Ecuador’s Economy: Oil and Agriculture, Overdependence Essay

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Ecuador’s Economy: Oil and Agriculture, Overdependence

One of the main features of Ecuador ’s economy is its dependence on only a few key export commodities, most importantly oil and bananas. Oil accounts for approximately 40% of the export economy, while bananas are responsible for about 17%, and Ecuador is the largest producer of bananas in the world. The rest of the economy is mostly based on less important agricultural exports, such as shrimp and flowers, which account for 6% and 4% of exports respectively. Ecuador is almost completely reliant on the success of these few industries, particularly oil, and so has suffered through a cycle of boom and bust economies over the past several decades, since oil was discovered in the 1970s.
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El Nino and Recession
The El Nino Southern Oscillation, or simply El Nino, has hit Ecuador with devastating effect a number of times over the past t we nty-five years. The 1982-83 El Nino cause over $650 million in damage, and was the cause of 600 deaths, wreaking havoc on Ecuador ’s agricultural industries especially. Most recently, the El Nino of 1997-98 battered Ecuador, causing $2.65 billion worth of damage. This El Nino is considered to be one of the biggest ever, and the floods and torrential downpours that struck Ecuador again crippled the agricultural industries, including the important banana industry. In addition, parts of the SOTE pipeline we re damaged, and along with a global depression in oil prices Ecuador ’s economy was thrown into a tailspin.

During 1999 and the first years of the new millennium, Ecuador experienced its worst economic downturn since the depression era of the 1930s. Ecuador ’s GDP fell by 30% in 1999 alone, and per capita income fell by 30% as we ll, leaving over 70% of Ecuador ’s 12.4 million people living in poverty. This recession caused a monetary crisis which saw the value of the sucre, Ecuador ’s currency, fall by 70% in 1999 and 2000. In order to stop the free fall of the sucre, and curb the attendant rampant inflation, the government was forced to dollarize their currency, or peg it to the American dollar. All of this economic instability led to the first military coup in Latin America in ten years, as President…