- The Washington Times - Tuesday, November 4, 2008

QUITO, Ecuador

The global economic crisis that began in the United States has spread to several nations in Latin America - and Ecuador, an Andean nation dependent on oil exports, is among the hardest hit.

A report by the U.N. Economic Commission for Latin America and the Caribbean in late October warned that the crisis “has started to filter through to the Latin American economies and will have deeper repercussions in 2009.”

The Ecuadorean economy of 13.9 million people is feeling the twin effects of the dramatic collapse in world oil prices and a drop in market prices of other commodity exports.

“We know we cannot escape the effect of the crisis; we are not immune,” said Eduardo Egas Pena, Ecuador’s deputy minister of foreign relations, commerce, and integration.

“We start to see some of the effects of the crisis on prices. Some have gone down, and also has demand, particularly for products on the market in big quantities, like flowers, shrimp, cacao, bananas,” he said.

A second effect on Ecuador, Mr. Pena said, is that remittances sent by Ecuadorean emigrants have been reduced by 30 percent.

Before the financial crisis, remittances from Ecuadoreans working abroad - mainly in Europe and the U.S. - have been about $3 billion per year.

In 2007, Ecuador’s merchandise exports, boosted by high prices for oil and other commodities, increased in value terms by 8 percent to $13.7 billion, with agricultural products accounting for about 30 percent and fuels and mining - a category that includes oil - about 60 percent, according to the World Trade Organization.

The U.S. was the major destination and accounted for 43 percent of Ecuador’s exports, followed by the European Union, with 13 percent.

Agriculture Minister Walter Poveda told a group of foreign reporters that the crisis will affect the country’s exports, especially for such products as flowers and shrimp.

Diego Naranjo, manager at the Nevado flower-growing plantation in Santa Lucia, said exports of roses to the U.S. already have dipped by 5 percent.

Western Europe and Russia are other major market outlets for the company.

Sergio Cedeno Amador, an agronomist and a cocoa plantation owner in Las Canas, said demand is still high, but the price is low and dropping. One month ago, it was $2,800 per tons, and on Monday, it was $2000.

Mr. Pena, the deputy foreign minister, said the government prepared its 2009 budget assuming oil prices would average about $75 a barrel. Lately, oil has traded below $60.

Ecuador produces about 300,000 barrels of oil per day.

Tourism, one of the fastest-growing areas of Ecuador’s economy also has not been spared by the crisis, industry executives say.

“There’s a lot of cancellations,” said Maria de Lourdes Robalino, coordinator of tourism promotion for the capital, Quito.

Expectations are that in 2009, business would be 20 percent down in the big hotels in Quito, she said.

A recent country report by the Economist Intelligence Unit predicts Ecuador’s business environment scores and ranking will deteriorate in the future “owing largely to the government’s focus on state-led development and an uncertain policy framework for investors.”

“There will be marginal improvements in some areas of the business environment such as infrastructure … However weak investment security … will persist,” the Economist unit predicts.

Leftist President Rafael Correa, a U.S.-trained economist, has given priority to social programs, including health, education and housing in an attempt to improve the lot of millions of people living in poverty.

Mr. Pena said the government is renegotiating contracts with all foreign companies in Ecuador’s oil sector, including U.S. oil giants such as Chevron and Exxon Mobil.

Effects of the downturn also are affecting the resources of charities.

James Jensen, 59, executive director of the Fundacion Wong, which provides support to 4,000 poor children, including medical and dental care, worries that the crisis will affect its budget.

Mr. Jensen, an American national who has lived in Ecuador for 37 years, is concerned the crisis could affect his work because the foundation depends on a percentage of profits from the Wong Group, one of the nation’s major banana export companies.

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