The economy of Ecuador is based mostly on exports of bananas, oil, shrimp, gold, other primary agricultural products and money transfers from nearly a million Ecuadorian immigrants employed abroad. In 2002, oil accounted for about one-third of public sector revenue and 40% of export earnings.

Ecuador is the world’s largest exporter of bananas ($936.5 million in 2002) and a major exporter of shrimp ($251 million in 2002). Exports of nontraditional products such as flowers ($291 million in 2002) and canned fish ($333 million in 2002) have grown in recent years. Industry is largely oriented to servicing the domestic market.

Deteriorating economic performance in 1997–98 culminated in a severe economic and financial crisis in 1999. The crisis was precipitated by the El Niño weather phenomenon in 1997, a sharp drop in global oil prices in 1997–98, and international emerging market instability in 1997–98.

These factors resulted in a 7.3% contraction of GDP, annual year-on-year inflation of 52.2%, and a 65% devaluation of the national currency, the Sucre, in 1999, which helped precipitate a default on external loans later that year.

In January 2000, President Jamil Mahuad announced a policy to adopt the U.S. dollar as the official currency of Ecuador, and although Mahuad was forced from office, his successor Gustavo Noboa continued with the plan, and also entered into negotiations with the IMF.

Following the completion of a one-year stand-by program with the International Monetary Fund (IMF) in December 2001, Ecuador successfully negotiated a new $205 million stand-by agreement with the IMF in March 2003.

Buoyed by higher oil prices, the Ecuadorian economy experienced a modest recovery in 2000-01, with GDP rising 2.3% in 2000 and 5.4% in 2001. GDP growth leveled off to 3.3% in 2002. The completion of the second Transandean Oil Pipeline (OCP in Spanish) will enable Ecuador to expand oil exports. The OCP will double Ecuador’s oil transport capacity, but Ecuador will need to attract additional foreign investment to realize the full economic potential of the added capacity.