Emerging Markets – Opportunities & Threats: Ecuador
by Sterling J. Scott, Marketing Communications Coordinator, MHI | @mhi_sterling
Opportunities
Ecuador has experienced healthy economic growth since the global financial crisis, with the economy growing at a rate of nearly 5% annually on average and GDP per capita growing at a rate of over 3%. The country’s economic growth is fueled by oil and gold exports as well as shrimp, banana, and other agricultural exports. There are also over one million Ecuadorians living abroad. They transfer homing home and it boosts the economy even further. Ecuador uses the United States Dollar and has emerged as a popular destination for United States retirees as well as foreign investment. However, the flow of foreign investment is in a state of decline.
Threats
Oil account for roughly 40% of Ecuador’s export earnings, which leaves the economy vulnerable to fluctuations in demand. While the country is one of the world’s top producers and exporters of bananas, Ecuador’s economy is not diversified. Ecuador has continued to nationalize control over its natural resources while also strengthening its relationships with Venezuela and Iran. Foreign investment is declining from the West; however, Ecuador has continued to thrive based on oil exports and borrowing from China. One-third of the population lives below the poverty line and the country faces ongoing political instability and corruption.
Conclusion
Ecuador is a small country but an emerging market due to oil exports. The country’s economy is natural resource-dependent and the government is nationalizing control over its natural resources, both of which discourage investment. Ongoing political instability and corruption are not boosting investors’ confidence in the small but thriving market of Ecuador
More information on supply chain trends, recommended strategy, and innovations that drive supply chains are available in the 2014 MHI Annual Industry Report which can be downloaded at www.mhi.org.
