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Ecuador - ECONOMY
AS THE 1980S DREW TO A CLOSE, Ecuador remained a lower middle income nation with a gross domestic product (GDP) of US$9.4 billion, or US$940 per capita. In South America, only Peru, Bolivia, and Guyana had a lower per capita GDP. Agriculture (primarily bananas, coffee, and cacao) and fishing were still important sectors of the economy, together providing 40 percent of export earnings in 1989. Petroleum, the other major export commodity, produced 50 percent of export earnings in the same year. Nevertheless, services, especially trade and financial services, constituted the fastest-growing economic sector and by the end of the 1980s employed almost half of the work force. Manufacturing also played a small but growing role in the economy.
Historically, Ecuador's economy has been characterized by the dichotomy, and sometimes bitter rivalry, between the large-scale, export-oriented agricultural enterprises of the Costa (coastal region) and the smaller farms and businesses of the Sierra (Andean highlands). Unlike many developing countries that have highly centralized infrastructures, Ecuador had two banking, communications, transportation, and trade centers--one in Guayaquil to handle the country's export trade and the other in Quito to serve the populace in the Sierra. Manufacturing was divided also, with Guayaquil leading Quito in output.
The discovery of substantial new petroleum deposits in 1967 spurred economic growth and a shift away from traditional agriculture to manufacturing and services. The government invested much of its petroleum revenue in domestic development programs. The rapid growth years in the 1970s were followed by hardship in the 1980s, however, as petroleum prices fell and the entire economy slumped.
Two administrations in the 1980s tried different approaches to restoring the economy. President León Febres Cordero Ribadeneyra (1984-88) applied free-market principles and deregulation, policies that initially promoted growth. Wage increases and high inflation, however, ultimately erased most gains. President Rodrigo Borja Cevallos (1988- ) replaced the free-market approach with state intervention and imposed an austerity program. His policies resulted in new economic growth, but inflation and unemployment remained at record high levels.
Ecuador's chronically large foreign debt continued to stifle economic growth. Having borrowed heavily during the boom years of the 1970s, the government found itself unable to meet its foreign debt obligations at the end of the 1980s. An earthquake in 1987, which damaged the country's crude petroleum pipeline, further curtailed import earnings. Although by 1989 Ecuador had resumed its foreign debt payments and was again exporting oil, the nation's economic future remained uncertain.
Colonial Ecuador was governed first by the Viceroyalty of Peru and then by the Viceroyalty of Nueva Granada. Ecuador differed significantly from the viceroyalty centers (Lima and Bogotá), however, in that mining never became a vital part of the economy. Instead, crop cultivation and livestock raising dominated the economy, especially in the Sierra. The Sierra's temperate climate was ideal for producing barley, wheat, and corn. The Costa became one of the world's leading producers of cacao. Sugarcane, bananas, coconuts, tobacco, and cotton also were grown in the Costa for export purposes. Foreign commerce expanded gradually during the eighteenth century, but agricultural exports remained paramount. Manufacturing never became a significant economic activity in colonial Ecuador, but busy sweatshops, called obrajes, in Riobamba and Latacunga made Ecuador an exporter of woolen and cotton fabrics; a shipyard in Guayaquil was one of the largest and best in Spanish America; and sugar mills manufactured sugar, molasses, and rum made from molasses.
When Ecuador gained complete independence in 1830, it had a largely rural population of about one-half million. The rural economy came to rely on a system of peonage, in which Sierra and Costa Indians were allowed to settle on the lands belonging to the hacendado, to whom they paid rent in the form of labor and a share of their crop. The economy of the new republic, based on the cultivation of cash crops and inexpensive raw materials for the world market and dependent on peonage labor, changed little during the remainder of the nineteenth and first half of the twentieth century. Vulnerable to changing international market demands and price fluctuations, Ecuador's economy was often characterized by instability and malaise.
During the second half of the nineteenth century, cacao production nearly tripled, and total exports increased tenfold. As a result, the Costa became the country's center of economic activity. Guayaquil dominated banking, commercial, and export-import affairs. During the first two decades of the twentieth century, cacao exports continued to be the mainstay of the economy and the principal source of foreign exchange, but other agricultural products like coffee and sugar and fish products were also important exports. The decline of the cacao industry in the 1930s and 1940s, brought about by chronic pestilence and the loss of foreign markets to competitors, had debilitating repercussions for the entire economy. During the 1950s, government-sponsored replanting efforts contributed to a partial revival of the cacao industry, so that by 1958 Ecuador was the world's sixth leading exporter of cacao. Nonetheless, by the early 1950s bananas had replaced cocao as the country's primary export crop.
The Ecuadorian economy made great strides after 1950, when annual exports, 90 percent of which were agricultural, were valued at less than US$30 million, and foreign-exchange reserves stood at about US$15 million. Between 1950 and 1970, a slow, steady expansion of nonagricultural activities took place, especially in the construction, utilities, and services sectors. Construction, for example, made up only 3 percent of the GDP in 1950, but it contributed 7.6 percent to the GDP in 1971. Agriculture's annual share of the GDP was 38.8 percent in 1950 compared with a 24.7 percent share in 1971.
The 1960s saw an acceleration and diversification of the manufacturing sector to meet domestic demand, with an emphasis on intermediate inputs and consumer durable goods. By 1971 these accounted for about 50 percent of industrial output. Still, manufactured products--mainly processed agricultural goods--made up only about 10 percent of Ecuador's exports in 1971. Industry was still at an early stage of development, and about 50 percent of the labor force worked in agriculture, forestry, and fishing. Traditional industries, such as food processing, beverages, and textiles, were largely dependent on agriculture. The small size of the domestic market, the high production cost in relation to available external markets, and an undeveloped human, physical, and financial infrastructure all combined to limit the expansion of consumer durable goods in the Ecuadorian economy.
The discovery of new petroleum fields in the Oriente (eastern region) after 1967 transformed the country into a world producer of oil and brought large increases in government revenue beginning in 1972. That year saw the completion of the Trans-Ecuadorian Pipeline, a 503-kilometer-long oil pipeline leading from the Oriente to the port city of Esmeraldas. A refinery also was constructed just south of Esmeraldas. In addition, in 1970 large quantities of natural gas deposits were discovered in the Gulf of Guayaquil. Largely because of petroleum exports, Ecuador's net foreignexchange earnings climbed from US$43 million in 1971 to over US$350 million in 1974.
The production and export of oil that began in the early 1970s, coupled with dramatic international price increases for petroleum, contributed significantly to unprecedented economic growth. Real GDP increased by an average of more than 9 percent per year during 1970 to 1977 as compared with only 5.9 percent from 1960 to 1970. The manufacturing sector alone experienced a 12.9 percent average annual GDP real growth rate during 1975-77. Ecuador became a lower middle-income country, although it remained one of the poorer countries of South America. Economic growth had negative side effects, however. Real imports increased by an annual average of 7 percent between 1974 and 1979; this spawned an inflationary pattern that eroded income. During the same period, the country's external debt grew from US$324 million to about US$4.5 billion.
The Constitution reserves to the state the sole right to exploit natural resources and to create and maintain the basic national economic infrastructure. The central government traditionally handled this responsibility through a decentralized approach to economic development. Over the decades, the government formed numerous autonomous or independent agencies in an ad hoc fashion to perform public services or develop natural resources. Some of these independent enterprises became large and powerful and functioned largely beyond government control or monitoring.
Mismanagement and inefficiencies characterized many independent agencies. PETROECUADOR, for example, the largest and perhaps most important state-owned enterprise, which was responsible for much of Ecuador's petroleum production and refining, was not required to pay dividends or to meet established performance standards. Because it had no control over oil-generated income, PETROECUADOR lacked the incentive to keep production costs down or to improve efficiency. The Ecuadorian Institute of Electrification (Instituto Ecuatoriano de Electrificación--Inecel), which was founded in 1961 under the auspices of the Ministry of Energy and Mines, was unable to coordinate its major departments, or to set the rates charged to electricity consumers. As a result, Inecel relied on the government to meet operating costs. The Ecuadorian Institute of Telecommunications (Instituto Ecuatoriano de Telecomunicaciones-- Ietel), established in 1972 and attached to the Ministry of Public Works and Communications, suffered from poor internal organization and weak financial management.
The government's highly bureaucratic and decentralized approach to economic development thus served as a disincentive to entrepreneurs, who were forced to battle an array of regulations controlling business and commerce. Cumbersome administrative procedures often resulted in protracted and costly delays in such fundamental activities as procurement, business registration, and trade transactions.
The Ecuadorian public sector, comprising the central government, state enterprises, and autonomous agencies operating on a national scale, expanded rapidly during 1972-77. Public-sector expenditures, adjusted for an average annual inflation rate of 14 percent, swelled about 65 percent during this period. Such increases were made possible because of the boost in revenue derived from a rise in international oil prices and the expansion of oil exports, especially during the 1972-74 period, when petroleum revenues rose as a proportion of GDP from 2 percent to 8.4 percent. Meanwhile, revenues from nonpetroleum commodity exports declined from 18.7 percent of GDP in 1972 to 13.8 percent in 1975. In effect, the government substituted the taxation of oil for the taxation of other traditional products.
This policy caused no harm until 1975, when the volume of petroleum exports began to moderate and oil revenues declined relative to GDP. As the gap between public revenues and expenditures widened, budget deficits became the norm, and the government resorted increasingly to foreign borrowing as a substitute for declining tax revenues from nonoil products. Between 1976 and 1979, the foreign debt more than quadrupled; after 1979 the rate of borrowing decelerated, but still the foreign debt had doubled by the end of 1986. In 1983, as foreign banks reduced the amount of credit available to the government, unpopular austerity measures were adopted to help reduce the public-sector deficit.
The oil bonanza encouraged the government to undertake two deficit-producing policies. First, the government used about 50 percent of total public revenues from oil exports to subsidize domestic consumption of such items as food products, electricity, and gasoline and other oil derivatives. Government subsidies to consumers reached a peak of 10 percent of GDP in 1981. Second, the government increased substantially its public-sector employment and public capital expenditures. Although the labor force increased at an average annual rate of only 2.8 percent between 1970 and 1984, public-service employment rose at an average annual rate of 7 percent during the same period. A moderate expansion in public capital expenditures during the 1974-82 period contributed to improvements in the transportation and utility infrastructure and also in water and sewerage systems. During this period, public capital spending increased from 7.3 percent of GDP to 10.1 percent of GDP. Overall government revenue, however, had declined by 1 percent of GDP between 1973 and 1982. The public-sector deficit in 1982 represented 7.5 percent of GDP, most of which was financed by foreign borrowing.
The sharp drop in the international price of petroleum in 1986, followed a year later by a US$700-million loss of oil revenue in the aftermath of the March 1987 earthquake, generated increased foreign borrowing by the government, reduced debt-service payments, and induced the government to print money to make up for revenue shortfalls. To help keep inflation down to 32.5 percent in 1987 (about a 5-percent increase over 1986), liquidity was restricted in the private sector by raising bank reserve requirements. This policy made it difficult to acquire a commercial loan during the second half of 1987.
Although oil production reached near-record levels of 310,000 barrels per day following the repair of the Trans-Ecuadorian Pipeline in August 1987, international crude oil prices remained low, averaging about US$17.70 for that year. The government's failure to raise domestic energy prices or reduce spending in other areas contributed to a fiscal deficit approaching 12 percent of GDP.
Real GDP improved 8 percent in 1988, mainly as the result of increases in crude petroleum exports. The government's deficit reached about 12 percent of GDP. The government controlled the fiscal deficit by doubling domestic fuel prices, eliminating wheat import subsidies, and increasing electricity rates by 40 percent for household users and 60 percent for industrial users.
In 1989 the fiscal budget totalled US$1.4 billion, of which 49 percent was financed by oil export revenues and most of the remainder through taxes. About 38 percent of expenditures went to meet foreign debt payments after April, 10 percent for internal investment, and the balance to meet internal debt payments and current government expenditures. During 1989 the Borja administration accelerated efforts to curtail public spending, but the deficit, 10 percent of GDP, was still too high to be fiscally sound. The government continued its tight money policies, sustaining high interest rates and strict credit requirements, especially for noncorporate consumers.
Ecuador had a complex and splintered budget process. Only about 65 percent of tax revenues were dedicated to financing the national budget. The remainder were earmarked for direct and automatic allocation to autonomous agencies, state enterprises, and local governments on a predetermined basis. Despite tax reform efforts in the 1980s, several funds continued outside the regular budget process. About 5 percent of income, for example, was designated for revenue sharing with 100 municipalities and 20 provincial governments. This system, which did not require recipients to justify their need for the automatically appropriated sums, reduced the amount of economic planning and fiscal control that could be exercised by policy makers. Not only did recipient agencies and local governments lack the incentive to be frugal, but the central government was left with inadequate funds to begin new programs or establish new agencies as needed.
With the national budget, preparations for current and for capital expenditures were each handled differently. The Ministry of Finance and Credit established current expenditures based on actual budgets from the previous year, allowing for increases needed to offset inflation. The National Development Council (Consejo Nacional de Desarrollo--Conade) formulated a budget proposal for all capital expenditures relying on project requests from public agencies, which was sent to the Ministry of Finance and Credit; a national budget plan was then drafted at the ministry and forwarded to the National Congress (Congreso Nacional--hereafter, Congress).
Authorization for both current and capital expenditures was complete when Congress passed the budget plan, but disbursements against authorizations were at the discretion of the Treasury. The Constitution requires each budget to be balanced, but throughout the 1980s deficits were the norm.
In 1987, of total government revenues, 65 percent was derived from taxes on income and capital gains, 13.7 percent from domestic taxes on goods and services, 17.3 percent from taxes on international trade and transactions, 2 percent from other taxes, and 2 percent from nontax revenues. Total revenues for that year represented about 18.5 percent of Ecuador's gross national product (GNP).
During the same year, of total government expenditures, 11.8 percent was earmarked for the military, 24.5 percent for education, 7.3 percent for health, 0.9 percent for housing and social security, 19.8 percent for economic services, and 35.7 percent for other purposes. Total expenditures represented 16.3 percent of GNP; the overall budget deficit represented 2.1 percent of GNP.
In 1987 about 3.3 million people, or 33 percent of Ecuador's total population, were estimated to be economically active. The economically active population was almost evenly divided between the self-employed and wage earners. Agriculture remained the largest employer in 1987, but the previous fifteen years had seen the total percentage of the work force employed in this sector drop from almost half (46 percent) to just slightly over a third (35 percent). The service sector experienced the largest growth, with the percentage of the work force employed in government and other services rising from 17 to 24 percent from 1974 to 1987. Manufacturing and commerce each employed about 10 percent of the economically active populace in 1987.
Although the percentage of the economically active population employed in manufacturing declined from 12 percent in 1974 to 11 percent in 1987, the percentage engaged in commerce rose from 10 percent to 12 percent over the same period. Artisan manufacturing, defined as firms employing up to thirteen workers, declined compared with larger-scale factory manufacturing. Employment in manufacturing also shifted to larger urban areas; in the late 1980s, over half of the labor force engaged in manufacturing was in the provinces that included Quito and Guayaquil.
In the late 1980s, analysts estimated the median age for the total labor force to be slightly under thirty. When broken down by sex, however, data showed that women in the work force tended to be younger. The median age for men alone was over thirty. Other employment statistics broken down by gender revealed a higher ratio of women employed in urban areas, whereas men had higher percentages of employment in rural districts.
Figures for unemployment and underemployment varied and were considered unreliable, but analysts agreed that both problems increased during the 1980s. Unemployment in urban areas was officially estimated at 10.2 percent in 1987, up from about 6 percent in 1975. According to government statistics, underemployment climbed from 25 percent in 1975 to 40 to 50 percent in 1987. Underemployment in rural areas was particularly high and had proven an intractable problem.
The government set minimum wages and increased them frequently to keep abreast of inflation and devaluations of the currency. Minimum wages alone, however, did not accurately represent economic conditions of the average worker because Ecuadorian labor enjoyed an extensive system of mandatory fringe benefits. For example, the average wage earner was entitled to a yearly bonus equal to three months of his or her basic monthly wage and to a monthly cost-of- living and transportation allowance. Paid vacations, overtime pay, and severance pay were all obligatory. These and other supplements could raise a wage earner's average monthly income by as much as 70 percent over his or her basic wage. Workers also benefited from legislation making it difficult to fire employees.
Because of the government's strong regulation of the economy and direct control over wages and prices, organized labor directed its challenges against the government rather than against the private sector. Even disputes between labor and government, however, lacked the acrimony or frequency found elsewhere in Latin America, largely because a succession of populist governments curried favor with low-income groups by conceding economic benefits and expanded worker rights. With little struggle, workers gained the right to organize, to strike and bargain collectively, to withhold union dues from paychecks, to work a forty-hour week, and to receive minimum wage and social security benefits. Thus, while the legal framework favored union development, government endorsement of benefits undercut the power of union leadership. High underemployment and rising unemployment in the 1980s also moderated aggressive bargaining.
Labor-government relations became more strained during the Febres Cordero presidency, however, because of that administration's free-market philosophy. Labor called two national strikes in 1987, a one-day stoppage on March 25 to protest rises in gasoline and transportation prices and a second strike on October 28 to demand the ouster of the minister of government and justice. The first stoppage was highly successful and showed an unprecedented degree of unity among Ecuador's divergent labor groups. The second, more political in nature instead of being focused on monetary issues, had much less impact on national activity.
In contrast to growing tension between organized labor and government, the number of conflicts and strikes centered on collective bargaining issues with the private sector declined during the 1980s. Analysts attributed the decline to the increasing reluctance of the average worker to risk his or her job in the face of rising unemployment and a deteriorating economy. The most serious strikes during this period involved work stoppages by public-sector employees, usually teachers or university personnel. Short strikes by petroleum workers and employees of the state electric utility also occurred.
Agriculture and fishing were the country's largest employers in the late 1980s, providing nearly half of all export earnings. Including livestock raising, forestry, and fishing, agriculture generated almost 16 percent of the GDP in 1986 and nearly 18 percent in 1987. The three principal export crops--bananas, coffee, and cocoa--alone accounted for 2.4 percent of the total GDP in 1986, while livestock raising contributed 5.3 percent of the GDP, and forestry and fishing contributed 1.1 and 1.9 percent, respectively.Land Use and Tenure
Data on land use varied widely and were often considered by analysts as unreliable or at best an approximation of actual numbers. In the mid-1980s, for example, estimates of cropland ranged from 1.6 to 2.5 million hectares out of the total land area of 27.1 million hectares. Different sources put the amount of pastureland at 4.4 or 4.8 million hectares. Estimates for the total land area suitable for agriculture showed an even wider variation, from less than 50 percent to as high as 90 percent. Over half of the cultivated land was in the Costa (coastal region), about a third in the Sierra, and the remainder dispersed throughout the Oriente region. The Costa, with the exception of the area near the Santa Elena Peninsula, had generally fertile land with a climate conducive to agriculture. Altitude, rainfall, and soil composition determined land use in the Sierra. The intermontane basins near Quito and farther south near Cuenca and Loja offered the most productive Sierra lands, whereas the basins surrounding Latacunga and Riobamba had dry and porous soil and the least fertile lands. Higher areas of the Sierra contained grasslands suitable only for grazing or cold-tolerant crops, such as potatoes.
Modern land tenure patterns developed from Spanish colonial land systems. The Spanish encountered large native populations in the Sierra and established the encomienda system whereby the crown granted individual colonists rights to land and the Indians who lived there. This system gradually produced haciendas worked by a "captive" labor force composed of huasipungueros. These huasipungueros worked without salary in return for the farming rights to minifundios (small plots) on the haciendas. In many cases, the huasipungueros were bought or sold with the hacienda. Large-scale agriculture developed later in the Costa, where farming for export used sharecroppers or paid labor to harvest crops. The monetary labor system that developed in the Costa began to compete with the feudal system of the Sierra for cheap labor.
Pressure to reform feudal agricultural practices came from abroad, from humanitarian and liberal elements within the country, and from large landowners in the Costa, who needed additional cheap labor. A land reform law enacted in 1964, the Land Reform, Idle Lands, and Settlement Act, outlawed the huasipungo system and also set up the Ecuadorian Institute of Agrarian Reform and Settlement (Instituto Ecuatoriano de Reforma Agraria y Colonización--IERAC) to administer the law and to expropriate idle arable land for redistribution to farmers. The law outlawed absentee ownership and limited the size of holdings to 800 hectares of arable land in the Sierra, 2,500 hectares of arable land in the Costa, and 1,000 hectares of pastureland in either region. The law also set the minimum amount of land to be granted in the redistribution at 4.8 hectares. Revisions of the law in the early 1970s required that all land with absentee landlords be sold to the tenants and that squatters be permitted to acquire title to land they had worked for three years.
Although IERAC made some progress initially, political opposition slowed implementation of the land reform act. IERAC received little government funding and was not permitted to actively encourage expropriation. Later amendments to the land reform act exempted all farms that were efficiently run. In addition, redistributed land was frequently poor or on mountainsides because the large landowners kept fertile valley lands for themselves. Except for a few showcase examples, farmers on minifundios received no government assistance or services to make the plots productive. In spite of these difficulties, however, by 1984 over 700,000 hectares had been distributed to 79,000 peasants.
Distribution of the land remained highly unequal. In 1982, 80 percent of the farms consisted of less than ten hectares; yet these small farms accounted for only 15 percent of the farmland. Five percent of the farms had more than fifty hectares, but these large farms represented over 55 percent of the land under cultivation. In addition, minifundios were more likely to be found in the Sierra in areas of poor soil or with poorer growing conditions than in other areas.
Agricultural censuses revealed that over three-quarters of the farms were worked by their owners. About 12 percent of the farms were occupied by families that did not hold title to the land but rented it, sometimes hiring additional laborers. Sharecroppers or communal farmers cultivated the remaining 7 percent.
Although intensely cultivated, minifundios in the Sierra could not sustain the region's occupants. Because of the higher wages for nonagricultural jobs, many farmers held unskilled jobs in the cities while family members stayed on the land to grow crops for home use or for sale. A study in the late 1970s indicated that over half of small farm earnings came from off the farm.
Patterns of cultivation ranged from primitive to modern, with the more modern methods generally used in the Costa, where much of the production was geared for export. In 1982 Ecuador had fewer than 7,000 tractors in use. Ox-drawn plows were used on some farms, and digging sticks were used for cultivation on slopes. High prices limited the use of chemicals; manure was the common form of fertilizer in the Sierra, but farmers had increased the use of pesticides and fungicides.
Sizeable areas of land, estimated at over 320,000 hectares, were under irrigation using ditches dug by individual farmers, and about 40,000 hectares were irrigated under government-supported irrigation projects. State support for irrigation schemes began in 1944 with the creation of the Ecuadorian Institute of Hydraulic Resources (Instituto Ecuatoriano de Recursos Hidráulicos--Inerhi). Inerhi's largest project, inaugurated in 1970, brought water to 10,000 hectares of land in Pichincha Province.
A variety of temperature and rainfall patterns resulted in a diversity of tropical and temperate crops. Moderate or cool temperatures in highland areas allowed the cultivation of products usually associated with more northern latitudes. In the Costa, a warm climate, fertile soils, and proximity to ports led to large-scale production of such export crops as coffee, bananas, sugar, cacao, palm oil, and rice. Smaller plots in the Sierra produced potatoes, corn, beans, wheat, barley, and tea. Larger farms practiced dairy farming as well as increasing production of nontraditional crops such as cut flowers, asparagus, and snow peas. Farmers planted some coffee and tea in transition areas between the Sierra and the Oriente, but in general the Oriente's poor soil made it badly suited to agriculture.
Ecuador began marketing bananas abroad after World War II. By 1947 bananas had become the country's leading export crop. Capitalizing on problems with hurricanes, disease, and labor unrest in the traditional banana-growing regions of Central America, Ecuador emerged as the world's largest exporter of bananas by the mid-1980s. The main banana-producing areas were the eastern parts of Los Ríos, Guayas, and especially El Oro provinces. Banana production involved few very large or very small plantations; most ranged from 80 to 120 hectares.
In 1969 the Ecuadorian National Board of Planning and Economic Coordination recommended that land devoted to banana cultivation be more than halved and that the higher yielding, disease-resistant Cavendish-type bananas replace the traditional Gros Michel variety. This latter change prompted modifications in production patterns. Cavendish bananas bruised easily and required more careful handling. In addition, they could not tolerate transport in open trucks, so boxing had to take place at the plantation. Centralized, specialized packing meant the end of small-farm production. Since the new variety had triple the yield of the Gros Michel banana, the government realized that the hectares planted in bananas needed to be reduced to avoid a sharp drop in world prices. Statistics showed the change: land devoted to bananas dropped from 200,000 hectares in 1972 to about 110,000 in 1980, yet production remained fairly constant. In 1987, 2.4 million tons of bananas were produced on 120,000 hectares of land; 1.4 million tons were exported.
Coffee, introduced into the country early in the nineteenth century, was the second most valuable crop throughout the 1980s. Ecuador produced both arabica and robusta varieties, with over half of the plantings in the hilly areas of Manabí Province; most of the remaining plantings were found in the western foothills of the Andes south of Guayaquil. In 1987 over 380,000 hectares were devoted to coffee, and 373,000 tons were produced. Most of this coffee was exported. Coffee was generally grown on small landholdings with about half the land planted in coffee trees alone and the rest planted with coffee trees mixed with cacao, citrus fruits, bananas, or mangoes.
The small size of typical coffee farms usually resulted in poor production techniques, yields, and quality. Much of the coffee produced retained the pulp after processing and therefore brought a lower price on world markets. Other than establishing minimum prices for coffee, the government provided little technical assistance to coffee farmers.
Cacao was the mainstay of the economy in colonial times. The Spanish found the Indians cultivating cacao when they arrived in the sixteenth century, and it first became an export crop in 1740. Produced on large Costa plantations, the crop was nearly wiped out by a fungal disease in the 1920s. Low world prices during the Great Depression further discouraged production, and the plantations were broken up and diversified into rice, sugar, corn, and bananas. After World War II, increased prices and new disease-resistant strains revitalized the industry.
Most cacao production took place on small farms, frequently only to provide supplemental income to the farmer. Most small producers preferred traditional cultivation techniques and did not harvest the beans in years when the price was low. In contrast, the few large plantation owners systematically replaced older trees with newer disease-resistant varieties and used fertilizer to increase yields. Most cacao farmers grew an aromatic variety used for flavoring. In 1987, 311,000 hectares were planted in cacao, producing 57,000 tons of cocoa beans. Sugarcane was grown widely, both in the Sierra and in the Costa. Over 44,000 hectares were planted in 1987, producing 3 million tons of sugarcane. The sugar extraction rate from the cane was about 10 kilograms of sugar from 100 kilograms of cane. Sugar was an important export crop in the 1960s and 1970s, but production levels dropped in the 1980s, and the supply could not satisfy the domestic market, so that Ecuador had to import refined sugar. Almost all of the sugarcane grown in the Costa was used to make centrifugal sugar, so called because of the means of extracting the sugar. Centrifugal sugar was the type most used in foreign trade. Sugarcane in the Costa was grown on large plantations and processed in one of the five mills located east of Guayaquil. Sierra peasants grew sugarcane on small landholdings and used much of the cane for noncentrifugal sugar, mainly in a form known as panela (a raw brown-sugar cake). Growers also marketed molasses, a sugarcane by-product, exporting some of it and using the rest for the domestic manufacture of alcohol or for livestock feed.
Farmers cultivated rice, a staple of the Ecuadorian diet, mainly on the flood plains of the Guayas River Basin in Guayas and Los Ríos provinces. Rice production fluctuated depending upon the weather, but during the 1980s the harvest increased by an annual average of 7 percent. In 1987, 780,000 tons were produced on 276,000 hectares of land. In years of good harvest, growers produced enough rice to meet domestic demand and to export a surplus. Because of low international market prices for rice, however, the government policy stabilized rice production at the level required to meet domestic needs.
Corn, another basic foodstuff, had been grown since precolonial times. Corn was widely grown throughout the country and could be planted from sea level to an altitude of 2,200 meters. Farmers used about half the crop for animal feed, particularly for poultry. In 1987 over 422,000 tons were produced on 460,000 hectares.
Barley, a crop introduced by the Spaniards, proved highly adaptable to the rigorous climate of the Sierra. Its tolerance for cold and severe weather allowed it to be grown at higher altitudes than corn. Widely planted on small landholdings in the central highlands areas, it was grown both for food and for malt for the beer industry. Figures for 1987 showed 43,000 tons produced on 61,000 hectares.
Wheat, almost all of which was used to make bread, was formerly widely grown in the Sierra. Ironically, however, as bread increased in popularity and replaced potatoes and corn as a dietary staple, domestic wheat production decreased. Perhaps the most significant reason was that the government introduced subsidies on wheat imports in order to ease the effects of the inflation that began in the oil-boom years of the 1970s. As a result, consumption of the more expensive domestic wheat declined from 46 percent in 1946 to 7 percent in 1980. The breakup of the large wheat-producing haciendas in the Sierra also contributed to lower levels of wheat production.
Cotton and hemp were the principal fiber crops. The government carried out a program in the 1980s to increase both the quality and quantity of cotton produced. Output increased, and by 1986 Ecuador was nearly self-sufficient in cotton. Hemp was turned into Manila hemp fiber used to produce tea bags. Lesser fiber crops included aloe, which was used to make cloth for sacks, and ramie, which was woven into a cloth resembling linen.
Tea was produced near Puyo on the eastern slopes of the Andes at elevations of about 1,000 meters. An even distribution of rainfall allowed for year-round harvests, a condition not usually found in tea-producing nations.
African palms were widely planted and were the main source of vegetable oil. The government promoted and financed large plantings to cut imports of expensive cooking oils. Although not as high in oil content as the nuts of the royal palm, previously the principal domestic source of vegetable oil, African palms bore more nuts and matured more quickly.
Cottonseed, sesame seed, peanuts, coconuts, and soybeans were other sources of vegetable oils. Cottonseed production fluctuated, depending upon weather conditions. Sesame could be planted from two to three times a year on the warm coastal plains where it took only three months to mature. About 9,000 hectares of peanuts were planted, but most of the production was used for direct consumption as peanuts rather than for crushing into oil. Production of coconut oil varied because most coconuts were consumed directly and not processed. Soybean plantings had increased, and soybeans could be grown both in the Costa and lower reaches of the Sierra.
Ecuador was one of the world's major castor bean producers. Although the bean was inedible, its oil was used for medicinal purposes and as a lubricant in precision tools. The plant could be grown on dry lands where it was uneconomical to raise other crops, or planted along with corn, peanuts, or cotton.
Black tobacco, Ecuador's traditional type, made up the bulk of the 3,600 tons grown in 1987. Blond tobacco for cigarettes was introduced in the late 1960s and was produced mainly in Loja Province. The growth of a domestic cigarette industry was slowed, however, by the high volume of cigarettes smuggled into the country.
Farmers also grew numerous minor crops for domestic food consumption or for export in small quantities. Growers raised pears, peaches, apples, berries, grapes, and plums in the Sierra and citrus fruit, avocados, mangoes, and a wide variety of tropical fruits in the Costa. Important vegetable crops included garlic, onions, cabbage, lettuce, cucumbers, tomatoes, and various types of melons and peppers. Spices included annatto seed, anise, and cardamon. Rubber and mocora and toquilla grass, used to make Panama hats, were minor nonfood crops.
Livestock raising represented an important part of agricultural output and grew significantly throughout the 1980s. Livestock was produced primarily for domestic consumption and was one of the few agricultural products found throughout the country. Although animal husbandry was widespread, it was generally practiced on small plots of land.
The Costa and Oriente produced mainly beef cattle with dairy cattle found mostly in the Sierra. Cattle were grazed on Costa land otherwise unsuited for agriculture, such as the hilly terrain in Manabí Province, seasonally flooded river plains, or semiarid parts of the far south. Dairy production in the Sierra typically was carried on in fertile valleys, particularly between Riobamba and the Colombian border. Beef cattle were fairly new to the Oriente, although large parcels of land were suitable for grazing. The beef industry in the Oriente suffered a serious setback in 1987, however, when the earthquake damaged roads used to transport the beef to markets. Ecuador had about 3.7 million head of beef cattle in 1986.
The 1980s saw an improvement in stock with the introduction of European and Asian breeds. The native criollo breed represented about half of all cattle, with the rest a cross between criollo and Holstein, Brown Swiss, or Jersey for dairy, and criollo and Santa Gertrudis or Charolais for beef. The absence of veterinarians and medicines remained a problem, however, and diseases and parasites plagued many herds.
Besides cattle, livestock included pigs, sheep, and a small number of goats. The number of pigs increased dramatically in the 1980s to about 5 million in 1986; they were raised nationwide but the greatest concentration was in coastal areas. Sheep numbered 2 million in 1986 and were generally found in pastureland higher than 3,000 meters in altitude. Analysts estimated that Ecuador had fewer than 300,000 goats in 1986.
Poultry raising was another rapid-growth area in the 1980s, although floods in 1983 from El Niño caused a sharp drop in production. Chickens were raised both for eggs and for meat, and in 1986 there were more than 45 million birds. Historically, peasant families raised chickens, but the 1980s saw the establishment of large-scale poultry enterprises near larger cities.
The Pacific waters along the coast and as far west as the Galápagos Islands had abundant and varied fish resources. The importance of marine resources to the economy increased steadily, and fisheries were one of the faster-growing industries in the 1980s, as both export sales and domestic consumption increased.
Tuna represented the most important of the many varieties of saltwater fish. Most of the tuna caught was skipjack or albacore, although the yellowfin was the variety most often exported. Ecuador modernized its tuna fleet in the late 1980s with the addition of refrigerated vessels and the leasing of several large seiners (nets) from the United States.
Shrimp production was the strongest growth area in the fishing industry. Although ocean shrimping declined, Ecuador's warm climate and shallow coastal waters, especially in the Gulf of Guayaquil, provided ideal conditions for shrimp farming. In 1986 Ecuador overtook Mexico as the world's largest shrimp exporter. Other important fish included sardines, anchovies, and mackerel. Most of the anchovies and sardines were canned for the export market, with the remainder ground into fishmeal for poultry feed. Except for a few trout hatcheries in the Sierra, the country gave little attention to freshwater fish.
An estimated 50 percent of Ecuador (about 14 million hectares) was forested, about half of this in government-owned lands. Although officially contributing only 4 percent to Ecuador's GDP, the forest resources were important because of wood's wide use for fuel and rural construction. Erosion and deforestation from widespread cutting of timber for fuel had emerged as significant national problems in the 1980s.
The original forests in the Sierra had long ago been cleared to provide space for pastures and wood for fuel and construction. Eucalyptus trees introduced from Australia in the 1800s supplied the Sierra with fuel and construction material and helped prevent soil erosion. In the 1980s, the northern province of Esmeraldas contained most of the forests in the Costa and supplied the majority of the country's wood. The jungles of the Oriente contained several thousand known species of trees, the most valuable of which was the balsa. Isolation from population centers and lack of roads hampered exploitation of the Oriente's resources, however. Other forest products included cinchona bark for quinine, ivory palm nuts for buttons, and kapok from the ceiba tree for mattress stuffing.
The natural resource sector of the Ecuadorian economy contributed almost 15 percent to the GDP in 1986, with the petroleum industry providing virtually all of that total. Although analysts believed that Ecuador had numerous mineral deposits, few metals had been exploited. Hydroelectric power from several large dams provided the primary source of energy. Petroleum and Natural Gas
Petroleum was the single most important element in the Ecuadorian economy, accounting for over 14 percent of the GDP in 1986, two-thirds of all export revenues in that year, and much of the foreign investment. In 1987 petroleum and mining together accounted for only about 8 percent of GDP because of a significant drop in petroleum production, but estimates for 1988 indicated that petroleum production had risen, exceeding its 1986 level. Although Ecuador's level of production in the late 1980s ranked near the bottom of the thirteen members of OPEC, it exceeded all countries in Latin America except Mexico and Venezuela.
Petroleum was first discovered in the early 1900s both on and offshore from Salinas on the Santa Elena Peninsula west of Guayaquil. More than 100 million barrels of crude petroleum were removed in six decades of exploitation; by the mid-1980s, however, Costa production had fallen to less than 1,000 barrels per day (bd). Old, expensive-to-maintain equipment produced high operating costs, making continued exploitation uncertain.
The Oriente, however, had long since eclipsed the Costa as the center of Ecuador's petroleum activity. In the late 1980s, the vast majority of Ecuador's 1.6 million barrels of proven reserves lay in the northern part of the Oriente, between the Napo River and the Colombian border. This area formed part of a rich oil-bearing region extending from southern Colombia through Ecuador and northeastern Peru. Indeed, analysts believed that this region represented one of the richest oil-bearing areas of the Western Hemisphere.
Although exploration in the Oriente began in the 1920s, petroleum was not actually found until a consortium formed by the Texaco Petroleum and Gulf Oil companies discovered several rich fields near Lago Agrio (now Nueva Loja) in 1967. The success of the Texaco-Gulf exploration attracted other companies, and over the next two decades more than fifty new wells began producing commercial quantities of crude petroleum. Production in 1989 had risen to over 1.1 billion barrels, over 99 percent from the Oriente fields.
Ecuador built the 503-kilometer Trans-Ecuadorian Pipeline to carry crude petroleum from the Oriente fields across the Andes to a new refinery just south of Esmeraldas. Although the pipeline was designed to carry as much as 400,000 bd, volume averaged just over 300,000 bd in the late 1980s. A landslide caused by a severe earthquake in March 1987 destroyed forty kilometers of an aboveground section east of Quito. To keep exports from stopping completely, Ecuador quickly constructed a thirty-eight-kilometer spur from the Oriente fields to Colombia's pipeline. Oil was then either exported directly as crude from Colombian ports or taken by tanker from Colombia to Ecuador's largest refinery at Esmeraldas. Although this stopgap measure allowed for some petroleum to be exported, production at the Oriente fields had to be trimmed by more than half for the five months it took to repair the TransEcuadorian Pipeline.
Unlike many of the larger OPEC countries, Ecuador refined less than half of the petroleum it produced. Most of the country's 123,000 bd refining capacity was located at two refinery complexes, one at Esmeraldas and a complex of three refineries at the Santa Elena oil fields. The Esmeraldas refinery had a 90,000 bd capacity, whereas the three older Santa Elena refineries had a combined output of 32,000 bd. Ecuador's newest refinery, completed in 1987 near Nueva Loja in the Oriente fields, had a capacity of 1,000 bd.
Control and ownership of petroleum production and refining was held by foreign oil companies, the government-owned PETROECUADOR which replaced the former Ecuadorian State Petroleum Corporation (Corporación Estatal Petrolera Ecuatoriana--CEPE), or consortia composed of both. PETROECUADOR assumed complete control of the Trans-Ecuadorian Pipeline in 1989 and announced it would take over most other foreign interest in the petroleum industry in the early 1990s.
In addition to abundant supplies of petroleum, observers estimated that the country had natural gas reserves in the Oriente and offshore in the Gulf of Guayaquil totalling 400 billion cubic meters. Reserves in the Oriente were collocated with petroleum deposits. Producers flared most of the gas associated with petroleum drilling, using only small amounts as fuel. Distance from markets made exploitation of the gas uneconomical, although a small plant to harness the gas as a fuel was completed near Nueva Loja in the mid-1980s. Reserves in the Gulf of Guayaquil, thought to be among the largest in Latin America, remained unexploited because of an uncertain domestic market for natural gas and a legal dispute between the government and foreign companies over ownership.
<>Mining and Minerals
Mining played a small role in the economy in the 1980s, contributing only 0.7 percent to the GDP in 1986 and employing about 7,000 persons. Inaccessibility of the regions where minerals were located and the incomplete exploration of resources hampered mining activities. Although observers believed that Ecuador had reserves of gold, silver, copper, zinc, uranium, lead, sulfur, and kaolin, as well as limestone, the latter dominated the industry. Miners generally produced limestone in many small operations countrywide and used it in local cement plants.
Gold, largely forgotten since its early exploitation in the sixteenth century, grew in importance in the 1980s; by 1987 Ecuador was exporting 2.4 tons per year. The southern Sierra region held the country's largest deposits; the newest veins were discovered in the southeastern province of Zamora-Chinchipe.
In 1985 Congress passed a new law to encourage foreign exploration and investment in the mining industry. Designed to simplify regulation of the industry, this legislation also offered higher financial incentives for the investor and lower overall taxation and established the Ecuadorian Institute of Minerals (Instituto Ecuatoriano de Minería--Inemin) under the Ministry of Energy and Mines.
The period from 1976 to 1985 saw a rapid rise in the demand for electricity and in the construction of generating facilities. During the same period, the country switched from primarily oilfired thermal plants to hydroelectric-power generation. In 1986 total generating capacity reached 1,802 megawatts, and the country produced 5,202 gigawatt-hours of electricity. Although Ecuador had a larger generating capacity from thermal plants than from hydroelectric facilities, 70 percent of the electricity produced in 1986 came from hydroelectric sources, because many of the thermal plants sat idle or underutilized. Completion of three new hydroelectric complexes under construction in the late 1980s was expected to allow complete dependence on hydroelectric sources by 1992.
The Amaluza complex on the Paute River near Cuenca offered Ecuador's largest single source of power. Current from this complex was carried to Guayaquil and to Quito via a 230-kilovolt transmission line. Disruptions of these lines caused occasional blackouts, and to provide for alternate routing, a second 230- kilovolt line was completed in 1988. Expansion of the grid continued throughout the early 1980s, until by 1984 more than half the households nationwide had access to electricity. Access for urban households considerably exceeded that for rural dwellings, however.
A government agency, the Ecuadorian Institute of Electrification (Instituto Ecuatoriano de Electrificación--Inecel), functioned as the nation's generation and transmission company. Inecel in turn sold electricity to local distribution companies over which it exercised some control through majority ownership of their stock.
Industrialization occurred later in Ecuador than in most other Latin American countries. As late as 1960, the small industrial sector consisted almost entirely of textile production, food processing, and artisan activity. Manufacturing began to develop in the mid-1960s, and during the 1970s, spurred by petroleum revenues and exports to other nations in the Andean Common Market (Ancom, also known as the Andean Pact), manufacturing became the most dynamic sector of the economy. Manufacturing stagnated in the 1980s, however, with an average annual growth of only 0.8 percent for the period 1981-87. In 1987 it accounted for over 17 percent of the GDP.
Food processing and textile manufacturing accounted for almost 60 percent of the total value of manufacturing in 1986. Nonmetallic minerals and metals comprised 12 percent of the total value; all other industries accounted for the balance.
Most industrial establishments were small and barely more than handicraft operations. A government industrial census in the early 1980s listed more than 35,000 firms, but only 28 of these had more than 500 employees; more than 31,000 had from 1 to 4 workers. Individual proprietors owned and managed most firms. Shoemaking shops, woodworkers, or furniture makers represented nearly half of the establishments listed in the census.
Guayaquil was the most important industrial center, followed by Quito. Together the two cities accounted for about two-thirds of total factory employment. Agricultural and beverage processing plants, sawmills, shipyards, iron foundries, and cement and chemical plants were Guayaquil's main industries. Textile production and food processing topped the list of industrial activities in Quito. The government had made an attempt in the early 1970s to disperse industrial activity by promoting industrial parks in other cities, with some success.
Sugar refining, rice milling, and flour milling were among the largest sectors in the food-processing industry. Two sugar mills dominated the industry and processed most of the sugar used domestically. Rice milling was concentrated in the Costa and consisted of numerous publicly owned mills, as well as many smaller private ones. Most flour mills were located near larger cities in the Sierra and used locally grown wheat; the three large flour mills near Guayaquil used mainly imported wheat. Ecuador also had a large baking industry, and nearly all cities had commercial bakeries producing bread and cakes.
The textile industry, which ranked next to food processing in value of production, was concentrated in the Sierra, where it originated as an outgrowth of home weaving. Most textile plants remained small, although one Quito firm was among the largest employers in the country.
The construction industry showed a steady decline during the 1980s and accounted for only about 4 percent of the GDP in 1987. Because over 95 percent of the construction in Ecuador resulted from government-financed projects, the industry remained highly vulnerable to periods of austerity in government spending. Indeed, the sector's only growth year in the decade of the 1980s occurred in 1987, reflecting large-scale highway rebuilding after the earthquake. High interest rates and a shortage of cement also hampered construction projects.
Artisan activity constituted a large part of the manufacturing labor force. Although many of the artisans had considerable skills in such occupations as weaving, their wages were among the lowest in the labor force, and as machine-weaving became more widespread their skills were increasingly obsolete. In the 1980s, the government offered special credits and loans to encourage a transition from artisan workshops to small factories.
The largest number of artisans produced clothing and furniture. This group included dressmakers, tailors, shoemakers, cabinetmakers, and carpenters. Several thousand additional artisans were goldsmiths or silversmiths.
The service sector constituted the largest component of the Ecuadorian economy, accounting for almost 50 percent of the GDP in 1987. The largest parts of the service sector were wholesale and retail trade at 29 percent, financial services at 23 percent, and transportation and communications at 15 percent of services. Although contributing half the nation's wealth, financial services were inadequate, and the communication and transportation networks remained underdeveloped. Financial System
The country's modern finance and banking system began in 1948 with the establishment of the Central Bank. The Law of the Monetary System of 1961 defined the functions of the Central Bank, which included issuing and stabilizing the national currency, providing credit to the private sector, managing foreign-exchange reserves, controlling import-export permits, carrying out the Monetary Board's policies, supervising private banks, and regulating international financial transactions. The bank also maintained a check clearinghouse, rediscounted and made advances to commercial banks, and published economic data.
In 1989 the structure of the banking system resembled a threetiered pyramid with the Monetary Board at the apex. The Bank Superintendency and the Central Bank occupied the next tier and lent funds to four state-owned financial institutions. At the bottom came the commercial banks, savings and loan associations, and finance companies, which operated at the local level.
The Monetary Board regulated the entire banking and credit system, including the Central Bank. In the 1980s, the board's eleven members included the chairman, appointed by the president of Ecuador, and the ministers of finance and credit; agriculture and livestock; energy and mines; and industry, commerce, integration, and fishing. Also included were the president of the National Planning Board, two representatives of national chamber of commerce organizations, a representative of the commercial banks, the general manager of the Central Bank, and the head of the Bank Superintendency. The Monetary Board's functions included formulating the country's economic policy; determining interest rates; and setting Central Bank credit levels, minimum reserve requirements, and exchange rates.
The Bank Superintendency supervised and controlled banks, finance companies, and insurance companies. The Congress appointed the head or superintendent from three candidates proposed by the president. Funded by compulsory contributions from the financial institutions under its control, the Bank Superintendency also collected and published banking statistics.
The national government and the private banks jointly owned the Central Bank and tasked it with carrying out the policies of the Monetary Board and for supervising the activities of private banks. All private banks in Ecuador were required to invest at least 5 percent of their capital and reserves in the Central Bank, and together they owned the majority of shares in the Central Bank. Headquartered in Quito, the Central Bank had sixteen branches in other cities and towns in the late 1980s.
The four major government-owned financial institutions were the National Development Bank (Banco Nacional de Fomento--BNF); the Securities Commission-National Financial Corporation (Comisión de Valores-Corporación Financiera Nacional--CV-CFN), more commonly known as the National Financial Corporation (Corporación Financiera Nacional--CFN); the Ecuadorian Housing Bank (Banco Ecuatoriano de la Vivienda--BEV); and the Development Bank of Ecuador (Banco de Desarrollo de Ecuador--Bede), formerly known as the Cooperatives Bank of Ecuador. Each institution had a specialized role: the BNF provided loans for agriculture and industry, the CFN lent capital to industries utilizing local raw materials or making handicrafts, the BEV promoted low-income housing, and the Bede lent funds to local credit cooperatives, especially those in rural areas.
The thirty-one commercial banks were the most important financial institutions in the country, attracting the major portion of deposits and making the largest percentage of total loans in the banking system. Only four of the commercial banks were foreign: the United Holland Bank from the Netherlands, Citibank and the Bank of America from the United States, and Lloyd's Bank from Britain, formerly known as the Bank of London and South America. In 1986 the Bank of Pichincha, Pacific Bank, Philanthropic Bank, People's Bank, and Continental were the five largest locally owned commercial banks.
Several other types of private financial institutions existed in 1988. Eleven savings and loan associations, 26 finance companies, 123 cooperative savings institutions, and 4 credit card companies provided various forms of financing or credit. The Ecuadorian Development Finance Company (Compañía Financiera Ecuatoriana de Desarrollo--Cofiec) was founded in 1966 by local and foreign commercial banks, local businessmen, several international finance firms, and the CFN. Cofiec was an important source of funds to private industry, both in the form of loans and in equity investment.
Two stock exchanges operated, one each in Quito and Guayaquil. Although the Quito exchange handled almost twice as many transactions as the Guayaquil exchange in 1986, neither was large. The great majority of trading occurred in government issues and mortgage bonds, with only a small amount of trading in common stocks or other securities. Most Ecuadorian businesses were owned by small numbers of individuals, and few resorted to public financing to raise capital.
In contrast to many other Latin American countries, Ecuador had a small tourist industry, and it played only a minor role in the economy in the 1980s. In 1985 approximately 250,000 tourists visited Ecuador and contributed over US$200 million to the economy. Colombia was the source of 36 percent of the visitors, followed by the United States with 2l percent and Western Europe with 18 percent. Ecuador did not include brief cross-border visits in official tourist statistics, so these figures do not include the many Colombian visitors who were only on short shopping trips, taking advantage of the generally lower prices in Ecuador.
The government provided limited support of tourism, and many colonial towns, ancient ruins, and areas of natural beauty were undeveloped because of lack of promotion or inadequate infrastructure for visitors. The most popular tourist destination in the 1980s was the Galápagos Islands, but concerns over the delicate and unique environment limited large-scale tourism there. The National Directorate of Tourism was attempting to broaden the tourist destinations available.