Ecuador: Development and Growth Opportunities

Speakers:

• Susana Cabeza de Vaca, Coordinating Minister of Production
• Derlis Palacios, Minister of Mines and Oil
• Eduardo Egas Peña, Vice Minister of Foreign Trade and Integration
• Luis Enrique Berrizbeitia, Vice President and Deputy CEO, Corporación Andina de Fomento (CAF)
• Alberto Bernal, Head of EM Macroeconomic Strategy, Bulltick Capital Partners
• Ricardo Estrada, Executive President, CORPEI
• Fernando Pozo Crespo, General Manager, Banco Pichincha; President, Federación Latinoamericana de Bancos (FELABAN)
• Javier Salazar, Tax Managing Partner, Ernst & Young Ecuador
• Susan Segal, President and CEO, Americas Society and Council of the Americas

Summary

On November 20, 2008, the Americas Society/Council of the Americas hosted its first conference in Quito, entitled “Ecuador: Development and Growth Opportunities” as part of the 2008 Latin American Cities Conference series. The conference was held in association with Ecuador’s Ministry of Foreign Relations.

Speakers from the private and the public sector offered perspectives on the economic outlook for the country, development, investment, energy, and the social challenges facing Ecuador just weeks after the country’s electorate voted in favor of a new constitution. Much discussion centered on Ecuador’s economy and the concern over the Correa government’s announcement that it may default on the country’s foreign debt.

CAF’s Luis Enrique Berrizbeitia: Latin America’s Outlook

In his opening remarks, CAF’s Luis Enrique Berrizbeitia provided an overview of Latin America in the context of the global financial crisis, providing his perspective on challenges the region faces. He noted the anticipated deterioration of emerging markets as a result of the decline in global ones, but was quick to recognize that effects would vary depending on the longevity of the recession and Asia’s stability. Berrizbeitia said that further deterioration of external and fiscal accounts was likely in 2009; foreign direct investment would drop as well as exports. On a more positive note, he said inflation would decelerate as a result of the slowdown in external demand coupled with monetary restraint, dropping from 8.3 percent in 2008 to roughly 7.6 percent in 2009 and continuing to decline in 2010.

Ecuador’s Investment & Growth Opportunities

In the panel “Perspectives of Development and Opportunities of Growth in Ecuador,” speakers agreed that, despite Ecuador’s vast untapped natural resources, the country could face challenging times in 2009. Budget shortfalls are expected for next year as oil prices drop and crimp domestic revenue.

Speakers discussed the possibility of Ecuador’s foreign debt default, and its possible effects on private investment and economic growth. Bulltick Capital Partners’ Alberto Bernal and FELABAN’s Fernando Pozo expressed their concern. Bernal said that Ecuador’s net debt to GDP in 2008 stands at 9 percent while gross domestic debt is 24 percent (compared to 2000, when gross domestic debt stood at 80 percent of GDP). As such, Ecuador has one of the lowest debts in the region—four times lower in relative terms than its neighbor Brazil. Moreover, both Bernal and Pozo agreed that Ecuador had enough liquidity to pay the $30 million payment on time. 

Speakers concluded that Ecuador should promote efficiency and productivity and reduce public expenses in order to minimize the effects of the spreading global financial crisis. Moreover, Ricardo Estrada, President of CORPEI, discussed the role of investment in Ecuador and the need to spur both local and foreign private investment as a way to promote the country’s social and economic development.

Minister Derlis Palacios: Forge International Energy Alliances

During his remarks, Minister Derlis Palacios noted the importance of establishing international alliances to further consolidate the integration of Latin American energy. He also said objectives for the ministry include strengthening state-owned oil companies to meet the demands of the international oil industry, refining and commercializing hydrocarbons, and introducing new fuels for thermo-electrical generation. Such actions would take place within a sustainable exploration framework, said Palacios.

Minister Susana Cabeza de Vaca: Building Production Sectors

In closing remarks, Minister Susana Cabeza de Vaca highlighted the government’s commitment to production sectors—including agriculture, fishing, forestry, transportation, tourism, software, and engineering—and strategies implemented to strengthen Ecuador’s exports. As she pointed out, the government is devoting a large part of its resources to empower small- and medium-sized enterprises through research and development, infrastructure, credit, and science and technology with the ultimate goal of building stronger sectors. On the global financial crisis, the minister mentioned that no crisis lasts forever, and that Ecuadorians have proven to be “very resilient” in troubled times. According to the minister, the challenge now is to build liaisons between sectors in order to encourage development and growth.