Ecuador Economic Report: Analysis of Performance, Outlook & Investment

This report provides an economic analysis of Ecuador, focusing on its reliance on the petroleum sector and the impact of the 2014-2017 financial crisis. It examines the effects of dollarization and Chinese loans on the country's economic growth, while also highlighting challenges such as crowding effects and insufficient rule of law that deter foreign investment. The analysis includes a review of key economic indicators like GDP, labor force data, and consumer spending, and discusses the benefits and challenges of investing in Ecuador, including emerging sectors such as oil, tourism, and manufacturing. Furthermore, it explores the economic relations between the United Arab Emirates and Ecuador, and provides short-term and long-term economic forecasts, along with an assessment of the country's financial market performance and future investment opportunities. The report concludes that Ecuador's economy shows signs of recovery and potential for growth, making it an attractive destination for investors.

Running head: ECUADOR ECONOMIC ANALYSIS 1
Ecuador Economic Analysis
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Ecuador Economic Analysis 2
Ecuador Country Analysis
Generally, the Ecuador economy is highly relying on the petroleum sector at large which takes
into account about 50% of the country’s exportations with almost 25% of the government sector
over the past years. Between 2014/2017, there has been an effect on the economy as a result of
the financial crisis which, which caused a tremendous decline in the country’s GDP rates with
the poverty levels increasing to substantial standards (Flores-Mena, Jara-Tamayo, Herrera-
González & Gea-Izquierdo, 2017). Therefore in March 2014, the Ecuadorian government
proposed the legalizing of the US dollar which would help them recover from the financial crisis.
As a result of the dollar approval, the Ecuador economy was stable leading to a positive growth
rate of the country’s economic levels.
Noticeably, in 2014 the country’s economy had risen to an average of 5.3% annually between
2014/2017. Lately, Ecuador has borrowed loans from China which has helped boost its financial
levels, by also permitting the national government in upholding high levels through the
regulation in the country’s social spending. The Chinese government lends the Ecuadorian a sum
of $9.9 billion with an astute of boosting their oil sales, financing of the country’s projects, and
budget support for loans in December 2014. Due to certain unfavorable challenges in Ecuador
such as the crowding effect of public investments, insufficient rule of law and unfavorable
environment has caused a substantial decline of foreign investment in the country.
With the 2013 economic deficit of approximately $1.1 billion raised various mechanical
hindrances in order to trade in 2015 which rose huge tension with the country’s potential

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investors. On the contrary, Ecuador also legalized the use of rational assets which the violated
country’s set laws in 2014. In 2015, there was imposition of tariffs on the imports in Ecuador
from 5% to 45% (Granderson & Paul, 2015). There was a rapid increase in the production of oil
in 2014 which stabilized Ecuador’s economy, although in 2014 the prices also decline which
highly impacted the country’s revenue. Thus the country underwent a recession in 2015 which
and remained is such a state in 2016. Over time the country’s recession was cut down and normal
economic levels resumed in 2017.
Ecuador economic Performance indicators
According to the research analysis economic indicators are very useful in providing substantial
information on a country’s economic progress. It enables financiers determine whether a country
is under expansion or rather a contraction. Majority of economic indicators which are released by
the government every month always provide activity’s data which have been carried out in the
past few months and years which are essential for comparison purposes. Moreover the GDP of
any economy basically provides important information about the value of the goods or service
produced by a particular economy thus knowing is the economy is declining or on a rise
(MOORE, 2015). Thus the national government will institute certain estimation which enables it
come up with possible solutions to the problem.

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Figure 1: Ecuador economic indicators
Indicators such as labor forces are the major determinant for evaluating the economy’s
performance rates. Labor involves concepts such as job creation which has happened in the prior
months. Labor forces generally take into account certain firms and other national related
unemployment rate levels. Costs on consumer spending are projected to cover about 2/3 of
Ecuador’s economic processes and provide rigid valuation of the country’s consumption health
levels. Thus the Ecuadorian’s commerce unit annual release has provided the general income and
outlays which provides detailed explanation about consumer usage (Moreno Brieva &
Peñaherrera-Patiño, 2018). Additionally, it provides data about inflation levels by explaining the
price index levels which evidently shows the consumption rate of each individual.
Benefits of investing in Ecuador
According to the research analysis done from the Ecuadorian’s market analysis, it is seen that
Ecuador’s economy is among the best performing economies present in Latin America.
Therefore, this implies that the country opens widely for investors to chip in and exploit the
country’s present resources. The country has consistently eased up the investment processes
through permitting of trade free zones by provision of supplements in the preset domestic firms

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which attracts investors in the country (International Business Publications, 2015). Since much
of the labor force is already employed in the farming industries, the government’s main
aspiration is renovating the industrial and the technical sector which will provide effective
working conditions for investors. Therefore below are factors which makes it suitable for
investors to work in Ecuador, they include:
 Provision of financial aid upon investing in certain sectors of Ecuador’s economy. There
is allocation of fiscal credits and unlimited remissions in every area of the economy.
 Low tax income rate to attract investors
 Minimization of 10 points which will initiate investment processes
Challenges to investing in Ecuador
Similar other emerging economies in the world Ecuador are also encountering various challenges
in the process of boosting its economic levels. Ecuador faces different challenges such as natural
pandemic like floods, landslides, earthquakes etc which makes it unfavorable for investment
processes to occur. The country is known to be prone of active volcanoes which affect the social
and economic living of the people in the country (Ampah, Besan?ñon, Niang & Srot, 2014). The
eruptions affect the water channels in the country thus affecting the country’s diary and food
production industries which directly affects Ecuador’s economy.
Emerging Sectors in Ecuador
In the economy of Ecuador, the major emerging sectors are oil, tourism, lumber, fishing, plastics,
chemical production, paper products, metal works, and textile industries. Due to these emerging
markets in Ecuador’s economy, there has been an increase in the inflation level leading to a high

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gross domestic growth of the country (Fakier, 2014). Additionally with the high influence of the
government foreign investment will raise which will improve the country’s economy. Moreover
the entrepreneurial activities are current being motivated by the country which will help the
country grow.
United Arab Emirates’ Economic relation with Ecuador
Lately, there has been close relation of the UAE and Ecuador’s economies. Both countries have
been striving to improve their countries’ economies through cooperating with one another. The
two countries overall trade exchange in the year 2016, was found to be about $55 million which
that the two countries have been financial partners over a long period of time. The United Arab’s
Emirate’s economic is said to substantially benefit from Ecuador’s economy with the country’s
interests and aspirations attained (Arnold, 2014). Their cooperation has motivated both countries
to explore different fields and acquire profitable partnership at national and private levels.
Additionally, both countries are targeted to share knowledge and skills in the development of
harbors which will increase the relation to an upper level.
2019/2020 Short-Term and Long-Term Prospects/Forecasts

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According to the results should in figures above the projected expenditure on GDP of Ecuador in
the coming years is projected to decrease with the private consumption levels decreasing from
2.2 to 0.4, government consumption from 0.5 to 0.3, gross fixed investments from 5.5 to 0.1,
exports of goods and services from 5.0 to 2.7 and imports of goods and services from 6.2 to 3.7.
On the other hand, the origin of GDP levels will increase in the agricultural and the industrial
sector while exhibiting a constant decline in the service sector. Analysis of these figures shows
that the economy of the country is aspired to increase as a result of the employed measures.
Foreign investments to Ecuador
About 80% of the Ecuador foreign investments are all targeted in boosting the oil sector. In
2015, the country reached acquired $1.3 billion, while in the second year there was a decrease in
the FDI levels. Additionally, in 2017, about $606 million was attained which was 20% less than

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in 2016 and 50% less compared to 2015. As a result of foreign investment processes there was an
increase in the FDI to about $17 billion which made the Ecuador’s GDP be about 17% (Adrian,
2016). According to the central bank of Ecuador there is a notable decrease in the FDI rates
which negatively impacts the foreign investment processes in Ecuador. As a matter of fact, the
business processes in the country is continually experiencing many challenges due to the tough
labor regulations rules and regulations, and the government intervention process always tend to
be intervening specifically in the oil sector. Therefore, based on the foreign investment activity
the country is ranked to be 118/190 presently according to business reports accessed by the
World Bank.
Figure 2: 2015/2016 foreign investment of Ecuador
Financial Market Performance, Future Outlook and Investment Opportunities
According to the World Economic Outlook, Ecuador’s financial market performance has
portrayed strong progress, thus indicating that the country has recovered quickly from its initial
financial crisis resulting to the country’s economy rising by 0.6% in 2018. Although in 2016
there was a poor recovery rate of -1.6% and a 1% growth rate in 2017 which was data presented

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by the economic commission for Latin America. The commission adds by stating the figures are
dissimilar with those of 2018 and the records presented by CEPPAL which show 1.3% and
1.8%-2.0% published by the Ecuador’s central bank (Alfred, 2016). The fruitful market
performance of Ecuador is as a result of the intervention by the government in formulating
economic programs which boosted the public expenditure and other foreign debts in the country.
The future prospects of the country are projected to increase through excellent performance in
market levels and the country’s GDP levels (Pérez, Fernández, Méndez, Méndez & Fernández,
2018). In the near future the economy of Ecuador will increase to considerable size making it to
attract potential investors in investing the country’s economy. Additionally, the due to the
emerging markets in the country there will be numerous investment opportunities as a result of
the government providing funds which will boost the emerging sector. Thus it is projected that in
the near future the economy of Ecuador will increase greatly reaching other great nations like
USA, China, and Japan etc.

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References
Adrian, M. (2016). Ecuadorean projects requiring foreign investment participation (3rd ed., p.
678). [Quito? Ecuador]: Centro de Desarrollo Industrial del Ecuador.
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Ampah, M., Besan?ñon, L., Niang, C., & S??rot, A. (2014). Creating Fiscal Space for Poverty
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Arnold, G. (2014). The Resources of the Third World (2nd ed., p. 68). Hoboken: Taylor and
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