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Ecuador Country Analysis

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Autor:   •  November 5, 2018  •  Research Paper  •  2,057 Words (9 Pages)  •  19 Views

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Ecuador Economic Analysis

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Ecuador Country Analysis

Generally, the Ecuador economy is highly relying on the petroleum sector at large which takes into account about 50% of the country’s exportations with almost 25% of the government sector over the past years. Between 2014/2017, there has been an effect on the economy as a result of the financial crisis which occurred in 1999, which caused a tremendous decline in the country’s GDP rates with the poverty levels increasing to substantial standards (Flores-Mena, Jara-Tamayo, Herrera-González & Gea-Izquierdo, 2017). Therefore in March 2000, the Ecuadorian government proposed the legalizing of the US dollar which would help them recover from the financial crisis. As a result of the dollar approval, the Ecuador economy was stable leading to a positive growth rate of the country’s economic levels.

Noticeably, in 2014 the country’s economy had risen to an average of 5.3% annually between 2014/2017. Lately, Ecuador has borrowed loans from China which has helped boost its financial levels, by also permitting the national government in upholding high levels through the regulation in the country’s social spending. The Chinese government lends the Ecuadorian a sum of $9.9 billion with an astute of boosting their oil sales, financing of the country’s projects, and budget support for loans in December 2014. Due to certain unfavorable challenges in Ecuador such as the crowding effect of public investments, insufficient rule of law and unfavorable environment has caused a substantial decline of foreign investment in the country.

With the 2013 economic deficit of approximately $1.1 billion raised various mechanical hindrances in order to trade in 2015 which rose huge tension with the country’s potential investors. On the contrary, Ecuador also legalized the use of rational assets which the violated country’s set laws in 2014. In 2015, there was imposition of tariffs on the imports in Ecuador from 5% to 45% (Granderson & Paul, 2015).  There was a rapid increase in the production of oil in 2014 which stabilized Ecuador’s economy, although in 2014 the prices also decline which highly impacted the country’s revenue. Thus the country underwent a recession in 2015 which and remained is such a state in 2016. Over time the country’s recession was cut down and normal economic levels resumed in 2017.

Ecuador economic Performance indicators

According to the research analysis economic indicators are very useful in providing substantial information on a country’s economic progress. It enables financiers determine whether a country is under expansion or rather a contraction. Majority of economic indicators which are released by the government every month always provide activity’s data which have been carried out in the past few months and years which are essential for comparison purposes. Moreover the GDP of any economy basically provides important information about the value of the goods or service produced by a particular economy thus knowing is the economy is declining or on a rise (MOORE, 2015). Thus the national government will institute certain estimation which enables it come up with possible solutions to the problem.

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Figure 1: Ecuador economic indicators

Indicators such as labor forces are the major determinant for evaluating the economy’s performance rates. Labor involves concepts such as job creation which has happened in the prior months. Labor forces generally take into account certain firms and other national related unemployment rate levels. Costs on consumer spending are projected to cover about 2/3 of Ecuador’s economic processes and provide rigid valuation of the country’s consumption health levels. Thus the Ecuadorian’s commerce unit annual release has provided the general income and outlays which provides detailed explanation about consumer usage (Moreno Brieva & Peñaherrera-Patiño, 2018). Additionally, it provides data about inflation levels by explaining the price index levels which evidently shows the consumption rate of each individual.
Benefits of investing in Ecuador 

According to the research analysis done from the Ecuadorian’s market analysis, it is seen that Ecuador’s economy is among the best performing economies present in Latin America. Therefore, this implies that the country opens widely for investors to chip in and exploit the country’s present resources. The country has consistently eased up the investment processes through permitting of trade free zones by provision of supplements in the preset domestic firms which attracts investors in the country (International Business Publications, 2015).  Since much of the labor force is already employed in the farming industries, the government’s main aspiration is renovating the industrial and the technical sector which will provide effective working conditions for investors. Therefore below are factors which makes it suitable for investors to work in Ecuador, they include:

  • Provision of financial aid upon investing in certain sectors of Ecuador’s economy. There is allocation of fiscal credits and unlimited remissions in every area of the economy.
  • Low tax income rate to attract investors
  • Minimization of 10 points which will initiate investment processes

Challenges to investing in Ecuador 

Similar other emerging economies in the world Ecuador are also encountering various challenges in the process of boosting its economic levels. Ecuador faces different challenges such as natural pandemic like floods, landslides, earthquakes etc which makes it unfavorable for investment processes to occur. The country is known to be prone of active volcanoes which affect the social and economic living of the people in the country (Ampah, Besan?ñon, Niang & S??rot, 2014). The eruptions affect the water channels in the country thus affecting the country’s diary and food production industries which directly affects Ecuador’s economy.
Emerging Sectors in Ecuador 

In the economy of Ecuador, the major emerging sectors are oil, tourism, lumber, fishing, plastics, chemical production, paper products, metal works, and textile industries. Due to these emerging markets in Ecuador’s economy, there has been an increase in the inflation level leading to a high gross domestic growth of the country (Fakier, 2014). Additionally with the high influence of the government foreign investment will raise which will improve the country’s economy. Moreover the entrepreneurial activities are current being motivated by the country which will help the country grow.

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