Ecuador country brief
Australia and Ecuador established diplomatic relations in 1975, when Australia’s first Ambassador to Ecuador, A.H. Loomes presented credentials.
Australia's Embassy in Santiago, Chile is responsible for Ecuador. Australia has an Honorary Consulate in Guayaquil, which provides consular services to Australians in Ecuador. Ecuador maintains an Embassy in Canberra.
The Spanish conquered Ecuador in 1534 and incorporated Ecuador in the Spanish Vice-royalty of Peru. Ecuador gained independence from Spain in 1822, joining the Federation of Gran Colombia with Venezuela, Colombia and Panama. In 1830, Ecuador left to become an independent country. Political rivalry between the coast and the mountains, which emerged soon after independence, has become one of the country's defining political characteristics. Landowners from the mountain region combined with the Catholic Church to create a strong political alliance, opposed by the rapidly growing banking and agricultural (particularly cocoa) interests of the coast.
Ecuador's twentieth century political history is marked by instability. The collapse of the global cocoa market in the 1920s and the Great Depression of the 1930s created a period of political turmoil lasting until 1948, in which no single government completed a term in office. From 1948 to 1960 political order was restored as the economy improved with the benefit of the growing export of bananas. Instability again became a feature of Ecuadorian political life in the early 1960s, with the influence of the Cuban revolution leading to a series of military, anti-communist governments. The military has traditionally enjoyed a high degree of independence in Ecuador and exerted considerable political control. In 1972 a military government reserved petroleum exploration rights for the state. Modernisation of the state was in part paid for by the influx of petro-dollars during the boom period of the 1970s but also by heavy foreign debt commitments. A constitutional referendum in 1978 provided the basis for a return to civilian rule the following year.
Ecuador had nine presidents between 1984 and 2005, three of whom were dismissed due to social unrest and public pressure. Alfredo Palacio was sworn in as interim-president following a vote by Congress to dismiss his predecessor, Luis Gutierrez in April 2005. Presidential elections were held in October 2006 with a run-off in November of the same year, which was won by current President Rafael Correa.
President Correa had campaigned on a platform of promoting economic growth and attracting foreign investment to aid poverty reduction, while opposing neoliberal economic management. President Correa also promised to restructure the country's external debt and indicated that he opposed a free trade agreement with the United States, the leading destination for Ecuador’s exports.
On 28 September 2008, nearly 70 per cent of Ecuadorians supported a new Constitution that allowed the president to stand for one consecutive term, gave the president power to dissolve the legislature and gave the state more control over strategic sectors of the economy such as health and education. President Correa ran again in the 2009 election, winning in a single round of voting.
Recent political developments
President Rafael Correa won a third consecutive term in Ecuadorian presidential elections on 17 February 2013. Following parliamentary elections held on the same day, President Correa's Allianza Pais party also achieved an absolute majority (100 out of 137 seats) in the National Assembly. The constitution currently prevents President Correa from running for a further term; however, in March 2014, he signalled his intention to amend the constitution to allow him to stand for re-election in 2017.
President Correa’s popularity remains high, particularly amongst lower socio-economic communities following increased spending on hospitals, roads and schools, made possible by high oil prices. The public has, however, generally opposed his more recent commitments to develop large-scale mining and further oil exploration in environmentally sensitive areas. His party also suffered notable setbacks in the local elections in February 2014, in which it lost eight of Ecuador’s ten largest cities and a number of regional governments in the Amazon and other rural areas.
System of Government
Ecuador is a constitutional republic headed by an elected president, with a unicameral legislature. The president is elected to a four-year term and is able to serve one consecutive term. As noted above, President Correa has indicated that he may seek to amend this limitation to allow him to stand for re-election in 2017.
The National Assembly is comprised of 137 members who are elected in 24 provincial constituencies for a four-year period. The Constitutional Court replaced the Supreme Court as the highest court in the land under the 2008 constitution.
Ecuador is a member of several regional political and economic groupings including the Bolivarian Alliance for the Americas (ALBA), the Organization of American States (OAS), the Rio Group, the Union of South American States (UNASUR), and the Community of Andean Nations (CAN). Ecuador has also made a formal request to join Mercosur (it is currently an associate), and is an observer to the Pacific Alliance (Chile, Colombia, Mexico and Peru).
Ecuador's relationship with Colombia has steadily improved following a violation of Ecuadorian territory by Colombian government forces in 2008. Colombian government forces launched a military attack against the Colombian guerilla group, the Revolutionary Armed Forces of Colombia (FARC) inside the Ecuadorian border and Ecuador subsequently broke off diplomatic relations with Colombia. Diplomatic relations were restored in June 2008 and in December 2011, President Correa and Colombia's President Santos signed a maritime border treaty and a security cooperation agreement during the first bilateral visit by a Colombian president to Ecuador in four years.
Ecuador’s relationship with China is growing as China is an important source of finance. Ecuador has signed loan agreements in exchange for oil with China, and has initiated the large-scale copper mining project Ecuacorriente, operated by Chinese firm ECSA. Chinese investments in Ecuador’s energy sector are expected to grow.
At a glance
For latest economic data refer to the Ecuador fact sheet [PDF 65 KB]
Ecuador’s economy is dominated by petroleum production and agriculture for domestic consumption and export. Oil exports raised US$12.7 billion in 2012. Other exports are bananas, prawns and cut flowers.
Ecuador experienced strong growth through the 2000s, averaging 4.4 per cent real GDP growth per annum until a fall to 0.4 per cent in 2009 as a result of the global financial crisis. While real GDP growth bounced back strongly to 7.8 per cent in 2011, it fell from 5.1 per cent in 2012 to an estimated four per cent in 2013, mainly due to weaker demand from the United States and sluggish oil price and production gains. After a period of very high inflation early in the decade, consumer prices were brought under control and inflation has averaged around four per cent per annum since 2003. Foreign Direct Investment is expected to remain low (1.5 per cent of GDP) and focused on the energy and mining sectors.
Ecuador’s oil sector accounts for a sizeable portion of its export income and represents between 30 and 40 per cent of all tax revenues. High oil prices in previous years allowed President Correa’s administration to run an extremely expansionary fiscal policy, investing in infrastructure and other social projects. The government has limited access to external financing owing to the legacy of a 2008 debt default on US$3.2 billion in global bonds. As such, oil revenue allowed the authorities to raise spending while keeping the fiscal deficit low at one per cent of GDP. President Correa is expected to continue this expansionary fiscal policy into the latter half of his term, although it may be harder to sustain in the face of moderate growth in oil prices production capacity. Some further borrowing from China against future oil shipments is possible.
In 2010, Ecuador agreed to protect the Yasuni National Park, an area known for its biological diversity, and forego the extraction of the equivalent of 846 million barrels of oil and more than US$7.2 billion in income if other governments, the private sector, and NGO's contributed to the Yasuni ITT Initiative trust fund, to be used for sustainable development initiatives. The initiative received less foreign support than expected, and in August 2013, the Ecuadorian Government took the controversial decision to abandon it and allow drilling in the environmentally sensitive area. The move coincided with a decrease in oil production, which is needed to finance the public investment growth model underpinning President Correa’s administration.
In September 2011, Australian and Ecuadorian Foreign Ministers signed a Memorandum of Understanding on the establishment of political consultations.
Australia cooperates with Ecuador in the Forum for East Asia Latin America Cooperation (FEALAC) and the South Pacific Regional Fisheries Management Organisation (RFMO).
Australia is expanding its people-to-people links with Ecuador through development cooperation, including scholarships to study in Australia and the Direct Aid Program (DAP). In December 2012, 274 students from Ecuador were enrolled to study in Australian education institutions, including some 144 Ecuadorian students on Ecuadorian Government scholarships.
From 2010 to 2014, Australia provided $100 million in official development assistance to Latin America, including 250 Australia Awards scholarships. Ecuador received 14 Australia Awards Scholarships and nine Australia Awards Fellowships. The regional program has now closed, though some activities that have already been funded will continue until 2017. Contributing to sustainable economic development in Ecuador, Australia contributed $293,000 toward developing the Yasuní ITT Initiative.
In 2001, the Australian Government established the Council on Australia-Latin America Relations (COALAR) which aims to enhance commercial, political and cultural relations between Australia and Latin America. Since its inception, COALAR has been active in promoting business, education, tourism and cultural links between Australia and Latin America. For updates on COALAR activities and information on the annual grants program, follow COALAR on Facebook.
Bilateral economic and trade relationship
Two-way merchandise trade between Australia and Ecuador is small, but is increasing gradually. In 2012, merchandise trade totalled approximately $35 million. Australia's exports to Ecuador were $15.8 million in 2012, consisting primarily of aluminium, electrical equipment, copper and paper. Australian imports from Ecuador totalled $19.3 million in 2012, mainly animal feed, cocoa and fruit (prepared, preserved and juices).
Opportunities to strengthen bilateral trade and investment ties exist in the energy and mining sectors.
There may also be potential for Australian companies to invest in telecommunications services and equipment, port infrastructure and information technology (though many of these opportunities will depend on the ongoing privatisation process). Cooperation in agribusiness and tourism could also lead to further business opportunities. The educational services sector holds good potential, and is growing, albeit from a low base.
Updated April 2014