Ecuador WT/TPR/S/254 
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I. ECONOMIC ENVIRONMENT 
(1) OVERVIEW  
1. Ecuador remains a small, fairly open, economy, very much dependent on oil.  The oil sector, 
which has traditionally been heavily reliant on fore ign direct investment (FDI), typically accounted 
for 14%-20% of GDP, more than half of expor t earnings, and 20%-30% of government revenues, 
during the period under review (2005-11).  Ecuador is  also the world's largest exporter of bananas.  
Ecuador's economy remains vulnerable to external shocks, including the recent global economic crisis 
that began in 2008.  While Ecuador's monetary regime, involving the use of the U.S. dollar as the national currency since 2000, has contributed to  macroeconomic stability, it has constrained 
macroeconomic policy options in responding to such s hocks.  The outcome of th e recent global crisis 
was a slowdown in growth (Table I.1) due in larg e part to the sharp reduction in oil export prices
1 as 
well as volumes (owing to longstanding underinvestme nt in the sector), which was compounded by a 
sharp drop in expatriate Ecuador ians' remittances, the second most important source of foreign 
currency.  Given the Government's considerable dependence on oil export receipts for revenue, public 
finances deteriorated, and as a consequence, in 200 8 Ecuador was unable to re-finance its external 
debt.  With the weakening of public finances, offi cial net foreign assets (freely available international 
reserves) declined from US$6.5 billion (equivalent  to 4.75 months of imports) at the end of 
September 2008 to US$3 billion (2.2 mont hs of imports) in early April 2009.2  Subsequent to 2008, 
FDI also fell sharply, partly as a result of an in creasingly uncertain investment climate related to 
policy changes. 
Table I.1  
Selected macroeconom ic indicators, 2005-10  
  2005 2006 2007 2008 2009 2010 
Real GDP (US$ million, 2000 prices) 20, 966 21,962 22,410 24, 032 24,119 24,983 
Current GDP (US$ million) 36,942 41,705 45,504  54,209 52, 022 57,978 
GDP per capita at current market price (US$) 2,795 3,110 3,345 3,927 3,715 4,082 
Population (thousands)a 13,215 13,408 13,605 13,805 14,005 14,205 
Overall government accounts (% change)  
Real GDP (at 2000 prices) 5.7 4.8 2.0 7.2 0.4 3.6 
Consumption 6.8 5.2 3.9 7.4 -0.1 6.9 
Private consumption expenditure 7.2 5.4 3.7 6.9 -0.7 7.7 
Government consumption expend iture 3.5 3.7 6.1 11.5 4.0 1.4 
Gross fixed capital formation 10.9 3.8 2.5 16.1 -4.3 10.2 
Exports of goods and non-factor services 8.6 8.8 2.3 3.3 -5.9 2.3 
Imports of goods and non-factor services 14.1 9.1 7.9 9.9 -11.6 16.3 
XGS/GDP (%) (at current market price) 30.9 33.9 35.1 37.9 29.5 32.9 
MGS/GDP (%) (at current market price) 32.0 33.0 34.4 37.8 32.0 38.6 
Urban unemployment rate (%) 9.3 9.0 6.1 7.3 7.9 6.1 
Urban employment rate (%) 90.7 91.0 93.9 92.7 92.1 93.9 
Urban underemployment rate (%) .. .. 50.2 48.8 50.5 47.1 
Total unemployment rate (%)b 7.9 7.8 7.4 6.9 8.5 7.6 
Prices and interest rates (%)  
Inflation (CPI, % change) 2.1 3.3 2.3 8.4 5.2 3.6 
Discount rate of the central bank (end-period) 3.0 2.9 5.6 5.1 0.2 0.2 
Commercial one-year deposit rate (end-period) 4.3 4.9 5.6 5.1 5.2 4.3 
Commercial one-year lending rate (year average) 8.7 8.9 9.9 9.8 9.2 9.0 
Interest rate spread 4.4 4.0 4.2 4.7 4.0 4.8 
Exchange rate 
Real effective exchange rate (% change)c 3.2 -0.3 4.8 0.0 -6.4 -0.7 
Table I.1 (cont'd) 
                                                      
1 For example, oil export prices fell from US$97 a barrel in the first seven months of 2008 to US$54 a 
barrel in the seven month period to February 2009. 
2 WTO document WT/BOP/R/91, 11 June 2009, Annex 2.  WT/TPR/S/254 Trade Policy Review 
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  2005 2006 2007 2008 2009 2010 
(% of GDP)  
Fiscal balance 
Total revenued 16.4 16.5 18.7 25.5 22.3 25.8 
Oil 4.2 4.1 3.9 8.6 4.4 7.6 
Non-oil 12.1 12.4 14.8 16.9 17.8 18.2 
Tax revenue 10.1 10.2 10.4 12.1 13.9 14.9 
Total expenditured 16.9 16.8 19.0 26.5 27.3 28.2 
Current expenditure 12.8 12.8 13.2 15.7 17.2 17.1 
Capital expenditure 4.1 4.0 5.8 10.9 10.2 11.1 
Overall fiscal balance -0.5 -0.2 -0.1 -1.1 -5.1 -2.4 
Central government debtd 10.0 7.9 7.1 6.7 5.5 8.0 
Saving and investment 
Gross national savinge 24.6 27.7 27.9 30.1 22.6 20.9 
Gross investmente 23.6 23.8 24.3 27.9 23.3 25.2 
Public investment 4.9 4.6 7.0 12.8 12.1 11.3 
External sector 
Current account balance 1.3 4.2 3.7 2.5 -0.3 -3.3 
Net merchandise trade 2.1 4.2 4.0 2.9 0.3 -2.7 
Merchandise exports 28.3 31.6 32.7 35.9 27.7 31.2 
Merchandise imports 26.3 27.4 28.7 33.0 27.4 33.9 
Services balance -3.1 -3.1 -3.0 -3.1 -2.6 -2.7 
Capital account 0.0 0.0 0.0 0.0 0.0 0.0 
Financial account -0.3 -5.0 -0.6 -0.4 -4.5 1.4 
Direct investment 1.3 0.7 0.4 1.9 0.6 0.3 
Terms of trade (2000=100) 122.9 141.1 157.0 166.6 119.7 155.0 
Coverage index (exports / imports) 105.6 112.8 111.0 106.1 98.3 89.8 
Merchandise exports (% change)f 31.4 25.9 12.9 30.9 -25.9 25.3 
Merchandise imports (% change)f 26.4 17.5 14.4 37.3 -20.3 37.7 
Service exports (% change)f -0.2 2.4 15.8 9.5 -6.6 11.4 
Service imports (% change)f 8.9 9.3 9.8 16.3 -13.1 13.9 
Freely available international reserves (US$ million) 
(RILD) 1,667.9 1,455.6 2,762.8 3,711.6 2,846.5 1,387.3 
In months of imports of goods and services 1.7 1.3 2.1 2.1 2.0 0.7 
Total external central Government debt  (US$ billion) 10.9 10.2 10.6 10.1 7.4 8.7 
Debt service ratiog 94.5 71.9 66.2 48.6 47.3 44.6 
..  Not available.  
a    Data for the period 2008-10 are official projections  from the National Statistics and Census Institute (INEC).  
b    According to IMF International Financial Statistics.  
c    Sample of 18 countries that have major trade with Ecuador, excluding petroleum.  
d    The IMF provides different data in the World Economic Ou tlook database (WEO): the genera l government revenue represented 
 (as a % of GDP) 24.4% in 2005;  27.2% in 2006;  29% in 2007;  33.7% in 2008;  29.8% in 2009;  and 34.9% in 2010.  The 
 general government expenditure accounted for 23.7% of GDP in 2005;  23.6% in 2006;  26.8% in 2007; 34.5% in 2008;  34.5% 
 in 2009;  and 35.5% in 2010.  The general government gross debt  was of 43.8% of the GDP in 2005;  35.4% in 2006;  33.2% in 
 2007;  26.3% in 2008;  24.7% in 2009;  and 20.4% in 2010. 
e    According to EconomyWatch.  
f    Figures are taken from the balance of payments.  
g    Debt service in % of exports of goods and services.  
Source :  Central Bank of Ecuador online information, " Estadísticas Económicas ".  Viewed at:  
http://www.bce.fin.ec/con tenido.php?CNT=ARB0000003;  National Stat istics and Census Institute online 
information.  Viewed at: ht tp://www.inec.gob.ec;  IMF on line information, "I nternational Financ ial Statistics".  
Viewed at:  http://www.imfstatistics. org/imf/;  IMF online information, "World Economic Outlook database". 
Viewed at: http://www.imf.org/exte rnal/pubs/ft/weo/2011/01/weodata/in dex.aspx;  EconomyWatch online 
information, " Ecuador Economic Statistics and Indicators ". Viewed at:  http:/ /www.economywatch.com/ 
economic-statistics /country/Ecuador/;  Economis t Intelligence Unit (2011), Country Report:  Ecuador , March. 
Viewed at:  http://country.eiu.com/FileHandler.ashx?i ssue_id=1957854180&mode=pdf;  and data provided by the 
Ecuadorian authorities. 
2. Since 2008, the Government has been attempting to  re-finance its external debt and, at the 
same time, diversify Ecuador's economy.  Initially,  it sought to curb imports in January 2009 by 
imposing safeguard measures, but these were removed in July 2010.  Subsequently, with a view to Ecuador WT/TPR/S/254 
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reducing imports and promoting expor ts, the Government introduced, inter alia , the 2010 Organic 
Code of Production, Trade and Investment, which,  in accordance with the unorthodox inward-looking 
economic and social development strategy outlined in Ecuador's 2008 Constitution, included a variety 
of measures aimed at encouraging selective import substitution, investment, and production of higher 
value-added goods, particularly by small and medium -sized enterprises located in regions outside the 
major business centres (Chapter II(2), (5), and (8)).  At the same time, this strategy involves a greater 
role for the State in the economy, especially in "s trategic" sectors, public utilities, and infrastructure, 
to correct a long-standing lack of investment in these areas, and pave the way for sustainable growth.  
Insofar as the greater role of the state entails increased public spending/investment, it has obvious 
implications for fiscal policy, whose prudence is n ecessary to ensure that the functioning of Ecuador's 
currency board is not undermined.  Fiscal prudence re quires tax reform to ensure that sufficient taxes 
are collected as efficiently and as equitably as possi ble to finance the public  expenditure necessary to 
meet Ecuador's developmental needs. 
3. The effectiveness of Ecuador's new economic a nd development strategy  and related policies 
in diversifying the economy depends very much on  the extent to which it contributes to improved 
productivity, and thus the international competitiven ess of Ecuador's businesses.  In this regard, 
Ecuador is among the world's least competitive economies, particularly vis-à-vis  neighbouring 
non-dollarized economies.3  On the other hand, Ecuador's human development performance has 
improved4 partly due to increased public investment in social programmes.  Moreover, in 2009, the 
percentage of families liv ing below the poverty line was estimated to be 4.7%.5  There has been a 
slight fall in income inequality as a result of, inter alia , the implementation of more progressive 
taxation, low interest rates, business promotion, and salary increases.6 
(2) RECENT ECONOMIC PERFORMANCE  
4. After peaking at 7.2% in 2008, Ecuador's GD P growth dropped to 0.4% in 2009, largely due 
to a reduction in oil prices and oil output (sections (1 ) and (5)).  The drop in the latter was related to 
long-standing underinvestment in the sector, renegotiati on of oil contracts, and an apparent decline in 
business confidence7, resulting from uncertainty over polic y changes associated with the 2008 
                                                      
3 Ecuador ranked 105th out of 139 countries surveyed by the World Economic Forum, compared to 87th 
out of 117 countries in 2005-06 (World Economic Forum, 2010). 
4 In 2009, Ecuador ranked 77th out of 169 countries (89th out of 177 countries in 2005) in the UN 
Human Development Index (UNDP online information, "Ecuador:  International Human Development 
Indicators".  Viewed at:  http://hdrstats. undp.org/en/countries/profiles/ECU.html). 
5 This percentage represents the population living be low the specified poverty line of purchasing power 
parity (PPP) of US$1.25 a day (UNDP online information, "Ecuador:  International Human Development 
Indicators".  Viewed at: http://hdrstats.undp.org/en/count ries/profiles/ECU.html).  According to the National 
Statistics and Census Institute (INEC), during the pe riod 2006-2010 the national poverty level dropped by 
4.86 percentage points.  Ministry of Economic and Social Inclusion (MIES) programmes that contributed to the 
progress in poverty reduction, include Human Development Bond, and Human Development Credit, as well as proposals or initiatives in the context of the "popular  solidarity economy", includi ng preferences for micro, 
small and medium-sized enterprises in government procurement (Chapter III(2)(ix)).  
6 Ecuador's GINI coefficient (urban) fell from 0.531 in 2005 to 0.485 in 2009.  The GINI index 
measures the extent to which the distribution of income of households within an economy deviates from a 
perfectly equal distribution.  A GINI index of zero represents perfect equality and 1, perfect inequality (ECLAC, 
2011b). 
7 Despite perceptions from foreign observers, according to the authorities and data from 
Latinobarómetro  during the period 2006-10 confidence in the Ecuadorian political system increased by 
10.5 percentage points, and the perceived reduction of  corruption in public institutions (Chapter II(3)(ii)) 
increased by 41.2 percentage points (Latinobarómetro online information.  Viewed at:  WT/TPR/S/254 Trade Policy Review 
Page 4 
  
Constitution (Chapter II(2)).  However, growth rebo unded to 3.6% in 2010 and it is predicted to be 
5.1% in 20118, mainly due to higher oil prices, public investment in infrastructure projects, and a 
strong rebound in domestic demand.9  The sustainability of the upturn will depend in part on the 
extent to which the Government can incr ease oil-financed public investment/spending.10 
5. During the period under review, urban unemplo yment decreased from 9.3% to 6.1%;  its 
temporary rise in 2008 and 2009 was due to Ecua dor's economic slowdown and reduced private 
investment (Table I.1).11  The authorities indicated that th e decrease in unemployment as from 2010 
was the result of the revitalization of domestic production and the recovery of the economy from the 
international financial crisis.  Unemployment ra tes are expected to rema in stable at around 8%.12  
Underemployment13, decreased from 50.2% in 2007 to 47.1% in 2010, of which one quarter is 
classified as poor.14  Ecuador's dollarized wages attract mi grant workers from Colombia and Peru. 
6. Since 2005, there have been minor changes in the overall sectoral pattern of Ecuador's GDP 
and employment, which remain dominated by services (56.5% of GDP in 2010) (Table I.2 and Chapter IV(6));  the GDP share of manufacturing incr eased slightly (9.3% in 2010), while the shares 
of mining and quarrying (including oil) dropped (excep t for 2008), and agriculture remained stable, at 
around 6%. 
                                                                                                                                                                     
http://www.latinobarometro.org/latino/latinobarometro.jsp ).  According to INEC, between 2008 and 2009 the 
index of perceived quality of public services improved by 0.7 points. 
8 Ministry of Finance (2010). 
9 The IMF projects real GDP growth at 2.2% for2011 (IMF online information, "Country Info:  
Ecuador and the IMF".  Viewed at:  http://www.imf.org/external/country/ECU/index.htm?type=9998#56). 
10 In August 2010, Ecuador signed a loan of US$1 billion with the China Development Bank to fund its 
Annual Investment Plan 2010 and oil projects of national interest.  The loan terms consist of a fixed interest coupon of 6%, a four-year term (six-month grace period); according to the au thorities, this credit is not paid 
with crude nor does it provid e security or collateral for oil supply to  China.  However, two-year pre-sale 
agreements between PETROECUADOR a nd Petrochina are in place since 20 09; the first pre-sale agreement 
was signed in July 2009, and the second in February 2011, taking effect as of August of the same year.  In 
February 2011, Ecuador received a US$1 billion adva nce payment from the state firm Petrochina for the 
renewal of their commercial transaction contract for pre-sale of oil.  These financial resources are to part-finance 
investment projects under the 2011 Budget.  The loan by Petrochina provides for an interest rate of 7.08% 
(previously 7.25%) and a si x-month grace period against delivery of si x oil shipments of 360 ,000 barrels from 
the Oriente field (i.e. a total of 2.16 million barrels) each  month, and another two sh ipments of 360,000 barrels 
of crude from the Napo field (i.e. a total of 720 barrels) each month also, with a possible volume variation of 5% 
(up or down) to be decided by PETROECUADOR (Ministry of Finance, Press Release No. 4, " Se fortalece 
Alianza Estratégica Ecuador-China:  Ll egan mil millones al Ecuador para inversión ", 22 February 2011.  
Viewed at:  http://finanzas.gob.ec/pls/port al/docs/PAGE/MINISTERIO _ECONOMIA_FINANZAS_ 
ECUADOR/SUBSECRETARIAS/D IRECCION_DE_COMUNICACION_SOCIAL/PRODUCTOS_COMUNI
CACION_PRENSA/BOLETINES_DE_PRENSA/BOLET INES_2011/ARCHIVOS/B OLETIN4FEBRERO22.P
DF;  and Ministry of Finance, Press Release No. 34, " Ecuador firma crédito por mil millones de dólares con 
China ", 31 August 2010.  Viewed at: http://finan zas.gob.ec/pls/portal/docs/PAGE/MINISTERIO_ 
ECONOMIA_FINANZAS_ECUADOR/SUBSECRETARIAS/DIRECCION_DE_COMUNICACION_SOCIA
L/PRODUCTOS_COMUNICACION_PRENSA/BOLETINES_DE_PRENSA/BOLETINES_2010/ARCHIVOS
_2010/BOLETIN34AGOSTO31.PDF). 
11 Since 2007, government intervention has led to a decrease in private investment, a prime driver of 
employment and job growth (De la Paz Vela, 2010). 
12 ECLAC (2011a). 
13 Person not having reached their full employment potential, according to the Agreement on 
Employment Policy adopted by the International Labour Conference (1964). 
14 Since June 2006, Ecuador's poverty line has been US$57.29 per month and its extreme poverty line 
US$32.28 per month (INEC, undated;  and Ministry of Economic Policy Coordination, 2011e). Ecuador WT/TPR/S/254 
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Table I.2 
Basic economic indicators, 2005-10 
(US$ million and %)  
 2005 2006 2007 2008 2009 2010a 
 (Annual % change) 
GDP per economic activity at constant 2000 prices       
Agriculture, cattle, forestry, and hunting 5.1 3.5 4. 4 5.2 0.7 -0.7 
Fishing 25.5 14.1 2.4 6.5 5.4 1.9 
Mining and quarrying (including oil extr action) 1.7 3.6 -8.3 0.0 -3.3 0.2 
Manufacturing (excluding petroleum re finery) 9.2 7.1 4.9 8.1 -1.5 6.7 
Petroleum refinery -5.8 -0.3 -3.4 7.9 3.1 -19.7 
Electricity and water distribu tion 1.3 0.5 15.5 20.2 -12.2 1.4 
Construction 7.3 3.8 0.1 13.8 5.4 6.7 
Services 6.1 4.9 4.3 8.0 0.8 4.7 
Wholesale and retail trade 5.8 5.1 3.2 6.6 -2.3 6.3 
Transport, storage, and communication 2.3 5.2 3.1 5.4 3.7 2.5 
Financial intermediation 18.3 20.6 8.0 11.2 1.7 17.3 
Other servicesb 9.4 5.8 6.0 7.1 1.7 5.4 
Indirectly measured services  of financial intermediationc 8.8 24.2 11.6 12.5 3.2 15.8 
Government administration and de fence 1.9 2.8 5.9 14.6 5.4 0.5 
Other activities 4.9 5. 5 5.0 11.3 0.3 5.5 
 (% of GDP) 
GDP per economic activity at current prices       
Agriculture, cattle, forestry, and hunting 5.8 5.8 5. 9 5.7 6.1 5.9 
Fishing 0.9 0.9 0.8 0.7 0.7 0.7 
Mining and quarrying (including oil ex traction) 14.6 16.8 16.6 18.4 12.0 15.0 
Manufacturing (excluding petroleum re finery) 8.9 8.9 9.0 9.2 9.2 9.3 
Petroleum refinery 2.1 1.8 2.5 2.3 2.2 1.5 
Electricity and water distribu tion 1.5 1.3 1.3 1.2 1.1 0.8 
Construction 8.4 9.2 9.1 9.9 10.6 10.3 
Services 57.8 55.4 54.8 52.5 58.1 56.5 
Wholesale and retail trade 12.0 11.6 11.7 11.7 11.4 11.8 
Transport, storage, and communication 7.7 7.3 6.8 6.1 6.6 6.2 
Financial intermediation 2.4 2.6 2.5 2.4 2.6 2.8 
Other servicesb 27.4 26.8 26.9 25.5 28.2 27.7 
Indirectly measured services  of financial intermediationc -2.1 -2.4 -2.5 -2.4 -2.7 -2.8 
Government administration and de fence 5.3 5.1 5.3 5.1 5.8 5.4 
Other activities 5.1 4. 4 4.1 4.1 6.1 5.5 
Share of sector in total employment       
Agriculture, forestry and fishing .. .. 29.6 28.7 29.3 28.2 
Mining .. .. 0.5 0.5 0.5 0.6 
Manufacturing .. .. 10.9 11.3 10.7 11.2 
Electricity and water distribution .. .. 0.4 0.4 0.5 0.5 
Construction .. .. 6.5 6.6 6.8 6.4 
Services .. .. 52.1 52.6 52.1 53.2 
Wholesale and retail trade, personal services .. .. 20.3 19.9 19.9 20.1 
Transport, storage, and communication .. .. 5.6 5.5 5.7 5.9 
Public administration, defence, and so cial security .. .. 3.1 3.5 3.1 3.4 
Financial intermediation .. .. 0.9 0.9 0.8 0.8 
Other community, social, and personal se rvice activity .. .. 3.3 3.2 3.2 3.2 
Other servicesd .. .. 18.9 19.6 19.4 19.8 
..   Not available.  
a  Provisional.  
b  Includes accommodation, cafés and restaurants;  communication;  rental;  business and househol ds services;  education and 
 health. c  According to statistical methodology, the percentage change of negative numbers is positive when  the absolute values of thos e 
 numbers increase. 
d Other services include hotels and restaurants;  real estate, business and rental activities;  household services;  education,  social 
 services, and health. 
Source:    Central Bank of Ecuador online information, " Información Estadística Mensual N° 1911 (Mayo 2011) ".  Viewed 
 at:  http://www.bce.fin.ec/ docs.php?path=/hom e1/estadisticas/bolmensual/IEMensual .jsp;  and data received from 
 the Ecuadorian authorities.  WT/TPR/S/254 Trade Policy Review 
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7. GDP, income, and employment are underestimated to the extent that part of the economy is 
informal.  In 2004, the informal sector was thought to account for one third of gross national income.
15  The informal sector, which usually does not adhere to tax la ws and business-related 
regulatory requirements, is prot ected under the 2008 Constitution.16  Nonetheless, efforts have been 
made to integrate the informal sect or into the formal economy (sections (4)(i) and (ii)).  Consequently, 
between 2008 and 2010, the share of informal workers dropped from 54.4% to 44.6% of the active population.  In 2010, the informal sector consis ted of 1.9 million persons operating mainly in 
wholesale and retail trade, 21.7% of which were classified as poor.
17 
8. As a result of Ecuador's dollarized economy, infl ation has been relatively low, except in 2008, 
when the CPI rose to 8.4%, largel y because of increases in prices of imported oil derivatives, raw 
materials, and food (e.g. rice, cereals, flour), befo re dropping gradually to 3.6% in 2010 (Table I.1).  
The authorities expect no significant changes in inflation rates (around 3%-4%) for the period 
2011-14.18 
(3) MAIN MACROECONOMIC POLICY DEVELOPMENTS  
(i) Monetary and exchange rate policies 
9. Since January 2000, Ecuador has been a dollari zed economy using the U.S. dollar as the legal 
tender19;  this did not change under the 2008 Constituti on.  However, the formulation of monetary, 
credit, exchange rate, and financial policies is now  the exclusive domain of the Executive, and these 
policies are implemented by the Central Bank of Ec uador (BCE) and other publ ic banking institutions.  
In the absence of a national monetary and excha nge rate policy under a currency board regime, as 
from September 2009 a new Central Bank Charter ga ve the Executive full control over BCE policies 
and operations.  The same Charter eliminated BCE 's autonomy and redefined the composition of its 
Board (Chapter IV(6)(iii)).20 
10. The dollarization regime implies that Ecuador  does not issue its own money and cannot use 
monetary and exchange rate policy to manage the ec onomy.  At present, the regime appears to be at a 
crossroads as the strict fiscal di scipline necessary to maintain inte rnal and external macroeconomic 
equilibrium needs to be observed (section (ii));  hi gh public spending/investment to deliver increasing 
social outlays and efforts to reduce poverty and in equality have required expa nsionary fiscal policies 
that may be unsustainable.21  However, the risks to the dollarization regime seem to be contained at 
present given high oil prices and Ecuador's ab ility to access bilateral and multilateral lending.22 
                                                      
15 WTO document WT/TPR/S/148/Rev.1, 25 July 2005. 
16 Provisions on the informal economy were included in Article 329 of the 2008 Constitution as a way 
of guaranteeing the right to  work.  Self-employment pe rformed in authorized pub lic places is recognized and 
protected; all forms of confiscation of goods, materials or tools of self-employed people are prohibited. 
17 Ministry of Coordination of Economic Policy (2011e). 
18 Ministry of Finance (2010). 
19 WTO document WT/BOP/G/15/Rev.1, 25 May 2009. 
20 The Central Bank was responsible for the formulation and implementation of monetary policy until 
September 2009.  Law Amending the Law on the Monetary Regime and State Bank, 22 September 2009.  
Viewed at:  http://www.bce.fin.ec/documentos/ElBan coCentral/leyReformatoriaaLeyRegimenMonetario.pdf. 
21 For example, in 2010, a general fuel subsidy, elect ricity subsidies, a monthly stipend for more than 
a million poor Ecuadorians, and a subsidy for the poor to afford housing and agricultural products totalled 
approximately 7% of GDP.  For more information on the challenges to Ecuador's dollarization model, see De la 
Paz Vela (2010). 
22 Economist Intelligence Unit (2011b). Ecuador WT/TPR/S/254 
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11. In December 2009, the foreign exchange flight tax was increased from 1% to 2%, with the 
aim of limiting the outflow of f unds/currencies (Chapter III(2)(v)(d)). 
12. Despite some variability during the review period, the real effective exchange rate23 was 
much the same in 2010 as in 2005 (Table I.1). 
(ii) Fiscal policy 
13. With monetary policy constrained by dollarization, fiscal policy is the main tool for 
macroeconomic adjustment.24  The 2008 Constitution requires th e Government to maintain a 
disciplined fiscal policy.  The reforms introduced  by the 2002 Fiscal Responsibility, Stabilization and 
Transparency Law already set fiscal deficit limits, i. e. annual growth of primary central government 
expenditure must not exceed 3.5% in real terms (excluding capital spending), the fiscal deficit as a 
percentage of GDP (excluding oil export revenue) must decrease by 0.2% each year, and public debt 
must not exceed 40% of GDP.25 
14. Ecuador's fiscal deficit ranged from 0.5% of GDP in 2005 to 1.1% in 2008 (Table I.1) before 
increasing sharply to 5.1% in 2009, largely reflec ting the higher fiscal burden imposed by increased 
energy subsidies26, higher public spending/investment on strategic infrastructure projects 
(hydroelectric and oil sectors), education and soci al welfare, and growth in the payroll of the 
public-sector workforce as part of anti-cyclical policies.27  The authorities indicated that the sharp 
increase occurred in the context of falling internati onal oil prices, resulting in lower non-tax revenue, 
and this despite increased tax revenue (by about 40%) as a result of some tax reforms (section (4)(i)).  
In 2010, the fiscal deficit fell to 2.4% of GDP, mainly  due to the recovery of international oil prices, 
higher tax revenue, a slight increase in oil produc tion by state-owned companies, as well as the 
non-implementation of some planne d public spending/investment.28  For 2011-14, the fiscal deficit is 
expected to range from 4.5% to 6% of GDP29, due to further social welfare expenditure and 
infrastructure development projects.  This deficit is to be financed through official lending from regional and multilateral institutions , international reserves held by the BCE, and domestic financing 
sources (i.e. state pension funds).
30  Central government debt, at onl y 8% (government data) or 20.4% 
(IMF data) of GDP in 2010 (Table I.1), appears to  be well below the 40% limit prescribed in the 2002 
Fiscal Responsibility, Stabilization and Transparency Law. 
(4) STRUCTURAL POLICIES  
15. During the period under review Ecuador's structural adjustment was influenced by 
inward-looking heterodox economic and social economic development actions under its "21st Century 
                                                      
23 International competitiveness is affected not only by the exchange rate but also by domestic and 
foreign price movements.  For example,  even when the nominal effective exchange rate of the national currency 
remains unchanged, the relative competitiveness of domes tic goods increases when the inflation rate of its 
trading partners is higher than its own.  Taking this into  account, the nominal effective exchange rate is adjusted 
to incorporate inflation-rate differences:  this is the real effective exchange rate. 
24 WTO document WT/BOP/S/15/Rev.1, 14 April 2009. 
25 Articles 3 and 4 of Fiscal Responsibility, Stabiliza tion and Transparency Law 2002-72.  Viewed at:  
http://www.mmrree.gob.ec/ministerio/legal/loresponsabilidad.pdf. 
26 WTO document WT/BOP/G/15/Rev.1, 25 May 2009. 
27 Since 2007, government intervention has allegedly led to the creation of 91,000 new government 
jobs;  this has been accompanied by the loss of 100,000 fo rmal jobs in the private sect or (De la Paz Vela, 2010;  
and Economist Intelligence Unit, 2011a). 
28 Ministry of Economic Policy Coordination (2011d). 
29 Ministry of Finance (2011).  Special Official Gazette  No. 108 of 19 January 2011. 
30 Economist Intelligence Unit (2011a). WT/TPR/S/254 Trade Policy Review 
Page 8 
  
Socialism" model31, which does not appear to be imme diately conducive to the market 
economy-oriented and structural adjustment objectiv es indicated to the WTO in 2009 (Chapter II(2), 
(5), and (8)).32  According to the authorities, the State has been subject to considerable regulatory and 
institutional change that allowed its involvement in strategic sectors, which ha ve a decisive influence 
on economic, social, or environmental policy.  Since 2008, constitutional and regulatory provisions 
promoting, inter alia , various forms of state intervention, priority industries, selective import 
substitution, and social welfare are shaping structur al adjustment that may not necessarily contribute 
to a more efficient allocation of resources,  and thereby improve productivity in the economy.33 
(i) Tax reform 
16. Steps have been taken to deal with traditionally low levels of tax collection owing to high tax 
evasion, inter alia , due to the large size of the informal ec onomy (section (2)).  In 2010, tax revenue 
attained US$8.7 billion, an increase of 19.2% from th e previous year (US$7.3 billion) (Table III.5).  
As from 2008, a Simplified Tax System (RISE) for the payment of direct and indirect (IVA) taxes by taxpayers with an annual income from commerc ial activities or services up to US$60,000 has 
provided for monthly tax instalments ranging from US$1.17 to US$212.4, depending on the activity.  
In 2010, 450,205 persons were registered unde r RISE and their tax annual contributions were 
US$5.7 million. 
17. A 70% windfall gains tax, introduced in Decemb er 2007, has been levied on a monthly basis 
(since January 2010) on extraordinary income earned by companies that have signed contracts with 
the Government for the exploration and exploi tation of non-renewable resources (e.g. mining, 
petroleum).  Under the 2009 Mining Law, all mi ning concessionaires pay a minimum 5% royalty on 
sales of all primary and secondary  minerals (Chapter IV(3)). 
18. In December 2009, an amendment to the In ternal Tax Regime Law allowed private 
companies to choose how to pay tax, and modified the dividend tax, introduc ing a "scaled" tax rate.
34  
The December 2010 Organic Code of Production, Trade and Investment included a provision for 
cutting the corporate tax rate by 1 percentage point  per year until it reaches 22% in 2013, and three 
types of tax incentives to promote investment for different purposes, including selective import 
substitution (Chapter III(3)(iv) and (4)(i)).35  The Internal Revenue Service (SRI) successfully 
modernized most of its operations and continued its campaign to increase value-added tax collection 
and to punish tax evaders. 
19. The latest tax changes included an increase in import tariffs on motor vehicles, as of 
January 2011 (section (5) and Ch apters III(2)(iv) and IV(5)(i)). 
                                                      
31 Bertelsmann Stiftung (2009). 
32 Ecuador's industrial policies for 2008-12 were aimed at:  altering the primary-mining-export 
specialization pattern;  and promoting activities with dynamic comparative advantages, which generate more value added and are conducive to the creation of skille d jobs, encourage production chains, develop technology 
and innovation, raise productivity levels and systemic co mpetitiveness, and boost domestic demand, while at the 
same time protecting the environment and making rational use of natural resources (WTO document 
WT/BOP/G/15/Rev.1, 25 May 2009). 
33 The structural divergence of the economy is  reflected by low productivity and productivity 
disparities, both at the international level (termed "trade  gap"), compared with other countries, and the domestic 
level (internal gap), among industries with dynamic or non-dynamic performance (Sectoral Council for 
Production, 2010). 
34 In the "scaled" tax rate, the dividend becomes part of the taxpayer's taxable income and is therefore 
subject to the global income tax.  Before this reform, the dividend income was exempt for all shareholders.  
Currently only co rporate shareholders are exempted. 
35 Economist Intelligence Unit (2010). Ecuador WT/TPR/S/254 
 Page 9 
 
 
(ii) Labour market reform 
20. Another measure against the informal economy, was the obligatory participation of informal 
workers in the pension fund of the Ecuadorian So cial Security Institute (IESS);  the May 2011 
referendum (Chapter II(2)) approved the criminaliz ation of non-membership in the IESS.  The 
April 2011 Organic Law of the People's and Solidary Economy and the People's and Solidary 
Financial Sector sets the regulatory and institutional framework for integrating, inter alia , the 
informal sector into the economy;  it includes provisions for registration, loan facilities, and incentives 
for a wide range of businesses.36 
21. At the same time, constitutional and regulatory changes have strengthened workers' rights, 
and promoted wage increases, while introducing some  rigidity into the labour market and possibly 
raising labour costs.  New types of employment contracts were introduced.37  The 2008 Constitution 
prohibited outsourcing and sub-contracting activities38;  an easing of this rule is expected for 2011, 
once the Government issues detailed rules on special  labour relations.  Following the amendment of 
Article 42 of the Labour Code, from 2009, companies with more than 25 employees were required to 
raise their employment of staff with disabilities to at least 4% of their labour force (by end-2010);  
companies that employ disabled persons qualif y for tax exemptions and other government 
incentives.39  The Ministry of Labour Relations sets rules regarding the "dignified salary" established 
in the Labour Code.40  Minimum wage levels for certain sectors were set in December 2010, and a 
dignified salary was to be attained in most sectors in the course of 2011.41  The revised Labour Code 
also requires companies that report net profits to  pay a monthly minimum salary equal to the basic 
basket of goods established by the national statistic s office and proportional to the employee's number 
of family members. 
(5) BALANCE OF PAYMENTS  
22. Under the 2008 Constitution, the Government s upports the "monetary equilibrium of the 
balance of payments" (section (3)(i)).42 
23. Ecuador's current account shifted from surplus to a small deficit in 2009;  this grew to 3.3% 
GDP in 2010, due mainly to the saving-investment gap resulting from the increased fiscal deficit, 
which meant that national saving was insufficient to  finance gross domestic investment.  The current 
account deficit reflected the decrease in the prices of crude oil and other commodities, and the lower 
remittances from abroad, the second most important source of foreign currency (Tables I.1 and I.3).43 
Ecuador implemented balance-of-payments safeguard measures from 22 January 2009 to 
                                                      
36 Organic Law of the People's and Solidary Economy and the People's and Solidary Financial Sector, 
28 April 2011, Official Register  No. 444, 10 May 2011. 
37 New types of labour contracts comprised:  partial permanent contract;  contract for outsourcing 
services for security, catering, maintenance, messenge r, and concierge;  and temporary continuous or 
non-continuous contract. 
38 Article 327 of the 2008 Constitution;  and Economist Intelligence Unit (2010). 
39 Several large companies were fined in Decem ber 2010 for failing to meet the requirement 
(Economist Intelligence Unit, 2010). 
40 The calculation of the dignified salary includes all wages and benefits that an employee is entitled to 
receive.  If the company is not profitable, it is not re quired to meet this require ment (Economist Intelligence 
Unit, 2010). 
41 Ministerial Agreement No . 255, 24 December 2010. 
42 Article 302 of the 2008 Constitution. 
43 Remittances fell owing to the worsening of the employment situation in Spain and Italy, two of the 
main destinations for Ecuadorian migrants (ECLAC, 2010). WT/TPR/S/254 Trade Policy Review 
Page 10 
  
23 July 2010 (Chapter III(2)(vii)(b)).44  The merchandise trade surplus peaked in 2007, but since then 
has fallen progressively.  A deficit in 2009 rose to over US$1.6 billion in 2010, due to high import spending driven by the lifting of import restric tions in 2010, rebounding domestic demand, and high 
public expenditure.  As a consequence, freely ava ilable/disposable international reserves dropped to 
less than one month of import cover (see below).  In response, as of January 2011, import duties on 
vehicles, including hybrid cars, with engines of up to 3,000cc increased by 5 percentage points (from 
35% to 40%) (section (4)(i) and Chapter III(2)(iv)).  The authorities expect the trade deficit to be 
reduced to approximately US$200 million by the end of 2011 as a result of higher oil prices and increased non-oil exports;  remittances are expected  to total US$2.4 billion, due to the gradual 
recovery in the main economies hosting Ecuadorian migrant workers. 
Table I.3  
Balance of payments, 2005-10 
(US$ million)  
  2005 2006 2007 2008 2009 2010 
I.  Current account 474.5 1,739. 1 1,690.2 1,357.1 -179.8 -1,917.3 
  Goods 758.3 1,768.4 1,823.0 1,548.7 143.6 -1,580.3 
   Exports 10,467.7 13,176.1 14,870.2 19,460.8 14,412.0 18,060.8 
   Imports -9,709.4 -11,407.7 -13,047.1 -17,912.1 -14,268.4 -19,641.1 
  Services -1,129.9 -1,304.7 -1,371.5 -1,675.5 -1,371.2 -1,592.7 
   Revenue 1,012.1 1,036.5 1,200.1 1,314.1 1,227.6 1,367.2 
     Transport 335.2 352.2 347.6 366.8 345.5 358.7 
     Travel 485.8 489.9 623.4 741.8 670.1 781.3 
     Other services 191.2 194.4 229.1 205.5 212.0 227.2 
      Communications 80.1 75.6 97.2 68.5 60.6 58.0 
      Insurance 0.7 0.0 .. .. .. .. 
      Personal, cultural, and recreational 38.5 41.1 43.9 46.8 53.8 66.4 
      Government 71.8 77.7 88.0 90.2 97.7 102.8 
   Payments -2,142.0 -2,341.3 -2,571.6 -2,989.5 -2,598.8 -2,959.9 
     Transport -1,042.5 -1,170.9 -1,327.0 -1,669.3 -1,369.2 -1,684.3 
     Travel -428.6 -466.3 -504.0 -541.6 -548.7 -568.1 
     Other services -670.9 -704.1 -740.6 -778.6 -681.0 -707.4 
      Communications -6.0 -6.5 -6.6 -4.6 -6.5 -9.3 
      Insurance -140.4 -138.9 -140.0 -178.6 -158.2 -214.0 
      Financial  -5.0 -4.6 -4.8 -4.5 -2.8 -18.8 
      Royalties and licence fees -42.9 -44.2 -45.3 -47.0 -47.5 -54.1 
      Other business services -308.0 -317.6 -327.4 -337.6 -264.8 -181.5 
      Personal, cultural, and recreational -106.1 -115.6 -125.9 -137.2 -150.7 -168.2 
      Government -62.6 -76.6 -90.6 -69.2 -50.5 -61.7 
  Income -1,814.9 -1,828.5 -1,944.9 -1,461.6 -1,384.0 -1,053.9 
   Revenue 213.2 286.6 360.6 315.2 105.8 76.6 
     Compensation of employees 6.5 6.2 6.0 6.0 6.9 7.5 
     Investment income 206.7 280.4 354.6 309.2 98.9 69.0 
   Payments -2,028.1 -2,115.0 -2,305.5 -1,776.8 -1,489.9 -1,130.4 
     Compensation of employees -5.8 -5.2 -5.3 -5.7 -6.4 -6.9 
     Investment income -2,022.3 -2,109.8 -2,300.2 -1,771.2 -1,483.5 -1,123.5 
     Direct investment -1,003.9 -977.4 -1,160.0 -786.8 -821.6 -537.9 
     Portfolio investment -372.3 -416.4 -399.0 -336.9 -65.5 -64.3 
     Other investment -646.1 -716.0 -741.2 -647.5 -596.5 -521.3 
  Current transfers 2,660.9 3, 103.9 3,183.5 2,945. 6 2,431.8 2,309.5 
   Current transfers received 2, 781.4 3,233.8 3, 332.7 3,107.4 2, 718.9 2,654.2 
    General government 194.4 221.2 171.5 200.3 206.1 217.0 
    Other sectors 2,587.0 3,012.6 3,161.3 2,907.1 2,512.8 2,437.2 
     Worker's remittances 2, 453.5 2,927.6 3, 087.8 2,821.6 2, 495.1 2,324.0 
     Other current transfers 133.5 85.0 73.5 85.4 17.7 113.2 
   Current transfers sent -120.4 -129.9 -149.2 -161.8 -287.1 -344.6 
    General government -32.5 -21.6 -13.2 -10.1 -8.5 -36.4 
    Other sectors -88.0 -108.4 -136.0 -151.7 -278.6 -308.3 
Table I.3 (cont'd)
                                                      
44 WTO documents WT/BOP/N/69, 30 June 2009;  WT/BOP/N/70, 24 July 2009;  
WT/BOP/G/15/Rev.1, 25 May 2009;  WT/BOP/G/17, 15 September 2009;  WT/BOP/G/19, 29 March 2010;  WT/BOP/G/20, 30 July 2010;  and WT/BOP/G/15/Rev.1, 25 May 2009. Ecuador WT/TPR/S/254 
 Page 11 
 
 
  2005 2006 2007 2008 2009 2010 
II.  Capital account 15.9 18.6 15.2 19.9 17.7 22.7 
III. Financial account -125.2 -2 ,102.5 -262.5 -241. 3 -2,347.2 799.9 
  Direct investment 493.4 271.4 194.2 1,005.9 319.0 164.1 
  Portfolio investment 365.9 -1,383.9 -118.3 213.1 -3,141.5 -731.1 
  Other investment -984.5 -990.0 -338.4 -1,460.4 475.3 1,366.9 
IV. Errors and omissions 300.9 214.2 -56.2 -201.7 -137.8 -117.6 
V.  Overall balance 666.1 -130.6 1,386.6 933.9 -2,647.2 -1,212.3 
VI. Financing -666.1 130.6 -1,386.6 -933.9 2,647.2 1,212.3 
..   Not available.  
Note:   IMF International Financial Statistics data may be significantly different, especially for the current account for 2005 , 2008, and 
2009;  the financial account figures also di ffer for 2007-09;  and the overall balan ce shows significant differences in 2005 an d 
2006. 
Source:    Central Bank of Ecuador online information, " Boletín Trimestral de la Bal anza de Pagos del Ecuador N° 34 ".  
 Viewed at:  http://www.bce.fin.ec/ frame.php?CNT=ARB0000805;  and IMF on line information, "International 
 Financial Statistics".  Viewed at :  http://www.imfstatistics.org/imf/.  
24. Total central government external debt d eclined gradually during the review period 
(Table I.1).  At the end of 2010, Ecuador's total exte rnal debt was US$8.7 billion, or a quarter less that 
in 2005, equivalent to 15% of GDP.  This drop was mainly due to the buybacks of 91% of outstanding 
2012 and 2030 Global Bonds at 35% of their value.   Of the total external public debt, 60.6% 
corresponds to debt held by international organi zations, primarily the In ter-American Development 
Bank (BID/IDB), and the Andean Development Corpora tion (CAF).  About 13% of this debt was held 
on a short-term basis. 
25. Freely available/disposable international reser ves peaked at US$3.7 billion (equivalent to 
2.1 months of goods and services imports) in 2008 (T able I.1);  they decreased sharply as from 2009 
(US$2.8 billion, to US$1.4 billio n in 2010, equivalent to 0.7 months of merchandise goods and 
services imports) as a result of higher government investment/spending, lower petroleum revenues, 
the buyback of government bonds, and import surges.45  By 31 May 2011, the freely 
available/disposable international reserves had rebounded to about US$3.9 billion (2 months of 
imports of goods and services), due to higher public sector deposits.46 
(6) DEVELOPMENTS IN MERCHANDISE TRADE  
26. The ratio of Ecuador's trade (exports and impor ts) in goods and services to GDP was in the 
range 60%-75% between 2005 and 2010 (Table I. 1).  In 2009, Ecuador was the world's 73rd largest 
exporter and 75th importer of goods, and the 107th largest exporter and 80th importer of services.47 
27. Ecuador remains largely dependent on commod ity exports, mainly crude oil and bananas 
(Chart I.1 and Tables AI.1 and AI.3).  In 2010, crude oil accounted for the largest share of total 
merchandise exports, with 51.2%, down from 54.7% in  2005.  A drop of 45.8% in 2009 reflected the 
period of renegotiation of oil company contr acts and lack of investment in the sector 
(Chapter IV(4)(i)).  While the share of manufactured  items in total imports has decreased (Chart I.1 
and Table AI.4), the share of fuels rose from 12%  in 2005 to 21.3% in 2010, due to refining capacity 
constraints (Chapter IV(4)(i)). 
                                                      
45 Bertelsmann Stiftung (2009);  Economist Intellig ence Unit (2011a);  and IMF online information, 
"International Financial Statistics".  Viewed at:  http://www.imfstatistics.org/imf/. 
46 Central Bank of Ecuador online information, " Estadísticas macroeconómicas Junio 2011 ".  Viewed 
at: http://www.bce.fin.ec/frame.php?CNT=ARB0000019 [18 July 2011]. 
47 WTO online information, "Statistics database ".  Viewed at:  http://stat.wto.org/Home/ 
WSDBHome.aspx?Language=E.  (Based on da ta excluding intra-EU (27) trade). WT/TPR/S/254 Trade Policy Review 
Page 12 
  
Chart I.1Merchandise trade, by product, 2005 and 2010
2005 2010
(a)    Ex ports (f.o.b.)
Total: US$9.9 billion
(b)    Im ports (c.i.f.)
Manufactures
77.4%
Total: US$9.6 billion Total: US$20.6 billion
Source: UNSD, Comtrade database (SITC Rev.3).Total: US$17.5 billionPrepared fish
4.4%Crustaceans
4.8%
Crude oil
54.7%Other 
agriculture
12.7%Other manuf.
3.9%Machinery
2.2%
Agriculture
34.1%Chemicals
1.2%Bananas
11.6%
Other 
agriculture
14.2%
Crude oil
51.2%Other mining
4.7%Chemicals
1.6%Other manuf.
4.8%
Prepared 
fish
3.4%
Mining
55.9%Agriculture
32.6%
Mining
59.9%
Other 
agriculture
1.3%
Chemicals
16.8%
Other semi-
manuf.
7.2%Machinery & 
transport eqpt.
36.8%Other 
manuf.
4.6%
Other mining
1.2%Fuels
12.0%Food
8.0%
Chemicals
15.3%Other 
agriculture
1.0%Food
8.3%
Agri.
9.4%
Manufactures
67.7%Mining
22.4%Agri.
9.4%Mining
13.2%Fuels
21.3%
Other 
mining
1.2%
Other semi-
manuf.
6.5%Machinery & 
transport eqpt.
33.2%Other manuf.
1.6%Other
0.4%Bananas
11.0%
Manuf.
7.3%Manuf.
9.6%Other mining
5.2%Machinery
3.2%
Automotive 
products
12.0%Automotive 
products
11.1%Crustaceans
4.5%Other
0.4%Other
0.2%
 Ecuador WT/TPR/S/254 
 Page 13 
 
 
28. Despite Ecuador's increased em phasis on integration with certain Latin American trading 
partners (Chapter II(6)(ii)), its main, albeit declin ing, single export market and supplier remains the 
United States (Chart I.2 and Tables AI.2 and AI.3) According to the authorities, the EU is Ecuador's 
main non-oil export market.  The share of other Am erican countries (e.g. Chile, Panama, Colombia), 
the EU(27), and other emerging countries (e.g. Chin a) in Ecuador's exports increased during the 
review period.  America, mainly the United States,  remains Ecuador's largest supplier, although its 
share in total merchandise imports fell considerably (C hart I.2).  While China's share in total imports 
increased from 6.5% in 2005 to 7.8% in 2010, making it the fourth most important source of imports, 
the shares of Colombia and Brazil diminished considerably, from 14.4% to 9.8% and from 7.1% to 4.1%, respectively.  The shares of the Un ited States and the EU(27) also declined. 
29. Ecuador remains a net importer of services, running a deficit in the service account 
(Table I.3).  In 2010, total credit in services trad e was US$1.4 billion (US$1 billion in 2005), while 
total deficit was US$2.96 billi on (US$2.1 billion in 2005).  
(7) F
OREIGN INVESTMENT  
30. Foreign investment helps not only to bri dge the gap between national saving and gross 
domestic investment, insofar as the former is insu fficient to finance the latter (as in 2009 and 2010), it 
also helps disseminate know-how and new technol ogy, which is the main source of productivity 
growth in the long run.  As multinational enterprises  (MNEs) tend to be more efficient than purely 
domestic firms, they can also pay higher wages.48 
31. During the period under review, Ecuador's foreign direct investment (FD I) inflows peaked at 
US$1 billion in 2008 (Table I.4), mainly due to inv estment by foreign subsidiaries in transport, 
storage and communications, as well as reinvestment of profits in the oil sector.  However, inward 
FDI dropped sharply in 2009 and in 2010, due to the international financial cr isis, the renegotiation of 
oil contracts (completed in April 2011), and un certainty associated with major constitutional and 
legislative changes.  In 2010, FDI inflows orig inated mainly in Panama, Canada, and China 
(Table I.4);  most disinvestment during the review period was of United States origin.  FDI inflows 
were mainly in mining and quarrying, and manufacturing. 
 
                                                      
48 According to a recent OECD report, foreign MNEs  pay 40% higher average wages than local firms 
and the differential is greater in low- income countries of Latin America and Asia.  As MNEs tend to have a 
greater technological edge over local competitors in developing countries, it is not surprising that wage gains 
from FDI would be larger there than in more developed economies (OECD, 2008, "Chapter 5:  Do multinationals promote better pay and working conditions?"). WT/TPR/S/254 Trade Policy Review 
Page 14 
  
Chart I.2
Merchandise trade, by main orig in and destination, 2005 and 2010
2005 2010
(a)    Ex ports (f.o.b. )
Total: US$9.9 billion
(b)    Im ports (c.i.f.)
Total: US$9.6 billion Total: US$20.6 billion
Source: UNSD, Comtrade database (SITC Rev.3).Chile
3.1%
Total: US$17.5 billionPanama
6.9%Others
3.8%
United States
50.1%
Panama
12.2%Other 
America
12.7%Other Europe
0.4%
Colombia
14.4%China
0.1%Other Asia
1.5%
America
75.5%United States
34.7%
Peru
8.8%Other America
16.1%China
1.9%
EU (27)
13.0%Other Europe
0.9%Other 
Asia
3.8%Others
4.8%
America
81.5%
United States
19.2%
Peru
3.8%
Other America
26.3%EU (27)
11.0%Other Europe
0.8%Japan
3.6%
China
6.5%Other Asia
7.6%Others
3.3%
United States
16.5%
Colombia
9.8%
Other America
32.0%EU (27)
8.9%Other Europe
0.6%Japan
3.4%
China
7.8%Other Asia
9.0%Others
1.9%
America
67.2% America
68.4%EU (27)
12.8%
Peru
7.6%Chile
4.8%
Panama
3.6%Peru
5.0%
Panama
5.0%
 Ecuador WT/TPR/S/254 
 Page 15 
 
 
Table I.4  
Foreign direct investment inflows, 2005-10  
(US$ million)  
2005 2006a 2007a 2008a 2009a 2010a 
Total FDI 493.4 271.4 194.2 1,005.7 318.9 167.3 
FDI by origin 
America 509.7 145.2 -130.2 558.6 267.6 90.3 
United States -77.2 -159.8 49.8 -14.6 -37.5 6.7 
Andean Communityb 12.4 13.7 23.7 68.0 -2.2 25.8 
Bolivarian Republic of Venezuelab 2.4 -0.1 n.a. n.a. n.a. n.a. 
Peru 8.9 -6.7 2.6 31.7 14.4 13.2 
Colombia 1.0 19.9 21.1 25.0 -5.5 12.6 
Plurilateral State of Bolivia 0.0 0.7 0.0 11.3 -11.1 0.0 
Other America 574.5 291.3 -203.8 505.2 307.3 57.7 
Argentina 1.7 2.9 3.6 6.3 15.0 8.2 
Bahamas 28.3 -17.4 -116.8 -25.3 -1.9 38.8 
Barbados 15.1 -24.5 0.3 -4.0 -0.3 8.5 
Belize -2.2 0.8 0.5 0.0 8.9 0.0 
Bermuda 2.2 -0.1 2.2 3.2 2.4 3.5 
Brazil 288.1 369.6 99.5 46.3 2.9 10.1 
Canada 29.2 -251.7 48.5 43.6 52.5 79.3 
Cayman Islands -1.6 -9.6 -356.6 2.1 14.8 -16.4 
Chile 72.6 15.5 11.8 5.0 26.0 7.6 
Costa Rica 9.0 34.2 1.3 -0.1 -5.7 2.0 
Curacao 0.0 0.0 0.0 2.6 4.1 0.0 
Mexico 7.3 42.6 -40.2 302.6 38.9 -286.1 
Netherlands Antilles -2.8 8.0 5.3 0.3 -5.0 0.2 
Panama 76.2 66.7 76.5 73.2 117.9 136.3 
Uruguay 6.4 14.8 2.3 -32.4 -11.8 39.8 
Bolivarian Republic of Venezuelab n.a. n.a. 15.8 19.6 8.0 13.6 
Virgin Islands 45.0 39.2 41.9 62.2 40.1 12.1 
Others 0.2 0.3 0.3 0.1 0.5 0.2 
Europe -2.5 83.4 231.9 397.6 -15.5 31.3 
Austria -0.3 -0.1 27.3 115.3 -139.9 -1.9 
Belgium and Luxembourg 4.9 4.5 3.4 15.2 -11.5 -8.9 
Cyprus 0.0 0.0 0.0 0.0 4.7 0.0 
Denmark 0.5 0.4 -0.5 0.0 0.0 0.0 
Finland 1.0 -5.6 26.6 50.8 30.5 -7.8 
France -0.8 8.4 68.0 30.4 -2.8 0.5 
Germany 11.7 12.0 3.5 9.2 -1.4 0.1 
Ireland -0.7 -1.6 -1.3 -0.3 -0.3 -0.2 
Israel -2.3 -0.4 0.2 0.1 -0.1 0.5 
Italy 0.0 0.4 10.8 16.8 1.3 10.6 
Netherlands -43.1 38.1 7.8 -4.1 4.6 16.6 
Norway -0.2 0.0 0.0 0.5 0.1 0.0 
Spain 2.7 6.9 85.2 128.1 72.6 16.0 
Sweden 1.0 1.5 -4.5 0.4 -1.6 -1.3 
Switzerland 3.6 7.0 0.7 31.3 24.1 6.8 
United Kingdom 19.3 11.9 4.9 4.0 3.9 0.2 
Others 0.0 0.0 0.1 0.0 0.4 0.1 
Asia -17.0 29.0 91.9 49.2 64.9 44.4 
China -19.9 11.9 84.8 46.5 56.3 45.0 
Japan 0.2 0.0 0.0 2.9 0.1 0.1 
Korea, Rep. of 2.1 0.1 0.8 0.4 0.5 0.4 
Philippines 0.0 0.0 10.0 1.9 12.8 0.0 
Russian Federation 0.2 0.1 0.0 0.2 0.1 0.0 
Singapore 0.4 16.8 -5.4 -2.9 -5.3 -1.5 
Chinese Taipei 0.0 0.0 1.2 0.0 0.3 -0.3 
Others 0.0 0.0 0.5 0.2 0.3 0.8 
Others 3.2 13.8 0.6 0.3 1.8 1.3 
FDI by economic activity 
Agriculture, forestry, hunting, and fisheries 23.9 48.0 25.5 20.6 51.6 9.5 
Mining and quarrying 198.3 -116.6 -102.8 244.2 -6.4 159.1 
Manufacturing 75.4 90.2 99.0 206.1 127.7 123.2 
Electricity, gas, and water 6.5 6.9 11.9 -7.1 0.6 -6.5 
Table I.4 (cont'd) WT/TPR/S/254 Trade Policy Review 
Page 16 
  
2005 2006a 2007a 2008a 2009a 2010a 
Construction 7.4 8.4 19.6 49.4 -13.9 27.8 
Wholesaled and retail trade 72.5 32.3 92.2 120.8 75.2 70.2 
Transport, storage, and communication 17.5 83.3 -52.5 217.3 88.2 -304.5 
Business services 73.8 89.4 84.6 139.4 -24.4 66.1 
Community, social, and personal services 18.0 29.5 16.7 15.1 20.3 22.4 
n.a.     Not applicable.  
a    Data subject to revision.  
b    As from the second quarter of 2006, the Bolivarian Republic  of Venezuela has not been part of the Andean Community.  
Therefore, starting in 2007, it appears under other America.  
Note:   Negative values for a particular y ear show that the value of disinvestment by  foreign investors was more than the value  of capital 
newly invested by the reporting economy.  
Source:   Central Bank of Ecuador online information, " Inversión Extranjera Directa Reportada en la Balanza de 
 Pagos ".   Viewed at:  http://www. bce.fin.ec/frame .php?CNT=ARB0000806.