Economic Liberalization, Distribution and Poverty

Economic Liberalization, Distribution and Poverty

Latin America in the 1990s

Edited by Rob Vos, Lance Taylor and Ricardo Paes de Barros

Since the late 1980s, almost all Latin American countries have undergone a series of far-reaching economic reforms, particularly in the areas of financial and capital account liberalization and trade. This book provides a comparative and analytical framework for assessing the impact of these reforms upon 16 countries in Latin America and the Caribbean, including: Argentina, Brazil, Chile, Colombia, Ecuador, El Salvador, Mexico, and Peru.

Chapter 7: Ecuador: economic liberalization, adjustment and poverty, 1988-99

Rob Vos

Subjects: development studies, development economics, economics and finance, development economics


7. Ecuador: economic liberalization, adjustment and poverty, 1988–991 Rob Vos 7.1 INTRODUCTION Ecuador was a late reformer. Market-oriented reforms were implemented in earnest starting around 1992 with the liberalization of trade and capital flows. Adjustment policies in the 1980s in response to the debt crisis and falling oil prices had focused on short-term economic stabilization with only isolated and sometimes short-lived attempts at reforms of the protectionist trade regime. Historically, Ecuador’s economy always seems to have survived difficult periods being ‘bailed-out’ by new primary export booms. High adjustment costs had to be paid in the 1980s, but cushions were found in the surge of shrimp farming, expansion of oil production and recovery of its position as the world’s largest banana exporter. This has likely been a factor in slowing down the necessary policy reform process and kept the economy highly vulnerable to shocks in world demand and commodity prices. Major reforms to the policy regime were implemented in the 1990s. Nonetheless, a main conclusion of this chapter is that, at the turn of the century, the Ecuadorian economy is still struggling to achieve macroeconomic stability, while volatile oil prices and the external debt overhang continue to be key determinants of the fiscal and external adjustment process. Plus ça change? Some important changes have been observed, including a significant growth of non-traditional exports and substantial volume shifts in the macroeconomic balance. The real trade balance has moved to large surplus positions, while the real primary fiscal balance has...

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