayments to the IMF nor deal with the World Bank.
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