Ecuador : a nation in the midst of fervent change

by Dominique THIBAULT

For the majority of outside observers, Ecuador is a veritable paradox. Despite a geographically exceptional location on the Pacific coast, natural resources, good climactic conditions and substantial petrol profits, Ecuador, which is ranked seventh in terms of global economic power, has been the victim of an unstable political situation for nearly fifteen years and has been
sinking into economic stagnation for a long time. Under the aegis of a new governmental oligarchy that is dynamic as well as more environmentally and socially conscious, the country is slowly emerging from the crisis and opening up to Asia and Europe…

Since 1832 this small South American nation (283,950 km2, about half the size of France) has been divided into 22 provinces, including the Galapagos Islands. Its biodiversity is unique in the world : verdant coastal valleys (La Costa), plains with very dense tropical forests that stretch as far as the Amazon (L'Oriente), a vast central plateau (La Sierra), and mountain chains with snow-capped summits that cross the country from north to south (La Cordillère des Andes, whose Mount Chimborazo volcano tops 6310 metres in height). Ecuador became an independent republic in 1830 and owes its name to an imaginary line calculated in the mid 18th century by French aristocrat Charles-Marie de la Condamine. Drawn around the planet by the members of the French geodesic mission and situated mid-way between the earth's poles, the line marks the separation between the northern and southern hemispheres. By definition the line's latitude of 0° is fixed fifteen kilometres north of Quito, at an altitude of 2483 metres. An unusual commemorative monument "La Mitad del Mundo" ("The Middle of the World") marks the place of the official equinoctial line, the ruins of the fifteen Cochasqui pyramids at the foot of the Mount Cayambe volcano, site of shamanic rituals since the year 150 BC, and remaining for the Amer-indians the veritable axis mundis. Astonishing scientific experiments verifying Newton's theory on inertia and the laws governing universal attraction also take place here.

Towards a cautious liberalism under the giant American wing

Profiting from the controversial booster effect from the dollarisation imposed by the government in 2000 and from relative political calm, the Republic of Ecuador now hopes to show the world's powers that they are restoring an image tarnished by the many socio-economic crises happening since 1998. The strategy is clear : to accelerate the winds of reform and transformation in order to progressively guide the nation towards a liberal democracy, a structural adjustment and an economic plan inspired from the American model, its main creditor (nearly $400 million in 2000). This international approach could also function as a diversion from the incessant territorial conflicts with bordering nations, an opening that is encouraged by the United States. By 1998, Washington DC began pushing Ecuador and Peru to sign peace agreements in order to help control the extent of the FARC, Colombia's Armed Revolutionary Forces, and to eventually create a multinational force to assist these countries.

An incongruent economic development

Each region of Ecuador has its own particular economy. The economy of La Sierra essentially relies on subsistence farming destined for local consumption. Corn, potatoes, wheat and barley make up most of what is raised on the cultivated lands. However, farmers do practice small-scale livestock farming in order to supply neighbouring towns. But the division of farmland is nevertheless very irregular and that has consequently affected profits for farms that are either too small or too big. Despite the agricultural reforms of 1964 and 1974, over two million farmers possess only 1.6 hectares, barely enough to survive upon. The fragmentation of farmland continues to get worse. The industry of La Sierra is limited to the manufacture of the famous Panama hats in the city of Cuenca, whose most well-known is that of Monte-Christi. The textile industry, once flourishing in Quito and other cities of the region, has completely collapsed, not knowing how to face British competition in the 19th century. Many inhabitants of La Sierra have gone to search their fortune in the neighbouring regions, where living conditions seem more favourable. As for the coastal region, it is enjoying economic prosperity. From 1870 to 1924, the cultivation of cocoa has proved to be very profitable and has enabled the financing of the railroad linking Guyaquil to Quito. This region's economic takeoff has also been accompanied by the expansion of cultivated lands in the Guayas Basin. The planting of the first rice fields and coffee plantations happened only at the beginning of the 1930s. The banana plantations only started sprouting up along the coastline after 1945 and have enjoyed extremely favourable climactic conditions since that time. Banana exports rapidly became even more profitable than those of petrol, thanks to the growing popularity of this fruit in the United States and other western countries. By 1953, the Republic of Ecuador became the world's top producer of bananas. The nation's banana plantations are now concentrated in the region of Guyaquil and Esmeraldas. Since the construction of a specialised port near Guyaquil, the plantations have extended to the south of the country as their profitability largely depends upon their capacity to quickly expedite their produce abroad. The coastal plains' economic prosperity has indeed attracted a number of inhabitants of La Sierra.

Petrol, the main wealth of the nation : a harnessed exploitation

The region L'Oriente is completely different from the coast. In this isolated and under-developed region, the 1967 discovery of several oil deposits on the banks of Lake Agrio and principally drilled by the American company Texaco marked a decisive economic turnaround. Rapid construction of pipelines linking Quito to Esmeraldas along the coast in 1971 were followed by the nation's first petrol exports. The Republic of Ecuador became a member of OPEC in 1974. The considerable rise in the price of petrol after 1973 allowed for an improvement in the region's economy, and because of this, the region largely benefit from the influx of foreign capital. Between 1971 and 1975, the benefits linked to petrol exports (35% of the country's exports) had multiplied by five and were invested in large public works projects. Petrol also financed the extension of the road network, which grew from 10,000 to 28,000 kilometres between 1970 and 1985. The government also invested in the development of certain industries such as steelworks, petrochemical factories, naval yards and fisheries. Despite the progressive diversification of Ecuador's economy, the nation did not prove to be competitive on the international market, which explains why their consumer goods and food products continue to represent two-thirds of the national industrial production.
The evolution of Ecuador's economy had undeniable repercussions on the distribution of the population. It was in 1974 that the coastal regions first recorded a higher population density than that of La Sierra. The cities that line the coast do indeed attract more and more farmers from La Sierra and the shantytowns are multiplying around the coastal urban agglomerations. Moreover, new cities have appeared in the country's east, which was occupied until then by a very dense tropical forest. Unfortunately, the new technologies require very qualified workers and have left out thousands of Ecuadorians whose sole options for survival are small jobs or part-time work. The streets are teeming with shoe-shiners and illicit street vendors.

Ecuador, multicultural ethnic mosaic

The Republic of Ecuador has four large ethnic groups : the Indians, the Mestizos, the Whites and the Blacks. The Indians live traditionally in La Sierra but their albeit shining civilisation did not resist to the shock of the Spanish invasion of the 16th century. Over the course of the last 400 years, the Indian population strove to preserve its cultural identity by maintaining its Quechua language and its customs, but they could no stop the rural exodus and the adoption of the methods of modern culture, which slowly isolated their own. While Indians represent 40% of the population, they have found themselves today at the bottom of the Ecuadorian social hierarchy. The second largest ethnic group in Ecuador is made up of the Mestizos of the Andes, nicknamed "Cholos" (also 40% of the population) and located mostly in the coastal regions where they generally work in the rice fields and the cocoa and banana plantations. Although some have a higher quality of life, it is rare to see a Mestizo involved in national political life. The Mulattos and the Blacks make up 10% of Ecuador's population and are a testimony of the nation's colonial past. They are, in fact, the direct descendants of African slaves employed by the Spanish in the coastal plantations and are mostly concentrated in the northern coastal areas. The Whites, most often people with Spanish origins, make up Ecuador's society elite, even though they only represent 10% of the population. They are manufacturers, landowners, businessmen and politicians. This essentially urban community occupies the highest posts in the government: a social imbalance, which explains the cyclical explosive situation in Ecuador.

A continually explosive socio-political situation

According to their 1978 constitution, Ecuador is a republic blessed with a unicameral National Congress. The president, elected for a five-year term, is both head of state and head of government. As for the Supreme Court of Justice, it is the head of the judicial system. Its members are elected by the National Congress. The rights of the 5 million descendants of Pre-colombian peoples here are defended by the National Confederation of Ecuadorian Indigenous People (Conaie). Their history, as well as that of the rest of the country (a total of 13 million inhabitants) is founded on military putsches and revolts. The political history of this small South American nation is more than turbulent. During the first century of Ecuador's independence, its political life was marked by numerous coups d'états, often bloody ones. And between 1922 and 1948 more than 22 heads of state became government leader without ever finishing their terms. Two major political groups continue to vie for power. The conservative Catholics generally dominate the large landholders of La Sierra and the bureaucrats of Quito, whereas the progressive liberals rule the political scene in Guayaquil and the coast. They contest the traditional preeminent elite of La Sierra. Between 1990 and 1998 the most poverty-stricken Indians peacefully revolted time and time again, claiming new territory, more financial assistance and a multi-ethnic, pluri-national state with indigenous laws governing intercommunal relations as well as bilingual schooling (in Spanish and Quechua). The first major popular uprising was provoked in October of 1998 through the decision of President Mahud, elected on August 10. A partisan of a neoliberal policy supported by the International Monetary Fund, right away he proceeded to attack the rampant inflation and the national debt (13 billion dollars) first with a devaluation of the sucre (the national currency) by 15% compared to the dollar (25,000 sucres = 1 dollar) and then with a phenomenal rise in fuel prices (petrol, domestic fuel, etc.), electricity and public transportation costs. In a mountainous country where practically all transportation is done in lorries, buses or cars and where 70% of the population lives below the poverty line (85% of Indians subsist on 2 euro a day, according to a study published in 2004 by the National Institute of Statistics and Census-taking), this programme operating on the increase in prices of all the products of common consumption hit the nation like a bomb. From 1998 to 2000 the Indian movement intensified and the country had six successive presidents. Then, unexpectedly, a Mestizo officer named Colonel Lucio Gutiérrez came to power. Despite his promises to restore the former national monetary system and a more socially oriented government, to the great displeasure of the Conaie who felt betrayed, he established a liberal policy based on the Almighty Dollar. The indigenous peoples' uprisings continued. Gutiérrez was thrown out by the National Congress on April 20, 2005 and replaced by Vice-President Alfredo Palacio who remains in power to this day. The dollarisation plan accompanies a rethinking of workers' rights with, as a central measure, the introduction of work contracts that are by the hour (and no longer by the month), the general implementation of the flexibility of hours and the fixation of a very low minimum monthly wage (averaging US $60), at a time when the average household income was about $200 a month. The precariousness of employment is becoming widespread (18.8% unemployment with 26.6% of the population employed full-time) in a country where workers often must cumulate two jobs to survive and where the blue-collar sector is already overdeveloped. The privatisation of social security also threatens the established social protection system, the National Rural Insured Social Security Confederation, composed of 3,500 branches and managing 563 healthcare centres. Its complete or partial disappearance would result in a brutal increase in illnesses, infant mortality, etc. In order to counter these risks, the most united and consensually dynamic developmental policies are being established, and Guyaquil is taking the lead.

SOS environment: an endangered global heritage

The top crucial environmental problem that has been ignored far too long : the massive deforestation of the Amazon forest, which is slowly depriving Ecuador of one if its essential natural resources. Initially the policies oriented around agro-export models obliged the poorest people to live near running water, at the foot of volcanos and in the hills. With a perpetual lack of wood for building and cooking, they logged ad infinitum, leaving only stripped mountainsides, and exposed land incapable of retaining water. In "annus horribilis", 1998, El Niño, which destroyed 350,000 hectares of 10,919,000 metres3 of forest in its wake, indirectly made the government realize, for the first time, the vital need to protect the Amazon basin, the lungs of humanity.

Another dilemma the Galapagos

The mythic word universally evokes this unique marine sanctuary, where men and animals still cohabit in harmony. Only the 10,000 giant tortoises after whom the islands were named (galapagos means "turtle" in Spanish) still retain their reptilian memory, the scars of the tragic time that saw their decimation : 5000 animal species, 2000 of which lived exclusively on the 19 islands and 40 islets which make up the archipelago just 1000 km from the Ecuadorian coast. Threatened by harsh pollution, a contradictory tourism policy and regular volcanic eruptions (currently those of the Mount Cumbre volcano on the island of Fernandina), this earthly paradise, where naturalist Charles Darwin developed his theory of evolution, is in a precarious state. Situated near the Panama Canal, on a route frequented by ships shuttling between North and South America, the Galapagos is exposed to the pollution of the oil tankers. (A famous example is that of the Jessica in January of 2001, when 160 tons of fuel spilled, a large amount of it spread to the island of San Cristobal and to the Bay of Turtles on the island of Santa Cruz, where the giant tortoises and marine iguanas come to mate.)

Other savage invasions : those of the tourists, whose number has doubled in ten years (about 90,000 visits per year to the national park established in 1959 and classed as a UNESCO World Heritage Site), increasing the population of the big islands, particularly the islands of Isabela and Santa Cruz, whose population has reached 15,000 (compared to barely 80 in 1980). In light of criticism by Peter Kramer, former president of the Darwin Foundation and representative for the World Wildlife Fund, who deplores the Galapagos Protection Law signed in 2000 as "too general and above all not applied," the government of Ecuador has responded with an ambitious programme presented by very involved and dedicated Tourism Minister Maria Isabel Salvador. At the programme's official launching at the international FITE show in Guyaquil last September 22, she said, "We have set three priorities. Ironically, in order to protect our national heritage we urgently need to make it better known on an international level. To do this we should increase the amount of diplomatic schooling so that young people will be more informed about tourism careers, actions that we will introduce at the First National Convention of Tourism, which will take place in May 2006, and is financed by the Tourism Publicity Fund of Ecuador. Some specific measures should then be established to protect Amazonia and the Galapagos from a manmade destruction of the ecosystem. Lastly, we need to direct our publicity towards an ecotourism oriented around two key cities : Quito and Guyaquil, stressing a tourism that is social as well as ethnic and economic. The strategic alliance established between the private sector (like hotel unions such as AHOTEG in Guyas Province) and the public sector (municipalities, chambres of commerce and tourism federations) should, in the short-term, contribute to making tourism Ecuador's main activity."

So these two cities situated at either end of the country are raising hopes of renewal for the entire population : Quito, in the north, the official capital of the country, hotbed of the populist Indian movement and its fiery past, and Guyaquil, the nation's economic capital, Quito's southern rival and in fervent growth, bard of state "decentralisation" and liberalism.

Traditional Quito is preserving its identity

Perched 2850 metres above sea level, surrounded by superb volcanoes that give an aura of protection, Quito is the second highest capital in South America (after La Paz, Bolivia). Despite its Spanish-style character, the capital of Ecuador was initially inhabited by numerous tribes, including the brilliant Incas, who chose to raze their city in 1533 rather than have it pass to the hands of the Spanish Conquistadors led by Sebastian de Banalcazar and Francisco Pisarro. A vice-royalty of Peru in 1563, then a subdivision of the vice-royalty of New Grenada, the province of Quito was liberated from Spanish domination in 1822 by the troops of Simon Bolivar. Today, the city of Quito (with 1.5 million inhabitants) spreads over 30 km and is divided into two distinct districts : modern Quito, with its exclusive bourgeois residences, malls, banks, restaurants, hotels, and chic neighbourhoods like Le Mariscal… and old Quito, teeming with poor neighbourhoods. Its reconstructed colonial centre testifies to the opulence and splendour of its glorious past and nightlife under enchanting Baroque-style lights. New palaces dedicated to a hip international clientele adjoin the central square, like the Patio Andaluz and its refined aesthetic. Further north, on the Andes Route, towards the province of Imbabura, 3300 m high in altitude, the thermal baths of Papallarca lie in the heart of the Andes, facing the snow-capped peak of Mount Antisana. A great spot for recharging your batteries in the natural hot waters (ranging between 30 and 70° Celsius) of its open-air pools, day and night under the starlit skies, and resting afterwards in the exotic thatch-roofed bungalows. Hiking and thalassotherapy are on the programme for an exceptional holiday. Higher up is the village of Otavalo, one of Ecuador's most famous Indian markets, where every Saturday at Poncho Square, descendants of the Cara People put their brightly coloured fabrics (rugs, blankets, ponchos, sweaters, bags, jewelry, pottery, etc.) on display. Along the way, hundred-year-old haciendas with luxurious gardens follow the example of Pinsaqui and invite tourists to gourmet venues or equestrian events. If Quito jealously aims to preserve its cultural and archeological heritage, witness to its own rich past, then Guayaquil is resolutely playing the card of change.

Guayaquil, the bearer of change

Reorganised and governed in 1537 by Spanish explorer (and discoverer of the Amazon River and the myth of Eldorado) Francisco de Orellana, the city named after Santiago de Guyaquil, a privileged maritime stop en route from North America, is booming. It is now Ecuador's biggest commercial port in terms of traffic of merchandise (bananas, cocoa, coffee, etc, about 5.1 million tons in 1998). The whole of Ecuador's container traffic is constantly growing (9.6% from '99 to 2000, reaching a capacity of 414,104 EVP, classing the country 30th worldwide among 48 nations surveyed (according to a study done in 2002 by the United Nations on international maritime transport). This city of over 2 million inhabitants is accessible by the Morro and Jambali Canal, and is protected by the myriad of little islands facing it. Guayaquil benefits from a very warm climate, where days often reach 40° C. As for its colonial past, the city has only preserved its very beautiful Las Peñas district, on the banks of the Guyas, Ecuador's largest river, which has given its name to the nation's biggest province (28 sections in all) with Guayaquil as its capital. Under the aegis of a municipal team working hand in hand with the charismatic mayor Jaime Nebot Saadi, and with support of the local citizens, Guayaquil has subsidized City-State plan contracts in record time (2000-2004) for programmes to renovate disadvantaged neighbourhoods (including the Santa Anna Project and Malecon Boulevard's colourful and high-tech design, a street that might be compared to Cannes' Croisette or Nice's Promenade des Anglais). Proud of their new living environment turned popular tourist destination, the residents now seem to be less inclined towards violence. UN Secretary General Kofi Annan praised the programme during his visit to Guyaquil in November 2003. Current port and airport expansion projects aim to be finished in 2007. More so than other cities of Ecuador, Guyaquil is actively pursuing a policy centred on international tourism and has financially supported the organisation of the 2005 FITE show (a subsidy of $440,000, in partnership with the Mixed Funds for Tourism Promotion). Guyaquil's director of tourism, international relations and city competitiveness, Joseph Garzozi Buchdid, explains, "For four years, we have driven intense global media campaigns in order to improve our image towards tourism professionals. Guayaquil has thus increased its tourism wealth by 20% (Ecuador welcomes nearly 19 million tourists per year). The city has invested almost $100 million into its urban renewal programme, which was strengthened by the recent decentralisation of the state. Our goal today is to curb the migratory flux abroad by training the populace in languages, the top communication tool, all the more easily accomplished since our universities are free. If the six Ecuadorian Indian peoples apply themselves to learn English, they could then mix with the tourists, create their own jobs, and that will further guarantee this connection with their ancestral culture. We need to adopt what Anthony Giddens (economic counsellor to Tony Blair) calls 'the third way', to bring us closer to the modernisation of social democracy, to see the rebuilding of a society through more involvement from individuals and more responsibility by politicians."

Blessed with 17 multidisciplinary universities (with a total of 60,000 students), Ecuador is favouring the development of agribusiness and new technologies by multiplying the creation of technological parks like the Incoval Foundation in Guyaquil, an incubator of innovative company projects.

FITE 2005 in Guyaquil : Ecuador's premiere international tourism event

FITE, Feria Internacional del Turismo en Ecuador : an acronym that snaps like a whip and a good example of one city's desire to make new economic alliances for the future, with Europe in particular. This third edition, which took place from September 22 to 25 at the Palacio de Crystal (a giant 21000m2 steel and glass cathedral designed by Gustave Eiffel), kept all its promises. The numbers are impressive: 256 exhibitors, 85,000 visitors and 777 international journalists. This ambitious concept owes its exceptional success, now three years after its launching, to the tenacity of a man passionate about his country : Jaime Rull, who set himself a challenge: to organise a tourism fair impressive enough to attract world leaders in the sector (tour operators, hotels, airlines, event planning agencies, institutions, financiers and manufacturers). A bet that's as audacious as the project that aims to propel Ecuador into the glare of the spotlights.

"The idea came to me in 2001. Being the only representative of Ecuador at the SITC in Barcelona, I realized that our country's unique ecological heritage was relatively unknown to the rest of the world. So, with the help of a small team, I threw myself into this adventure in 2003. Today, despite all the inherent difficulties of an organisation of such stature, I am happy with the results we've obtained. Thanks to the support of the city of Guyaquil and 420 volunteer students, in a single year's time we have practically doubled the number of visitors, exhibitors and represented nations, 36 this year. We've hosted a number of embassies and foreign delegations such as China, Indonesia, Thailand, Israel, Spain, Germany, Italy, Netherlands and Austria. The first two days alone, 2800 business meetings were initiated between Ecuadorian tour operators and foreign buyers. China (28 million tourists across the world), seduced by Ecuador, envisions offering Mexico-Peru-Ecuador tours as soon as next spring, meaning a potential of 3 million Chinese prospective tourists. Of course we would also love to establish a number of partnerships in Europe."

A Europe which has already been investing in Ecuador for a decade but in a rather small way with the tourism and industry sectors.

The European Community opens to the Andean Community

On October 15, 2003 in Quito, Ecuador, the European Community and the Andean Community (Bolivia, Colombia, Peru, Venezuela and Equador) made an agreement of political dialogue and cooperation between the two regions whose goal is to accelerate the process of the Andean Community's integration in the economic, political and social domains. A 420 million euro subsidy was allotted to the Andean Community for the period of time from 2002-2006 in order to fight against drugs and poverty and to help strengthen the government. Thanks to this budget, Ecuador's top mission became to boost rural development and access to social services, particular health care. In 2000, the commission approved the project for the cross-border Piura-Guayaquil route between Peru and Ecuador. Lastly, commercial relations between the EU and the Andean Community were strengthened, attaining a 100% increase between 1990 and 2000, a total of 16 billion euro, in Andean exports consisting of raw materials or base products as well as European exports of manufactured products. For the Andean nations, the EU is their second source of direct foreign investment. The European programme AL-Invest aims to stimulate partnerships between the European and Andean decision-makers. An obvious overture that's starting to produce its effects.

Many executives from affluent French corporations are flocking to the new Ecuadorian Eldorado. Philippe Roger, French business manager, married to an Ecuadorian and living in Quito for five years, tells us about his plans and projects. "Two years ago I created my own Ecuador promotions agency for high-end European clientele : Latine Voyages, today managed by my young French associate Bastien Sionneau. With the help of our success, the contact network that I built over time has opened other opportunities for us. The government is offering very attractive advantages for investors. So I decided to join a consortium of European and Ecuadorian industrial financiers in order to get myself involved in large-scale property projects in Quito and Guyaquil : by 2006, JP Holding's (http://www.jpbholding.com) goal is to finance two hydroelectric plants, a 120-bed hospital and two luxury hotels with some forty rooms including suites, one in Quito and another in Guyaquil, a business centre, etc. We are seeking European investors to complete our pool of investors…"

And attention! The incentives for those interested are quite tempting: a price per metre2 that is one of the lowest on the market ($800!), an advantageous tax system (a 25% deduction with investments), loans matched by the banks at 100% according to the project, and rapid amortizations. Undeniable proof of a market in full upswing, the Partouche Group, still on the lookout for new opportunities, launched a new Casino last October 15 in partnership with the Accor Group and a group of Chilean manufacturers in the heart of Guyaquil's Mercure Hotel.

Lastly, turning to Galapagos, some tour operators are following the new ecotourism policy to the tee. Frenchman Jean Roque (from the Expertur SA Agency created in 1989) hopes to established tailored visits as early as 2006 that would offer the services of the islanders (as guides, hosts, providers of transportation, etc.) in order to ensure their employment and allow them to participate in proposed programmes (food service, lodging with a native, for example), the best way to share their customs and local life.

Ecuador has a lot going for itself so long as the political situation does not deteriorate once again, in order to ensure its promotional development as it pursues its way towards economic renewal with a more social liberal market in mind.