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Ecuador
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Situation and cooperation
Between 1998 and 2000 Ecuador experienced one of the worst economic and financial crises of its history. Among the causes were the fall-out from the 1997 Asian crisis, the drop in oil prices at the end of the 1990s, the meteorological phenomenon El Niño, and above all serious weaknesses in the country’s economic structure and economic policy.
Since then the economic situation has stabilised substantially. Nevertheless, poverty remains a core problem. According to the United Nations Development Programme (UNDP), 46 per cent of the population are still living below the national poverty line; 13 per cent are living in extreme poverty. The rural population, especially indigenous and Afro-Ecuadorian groups, and children, are worst affected.
In recent years Ecuador has improved its position on the Human Development Index, and is now ranked 80th out of 182 countries (HDI 2009). Nevertheless, this still leaves it trailing most other countries in South America. Whether the country will attain the Millennium Development Goals (MDGs) is considered very uncertain. The National MDG Report (2007) concludes that greater efforts are needed if the targets are to be achieved for five of the eight goals. Most ground must be made up in the elimination of extreme poverty, in access to further education, in combating HIV/AIDS and other diseases and in sustainable environmental protection.
Shortcomings in good governance
The principal constraint on Ecuador’s development lies in the field of governance. The country has continually been beset by political instability.
Seven presidents have been removed from office prematurely in the space of ten years. None of the rapid succession of governments has managed during its short term in office to draft, let alone implement, an effective long-term poverty reduction strategy.
The country also lacks both efficient administrative structures, and democratic and transparent participatory processes. Corruption, nepotism and the strong political and economic clout traditionally wielded by national elites are constraining development. Widespread legal uncertainty is a serious problem for investors and trading partners.
Poor governance has sapped public confidence in political institutions. The indigenous populations in the highlands and in the Amazon region and the Afro-Ecuadorians are largely excluded from political life.
Ecuador’s health system is totally under-developed, especially in rural areas. Thirty per cent of the population is without access to health care services. The quality of medical care is poor. State education also falls far short of requirements. Here too indigenous groups are severely disadvantaged. On average they attend school for only two years and have the highest illiteracy rate of all population groups (40 to 50 per cent).
Ecuador’s economy depends on oil reserves in the Amazon region and on the export of agricultural produce and fisheries products (bananas, coffee, fish, shrimp). It is thus susceptible to fluctuations in the world market prices for these products. Moreover, state subsidies and social transfers have for decades been funded by oil revenues. The fall in the price of oil in late 2008 led to a budget crisis that impacted directly on the economy and the needy sections of the population.
Over-exploitation of natural resources and the non-sustainable use of farmland and forests are destroying the natural and economic foundations of life on a massive scale. To this must be added the destruction caused by illegal use.
2007: a fresh start
Hopes for greater political stability and democracy are now pinned on the government
of President Rafael Correa, which has been in office since January 2007. In April 2009 Correa became the first president to be re-elected in the country's history. He has used his popularity among other things to push through a new constitution, which was adopted by referendum
in September 2008. His work so far indicates
that he wants to bring in reforms and adopt pro-development policies. Poverty reduction, social justice, attaining the Millennium Development Goals and state reform are all central items on the reform agenda. The publication in September 2007 of a national development plan 2007-2010 was a first step, followed by the revision of the "Plan Nacional para el Buen Vivir" completed in late 2009, which will now remain in force until 2013. Implementation of the plan is being managed by a national planning and development secretariat (Secretaria Nacional de Planificación y Desarrollo, SENPLADES), which has a comprehensive planning mandate for the entire country and all sectors.
The government is aiming among other things for a decentrally organised, efficient, transparent, responsive state which would also adopt a higher profile in the field of economic policy. Its ambitious social policy sets out to combat the worst poverty, bring about equality of opportunity for disadvantaged groups, improve the education and health systems and promote small-scale entrepreneurs. But funding for these reforms has yet to be secured.
In the environmental sector, the government aims to achieve ecologically sustainable economic development. It is not yet clear, however, what priority will effectively be given to protecting natural resources if this aim is forced to compete with economic policy goals and financial necessities. Nonetheless the government's proposal for protecting the Yasuni Biosphere Reserve has caused an international sensation: Ecuador is willing to do without oil production in the National Park, even though it is assumed that some twenty per cent of the country's reserves are located there. This sacrifice is subject to the proviso that the international community substitutes at least half the anticipated earnings from the lost oil production. Germany has supported this proposal for instance by financing feasibility studies.
Development potential
With its geographic location, and superb endowment with natural resources, Ecuador has good potential for economic development – oil production, tourism, trade and agriculture spring immediately to mind. Traditionally the most important agricultural product is bananas, which are grown in the coastal belt. Ecuador is also the world’s leading producer of high-grade varieties of cacao.
Ecuador’s reasonably good economic situation and the currently relatively high oil prices are a good basis on which to implement the programme of reform. It remains to be seen, however, to what extent the Correa government will intervene to regulate the economy, and by so doing possibly deter private investors. Another important factor is Ecuador's further regional integration, and trade with its neighbouring countries Colombia and Peru. Since 2008 the unilateral raising of customs duties and import quotas by the Correa government, and disputes concerning national security and freedom of travel, have been hampering economic cooperation in the region.
Priorities of German cooperation with Ecuador
Germany has been engaged in development cooperation with Ecuador since the 1950s. Germany is the country's third largest bilateral donor after the USA and Spain. In 2008 Germany pledged 25.5 million euros in new funds to Ecuador for the period up to 2010. Of this, 12 million euros will go to Technical Cooperation projects and 13.5 million euros to Financial Cooperation projects. It has been agreed with the Ecuadorian government that German assistance will go to two priority areas:
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Protection of the environment and natural resources
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Modernisation of the state, decentralisation, and promotion of local government
Gender equality and reducing discrimination of indigenous and Afro-Ecuadorian groups will be cross-cutting themes in all projects.
In the context of international development cooperation, Germany has strengthened its support for better coordination with other donors working in Ecuador. These include United Nations agencies, the Inter-American Development Bank (IDB) and European partners such as Spain, Belgium, France, the Netherlands and Switzerland.
Protection of the environment and natural resources
The activities of German development cooperation in the priority area of protection of the environment and natural resources are guided by the National Development Plan and the strategic plan of the national system of protected areas (SNAP). Germany’s engagement aims to contribute significantly to protecting biodiversity and the natural resource base on which life depends. Efficient management of the protected areas and their zones of influence and the introduction of sustainable forms of natural resource use will ensure the long-term protection of these areas, create sources of income for the local population and help to reduce poverty.
The German contribution focuses on three fields of action:
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Policy advisory services, institution building and investments to put in place an enabling environment for the effective management of protected areas and their zones of influence at the national level.
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Support for actors relevant to the conservation of the protected areas at the sub-national level in the performance of their tasks (and investments to improve infrastructure and equipment relevant to protecting these areas).
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Sustainable natural resource valorisation in the protected areas and their zones of influence.
To help strengthen the system of protected areas created by the Ecuadorian Ministry of the Environment, in 2009 the BMZ made additional funds of four million euros available. Germany is thus supporting the conservation of species diversity and helping reduce climate change.
Germany has made an important contribution over the last few years to strengthening the Ministry of the Environment. The Ministry has been enabled to place issues such as governance and decentralisation in the environmental sector, forestry management and cooperation with indigenous groups firmly on the government’s agenda. Another success story is the establishment of a – politically largely independent – environment fund (Fondo Ambiental Nacional, FAN). Its aim is to secure the long-term financing of the strategic plan of the national system of protected areas (SNAP). In the future, Germany would also like to support measures to control deforestation under the United Nations Collaborative Programme on Reducing Emissions from Deforestation and Forest Degradation in Developing Countries (REDD), and the establishment of a national REDD framework in Ecuador. To this end the BMZ pledged a further 14 million euros in 2009.
Modernisation of the state, decentralisation, and promotion of local government
A decentralised, democratic and transparent state capable of taking action and based on the rule of law is essential to sustainable development and successful poverty reduction in Ecuador.
The aim of the joint strategy in this priority area is to promote stable, democratic and decentralised state structures geared to public core functions and the needs of citizens, so as to establish in Ecuador the frame conditions necessary for poverty reduction and sustainable development.
Activities in this priority area are focused on the following fields of action:
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Support for modernising and decentralising public administration.
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Strengthening decentralised administration and establishing and developing capacities for delivering quality services in line with citizens’ needs.
The prevailing political environment has so far made it very difficult to bring about structural improvements at national level. Germany has therefore concentrated on cooperating with selected provinces and municipalities. They have been helped to provide social services in line with citizens’ needs. Important factors are the participation of civil society and better integration of women and ethnic minorities. With the new government in place there are grounds for hope that positive results can now also be achieved at central government level.
Information
Publications
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Latin America Dossier
German Development Cooperation with Latin America and the Caribbean
Topics 184
(PDF 5 MB, accessible) -
Promoting democracy in German development policy: Supporting political reform processes and popular participation
Special 137
(PDF 482 KB) -
Biological Diversity
Strategies 166
(PDF 450 KB, accessible) -
FLEGT – Combating illegal logging as a contribution towards sustainable development
Topics 180
(PDF 964 KB, accessible) -
Decentralisation and local self-government
Leaflet
(PDF 372 KB, accessible)
