Ecuador is a country that is very dependent on the petroleum resources that it has. In fact, this has accounted for more than half of the export earnings for the country. This is one third of the public sector revenue in recent years also. In 1999 and 2000 Ecuador had to deal with a severe economic crisis and their GDP shrunk by 5.3%.
Because of this, poverty increased significantly, the banking system essentially collapsed, and Ecuador defaulted on the debt that they had. In March of 2000, their Congress approved structural reforms that helped to adopt the US dollar as legal tender. With dollarization, the economy was stabilized and growth returned to the country. This was aided by the high oil prices and the fact that they were able to increase some other types of exports, which is something that they really should have expanded on before this point so that they were well rounded.. From 2002-2008, the country grew and grew thanks to the increased rates for petroleum and the better public sector investment.
President Rafael Correa took office in January of 2007. In 2008, he defaulted on Ecuador's debt, which was about $3.2 billion and was 80 percent of their external debt. In May of 2009, Ecuador was able to buy back about 91% of their defaulted bonds at an international auction. The presidency of Correa also meant that many international trade agreements would be terminated including the one held with the United States. The economy in Ecuador contracted slightly in 2009 and went down .4%, that was because of the global financial crisis and a very sharp decline because of the oil prices in the world and the remittance flows. Something worked, and today, their growth is steady and they grew at 3.7% in 2010.
Focus on: Foreign Relation
Ecuador has always put a lot of emphasis on the multilateral approaches to solving their international problems. Ecuador is a member of the UN, the organization of the American States, and other groups that are more regional including Rio Group and the Latin American Energy Organization. They are also part of the Union of South American Nations, the Community of Andean Nations, and a few others. From August of 2009 to November of 2010, Ecuador also helped a rotational presidency of UNASUR. Ecuador has done a really good job of strengthening and diversifying their political economy and their ties with countries in Latin America, Europe, and Asia.
President Correa has done a lot and has traveled a lot so that they can work with countries in their region and outside the region and improve relationships. He has traveled to countries like Peru, Chile, Brazil, Argentina, Venezuela, Costa Rica, Panama, Uruguay, Haiti, and Cuba. He has also traveled outside of the region to countries like Spain, Italy, France, China, Iran, and Russia. He has also worked on settling peace between Ecuador and Peru so that they can settle all of the border disagreements that they have and to help to simmer this down and keep everyone calm. With four guarantors, they were able to help settle the conflict down and make it so that there is peace between Ecuador and Peru and the borders that are out there. This is very important in making sure that a country is stable and can handle the trade that they are doing with other countries.
To settle things down, in 1998, Ecuador and Peru signed a peace agreement to help with border differences that had occasionally caused armed hostility in certain areas. The US government was a huge help in helping to settle this conflict and bring it to an end. The peace agreement was brokered in 1995. However, there are still some issues with the Colombian guerrilla activity, and occasionally they will come across the border asking for extortion payments and working on vigilante justice. With the Correa administration, they are working on a policy called Plan Ecuador that is going to help protect the northern citizens from the drug threat from the Columbia military and guerillas. There was a Columbian military incursion in Ecuador in March 2008 that caused the Ecuadorian government to break their diplomatic ties with Colombia. However, in November of 2010, these ties were full reestablished.
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