WT/BOP/G/22  
28 May 2015  
(15-2763)  Page: 1/59  
Committee on Balance-of -Payments Restrictions  Original: Spanish  
 
  CONSULTATIONS WITH ECUADOR 
BASIC DOCUMENT SUPPLIED BY ECUADOR 
OVERVIEW OF THE MACROECONOMIC CONTEXT AND OUTLOOK 
FOR THE BALANCE OF PAYMENTS IN 2015 
1  INTRODUCTION 1.  This document analyses the macroeconomic factors that compelled the Government of 
Ecuador, in March of this year, to adopt a balance-of-payments safeguard as a last resort measure 
to protect the liquidity of its economy and pr event a sharp decline in economic growth and 
employment. 
2.  The measure was introduced to contain the significant external imbalance that developed as of 
the middle of 2014 as a result of the fall in the in ternational price of oil and the appreciation of the 
US dollar, both of which had a negative impact on the fundamentals of the Ecuadorian economy. 
3.  The measure is transitional and non-discriminatory, and will be monitored on a permanent 
basis during the 15 months of its planned duration. 
4.  The document is split into five sections. The first section sets out the economic basis for the 
adoption of the safeguard; the second describes  the country's positive economic performance 
during the previous years and the sudden appearance  of the negative factors referred to; the third 
analyses balance-of-payments projections in the absence of the measure implemented; the fourth 
reviews other economic policy measures taken by the Government to surmount the crisis and correct the imbalances; and the fifth describes the measure itself and the legal basis on which it 
rests. 
2  ECONOMIC REASONS FOR THE MEASURE 2.1  Dollarization combined with external imbalances: a constant risk 
5.  In economies that issue their own money, the balance-of-payments position determines the 
volume of external assets (international monetary  reserves) that may be used at the discretion of 
the monetary authorities to regulate imbalances in  the external sector or to intervene in currency 
markets and have an impact on the economy's liquidity. These assets are available to the 
monetary authorities and the Central Banks, which are responsible for administering and using them. 
6.  On the other hand, if an economy does not issue its own money, it will have lost its main 
monetary and exchange rate policy instrument, and will be much more vulnerable to fluctuations 
in its foreign economic relations. In a dollarized economy, the supply of foreign currency is at the same time the supply of money and any adjustments there to will have a direct impact on the real 
economy. With dollarization, the economy's liqu idity will to a large extent depend on the 
balance-of-payments figures, so that external sh ocks that cause rapid and significant changes in 
the inflow of foreign currency into the country will seriously disrupt growth, employment and the 
overall well-being of the population. As a result, in a dollarized country, fiscal and trade policies 
take on a fundamental role.  WT/BOP/G/22 
- 2 - 
  7.  Far from protecting the economy from a balance-of-payments crisis, dollarization makes it 
more vulnerable to external shocks. When an economy issues its own money, although international reserves can decline, the risks to the monetary system are not as great, since in 
order to satisfy domestic demand for local currency, countries can always turn to monetary and 
exchange rate policy. In the case of the Ecuadori an economy, since these tools do not exist there 
is always a risk that beyond a certain point, negati ve external shocks can affect the liquidity levels 
and weaken the real sector. 
8.  When Ecuador adopted dollarization (January 2000), its monetary authorities used much of the 
international monetary reserves to "withdraw" the national currency (the sucre) and "exchange" for dollars taken from the reserves at a nominal rate of 25,000 sucres per dollar. The international 
reserves were therefore "distributed" and became part of the money supply, while the monetary 
authorities lost control of the economy's liquidity.
1 
9.  The fact that its international reserves are not solely controlled by the Central Bank but also by 
other agents means that a change in the balance-of-payments situation can occur as a result of 
(a) a loss of Central Bank reserves to deal with cu rrent needs; or (b) a drastic liquidity squeeze. In 
either case, the result is ultimately a fall in the level of production and employment accompanied by a decline in the capacity to generate resources, whether fiscal (tax revenue) or external 
(exports, attracting foreign capital); or a sharp decline in reserves, making it impossible to do 
business with other countries.  
10.  It should be borne in mind that the internat ional financial crisis of 2008 had a negative impact 
on the Ecuadorian economy in the form of a downtu rn in non-oil exports caused by lower external 
demand, and a reduction in remittances because of  unemployment in the source countries, as well 
as fluctuations in the exchange rates of the main  trading partners and limited access to external 
financing. Among the most important effects of th e crisis were higher rates of unemployment, a 
growing oil and non-oil deficit, and a slowdown in lending. Thus, between 2008 and 2009, there 
was a drastic fall in the oil trade balance (44.7%). The impact of the crisis was felt more strongly in the real sector of the economy, so that in December 2009, the nationwide unemployment rate 
had reached 6.47%, the highest since comparable figures have been available.
2 
11.  In response to this situation, countercyclical policy measures were applied to counteract the 
economic slowdown. These included an increase in public banking loans; greater public investment in productive infrastructure works, hydroelectric power, highways, and social services; the 
repatriation of surplus public sector liquidity to be channelled through the development bank to 
promote production (domestic investment); and the establishment of minimum domestic liquidity requirements for financial institutions. As a last resort, however, Ecuador had to resort to 
Article XVIII:B of the GATT, applying temporary im port restrictions in order to prevent further 
deterioration of the balance of payments, in particular the trade balance, which was suffering from the international crisis. 
12.  In the years that followed the crisis, economic recovery combined with favourable oil prices on 
the international market provided the Ecuadorian Government with additional resources to undertake unprecedented improvements in the country's production, road, education and health infrastructure. Guided by a medium-term vision that prioritized poverty reduction as well as 
improved systemic competitiveness by building major infrastructural works with a view to 
changing the energy matrix
3 and the production matrix, considerable amounts were invested in 
roads, ports, airports, schools and hospitals, incr easing the competiveness of Ecuadorian products 
while at the same time improving living cond itions and providing the population with new 
opportunities. Public investment was geared towards increasing the capital stock in the economy in order to support private sector production, boost competitiveness and ensure sustained economic 
growth at average rates exceeding 4%. 
                                               
1 The balance of the international mo netary reserves, with the exception of public  sector deposits and 
bank reserves in foreign currency in Ecuador's Central Bank, became part of the economy's liquidity. 
2 Since June 2007. 
3 As regards energy, for example, construction was begun on 8 hydroe lectric power plants to replace 
heat generation with renewable ener gy at a lower cost, thereby saving foreign exchange for the economy. WT/BOP/G/22 
- 3 - 
  13.  However, since the second half of 2014, these important achievements have been threatened 
by international economic developments, and the economic climate has adversely affected the performance of the external sector of the ec onomy and the balance-of-payments figures. The 
impact of this unfavourable international environment has been felt chiefly in the following areas: 
(i) lower earnings from oil because of the decline in the international price of crude oil; (ii) decline 
in exports and increase in non-oil imports owing to the appreciation of the dollar; (iii) delay in payments from abroad for Ecuadorian exports to different markets; (iv) increase in the Emerging 
Market Bond Index (EMBI). 
14.  The deficits in the external accounts recorded in the last months of 2014 and the beginning of 
2015 and the somewhat discouraging projections for th e rest of this year, in the context of a sharp 
decline in international oil prices, led the government of Ecuador to introduce a series of 
measures
4 and, as a last resort, a balance-of-payments safeguard under Article XVIII: B of the 
GATT 1994. This was done in response to the threat  of a serious liquidity squeeze resulting, above 
all, from the deterioration in the trade balance and its effects on international reserves. In this 
context, according to the forecasts of the Cent ral Bank of Ecuador, the growth rate for 2015 
should be between 2% and 2.5%, as compared to 3.8% in 2014. 
15.  At the same time, if we look at forecasts for the external sector of the Ecuadorian economy 
for 2015, international reserves are expected to decrease by US$2,009 million and the trade deficit 
is expected to reach US$2,404 million, at which levels the country's external sustainability would not be guaranteed. In order to achieve a sustainable trade performance, Ecuador would have to lower its deficit by approximately US$2,379 million.
5 Thus, the Ecuadorian Government was faced 
with the problem of safeguarding the dollarized economy's liquidity while continuing to carry out 
the strategic projects that were in their final phase in order to stimulate economic growth and 
hence the medium- and long-term sustainability of the monetary regime. 
16.  This is why Ecuador has had to resort to Article XVIII:B of the GATT 1994 under which it is 
permitted to apply temporary import restrictions to forestall a major threat to its balance of payments, which has been seriously affected by an international situation that has undermined the 
country's main sources of foreign currency. 
17.  The measure in question, adopted as a last resort, is part of a package of short-term policies 
underpinning the long-term measures designed to improve the structural situation of the non-oil trade balance, reduce the external sector's depe ndence on oil in the medium term, and improve 
the liquidity of the economy in order to restore the balance-of-payments equilibrium on a sound 
and lasting basis. 
18.  For a country like Ecuador, Article XVIII: B of the GATT states that a safeguard measure taken 
for balance-of-payments reasons may be adopted in order to forestall the threat of, or to stop, a 
serious decline in monetary reserves, and to safeguard the external financial position and ensure an adequate level of reserves (which in Ecuador's case means maintaining a sufficient level of 
liquidity) for the implementation of its economic development policy. 
3  PERFORMANCE OF ECUADOR'S ECONOMY IN RECENT YEARS
6 
19.  The performances described in this section are the product of a suitable and efficient 
economic policy designed to achieve the country's  national planning objectives. Tackling existing 
inequalities and gaps, both internally and in relation to other countries, depends not only on the 
formulation and application of public policy, but also to a great extent on the availability of enough liquidity to support the normal development of the economy. 
20.  The public policy measures with the greatest impact were directed not only towards 
overcoming related structural problems, but also towards guaranteeing external balances in normal conditions. However, the complexity of the current external economic environment has 
meant that additional instruments are urgently needed to ensure the continuity of development 
planning. 
                                               
4 The measures referred to appear later on in the "Crisis Measures" section. 
5 See Annex 3, which explains the results of the external sustainability analysis. 
6 This section was prepared on the basis of the statistical information available at 5 May 2015. WT/BOP/G/22 
- 4 - 
  21.  The efficient use of oil revenue between 2007 and 2014 in conjunction with a new economic 
policy vision enabled Ecuador to achieve considerable progress in reducing unemployment and poverty, which are among the lowest in Latin America and the Caribbean. In 2014, Ecuador's average annual unemployment rate (5.1%) was 0.9 percentage points lower than the average for 
Latin America and the Caribbean (6%). Moreover, th e incidence of income poverty at the national 
level fell from 36.7% in 2007 to 22.5% in 2014 (i.e. more than a million persons have been lifted out of poverty); and the per capita income gap between the richest 10% and the poorest 10% has 
fallen sharply over the past years, particular ly among the urban population, where the gap has 
narrowed by 20 percentage points between 2007 and 2014. 
22.  On the budgetary front, Ecuador has drastica lly reduced its dependence on oil income over 
the past few years. General State Budget Revenue has been supported by higher progressive tax 
revenue and sound management of public finances (spending on quality) that seeks diversification 
of sources of financing. 
23.  On the tax front, there was a significant increase in Central Government tax revenue, from 
US$4,244 million in 2006 to US$14,460 million in December 2014
7, reflecting the Government's 
efforts to manage tax collection more efficiently. Increased tax income has led to a current fiscal surplus; the overall deficit is in fact a result of the enormous investments in strategic sectors for 
the purpose of generating additional resources an d foreign exchange savings in the medium term. 
24.  The renegotiation of oil contracts
8 with private companies led to an increase in investment in 
the sector and had a positive impact on output. The State further benefitted from estimated additional income resulting from the change in contractual arrangements and the increase in oil 
prices and production. The result was a US$4,101 million profit between 2011 and the first half 
of 2014. Moreover, with a share in oil revenue averaging about 79%, Ecuador ranks fifth in the 
world in terms of the percentage received from the oil business.
9 
25.  During the period 2007-2014, Ecuador invested 2.5 times as much in public infrastructure (as 
a percentage of GDP) as during the period 2000-2006. Four times as many roads and five times as many airports were built, ten times the power generation capacity is currently under construction, 
and the fibre-optic network is now 28 times more extensive than in 2006. Access to basic public 
goods and services has also improved. 
26.  As of 2014, more than 85% of Ecuadorian households were connected to a sewage system, 
75% were connected to piped water, 83% had access to rubbish disposal and 97% had access to 
electricity.
10 With these achievements, some of the most severe limitations to private sector 
competitiveness and the well-being of Ecuadorian ci tizens were removed. Af ter a period of limited 
investment in support infrastructure, which was neglected for a number of years, priority was 
given to these projects which, in economic and so cial terms, represented more profitable use of 
resources than investment abroad at negative real interest rates. The high opportunity cost of postponing such projects justified the development of a proper infrastructure that would help to 
stimulate the productive sector. 
27.  Radical reforms were introduced in the education sector, and the level of expenditure rose 
from 2.3% of GDP in 2006 to 5% in 2013. More than 55,000 classrooms and 48,000 teachers were provided throughout the country, as well as text books, uniforms, meals and scholarships, and the 
proportion of qualified primary school teachers rose from 71% in 2006 to 84% in 2012. This 
substantially improved access to education, so that a young Ecuadorian now receives on average more than ten years of schooling. As one of th e key elements in transforming the production 
                                               
7 According to Información Estadística Mensual (M onthly Statistical Bulletin) No. 1957 of May 2015, 
published by the Centra l Bank of Ecuador. 
8 The Law Amending the Hydrocarbons Law, which establishes a new legal institutional framework and 
introduces new contracting arrangements for the prov ision of hydrocarbon expl oration and exploitation 
services, was issued at the end of July 2010. Under this system, the State assigns the private company a "block" for exploration and exploitati on. The company in question invests the capital needed at its own risk, 
and uses the appropriate technology to achieve the obje ctive of the contract. The State pays the company at a 
rate that depends on the level of output. 
9 Management Report, Ministry of Non-Renewable Natural Resources, 2011. 
10 Sources: National Statistics and Census Institute (INEC) and the Ministry of Economic Policy 
Coordination (NCPE). WT/BOP/G/22 
- 5 - 
  matrix, between 2007 and 2014 the National Govern ment provided a total of 84,458 scholarships 
worth approximately US$454 million to fund studies both at home and abroad.  
28.  Public health spending was doubled, reaching 2.1% of GDP, and the health sector was 
extensively reformed. The result was a 19% increase in the number of hospital beds and an 
increase of more than 40% in the number of health professionals. Thus, access to primary health 
care is now practically universal, and 94% of Ec uadorian women give birth in health centres 
(public and private) and receive prenatal care.11 
3.1  Real sector 
29.  Once the impact of the 2009 crisis had be en overcome, and in spite of the inevitable 
constraints of the dollarization regime on economic policy management, Ecuador experienced sustained growth at rates averaging 4.3% betw een 2000 and 2014. This is higher than the 
average for the 14 years that preceded dollariza tion (1986-1999), when growth averaged 2.4%. 
Chart 1: Trend in Ecuador's economy. Real GDP growth rate, 1986-2014 
3.5
-0.3
5.9
1.0
3.7
4.3
2.1
1.8
4.4
2.3
2.2
3.8
3.3
-4.7
1.1
4.0
4.1
2.7
8.2
5.3
4.4
2.2
6.4
0.6
3.5
7.9
5.2
4.6
3.8
-6-4-20246810
1986 1988 1990 1992 1994 1996 1998 2000 2002 2004 2006 2008 2010 2012 2014Percentage
GDP growth rate Average 1986-1999 Average 2000-2014 
Source: Central Bank of Ecuador. 
30.  In spite of the marked slowdown in economic  growth in 2009 as a result of the international 
financial and economic crisis, between 2007 and 2014 the Ecuadorian economy grew at an 
average rate of 4.3%, partly thanks to the invi gorated non-oil sector, a generator of employment. 
Average annual growth in that sector rose fr om 4.6% between 2000 and 2006 to 5.1% between 
2007 and 2014.12 
                                               
11 This has been corroborated by a number of internatio nal organizations, more recently by SELA in its 
document Evolución de la Comunidad Andina (CAN) issued in August 2014 (SP/Di No. 7-14), which ranks 
Ecuador among the best in terms of social development. 
12 The calculation excludes the heading "Other elements of GDP". WT/BOP/G/22 
- 6 - 
  Chart 2: Trend in real oil GDP, 2000-2014 
12.5%
0.0%
-3.0%
4.9%
37.9%
1.1%
4.7%
-7.1%
0.7%
0.4%
-2.3%
3.8%
0.2%
3.2%
2.2%
-10%0%10%20%30%40%50%
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014Oil GDP growth rate Average 2000-2006 Average 2007-2014Average for the period
2000-2006 : 8.3%
Average for the period
2007-2014 : 0.2%
 
Source: Central Bank of Ecuador. 
Chart 3: Trend in real non-oil GDP, 2000-2014 
5.3%
4.6%
4.6%
3.0%
4.0%
6.2%
4.6%
3.6%
7.0%
1.8%
4.6%
8.2%
5.9%
5.0%
4.3%
0%1%2%3%4%5%6%7%8%9%10%
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014Non-oil GDP growth rate (does not include other elements of GDP)
Average 2000-2006
Average 2007-2014Average for the period
2000-2006 : 4.6%Average for the period
2007-2014 : 5.1%
 
Source: Central Bank of Ecuador. 
31.  During the period from 2000 to 2006, oil GDP grew at an annual average rate of 8.3%, a 
figure which can be explained by the rate of change in 2004 (37.9%).13 In the period from 2007 
to 2014, the average rate of change in the oil GDP was 0.2% following the 7.1% decline in 2007, 
which was the result of a fall in the production of private companies that year due to lower 
investment in the sector. Starting in 2008, oil GDP growth was supported by the performance of 
public sector and mixed economy production driven by the Government's productive investments, 
                                               
13 In that year, the sector was invigorated by the co mmissioning of the Heavy Crude Oil Pipeline (OCP), 
which caused the volume of exported crude to increase by 40%. WT/BOP/G/22 
- 7 - 
  which reached US$1,594 million in 2012 (67.5% higher than in 2011) and US$2,924 million 
in 2013 (83.4% higher than in 2012). In 2014, investments reached US$3,291 million, 12.5% higher than in 2013.
14 
32.  Non-oil GDP was more dynamic than oil GDP, and provided the main underpinning for 
economic growth. In 2014, oil GDP accounted fo r 10.5% of total GDP. The petroleum sector's 
contribution to growth in that year was 0.2% for a real growth of 3.8%, while the non-oil sector's contribution to growth was 3.7%.
15 
33.  Over the past few years, gross fixed capital formation (GFCF) and household consumption 
have made a greater contribution to the count ry's economic growth. Between 2007 and 2014, 
these factors accounted, on average, for 2% and 2.7% of GDP growth respectively. 
34.  In 2014, the Ecuadorian economy's growth rate reached 3.8%, driven by household 
consumption and public and private investment, essentially in capital construction, real estate 
projects and hydroelectric projects. 
35.  Following the dollarization of the economy, inflation trended downward, and then remained 
stable. From 12.5% in 2002, it dropped to 7.9% in 2003, and averaged 4% between 2004 and 
2014, contributing to the buoyancy  of deposits and cred it and positively influencing the medium- and 
long-term expectations of entrepreneurs, particularly as regards the outlook for production costs. At 
the same time, the elimination of the exchange rate risk with the adoption of dollarization caused 
imports to increase steadily, a trend also attributable to structural weaknesses in the economy. 
36.  The wage increase policy coupled with a slowdo wn in the growth of prices contributed to the 
recovery of real wages which, combined with productivity criteria and improvements in workers' 
living conditions, meant that by January 2014, for the first time in 32 years, the monthly family 
income of Ecuadorians covered the basic family basket. 
Chart 4: Percentage coverage of the ba sic basket, February 2010-February 2015 197 
278 
323 
362 
384 
420 
442 
454 
483 
513 
535 
551 
583 
602 
628 
654 80 
201 
221 
253 
266 
268 
299 
317 
373 
407 
448 
493 
545 
594 
635 
661 40.8 
72.2 
68.5 
69.9 
69.3 
63.9 
67.5 
69.9 
77.3 
79.3 
83.7 
89.4 
93.5 
98.6 
101.0 
101.0 Feb-00
Feb-01
Feb-02
Feb-03
Feb-04
Feb-05
Feb-06
Feb-07
Feb-08
Feb-09
Feb-10
Feb-11
Feb-12
Feb-13
Feb-14
Feb-15
Cost of basic basket Monthly famiily income Coverage of basic monthly basketDollars
Percentage
 
Note 1: Family income measured as the Unified Basic Wage 2015 (US$354*12 months) + reserve funds 
+ a monthly pro rata of 13th salary, multiplied by 1.6 recipients. 
Note 2: Coverage of the basic basket as a percentage. 
Source: INEC. 
                                               
14 These values correspond to investments by Petr oamazonas EP and Río Napo, and were taken from 
Petroamazonas EP's management reports for 2013 and 2014. 
15 The contribution of other elements of GDP was -0.1%. WT/BOP/G/22 
- 8 - 
  37.  Thanks to sustained economic growth, of the non-oil sector in particular, unemployment was 
brought down to the lowest level in the country's history. The national unemployment rate dropped from 5% in December 2007 to 3.8% in December 2014. Urban unemployment went from 6.1% in December 2007 to 4.5% in December 2014.
16 Empirical evidence and the experience 
of the 2009 crisis show that when external shocks  take place, one of the variables that is most 
heavily impacted by the rigidity of a dollarized sy stem is the level of employment, so that the fall 
in the GDP change rate from 6.4% in 2008 to 0.6% in 2009 was accompanied by a rate of 
unemployment of 6.5% at the end of 2009, the highest rate since comparable figures have been 
available. 
Chart 5: National unemployment trend, 2007-2014 
5.0%
5.2%
6.0%
6.5%
6.2%
5.0%
5.0%
4.2%
4.1%
4.1%
3.9%
4.2%
4.85%
4.65%
3.90%
3.80%Dec-2007
Jun-2008
Dec-2008
Dec-2009
Jun-2010
Dec-2010
Jun-2011
Dec-2011
Jun-2012
Dec-2012
Jun-2013
Dec-2013
Mar-2014
Jun-2014
Sep-2014
Dec-2014Percentage
National unemployment rate  
Source: INEC. 
                                               
16 Average annual figure: 5.1%. This is the figure us ed by CEPAL for comparative analysis with countries 
of the region. WT/BOP/G/22 
- 9 - 
  Chart 6: National urban unemployment trend, 2007-2014 
6.1%7.3%7.9%
6.1%
5.1% 5.0%4.9%
4.54%
0%1%2%3%4%5%6%7%8%9%10%
Jun-2007
Sep-2007
Dec-2007
Mar-2008
Jun-2008
Sep-2008
Dec-2008
Mar-2009
Jun-2009
Sep-2009
Dec-2009
Mar-2010
Jun-2010
Sep-2010
Dec-2010
Mar-2011
Jun-2011
Sep-2011
Dec-2011
Mar-2012
Jun-2012
Sep-2012
Dec-2012
Mar-2013
Jun-2013
Sep-2013
Dec-2013
Mar-2014
Jun-2014
Sep-2014
Dec-2014
Urban unemployment rate  
Source: INEC. 
38.  At the same time, one of Ecuador's priorities  over the last eight years has been the fight to 
eradicate poverty and extreme poverty, for which the indicators dropped considerably between 
2007 and 2014, both nationwide and in urban and ru ral areas. These results have been achieved 
thanks to policies geared towards improving income distribution. As mentioned earlier, the historical levels of social investment led to improved access to social services, particularly 
education, health and housing, while helping to push forward social protection programmes, such 
as the Human Development Bond and the Human Development Credit. 
Chart 7: Income poverty incidence, nationwide, 2007-2014 
36.7%
25.6%
22.5%
20%22%24%26%28%30%32%34%36%38%
Dec-07
Jun-08
Dec-08Dec-09
Jun-10
Dec-10
Jun-11
Dec-11
Jun-12
Dec-12
Jun-13
Dec-13
Jun-14
Dec-14
National poverty incidence  
Source: INEC. WT/BOP/G/22 
- 10 - 
  Chart 8: Urban income poverty in cidence, nationwide, 2007-2014 
24.3%25.5%
17.6%
16.4%
10%12%14%16%18%20%22%24%26%28%
Jun-07
Sep-07
Dec-07
Mar-08
Jun-08
Sep-08
Dec-08
Mar-09
Jun-09
Sep-09
Dec-09
Mar-10
Jun-10
Sep-10
Dec-10
Mar-11
Jun-11
Sep-11
Dec-11
Mar-12
Jun-12
Sep-12
Dec-12
Mar-13
Jun-13
Sep-13
Dec-13
Mar-14
Jun-14
Sep-14
Dec-14
Urban poverty incidence  
Source: INEC. 
3.2  Fiscal sector 
39.  In conformity with constitutional requirements relating to the country's fiscal policy objectives 
and the rules of sound management of public accounts in the short, medium and long term, over the past few years Ecuador's fiscal policy has focused essentially on: (i) supplying public goods 
and services and carrying out investments; (ii) redistributing income; (iii) providing incentives for 
investment in the different sectors of the economy and for the production of goods and services. 
40.  A fundamental component of Equador's fiscal po licy has been investment in strategic sectors, 
such as the construction of hydroelectric power plants that will generate foreign exchange savings 
for the country, as well as road infrastructure and basic infrastructure projects, hospitals, schools and housing programmes that will improve the competitiveness of the economy and social 
conditions for the population. 
41.  At the same time, it should be noted that fiscal policy currently aims to reduce dependence on 
oil revenue by developing a more progressive tax system with a particular focus on the analysis of the quality of public spending, while ensuri ng the sustainability of public finances. 
42.  Thanks to increased efficiency in the management of tax revenue, the share of taxes in total 
central government revenue rose from 62.6% in 2009 to 70.9% in 2014. Central government tax revenue increased from US$4,244 million in 2006 to US$14,460 million in 2014. Meanwhile, the 
share of oil revenue fell considerably. In 2014, it accounted for 18.5% of the total, 
13.3 percentage points lower than in 2012 (31.2%). WT/BOP/G/22 
- 11 - 
  Chart 9: Trend in central government tax revenue, 2000-2014 
1,623 
2,370 
2,748 
2,789 
3,166 
3,741 
4,244 
4,749 
6,570 
7,257 
8,794 
9,765 
12,255 
13,668 
14,460 8.9%
9.7%
9.6%
8.6%
8.7%
9.0%
9.1%
9.3%
10.6%
11.6%
12.6%
12.3%
14.0%
14.5%
14.4%
0.0%2.0%4.0%6.0%8.0%10.0%12.0%14.0%16.0%
 - 2,000 4,000 6,000 8,000 10,000 12,000 14,000 16,000
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014Central government tax revenue (US$ millions) Central goverment tax revenue (% of GDP)US$ millions
% of GDP
 
Source: Central Bank of Ecuador. 
Chart 10: Relative share of the main co mponents of central government revenue, 
2009-2014 (December of each year) 
62.6%58.3% 56.8%62.8%67.0%70.9%19.8% 29.3%34.7%31.2% 22.9%18.5%6.5%10.0%7.0%5.8%9.6% 8.9%11.0%2.4% 1.5%0.3% 0.5% 1.3%
2009 2010 2011 2012 2013 2014
Tax Oil Non-tax TransfersShare
 
Source: Central Bank of Ecuador. WT/BOP/G/22 
- 12 - 
  43.  According to information from the Internal Revenue Service, in 200617, the figure for the 
actual tax collected18 was US$4,672 million, and rose to US $12,758 million by the end of the 2013 
and to US$13,617 million by December 2014. In other words, the value in dollars practically tripled over 9 years. This increase reflects the Government's efforts to manage tax collection more 
efficiently. Furthermore, the gap between direct  and indirect taxes narrowed from 30.2 points 
in 2006 to 8.2 points in 2014. 
Chart 11: Annual share of direct and indirect  taxes in actual tax collected, 2006-2014 
34.9% 35.4%39.4%43.4% 43.7% 41.7%45.0% 45.6% 45.9%65.1% 64.6%60.6%56.6% 56.3% 58.3%55.0% 54.4% 54.1%
2006 2007 2008 2009 2010 2011 2012 2013 2014
Direct taxes Indirect taxes 
Source: Internal Revenue Service. 
44.  As a rule of sustainable, responsible and transparent management of public finances, 
the 2008 Constitution stipulates that at all levels of government, permanent expenditure must be 
financed by permanent revenue. For 2014, the ratio of permanent revenue to permanent 
expenditure at the central government level was 110%. 
                                               
17 Includes pre-allocations provided for by law. 
18 No deduction for tax refunds. WT/BOP/G/22 
- 13 - 
  Chart 12: Ratio of permanent revenue to  permanent expenditure at the central 
government level for 2000-2014, December of each year 
72.1%
97.6%
90.9%
86.9%
88.2%
95.0%
96.9%
112.1%
108.2%
103.9%
109.1%
108.0%
112.0%
110.1%
110.4%63.1%
90.2%
77.8%
75.5%
77.1%
79.2%
79.4%
79.2%
77.7%
81.2%
90.0%
93.9%
102.2%
95.7%
96.5%
50%60%70%80%90%100%110%120%130%
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014Current revenue/current expenditure
Permanent revenue/permanent expenditure Taxes/permanent expenditure 
Source: Central Bank of Ecuador. 
3.3  Financial Sector 
45.  The national government designed the financial system as a cornerstone for the structural 
transformation of the production matrix and povert y reduction. In accordance with the precepts of 
the 2008 Constitution, a number of institutional changes were made to ensure that financial 
activity would promote a democratization of capital, access to credit, and financial inclusion, and 
that it channelled savings towards productive activities, in particular those involving micro, small-and medium-enterprises, which have hitherto had limited access to financing in the formal sector. 
46.  This approach meant transforming the traditional structure of the regulatory institutions and 
reorganizing the institutional framework for the control and execution of financial policy. New supervision arrangements were also introduced for cooperatives and savings banks, for securities 
market professionals, and for insurance and re insurance companies. Since the change in the 
production matrix means providing and expanding access to the means and tools of production for 
all those involved, efforts were made to extend intermediation and to guarantee access to credit for the actors of the "popular and solidarity economy", often excluded from traditional or formal 
financial circuits supporting production and consumption, by enacting the Organic Law on the 
Popular and Solidarity Economy and the Popular and Solidarity Financial Sector and creating the Supervisory Authority for the Popular and Solid arity Economy and the National Popular and 
Solidarity Finance Corporation. 
47.  Under dollarization, once the economic crisis of 2000 (the year in which Ecuador dollarized its 
economy) had been surmounted, the Ecuadorian financial system gained strength and its 
performance was stable as regards all of its main financial variables. In recent years, the size of 
the financial sector in relation to the economy has increased, as confirmed by the various indicators, such as funding, measured as the loans to GDP ratio, and the financial deepening indicator (deposits/GDP), which have recorded the highest levels on average since 2010. This is 
essentially due to (i) better access to financial services for both companies and households; (ii) a 
higher percentage of the population using bankin g services for their transactions and investing 
their savings thanks to an improved financial culture and a decline in informality; (iii) an increase 
in confidence in the financial system in general. WT/BOP/G/22 
- 14 - 
  Chart 13: Financing and financial deepen ing, 2002-2014 (December of each year) 
(Percentage of GDP) 
18.1%
17.5%
18.8%
20.5%
19.7%
20.9%
22.0%
22.2%
24.8%
26.7%
27.7%
28.4%
29.0%19.5%
17.0%
18.4%
19.3%
19.2%
20.9%
21.1%
22.9%
25.4%
26.8%
28.0%
29.3%
30.4%
Dec-02 Dec-03 Dec-04 Dec-05 Dec-06 Dec-07 Dec-08 Dec-09 Dec-10 Dec-11 Dec-12 Dec-13 Dec-14
Financing (current portfolio/GDP) Deepening (deposits/GDP)% of GDP
 
Source: Central Bank of Ecuador. 
48.  As regards the liquidity trend, there has been a close correlation between the variation in the 
money aggregates (M1 and M2) and the GDP grow th rate. The monetary aggregates started 
declining in the third quarter of 2014 when ther e was also a slowdown in economic growth. 
Chart 14: Trend in the monetary aggregates M2  and M1 in relation to economic growth, 
2008-2014 
-4%-2%0%2%4%6%8%10%
0%5%10%15%20%25%30%
2008.I
2008.II
2008.III
2008.IV
2009.I
2009.II
2009.III
2009.IV
2010.I
2010.II
2010.III
2010.IV
2011.I
2011.II
2011.III
2011.IV
2012.I
2012.II
2012.III
2012.IV
2013.I
2013.II
2013.III
2013.IV
2014.I
2014.II
2014.III
2014.VI
2015.I
Rate of change GDP (t/t-4)Rate of change M1 (t/t-4)
Monetary Supply GDP
 WT/BOP/G/22 
- 15 - 
  -4%-2%0%2%4%6%8%10%
0%5%10%15%20%25%
2008.I
2008.II
2008.III
2008.IV
2009.I
2009.II
2009.III
2009.IV
2010.I
2010.II
2010.III
2010.IV
2011.I
2011.II
2011.III
2011.IV
2012.I
2012.II
2012.III
2012.IV
2013.I
2013.II
2013.III
2013.IV
2014.I
2014.II
2014.III
2014.VI
2015.I
Rate of change GDP (t/t-4)Rate of change M2 (t/t-4)
Total Liquidity GDP 
Source: Central Bank of Ecuador. 
49.  At the same time, not having the option of lender of last resort, Ecuador implemented a 
number of different policies aimed at maintaining higher levels of liquidity and offsetting the 
effects of crises such as the one in 2009. Foremost among these policies was the strengthening of the financial safety net in order to avoid and mitigate the risks to depositors and to the economy 
associated with financial activity. The safety net includes enhanced bank supervision, the creation 
of the Financial System Liquidity Fund, an ex pedited bank resolution scheme and a deposit 
insurance scheme. With respect to bank supervision,  the aim is to strengthen its main function of 
keeping track of the state of the financial inst itutions and ensuring that they conduct their 
activities in a prudent manner. The Liquidity Fund is designed to act as a lender of last resort when financial institutions suffer from temporary illiquidity.  
50.  On the other hand, it should be stressed that  during the 2009 crisis private banks cut back on 
loans, and to minimize the impact on the real sector, a counter-cyclical policy was adopted, 
involving a more active role for the State banks,  through which greater resources were channelled. 
3.4  External Sector 
51.  An economy without any capacity to issue money becomes highly dependent on  
balance-of-payments figures, since changes in the liquidity of the system will largely depend on 
the external account position. External shocks that have a significant negative impact on the 
country's net foreign exchange earnings may significantly disrupt employment and the population's  
well-being, since the limited availability of foreign exchange will affect, for example, the supply and cost of credit. Thus, the performance of the external sector and trade policy are cornerstones 
of economic policy under a dollarization regime. In a dollarized economy, trade policy instruments 
must perform a dual function: (i) they must administer the external balance (since there are no 
monetary instruments for that purpose); and (ii) they must intervene in the real sector of the economy in the framework of a development strategy with clear objectives that ensures proper 
management of medium and long term liquidity.  
52.  Thanks to economic and social progress as reflected in higher rates of employment and 
reduced poverty, the purchasing power of the Ec uadorian population has increased, leading to 
higher levels of consumption and hence, to a certain extent, to an increase in imports without a 
similar increase in exports. 
53.  In the case of Ecuador, the balance of payments current account balance is explained chiefly 
by the balance of goods. In 2014, the deficit in the services and income accounts 
(US$2,799 million) was offset by the surplus in  current transfers (US$2,264 million), made up WT/BOP/G/22 
- 16 - 
  almost entirely of remittances received (US$2,450 million). Thus, the current account balance 
(US$602 million) is closely linked to the performance of the balance of goods.  
Chart 15: Trend in the current account and its components, 2006-2014 
(US$ millions) 
‐2,7992,264
‐602‐67
-4,000-3,000-2,000-1,00001,0002,0003,0004,000
2006 2007 2008 2009 2010 2011 2012 2013 2014Services and income Services Current transfers
Current account Balance of payments
 
Source: Central Bank of Ecuador. 
54.  In 2014, the overall trade balance posted a deficit of US$67 million, comprising a positive 
figure of US$6,885 million for the oil balance. In fact, although Ecuador is less and less oil 
dependant19, oil continues to be its main export product, and consequently a source of foreign 
exchange. 
55.  The unfavourable trend in the international market prices of Ecuador's main commodities, 
including oil, has an impact on the estimated overall balance-of-payments figures. For each dollar 
decrease in the price of crude oil, the net impact is a decrease in revenue of approximately US$77 million in the balance of payments, and the direct result is a decrease in the inflow of 
foreign exchange into the country. 
56.  According to estimates for 2015, although the volume of oil exports should remain at around 
154 million barrels, the fall in the average price to US$40 per barrel (52.5% of the average price 
for 2014) means a fall in the value of crude oil exports of US$6,847 million which, coupled with the 
decrease in exports of derivatives (US$162.2 million) means a US$7.010 million decline in oil 
exports compared to the previous year (US$13,302 million). 
57.  Meanwhile oil imports, which reached US$6, 417 million in 2014, declined in 2015 by 44.5%, 
i.e. by US$2,860 million. Imports of derivatives fell owing to the lower price of oil products on the 
international market. Estimates suggest that the lower value of these imports for 2015 will not 
offset the loss of resources from oil exports. In net terms, the oil trade balance is expected to 
reach US$2,736 million in 2015, US$4,149 million lower than in 2014 (US$6,885 million). 
58.  As regards the non-oil trade balance, 2015 the deficit (US$5,837 million) decreased by 
US$1,775 with respect to 2014, insufficient to offset the loss of revenue from the oil trade balance. 
The result is a deficit in the to tal trade balance of US$2,404 million. 
                                               
19 The share of oil in total exports fell 10 percentage points from 62% in 2008 to 52% in 2014. WT/BOP/G/22 
- 17 - 
  Chart 16: Trend in the total trade balance (oil and non-oil), 2000-2014 
(US$ millions) 
6,885
-7,612-727
-12,000-10,000-8,000-6,000-4,000-2,00002,0004,0006,0008,00010,000
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014Oil balance Non-oil balance Trade balance 
(Percentage of GDP) 
6.8%
-7.6%-0.7%
-15-10-5051015
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014
Oil balance Non-oil balance Trade balance
 
Source: Central Bank of Ecuador. WT/BOP/G/22 
- 18 - 
  Chart 17: Total imports (oil and non-oil), 2000-2014 
3,145
4,686
5,721
5,496
6,560
7,834
8,885
10,317
14,194
11,733
15,236
18,002
18,740
19,899
20,0163,401
4,936
5,953
6,228
7,555
9,549
11,266
12,895
17,552
14,071
19,279
23,088
24,182
25,827
26,433
2.3%
-30%-20%-10%0%10%20%30%40%50%
-10,000-5,00005,00010,00015,00020,00025,00030,00035,000
2000
2001
2002
2003
2004
20052006
2007
2008
2009
2010
2011
2012
2013
2014
PercentageUS$ millions
Non-oil   Petroleras
  Importaciones totales VAT Imports (right access)
 
Source: Central Bank of Ecuador. 
Chart 18: Imports of capital goods and components, 2000-2014 
890
1,567
1,920
1,703
1,944
2,557
2,829
3,319
4,501
3,927
5,129
5,845
6,418
6,778
6,648
-1.9%
-20.0%-10.0%0.0%10.0%20.0%30.0%40.0%50.0%60.0%70.0%80.0%90.0%
-2,000-1,00001,0002,0003,0004,0005,0006,0007,0008,000
2000
2001200220032004200520062007
2008
200920102011201220132014
PercentageUS$ millions
   For agriculture    For industry
   Transport equipment    Capital goods
   Capital goods VAT (right axis) 
Source: Central Bank of Ecuador. WT/BOP/G/22 
- 19 - 
  Chart 19: Imports of consumer goods and components, 2000-2014 
762
1,322
1,687
1,765
2,048
2,337
2,585
2,901
3,852
3,094
4,116
4,885
4,989
5,230
5,232
0.04%
-40%-20%0%20%40%60%80%
-2,000-1,00001,0002,0003,0004,0005,0006,0007,000
2000
2001
2002
2003
2004
2005
2006
20072008
2009
2010
2011
2012
2013
2014
PercentageUS$ millions
  Postal and express courrier traffic   Durables
  Non-durables   Consumer goods
  Consumer goods VAT (right axis) 
Source: Central Bank of Ecuador. 
Chart 20: Imports of raw materials and components, 2000-2014 
1,491
1,795
2,113
2,028
2,566
2,935
3,469
4,093
5,828
4,670
5,915
7,231
7,291
7,829
8,080
3.2%
-30%-20%-10%0%10%20%30%40%50%
-6,000-4,000-2,00002,0004,0006,0008,00010,000
2000
2001
2002
2003
2004
2005
2006
2007
20082009
2010
2011
2012
2013
2014
PercentageUS$ millions
    Construction    For industry
    For agriculture    Raw materials
    Raw materials VAT (right axis) 
Source: Central Bank of Ecuador. 
59.  We note the increase in imports of consumer  goods, durable and non-durable, particularly as 
from 2009. From US$2,901 million in 2007, they rose to US$4,116 million in 2010 and US$5,232 million in 2014. This growth  of imports is the result of a change in the consumption 
patterns of the population due to their increased income and purchasing power. WT/BOP/G/22 
- 20 - 
  60.  Another result of the increase in Ecuador's imports is an outflow of foreign currency appearing 
in the balance of services under freight and insu rance paid by the importer in addition to the 
amounts paid for the merchandise. 
61.  Tourism has gone some way to offset the deterioration of the balance of services thanks to 
the impetus provided to the sector in connection with the transformation of Ecuador's production 
matrix: from 937,487 tourists entering the country in 2007, the figure rose by 66.1% in 2014 to 1.6 million. The income generated by tourism is estimated to have reached US$1,482 million 
in 2014, more than double the amount for the same period in 2007 (US$623 million).
20 
62.  At the same time, the average annual growth rate of non-oil exports was a modest 3% 
in 2015 compared to the previous year, a fact which can be explained by the adverse international price trends for Ecuador's main export products an d the lack of any signs of recovery in the short 
term, not to mention the negative impact of the appreciation of the dollar on the currencies of 
Ecuador's main trading partners. In conclusion, what  stands out is the significant slowdown in the 
growth of non-oil exports compared to 2014 (16%). 
63.  In spite of the national government's efforts to stimulate higher value-added exports, Ecuador 
still depends on exports of primary commodities deriving from the exploitation of natural resources, the prices of which are volatile on international markets. This is the case for oil, but 
also for bananas and shrimps, which account ed for 72% of total sales abroad in 2014. 
Chart 21: Trend in the structure of  exports by major products, 2008-2014 
62%
50%55%58% 58% 57%52%
0102030405060708090100
2008 2009 2010 2011 2012 2013 2014
Crude oil and derivitives Bananas and plantains Shrimp
Cocoa and cocoa products Tuna and other fish Flowers
OtherShare
 
Source: Central Bank of Ecuador. 
64.  Although export revenue still largely depends on sales of crude oil, in the past two years 
shrimp exports have been on the rise thanks to a cyclical increase in their international market share, so that in 2014 shrimp exports were comparable in value to banana and plantain exports. 
                                               
20 One of the results of public in vestment in road infra structure was a significant improvement in 
mobility in the interior of the coun try. Among other things, this stimulated tourism-related activities. Public 
investment in the railway company, which has received a certain amount of recogn ition internationally, is 
another example of how public investment has contributed to productive activity in the interior of the country. WT/BOP/G/22 
- 21 - 
  Chart 22: Ecuadorian exports by product, 2014 
(% share) 
Cocoa and cocoa products
2.8%
Bananas and plantains
10.1%Crude oil and derivitives
51.8%
Shrimp
10.0%Other
22.2%
Flowers
3.1%
 
Source: Central Bank of Ecuador. 
65.  Although certain products such as shrimps an d mining products had begun to emerge in 2014, 
the structure of Ecuador's exports remains concentrated on a limited number of products. In fact, 
in 2014, there was a greater concentration of non-oil exports in a handful of products: 80% of total exports were concentrated in 5 products, as compared to 74% in 2008 and 72% in 2010. 
66.  It should also be borne in mind that changes in the development model, particularly those 
relating to the productive structure, take decades, as the experiences of the international 
community will testify. Nevertheless, Ecuador has continued its sustained efforts in one strategic area, namely the change in production matrix, in which, as explained further on, it has invested 
heavily over the past few years. 
Chart 23: Cumulative share by number of export products, 2008-2014 
0%20%40%60%80%100%
0 5 10 15 20 25 2008 2010 2012 2014Cumulative share
Number of products
 
Source: Central Bank of Ecuador. WT/BOP/G/22 
- 22 - 
  67.  At the same time, as a result of the international economic crisis of 2009 there was 
a downward trend in current transfers owing to the adverse employment situation in the main countries of residence of Ecuadorian migrants, the United States and Spain. in 2009, current transfers fell by 11.3%. Subsequently, in 2012, the debt crisis in European countries led to 
a 7.7% fall in remittances attributable to the high rates of unemployment in Spain and Italy that 
year (26% and 11.5% respectively). This downward trend in remittances is expected to continue, partly as a result of various government programmes promoting the return of migrants and partly 
as a result of the appreciation of the dollar and its impact on the currencies in the countries 
of origin of the remittances. 
68.  However, despite the decline in remittances starting in 2008 with the world economic 
slowdown, they continue to be one of the main sources of foreign exchange. At the end of 2013, 
they were the main source of non-oil revenue . In 2014, they totalled almost US$2,450 million 
before decreasing by an estimated US$105 million in 2015. 
69.  In 2014, the Ecuadorian economy showed a capital account surplus of US$191 million, a 
figure which is expected to rise to US$1,087 million in 2015, reflecting an increase in claims on the 
rest of the world in net terms. 
70.  There was a gradual decline in resources generated by Foreign Direct Investment (FDI) over 
the past few years. Net FDI earnings fell from US$439 million in 2005 to US$193 million in 2007. 
In 2014, however, FDI flows reached US$774 milli on, and the estimate for 2015 is US$660 million. 
71.  Below is a summary table for the external sector outlining the balance of payments outlook 
for 2015. 
Table 1: Balance of payments 2014-2015 
(US$ millions) 
EXTERNAL SECTOR – SUMMARY TABLE 
 2014 2015 Absolute 
variation Relative 
variation 
CURRENT ACCOUNT  (602)  (3,096)  (2,495) 414.6%  
TRADE BALANCE (67) (2,404)  (2,337)  3,477.1%  
Trade balance (Recorded Trade) (727)  (3,101)  (2,374) 326.6%  
Exports 25,732  19,112  (6,620)  -25.7%  
Oil and byproducts 13,302  6,293  (7,010) -52.7% 
Non-oil 12,430  12,819  389  3.1% 
Imports 26,459  22,213  (4,246) -16.0% 
Oil 6,417  3,557  (2,860) -44.6% 
Non-oil 20,042  18,656  (1,386) -6.9% 
Trade balance (unrecorded trade, other) 660  697  37  5.6% 
SERVICE AND INCOME BALANCE (2,799)  (3075)  (276)  9.9%  
Services (1,219) (928) 291  -23.9% 
Credit 2334  2,312  (22) -0.9% 
Debit (3,553)  (3,240)  313  -8.8%  
Income (1,579) (2,146) (567) 35.9% 
Credit 118  88  (30) -25.6% 
Debit (1,697) (2,234) (537) 31.6% 
CURRENT TRANSFERS  2,264  2,382  118  5.2%  
 d/c remittances received 2,450  2,344  (105) -4.3% 
CAPITAL ACCOUNT 191  1,087  897  470.0%  
FOREIGN DIRECT INVESTMENT 774  660  (114) -14.7% 
EXTERNAL DEBT AND VARIATION IN FOREIGN 
ASSETS (583) 427  1,011  -173.3% 
INTERNATIONAL RESERVES 1/ 411  2,009  1,598  388.9%  
Estimates: Ministry Responsible fo r Economic Policy Coordination. 
Note: 1/ Positive figures indicate a decrease. 
 Under Article 137 of the Monetary and Financial Code in force since September 2014, "freely disposable 
international reserves" are now called international reserves without implying any methodological changes in the calculation. WT/BOP/G/22 
- 23 - 
  72.  Annex 4 also provides an update of the bala nce-of-payments situation (Table 1) which adjusts 
the levels of investment in the oil sector associated with a price of US$40 per barrel. 
This increases the trade balance and current account deficit, further justifying Ecuador's adoption of the safeguard measure. 
4  THE ADVERSE ECONOMIC SITUATION IN 2014 AND ITS IMPACT ON THE ECUADORIAN 
ECONOMY 
73.  The international economic environment prevailing in late 2014 has negatively affected the 
performance of the economy's external sector and balance of payments figures. As mentioned, 
the main impacts of the crisis are the result of: (i) lower earnings from oil owing to the slump in international crude prices; (ii) a downturn in exports and an increase in non-oil imports owing to the appreciation of the exchange rate; (iii) delays in payments from abroad for Ecuadorian exports 
to various markets; and, (iv) the increase in the EMBI spread. 
74.  Besides, 2014 witnessed one of the highest le vels of public investment in the country, which 
went to ongoing strategic projects such as the building of eight hydroelectric power plants. 
This high level of investment proved an additional source of pressure on the fiscal and 
external accounts. 
75.  Falling international oil prices and the lack of any prospect of a short-term improvement in the 
situation mean that the country will be receiving less than half the funds earned in 2014 from 
exports of hydrocarbons. This situation is directly impacting the real economy. Falling revenue for the treasury made it necessary to revise the annual investment plan for 2015 drawn up in the second half of last year to deal with the pressure on fiscal accounts and reduce both oil and non-oil 
imports as of 2016. Investment spending for 2015 will be cut by US $840 million, from the 
US$8,164 million approved by the National Assembly for the 2015 General State Budget. The reduction is basically bound up with investment spending and this will mean a considerable 
social sacrifice in terms of growth and employment. 
76.  According to the scenarios constructed for macroeconomic planning, the collapse of oil prices 
means that the Ecuadorian economy will forego income of some US$2,292 million in 2015. 
The explanation for this is that under the scenari o based on a price of US$79.7 per barrel used to 
formulate the pro forma budget, the current account deficit was US$805 million, while in the second scenario, based on a price of US$40/barrel, that deficit is US$3,096 million. Furthermore, the projected balance-of-payments position and is likely to show a decline in international reserves 
to the tune of US$2,009 million and a trade defici t of US$2,404 million (2.4% of GDP), a level that 
would not be sufficient to ensure the country's external sustainability.
21 This prompted Ecuador to 
introduce a safeguard measure as a last resort in order to reduce the external account deficit by 
approximately US$2,400 million. 
77.  The decline in crude oil prices as of the second half of 2014 increased the sovereign risk, 
as such reflecting the increase in the EMBI+ (Emerging Markets Bond Index)22, which moved 
from 412 points at the end of October 2014 to pe ak at 1,111 points on 16 December that same 
year, a period that witnessed an accelerated slide in the international price of oil. One immediate consequence of the increased risk is a rise in the cost of external credit lines, which even further 
complicates the task of external adjustment. 
                                               
21 See Annex 2. 
22 The EMBI is the spread between interest rates on dollar-denominated bonds issued by emerging 
countries and US Treasury bonds, which are considered "zero risk". WT/BOP/G/22 
- 24 - 
  Chart 24: Oil price trend and EMBI rating, 2014-2015 
865
47.6
020406080100120
1003005007009001,1001,300
31/05/14
30/06/14
31/07/14
31/08/14
30/09/14
31/10/14
30/11/14
31/12/14
31/01/15
28/02/15
31/03/15Index
EMBI+ WTI
US$/bbl
 
Sources: Bloomberg and JPMorgan. 
78.  The situation caused by oil price movements is being exacerbated by the partial stoppages in 
progress since June 2014 – with a total stoppage in October that had been planned for 40 days –at 
the Esmeraldas refinery, the country's biggest, leading to a drop in output of oil products. 
The main reason for the stoppage is to upgrade the facilities so as to realize the full potential for 
crude processing, which is 110,000 barrels per day. During the first half of 2014 the refinery had 
been processing an average of 89,100 barrels per day. The plant upgrading programme will 
continue until September 2015 and also includes part ial stoppages at some distillation units. This, 
together with steadily growing demand for petrol eum products – mainly owing to the expansion of 
the motor vehicle fleet in recent years – will put pressure on fuel imports. Higher petroleum 
imports and lower income from exports of hydrocarbons not only lessen the revenue available to the central government, but also negatively impact net foreign currency income, and this poses a 
major risk to liquidity in the Ecuadorian economy, which is what sustains the dollarization model. 
79.  The recent appreciation of the dollar is also having serious repercussions, particularly on the 
non-oil trade balance, which are compounded by the country's lack of foreign exchange policy 
instruments with which to preserve external market share where Ecuador is competing with its 
trading partners.
23 These repercussions are evident from falling export competitiveness, 
higher prices of exports on destination mark ets, whilst imports from those markets become 
cheaper, with the corresponding negative impact on the country's external accounts. Furthermore, 
the depreciation of the currencies of Ecuador's trading partners directly affects internal monetary 
dynamics as Ecuador is unable to offset this by currency devaluation, a foreign exchange policy option not available to Ecuador but to its trading partners. 
80.  The situation has impacted exports directly and negatively, leading to a contraction in their 
volume, loss of employment and the closure of production plants. In the flower-growing sector for example, the situation has meant closing down producing farms and seeking markets with lower 
prices and quality in order to sell the flowers. The outlook for the sector is not very bright, as the 
value of exports is expected to fall by 10–12 % by the end of 2015 and this could affect 
over 105,000 families in this sector by directly jeopardizing 50,000 jobs filled by women.
24 
                                               
23 See Annex 2. 
24 Source: Flower Exporters Association EXPOFLORES. WT/BOP/G/22 
- 25 - 
  81.  The recovery of the United States dollar against the euro is threatening Ecuador's 
non-petroleum exports to the European Union, which totalled roughly US$3,500 million in 2014. This situation is reflected in a significant falloff in competitiveness, with the consequent contraction of market share which it could take some time to recover.
25 
82.  Added to this is an unfavourable outlook fo r world commodity prices. According to the IMF, 
the prices of several of Ecuador's main exports su ch as bananas, shrimps, flowers, cocoa, coffee 
and palm oil, inter alia,  have been falling since September 2014 and there are no signs of any 
near-term improvement in price trends. 
Chart 25: Trend and outlook for international banana prices, 2010-2015 
881976984
926932
906
8208408608809009209409609801,000
2010 2011 2012 2013 2014 2015US$ per metric tonne
 
Source: WEO-IMF. 
Chart 26: Trend and outlook for international shrimp prices, 2010-2015 
1012
101417
16
681012141618
2010 2011 2012 2013 2014 2015US$ per kg
 
Note: The average price differential between 2010-2012 and 2013-2015 is equivalent to 36%. 
Source: WEO-IMF. 
                                               
25 On 17 July 2014 Ecuador concluded negotiations on a trade agreement with this important partner. WT/BOP/G/22 
- 26 - 
  Chart 27: Trend and outlook for internat ional coffee prices (robusta), 2010-2015 
84116
111
101106
86
60708090100110120130
2010 2011 2012 2013 2014 2015Cents per pound
 
Source: WEO-IMF. 
83.  The improvement in Ecuador's economic situation and the consequent rise in the income level 
of the population has led to increased consumption, which is largely satisfied with imports. 
Borrowing and foreign travel have also been on th e rise, and both also affect external accounts. 
Chart 28: Consumer credit, national financia l system and imports of consumer goods, 
2008-2014 and 2009-2014 
(US$ million) 
02004006008001,0001,2001,4001,600
05001,0001,5002,0002,500
2008.I
2008.III
2009.I
2009.III
2010.I
2010.III
2011.I
2011.III
2012.I
2012.III
2013.I
2013.III
2014.I
2014.III
Consumer credit SFN (left-hand column) Consumer goods imports (right-hand column)  
 WT/BOP/G/22 
- 27 - 
  -40-30-20-1001020304050
-40-20020406080100120
2009.I
2009.III
2010.I
2010.III
2011.I
2011.III
2012.I
2012.III
2013.I
2013.III
2014.I
2014.III
Consumer credit SFN  (left-hand column) t/t-4 Consumer goods imports (right-hand column) t/t-4Annual rate of variation (t/t-4)
Annual rate of variation (t/t-4)
 
Source: Central Bank of Ecuador. 
84.  For all the reasons laid out in the first part of this document, the different factors mentioned 
here will negatively impact not only the external account position but also liquidity in the economy. 
85.  Further explanations will now follow concerning the impact of the drop in oil prices, 
the implications of the dollar's appreciation and the effects of the adverse international 
environment on liquidity in the Ecuadorian economy. 
4.1  Drop in oil prices, external sector and public finances 
86.  International market imbalances drove down the price of oil to a monthly minimum average of 
US$39.1/bbl in February 2009, a level that had not been seen since June 2004. For that episode, however, the slump in hydrocarbon prices was short-lived. Already in 2010, oil prices had 
recovered to pre-crisis levels. WT/BOP/G/22 
- 28 - 
  Chart 29: Annual average oil price trend, WT I and national reference crude, 2000-2014 
30.4 
26.0 
26.2 
31.1 
41.5 
56.6 
66.1 
72.3 
99.7 
62.0 
79.5 
94.9 
94.1 
97.9 
93.3 
24.9 
19.2 
21.8 
25.7 
30.1 
41.0 
50.7 
59.9 
83.0 
51.6 
71.2 
96.9 
98.1 
95.6 
84.2 
0102030405060708090100110120
WTI National crude 
Source: Petroecuador and the Central Bank of Ecuador. 
87.  Since mid-2014, the country has witnessed a marked downturn in the prices of WTI – the 
reference crude for the sale of Ecuadorian oil – owing to the increased worldwide supply of crude 
accompanied by slowing growth of demand . In June 2014, the WTI price averaged 
US$105.8/barrel, which fell to US$47.2 in January 2015, a fall of 55.4% in seven months. 
Chart 30: WTI price trend, January 2013-January 2015 
(US$/barrel) 
105.8
47.2
405060708090100110120
Jan-13
Feb-13
Mar-13
Apr-13
May-13
Jun-13
Jul-13
Aug-13
Sep-13
Oct-13
Nov-13
Dec-13
Jan-14
Feb-14
Mar-14
Apr-14
May-14
Jun-14
Jul-14
Aug-14
Sep-14
Oct-14
Nov-14
Dec-14
Jan-15
WTIPrice US$/bbl
 
Source: United States Energy In formation Administration (EIA). 
88.  In the case of Ecuador, the impact of the o il price decline has been greatest on the external 
sector of the economy, where exports consist mainly of oil products. As previously mentioned, 
each one-dollar drop in the price of oil means a loss of about US$77 million in the trade balance. WT/BOP/G/22 
- 29 - 
  Given the direct relationship between exports and external revenue, an adverse situation resulting 
from falling oil prices substantially reduces foreign currency inflows into the country. 
Chart 31: Oil exports and public sector foreign exchange inflows, 2002-2014 
(US$ million) 
1,69617,836
2,05513,302
02,0004,0006,0008,00010,00012,00014,00016,00018,00020,000
2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014Foreign exchange inflow (public) Oil exports
 
Source: Central Bank of Ecuador. 
89.  In addition to the fall in price, the crude price differential re-entered negative territory 
in 2013, meaning that the price of Ecuadorian crude again dipped below the benchmark crude 
price. It is worth recalling that as of August 201 0, the price of Brent crude was higher than that 
of WTI, the difference reaching US$14.1/barrel in September 2011. In that environment, the price of Ecuadorian crude remained above that of WTI for two consecutive years (2011 and 2012). WT/BOP/G/22 
- 30 - 
  Chart 32: Trend in the pr ice differential between Ecuadorian crude and WTI, 
March 2008-March 2015 
-19.0 -14.9 14.1 
-14.2 -5.1 
-25-20-15-10-505101520
Mar-08
Sep-08
Mar-09
Sep-09
Mar-10
Sep-10
Mar-11
Sep-11
Mar-12
Sep-12
Mar-13
Sep-13
Mar-14
Sep-14
Mar-15 
Source: Petroecuador and the Central Bank of Ecuador. 
90.  The following are the figures for exports of oil and oil products in 201426 and the estimate for 
2015, based on two scenarios for the price of Ecuador' s crude oil basket, that of US$79.7/bbl included 
in the pro forma budget for that year, and US$40.0/b bl based on the current oil market situation. 
Chart 33: Exports of hydrocarbons (2014 actual; 2015 estimated) 
(US$ million) 
 
Source: Central Bank of Ecuador. 
                                               
26 The accrual method is used in order to make the figures comparable. WT/BOP/G/22 
- 31 - 
  91.  According to estimates for 2015, under the scenario used for the pro forma budget based on 
a price of US$79.7/bbl, exports will have amounted to US$12,294 million, or US$957 million less than the prior year; and, under a second scenario using a price of US$40.0/bbl, exports will have been worth US$6,170 million, representing a decl ine of US$7,081 million, or more than 50%. 
92.  This decline in resources in the Ecua dorian economy (US$7,081 million) represents 
16% of total foreign currency earnings for the previous year. This situation is further compounded by the fact that the country imports oil products, the prices of which are not falling to the same 
extent as those of Ecuadorian crude, which means that at some point, the net value of crude 
exports versus imports of oil products could be negative. 
93.  As pertains to oil production costs and in vestments in the oil industry, one of the goals 
of Ecuador's medium-term fiscal planning is to implement substantial programmes and projects in 
relation to operating costs and investment with a view to boosting the level of hydrocarbon 
activities, thereby generating larger export volumes and foreign exchange inflows. For 2015, therefore, operating costs, expenditure, investme nts and re-investments pertaining to Ecuador's 
oil industry, covering both direct operations by State enterprises and operations through contracts 
with private companies, absorb an average of  47.3% of gross revenues generated by the oil 
industry (initial 2015 budget). Diminishing internationa l oil prices will tend to increase that share, 
if the cost structure remains constant. 
94.  The Ecuadorian Government pays an average of US$34.52/bbl to private companies for oil 
exploration and exploitation serv ices. When the costs of transport, marketing and legislation are 
included
27, the total unit value of this product to the State is US$36.97/bbl; Ecuadorian crude was 
being exported at around US$41.00 per barrel in January 2015. 
4.2  Implications of the rising dollar 95.  Under a dollarization regime there is no local currency exchange rate that can serve as a tool 
for offsetting external imbalances marked by a rising dollar and depreciating currencies of principal 
trading partners. Account must also be taken of the direct impact of reduced net inflows from abroad on local monetary and financial dynamics, all of which plays out in the same currency – the 
dollar. 
96.  In Ecuador's case, the real exchange rate has appreciated rapidly, directly impacting the 
external sector. This notwithstanding, leaving aside the effect of dollarization on the trade balance, the balance as of 2007 was much more in deficit - 0.3% of GDP (average for 2007-2014) - than 
the previous period, when the figure was 1.6% of GDP (average for 2000-2006). 
97.  Similarly, the bilateral real exchange rate has appreciated in relation to the main trading 
partners, largely owing to exchange rate movements taking place in those economies. It is worth 
recalling that in response to the 2008 financial crisis, LAIA countries devalued their currencies, 
which meant cheaper imports from those markets, with the resulting impact on Ecuador's competitiveness and hence its trade balance. 
                                               
27 Fund for Eco-Development in the Amazon Region (Law No-10/20, 4 January 2008 R.O. 245).- Fund 
for Eco-Development in the Amazon Region equivalent to  US$1 per barrel of oil extr acted in the Amazon region 
and sold on domestic and foreign markets. 
Alternative revenue for the provinces of Napo, Es meraldas and Sucumbíos.  (Law RO-S/No. 248, 
7 August 1989. Tax of five cents per barrel of crude tr ansported via the trans-Ecuadorian pipeline, on top 
of the transport tariff, excluding only  oil meant for domestic consumption. WT/BOP/G/22 
- 32 - 
  Chart 34: Real exchange rate index (ITCR), 1990-2014 
(Base year 2007=100) 
122
118
118
103
96
98
98
96
95
133
144
104
88
85
88
92
94
100
102
96
98
97
94
92
91
8090100110120130140150
1990
1991
1992
1993
1994
19951996
1997
1998
1999
2000
2001
20022003
2004
2005
2006
20072008
2009
2010
2011
20122013
2014
Real exchange rate index
Appreciation Depreciation
 
Source: Central Bank of Ecuador. 
98.  It is also important to underscore the relationship between exports and the financial 
intermediation process (deposits and portfolio), both of which affect the level of liquidity in the 
economy. This relationship was particularly evident at the time of the 2009 crisis, when those variables moved in step with export performance. It is hoped that 2015 will witness an effect similar to that of 2009, with the corresponding impact on liquidity. WT/BOP/G/22 
- 33 - 
  Chart 35: Change in total exports, deposits and credit in other deposit-taking companies, 
2004-2014 
(%) 
 
10%11%
4%
-30%-20%-10%0%10%20%30%40%
Dec-04 Dec-05 Dec-06 Dec-07 Dec-08 Dec-09 Dec-10 Dec-11 Dec-12 Dec-13 Dec-14
Change in deposits Current portfolio Change in exports 
Note: For the annual rate of change for 2014, the monthly growth rate for December was estimated. 
Source: Central Bank of Ecuador. 
99.  The analysis of exports in relation to de posits taken and loans granted by what are called 
"other deposit-taking companies" shows that a de cline in the rate of change of exports between 
the second half of 2008 and the first half of 2009 induced a similar movement in the rate 
of change for deposits and the current portfolio. This situation, in which these three variables 
evolve very closely over time, indicates that they are interrelated. The upshot is that because the financial intermediation process is a driver of domestic liquidity, a negative trend in exports and 
export earnings will directly affect the rate of  growth of liquidity in the economy. Moreover, 
the contracting rates of change of exports as we ll as those of credits and deposits between 2008 
and 2009, are consistent with the trend in the real economy, where growth was 6.4% and 0.6% 
for those years, respectively. 
4.3  Impacts of the external situation on liquidity in the Ecuadorian economy 
100.  Although the use of the United States dollar as legal tender in Ecuador did bring price 
stability, it has left the economy more vulnerable, for lack of certain monetary policy tools for 
dealing with certain impacts originating abroad which chiefly affect internal liquidity, amongst 
other things. Dwindling foreign currency inflows on the back of falling prices or volumes of the main exports, in combination with the appreciati on of the dollar and the depreciation of the 
currencies of the most representative trading partners, are currently the events originating abroad 
with the greatest impact on the Ecuadorian economy. 
101.  International reserves, which are the main vari able affected by situations of this kind, known 
as a "balance-of-payments crisis" in economies with their own currency, are even more important 
in Ecuador's dollarized economy, for not only do  they supply the liquid resources for meeting the 
foreign obligations of all private and public agents, but they also determine the supply of funds for covering local transactions. 
Composition of international reserves 
102.  International reserves are described as the amount of foreign currency resources 
immediately available to the Central Bank of Ecuador (BCE) for meeting its obligations as the 
Government's financial agent and bank of banks; it is also understood as the total of highly liquid WT/BOP/G/22 
- 34 - 
  and immediately available external assets that have  a balancing entry on the liabilities side of the 
BCE balance sheet. 
103.  At March 2015, net international reserves were US$3,668 million, representing 
a 7.8% decline on the same month of the prior year. 
Chart 36: International reserves, millio n dollars and rate of change, 2008-2015 
-80%-60%-40%-20%0%20%40%60%80%100%120%
 - 1,000 2,000 3,000 4,000 5,000 6,000 7,000 8,000
Apr-08
Jul-08
Oct-08
Jan-09
Apr-09
Jul-09
Oct-09
Jan-10
Apr-10
Jul-10
Oct-10
Jan-11
Apr-11
Jul-11
Oct-11
Jan-12
Apr-12
Jul-12
Oct-12
Jan-13
Apr-13
Jul-13
Oct-13
Jan-14
Apr-14
Jul-14
Oct-14
Jan-15
Interational reserve position Annual rate of changeUS$ million
Rate of change (t/t-12)
 
Source: Central Bank of Ecuador. 
104.  As of 31 December 2014, internationa l reserves were made up as follows: 
Table 2: International Reserves 
(US$ million, to 31 December 2014) 
International Reserves 
to 31 December 2014 
US$ million 
Cash in foreign currency 361 
Deposits abroad  1,193  
Investments abroad 1,683  
Gold abroad 457 
Special drawing rights 26 
Non-monetary gold 8 
LAIA -21 
IMF reserve position 41 
S.U.C.R.E. 201 
Total 3,949  
Source: Central Bank of Ecuador. WT/BOP/G/22 
- 35 - 
  105.  The items that affect international reserv es are foreign exchange flows to and from the 
economy through the Central Bank of Ecuador (BCE) and cash deposits and withdrawals by the financial sector at the BCE. The most important income and expenditure variables are the following: 
Income variables 
 Crude oil exports 
 Financial system transfers from abroad 
 Foreign debt disbursements 
 Advance oil sales 
 Cash deposits in BCE vaults 
 Movement of letters of credit 
 Public sector transfers from abroad 
 Exports of byproducts 
Expenditure variables 
 Financial system transfers abroad 
 Imports of byproducts 
 External debt service 
 Public sector transfers abroad 
 Payment for advance oil sales 
 Cash withdrawals from BCE vaults 
 Contributions to the Liquidity Fund 
106.  The following table shows the value of infl ows and outflows that affected the level of 
international reserves in 2014: 
Table 3 Change in international re serves, 1 January-31 December 2014 
(US$ million, %) 
Private sector transfers from abroad   21,416  48.3% 
Exports of hydrocarbons 10,550 23.8% 
Debt disbursements 5,273 11.9% 
Deposits in BCE vaults 3,790 8.6% 
Pre-sale of oil 1,600 3.6% 
Financial derivatives 515 1.2% 
Movements of the SUCRE 442 1.0% 
Public sector transfers from abroad  413 0.9% 
Movement letters of credit 302 0.7% 
Remittances from migrant worker 16 0.0% 
Total Income 44,316 100% 
Private sector transfers abroad  (26,502) 59.3% 
Imports of byproducts (6,270) 14.0% 
Withdrawals from BCE vaults (6,183) 13.8% 
Debt servicing (2,418) 5.4% 
Public sector transfers abroad  (2,199) 4.9% 
Gold (560) 1.3% 
Contributions to the Liquidity Fund (471) 1.1% 
LAIA movements (90) 0.2% 
Other (36) 0.1% 
Total expenditure (44,728) 100% 
Variation in international reserves (411)  
Source: Central Bank of Ecuador. 
107.  The analysis changes in international reserves for the peri od January-December 2014 
(Table 3) shows the weight of private sector transf ers abroad (59.3% of expenditure) and of public 
sector imports of byproducts (14.0% of expenditure). WT/BOP/G/22 
- 36 - 
  108.  Prominent amongst inflows that cause change s in international reserves are private sector 
transfers from abroad and earnings from exports of hydrocarbons, which together make up 72.1% 
of total foreign currency inflows. These two variab les depend on international trade, the first on 
non-oil exports and the second on oil and oil byproducts, so that any fall-off in the earnings from 
these items will significantly impact international reserves. 
5  MEASURES TO STIMULATE ECONOMIC DEVELOPMENT 109.  The Government's public policy since 2007 has been aimed at building a sustainable 
development model that is fair, socially oriented and mutually supportive, through active fiscal, tax 
and financial economic policies to overcome depe ndence on the mining and primary exports matrix 
and bring about a change in the country's prod uction matrix, by building a knowledge-based 
society, playing a strategic and sovereign role in the world, eradicating extreme poverty as a 
Government response to persisting inequalities in our society, and achieving growth based on 
redistribution and the strengthening of the monetary system. 
110.  High oil prices, which benefited the Ecuadorian economy, obviously played a pivotal role in 
achieving those objectives. On the one hand, the Government set out to correct market distortions 
and made substantial investments to facilitate the activity of private agents while at the same time helping to enhance the country's systemic competitiveness and usher in the modification of the 
traditional production matrix. 
111.  The Government's policy has been aimed at intelligently securing a long-term role for the 
country in the international arena, subject to close monitoring of fulfilment and observance of the international commitments assumed by Ecuador, despite the limitations it faces owing to its 
monetary system, as has been reiterated in this document. 
112.  One of the main aims of the Government's economic policy has been to grow exports over 
the medium-to-long term through more dynamic economic growth than in the past. 
113.  More specifically, attempts are being made to promote systemic competitiveness that 
consolidates the projected modification of the prod uction matrix based on standards of efficiency 
comparable with the rest of the world. Of necessity, the shaping of this long-term vision had to be 
strongly tied in with the short term. The short-term paves the way for achieving those long-term 
objectives and the Government of Ecuador has been very keen to establish that linkage. 
114.  Considering the degree of exposure and vulner ability of the Ecuadorian economy to external 
shocks owing to its heavy dependence on commodity  exports, and given that the sustainability of 
its system depends on balance of payments positions, Ecuador has done the utmost to coordinate 
economic management and effective regulation in the financial and fiscal spheres by means of production and social sector policies that underpin sustained and inclusive economic growth. 
115.  To attain the aforementioned objectives, Ec uador has focussed on three main lines of action, 
namely, changing the production matrix, growth with redistribution and the strengthening of dollarization, and greater equity and the eradication of extreme poverty. 
5.1  Changing the production matrix 
116.  The overall aim of the national strategy for changing the production matrix is to alter the 
structure of production so as to give way to a dynamic knowledge and innovation-based economy 
that is sustainable, diversified and inclusive.  The following are the broad objectives of the 
strategy: 
i. Reducing external vulnerability in a dollarized economy 
a. Increasing and diversifying goods and services exports 
b. Diversifying and promoting production and markets WT/BOP/G/22 
- 37 - 
  ii. Incorporating greater added value into th e production system based on knowledge and 
innovation 
a. Increasing innovation, technology and knowledge-intensive production28 
b. Increasing the value added in the production process 
iii. Equitable internal development 
a. Enhancing productivity and quality 
b. Reducing territorial and sectoral productivity gaps and company sizes 
c. Generating quality jobs 
iv. Promoting environmental sustainability 
5.2  Growth with redistribution and strengthening dollarization 117.  For the past eight years the Government has given priority to economic and social policies 
designed to improve the living conditions of citizens, fairly redistribute wealth and narrow social 
gaps. In parallel, there has been a push towards growth and wealth generation in Ecuador's economy based on the principles of redistribution and progressivity. 
118.  The Government has implemented active countercyclical policies not only to safeguard jobs 
and achieve inclusive growth but also to strength en the current monetary system. One of the main 
economic policy priorities is achieving greater net foreign exchange inflows to sustain the internal 
liquidity of the economy. 
5.3  Seeking greater equity and eradicating extreme poverty 119.  The National Equality and Poverty Eradication Strategy for the period 2014-2017 aims to 
eliminate poverty on a sustained and lasting basis by changing the production, work and 
employment models, by empowering citizens, and by building capacities and opportunities for 
shaping a fair and mutually supportive society. 
Short-term measures 
120.  For Ecuador, the process of change and adaptation to the global environment is a more 
complex one, as it is difficult to achieve greater competitiveness on the external market with the only economic policy tools at the country's disposal. 
121.  The possibility of a smooth integration into the world market whilst operating under a rigid 
monetary and foreign exchange scheme is dependent on three key principles: a stable macroeconomic environment; a trade and investment policy that is part of a long-term economic programme, as already mentioned; and, on the implementation of structural reforms that help 
underpin a more equitable system of distribution. 
122.  A series of economic policy approaches ha ve therefore been implemented to safeguard the 
progress already made and to secure new adva ntages based on trade negotiations under a 
country-by-country and product-by-product strategy, which by no means entails trade 
protectionism or the adoption of discriminatory measures, but instead, as already pointed out, 
involves playing a logical and intelligent role on the world stage. 
123.  If, as has been shown, the business cycle is  such that the process of transition towards a 
modern and competitive society is being affected by plunging oil prices, the economic authorities are forced to take temporary corrective measures so  as to be able to continue with the chosen 
model of change without compromising previously established goals. 
124.  However, in the circumstances and above all considering the restrictions inherent in 
dollarization, the country has been forced to implement this restrictive trade measure, albeit temporarily, and which, by reason of the rigidity of its monetary system, imposes other conditions 
for achieving equilibrium in key macroeconomic variables. 
                                               
28 Between 2007 and 2014 the Government of Ecuador provided a total of 84,458 scholarships worth 
approximately US$454 million to fund studies both at home and abroad. WT/BOP/G/22 
- 38 - 
  125.  In pursuit of these goals, a series of policies were adopted on the external front, in the real 
economy and of a monetary, financial and fiscal nature, both to assure the long-term sustainability of the development model and to deal with the impacts emanating from negative external shocks in the short term. These short-term measures ar e designed to provide direct and consistent 
support in the attainment of the long-ter m objectives that have been described. 
5.4  External sector Ecuador – European Union Trade Agreement 
 
126.  On 17 July 2014 Ecuador concluded negotiations on the trade agreement with the European Union, the main market for Ecuadorian non-petroleum products, in the hope of securing greater access for our exports to that market and consolidating long-term trade relations with that bloc. 
Reform of the duty drawback system 
 
127.  Committee on Foreign Trade Resolution No. 013-2015 of 20 March 2015 simplifies customs 
duty drawback procedures in keeping with th e WTO Agreement on Subsidies and Countervailing 
Measures. 
Export promotion 
 
128.  To boost exports and diversify their destination markets, a process was launched to strengthen public institutions that support the export sector through PRO ECUADOR, the Export and Foreign Investment Institute that forms part of  the Ministry of Foreign Trade. This Institute 
promotes Ecuador's exportable supply of traditional and non-traditional products and services, with 
a focus on the diversification of products, markets and players, and promoting strategic integration in international trade. Furthermore, PRO ECUADO R's activities are geared towards attracting 
foreign investment in line with the National Plan for Good Living. This process was launched in 
early 2007 and there are now 31 trade offices. 
Additional measures to combat smuggling 
 
129.  To combat smuggling, Ecuador has stepped up vigilance at sensitive strategic points on the borders with Colombia and Peru. Measures are also in place through the SENAE to control smuggling via e-commerce. It is expected that this year, the project "Border Crossings 
Optimization in Ecuador" will come on stream in an attempt to ramp up controls and operational 
efficiency in the districts along the border, by providing the necessary physical and technological 
infrastructure for control operations designed to discourage informality and smuggling and improve 
customs service processes. In addition, a unit specialized in police and military intelligence was 
created and will work alongside customs personne l to carry out anti-smuggling operations, backed 
up by a programme of incentives relating to goods seizures. 
130.  This tool is of fundamental importance in the current economic situation, as neighbouring 
countries have several free trade agreements in force which, given the permeability of the borders, are generating pressures that encourage the smuggling of competitive products not originating in those neighbouring countries. 
131.  Proper control of smuggling favours employ ment and production in Ecuador and reduces the 
outflow of foreign exchange from Ecuador to neighbouring countries. 
Promoting the New Regional Financial Architecture – CELAC 
 
132.  One of the main regional integration forums is CELAC, where advances being made with the New Financial Architecture are reducing Ecuador's exposure to external shocks. The main aims are 
the following: 
1. developing payment systems; 
2. developing the fund for regional projects; 
3. strengthening the Reserve Fund. 
 WT/BOP/G/22 
- 39 - 
  Customs tariff increases 
 
133.  Through COMEX Resolution No. 51-2014 of 29 December 2014 which took effect on 12 January 2015, Ecuador introduced a reform of the national import tariff by increasing customs 
duties on imports from third countries of some capital goods (588 products), the maximum tariff 
being 25% and the minimum 5%, representing approximately US $4,000 million in c.i.f. terms for the year 2014. 
5.5  Real sector 
Change of production structure 
 
134.  Given the need for structural changes to the economy allowing for the sustainable 
exploitation of the existing natural wealth, the Government of Ecuador has formulated a national 
strategy for changing the production matrix. It considers the various strategic sectors and their future prospects in order to devise strategies for making viable proposals for each sector and 
ensuring their sustainability over time. This strategy aims to bring about a transition from an 
economy based on primary sources, mainly oil, to  a knowledge-based economy. In other words, it 
aims to change the country's production structure so as to give way to a dynamic economy geared 
towards improving innovation and knowledge-inten sive production, productivity and quality, 
increasing value added with a greater Ecuadorian component, diversifying and expanding production, exports and markets, and fostering prod uctive development. The overall intent is to 
generate quality employment and reduce territori al and sectoral disparities on the basis of 
environmental sustainability and with a view to achieving sustainable and equitable development. 
135.  The lines of action under the Ecuadorian Government's programme to modify the production 
matrix include promoting the industrialization of manufacturing, agro-industry and fresh and 
processed foods, the development of services and the generation of added value in production, as 
well as boosting productivity by expanding production chains, building complementary and 
synergistic networks that favour production processes and the development of industrial 
complexes. 
136.  Hence, under an approach focused on production chains, actions were taken to provide 
support to priority sectors that attract and promote private productive investment (both from Ecuador and abroad) in strategic and non-strategic sectors that support Ecuador's export supply, 
generate added value and innovation and are able to bolster job creation and production chains. 
137.  The Ecuadorian Government's industrial po licy seeks to implement plans and policies aimed 
at realizing the maximum potential of basic industries, intermediate industries and agro-industry. 
138.  Work has been done on the Basic Industries Plan to be implemented over the next few years 
with the main aim of industrializing natural resources in order to generate new development opportunities for Ecuadorians and overcome poverty. The plan is to begin by responsibly exploiting 
natural resources (raw materials), which will be transformed into intermediate products that will 
be required by other industries to produce final goods. These industries generate a range of activities in the manufacturing, commercial and services sectors and lend dynamism to the country's development, serving to provide leverage and added value in the production, social and 
economic spheres. 
139.  Strategies will be developed for all these chains to allow them to foster development and 
attract investments. It is planned to focus support on research-related issues as well as obtaining 
lines of credit and developing science and technolo gy. At the same time, efforts will be made to 
seek new markets for these products and to expand  their share both at the internal and external 
levels. 
140.  As pertains to intermediate and final industries producing plastics, pipes, pumps and valves, 
white goods, cables, transformers, drugs, agrochem icals and agricultural equipment, it has been 
determined that by 2025, they could potentia lly be generating income of US$5,800 million, 
providing 12,000 jobs with 38 factories to be se t up, and could have an export capacity of 
US$4,190 million. Similarly, priority  has been given in agro-industry to cacao/chocolate, palm 
products, processed coffee, wood-based feed, produc ts from fishing, aquaculture and mariculture, WT/BOP/G/22 
- 40 - 
  flowers, and dairy and balanced feed, and it has been determined that by the year 2025, they 
could potentially be earning US$8,727 million in income, generating 80,000 jobs in 84 factories, and could have an export capacity of US$2,280 million. 
141.  This change of production matrix, toge ther with the resulting economic and social 
development, will enable the country to restore and maintain balance-of-payments equilibrium on 
a sound and lasting basis and will generate additi onal foreign exchange in the economic system 
through new investments and the growth of exports. 
Production incentives 
 
142.  In December 2010, the National Assembly adopted the Organic Code of Production, Trade and Investment (COPCI), which is conceived as a legal and regulatory mechanism to consolidate 
the proposed strategy. This piece of legislation provided for key reforms to several of the cross-
cutting components of the country's production system; on the one hand, it updated the legal 
framework for domestic and foreign investment by establishing tax and non-tax incentives for 
productive investments, including a lower income tax rate, tax waivers and stable tax incentives, 
inter alia . Furthermore, it established the rules for implementing the country's trade policy through 
the Committee on Foreign Trade (COMEX), an inter-institutional body chaired by the Minister of 
Foreign Trade. In addition, the aforementioned  Organic Code included the country's quality 
system, and put in place the Inter-Ministerial Committee on Quality as a body for coordination, collaboration and the overall formulation of public policies on quality, with a view to consolidating the related regulations and stimulating Ecuador's production and exports. 
143.  Along these same lines, the Code of Produc tion thoroughly reformed the country's customs 
regime in order to create a facilitating structure in keeping with the aims of systemic competitiveness being pursued by Ecuador. 
144.  Finally, the Technical Secretariat for training was set up, which entailed incorporating the 
policy of coordinated training into the production sector, including such key elements as competency-based training. 
145.  For its part, the Organic Law on Production  Incentives and Tax Fraud Prevention, approved 
on 22 December 2014, is a regulatory instrument that will promote production through a long term government policy and with special emphasis on investments relating to basic industries and large-scale mining. Furthermore, clear rules are established that offer legal certainty and promote 
the transformation of the production matrix. Amongst the main elements of and incentives 
provided under the new law are: 
 Tax stability for companies investing in medium and large-scale metallic mining projects, 
for basic industries and other sectors, in keeping with the First Amending Provision of 
the Organic Law on the Remission of Interest, Fines and Surcharges, published in the Supplement to Official Register (Registro Oficial)  No. 493 of 5 May 2015. 
 A stable income tax rate for companies ente ring into investment contracts, according 
them tax stability: 22% for large- and medium-scale investments in metallic mining and for basic industries; while for companies in other sectors making investments that contribute to changing the production matrix, the rate will be 25%. 
 As an investment promotion measure, income tax is waived for ten years for new and 
productive investments in basic industries. 
 New investments by companies incorporated before the entry into force of the Organic 
Code of Production (29 December 2010), are entitled to a deduction, over five years, of 
the 100% additional annual depreciation cost generated by investments in new and productive fixed assets. 
Organic Law on the Remission of Interest, Fines and Surcharges 
 
146.  To support job preservation and creation, and to boost investment and support for entrepreneurship while reducing the liabilities of companies and small taxpayers based on the 
principle of equity, the National Assembly adopted the Organic Law on the Remission of Interest, 
Fines and Surcharges in April 2015. This legislation encourages the payment of outstanding tax WT/BOP/G/22 
- 41 - 
  obligations, which in the short term reduces the tax burden on these taxpayers and boosts 
government liquidity. 
5.6  Monetary and financial sector Export financing 
 
147.  As Ecuador lacked a specialized foreign trade bank for meeting the financial needs of foreign trade operators, and as the National Finance Corporation (CFN) only covered some of these needs 
through the FOPEX line of credit and another line to finance fixed assets, the Foreign Trade 
Division (EXIMECUADOR) was created within the National Finance Corporation to provide financial products and services to encourage national export s. This Division therefore has the following lines 
of financing, inter alia : 
 Pre-and post-shipment export financing: Credit for funding product exports both before 
and after they leave Ecuadorian ports. Services exports are also being financed. 
 Local and international factoring: The client is provided with liquidity through the 
endorsement of invoices generated through the domestic or international sale of 
products. This is available to natural or legal persons that require an injection of working capital in order to seize market opportunities or if they are in a growth phase. 
 Value chain: Financing to cover liquidity needs for the entire process from the acquisition 
of local or imported inputs to the processing and adaptation and sale of the final product. 
It also includes a short-term credit facility for the purchaser. 
Bolstering the financial system 
 
148.  Bolstering the Financial Security Network so as to forestall and mitigate the implications of 
the risks associated with financial activity for deposit holders and economic activity through the 
Deposit Insurance Corporation and the Liquidity Fund. In June 2012, Regulation No. 027-2012 of 
the Board of Directors of the Central Bank of Ecuador increased the contribution by financial institutions to the liquidity fund by 2% and by a further 1% as of 2013, increases that will continue 
until reaching 10%. To complement the foregoing actions, grassroots and solidarity-based 
financing institutions are being strengthened through the Financial Security Net for Grassroots Financing. 
Domestic liquidity coefficient 
 
149.  In July 2012, Regulation No. 028-2012 issued by the Board of Directors of the Central Bank 
of Ecuador increased the domestic liquidity coefficient for financial institutions from 45% to 60%, 
thereby establishing liquidity requirements to ensure that there are ample financial security 
margins, which will in turn make it possible to meet financing needs for achieving the country's developmental objectives, which are focused on promoting national productive investment and 
socially and environmentally responsible consumption. 
Productive financing 
 
150.  Investment by public banks goes towards promoting priority production sectors that are 
helping to change the production matrix, such as the "Progresar" programme launched by the 
National Finance Corporation in April 2014 and which covers the funding of fixed assets, the provision of credit guarantees and the creation of risk capital funds for innovative business 
ventures. There are preferential financial conditions for the funding of fixed assets for changing the 
production matrix, such as an interest rate of 6. 9%, a grace period of up to 2 years and a 15-year 
loan repayment term, and amounts of up to US $25 million per credit recipient and US$50 million 
per economic group. 
Democratization of productive credit 
 
151.  Bearing in mind the limited capacity of MiSMEs to post collateral for obtaining credit, 
the National Guarantee Fund was created as a financial tool for providing the necessary collateral, 
backing up to 50% of the amount of the operations requested in the private financial sector. WT/BOP/G/22 
- 42 - 
  Popular and Solidarity Financial Sector: financial inclusiveness 
152.  To promote greater access to funding for entrepreneurial and self-employment activities 
through the institutions in the Popular and Solidarity Financial Sector, the Popular and Solidarity Finance Corporation was established in 2011 as a second-tier banking institution that has been 
instrumental in strengthening the organizations of the popular and solidarity-based financial 
sector, which are present in areas not covered by the traditional financial system and which play a key role in improving the living conditions of entrepreneurs and micro and small business people. 
The deposit insurance scheme for the mutually supportive people's economy was also created and 
regulations on money laundering put in place. 
Active financial and monetary regulation 
 
153.  As pertains to financial regulation, the most important instrument for launching management 
of the sector geared to attaining the developm ent goals is the Organic Monetary and Financial 
Code, promulgated in September 2014 and which enhances the Government's regulatory capacity 
in the monetary, credit, financial and insurance and securities realms by encouraging access to 
financial services and democratizing credit, efficiently boosting the role of financial activities in strengthening domestic public investment and socially and environmentally responsible 
consumption. 
Electronic money and alternative means of payment 
 
154.  Resolution No. 005-2014-M of the Monetary an d Financial Policy and Regulation Board issued 
in November 2014 contains the rules for managing e-money, which is an electronic payment 
mechanism that makes for greater flexibility in trade and the financial inclusion of more citizens, especially those in remote areas with a limited presence of financial entities. This alternative 
means of payment operates on the basis of liquid assets held by the Central Bank and it is 
therefore crucially important to ensure the availa bility of foreign exchange in the economy. To 
encourage various alternative means of payment, it  is also planned to cut the costs of managing 
them, without prejudice to the profitability of financial institutions. 
Incentives programme for the construction and purchase of housing 
 
155.  On 5 March 2015, the Monetary and Financial Policy and Regulation Board issued Resolution 
No. 045-2015-F approving the public-private programme that channels resources into the financial 
system, allowing for longer time-frames, smaller downpayments and lower interest rates on mortgage loans for the purchase of low-cost housing (up to US$40,000) and public interest 
housing (between US$40,001 and US$70,000), and at the same time represents an incentive for 
directing credit towards this activity, which is closely bound up with production, promotes job creation and utilizes a high percentage of domestically produced inputs. 
156.  The public banking system will play a pivota l role in executing this new policy. On the one 
hand, the State Bank will finance low-cost housing worth up to US$40,000 through two mechanisms: (i) direct credit to the purchaser, and (ii) second-tier operations with entities in the private financial system. The CNF for its part will su pport builders with credit of up to 5 years, with 
a grace period of one and half years and at an annual rate of 6.5% for houses worth up to 
US$70,000. 
Financial and monetary regulations for the registration of foreign exchange 
157.  On 5 March 2015, the Monetary and Financial Regulation Board issued Resolution 
No. 052-2015-F containing the "Regulations on foreign money transfers conducted through the entities of the national financial system" in order to encourage greater transparency in the 
registration of foreign currency movements. 
5.7  Fiscal sector 158.  Given the public goods and services supply requirements and the gradual narrowing 
of the historic gap between infrastructure and human capital in Ecuador, the growth of 
consumption and of public investment over recent  years have been interlinked by two important WT/BOP/G/22 
- 43 - 
  events: (i) the emergence of fiscal deficits (glo bal and primary), which are expected to reach 
equilibrium by the year 2018; and (ii) an increa se in total public debt as of the year 2010 
by about 13.44% (as a percentage of GDP at December 2014), reaching 29.81% of GDP, of which 58.33% is external debt. 
159.  Current estimates made from fiscal planning scenarios show that a permanent drop in the 
price of oil during 2015 in relation to the initial scenario used to prepare the General State Budget (PGE) for that year and the Four-Year Budget Plan 2015-2018 will cause Ecuador's economy to 
forego, in the form of net income for the PGE, al most US$78.33 million a year for every dollar that 
is wiped off the price of Ecuadorian crude exports.  This fact undoubtedly places pressure on fiscal 
policy space in the short term. In this situation th erefore, three lines of action have been adopted 
to deal with the crisis and gradually mitigate the current vulnerabilities of Ecuadorian economy: 
 Making the best use of resources and promoting programmes to encourage external and 
fiscal sustainability 
 Setting of public spending priorities 
 Funding for the General State Budget 
5.7.1  Making the best use of resources and promoting programmes to encourage 
external and fiscal sustainability 
160.  Steps have been taken in the form of short-term measures to ensure the best use of 
resources that affect fiscal accounts over the medium-to-long term. These actions revolve around support for the modification of the energy ma trix and the adoption of the Organic Law on 
Production Incentives and Tax Fraud Prevention. 
5.7.1.1  Support for the change of energy matrix 
161.  The Ecuadorian Government is funding the construction and operation of hydroelectric, wind 
energy and thermoelectric projects to the tune of some US$5,446 million in an attempt to bring 
about a more efficient and environment-friendly energy matrix, based mainly on hydroelectric 
power generation. At the same time, fiscal savings are also being sought by reducing imports of 
fuels for thermoelectric power generation in the course of 2016. These projects will boost 
power-generating capacity and significantly bring down generating costs and the costs of energy 
imports from neighbouring countries. 
162.  This will lead to an annual reduction in  government expenditure of some US$900 million, 
with an accompanying positive and durable impact on the trade balance, enabling the country to 
restore balance-of-payments equilibrium on a sound and lasting basis (US$500 million for imports 
of liquid petroleum gas and US$400 million by re placing the use of hydrocarbons for operating 
power plants).
29 
163.  Furthermore, the steps taken to encourage the use of electric induction stoves will facilitate 
households in the transition from the use of cookin g gas to the use of electricity. It is estimated 
that this measure will reduce foreign exchange ou tflows for imports of liquefied petroleum gas and 
relieve the pressure on the budget thanks to reduced subsidies for the use of domestic gas. These 
developments will go hand-in-hand with the full operation of the country's new electricity grid as of the year 2016. 
5.7.1.2  Approval of the Organic Law on Prod uction Incentives and Tax Fraud Prevention 
164.  Another aspect of the Organic Law on Production Incentives and Tax Fraud Prevention 
mentioned above is that it incentivizes production, investment, job creation and competitiveness. It also facilitates tax compliance and the payment of obligations, reinforces human talent in micro 
and small enterprises and boosts tax collection without creating new taxes. It does this by striving 
to reduce inequalities and discourage the consumption of products that are harmful to health. 
                                               
29 Figures computed by the Ministry of Finance, based on an export price of US$40/bbl for Ecuadorian 
crude. WT/BOP/G/22 
- 44 - 
  165.  Against this backdrop, the aim is to strength en the tax base and generate a virtuous circle 
linked, amongst other objectives, to the sustainability of fiscal income. In addition, thanks to the implementation of this law, it is hoped to reduce the levels of tax fraud and thereby increase the country's tax revenues. 
5.7.2  Setting of public spending priorities 
166.  Given the reduction of General State Budget funds, government spending priorities will be 
introduced during the year 2015, largely focused on those with the least negative impact on 
employment and economic growth in the country, and maintaining the priority on spending that 
will drive Ecuador's economy during this year (road infrastructure, housing, strategic projects). 
5.7.2.1  Priorities under the annual invest ment plan and reducing current spending 
167.  On the back of diminishing tax revenues, the Ecuadorian Government found it necessary to 
set priorities for current and capital spending. Acco rdingly, the Ministry of Finance and the National 
Planning and Development Secretariat set funding pr iorities for projects during the year 2015, at 
the heart of which was safeguarding jobs and stimulating economic growth. 
5.7.2.2  Specific investment guidelines for the year 2015 
 A reduction of US$840 million in investme nt spending from the US$8,164 million 
approved by the National Assembly for the 2015 General State Budget (PGE). 
 Reviewing the budgets of public enterprises in the oil industry, so as to optimize 
operations. 
 Seeking bilateral funding and investment to meet the investment needs of the oil 
industry. 
5.7.2.3  Specific guidelines fo r current spending during 2015 
 A US$580 million cut in non-essential current expenditure (salaries – goods and services 
for public consumption) from the US$15,489 million approved by the National Assembly 
for the 2015 General State Budget. Of that  amount, US$200 million represent a direct 
cut, while US$380 million correspond to better resource use across several entities. Amongst the savings measures adopted are the postponement of a 5%-wage increase 
for civil servants, a measure that would have been initially included when formulating 
the 2015 General State Budget. 
 As of March 2015, the salaries of senior public servants were cut by percentages ranging 
from 5% to 10% depending on hierarchical scale, in order to pay for the recruitment of 
health workers needed to reduce maternal mortality. 
 During 2014, the Ministry of Labour issued Ministerial Agreements classifying and 
limiting the maximum number of government counsellors and advisers that central 
government authorities may hire in their institutions. Moreover, the required academic 
qualifications and work experience for those officers were also determined, as were their maximum salaries. 
 Owing to the reduction in income poverty in Ecuador from 36.7% in 2007 to 22.5% in 
2014, some beneficiaries were graduated from the social development programme, the Human Development Bond, which has almost 500,000 participants. This meant a savings to the treasury of US$300 million per year for transfers of this kind. 
5.7.2.4  Establishment of the Inter-Instit utional Committee for Prioritizing Public 
Investment 
 This Inter-Institutional Committee is being created for the purpose of reviewing all new 
works or works that require a supplementary contract or addenda, for subsequent 
approval by the President of the Republic. It  is established that public bodies must 
review their annual investment plan so as to identify the procurement of goods, the 
execution of works and provision of services, including consultancy services, 
supplementary contracts, the creation of ne w headings, differences in quantities of 
works or work orders. WT/BOP/G/22 
- 45 - 
   The Ministry of Finance subsequently issued Ministerial Decision No. 149 on 
13 April 2015 containing mandatory provisions for prioritizing and optimizing public investment in procurement processes that are subject to the Organic Law on the National Public Procurement System and its Regulations, including those taking place 
under special regimes. 
5.7.3  Funding for the General State Budget 168.  Given that the introduction of anti-cycli cal measures to bolster economic growth, job 
creation, the funding of strategic projects (ene rgy, human capital, multi-purpose, etc.) and 
balance-of-payments funding depend mainly on ex ternal financing that can be secured by the 
Government of Ecuador, the planned short-term st rategies are based on seeking alternative ways 
of accessing loans or funds (on the international capital market) by means of tools that diversify 
the portfolio of financiers with better conditions with respect to maturity and financial costs. 
5.7.3.1  Freely disposable fundin g from multilateral agencies 
169.  At 31 December 2014, freely disposable financing from multilateral agencies was made up as 
follows: US$142 million from the Inter-Americ an Development Bank (IADB) and US$618 million 
from the Latin American Reserve Fund (LARF). Pr oject-specific loans amounted to US$512 million. 
5.7.3.2  Bilateral financing 
170.  The Ecuadorian Government has approached countries such as Brazil, China, Qatar and 
several Arab countries in search of funding for strategic projects in energy and infrastructure. 
171.  During the official visit by a high-level dele gation headed by the President of the Republic of 
Ecuador to China during the first week of 2015, Ecuador's Minister of Finance signed financial 
agreements with banking institutions in that As ian country worth almost US$7,500 million. Of that 
amount, US$5,296 million consist of a concessional  loan from the China Exim Bank intended for 
social as well as mobility, risk and infrastructure -related projects, etc. Another US$250 million line 
is funding for the modification of the energy ma trix (induction stoves). The China Development 
Bank will grant a further US$1,500 million to finance the annual investment plan, whilst the Bank of China signed two agreements, one worth US$400 million for the building of Millennium Schools 
and the other US$80 million for infrastructure. 
5.7.3.3  Stand-by financing 172.  In December 2014, the Ministry of Finance signed a stand-by line of credit with the 
Inter-American Development Bank (IADB) worth US$300 million for dealing with exogenous 
macroeconomic shocks such as oil price declines, increases in international interest rates, 
increased country risk, etc., with a view to strengthening its fiscal space for ensuring the funding of projects that help reduce poverty in Ecuador. 
5.7.3.4  Governance for improved  perception of sovereign risk 
173.  Approaches have been made in recent years to leading risk rating companies worldwide with 
a view to improving the country's sovereign debt rating, as this would help diversify the portfolio 
of public funding sources, reduce risk premium co sts and pave the way for a return to the capital 
market with financial costs in line with world peers that have comparable risk ratings. These moves led to an improvement in risk ratings by Moody's, S&P and the Organisation for Economic 
Co-operation and Development (OECD) during the year 2014. WT/BOP/G/22 
- 46 - 
  Table 4: Ecuador: Risk rating trend 
Moody's Standard & Poor's Fitch 
Date Rating Date Rating Date Rating 
Dec-08 Ca Dec-08 SD Dec-08 CC 
Sept-09 Caa3 Feb-09 C Sept-09 CCC 
Feb-11 Caa2 Jun-09 CCC+ Nov-10 B- 
Sept-11 Caa1 Aug-10 B- Oct-13 B 
Dec-14 B3 Jun-12 B   
  Aug-14 B+   
Source: Ministry of Finance. 
5.7.3.5  Government bond issue 
174.  In March 2015 the Ecuadorian Government floated a bond issue worth US$750 million with a 
five-year maturity and an interest rate of 10.5%, in order to diversify sources of funding and be 
able to move forward with various investment proj ects of priority to the Government. For the same 
reason, a new issue was floated in May 2015 worth US$750 million, with a five-year term and an 
interest rate of 8.5%. 
Measures taken to deal with the crisis 
175.  In addition to the progress made by the Go vernment since 2007, as of the second half of 
2014 and up to the present time, the Government has been implementing the measures set out below, making use of the few economic policy instruments at its disposal for dealing with the 
international economic situation and the projected balance-of-payments disequilibrium: 
 August 2014: Stepping up the modification of the energy matrix: Induction stoves 
programme (savings on imports of LPG). 
 September 2014: Active financial and monetary regulation to promote lending for 
production and housing). 
 November 2014: Encouraging the use of electronic money and alternative means of 
payment (optimizing money supply). 
 December 2014: Production incentives: Organic Law on Production Incentives and Tax 
Fraud Prevention (promoting investment, attracting foreign currency). 
 December 2014/January 2015: Funding for the General State Budget: 
(a) Multilateral agencies: US$142 million from the Inter-American Development Bank 
(IADB) and US$618 million from the Latin American Reserve Fund (LARF). Project-specific loans amounted to disbursements of US$512 million. 
(b) Bilateral financing: Chinese banking institutions, for an amount of almost 
US$7,500 million. Of that amount, US$5,296 mi llion consist of a concessional loan 
with the China Exim Bank intended for social as well as mobility, risk and infrastructure-related projects etc. Another US$250 million credit line is funding for 
change of energy matrix (induction stoves ). The China Development Bank will provide a 
further US$1,500 million to finance the annual investment plan, whilst the Bank of China signed two agreements worth US$400 mi llion and US$80 million for the building 
of Millennium Schools and for infrastructure, respectively. 
(c) Stand-by financing: Inter-American Development Bank (IADB), in the amount of 
US$300 million for dealing with exogenous macroeconomic shocks such as oil price declines, increases in international intere st rates, increased country risk, etc. 
 
 January 2015: Customs tariff increases (to discourage imports). 
 January/March 2015: Setting of public spending priorities. Priority given to the annual 
investment plan and reduction of current spending (reduction of investment and current 
spending: US$1,420 million). 
 March 2015: Regulations governing foreign money transfers through entities of 
the national financial system – Resolution No. 052-2015-F (encouraging greater 
transparency in the registration of foreign currency movements). 
 March 2015: Additional mechanisms to comb at smuggling (preventing foreign exchange 
outflows and tax fraud). WT/BOP/G/22 
- 47 - 
   March 2015: Adoption of the strategy to change the production matrix (promoting 
production with added value). 
 March 2015: Reform of duty drawback system (export promotion). 
 March 2015: Government bond issue worth US$750 million, with a five-year maturity 
and an interest rate of 10.5% (financing). 
 March 2015: Safeguard measure on account of balance-of-payments disequilibrium. 
 April 2015: Programme of incentives for the building of subsidized and public interest 
housing (stimulating national production and job creation). 
 April 2015: Establishment of the Inter-instit utional Committee for Prioritizing Public 
Investment (rationalizing investment spending). 
 April 2015: Organic Law on the Remission of Interest, Fines and Surcharges: 
This legislation encourages the payment of outstanding tax obligations, which in the 
short term reduces the tax burden on these taxpayers and boosts government liquidity. 
6  DESCRIPTION OF THE BALANCE-OF-PAY MENTS RESTRICTIONS AND THEIR LEGAL 
BASIS 
176.  Internally, the legal basis of the measur e is Resolution No. 011-2015 issued by the 
Committee on Foreign Trade (COMEX) and published in  the Second Supplement of Official Register 
No. 456 dated 11 March 2015, which was forwarded together with notification WT/BOP/N/79 
submitted to the WTO General Council. The measure entails introducing, for up to 15 months, a temporary, non-discriminatory ad-valorem  tariff surcharge of 5%, 15%, 25% and 45% 
calculated on the basis of the c.i.f. value of import s as set out by tariff line in the Annex to COMEX 
Resolution No. 011-2015. It covers 2,955 ten-digit tariff subheadings equivalent to 38% of 
a universe of 7,581 subheadings, which in c.i.f. value terms represents 31% of total imports for 2014. This tariff surcharge is applied on top of the tariffs currently in force, in accordance with 
Ecuador's Tariff and the bilateral and regional trade agreements to which Ecuador is a party. 
177.  The safeguard measure in question has be en adopted pursuant to Article XVIII:B of the 
GATT, which allows its use to forestall the threat of, or to stop, a serious decline in monetary 
reserves. This Article also provides that the measure may be taken in order to safeguard the 
external financial position and ensure an adequate  level of reserves for the implementation of the 
programme of economic development
30, which in the case of Ecuador, as a dollarized economy, 
means maintaining an adequate liquidity level. Th e country is therefore taking the aforementioned 
measure in order to regulate the general level of imports and rectify the external sector imbalance 
and the liquidity situation in the Ecuadorian economy, with the resulting implications for its balance of payments and the strong impact on the country's current monetary system. 
178.  Taken as a last resort, this measure is intended to forestall any further deterioration in the 
country's balance-of-payments situation and is designed in a manner consistent with WTO rules and with the intent not to exceed the limits necessary to correct the disequilibrium identified, 
which would be around US$2,400 million in 2015. It is in keeping with Article XVIII:B(9) of the 
GATT 1994, which states: "[…] control the general level of its imports by restricting the quantity or 
value of merchandise permitted to be imported; provided that the import restrictions instituted, maintained or intensified shall not exceed those necessary […]",  and with paragraph 4 of the 
Understanding on the Balance-of-Payments Provisions of the GATT 1994, which states: 
"Members confirm that restrictive import measures taken for balance-of-payments purposes may 
                                               
30 The balance-of-payments safeguard adopted by Ec uador follows the interpretative guidelines to 
Article XVIII formulated by the Panel an d confirmed by the Appellate Body in  India - Quantitative Restrictions 
(WT/DS90/AB/R). The Panel concluded that the assumptions justifying the introduction and maintenance of restrictions under Article XVIII for balance-of-payments reasons are: (i) the threat of a serious decline in 
monetary reserves, (ii) a se rious decline in monetary re serves or (iii) inadequate monetary reserves. At the 
same time, the Panel determined that the objectiv es of safeguarding the balance-of-payments under 
Article XVIII:B of the GATT 1994 are to safeguard the external financial position and to ensure a level of reserves adequate for the implementation of the pr ogramme of economic develo pment. On that basis, 
developing Member Countries may exercise the right to control the general level of their imports by restricting the quantity or value of merchandise permitted to be im ported in accordance with the three conditions already 
mentioned, temporarily deviating from the provisions of other Articles of the GATT 1994. Lastly, the Panel stated that the provisions of  Article XVIII are based on recognition of th e specific needs of developing countries 
in relation to measures taken for balance-of-payment s reasons. The provisions of Article XVIII of the GATT 
1994 therefore embody the special and differential trea tment contemplated for developing countries with 
regard to measures of this kind. Therefore, the degr ee of rigour required under  Article XVIII:B is clearly 
different from that of Article XII:2(a) of the GATT 1994. WT/BOP/G/22 
- 48 - 
  only be applied to control the general level of imports and may not exceed what is necessary to 
address the balance-of-payments situation. […]" . It is worth emphasizing that in the absence 
of any measures to correct this imbalance, the current account deficit is expected to be US$3,097 million this year. 
179.  In conformity with paragraph 2 of the Unde rstanding on the Balance-of-Payments Provisions 
of the GATT 1994, which provides that: "[…] Members confirm their commitment to give 
preference to those measures which have the leas t disruptive effect on trade. Such measures 
(referred to in this Understanding as "price-based measures") shall be understood to include 
import surcharges, import deposit requirements or other equivalent trade measures with an impact on the price of imported goods. […] ," Ecuador has therefore opted for price-based 
measures comprised exclusively of ad valorem  import surcharges. In addition, pursuant to 
paragraph 10 of Article XVIII:B of the GATT 1994, which reads: "[…] In applying these restrictions, 
the contracting party may determine their incidence on imports of different products or classes of products in such a way as to give priority to the importation of those products which are more 
essential in the light of its policy of economic development […]",  the tariff levels have been applied 
giving priority to imports of goods that are more essential in a situation such as that facing Ecuador; and, considering the provisions of  paragraph 4 of the Understanding on the 
Balance-of-Payments Provisions of the GATT 1994, the relevant part of which states: 
"The term 'essential products' shall be understood to mean products which meet basic consumption needs or which contribute to the Memb er's effort to improve its balance-of-payments 
situation, such as capital goods or inputs needed for production." , the measure excludes "essential 
products" on the one hand, which satisfy basic consumption needs of the Ecuadorian population, 
and on the other, capital goods and basic inputs  indispensable to production, and likewise takes 
account of the exclusions laid down in Article 2 of COMEX Resolution No. 011-2015. 
180.  Subparagraph (e) of Article 2 of COMEX Resolution No. 011-2015 excludes from the measure 
goods originating in States with a lower relative level of economic development Members of the Latin American Integration Association (LAIA), i.e. Bolivia and Paraguay. This exclusion is based on 
Article 2 of Resolution No. 70 of the Committee of  Representatives of the LAIA, which determines 
the Regional Safeguards Regime applicable to countries signatory to the Treaty of Montevideo: 
"ARTICLE 2.- Member States shall not apply safeguard measures to imports originating in 
States with a lower relative level of economic development in order to remedy imbalances 
in their overall balance of payments." 
 181.  Ecuador legitimately acquired this obligation as a signatory to the treaty in question, 
a member of the LAIA and consequently of the Committee of Representatives of the LAIA, 
which was notified to the GATT and subsequent ly to the WTO by the LAIA as shown in 
GATT Documents L/6985, L/6985/Add.1 and in LAIA I document No. ALADI/SEC/di 740. 
182.  The ad-valorem  percentages used to implement the measure were set by analysing 
elasticities and, as previously stated, in a manner that accords priority to imports of certain categories of goods that are more essential in an economic situation where there is a sizeable 
balance-of-payments disequilibrium, based on the economic development policy and in an amount 
equivalent to the total of the gap to be covered. Accordingly, the ad valorem  surcharge of 5% 
and 15% on c.i.f. value was established for imports of products also used in production, but which have been included in the measure owing to the scale of the imbalance; a surcharge of 25% was 
set for mass consumption products, and of 45% for final consumer goods that are not essential in 
the country's current economic situation. 
183.  In application of the aforementioned provisio ns and in particular in defence of the country's 
overriding economic and social development needs which, as previously indicated, are recognized 
in paragraphs 9 and 10 of Article XVIII:B of th e GATT 1994, Ecuador has only excluded those 
products that are essential to meeting the basic needs of human consumption, as well as capital goods, inputs and raw materials essential for production and which fall under economic and social 
development programmes and policies. Therefore, th e applied measure in no way seeks to protect 
domestic industry from imports from trading partners, but instead to forestall a decline in foreign exchange caused by the balance-of-payment s disequilibrium and implement economic 
development programmes. WT/BOP/G/22 
- 49 - 
  184.  To promote its economic development, Ecuador has devised a comprehensive 
medium-to-long-term plan of support for industry and agro-industry, giving priority, inter alia,  
to the following products: plastics, piping, pumps and valves, white goods, cables, transformers, drugs, agrochemicals and agro-industrial equipment. The intent is to boost production and 
innovation, build linkages and export capacity so as to attract investments and generate sufficient 
foreign exchange for maintaining solid and long-term balance-of-payments equilibrium. 
6.1  Plan to eliminate and wind down the measure 
185.  Ecuador will monitor and assess the application of the measure on a quarterly basis in order 
to ensure that it is commensurate with ongoing needs to overcome the disequilibrium in the balance-of-payments, the intention being to re lax the measure as the balance improves and 
eliminate it when it is no longer necessary. This first assessment will yield clear indications as to 
the effects of the measure and provide a basis for drawing up concrete scenarios for removing it. 
186.  Hence, under paragraph 1 of the Understanding on the Balance-of-Payments Provisions 
of the General Agreement on Tariffs and Trade of 1994, which provides that: "Members confirm 
their commitment to announce publicly as soon as possible, time-schedules for the removal of 
restrictive import measures taken for balance-of-payments purposes […]"; as well as paragraph 11 
of Article XVIII:B of the GATT 1994, which reads: " In carrying out its domestic policies, 
the contracting party concerned shall pay due regard to the need for restoring equilibrium in its 
balance-of-payments on a sound and lasting basis and to the desirability of assuring an economic employment of productive resources […] ", Ecuador will publicly announce the time schedules 
envisaged for eliminating the import restrictions. 
Final considerations 
187.  Concerned over external accounts figures for the closing months of 2014 and projections for 
2015, the Government of Ecuador had to introduce a series of measures to tackle the decline in 
liquidity as described in Section 4 of this document, owing to reduced foreign currency inflows to 
the national economy. The balance-of-payments safeguard measure is a last resort, given the magnitude of the external imbalance. 
188.  To ensure that the country's macroecono mic performances since 2007 remain sustainable 
and to ensure the normal development of econom ic activities, the Government of Ecuador felt 
compelled to make timely use of the few economic policy tools at its disposal to counter the harmful effects of a sharp decline in liquidity in the economy provoked by the slump in 
international oil prices and the effects of the strengthening dollar both in terms of the 
competitiveness of non-oil exports and the impact of increased imports. 
189.  An assessment of the performance forecast for Ecuador's external sector in 2015 indicates 
a US$2,009 million reduction in international rese rves and a trade deficit of US$2,404 million, 
figures that do not guarantee the country's external sustainability. If a sustainable trade performance is to be achieved, Ecuador must reduce its trade deficit by roughly US$2,379 million. 
190.  The nature of Ecuador's international reserves leaves the country vulnerable to impacts on 
the trade balance and the balance-of-payments, since any reduction in their level can affect not only international payments by private and public  agents but also the management of liquidity. 
191.  International reserves are currently equivalent to less than two months' worth of imports, 
which is not consistent with international standards, and even less so in a dollarized economy such 
as that of Ecuador. 
192.  For the reasons set out in this document and in the light of the current international 
economic environment, which is unfavourable to Ecuador, the country was compelled to adopt 
the balance-of-payments safeguard measure as a last resort in order to reduce the deficit in the external accounts, forestall any reduction in reserves and achieve macroeconomic stability 
for the country. 
193.  Ecuador's current Government has prepared the national economy for a path of sustainable 
growth. Hence, with a medium-term vision focused on reducing poverty and enhancing systemic WT/BOP/G/22 
- 50 - 
  competitiveness through large-scale infrastructure works leading to a change in the energy 
matrix31 and the production matrix, it has made substantial investments in highways, ports, 
airports, schools and hospitals that have enhanced the competitiveness32 of Ecuadorian products 
on the one hand, and raised the population's stan dard of living and created more opportunities 
for them, on the other. The public investments carried out were designed to increase the 
economy's stock of capital so as to sustain private sector productive activities and make them more competitive. 
194.  This economic development policy has called for substantial productive investments as 
already outlined. They are set to continue desp ite the unfavourable environment, as they are 
generating additional resources and foreign exchange savings over the medium term, and so as not to jeopardize the economic and social advances already made or their continuation in the 
years ahead whilst endeavouring to maintain so lid and lasting balance-of-payments equilibrium. 
195.  Given the bleak outlook for the international prices of crude and of Ecuador's principal 
exports, and with the dollar's appreciation, which is undermining Ecuador's competitiveness versus 
its trading partners and will impact the trade balance position for 2015, the adopted safeguard 
measure will remain in place for up to 15 months. 
196.  Because the measures taken by the Government to stem the outflow of foreign currency 
have proved insufficient to achieve the hoped-for results, Ecuador, as a developing country, has 
had recourse to Article XVIII:B of the General Agreement, applying temporary import restrictions to prevent further deterioration of its balance-of-payments, as this impacts Ecuador's major sources of foreign currency. Hence, the measure adopted through COMEX Resolution 
No. 011-2015, which was duly notified to the Committee on Balance-of-Payments Restrictions 
(WT/BOP/N/79), entails the introduction of a temporary and non-discriminatory ad valorem  tariff 
surcharge as set out in the Annex to the said Resolution. This tariff surcharge is applied on top of 
the tariffs currently in force, in accordance with Ecuador's Tariff and the bilateral and regional 
trade agreements to which Ecuador is a party. 
197.  The measure taken is price-based and has been implemented transparently, pursuant to 
paragraph 2 of the Understanding on the Bala nce-of-Payments Provisions of the General 
Agreement on Tariffs and Trade 1994; it excludes products that are essential under the country's 
economic development policy, as well as those indispensable to human well-being and which meet the basic consumption needs of the Ecuadorian po pulation, i.e. capital goods, inputs and raw 
materials essential to production. It also takes account of the exclusions laid down in Article 2 of 
COMEX Resolution No. 011-2015, and on the whole,  complies with paragraph 10 of Article XVIII:B 
of the General Agreement. 
198.  The ad valorem  percentages used for the measure were determined on the basis of an 
analysis of elasticities and the prioritization of imports of certain categories of goods that are more essential in an economic cycle with a significant balance-of-payments disequilibrium, and with a 
view to covering the total value of the gap. 
199.  Ecuador has applied these import restrictions on the basis of respect for and strict 
compliance of the multilateral rules in force in the WTO; the adoption of this balance-of-payments safeguard measure represents the exercise of a right that has been accorded to Ecuador as 
a developing country and a Member of this Organi zation, in keeping with Article XVIII:B of the 
General Agreement and relevant articles of the Understanding on the Balance-of-Payments Provisions of the General Agreement on Tariffs and Trade 1994. 
                                               
31 The following eight large hydroelectric plants will begin operating in 2016: Coca-Codo Sinclair, 
Sopladora, Minas-San Francisco, Delsintanisagua, Manduriacu (already operating since March 2015), Mazar-Dudas, Toachi-Pilatón and Quijos . They will generate 2,832 MW, cut CO
2 emissions by 8,197,000 tonnes 
per year and represent an invest ment of over US$4,700 million. 
This investment will cut annual government expenditure by some US$900 million and positively and 
permanently impact the trade balance, enabling the co untry to restore balance-of -payments equilibrium on 
a sound and lasting basis. 
32 The global competitiveness index of the World Economic Forum shows a gradual improvement in the 
competitiveness of the Ecuadorian economy, with the country ranking 71st in 2013 (fifteen places above its 
2012 ranking). This index measures the way in which a country uses its resources to provide its citizens with sustainable levels of economic prosperity. WT/BOP/G/22 
- 51 - 
  200.  The measure in question is entirely legitimate and was designed to safeguard the country's 
external financial position and restore balance- of-payments equilibrium on a solid and lasting 
basis. Similarly, the motivation and approach to the measure have been clearly and convincingly set out in the light of technical, economic and legal criteria already analysed. As can be observed, 
the maintenance and implementation of the measur e in the form and for the duration stated is 
indispensable for Ecuador, which openly states its entire willingness to undertake all relevant steps, in strict compliance of its obligations. 
 WT/BOP/G/22 
- 52 - 
  ANNEXES 
Annex 1 
Chart: Real bilateral exchange rate tr end (TCRB) for Ecuador's main partners 
(Index base year: 2007=100) 
 
87
83
83
77
87
92
98
101
96
123
122
87
76
65
74
86
85
100
104
94
106
108
109
104
96
60708090100110120130
1990
1991
1992
199319941995
1996
1997199819992000
2001
200220032004
2005
2006200720082009
2010
201120122013
2014
Appreciation Depreciation
Bilateral real exchange rate index Colombia 
 WT/BOP/G/22 
- 53 - 
  
113
129
132
106
106
109
112
107
105
133
145
107
95
91
94
97
96
100
104
99
104
105
108
106
100
8090100110120130140150
1990
1991
1992
199319941995
1996
1997199819992000
2001
200220032004
2005
2006200720082009
2010
201120122013
2014Bilateral real exchange rate index Peru
Appreciation Depreciation
 
 
306
254
239
212
138
128
119
108
105
147
163
119
104
98
98
95
95
100
102
93
94
96
91
90
87
60110160210260310360
1990
1991
1992
199319941995
1996
1997199819992000
2001
200220032004
2005
2006200720082009
2010
201120122013
2014
Appreciation Depreciation
Bilateral real exchange rate index China
 WT/BOP/G/22 
- 54 - 
  
123
118
116
102
94
92
95
93
95
137
154
115
104
98
98
100
99
100
96
91
89
88
85
84
83
708090100110120130140150160
1990
1991
1992
199319941995
1996
1997199819992000
2001
200220032004
2005
2006200720082009
2010
201120122013
2014
Appreciation Depreciation
Bilateral real exchange rate index USA  
Source: Central Bank of Ecuador. WT/BOP/G/22 
- 55 - 
  Annex 2 
Chart: Nominal exchange rates of select ed trading partners from January 2010 
to April 2015 
(Index base year: 2007=100) 
 
(Colombian peso to US$) 
1,5001,7001,9002,1002,3002,5002,700
Apr-05
Jul-05
Oct-05
Jan-06
Apr-06
Jul-06
Oct-06
Jan-07
Apr-07
Jul-07
Oct-07
Jan-08
Apr-08
Jul-08
Oct-08
Jan-09
Apr-09
Jul-09
Oct-09
Jan-10
Apr-10
Jul-10
Oct-10
Jan-11
Apr-11
Jul-11
Oct-11
Jan-12
Apr-12
Jul-12
Oct-12
Jan-13
Apr-13
Jul-13
Oct-13
Jan-14
Apr-14
Jul-14
Oct-14
Jan-15
Apr-15 
 
(Peruvian sol to US$) 
2.52.72.93.13.33.5
Apr-05
Jul-05
Oct-05
Jan-06
Apr-06
Jul-06
Oct-06
Jan-07
Apr-07
Jul-07
Oct-07
Jan-08
Apr-08
Jul-08
Oct-08
Jan-09
Apr-09
Jul-09
Oct-09
Jan-10
Apr-10
Jul-10
Oct-10
Jan-11
Apr-11
Jul-11
Oct-11
Jan-12
Apr-12
Jul-12
Oct-12
Jan-13
Apr-13
Jul-13
Oct-13
Jan-14
Apr-14
Jul-14
Oct-14
Jan-15
Apr-15 
 WT/BOP/G/22 
- 56 - 
  (Rouble to US$) 
203040506070
Apr-05
Jul-05
Oct-05
Jan-06
Apr-06
Jul-06
Oct-06
Jan-07
Apr-07
Jul-07
Oct-07
Jan-08
Apr-08
Jul-08
Oct-08
Jan-09
Apr-09
Jul-09
Oct-09
Jan-10
Apr-10
Jul-10
Oct-10
Jan-11
Apr-11
Jul-11
Oct-11
Jan-12
Apr-12
Jul-12
Oct-12
Jan-13
Apr-13
Jul-13
Oct-13
Jan-14
Apr-14
Jul-14
Oct-14
Jan-15
Apr-15  
 
(Euro to US$) 
0.50.60.70.80.91.0
Apr-05
Jul-05
Oct-05
Jan-06
Apr-06
Jul-06
Oct-06
Jan-07
Apr-07
Jul-07
Oct-07
Jan-08
Apr-08
Jul-08
Oct-08
Jan-09
Apr-09
Jul-09
Oct-09
Jan-10
Apr-10
Jul-10
Oct-10
Jan-11
Apr-11
Jul-11
Oct-11
Jan-12
Apr-12
Jul-12
Oct-12
Jan-13
Apr-13
Jul-13
Oct-13
Jan-14
Apr-14
Jul-14
Oct-14
Jan-15
Apr-15 
Sources: Central Bank of Ecuador and Bloomberg. WT/BOP/G/22 
- 57 - 
  Annex 3 
Methodology, assumptions and findings of th e assessment of Ecuador's external sector 
sustainability for the year 2015. 
Methodology: 
 
1.   The analysis of external sector sustainability is a basic tool for providing guidance in making 
the right economic policy decisions that affect infl ows of foreign exchange to or outflows from the 
national economy. 
2.   According to the economic literature, external sustainability is defined as a country's capacity 
to meet its foreign commitments, in other words, an economy is sustainable if there is a sufficient foreign currency flow for coping with debt service over time (Blázquez and Taft, 2003). 
3.   External sustainability depends ultimately on the current account position (Obstfeld and 
Roggoff, 1996). A negative current account position does not necessarily constitute a problem. Any country can run a deficit, provided it is in a position to pay its obligations in the future. 
The deficit becomes a problem when resource gene ration (current and future), which brings in 
foreign exchange, is insufficient for servicing contracted debt. Such a situation compromises a nation's wealth. Consequently, solvency depends not only on the level of indebtedness, 
its conditions and profile, but above all, on a country's capacity to pay its debt (Fernández, 2003). 
4.   With this in mind, the accounting approach to sustainability used to assess the sustainability of 
the external sector of Ecuador's economy is that whereby future trade balance positions, foreign direct investment flows and remittances from abroad, expressed in present value terms, 
must be sufficient to meet a country's external obligations. 
5.   The model is based on the classic current account equation
33, which can be expressed as 
follows: 
 
 
6.   Where tb is the trade balance, rem* and IED* are the estimates for remittances and foreign 
direct investment; b is the stock of debt at the end of the period, all these variables being in 
relation to GDP; n is the average debt maturity period and  is a discount factor.34 
7.   The equation (1) expresses the condition for sust ainability; it shows that the sum of future 
foreign exchange flows, stated in present value, must be equal to the current stock of external 
debt. This equation makes it possible to calculate the trade balance tb that fulfils the condition for 
sustainability, given a stock of debt as a percentage of GDP, an interest rate, an economic growth 
rate and a relevant horizon for debt repayment. 
Assumptions: 
 
8.   Under the methodology used, debt sustainability depends on several variables. In particular, 
the higher the initial level of external debt, the higher the nominal interest rate on that debt, the lower the projected economic growth and the lower the flows of foreign investment and 
remittances, the higher must be the trade balance necessary to ensure debt sustainability. 
9.   The assumptions used in the model are shown in the table. 
                                               
33 CC t + 1 = B t + 1 - B t- IED t + 1 = Y t + 1+ rB t - C t + 1 - I t + 1- G t + 1 + REM t+1 where B is the stock of 
net external assets, r the international interest rate, Yt+1 is gross domestic product, Ct+1 is private 
consumption, It+1 investment, Gt+1 government spending, REMt+1  remittances by migrant workers and 
IEDt+1  the flow of foreign direct investment (Obstfeld and Rogoff, 1996). 
34 
  where r is the implicit debt ratio and g is  the rate of real gr owth in the economy. WT/BOP/G/22 
- 58 - 
  Table showing assumptions used to calculat e the trade balance position required to 
meet the condition for external  sustainability, 2015 scenario 
(US$ million and % GDP) 
Variable  
Oil price (US$/barrel) 40 
GDP 99,483.50 
Real GDP growth rate 2.06% 
Total external debt* 30,000.67 
Interest 1,535.00 
Net remittances 2,184.56 
FDI 660.00 
Debt/GDP 30.20% 
Implicit interest rate** 5.12% 
FDI/GDP 0.66% 
Net remittances/GDP 2.20% 
Notes: 
* Corresponds to the final balance (arrears + interest) to December 2014, plus the flow considered in 
the 2015 programming (including commercial credit). 
** Calculated as the ratio of interest payments to total external debt.  An average debt term of 13 years was used. 
Sources: MCPE, Ministry of Financ e and Central Bank of Ecuador. 
Findings: 
 
10.   The model's finding is that for the year 2015, under a scenario based on an oil price 
of US$40/barrel, Ecuador ought not to be running a trade deficit. In particular, it would have to maintain a slightly positive trade position of about 0.02% of GDP, which is equivalent 
to US$24.5 million, in order to ensure external sustainability, provided that remittances from 
migrant workers and foreign direct investment remain constant. 
11.   Under the macroeconomic planning scenario built with the same price per barrel of crude, 
the estimated trade deficit for 2015 will be US $2,404 million (2.4% of GDP); therefore , to arrive 
at levels that guarantee external sustainabili ty, that deficit would have to be reduced by 
US $2,379.5 million. WT/BOP/G/22 
- 59 - 
  Annex 4 
Table updating balance of payments outlook 
(US$ million) 
EXTERNAL SECTOR – SUMMARY TABLE  
Update takes account of change in oil production level  
 2015 
  CURRENT ACCOUNT  -3,133 
 TRADE BALANCE  -2,721 
 Trade balance (Recorded Trade) -3,404 
 Exports 18,954 
 Oil and byproducts  6,209 
 Non-oil 12,744 
 Imports  22,357 
 Oil 4,151 
 Non-oil 18,206 
 Trade balance (unrecorded trade, other) 683 
 SERVICES AND INCOME BALANCE -2,794 
Services  -890 
 Credit 2,354 
 Debit -3,244 
Revenue -1,905 
 Credit 88 
 Debit -1,993 
 CURRENT TRANSFERS 2,382 
  d/c remittances received 2,344 
CAPITAL ACCOUNT 974 
 FOREIGN DIRECT INVESTMENT 660 
 EXTERNAL DEBT AND VARIATION IN FOREIGN ASSETS  314 
 PUBLIC EXTERNAL DEBT 5,049 
 Expenditure 7,185 
 Repayments -2,137 
 NET RECORDED PRIVATE DEBT  132 
 VARIATION IN FOREIGN ASSETS 1/ -4,867 
INTERNATIONAL RESERVES 1/ 2,159 
Estimates: Ministry Responsible fo r Economic Policy Coordination. 
Note: 
1/ Positive figures indicate a decrease. 
 Under Article 137 of the Monetary and Financial Code in force since September 2014, freely 
disposable international reserves are now called international reserves, without implying any methodological changes in the calculation. 
 
__________