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The Ecuadorian Economy
The Ecuadorian economy is the eighth largest
in Latin America after Brazil, Mexico, Argentina,
Chile, Colombia, Venezuela, and Peru.
Ecuador ’s exports have been the key factor in its
economic growth since the late nineteenth cen-
tury until the Great Depression. Ecuador gets
its revenue based on the export of two primary
products: cocoa and coffee. However, this has
had a negative effect on industrialization as it
means alternative areas have not been investi-
gated or exploited. Exports account for between
70% and 80% of the total economic activity,
most of which are agricultural products: cocoa
and coffee with 64.1% and 5.4% respectively.
As a result the economy grew but became more
dependent on international markets. This growth
was extensive and this was portrayed in the in-
crease size of the Ecuadorian workforce and the
increase in the amount of land being cultivated.
. Ecuador has almost come from nowhere when
you consider that in 1900 it only had a popula-
tion of 1 million. The fragmentation of Ecuado-
rian markets back then meant that they missed
the export boom, however, Ecuador markets are
feeling positive effects now with growing exports
to the USA and increased trade with European
countries.
In 1913, cocoa accounted for 64% of Ecuador ’s
exports which made the country somewhat one
dimensional on the global economic scene. This
type of situation is always risky because coun-
tries that specialize in production become very
vulnerable in that they are completely reliant on
global demand for certain products. With the ar-
rival of the First World War exports dropped. In
1917, due to the cocoa crisis and falling world
prices, exports suffer another stroke back and
drop again
Since 1950, Ecuador regained its position in in-
ternational markets thanks one of its most im-
portant exports – the banana. Ecuador then saw
a period of prosperity. The increasing demand
for bananas in Europe and the United States and
the impact of pests and hurricanes in Central
American plantations were the two main factors
that contributed to Ecuador becoming so impor-
tant in the worldwide banana market. The coun-
try was perfect because of its cheap labor, its
HISTORICAL INTRODUCTION:
ECUADOR – THE ULTIMATE
PRIMARY PRODUCER
abundance of agricultural land, its government
support policy (which included credit and infra-
structure) and its lack of pests and hurricaines.
Banana exportation was the focus of the Ecua-
dorian economy until the 1970’s, when oil also
became very important to trade mechanisms
within Ecuador.
In the 1970’s, the country’s mining and oil indus-
tries were aided by the development of a unique
situation characterized by high oil prices on the
global market. The export of oil allowed incre-
mental growth of major economic aggregates.
These aggregates grew previously unseen
rates. Exports rounded $ 190 million at that time
whilstGDP increased from $1.062 million dollars
to $ 13.946 billion dollars from 1970 to 1977 and
RMI from $ 55 million to $ 563 million dollars.
This energized the participation of Ecuador in
the globalizing logic of international capitalism.
The country became more attractive for invest-
ments and foreign banks because of this new-
found oil wealth and suddenly the Ecuadorian
‘nouveau riche’ was formed. The subsequent
acquisition of extensive resources allowed the
state to invest in roads, energy, health and ad-
dress multiple economic and social pressures.
These and many other circumstances (that had
not previously been experienced) marked the
beginning of a different stage in the economic
history of Ecuador from 1972. The country was
moving away from the inefficient economic mod-
el based on exports of raw materials and primary
products of agricultural origin to a new one that
was based on petroleum prices. From that pe-
riod, the industrialization process intensified,
generating further economic growth and wealth
and laying a path for creating a new urban and
industrial society.
The seventies had brought further development
but the commodity based system had made the
country relatively vulnerable to external trade.
In recent years Ecuador has been developing
a new strategy that would use oil revenues to
change the productive matrix and create an in-
digenous industry that would create added value
to raw materials that are usually exported as pri-
mary products. This would cause a re-industri-
alization of the country.