The Economic Mouse that Roared

 Ecuador – The Economic Mouse that Roared

Come on, admit it.  If I spoke to you about an economic giant…a powerhouse in Latin American fiscal health, perhaps a lot of countries would come to mind – Chile, Argentina and, most likely Brazil, which is poised to enjoy not only the 2014 World Cup extravaganza, but also the 2016 Olympic Games.  What if I told you that against Brazil’s “Goliath”, stands a tiny, but valiant “David” ? Meet the Economic Mouse that Roared.

It’s true.  Ecuador’s economy is growing even faster than that of Brazil !  Since the year 2000, Ecuador has averaged a 5.5% growth rate to Brazil’s more modest 4.0% growth rate.  Few would have ever imagined it as Ecuador limped out of a horrid economic crisis in 1998-1999.  However, the story of Ecuador’s resilient and expanding economic base does not stop at a single economic indicator.  It is showing success on multiple fronts.

For example, Ecuador also excels at debt-to-GDP ratio, which shows an impressive 24 percent, as confirmed in a study by the United Nations Economic Commission for Latin America and the Caribbean. By comparison, as a stark contrast, the United States features a troubling ratio of 100 percent. Ecuador’s strong showing, as the second fastest growing South American economy, as well its orderly handling of existing debt, plus a strong economic prosperity and diversification program under the President Correa Administration has lifted Ecuador onto the global economic stage and likely well prepared it for a return to the international financial markets.

Further evidence of Ecuador’s economic emergence showed the country clocking in an impressive 6.5% GDP growth rate in 2011, comparing favorably with that year’s strongest global economies, as illustrated by the following chart:

For an encore, Ecuador followed up the successful GDP numbers of 2011, with a lower, but still very consistently impressive 5.1% GDP growth rate in 2012.

Ecuador’s import/export figures are rapidly improving, especially under the tenure of the Correa Administration, which has made a valiant effort to diversify Ecuador away from an almost 100% pure natural resources and agricultural base, to one that also features a more diversified manufacturing component.  While still a long ways away from “ideal”, the improvement can be noted in the chart below, as one can readily see a readily notable increase in domestic manufacturing exports, and a relatively modest need to import natural resources or agricultural products, both positive trending signs of a healthy economy.

                                                                                                     Imports                            Exports

chart 2

Also, the Import/Export sector is seeing significant improvements in efficiencies, where past paperwork was often measured in months and thousands and thousands of dollars.  Today, the realities are much different, as can be seen by the chart below:

Ecuador Economic Mouse that Roared

This economic renaissance has followed a concerted and purposeful effort by the Correa Administration to focus on public investment, which took 12 percent of GDP, and on improving the country’s national security, infrastructure, education and human development sectors.  Ecuador has now hung up the proverbial “Open for business” shingle and is now poised to welcome foreign businesses, in a more efficient and professional manner.  This preparatory stage, much needed to the point of being “essential”, unfortunately caused some in the misguided foreign press to label Correa’s Ecuador as “anti-foreign investment” or “eschewing FDI”.  Nothing could be further from the truth and a “boots on the ground” inspection of the country would instantly erase any lingering doubts.

Showing further sounds of a strong economic base, especially in today’s turbulent currency markets, Ecuador boasts a relatively significant $2 billion worth of gold reserves as of the 2011 audit.  Likewise, Ecuador enjoys a solid 7.2 billion barrels of oil reserves, as of 2012, placing it 20th in the entire world, ranking, perhaps surprisingly, ahead of nations such as Norway and Oman.

Also, Ecuador has put a lot of emphasis on the multilateral approach to economic expansion, being involved  with economic committees representing diverse bodies such as the United Nations (UN), the Organization of American States (OAS), the Rio Group and the Latin American Energy Organization, to name a few.  The focus on economic trade expansion additionally has Ecuador featured as a member of the Union of South American Nations, the Community of Andean Nations and Bolivarian Alliance for the Americas (ALBA).

These activities have led Ecuador to be well recognized, especially under the Correa tenure, for diversifying their political and economic ties with countries in Latin America, Europe, and Asia.  The crowning achievement, giving credibility to the Ecuadorian economic miracle success, was the 2012 credit rating upgrade conferred upon Ecuador, by both Standard &Poor’s and Moody’s, considered the premiere global credit rating agencies.  This, at a time, when major “industrial powers” such as the USA and France, are seeing credit rating cuts by similar credit rating entities.

In closing, Ecuador has come a long way from an economic, banking and currency sector meltdown in 1998-1999.  Having accomplished this in such a short period of time is nothing short of an economic miracle, worthy of praise.  Having done so while laboring in relative obscurity, makes Ecuador one of the globe’s best true value plays for the retail investor, as well as institutional investors seeking excellent returns on FDI projects.  Come explore this mighty economic “mouse”, before its boisterous roar becomes impossible to ignore.  By then, the best value play deals will be gone.