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Ecuador

Situation and cooperation

The inactive volcano Chimborazo, with 6267 metres the highest mountain in Ecuador

President Moreno initiated a referendum on constitutional matters in February 2018. Matters to be voted on included placing a stronger focus on environmental protection. Other proposals put forward for discussion were the repeal of statutes allowing the state president to be re-elected for an unlimited number of terms and the introduction of tougher sentences for corruption offences. A clear two-thirds majority voted in favour of the proposals.

During his time in office, former President Rafael Correa had instigated a radical change of direction within the country, calling his policy a ‘citizens’ revolution’. The constitution defines Ecuador as a social, democratic, intercultural, multinational and secular state. It lays down basic social rights – such as the rights to food, health and education – and declares national sovereignty over strategic resources.

Ecuador is an upper-middle-income country. In recent years, there has been a marked drop in poverty and social inequality. However, more than one fifth of the country's population is still living below the national poverty line; some 12 per cent are considered malnourished.

Situation in Ecuador

School class in Ecuador

Ecuador's government has set itself ambitious development goals. The National Development Plan adopted in July 2017, which covers the period up to 2021, stipulates as its goal that all citizens should be able to lead lives free of poverty or violence. Furthermore, all citizens have a right to education, work, adequate housing, social protection, health services and cultural participation. Particular prominence is to be given to political and social dialogue and to giving the population a say in all areas of life. The new development plan was framed specifically for the purpose of implementing the 2030 Agenda. Its nine development goals are similar in structure and content to the Sustainable Development Goals. Furthermore, they include a rights-based approach to social inclusivity combined with goals targeted at ecological sustainability, political participation and peace.

The guiding vision behind the plan is that of an "inclusive economy" – an economy that serves all of society. A further aim is to manage the country's economic development in an ecologically sustainable way. And with regard to environmental policies, for example, State President Moreno intends to steer a very different course from that of his predecessor. Thus, on the one hand, Moreno is prepared to make concessions regarding restrictions on oil production; but, on the other hand, he also intends to push for a binding commitment regarding Ecuador's nationally determined contributions (NDCs) to climate protection. Moreno's predecessor had not made any specific commitments while he was still in office. The new president wants to do so soon, and to include civil society in the process.

The government's reform policies of the last ten years have achieved some initial successes. For example, the World Bank reports that, between 2007 and 2016, the proportion of people living below the national poverty line dropped from 36.7 per cent to 22.9 per cent, and that by 2015 the proportion of those living in extreme poverty had decreased from 10.1 per cent to 4.8 per cent. The annual gross national income rose from the equivalent of 3,330 US dollars in 2007 to the equivalent of 5,800 US dollars in 2016. The current Human Development Index (HDI) ranks Ecuador 86th out of the 189 countries assessed.


Challenges

Severe poverty still persists in the rural areas of Ecuador, where it affects especially indigenous and Afro-Ecuadorian groups and children. Although social inequality has been reduced, the gap between rich and poor remains wide and is far from being closed. Furthermore, access to safe drinking water and sanitation still needs to be improved.

Serious weaknesses in Ecuador's development are essentially the result of the political instability that was a feature of the country over many years. Economic and political power is centred round the country's two large cities, Quito and Guayaquil. Over many years, structures evolved there which favoured corruption and cronyism. Public administration has been slow to modernise. As a consequence, people place little trust in the country's political institutions.

The new government elected in 2017 faces an uphill battle – domestically because the Alianza PAÍS; which has been in power for eleven years, is split down the middle, as is the population, with one half supporting Correa and the other half Moreno; in economic policy terms because government expenditure has remained high despite a significant drop in revenues since 2014 following the decline of commodity prices, in particular oil.

Added to this, Ecuador faces some incalculable dangers because of its geographical location: the country sits on what is known as the Pacific "Ring of Fire", a ring containing many active volcanoes. Ecuador also counts as one of the countries particularly prone to earthquakes.


Economic development

Drilling for oil in the Yasuní National Park

Ecuador is heavily dependent on exports. By far the most important export is oil (accounting for 30 per cent of all exports); further export commodities are bananas, coffee and cocoa, fish and shrimps. Alongside the oil sector, the wholesale and retail sectors as well as the industrial sector are also important for the country's economy.

In September 2000, Ecuador introduced the US dollar as the country's sole functional currency. In the first instance, this move helped to end the economic crisis; later, however, linking Ecuador's economy to the US dollar had a negative impact on commodity prices and nominal wages.

High oil revenues over several years meant that Ecuador's economy grew year after year. Thus, the government was able to significantly increase its social and infrastructure spending. The subsequent fall in oil prices had a correspondingly negative impact. In 2016, Ecuador slid into recession. The International Monetary Fund (IMF) is predicting economic growth of 0.6 per cent for 2018.


Ecuador became the focus of international attention when, in 2007, President Correa launched the Yasuni ITT Initiative. This initiative was named after the Yasuni Biosphere Reserve and National Park, and the Ishpingo, Tambococha and Tiputini oil fields discovered there. Ecuador offered the international community a deal whereby it would forgo plans to exploit the oil fields if the international community agreed to compensate Ecuador for lost earnings by paying 50 per cent of the expected oil revenues (3.6 billion US dollars) into a trust fund administered by the United Nations. However, the international community did not enter into this bargain, and a civil society environmental alliance failed to push through a referendum on how the oil reserves should be used. In 2014, a licence for oil production in Yasuni National Park was granted. Drilling began in September 2016.


Priority areas of German cooperation with Ecuador

Germany is one of the country’s main bilateral donors for development cooperation and, in 2017, made a new commitment of 37.5 million euros to Ecuador. Of this amount, 19.5 million euros was allocated to Financial Cooperation and 18 million euros to Technical Cooperation.

German support focuses on two priorities:

  • Protecting the environment and natural resources
  • Public administration and economic reforms

Protecting the environment and natural resources

A marine iguana on a Galápagos island

Objective 3 of Ecuador’s national development plan, the PNBV, is to guarantee the rights of nature – for current and future generations. This is also a major focus of bilateral development cooperation. Germany is making a contribution to this objective, for example, by supporting the Ecuadorian government in its attempt to scale up the role of the environment ministry as well as of other organisations active in this field on a national level. A further objective is to lessen the country's dependence on oil and to foster the use of renewable resources (in a move towards a "bio-economy").

GIZ has been mandated by Germany's development ministry to help decision-makers in Ecuador develop and implement strategies for the sustainable use of the country's biodiversity. Areas for action include forest conservation, agro-biodiversity, the preservation of coastal and marine protected areas, the reduction of greenhouse gas emissions, and adaptation to climate change.

As part of its programme of financial cooperation, Germany is supporting the efforts of the Ecuadorian government to expand and bolster the national network of conservation areas. The KfW Development Bank has been mandated by the BMZ to help finance the conservation areas and related infrastructure. The KfW Development Bank is also providing the finance, in line with the REDD mechanism, for incentive payments to – mostly indigenous – owners of forest land who are willing to place their land under conservation.


Public administration and economic reforms

View of Quito, the capital of Ecuador

In Ecuador, there have traditionally been disparities in political, cultural, economic and ecological terms between the country's four great regions, made up of the Amazon region, the highlands, the coast and the Galápagos Archipelago. The constitution adopted in 2008 provides for the restructuring of territorial divisions, the reform and decentralisation of administrative structures.

The key challenges now facing Ecuador are to shed centralist patterns of behaviour; improve management capabilities at various levels of administration; place the country's provinces and municipalities on a sounder financial footing; and remove deficits in the provision of local infrastructure and public services. To this end, selected medium-sized towns in Ecuador are receiving advisory support through Germany's Technical Cooperation so that they can implement the national agenda on municipal development, also in terms of its climate and environmental policy goals. There is also a special focus on involving civil society to a greater degree in policy discussions and decision-making.

In a complementary measure, Germany is also helping to enhance municipal administration through its financial cooperation programme of support. For this purpose, the KfW Development Bank is providing credits to the state-owned development bank, Banco del Estado, which will be used to help selected medium-sized municipalities in Ecuador make investments in their water supply and sanitation systems, waste management and urban mobility networks.


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