RESTRICTED  WORLD TRADE  
ORGANIZATION  WT/BOP/R/91 
11 June 2009 
 (09-2878) 
Committee on Balance-of-Payments Restrictions  
  
 
REPORT ON THE CONSULTATIONS WITH ECUADOR 
 
 1. The Committee held consultations with Ecuador on 22 and 24 April 2009, under the 
Chairmanship of Ambassador Arsene Balihuta (Uganda), and on 2 and 3 June 2009 under the 
Chairmanship of Ambassador Darlington Mwape (Zam bia), in accordance with the terms of reference 
of Article XVIII:12(a) of the GATT 1994 and the Understanding on the Balance-of-Payments 
Provisions of the GATT 1994.  The International M onetary Fund was invited to participate in the 
consultations in accordance with Article XV:2 of GATT 1994. 
2. The Committee had before it the following documents: 
 WT/BOP/S/15/Rev.1 Background Paper prepared by the Secretariat 
 WT/BOP/G/15  Basic Document supplied by Ecuador  WT/BOP/N/65  Notification from Ecuador  WT/BOP/N/65/Rev.1 Notification from Ecuador
1 
 WT/BOP/N/67  Notification from Ecuador  Ecuador  Statement by the IMF Representative at the 2009 Consultation of the 
WTO Committee on Balance of Payments Restrictions, 22-
24 April 2009 
 A. O
PENING STATEMENT  
3. The opening statement by the representativ e of Ecuador is attached (Annex 1). 
B. STATEMENT BY THE IMF 
4. The statement by the representative of the Inte rnational Monetary Fund is attached (Annex 2). 
C. DISCUSSION IN THE COMMITTEE  
(i) Balance-of-payments position a nd prospects; alternative measures to restore equilibrium 
5. The Committee recognized that Ecuador's balanc e-of-payments position had deteriorated in 
recent months, reflecting a number of factors.  Some  Members attributed this mainly to external 
factors, including the fall in global demand since mid-200 8, deteriorating terms of trade, in particular 
the decline in international oil prices, the appreciatio n of the U.S. dollar, and the decline in workers' 
remittances.  Some other Members, while acknowledgi ng the role that external factors had played, 
considered that a sharp increase in fiscal expenditu re combined with declining revenues and the recent 
default on part of the government's external debt played a major role in worsening the balance-of-
payments situation.   
6. Several Members commented on the limitations placed on balance-of-payments management 
by Ecuador's use of the U.S. dollar as its national cu rrency.  It was noted that this policy had been 
                                                      
1 In Spanish only. WT/BOP/R/91 
Page 2  
 
introduced by Ecuador's government in January 2 000 as a way of helping to exercise stricter 
macroeconomic discipline.  Dollarization of the economy had removed Ecuador's ability to pursue an 
independent monetary policy and to use the exchange  rate to manage the balance-of-payments.  The 
key tools at Ecuador's disposal for managing its ba lance-of-payments problems were fiscal policy and 
foreign borrowing, although it was noted by some Me mbers that Ecuador's decision to default on part 
of its external debt in 2008 had made it more  difficult to access foreign borrowing, including for the 
private sector.  Members enquired about the measure s the Ecuadorian government was taking in order 
to correct this situation.  
7. Some Members drew attention to the difficulty of assessing a balance of payments crisis in a 
dollarized economy like Ecuador's, in which the dete rmination of international reserve adequacy 
poses a unique challenge.  Instead of internationa l reserves, dollarized economies maintain foreign 
assets that are accounted for in large part by publ ic sector deposits;  in the case of Ecuador the 
depletion of these assets was indicative of fiscal problems.  These Members felt that improvement in Ecuador's balance of payments problems required fi scal policy corrections.  Other Members, however, 
were of the view that dollarization, the appreciation of the U.S. dollar, and the set of external shocks 
faced by Ecuador together justified the recourse to measures to protect the balance of payments.   
8. Answering a question regarding the nature of a balance-of-payments crisis in a dollarized 
economy, the representative of the IMF said that a ba lance of payments crisis affected the economy 
mainly by reducing domestic liquidity and weakening confidence.  This could have a strong impact on 
the level of domestic activity and lead to a recessi on.  He noted that there is no established way of 
determining the adequate level of reserves in a dollarized econo my.  The IMF had continued using the 
import coverage of Net Foreign Assets as a metric.  This indicator should, however, be interpreted 
with caution, since the role of net foreign assets in  Ecuador's dollarized economy differs from that of 
international reserves in other economies.  In this r espect, rather than focusing on its level, one should 
look at its trend and speed of change over time.  A fall in Net Foreign Assets would have two effects:  
a reduction in liquidity and, if large and fast, a loss of confidence.  Answering a question on whether 
the use of import restrictions would help rectify Ecuador's fiscal problem, the representative of the 
IMF said that import restrictions would not be helpfu l in solving fiscal problems.  He explained that a 
reduction in spending was needed, given that recent e xpenditure levels were no longer sustainable in 
light of the sharp decline in revenues.  In this resp ect, he drew attention to the fact that the Ecuadorian 
authorities were already planning expenditure reduc tions.  The IMF representative also said that, 
given the size and nature of the external shock (large  and partly transitory), fiscal adjustment efforts 
by the authorities needed to be complemented by financing from abroad.  He noted, however, that 
external financing options were limited for Ecuador, owing partly to the recent debt default.  To a 
question on how it was possible to reduce expe nditure in a dollarized economy, the IMF 
representative replied that the reduction of spendi ng and dollarization were unrelated issues.   
9. Some Members expressed concern about the policy mix chosen by Ecuador, particularly its 
over reliance on trade restrictions relative to the exte nt of macro economic policy adjustment.  In their 
view, Ecuador had not given sufficient explanation on why it considered that alternative measures 
were not adequate.  Most of the adjustment bur den had been placed on the external sector, with 
negative consequences for trading partners.  A more  balanced policy mix rely ing on reductions in 
public expenditure and increases in external financing would have been preferable, rather than relying 
on trade measures which shifted the burden extern ally.  Also, measures to improve the business 
climate to attract foreign direct investment should be devised.  Other Members took note of 
explanations given by Ecuador indicating that tr ade measures were adopted in a broader framework 
that also include fiscal measures. 
10. Some Members said that trade restrictive measur es were not the best way to restore balance-
of-payments equilibrium on a lasting basis;  in any case, if adopted, they should be part of a package 
of measures that include actions on other fronts.  The absence of an independent monetary policy due 
to the dollarization of the economy gave Ecuador one less policy tool with which to address the  WT/BOP/R/91 
 Page 3 
 
 
balance-of-payments deficit.  However, Ecua dor could still use measures other than import 
restrictions, for example fiscal policy.  One Member  said that the public sector financial deficit was 
unsustainable and had fuelled the current account deficit by generating excessive demand.  A 
thorough assessment of the country's domestic a nd balance-of-payments policies should include 
exploring fiscal alternatives.  The Balance- of-Payments Understanding required the Member 
undertaking the balance-of-payments measures to  provide an overview of the domestic policy 
measures taken in order to restore equilibrium on a sound and lasting basis.  However, an assessment 
of non-trade adjustment measures and other policies av ailable to Ecuador to respond to its balance-of-
payments problems had not been provided.  Ot her Members recognized that Ecuador has taken 
measures on a temporary basis, with a clear indication of the date of removal of these measures.  They 
also noted that measures were applied st rictly following the MFN principle.   
11. Some Members recalled that balance-of-payme nts measures were temporary and should be 
used, in accordance with WTO rul es, as a last resort.  A Member noted that the trade measures 
adopted by Ecuador may add to the deterioration of the global trading environment at a time when all 
Members should refrain from applying protectionist me asures and should try to maintain their markets 
open. 
12. Some other Members considered that Ecuador's recourse to trade measures for balance-of-
payments purposes was fully justifiable in the current  circumstances and that there were no alternative 
policy options available.  One Memb er noted that Ecuador's tariffs were low, and in the lack of an 
independent monetary policy, Ecuador had few instru ments to face the current international crisis.  
One Member said that adopting measures on the external sector was vital due to their effect on a 
dollarized economy such as Ecuador's particularly in the absence of some kind of stabilization fund.  
Another Member drew attention to the fact that Ec uador's situation was critical and said that hence the 
use of measures for balance-of-payments purposes was justified.  One Member highlighted the 
convenience of running some kind of stabiliza tion fund in the case of dollarized economies like 
Ecuador's.  Some Members said that there was a need to  be flexible with Ecuador, given the particular 
and temporary situation it was going through.  It was also noted that Ecuador was a developing 
country Member of recent accession to the WTO. 
(ii) System and methods of restrictions;  effects of restrictions 
13. Members noted with satisfaction that before imposing trade restrictions for balance-of-
payments purposes, Ecuador had reduced tariffs on a number of products and that half of its tariff 
lines were zero-rated. 
14. Notwithstanding the above, some Members consider ed that the use of quantitative restrictions 
for balance-of-payments purposes under the prov isions of GATT Article XVIII:B and the 1994 
Understanding was undesirable, and less effective than  the use of price-based measures.  They also 
were of the opinion that Ecuador's use of quantitativ e restrictions had not been sufficiently justified 
and lacked transparency.  One Member recalled that  WTO rules established stringent standards for the 
use of quantitative restrictions:  these standards hing ed on two factors:  a) the balance of payments 
had to be in a critical situation;  and b) price-ba sed measures could not arrest a sharp deterioration in 
the external payments position.  Moreover, a Me mber applying quantitative restrictions, should 
provide justification as to the reasons why price-based  measures were not an adequate instrument to 
deal with the balance-of-payments situation.  One Member voiced concern with respect to the method 
of allocating import quotas, which appeared to add to the restriction.   
15. On the other hand, some Members supported the measures applied by Ecuador and its request 
to the Committee.  Several Members expressed their view that Ecuador had acted in compliance with 
WTO rules and procedures and considered that the measures applied were also  consistent with WTO 
rules.  Some Members said that Ecuador's notificat ion of the measures adopted should be considered 
as an example of transparency.  One Member said that the WTO should consider defining more clear WT/BOP/R/91 
Page 4  
 
the concept of trade protection a nd trade distortion, since it was not clear that the fiscal stimulus 
packages implemented recently by certain WTO Memb ers were not more trade-distorting than the 
measures applied by a small count ry like Ecuador.  Other Members recalled that the provisions of 
GATT Article XVIII specifically recognize for deve loping countries the right to adopt certain 
measures in order to safeguard their external fi nancial position and to ensure a level of reserves 
adequate for the implementation of th eir economic development programme.   
16. Members took different views with respect to the WTO-consistency of the measures.  Some 
considered the measures adopted by Ecuador to be WTO-consistent, while other Members expressed 
doubts about their consistency with WTO rules.  One Member expressed concerns that quantitative 
restrictions had been applied on imports which had already been declining.  Another Member asked 
how Ecuador sought to ensure a fair and equita ble distribution of import quotas, and how would 
unnecessary injury to Members be avoided.  Some Me mbers also queried the need to use specific 
duties, which were less transparent than ad valorem  duties.   
17. Some Members recalled that the use of measu res for balance-of-payments purposes required 
the presentation of a time schedule for their gradual dismantlement.  These Members requested 
Ecuador to present a time schedule to phase out th e measures, and encouraged Ecuador to phase out 
the quantitative restrictions as soon as possible.  One Member requested that Ecuador phase out its 
quantitative restrictions and its specific tariffs no la ter than within the next three months;  others 
requested the prompt conversion of quantitativ e restrictions into price-based measures. 
18. A number of Members raised concerns about th e targeted application of the measures, which 
some considered trade-distorting, and expressed th eir preference for broader-based measures at lower 
restrictive levels.  Ecuador was reminded that , in accordance with WTO provisions, measures for 
balance-of-payments purposes could only be applied to the general level of imports, so as to alleviate 
a balance-of-payments deficit without diverting trade.  Some Members noted that the measures 
affected less than 9% of tariff lines and some 23% of imports;  such a targeted application of import restrictions did not seem the best way of deali ng with balance-of-payments problems, and was not 
consistent with WTO rules.  One Member said that selectivity was distortive and economically 
unsound, because it merely resulted in expenditure switching, without fixing the balance-of-payments 
problem.  It was also suggested that a targeted a pplication of trade measures was a form of industrial 
policy.  Some Members expressed their desire for cl arification of the rationale behind the restriction 
of selected imports, which seemed to include ma ny lines in which Ecuador had domestic production 
and exports.  Ecuador was also queried with respect to the criteria used to define "essential products", 
which had been excluded from the measures. 
19. Other Members, however, considered that Ecuador's adoption of measures on a limited 
number of tariff lines was preferable to the use of measures applied to a larger number of tariff lines, 
because this had a smaller impact on trade flows.  One Member stated that the measures applied by 
Ecuador did not distort trade.   
20. Some Members also expressed concern with respec t to the effect that the measures could have 
in their trade with Ecuador.  Several Members noted that Ecuador was an important trading partner for 
them and that the adoption of the measures woul d have a negative impact on a number of their 
industries.  A Member asked whether Ecuador ha d evaluated the negative impact the measures 
applied would have on trading partners.  Some Members expressed their concerns about the 
disproportionately negative effect of the measures on certain trading partners of Ecuador, particularly 
those which are developing countries.   
D. R
EPLIES BY THE REPRESENTATIVE OF ECUADOR  
21. The representative of Ecuador stated that his Government was strongly committed to 
respecting WTO rules, and, reflecting this, and in a spirit of total transparency, it had notified to the  WT/BOP/R/91 
 Page 5 
 
 
WTO the measures adopted.  Ecuador considered the information submitted to Members to be 
sufficient, but was willing to provide additional information.   
22. Ecuador considered its balance-of-payments pr oblems to be fundamentally a result of the 
global crisis;  internal factors could have played some role, but the main causes were external.  In 
response to comments made with respect to the ad equacy of the policy mix applied by Ecuador, the 
representative of Ecuador said that the purpose of the trade measures adopted had been to reduce 
private sector outward flows of US dollars, which we re causing liquidity problems and threatened the 
stability of Ecuador's financial system.  Measures ha d been adopted in areas other than trade.  For 
example, on the fiscal front, substantial spending cuts  had been applied in the past eight months, and 
the taxable base had been widened.  The invest ment environment had been improved through two 
constitutional reforms, which granted more stability and predictability to the investment regime.  
Ecuador had also approached regi onal organizations to obtain credit from these institutions.  With 
respect to trade policy, Ecuador had reduced tari ffs on a significant number of products, particularly 
inputs and capital goods.   
23. In response to concerns about the selectivity of measures applied, Ecuador pointed out that its 
goal was to protect liquidity in the economy a nd reduce demand for non-essential items.  Broad-based 
measures might contribute to a recessionary effect. 
24. With respect to Members' concern about th e type and nature of the measures adopted, 
Ecuador noted that to face the current financial and economic crisis several Members had adopted 
measures that were clearly targeted and that ha d not been reviewed in any WTO Committee.  The 
measures adopted by Ecuador had been targeted at products for which there had been a strong outflow 
of dollars.  Ecuador was not the only WTO Member to  apply quantitative restrictions.  Specific tariffs 
had been applied on certain produc ts departing from Ecuador's prac tice due to the very low import 
prices of these products.  The measures applied we re temporary, with a duration of 12 months.  
Ecuador had acted in a transparent fashion and had complied with its commitments.   
25. With respect to the effect of the measures on trading partners, Ecuador noted that it was 
logical that its main trading partners were the mo st affected.  However, Ecuador had not chosen the 
products on the basis of their origin.  The prod ucts selected were mostly non-essential consumer 
goods.  The measures had not been adopted for indust rial policy purposes and the tariffs applied were 
not prohibitive.  Overall imports from some of the Members most affected by the measures had continued to increase during the first quarter of 2009,  although those of the products targeted by the 
measures had declined moderately.  A full report of the trade effects of the measures on the different 
trading partners would be available at the end of Ap ril, three months after the measures were applied, 
and Ecuador would be willing to share the resu lts of the report with interested Members. 
26. Ecuador reiterated its engageme nt to apply the measures for a one-year period.  To the 
exhortation by some Members to dismantle the me asures gradually, Ecuador responded that this 
depended on the evolution of the balance of paymen ts.  While not excluding a move in this direction 
in the near future, the representative of Ecuador no ted that it would be irresponsible to offer to 
dismantle progressively the measures without taking in to account the evolution of the external sector.  
Ecuador was, however, willing to hold further consu ltations with WTO Members, to seek to review 
the measures. 
E. C
ONCLUSIONS  
27. Members noted with appreciation Ecuador's effo rts in ensuring a timely, full and transparent 
notification to the Committee.  The Committee recognized the unique circumstances faced by 
Ecuador with regards to its balance-of-payments si tuation, which has been negatively affected by a 
combination of factors.  WT/BOP/R/91 
Page 6  
 
28. The Committee noted that the trade measures app lied by Ecuador covered about 8.7% of all 
tariff lines, affecting a volume of trade equivalent to some 23% of its total 2008 c.i.f. imports.  It also noted that the measures applied by Ecuador cove red overall 630 HS subheadings, whereas ad valorem 
tariff increases were applied on 75 HS tariff subheadings.  
29. The Committee took note of Ecuador's commitment to re-assess its measures in the light of a 
positive evolution of the balance of payments situat ion as compared with the situation at the moment 
when the trade measures were adopted for balance of payment purposes.   
30. Ecuador agreed to replace most of the quantita tive restrictions for price-based measures no 
later than 1 September 2009.  
31. The Committee also took note of Ecuador's commitment to progressively modify the level 
and scope of the measures as Ecuador's balance of  payments situation improves in  accordance with 
the provisions of Article XVIII:B of GATT 1994 and the Understanding on the Balance of Payments 
Provisions of the GATT 1994.  
32. Ecuador committed to ensure that the above cha nges to its measures in paragraphs 30 and 31 
do not result in more trade-rest rictive market access conditions. 
33. The Committee welcomed Ecuador's commitment to  regularly keep the Committee informed,  
in accordance with article XVIII:B 12(b) of the GA TT 1994 and paragraph 7 of  the Understanding on 
the Balance of Payments Provisions of the GA TT 1994.  These periodic reports should include 
information of all relevant matte rs, inter alia, quantitative restrictions as well as products  excluded 
from the scope of the measures.  For the purposes of Art XVIII:B 12(b) of the GATT 1994 and paragraph 7 of the Understanding on the Balance of Payments Provisions of the GATT 1994 the 
Committee will meet in September and November 2009.  
34. The Committee also welcomed Ecuador's commitment to remove all trade measures for 
balance of payments purposes no later than 22 Janua ry 2010, and to immediately notify the steps 
taken to the Committee. 
35. On the basis of this request, and in the light of the commitments taken by Ecuador reflected 
above, the Committee agreed to conclude the consultations.  
36. While the measures described remain in force, Members reserve their rights under GATT 
1994.  WT/BOP/R/91 
 Page 7 
 
 
ANNEX 1 
 
Opening statement of the representative of Ecuador  
Mr Chairman,  Let me begin by thanking you and the distingui shed delegates of the WTO Member countries 
for gathering here at this meeting of the Bala nce-of-Payments Committee so that we can move 
forward with our consultations concerning the measu res adopted by Ecuador to safeguard its balance 
of payments, to protect the liquidity of its economy  and to prevent a sharp decline in economic growth 
against a backdrop of serious external imbalances  essentially caused by the international financial 
crisis. 
 My sincere thanks also go to the Secretaria t for the complete and well-founded supporting 
and background document that it prepared for the be nefit of all Members, to help them acquire a 
better understanding of the environment in wh ich the Ecuadorian economy is operating and the 
difficult circumstances that have led Ecuador to reso rt to temporary measures that partially restrict 
trade for a limited number of products. 
 I would also like to thank the Internationa l Monetary Fund for what will undoubtedly be a 
valuable contribution to these consultations in the form of an objective evaluation of the external 
position of the Ecuadorian economy. 
Mr Chairman,  Starting on 22 January 2009, following a careful analysis and a lengthy assessment of the 
possible consequences, the Foreign Trade and In vestment Council (COMEXI), on behalf of the 
Government of Ecuador, implemen ted Resolution 466 establishing a balance-of-payments safeguard 
that is of general application and non-discriminator y towards imports of the 630 subheadings listed in 
the annexes thereto.  This Resolution was suppl emented by Resolutions 467, 468 and 469, duly 
notified under paragraph 9 of the Understanding on Balance-of-Payments Provisions of the 
GATT 1994.  They can be found in document WT/BOP/N/65 and Rev.1, as well as in the updated 
version of that notification in document WT/BOP/N/67. 
 The substantive legal basis for the restrictiv e import measures which Ecuador has decided to 
adopt because of balance-of-payments problems can  be found in Article XVIII:B of the GATT 1994, 
and I shall be discussing today the reasons for taking this course of action:  namely that Ecuador has 
found it necessary to regulate the overall level of its  imports, restricting the volume or value of goods 
imported in order to "forestall the threat of, or to stop, a serious decline in its monetary reserves", a 
decline which severely affects the liquidity of its economy, with potentially devastating consequences 
for the country's current monetary regime. 
 Ecuador has complied with paragraph 9 of Article XVIII:B of the GATT 1994 and 
paragraph 4 of the Understanding on Balance-of-P ayments Provisions of the GATT 1994 by adopting 
import restrictions that do not exceed what is necessary to address the balance-of-payments 
disequilibrium.  Similarly, the measures adopted to restore equilibrium in its balance of payments 
seek to do so on a sound and lasting basis in orde r to assure an economic employment of its 
productive resources, pursuant to paragraph 11 of Ar ticle XVIII:B.  Nor should there be any doubt 
that the measures are temporary and are applied according to the MFN regime, as prescribed in 
Article XIII of the GATT 1994 and paragraph 1 of the 1979 Declaration on Trade Measures taken for 
Balance-of-Payments Purposes.  The measure will be applied for a period of one year as of 
22 January 2009, and pursuant to paragraph 1 of  the Understanding on the Balance-of-Payments 
Provisions of the GATT 1994.  The possibility of speed ing up the termination of the safeguard will be 
considered in the light of any favourable de velopment in Ecuador's balance of payments. WT/BOP/R/91 
Page 8  
 
Mr Chairman, 
 With your permission, I shall provide a brief overview of Ecuador's special situation linked to 
the fact that it has a dollarized economy, i.e. sin ce January 2000 the only currency in circulation in 
Ecuador is the US dollar.  In conducting its an alysis during these consultations, the Committee should 
bear in mind Ecuador's particular situation and rather than considering its balance-of-payments 
position from the classical or orthodox standpoint, it should first and foremost bear in mind that a 
balance-of-payments crisis in Ecuador will not f undamentally be reflected in the level of its 
international reserves, but in the level of the economy's liquidity. 
 In economies that issue their own money, th e balance-of-payments position determines the 
volume of external assets and they are reflected in the so-called international monetary reserve.  These 
assets 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.  They are 
fully available to the monetary authorities a nd the central banks, which are responsible for 
administering and using them. 
 In January 2000, faced with the worst economic crisis of the past 50 years, Ecuador adopted a 
dollarization regime as a way of slowing down th e accelerated depreciation of its national currency 
and preventing hyperinflation.  There was a high cost to dollarization as far as the tools and 
instruments available to intervene in the economy we re concerned;  basically, Ecuador was no longer 
able to issue its own money and so use monetary an d exchange policy to offset any external shocks. 
 When Ecuador adopted dollarization, its moneta ry authorities used the international monetary 
reserve to "withdraw" the national currency (the sucre) and "exchange" for dollars taken from the 
reserve at a nominal rate of 25,000 sucres/dollar.  The international reserves were therefore 
"distributed" in March 2000 and became part of the money supply at the same time as the monetary 
authorities lost control of the economy's liquidity.  That year, the balance in the international monetary reserve became part of the economy's liquidity, with the exception of that part corresponding to public sector deposits and bank reser ves in foreign currency in Ecuador's Central 
Bank. 
 What is known in Ecuador's balance-of-p ayments statistics as the freely disposable 
international reserves ( Reserva Internacional de Libre Disponibilidad  - RILD) is basically made up of 
the non-financial public sector depos its and the bank reserves at the Central Bank.  The RILD does 
not include the economy's transactions between resi dents and non-residents, in other words, balance-
of-payments movements.  Consequently, trade me asures taken to stabilize the balance-of-payments 
situation will not lead to any major changes in th e freely disposable reserves, but will affect the 
liquidity of the economy. 
 In a dollarized economy, the external sector  becomes the source that generates the money 
supply through the development of production. 
 An economy such as Ecuador's, without any capacity to issue money, becomes much more 
dependent on its economic relations with the outsi de as it has no margin of action in terms of 
exchange or monetary policy;  the supply of fore ign currency in the country is at the same time the 
supply of money and the adjustments this implie s have a direct impact on the real economy.  
Consequently, changes in the economy's liquidity will to a large extent depend on the balance of 
payments figures.  External shocks that cause rapi d and significant changes in the inflow of foreign 
currency into the country can m ean significant changes in employ ment and the population's well 
being.  The development of the external sector and trade policy thus become essential pillars of 
economic policy.  In a situation where oil prices are falling and external demand is shrinking (which also affects non-oil exports), it becomes unavoidabl e to adopt temporary measures to offset the 
liquidity squeeze in the economy caused mainly by  the downward trend in the trade balance.  WT/BOP/R/91 
 Page 9 
 
 
 For the foregoing reasons, the Government now has to monitor and influence factors that can 
affect the economy's liquidity, reflected  in balance-of-payments movements, inter alia  in the 
following sectors:  exports and imports, remittances, foreign direct investment, and public and private 
debt. 
 With the advent of the international financ ial crisis, the Ecuadoria n economy was faced with 
the worst possible scenario.  Everything that could go wrong went wrong.  The negative impact of the 
crisis on the balance-of-payments situation can be summed up as follows: 
 (i) A drastic and unprecedented decrease in ear nings from oil because of the decline in 
the price of crude oil on international markets; 
 (ii) a downturn in non-oil exports caused by lower external demand and the sharp fall in 
the prices of all of the main export pr oducts which, in Ecuador's case, are 
commodities whose prices have fluctuated even more than what might be called 
customary; 
 (iii) a significant reduction in remittances fr om Ecuadorian migrants abroad because of 
growing unemployment in the economies employing Ecuadorian migrant labours; 
 (iv) fewer lines of credit and resources to finance the balance of payments; 
 (v) reduced in foreign direct investment  flows owing to the slowdown of the world 
economy; 
 (vi) the devaluation or depreciation of the currencies of Ecuador's main trading partners 
added to the recent appreciation of the US  dollar, adding to the decline in the 
competitiveness of Ecuadorian goods and services exports. 
Mr Chairman, 
 Dollarization does not protect the economy from a balance-of-payments crisis but imposes an 
equally automatic adjustment mechanism.  It coul d be argued that theoretically, a dollarized economy 
is not confronted with a balance-of-payments crisis .  Nevertheless, 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 mean a dras tic decline in the economy's liquidity.  In such 
cases, the end result is a fall in the level of GDP , which will be accompanied by less capacity to 
generate resources whether fiscal, i.e. tax revenue, or  external, chiefly exports and attracting foreign 
capital. 
 The deficits in the external accounts recorded  in late 2008 and the discouraging forecasts for 
2009, at a time when there is also a marked deteri oration in the international climate, incited the 
Government of Ecuador to implem ent a series of measures to prevent a sharp decline in the economy's 
liquidity. 
 After the sustainability of the economy's extern al sector for 2009 had been evaluated, it was 
determined that the estimated balance of paymen ts would see a trade deficit of US$3,973 million (8% 
of GDP), which would not be consis tent with levels that guarantee Ec uador's external sustainability.  
In fact, in order to achieve a sustainable trade performance, Ecuador should lower this deficit to 
around US$2,693 million. 
 This is why Ecuador has found it necessary to turn to Article XVIII:B of the GATT 1994, 
applying temporary restrictive import measures in orde r to prevent further deterioration of its balance 
of payments, particularly the trade balance, serious ly affected by the current international crisis, WT/BOP/R/91 
Page 10  
 
which has had an impact on Ecuador's major sources of foreign currency:  o il, remittances and non oil 
exports.  The measure in question is part of a ser ies of policies intended to  resolve the structural 
deficit in the non oil trade balance and the ex ternal sector's marked dependence on oil. 
 Although Article XVIII:B of the GATT 1994 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, this Article also pr ovides that the measure may be taken in order to 
safeguard the external financial position and ensure an  adequate level of reserv es (which in Ecuador's 
case means maintaining a sufficient level of liquidity) for the implementation of its programme of economic development. 
Mr Chairman, 
 After having adopted dollarization, Ec uador's economy showed greater dynamism, 
particularly in the areas of consumption and investment, which in turn helped to increase domestic demand.  During the post dollarization period (2000- 2007), Ecuador had an average growth rate of 
4.%, higher than the average growth over the period 1990-1999 of 1.8 %;  the GDP growth rate in 2008 is forecast to be 5.3%.  Partly as a result of  the international economic crisis, however, it is 
estimated that growth in 2009 will barely reach 1. 4%, a much lower percentage than the average over 
the period 2000-2007 and even lower than the av erage for the period prior to dollarization. 
 Following the dollarization of the economy, per capita GDP in nominal terms rose from 
US$1,703 in 2001 to US$3,366 in 2007.  Another major achievement of dollarization has been the remarkable stability in price trends in the economy.  This, in its turn, help ed to stabilize production 
costs and business forecasts, and to restore confid ence in the currency and in the financial system 
(strongly compromised by the crisis in 1999), all of which contributed to an expansion in credit and 
more dynamic consumption, invest ment, exports and imports.   
 Factors such as these account for the popular support for dollarization and for the national 
government's decision to maintain the monetary regi me in force as a tool for development and for the 
well-being of the Ecuadorian economy. 
 In spite of the growth in the purchasing power of the Ecuadorian population and increased 
consumption as a result of more rapid economic gr owth, the stability achieved with dollarization was 
not jeopardized by the increase in purchases abroad as other external sources of revenue allowed very 
favourable balances in external accounts.  For exampl e, the trend in external demand combined with 
steadily rising oil prices (Ecuador's major expor t) meant that large amounts of dollars entered 
Ecuador, not only from increased oil exports but also  non oil exports.  Moreover, the money sent from 
abroad in the form of remittances,  which became the country's second largest source of revenue (after 
export earnings), provided the liquidity needed to allow the system to function properly and contributed towards the dynamism of all econom ic activities, mainly through bank loans. 
 With the international financial crisis, ex ternal conditions for the Ecuadorian economy 
deteriorated for the reasons already mentioned:  re duced global demand, fall in the price of crude oil 
and other commodities, decline in remittances from abroad, and reduced dynamism in the developed 
economies.  These circumstances suggest that there will be no improvement in the global economy's recessionary trend in the short term.  Consequently , the Government of Ecuador has to use the few 
tools available to it to defend the monetary regime  that has allowed it to achieve the macroeconomic 
results described earlier, promote the normal development of economic activities in Ecuador and minimize the cost of the impact of the in ternational crisis on the domestic economy. 
 In such a situation, the fact that Ecuador is one of the most open economies in the region 
increases its level of exposure to global markets;   moreover, the adoption of the dollarization 
monetary regime means that its external sector is much more sensitive to chan ges in the international  WT/BOP/R/91 
 Page 11 
 
 
situation.  To make matters worse, a special f eature of Ecuador's economy is its focus on primary 
mining exports, which means there is little diversifi cation of production for e xport or domestic use, 
the latter having to be covered by imports.  As  exports focus on a few commodities whose main 
characteristic is fluctuating international prices  and there are few export outlets, the Ecuadorian 
economy's external sector has become increasingly vulnerable. 
 The Government of Ecuador is aware that these problems are largely structural, but the fact 
remains that the country is faced with an extremel y serious cyclical situation which, to the extent 
possible, should be corrected or prevented using pr ecisely the kind of contingency measures that it 
adopted, in a responsible manner and in keeping w ith its international commitments, following the 
proper procedures and seeking the understandi ng and support of its trading partners. 
Mr Chairman, 
 For the reasons set out above, I think it is a ppropriate to provide you with a brief outline of 
the development of Ecuador's balance-of-payme nts current account, which has basically been 
determined by the trade balance and current transfer s.  The surpluses in the current account were the 
result of higher oil prices and the increased flow of resources from remittances from migrant workers. 
 With the global crisis, the structural problem affecting the external sector of the Ecuadorian 
economy, which became even more obvious after th e adoption of the dollarization monetary regime, 
has been exacerbated.  In fact, although Ecuador has traditionally had a non-oil trade deficit, the 
deterioration in the non-oil trade balance only became exponential from 2000 onwards, increasing the 
deficit from US$729 million in 2000 to US$6,914 million in the period January-November 2008. 
 Between January and November 2008, the gl obal trade balance showed a surplus of 
US$1,374 million, buoyed up by a positive figure  of US$8,287 million for the oil balance.  
Nevertheless, from September 2008 on wards, the total trade balance ha d a deficit of US$219 million, 
reaching US$535 million in October and US$500 million in November, changes that can be explained by the continued fall in oil prices, which directly af fected the economy's liquidity.  In fact, because the 
trade balance is heavily dependent on variations in o il prices, it is estimated that a decrease of US$1 in 
the price of Ecuadorian crude would mean a redu ction in total net foreign currency income of 
approximately US$100 million per year. 
 Ecuador supplied a very complete basic docum ent which is available to Members under the 
symbol WT/BOP/G/15.  It contains a more detaile d and precise version of the information to which I 
am referring as well as the charts which I am pres enting today.  Moreover, in the course of these 
consultations we remain at the disposal of Me mbers who may require further explanation of the 
information we have supplied, information which sh ould help to explain the reasons for the measures 
Ecuador has introduced. 
 Over the past few years, exports and imports gr ew rapidly in Ecuador.  However, the situation 
took a turn for the worse during the first months of 2008 with the brutal development of the world financial crisis and the dramatic fall in oil prices:  and while the growth trend in exports turned into a 
sharp decline, imports did not follow the same patte rn, so that the trade deficit was aggravated in 
arithmetic terms, resulting in a balance-of-payments s ituation that was unsustainable in the short term. 
 At the same time, the fiscal account position depends heavily on oil revenue, which for the 
last eight years has accounted for 40% of the total public sector revenue.  However, it is forecast that 
the fiscal situation will worsen in 2009 as a result of the plunge in oil prices.  Oil revenue will account 
for 31% of the NFPS total revenue, with a decrea se of 66% in nominal terms, falling from US$8,899 
million estimated for 2008 to US$3,001 million for 2009. WT/BOP/R/91 
Page 12  
 
 Moreover, non-oil income has also been eff ected, with a growth rate falling from 28.7% in 
2008 to 7.3% in 2009 as a result of the general decline in economic activity. 
 This is only a summary of the complex macroe conomic situation facing the country.  Detailed 
information can be found in the basic document men tioned earlier.  It should also be summarized in 
the International Monetary Fund's evaluation, an d the technicians of the Ecuadorian delegation 
present at these consultations would be happy to respond to any concerns and to provide further 
details in this respect. 
Mr Chairman,  While reserving the right to revert to the macr oeconomic justification of the measures later on 
in these consultations, let me turn briefly to  the main characteristics of those measures. 
Scope of application
: 
 Ecuador carefully selected a relatively small nu mber of products to which the measures would 
be applied:  630 tariff subheadings, slightly more than 8% of the tariff universe.  This means that approximately 92% of its products fall outside the scope of the measures. 
 The products chosen were chiefly consumer goods, and only those which were considered to 
be an non-essential or luxury goods and which did not  affect the economy's productive activity.  In 
other words, the idea was essentially to reduce imports of goods chosen to avoid a recessive effect on 
the economy which would thwart the reflationary po licies being introduced by the Government in 
response to the international economic crisis. 
 Origin was not used as a criterion for determ ining the products to which the measures would 
be applied, and the MFN principle was fully respect ed in order to avoid any inconsistencies with 
Ecuador's international obligations.  Nor was any protectionism involved in the application of the 
measures:  the most obvious proof of this is that the products selected consist mainly of goods that 
were not produced locally or with little local content for which Ecuador is a net importer. 
Duration
: 
 The measure is purely a temporary one:  on this we must be absolutely clear.  Its planned 
duration is until the beginning of next year, in other words approximately eight more months.  This is 
perfectly clear, because the objective was essenti ally to cool off an economy overheated by 
expenditure that has affected the levels of li quidity needed for it to continue to function. 
Implementation of the measures : 
 Ecuador has used three different methods based chiefly on effectiveness, and it has done so in 
such a way as to ensure that they  affect trade flows only to the extent strictly necessary and without 
interrupting existing flows.  It has been in Ecua dor's interest to preserve trade relations between 
suppliers and importers.  What it has sought is si mply a partial reduction in trade, and under no 
circumstances does it wish to suspend or interrupt traditional trade flows. 
• The first method consists of imposing an ad valorem  surcharge of 30 to 35 % on 75 
tariff subheadings. 
• The second method consists of imposing a specific tariff on 284 tariff subheadings, 
chiefly footwear and made up articles.  The reason for imposing this kind of tariff 
surcharge - untypical of Ecuador's tariff policy - is linked to the fact that an  WT/BOP/R/91 
 Page 13 
 
 
ad valorem  tax on low-cost products, which in Ecuador's case account for most of the 
imports in this category, would have virtually no effect. 
• The third method consists of imposing quantitative restrictions on 271 tariff 
subheadings.  Limits were established accord ing to the value of imports, with a 30 to 
35% reduction in the value imported in 2008.  It should be stressed that this reduction 
generally corresponds to import levels for 20 07, in other words prior to the massive 
increase in imports recorded in 2008.  Mo reover, consultations with the Ecuadorian 
import sector and estimates made by the Government revealed that the imposed reduction in imports of 30 to 35% of the value imported in 2008 coincides with private and official estimates of the fall in  demand that will in any case take place in 
2009 as a result of the world crisis and the slowdown of Ecuador's economy.  In other 
words, this method essentially seeks to ensure  that efforts to limit the outflow of 
foreign exchange from the economy are effective. 
  The introduction of quantitative restric tions is based on Article XVIII.B of the 
GATT 1994.  Using this instrument, Ecuador allows other Members of the WTO that 
supply Ecuador to maintain market access leve ls within the quota, in some cases with 
an applied tariff of 0% and in others with  a higher applied tariff, in accordance with 
Article VIII of the GATT 1994. 
The quantitative restrictions have been dete rmined in such a way as to represent the 
total amount of permitted imports of e ach product, not allocated among supplying 
countries, in accordance with Article XIII.2( a) and 3(b) of the GATT.  The measure 
has been established on the basis of the value of the quota set for each product, whose 
amount has been published by Ecuador.  The country also undertakes to publish any 
changes that may occur. 
In addition, for internal purposes, it is e nvisaged that quantitative restrictions should 
apply on the basis of quota allocation by im porter and subheading on an annual basis.  
Accordingly, the quotas are allocated by the COMEXI once only according to the 
share corresponding to each importer calculat ed on the basis of average imports over 
the previous three years.  In addition, a percentage under the heading "Others" has 
been reserved for new importers. 
Mr Chairman,  If I may sidetrack from the issue before this Committee, let me add that balance-of-payments 
safeguards were also applied in the framework of Ecuador's integration agreements at the regional 
level.  The reason this was done was to make the measure more effective and to make it as 
non-discriminatory as possible. 
 In this connection, it should be noted that Ec uador maintains permanent consultations on this 
matter in the appropriate framework with its partne rs in the integration processes, and is sincerely 
grateful for the understanding and support it has re ceived at the political, commercial and technical 
levels.  In the context of the Andean Community, th e measure was subjected to a preliminary analysis 
by the appropriate authority and the General Secret ariat of the Andean Community confirmed, in a 
thorough and extensive analysis (see Resolution 1, 227) that Ecuador was having trouble with its 
balance-of-payments equilibrium, that the nec essary conditions existed for the application of 
emergency global safeguard measures and that the me thods used to apply the measures, as described 
earlier, were justified under Andean law.  The only matter that remains pending is a request by 
Ecuador in the framework of the Andean Communi ty for reconsideration with respect to the 
maintenance of the preferential margin in the contex t of the application of the safeguard.  In any case, WT/BOP/R/91 
Page 14  
 
it is for the sake of transparency that we decided to mention this matter even though it does not fall 
within the competence of this Committee. 
 Finally, Mr Chairman, I would like once again to thank you and all the members of the 
Committee, the Secretariat, and the International Mone tary Fund for the attention you have given this 
matter and for the determination you have shown to push these consultations forward towards a 
successful outcome and to conclude the discussions with a consensus report in the course of this 
week.  I am sure that under your leadership, Mr Chairman, and with the understanding and the 
positive attitude shown by all WTO Members, we shall achieve that goal.  I repeat that Ecuador is 
most grateful to its trading partners with whom it has held consultations over the past few months, 
both bilateral and in the framework of its different regional integration agreements.  We are especially 
grateful for the understanding and support shown by our Andean, MERCOSU R and LAIA partners, 
not to mention Panama and other countries in th e region, as well as the United States, the European 
Union, Switzerland and Canada, whos e concerns we have addressed bilaterally and with whom we 
continue to cooperate in the same way as with all other WTO Members. 
 I understand the systemic concerns that may ari se with the reactivation of the work of this 
Committee after several years in res ponse to the international financial crisis.  I think we must bear 
two things in mind:  firstly, as we have seen, fo r a combination of reasons including its special 
monetary regime and the particular sensitivity of the ex ternal sector to fluctuations in the price of oil 
and other commodities, Ecuador is a special case;  secondly, to the extent th at there are concerns 
about setting a precedent, Ecuador's measured, restrict ed and provisional appli cation of the safeguard 
is a good example of the use of the measures stri ctly necessary for which a WTO Member can invoke 
Article XVIII.B of the GATT 1994, applying trade r estrictions that are consistent with multilateral 
rules as a policy measure, a series of concerted actions, to restore its balance-of-payments equilibrium. 
 Thank you.  WT/BOP/R/91 
 Page 15 
 
 
ANNEX 2 
 
Statement of the representative of the International Monetary Fund  
 1. In the context of a very favorable external  environment, domestic demand grew strongly 
during 2005–08, boosting ec onomic growth. Oil prices for the Ecuadorian mix rose from an average 
of US$24 a barrel in 2000–04 to US$83 in 2008.
1  Oil export receipts almost doubled during 2005–08, 
accounting for about 40 percent of central government revenue and 60 percent of exports.  With large 
increases in public spending and domestic credit, the economy grew at an average of 4¾ percent a 
year during 2005–08.  The external current account recorded surpluses averaging about 2½ percent of 
GDP a year during this period.  CPI inflation was low through 2007 but rose to 8¾ percent last year, 
owing to demand pressures and the gl obal shock to food prices (domestic fuel prices are regulated by 
the government and have remained unchanged in recent years). 
2. In the fiscal accounts, the surge in revenue  was accompanied by a sharp increase in 
expenditure.  Non-financial public  sector (NFPS) revenue rose by 10 ⅓ percentage points of GDP 
during 2005–08, with oil revenue accounting for ab out 40 percent of the increase. Primary spending 
grew by 12 ⅓ percentage points of GDP over the same peri od, with about two-thirds of this increase 
explained by higher capital outlays.  The NFPS regi stered surpluses averaging 1½ percent of GDP 
during 2005–08. These surpluses, together with st rong GDP growth, helped lower the public debt-to-
GDP ratio from 39 percent of GDP in 2005 to around 28 percent in 2008.  Public sector deposits at the 
central bank rose to close to 8 percent of GDP at e nd-2008, a level similar to that of official net 
foreign assets (NFAs). 
3. Since August 2008, Ecuador's external environm ent has deteriorated sharply.  Oil export 
prices (Ecuadorian mix) fell from US$97 a barrel in the first seven months of 2008 to US$54 a barrel in the seven-month period through Fe bruary 2009.  Non-oil exports a nd worker remittances have also 
been adversely affected, mainly because of the gl obal downturn.  Ecuador's monetary (dollarization) 
regime constraints policy options to respond to ongoing external shocks.  In this context, and with a 
substantial weakening in the public finances, o fficial NFAs have declined from a peak of 
US$6.5 billion (4¾ months of imports) at end- September 2008 to US$3.0 billion (2.2 months of 
imports) in early April 2009. 
4. Staff projects that the economy will contract in 2009, before initiating a slow recovery in 
2010. Consistent with the Spring 2009 WEO forecast, staff projections are based on an oil price of 
US$41 a barrel for the Ecuadorian mix in 2009 and US$54 a barrel in 2010.
2  R e a l  G D P  w o u l d  
contract by 2 percent in 2009, reflecting the difficult global environment, expected fiscal 
retrenchment, and lower domestic credit growth.  In 2010 growth is projected at  1 percent, consistent 
with the expected recovery in the world economy.   CPI inflation is projected to decline to 2–
2½ percent in 2009–10, as global inflation falls and weaker activity eases domestic demand pressures. 
5. In the fiscal accounts, the authorities face a cha llenge because of the sharp drop in revenue.  
They have indicated that they plan  to adjust capital spending as needed  in response to lower revenues.  
Under current WEO oil prices, staff projects an overall NFPS deficit of 4 percent of GDP in 2009.3  
The non-oil primary deficit—a better measure of the underlying fiscal position—would, however, 
decline from 9¾ percent of GDP in 2008 to 5 percen t of GDP this year.  These projections assume full 
implementation of the authorities' planned cuts in  capital spending of about 3½ percent of GDP in 
2009.  Staff projects the overall NFPS deficit to d ecline to 1¾ percent of GDP in 2010, reflecting 
mainly an expected recovery of oil prices. 
                                                      
1 Ecuadorian oil trades at a discount relative to the WTI, due to its lower quality. 
2 The terms of trade are projected to decline by 6½ percent in 2009, and improve by 4 percent in 2010. 
3 For every US$10/barrel drop in oil prices, the N FPS deficit increases about 1¾ percent of GDP and 
net export receipts decline by a similar magnitude. WT/BOP/R/91 
Page 16  
 
6. Gross NFPS financing needs are projected at about 6½ percent of GDP in 2009 and 3½ 
percent in 2010.  The government has requested fi nancing from regional multilateral institutions for 
2009, including program-related loans totalling around US$1.2 billion (2 ⅓ percent of GDP).
4  
Additional budget support is envisag ed for 2010, although on a smaller scale.  The authorities would 
also need to draw down on NFPS deposits at the central bank. In November 2008, a report prepared 
by a presidential debt auditing committee concluded th at part of the government's external debt was 
either "illegal" or "illegitimate".  In Decemb er, the government announced that that it would 
discontinue servicing its debt on tw o global bonds with a face value of  US$3.2 billion.  A third global 
bond (US$0.7 billion) has continued to be serviced.   The debt moratorium has reduced external 
financing options, including for the private sector.  The authorities have announced that they will 
present a debt restructuring proposal to bondholders in late April. 
7. The external accounts are proj ected to deteriorate sharply in 2009, before improving 
moderately in 2010.  In addition to the drop in export receipts and worker remittances, the current 
account would be affected by the appreciation of th e currency in real terms.  In large part, this 
appreciation reflects the strengthening of the U.S. do llar, including against the currencies of some of 
Ecuador's regional trading partners .  Ecuador's trade-weighted real  exchange rate appreciated by 
16 percent in the 12-month period through February  2009.  Staff projects the external current account 
to shift from a surplus of 2½ percent of GDP in 2008 to a deficit of 3½ percent of GDP in 2009.  This 
deficit would be financed through foreign dir ect investment, borrowing from regional multilateral 
institutions, and use of NFAs.  Assuming that th e government fully secures the multilateral program 
financing that it is seeking for 2009, official NFAs would decline from 3¼ months of imports at end-
2008 to under 2 months of imports at end-2009.  In 2010, the curre nt account deficit would fall to 
2¼ of GDP, consistent with an expect ed improvement in the terms of trade.5  However, official NFAs 
would decline further. 
8. The authorities have adopted administrative me asures to limit imports and other payments 
abroad. In November, Ecuador introduced changes to its tariff structure consisting mainly of increases 
in the duties on consumer goods, with some ta riff reductions for a more limited number of 
intermediate and capital goods.  Citing the risks of large balance of payments pressures for the 
functioning of the economy and the financial syst em under the dollarization regime, in January 2009 
the authorities adopted more stringent restrictions  on imports of consum er goods comprising about 
30 percent of 2008 non-oil imports.  These measures included hikes in ad-valorem tariffs, specific import duties, and quantitative restrictions.  Th e authorities expect these measures to lower total 
imports by about 3 percent of GDP in 2009, and have  indicated that the restrictions will be removed 
after one year.  In addition, to limit external outflows, the authorities have increased the tax on 
payments abroad (from ½ percent to 1 percent) and broadened its coverage.  They have also imposed 
a tax (1 percent) on liquid assets held  abroad by financial institutions. 
9. In the financial system, the authorities have taken a number of welcome steps recently. 
Financial soundness indicators appear generally good, although some sma ll institutions show 
weaknesses. In this context, legislation to upgrad e the financial safety ne t and strengthen prudential 
regulation and supervision was enacted in late 2008.   The norms and regulations to implement this 
legislation have been put in place, and include :  (i) introduction of new, improved methods of 
supervision;  (ii) creation of a new liquidity fund and establishing the guiding principles for its 
operation;  (iii) introduction of norms for bank reso lution procedures based on international standards;  
and (iv) creation of a new deposit insurance agency . Steps have also been taken to increase capital 
                                                     
 
4 The authorities have requested program-related support from the Inter-American Development Bank, 
the Andean Investment Corporation, and the Latin American Reserve Fund.  The authorities expect that these 
disbursements will take place in the remainder of this year. 
5 This projection also assumes that the bulk of import restrictions in troduced recently (p aragraph 8) are 
removed in 2010, as envisaged by the authorities.  WT/BOP/R/91 
 Page 17 
 
 
cushions by limiting dividend payments, strengthen the independence of financial supervisors, and 
increase the resources available to the new liquidity fund. 
10. Some progress has been made in structural fiscal  reforms.  Over the past two years, the 
authorities have taken steps to deal with budget rigidities—including by reducing non-constitutionally 
mandated earmarking of tax revenu es—and to improve tax administration. However, budget rigidities 
persist, while energy subsidies continue to be poorly targeted. 
__________