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Ecuador: Economic Development & International Marketing - Coggle…
Ecuador: Economic Development & International Marketing
Political Risk Analysis: What’s Ahead For Ecuador’s Economy In 2021?
According to the reading, it was assured that after growing by only 0.1% in 2019, Ecuador's GDP is expected to contract by 8.7% in 2020.
Encouraging investment and growth in new sectors will be essential to create jobs and generate additional tax revenues.
Ecuador has struggled to develop an adequate testing and tracking infrastructure, limiting its ability to further limit the spread of the virus and raising concerns about how recurrent outbreaks can be effectively contained.
In the short term, Ecuador's economic outlook has improved, as evidenced by a dramatic reduction in its sovereign risk premium and an upgrade of its credit rating to B-. However, the 2020 economic contraction will remain the steepest in Ecuador's history, leaving recovery in 2021 and beyond largely dependent on two main factors: the pace of the overall recovery of the global economy and the reforms that the new government will assume in May 2021. able to implement.
The article states that it is important for investors not to overlook the governance issue that will face any candidate elected in 2021, namely the composition of Congress. The 2021 electoral field is the most fragmented in more than a decade, which will make it difficult for any candidate to consolidate an absolute majority and for a new government to advance meaningful reforms, including those linked to an IMF program.
Before the pandemic hit, Ecuador had already entered a recession, and Covid-19 hit the country especially hard. The double whammy of the collapse of both oil revenues and tax revenues led to a $13.5 billion public financing gap, resulting in mounting delays in payments of public sector salaries and state suppliers and restricting the government's ability to offer even extremely limited stimulus programs to accelerate recovery.
In the final months of 2020, investor sentiment has become more optimistic that a market-friendly presidential candidate will be elected next year due to two key developments.
There has been a consolidation of the right wing behind candidate Guillermo Lasso, a high profile banker who previously served as governor of Guayas. Contributing to this consolidation has been the announcement of an alliance between the two main conservative forces, Lasso's party, CREO, and the Social Christians.
A court ruling upholding former President Rafael Correa's 8-year prison sentence forced Correa, who remains popular with a significant portion of the electorate, to drop out of the race for vice-presidential candidate along with his almost unknown running mate Andres Arauz.
World Bank
In Ecuador, in 1990 the population was 10.23 million while in 2020 it was 17.64 million.
Population estimates are usually based on national population censuses. Estimates for years before and after the census are interpolations or extrapolations based on demographic models. Errors and undercounting occur even in high-income countries. In developing countries, errors can be substantial because of limits in transportation, communications, and other resources needed to conduct and analyze a complete census.
GNI, Atlas method (US$ at current prices) (NY.GNP.ATLS.CD)
In the year 1990 GNI was 14.03 while in the year 2020 it increased to 97.65. GNI (formerly GNP) is the sum of value added by all resident producers plus taxes on products (less subsidies) not included in the valuation of output plus net receipts of primary income (compensation of employees and property income) from abroad. Data are expressed in current U.S. dollars. GNI, calculated in local currency, is generally converted to U.S. dollars at the official exchange rate for cross-economy comparisons, although an alternative rate is used when the official exchange rate is considered to differ by an exceptionally large margin from the rate actually applied in international transactions.
Economic Intelligence
The president, Guillermo Lasso of the center-right Creando Oportunidades party, gained support through an accelerated launch of the coronavirus vaccine and a period of relative stability after the elections.
Lasso's ability to impose his orthodox economic policy agenda will be threatened by his government's weak legislative position, rising violent crime and the latent risk of social unrest. Some progress is likely under IMF auspices, but economic growth will remain tepid.
Strengthening shared prosperity
Results achieved in the Country Partnership Framework
The World Bank Group and the Government of Ecuador resumed dialogue in 2014. The World Bank prepares analytical studies and lending operations in specific areas of the country. It also prioritizes investments in strategic sectors for development, such as education, transportation, water and sanitation.
Increased access to better quality education and social protection services
The trust funds financed various advisory services and technical assistance in areas such as combating malnutrition, inclusion of people with disabilities, and improving the efficiency of the social protection system.
Integration of reforms in water supply, sanitation, transportation and risk management.
In 2016, the World Bank published an assessment of poverty associated with water and sanitation services. To this end, it provided technical assistance to the National Institute of Statistics and Census for the publication of water, sanitation and hygiene indicators for the first time in Ecuador.
It also supported the National Secretariat for Risk Management in developing a national disaster response strategy and a methodology for creating sectoral disaster risk management programs that address a variety of hazards and risks.
Investment projects in Ecuador
From July 2013 to June 2015, the World Bank portfolio included three operations requested by the subnational governments of Manta, Quito and Guayaquil. In 2016, the Bank approved another operation for the government of Ibarra. These operations cover the transportation, water and sanitation sectors.
In 2016, it approved an investment operation to increase student enrollment and retention in public technical and technological institutes designed and implemented in collaboration with entrepreneurs, and to strengthen the institutional management of technical and technological higher education. The World Bank also mobilized an emergency response loan to provide assistance following the earthquake that affected Ecuador in April 2016.
2022 Index of Economic Freedom
Ecuador's economic freedom score is 54.3, making it the 126th freest economy in the 2022 Index. Ecuador ranks 25th out of 32 countries in the Americas region, and its overall score is below regional and global averages.
COVID-19 IMPACT: As of December 1, 2021, 33,250 deaths were attributed to the pandemic in Ecuador, and the government's response to the crisis ranked 37th among the countries included in this Index in terms of rigor. The economy contracted by 7.5 percent in 2020.
SIZE OF GOVERNMENT
The top individual income tax rate is 35 percent, and the top corporate tax rate is 25 percent. Government spending has amounted to 36.7 percent of total output (GDP) over the past three years, and budget deficits have averaged 4.2 percent of GDP. Public debt is equivalent to 64.6 percent of GDP.
REGULATORY EFFICIENCY
Regulations that apply to companies are subject to unpredictable changes. Child labor persists in the production of bananas, bricks, flowers, and gold. Dollarization has helped control inflation and the government has been reducing fuel subsidies, but still subsidizes many state enterprises and controls some prices.
RULE OF LAW
Ecuadorian law recognizes the right to private property. However, if land has not been in "active use" for two years, the state can redistribute it. Protection of property rights and enforcement of contracts are weak. Corruption is widespread, although Ecuador's score improved slightly in Transparency International's Corruption Perceptions Index 2020.
OPEN MARKETS
Ecuador has seven preferential trade agreements in force. The trade-weighted average tariff rate is 9.5 percent and 284 non-tariff measures are in force. The government's openness to foreign investment is below the world average.