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Ecuador (03/07)


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For the most current version of this Note, see Background Notes A-Z.

Flag of Ecuador is three horizontal bands of yellow - at top, double width - blue, and red with the coat of arms superimposed at center of flag.

PROFILE

OFFICIAL NAME:
Republic of Ecuador

Geography
Area: 276,840 sq. km; about the size of Colorado.
Cities: Capital--Quito (pop. 1.6 million). Other major cities--Guayaquil (2.4 million).
Terrain: Jungle east of the Andes, a rich agricultural coastal plain west of the Andes, high-elevation valleys through the mountainous center of the country and an archipelago of volcanic islands in the Pacific Ocean.
Climate: Varied, mild year-round in the mountain valleys; hot and humid in coastal and Amazonian jungle lowlands.

People
Nationality: Noun and adjective--Ecuadorian(s).
Population (July 2005 est.): 13,363,593
Annual population growth rate (July 2005 est.): 1.24%.
Ethnic groups: Indigenous 25%, mestizo (mixed Indian and Spanish) 65%, Caucasian and others 7%, African 3%.
Religion: Predominantly Roman Catholic (95%), but religious freedom recognized.
Languages: Spanish (official), indigenous languages, especially Quichua, the Ecuadorian dialect of Quechua.
Education: Years compulsory--ages 6-14, but enforcement varies. Attendance (through 6th grade)--76% urban, 33% rural. Literacy--92%.
Health: Infant mortality rate--23.66/1,000. Life expectancy--76.21 yrs.

Government
Type: Republic.
Independence: May 24, 1822 (from Spain).
Constitution: August 10, 1998.
Branches: Executive--President and 15 cabinet ministers. Legislative--unicameral Congress. Judicial--Supreme Court, Provincial Courts, and ordinary civil and criminal judges.
Administrative subdivisions: 22 provinces.
Major political parties: Over a dozen political parties; none predominates.
Suffrage: Obligatory for literate citizens 18-65 yrs. of age; optional for other eligible voters; active duty military personnel and police may not vote.

Economy
GDP: (2006 est.) $40.9 billion; (2005) $36.5 billion; (2004) $32.6 billion; (2003) $28.6 billion; (2002) $24.9 billion.
Real annual growth rate: 1996, 2.4%; 1997, 4.1%; 1998, 2.1%; 1999, -6.3%; 2000, 2.8%; 2001, 5.3%; 2002, 4.3%; 2003, 3.6%; 2004, 7.9%; 2005, 4.7%; 2006 est., 4.3%.
Per capita GDP: (2006 est.) $3,050; (2005) $2,761; (2004) $2,505; (2003) $2,230.
Natural resources: Petroleum, fish, shrimp, timber, gold.
Agriculture, including seafood (6.1% of GDP in 2006): Products--bananas, seafood, flowers, coffee, cacao, sugar, tropical fruits, palm oil, palm hearts, rice, corn, and livestock.
Industry (8.6% of GDP in 2006; oil and mining--24.3% in 2006): Types--petroleum extraction, food processing, wood products, textiles, chemicals, and pharmaceuticals.
Other major contributors to GDP: Commercial trade (wholesale and retail)--11.4% (2006); transportation and communications--7.5% (2006); construction--7.9% (2006).
Trade: Exports--$7.7 billion (2004); $10.1 billion (2005); $12.4 billion (2006). Types--petroleum, bananas, shrimp, coffee, cut flowers cacao, hemp, wood, fish. Major markets (2006)--U.S. 54%, Latin America 24%, European Union (EU) 12%, and Asia 4%. Imports--$7. 5 billion (2004); $9.5 billion (2005); $11.2 billion (2006). Types--industrial materials, nondurable consumer goods, agricultural products. Major suppliers (2006)--Latin America 39%, U.S. 23%, Asia 19%, and EU 9%.
Currency: U.S. dollar.

PEOPLE
Ecuador's population is ethnically mixed. The largest ethnic groups are indigenous and mestizo (mixed Indian-Caucasian). Although Ecuadorians were heavily concentrated in the mountainous central highland region a few decades ago, today's population is divided about equally between that area and the coastal lowlands. Migration toward cities--particularly larger cities--in all regions has increased the urban population to over 60%. The tropical forest region to the east of the mountains remains sparsely populated and contains only about 3% of the population. Due to an economic crisis in the late 1990s, more than 600,000 Ecuadorians emigrated to the U.S. and Europe from 2000 to 2001. It is estimated that there are over two million Ecuadorians currently residing in the U.S.

HISTORY, GOVERNMENT, AND POLITICAL CONDITIONS

The Inca Empire and Spanish Conquest
Advanced indigenous cultures flourished in Ecuador long before the area was conquered by the Inca Empire in the 15th century. In 1534, the Spanish arrived and defeated the Inca armies, and Spanish colonists became the new elite. The indigenous population was decimated by disease in the first decades of Spanish rule--a time when the natives also were forced into the "encomienda" labor system for Spanish landlords. In 1563, Quito became the seat of a royal "audiencia" (administrative district) of Spain.

Independence
After independence forces defeated the royalist army in 1822, Ecuador joined Simon Bolivar's Republic of Gran Colombia, only to become a separate republic in 1830. The 19th century was marked by instability, with a rapid succession of rulers. The conservative Gabriel Garcia Moreno unified the country in the 1860s with the support of the Catholic Church. In the late 1800s, world demand for cocoa tied the economy to commodity exports and led to migrations from the highlands to the agricultural frontier on the coast.

A coastal-based liberal revolution in 1895 under Eloy Alfaro reduced the power of the clergy and opened the way for capitalist development. The end of the cocoa boom produced renewed political instability and a military coup in 1925. The 1930s and 1940s were marked by populist politicians such as five-time President Jose Velasco Ibarra. In January 1942, Ecuador signed the Rio Protocol to end a brief war with Peru the year before. Ecuador agreed to a border that conceded to Peru much territory Ecuador previously had claimed in the Amazon. After World War II, a recovery in the market for agricultural commodities and the growth of the banana industry helped restore prosperity and political peace. From 1948-60, three presidents--beginning with Galo Plaza--were freely elected and completed their terms. Political turbulence returned in the 1960's, followed by a period of military dictatorship between 1972 and 1979. The 1980's and beginning of the 90's saw a return to democracy, but instability returned by the middle of the decade.

Political Instability (1997-2006)
Abdala Bucaram, from the Guayaquil-based Ecuadorian Roldosista Party (PRE), won the presidency in 1996 on a platform that promised populist economic and social policies and challenging what Bucaram termed as the power of the nation's oligarchy. During his short term of office, Bucaram's administration was severely criticized for corruption. Bucaram was deposed by the Congress in February 1997 on grounds of alleged mental incompetence. In his place, Congress named interim President Fabian Alarcon, who had been president of Congress. Alarcon's interim presidency was endorsed by a May 1997 popular referendum.

Congressional and first-round presidential elections were held on May 31, 1998. No presidential candidate obtained a majority, so a run-off election between the top two candidates--Quito Mayor Jamil Mahuad of the Popular Democracy party and Alvaro Noboa of the Ecuadorian Roldosista Party (PRE)--was held on July 12, 1998. Mahuad won by a narrow margin and took office on August 10, 1998. On the same day, Ecuador's new constitution came into effect. Mahuad concluded an historic peace agreement with Peru on October 26, 1998, but increasing economic, fiscal, and financial difficulties drove his popularity steadily lower. On January 21, 2000, during demonstrations in Quito by indigenous groups, the military and police refused to enforce public order. Demonstrators entered the National Assembly building and declared a three-person "junta" in charge of the country. Field-grade military officers declared their support for the concept. During a night of confusion and negotiations, President Mahuad fled the presidential palace. Vice President Gustavo Noboa took charge and Mahuad went on national television to endorse Noboa as his successor. Congress met in emergency session in Guayaquil the same day, January 22, and ratified Noboa as President of the Republic.

Completing Mahuad's term, Noboa restored some stability to Ecuador. He implemented the dollarization of the economy that Mahuad had announced, and he obtained congressional authorization for the construction of Ecuador's second major oil pipeline, this one financed by a private consortium. Noboa turned over the government on January 15, 2003, to his successor, Lucio Gutierrez, a former army colonel who first came to public attention as a member of the short-lived "junta" of January 21, 2000. Gutierrez' campaign featured an anti-corruption and leftist, populist platform. After taking office, however, Gutierrez adopted relatively conservative fiscal policies and defensive tactics, including replacing the Supreme Court and declaring a state of emergency in the capital to combat mounting opposition. The situation came to a head on April 20, 2005, when political opponents and popular uprisings in Quito prompted Congress to strip Gutierrez of the presidency for "abandoning his post." When the military withdrew its support, Gutierrez went into temporary exile. Congress declared Vice President Alfredo Palacio as the new president, and a new coalition reclaimed control of Congress. A semblance of stability returned, but the Palacio administration failed to achieve major reforms.

In national elections on October 15, 2006, third-time presidential candidate Alvaro Noboa won the first round, but Rafael Correa, Palacio's former finance minister, running on an anti-establishment reform platform, bested Noboa in the second round presidential runoff on November 26. Election observers characterized the elections as generally free, fair and transparent. Noboa's National Institutional Renovation and Action Party won the largest bloc in Congress, followed by Gutierrez's Patriotic Society Party; Correa's Proud and Sovereign Fatherland Alliance movement did not field any congressional candidates. Traditional parties saw their congressional representation cut in half. The new Congress took office January 5, 2007 and Correa was sworn in as President on January 15, 2007.

Government
The constitution provides for 4-year terms of office for the president, vice president, and members of Congress, although none of the last three democratically-elected presidents finished their terms. Presidents may be re-elected after an intervening term; legislators may be re-elected immediately. The executive branch currently includes 15 ministries. Provincial governors (prefects) and councilors, like mayors, city councilors and rural parish boards, are directly elected. Congress meets throughout the year except for recesses in July and December. Congress is divided into twenty seven-member subject committees. Justices of the Supreme Court are appointed by the Congress for life; members of the Constitutional Court serve four years.

Principal Government Officials
President--Rafael CORREA
Vice President--Lenin MORENO
Minister of Foreign Affairs--Maria Fernanda ESPINOSA
Minister of Defense--Lorena ESCUDERO
Ambassador to the United States--Luis GALLEGOS Chiriboga
Ambassador to the Organization of American States--Mario ALEMAN
Ambassador to the United Nations--Diego CORDOVEZ Egers

Ecuador maintains an embassy in the United States at 2535 15th Street NW, Washington, DC 20009 (tel. 202-234-7200). Consulates are located in Atlanta, Boston, Chicago, Dallas, Denver, Houston, Jersey City, Los Angeles, Miami, New Orleans, New York, San Francisco, and San Juan, Puerto Rico.

Political Conditions
Ecuador's political parties have historically been small, loose organizations that depend more on populist, often charismatic, leaders to retain support than on programs or ideology. Frequent internal splits have produced great factionalism. No party has won the presidency more than once through elections since the return to civilian government in 1979. Although Ecuador's political elite is highly factionalized along regional, ideological, and personal lines, desire for consensus on major issues often leads to compromise. Opposition forces in Congress are loosely organized, but historically they often unite to block the administration's initiatives.

Constitutional changes enacted by a specially elected National Constitutional Assembly in 1998 took effect on August 10, 1998. The new constitution strengthened the executive branch by eliminating mid-term congressional elections and by circumscribing Congress' power to remove cabinet ministers. Party discipline varies, and many congressional deputies switch allegiance during each Congress. After the new constitution took effect, the Congress passed a code of ethics that imposes penalties on members who defy their party leadership on key votes.

Beginning with the 1996 election, the indigenous population abandoned its traditional policy of shunning the official political system and participated actively. The indigenous population has established itself as a force in Ecuadorian politics, and participated in the Gutierrez administration before joining the opposition. In the 2006 elections the indigenous movement won six seats in Congress (down from 11 in 2002).

ECONOMY
The Ecuadorian economy is based on petroleum production, manufacturing for the domestic market, and agricultural production for domestic consumption and export. Principal exports are petroleum, bananas, shrimp, flowers, and other primary agricultural products. In 2005, oil accounted for 56% of total export earnings. Ecuador is the world's largest exporter of bananas (about $1.2 billion in 2006) and a major exporter of shrimp ($553 million in 2006). Exports of nontraditional products such as flowers ($416 million in 2006, a three-fold increase in 10 years) and canned fish, including pouch tuna ($495 million in 2006) have grown in recent years.

Ecuador's economic performance has been solid since it adopted the dollar as its national currency in 2000, following a major banking crisis and recession in 1999. Since 2000, growth has averaged over 5% per year. In 2006 economic growth was 4.3%, inflation was 2.9%, and both petroleum and non-petroleum exports expanded. This performance has taken place in spite of the political turbulence, thanks to the stability brought by dollarization, high oil prices, strong domestic demand, and growing remittances (over $2.5 billion a year) from Ecuadorians living abroad. Per capita income has increased from $1,296 in 2000 to an estimated $3,050 in 2006, while the poverty rate fell from 81% in 2000 to 63% in 2004.

Ecuador did not improve its overall competitiveness during this period of economic and export growth. In 2006 it slipped three positions in both the World Bank's Doing Business Index (from 120 to 123) and the World Economic Forum's Competitiveness Index (from 87 to 90), as other nations have moved more aggressively to adapt to globalization.

Though Ecuador has a relative abundance of oil reserves, it has been unable to take full advantage of those resources for its own development. Mismanagement, lack of investment, and corruption in the state-owned oil sector have caused declines in state oil production over the last decade. Overall oil production increased during that period because of growing production by private sector companies, but in 2007 initial projections show that production by both public and private sector companies will fall. Commercial disputes as well as judicial and contractual uncertainties have deterred private oil and other companies from investing in the country. The electricity and telecommunications sectors also have similar significant problems. Ecuador was in the final stages of negotiating a free trade agreement (FTA) with the United States, but that progress stalled with an April 2006 hydrocarbons law mandating revisions in contract terms, and the May 2006 seizure of the assets of Occidental Petroleum, at the time the country's largest U.S. investor. Resolution of the Occidental situation is currently pending international arbitration under the terms of the bilateral investment treaty.

President Correa has announced his opposition to resumption of FTA talks with the U.S., citing concerns that Ecuador is not yet sufficiently competitive, especially in sensitive agriculture sectors. Prior to taking office, he said that the Government of Ecuador would only service its external debt obligations after the funding domestic social priorities; he also said that Ecuador would not pay back "illegitimate" debt. As of February 2007 the government had met its external debt obligations and announced the creation of a commission to determine the legitimacy of the debt. The government increased income transfers for the poor and announced its intention to increase spending on health and education. It has also announced plans to increase low-cost loans to small businesses in parts of the country that are not well-served by the private banking sector.

FOREIGN RELATIONS
Ecuador always has placed great emphasis on multilateral approaches to international problems. Ecuador is a member of the United Nations (and most of its specialized agencies) and the Organization of American States (OAS) and also is a member of many regional groups, including the Rio Group, the Latin American Economic System, the Latin American Energy Organization, the Latin American Integration Association, and the Andean Pact.

In October 1998, Ecuador and Peru reached a peace agreement to settle their border differences, which had festered since the signing of the 1942 Rio Protocol. This long-running border dispute occasionally erupted into armed hostility along the undemarcated sections, with the last conflict occurring in 1995. The U.S. Government, as one of the four guarantor nations (the others are Argentina, Brazil and Chile), played an important role in bringing the conflict to an end. The peace agreement brokered by the four guarantors in February 1995 led to the cessation of hostilities and the establishment of the Military Observers Mission to Ecuador-Peru (MOMEP) to monitor the zone. In addition to helping broker the peace accord, the U.S. has been active in demining the former area of conflict and supporting welfare and economic projects in the border area.

The ongoing conflict in Colombia and security along the 450-mile-long northern border are important issues in Ecuador's foreign relations with Colombia. The instability of border areas and frequent encroachments of Colombian guerillas into Ecuadorian territory has led the Ecuadorian army to deploy more troops to the region. Although Ecuadorian officials have stated that Colombian guerrilla activity will not be tolerated on the Ecuadorian side of the border, guerrilla bands have been known to intimidate the local population, demanding extortion payments and practicing vigilante justice. The close proximity of the border to northern oil fields also has resulted in kidnappings of foreign oil workers by Colombian-based criminals. Ecuador has deployed a contingent of Army engineers to Haiti as part of the peacekeeping force.

U.S.-ECUADORIAN RELATIONS
The United States and Ecuador have maintained close ties based on mutual interests in maintaining democratic institutions; combating narcotrafficking; building trade, investment, and financial ties; cooperating in fostering Ecuador's economic development; and participating in inter-American organizations. Ties are further strengthened by the presence of an estimated two million Ecuadorians living in the United States and by 150,000 U.S. citizens visiting Ecuador annually, and by approximately 20,000 U.S. citizens residing in Ecuador. More than 100 U.S. companies are doing business in Ecuador.

The United States assists Ecuador's economic development directly through the Agency for International Development (USAID) and through multilateral organizations such as the Inter-American Development Bank and the World Bank. In addition, the U.S. Peace Corps operates a sizable program in Ecuador. Total U.S. assistance to Ecuador amounted to over $29 million in FY 2006.

The United States is Ecuador's principal trading partner. In 2006, Ecuador exported about $6.7 billion in products to the U.S. For over 10 years Ecuador has benefited from duty-free entry for certain of its exports under the Andean Trade Preferences Act (ATPA) and received additional trade benefits under the Andean Trade Promotion and Drug Eradication Act (ATPDEA) in 2002. The U.S. Congress approved a six-month extension of those benefits, now set to expire on June 30, 2007. In May 2004 Ecuador entered into negotiations for an Andean free trade agreement with the U.S., Colombia, and Peru, but negotiations between the U.S. and Ecuador have not resumed after the Government of Ecuador announced controversial reforms to hydrocarbons legislation in April 2006.

Both nations are signatories of the Rio Treaty of 1947, the Western Hemisphere's regional mutual security treaty. Although there are problems with money laundering, border controls, and illegal alien immigration, Ecuador shares U.S. concerns over narcotrafficking and international terrorism and has energetically condemned terrorist actions, whether directed against government officials or private citizens. The government has maintained Ecuador virtually free of coca production since the mid-1980s and is working to combat money laundering and the transshipment of drugs and chemicals essential to the processing of cocaine. It has recently given greater priority to combating child labor and trafficking in persons.

Ecuador and the U.S. agreed in 1999 to a 10-year arrangement whereby U.S. military surveillance aircraft could use the airbase at Manta, Ecuador as a Forward Operating Location to detect drug trafficking flights through the region.

Ecuador claims a 320-kilometer-wide (200-mi.) territorial sea. The United States, in contrast, claims a 12-mile boundary and jurisdiction for the management of coastal fisheries up to 320 kilometers (200 mi.) from its coast but excludes highly migratory species. Although successive Ecuadorian governments have declared a willingness to explore possible solutions to this issue, the U.S and Ecuador have yet to resolve fundamental differences concerning the recognition of territorial waters.

Principal U.S. Embassy Officials
Ambassador--Linda Jewell
Deputy Chief of Mission--Jefferson Brown
Political Counselor--Erik Hall
Economic Counselor--David Edwards
Consul General--Elizabeth Jordan
Commercial Attach´┐Ż--James F. Sullivan
Management Counselor--Michael St. Clair
Public Affairs Officer--Michael Greenwald
Regional Security Officer--Martin J. Rath
USAID Director--Alexandra Panehal
Narcotics Affairs Section Director--John Haynes

Guayaquil Consulate
Consul General--Douglas Griffiths
Chief, Consular Section--Jill Johnson

U.S. Embassy
Avenida Patria 120
Quito, Ecuador
(tel. (593)(2) 256-2890/256-1634)
The mailing address is APO AA 34039

U.S. Consulate
9 de Octubre and Garcia Moreno
Guayaquil, Ecuador
(tel. (593)(4) 232-3570)

Consular Agent for the Galapagos
Puerto Ayora
(tel. (593) (5) 526-330 or (593) (5) 526-296)

Other Contact Information
U.S. Department of State
2201 C Street, NW
Washington, DC 20520
Main Switchboard: (202)-647-4000 (http://www.state.gov)

U.S. Department of Commerce, Trade Information Center, International Trade Administration
1401 Constitution Avenue
Washington, DC 20230
(tel: 800-USA-TRADE, Internet: http://trade.gov)

Ecuadorian-American Chamber of Commerce--Quito
Edificio Multicentro, 4 Piso
La Nina y Avenida 6 de Diciembre
Quito, Ecuador
Tel: (593) (2) 250-7450
Fax: (593) (2) 250-4571
E-mail: info@ecamcham.com
Website: www.ecamcham.com (Spanish)
www.ecamcham.com/default_en.htm (English)
(Branches: Ambato, Cuenca & Manta)

Ecuadorian-American Chamber of Commerce--Guayaquil
Av. Francisco de Orellanda y Alberto Borges
Edificio Centrum, Piso 6, Oficina 5
Tel: 593-(4)-269-3470 or 593-4-269-3471
Fax: 593-(4)-269-3465
Email: infocenter@amchamecuador.org
Website: www.amchamecuador.org (Spanish)
(Branch: Manchala)



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