Democracy and Governance in Ecuador
The Development Challenge: The year 2004 was characterized by political instability, labor strikes, popular protests, and declining social conditions for the majority of Ecuadorians. President Lucio Gutierrez's administration fought for political survival after attempts by opposition parties to remove the President from power. The President's party suffered a poor showing in the October 2004 regional and municipal elections, thus forcing the President to rely on a fractious coalition of parties in the 100 seat Congress. However, the elections were deemed to be free and fair by international observers. According to the 2004 Democratic Values Survey, public support and confidence in democracy has increased slightly since the first survey in 2001. Given the volatile political climate and fragile democracy in Ecuador, much remains to be done before stability, development, and prosperity are assured.
As an oil exporter, Ecuador has benefited from high world oil prices, resulting in a projected real gross domestic product (GDP) growth rate of 5.1% for 2004. Due to structural inefficiencies, including corruption, the improved GDP figures have not translated into real benefits for most Ecuadorians. Health, education, and other public workers have participated in strikes against the government. In addition, poor understanding among Ecuadorians of the benefits of free trade has resulted in protests against the proposed free trade agreement with the United States.
Ecuador has an annual population growth rate of 2.1%, a high infant mortality rate (30 per 1,000), a high prevalence of infectious diseases (tuberculosis, malaria, and HIV/AIDS), chronic malnutrition, and high levels of maternal and child mortality. Access to safe water and sanitation is worse than in Peru and Bolivia, and modern health care facilities are limited among urban and rural poor populations. Ecuador invests approximately 3% of its GDP in education. Rural populations, particularly indigenous people, suffer from a lack of educational opportunities.
Ecuador continues to make strides in recovering from the collapse of the economy and banking system which befell the country in 1999. Important achievements have been accomplished in the fiscal sector, especially with the Law of Fiscal Responsibility which has imposed discipline in the management of the government budget. In 1999, rampant inflation and capital flight caused Ecuador to dollarize the economy. The measure has delivered low inflation and macroeconomic stability but has also highlighted Ecuador's lack of competitiveness. This deficiency as well as the need to implement structural changes in the oil, electricity, telecommunications, and banking sectors, continue to demand for further needed macroeconomic reforms. The total external debt estimated for 2004 represents 57% of GDP and debt service estimated as a percentage of earnings from exports reaches 22.1%. Unemployment rates continue above 10%, while underemployment is approaching 50%. Over 60% of the population lives in poverty.
Ecuador continues to suffer from the destabilizing effects of drug trafficking activities in neighboring countries and the collateral effects in security. Finally, the destruction of natural ecosystems is threatening Ecuador's impressive biodiversity. The country that is one of the world's richest biodiversity centers and holds 10% of the earth's plant species and 18% of bird species, is now approaching the highest deforestation rate in South America. Technical capacity, personnel, and the political will necessary to implement regulations aimed at protecting the environment have been lacking.
The U.S. national interests in Ecuador are upholding democratic institutions; combating drug trafficking and terrorism; fostering Ecuador's economic development; building trade, investment, and financial ties; and combating poverty. Ecuador's position in the heart of South America's most violent region also underscores the country's importance to U.S. interests. A democratic and prosperous Ecuador can help restrain the spread of illegal drugs and violence across the Northern Andes.
(Excerpted from the 2006 Congressional Budget Justification for Ecuador)
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