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IHTERlJATIONAL BlllK FOl RECONSmcTIDN ANIJ DEVELOPiUNT
HEPORT OimiddotI THE ECONCl~Y OF ECUADOR
Economic Denartment Pr~pared by Dr Harold Larsen
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ECUADOR
ESSENTIAL STATISTICS
Area
Population
Currency Unit
~ Parrty
Trade Statistics
Total I~orts 1947
Total middotExports 1947
Official Exchange Transactionsmiddot on Account of
_Inports 1947 Exports 1947
National Income in 1946
Budget in 1947
Internal D3bt of National Government
ExternaJ Debt Principal in Default EX-Im Bank June I94S
Wholesale Prices 1939 middot ~1947 May 194S
Net Exchange Reserves
December 3l 1946 June 30 1946
~=m~g~ ~7947 middotQisbursed Ex-Im Bank
ans June 1948
150000 square miles
35 million
sucre 1350 sucres ~ $1 (us)
Equivalent to US$ 448 million (6o4 million sucres)
Equivalent to US$ 44 1 million (594 million sucres)
US$ 535 million US$ 470 million
Estimated roughly as equivalent to US$ 150 million (per capita US$ 43)
590 million sucres (US$ 437 million) Total national finances (including
extra-budgetary funds) in s~~lus in 1947
97 million sucres (US$ 7 2 million)
US$ 12619000 US$ 7705606
100 368 416
US$ 29~3 million US$ 227 million US$ 254 million US$ 219 million
US$ 10100241
I
II
III
IV
TABLE OF CONTEUTS
Page
Strclla~r bullbullbull bull bull bull bull bull bull bull bull bull bull bull bull bull bull bull bull bull bull bull bull bull bull bull bull bull bull bull bull bull bull bull bull bull bull bull bull bull bull bull bull bull bull bull bull i
GeogrSl)hiC bullbullbullbullbullbullbullbullbullbullbullbullbullbullbullbullbullbullbullbullbullbullbullbull
Occupations and Income bullbullbullbullbullbullbullbullbullbullbullbullbullbullbullbullbullbull
~icultural Production bullbullbullbullbullbullbullbullbullbullbullbullbullbullbullbullbullbullbull
(a)
(b)
The Sierra The Coast
Mineral Production
l
5
8
14
19
V Manufacturing Production bullbullbullbullbullbullbullbullbullbullbullbullbullbullbullbullbullbullbullbullbullbullbullbullbullbullbullbullbullbull 20
VI
VII
VIII
IX X
XI
Domestic Trensport and Commerce bullbullbullbullbullbullbullbullbullbullbullbullbullbullbullbull bullbullbullbullbull 24
(a) Tran~ort bullbullmiddotbullbullbullbullbullbullbullbullbullbullbullbullbullbullbullmiddotmiddotmiddotmiddot~middotmiddotbullbullbullbullbullbullbullbullbullbullbull 24
(b) Commerce bullbullbullbullbullbullbullbullbullbullbullbullbullbull bullbull ~middotmiddotmiddotmiddotmiddotmiddotmiddotmiddotmiddotmiddotmiddotmiddotmiddot~middotmiddotbullbullbull 25 Official Development Finance bullbullbullbullbullbullbullbullbullbullbullbullbullbullbullbullbullbullbullbullbullbullbullbullbullbull
Government Finance and Inflationmiddotmiddotmiddotmiddotmiddotmiddotmiddotmiddotmiddotmiddotmiddot~middotmiddotmiddotmiddotmiddotmiddotmiddotmiddotmiddotmiddot
International Trade and the Balance of Payments bull bullbullbullbullbullbull
External Debt Record bullbullbullbullbullbullbullbullbullbullbullbullbullbullbull bullbullbullbullbullbullbullbullbull
Political
Statistical Anpendix bullbullbullbullbullbullbullbullbullbullbullbullbullbullbullbullbullbullbullbullbullbullbullbullbullbullbullbullbullbullbullbullbull
30
34
4o
48
51
IT07E Sou~ce of E James Used by
r~~e fran nLatin 11middotterica1 - br PCPston co-rricht 112 by the y PYPSs Inc
sion
0
ECUADOR AND SOUTHERN COLOMBIA SU~fACE CONfiGURATION
~ANDES lf-IINTERMONT BASINS
E72j COASTAL HILLY BELT
1lt-J PLAINS AND LOWLANDS
A CHIEF VOLCANIC PEAKS
0 GUAVAS RIVER I
T TULCAN RIVER
Q SCALE 0 I
MILES
ECUADOR AND SOUTHERN COLOMBIA POPULATION
URBAN bull MORE THAN 100000 bull LESS THAN 100000
RURAL bull EACH DOT ~000
SCALE I
MILES
BBOdVAR LR LOS R (os
100 I
CAUCA
ORIENTE
middotmiddotmiddotmiddotmiddotmiddotmiddotmiddot
SUMMARY
1 In terms of national income per capita Ecuador is one of the
poorest countries of the world Nor are her known but unexploi ted natUro
resources strikingly rich Her best potential resources are agricultural
owing to geographical configuration she can obtain the output of temshy
perate agriculture for domestic consumption and of tropical agri~~ture
for both domestic consumption and export She might also be able to
d~velop a cattle industry for supply of neighboring republics
2 Although socially and culturally as old as other Spanish Americm
Republics Ecuador is very young economically~ The Panama Canal bringing
her close to the Eastern United States and Europe was opened only 34 years
ago She has very little of the techlical and administrative skills and
abilities that underlie modern economic processes She is very poor in
capital equipment of all types And her Government is inexperienced in
the exercise of the modern economic functions of the State
3 The population of Ecuador is nevertheless increasing at about
2 per cent per annum and in the Sierra where 6o per cent of the populashy
tion is locatedt is already pressing against local focd output The situashy
tion is one which may be temporarily eased but cannot be finally solved by
extension of arable area in the Sierra except where such extension is
accomplished througf) irrigation Of basic importance is improvemm t of
arable farming practice in the Sierra valleys to obtain ~better yields
from land already cultivated Use of agricultural machinery would
- i ~
probably not achieve this unless accompanied by other more fundamental
chanesp in seed types crop rotations and fertilizer use Unskillful
employment of heavy agricultural machinery to bring into use higher ground
now unutilized would carry considerable danger of soil destruction tnrough
wind and water erosion
4 Non-subsistence coastal agriculture is in part an important
foreign exchange earner and in part a source of products also imported such
as sugar cotton and tobacco No export crop other than cacao enjoys an
established position in overseas markets and cacao production has not
recovered from disease losses impacting in tne 1920s Rice exports
expanded greatly during the war but retention of roarkets is doubtful
Coffee expoi lts have been increasing in value but not in volULle rem--ining
agricultural exports are at present minor non-staples
5 Expansion of coastal agriculture is rather a matter of illproving
the farming environment (in transport crop processing and credit facilishy
ties) than farm practices themselves ~1ile the coastal area is relatively
thinly populated (particularly ~hen compared i th Far Eastern tropical
areas) it is not yet clear apart from a few crops how mechanization
could be applied to offset a small labor supply This may prove to be a
key technical question in the development of coastal agriculture lll
economic problem is to identify and foster the products of good ~~port
prospects rather than those of probable decline
6 Exports of minerals and petroleum are a ~inor item In 1947 they
represented only 45 per cent of total exports exports of petroleum have
declined steadily with increased do~estic consumption of petrol
- ii
7 Apart from a few important consumer-good industries such as tex-
tiles Ecuador is not an industrial country Her manufactures are largely
in a handicraft stage that of panama hats provides an important export
commodity Power prodllction while deficient does not at present seem a
real obstacle to economic development~ which at this stage is principally
an agricultural problem
8 Changes of farm practices will however take time partly be-
cause of the educational problem in Indian collliDllli ties partly because the
provision of improved seeds and the -working out of new safe tillage pracshy
tices carmot be quickly accomplished While the work rh ould be taken up
immediate action in stimulation of development would not center upon the
farm itself but rather upon improvemm t of services middotsurrounding the farm
notably roads irrigation crop processing and storage and rural credit
facilities
9 Such immediate action might be supported by establishment of
multi-purpose rural machinery pools equipped with machinery and personnel
to undertake not only farm operations but also local road-building end
irrigation works work upon the various activities being fitted into the
farming calendar The actual use opound farm machinery would then be conshy
trolled by experts whose ear~ work might be mainly experimental and
demonstrational
10 Voluntal saviftgs directed lnto productive use ere small and a
large part of domestic development axpendi tUes att necessarily by Govern
ment or through GoverrJ~DSnt agencies In con~nce thefe 11 constant pres
sure toward inflation pressure which in the GovemmeDl sector has beea
bull 111-
offset during the past sixtem months by application of special exchange
tax revenues in reduction of Government debt to the Central Bank Ver-J
recently however 90-rer cent of these revenues has been diverted to finarce
of development with consequent renewed danger of monetary inflation v1hen
total Government finances no longer run a surplus
11 These special exchange revenues derive from a multiple excharge
rate system installed in iilay 1947 (with IivF advice and concurrence) to
meet rapid loss of foreign exchange reserves The system has bern successshy
ful in slowing the rate of loss bull but not in colq)Jetely preventing it midshy
year expectat ions were for a loss of foreign exchange of some US$ 5 million
in 1948 Recent action reclassifyinamp i~crts may reduce this e~~ected loss
12 The balance of p~ents position at present difficult and no
great easement can be expected It is improbable that Ecuador could safoly
assume any large additional debt burdens At the same time her ability
effectively to absorb and use loans directed tmmiddot1ard increase of production
is limited bya present lack of technical and administrative abilities
Here iLiprovement though clillilllati ve is necessarily slow at first
- iv-
I GIDGRaPHIC
13 Ecuador has common boundaries with Colombia on the North and
Peru on the East and South The greater part of the country lies immeshy
diately south of the equator which passes 13 miles north of Quito The
area of the country has never been measured but is estimated as 150 COO
square miles ri thin the frontiers resulting fror1 the war with Peru in 1942
the area west of the Andean crest is about 60000 square miles
14 Ecuador is divided by nature into tru-ee separate reeions of
which only two are in effective occupation
(a) The sea-coast plain (about 28000 square miles and about 425
miles long by 62 miles in width) is composed partly of swampy
lowlands and partly of low hills most of the region being
less than 1000 feet in altitude I the north it shares tbe
double rainy season of Colombia and is covered with dense
forest Not far south of the borders of Colombia the double
rainy season ~ves way to a single rainy season from Decemshy
ber to June as one goes further south the rains begin later
and end sooner until at the extreme south desert conditions
begin stretching onward into Peru ald Chile As the rainfall
becomes less the vegetation changes from wet forest to dry
scrub forest and savanna until in the south settlement is
limited to irrigated areas
Temperatures in the region are modified by the cold-vater
-2-
Humboldt current and are more pleasant than latitude alone
would suggest
The coastal region produces almost all the export commodities
of Ecuador its people are largely mestizo strongly conscious
of nationality and commercially active Its major port
Guayaquil (population 1942 154000) is larger than ~ito
(population 1942 139000) and is the commercial capital
of the country
(b) The Andean Highlands or Sierra (about 25000 square miles)
comprises the second natural region and forms the physical
backbone of the country There are two high corderillas
surmounted by towering volcanoes and separated by a series
of ten large intermont basins lying in a north-south line
seven are linked to Guayequil by railway Each basin is
occupied by a dense JOpulation 1hich is almost pure Indim
Only in ~ito and Cuenca are there any important number
of people with Spanish ancestors and these are either
office-holders in the Government or landowners with large
private estates
(c) The Oriente (Amazonian region to the East of the Andes) is
not yet part of the effectively occupied area of Ecuador
Its jungle inhabitants from time to time spear the
agents of the Shell Oil Company who are prospecting
for oil
3
In 1942 official Government figures for these rerions were
Area Population middot Density Square of
Kilometers middotmiddotNumber middot Ponulation
Sierra 70344 23 11686748 61 268
Costa 68633 23 1JooOl8 33 14 6
Oriente 153143 51 189005 6 12
CalapagS Islands 7880 j 2192 a 0~2 -Miera tory 4115 a middot-
300000 100 3089078 100 102
15 Very little however of the total area is under cultivation
It was estimated in 1916 that about 90 ~)er cent of the coast and 60 per
cent of the Sierra was suitable for cultivation that is about 25000
and 1)000 square miles respectively Of the total of Loooo square
miles of cultivable land~ only about 1$000 was under cultivation in
1946~
16 No census of the population has ever been in Ecuador
In 1892 estimated nopulation was 127 million in 1942 309 million
and in January 1948 3L7 million with crude birth rate of 379 oor v ~ thousand and crude death rate of 201 per thousand in 1942- Estimated
composition of the 1942 population was
a less than 05
Yhi te Mestizo Indian Negro Iulatto Other
100 per cent l-t10 ner cent 390 per cent 50 ner cent 5 o Per cenmiddot~
1000 ner cent
Just over half these deaths oc~urred in the are rroun of 0-4 years in 1942
4-
17 At the same date the literacy rate was estimated at 20 pe~ qent
s~i~literacy at 20 per cent and illiteracy at 60 per cent
-5-
II OCCUPAmtOUS AND INCOivES
18 There having been no census there is no at~curate information
under this beading
19 The Economic Department of the Ecuadorian Central Bank has esti-
mated that of a total population of 334 million in 1946 1285000 or
J9o per cent were gainfully employed in the following occupations
Agriculture Forestry etc
Mining
Building and Repairing
Manufacturing and Processing
Services (communication comshymerce government etc)
820000
10000
6oooo 10000
325000
5 5
26
100
20 No valid estimate of national inco~e exists At the request of
tne International Monetary fund the Technical Adviser to the Central Bank
of Ecuador Mr L A Carbo estimated national inccue in 1946 as 20096
million sucres or US$ 149 million Although this estimate is probably too
low ] it is clear that national income is very small Ecuador is very
low on the list of income per head among Latin American countries its
income per head is in feet among the lowest of countries of the world
21 Income is very unevenly distributed A survey made in 1943
yielded the following picture
g lror reasons Sdvanceit below Paragraphs 87 and 88
~ pt WI
-6-
To tal Monthly Average Monthly Population Income Income per Fw~ly
Number of Amount t tount People (SUcres) (Sa~res)
Upper Cla~s 4oooo 133 28000000 144o 2300
Middle Class 96oooo 3200 96000000 4950 4 L ~ 00- middotJ~
Lower Class 2000000 6667 70000000 3610 140 -- -~
3000000 10000 194000000 10000 10000 yenSliP C_~ ~
Note At the ofDcial rat~ of 1350 suc~es to the US$ average monthly incomes per family are equivalent to approximately $2J7 $30 and $10 respectively
~ Uneven distribution of incoue is of course largely a conse-
quence of uneven distribution of property Some ideas of the distribution
of rural property is afforded by analysis of re~urns made in payment of
rural property tax Such tax was paid by only ll2l4o proprietors in 1944
whose holdings may be summarized as follows
Per cent of Value of Rural ProEerties Number of Proprietors
916 4o
29-33 llOO
3041 10400
2030 37200
1080 634oO
10000 112J4o
23 Such statistics do not of course carry one very far beyond
the general observation that income and wealth is very unevenly distributed
and that much is obvious from a little travel in the country But it should
-7-
be said that comparing observations in Ecuador vrith those made in Peru
and Bolivia Ecuador by subjective judgment compares very favorably with the
tvo latter The Ecuadorian Indian seems to be on a perceptibly higher stan-
dard of life both in the highlands and on the coast than the Indians seen
in Peru and Bolivia Vhile his land holding is small it yields somethi1e
he very freqjl ently possesses livestock such as pigs and chickens has cot-
ton clothing drying on a line a~d often cultivates flowers and keeps
pigeons By American standards he is undoubtedly on the poverty level by
Latin American standards he may be a little off it
24 At the other end of the scale the wealthy upper class are pro-
bably not as wealthy as the Peruvian upper clas~h and the Bolivian elite
in operating in poundcuadc~the upper class lacks the rich property of mines
Thus while income is of course unevenly distributed in Ecuador as else-
wnere the range between the wealthy and the InJian may well be less tban
elsewhere The line of income distribution is of aboat the same slope
but probably significantly srJOrterY
This conclusion cannot be demonstrated statistically It results from a 11feel 11 deri ved from personal observetions in the respective counshytries
-8-
III AGRICULTURAL lROIDCTION
25 Ecuadorian development is largely a matter of increasing the out-
put of and improving internal and external trade in agricultural products
There appears to be no enduring geographic or physical reason ~middotby this can
not be accomplished She possesses soils and climate ranging from the
tropical to the temperate soils which in some areas are very fertile and in
others are in danger of exhaustion To anticipate subsecpent conclusions
her problem of development through agricultural progress breaks doTltD into
separate aspects all involving improved technique
(a) increasing arable yields from areas already cultivated
(b) improving pastures and stock in grazing areas
(c) enlarging both arable and pastural areas (including irrigation)
(d) improving roads in rural areas
26 Achieving these objectives involves providing more adequate
domestic credit for short- medi~ and long-term agricultural requirements
27 In application however interpretation of these problems is very
different in the two occupied regions of the country the Sierra and the
Coastal Lovrlands no generalization can cover both
(a) TLe Sierra
28 The occupied inter-Andean valleys are a region of temperate
agriculture producing almost exclusively for local consumptionmiddot Their
pat tern of tilled fields grazing land trees and flowerJl is almost
Y Flowers bloom all year round The main tree is the eucalyptusmiddot introshyduced some 70 years ago end used for all purposes (~indbreaks fuel 1
and lumber) affording a striking example of the effect of introduction of one plant upon regional habitability-
-9-
Western liiuropean in appearance but not unfortunately in productivity
Agricultural Production of the Sierra
1939 194o 1941 1942 - -(Hundreds of pounds)
Theat 49QOOO 611300 534300 527499
Potatoes 1201000 1476400 1386120 1146000
Rye 72500 79900 159495 115000
Lentels 46000 424oO 37955 csooo Corn 816700 1349300 1308062 1315200
Barley 85)000 795700 903600 911000
Cotton 45000 42020
Kidney Beans 80000
29 In addition about 1000000 hectares (247 m~llion acres) are
devoted to pasture supporting epproximate1y 683000 cattle 145 million
sheEf 107000 STrrine and 320000 goats
30 Yields are low in all Sierrean agricultural activities the
standing VJheat and barley crops are so thin that the ground can be seen
through them Yet the greater part (some 6o per cent) of the people of
Ecuador live in the Sierra and population is increasing at about 2 per
cent per annum The effect upon land use under existing tecnniques is
clearly visible cultivated areas are being pushed higher and higner up
the hillsides (slopes of 30 to 40 degrees being used) and onto the
fJparamon the high plateau betvreen adjacent valleys at altitudes of
11000 feet and higher The result is a picturesque scene but one which
reveals a near Malthusian situation in the man-land ratio rbullrith static
-10-
technical practices It is a situation which cannot remain unchanged if
economic development is to occur in the region
31 There sean to be three possible lines of advance increase of
output from highland areas in present use the bringing into use of new
ground in the highlandsbull or a change to increasing reliance upon the outshy
put of non-highland areas
32 The third possibility is not one for the immediate future It
involves either large-scale migration from highland areas to lowland
regions or a large transport program linking highlands and lowlands
together with growth of non-~ricultural activities on the highlands to
provide a cash income with which to purchase 11 imported 11 foodstuffs This
second possibility may indeed be the trend of ultimate development but
offers no irmnediate easement Large-scale internal population movement
from highland to lowland is probably impossible since the Andean
Indian (of different stock to the coastal Indian) is fullf acclimatized
both mentally and physically to life at high and temperate altitudes and
little suited to life on tropical lowlands
33 The two remaining lines of advance would both seec to increase
highland agricultural output But there is an important difference beshy
tween increasing output from valley land in rr esent use and bringing new
and higher land into arable use The first is a complex problem suscepshy
tible only of relatively slow solution the second is seemingly simple
and capable of quick result yet basically less sound offering only
temporary improvement
34 The thurst onto higher ground is already evident and the area
-11-
taken in could probably be greatly enlarged by efficient use of tractors
and modern plows Such use of mechanical equipment would thus give quick
increase of agricultural output but it is very doubtful whether improveshy
ment induced by these means alone could be long maintained The greatest
~r particularly on sloping land is that deep plowing may lead to
soil erosion so serious that land becomes finally llilgtroductive To use
mecbanical equipment i thout at the same time adopting eqJally modern
methods of soil conservation way well be disastrous and that perhaps
within no long period
35 Even apart from this physical daneer there is the virtual cer-
tainty that new land however plowed would gradually sink in fertility
end hence output unless farmed by better agricultural practices than
those now followed in highland Ecuador The present attraction of the
higher land is principally good natural fertility beine virgin ground
On all other counts this higher land is less advMtageous than the valley
floors the va)ley sides are steeply sloping a1d the fl~t paramo is some
2000 feet higher bare windswept and devoid of habitation It would
seem obvious that it is pastoral rather than arable ground were it not
for the pressure upon arable output of the region
36 The pressure today however rises from the relation betwem
popUation and output rather than that betvreen population and arable
area Productivity in the Andean valley is low and can certainly be
improved If improved the pressgtlre which is causing the thrust to
higher ground is relieved until population increase again overtakes outshy
put Against that time however the higher ground vrould remain
-12-
availfibleY and other lower regions may be coming under effective use
37 To increase output of the populated valleys is not a simple mat-
ter responsive to single policies such as simple mechanization by tracshy
tors It will embrace the wlo le range of agricultural practices from
better seed types to crop rotation and fertilizers including in some
valleys irrigation It is a matter rrther of agricultural education
than of~dtlgagricultural appliances and probably experiment under
the peculiar regional conditions will need to precede education Improveshy
ment will necessarily be slov1 but along these lines it can be sound and
permanent
38 Wher~ lfL mere importation of mechanical methods Vi thout
understanding of their dangers in speeding soil destruction by wind and
water erosion may permanently damage the region The somewhat gradual
mechanization of agriculture is of course to be expected and not disshy
couraged but it is not the wlole answer to development in highland
Ecuador
39 It seems that there is at present no over-all agricultural
lfibor sl1ortage in the Sierra and mechanization is nOt therefore called
for to relieve an adverse manpower position It seems however that
some of the larger estates are experiencing difficulty in obtaining their
labor requirements because Indian tenants are viitblolding quasi-feudal
labor dues and devoting whole time to cultivation of their own plotsbull
As a result hacienda holders are attracted to mechanization as an
escape from growing difficulties in obtaining and supervising labor upon
Y As it would not if destructi ve1y formed at this stage
-13-
their ovm land To the extent they are successful the tendency for agrishy
cultural money vrages to rise is weakened
4o There vrould seem to be good possibilities of increasing pas-
toral agriculture in the highlands 1Jrith improvement in both numbers and
strains of cattle and sheep If adequate arable development occurred in
the valleys the main grazing grounds could be the higher land not then
required for arable purposes ~lith dairy cattle on the valley margins or
on valley ground not well suited to arable use Such pastoral development
would be desirable not only to imp1middotove nutrition in Ecuador itself 1 but
as a possible new export of meats fats and hides to meat deficient
Republics notably Peru Early export would probably be on the hoof
along the Andea1 ridge it self
41 The Ecuadorian Government has not included any explicit propo-
sals for highland agriculture (other than irrigation) in its present apshy
proach to the Bank It has however suggested the Bank finance $1 mil-
lion of agricultural tractors and equipment to be handled by agriculshy
tural stations located at strategic places both in the coastal
provinces and the highlands 11 without further elaboration of the
intended highland use of such ecp ipment The description given above
suggests that the usefulness of agriculture machire ry depends to a conshy
siderable extent on the place plan and purpose for rhich it is to be
used
42 In some of the highland valleys (for example in Cotopaxi end
~ound Biobamba) rainfall is deficient and irrigation would increase
valley output by bringing more valley ground into effective use This
- 14 ~-
is clearly sound for flat valley ground already populated is more useshy
ful than higher sloping and more exposed ground The Ecuadorian Govern
ment has included purchase of eq1 ipment for irrigtion works to the value
of $500000 in its present approach to the Barik Assessed against the
requirements for economic development the request is sound provided of
course such equipment is effectively used
(b) The Ooast
43 The condition and nationel significance of agriculture on the
tropical coastal plains is quite different from that ltNl the Sierra The
area as a whole is less densely populated and in some parts such as the
Province of Esmeraldas is very sparsely populated Its principal pro-
ducts are exported The population has more mixed blood than the highland
people and is oore corumercially active and minded There is little feel-
ing of community of interest with the highlmds the rrincipal coastal
city GuayaqJil is larger than Quito and less remote fror-1 outside
influence
44 In terms of reported area devoted to its cultivation cacao
is the principal crop of the coast The table on the following page
shows output of main crops
45 Cacao is not however the most important export crop by value
being surpassed by both rice and panama rats (a handicraft product of the
region) Nor does the table show those products which result from
gatherage of mild growth tagua kapok oil-bearing vegetable nuts
balsa rood rubber etc
Y For use by the Caja de Klaquogo as required both in tile highlands and on the lowlands
-15-
46 Agricultural Production of the Coast
1939 ~ 1941 1942
(limdreds of pounds)
Rice 957164 872890 12304oO 1610489
Cacao 392000 263300 333250 315782
Coffee 343800 369000 310000 190633
Bananas (1000 bunches) 4090 3913 4568 4265
Oranges (COOs) 103000 lQ96oO 80550 75000
Cotton 200800 156800 155910 111500
Tobacco 24o43 4o 765 22349 29539
47 It has been estimated that about 500000 hectares (1 235 500
acres) are devoted to pastures on the coast supporting approximately
425000 cattle and 36000 swine
48 There is no doubt that the coast is an extremely rich agricul-
tural area although toward the south it is increasingly hampered by
shortage of water in the dry season And rt is overwhelmingly the
principal foreign exchange producing region of the country Yet it is
largely undeveloped by any modern standards lacking roads and almost
all basic civic amenities (water supply sewage paved streets etc) in
the provincial towns The development of a tropical agricultural region
without large labor supply _rill raise many interesting and some new
J Irrigation ~rks are in execution and others planned in various places and the irrigation equipment which it has bee11 suggested the Bank might finance would presumably be used on the lovlands as well as the highlands
-16-
problems the solution of hlch in detail may lack precedentY The
suitability of cacao to Ecuadorian conditions arises in part from the very
small labor requirements of the crop At bottom advance will lie along
the route of crop improvement and mechanization the difficulty will be
the proper application of mechanization crop by crop Some tropical pro-
ducts may never be suitable for mechanical cultivation being those whicl
would require intensive hand cul ti vat ion and may therefore not be appro-
priate for Ecuadorian condttions Others r1JJi3 be suitable only if grown on
relatively large plantations
49 Clearly for the foreseeable future many lowland products will re-
main at the stage of gathering of nld natural growth rather than plantashy
tion enterprise The flow to market of such productswould be increased
by improved access notably road core truction anQ at the same time road
building ~~uld seem to be a condition precedent for spread of plantation
methods particularly plantations using mechanical equipment lilliE diate
measures for the over-all agricultural development of the region may not
be directly agricultural at ell they are rather the provision of roads
and transport facilities the provision of long and medium term agric-llshy
tural credits and in some areas) the institution of health services
With the opening up of the region in this manner iiould come more clearly
perceived opportunity for better agricultural use of the land particu-
larly if effective demand for the products is transmit ted back to the
cultivator through establishment of product processing plants where approshy
priate for example in vegetable oils and tagua (vegetable ivory)
] This is the situation which in Brazil for example in an earlier technical epoch was 11 solvedll by importation of Negro slave lebor
-17-
50 As in the Sierra there are good possibilities for pastoral
development on the lowlands Some progress is already being made in this
direction with experiment in breeding more suitable cattle types through
crossing 11Ji th imported Indian brahmin strains Grazing for beef is not
highly labor intensive and this development is very promising since
export to other Republics by sea llould be reltti vely easy In the first
stages export would presumably be upon the hoof ith later development
of meat packing
51 There seems to be no single bottleneck or restraint upon devel~
ment presently existing all other conditions being favorable If developshy
ment occurs it will be along many simultaneous fronts but the front iJhiclf
is lagging and Inayen continue to lag is the provision of basic social ccp ishy
tal (roads water supplies health services etc) that is of those
things which no single private individual or corporation can provide for
itself Given these and the institution of suitable domestic credit
fecilities the rest may be accomplished by private domestic ini tiat1ve
52 The development plans of the Ecuadorian Government as outlined
in a Memorandum dated April 8 give much weight to lowland agriculture
The establishment of agricultural stations to provide farmers wi~h
disease-resisting cacao plants~ tecl1nical advice and credit facilities
is CD ntemplated no foreign exchange would be recpired all funds being
local currency The rehabilitation of cacao formerly a leading export
crop is desirable although development of cacao sources elsewhere may
prev~nt recapture of the position formerly held by Ecuador
53 A proposed agricultural mechanization programwoUld total
- 18
$25 million in foreign exchange cost )J The bulk of this ($1 5 million)
is allocated to wechanization of rice cultivation alone the benefit being
principally in resulting improved export position The remainder $1 milshy
lion is for mechanization of other agricultural produc~s apparently
mainly lowland (those products specifically mentioned being 11cotton sugar
oil-bearing seeds and other specified products11) the exclwnge benefit
forecast being principally through reduction of import a
54 Different criteria ~~ould be used in assessment of these two
projects The judgment on that for rice will depend upon forecast of
world rice markets and in particular upon expectations regarding rorld
demand for rice from the dollar area The validity of mechanization in
cotton sugar oil-bearing seeds and other lowland products will depend
first upon the technical possibilities for such mechanization a matter
not yet fully explored If sudl technical possibilities are favorable
effective mechanization vOuld constitute sound development upon the low-
lands which are relatively sparsely populated
Y Some part of which would be for the benefit of highland agriculture if machinery stations be established there
--19 -
IV MI-~RAL PHODUCTION
55 Ecuadorian mineral nroduction covers only a few products and
important the wells of the lowlands being exploited by the nglo-
Ecuadorian Oil Comany Production of crude petrolewn shows a slicl1t
rising tendency while exnorts have declined steadily a~ more refined 1
products are consumed domestically
56 Oil exploration to the Iast opound the Andesin the Amazonian
region is proceedinc under concession to tl-1e Shell Oil Go1~1any
Three wells have been drilled without success and tvro arc beinc
deepened Cost of this exploration to ciate j_s around US)23 million
If oil is found its only outlet middotwill be a pipe line over Ue Ances
(estimated to cost USiD93 million) and this the comany is not -rE1inz
to undertake unless assured of an outnut of at least 100000 barrels a
day
57 The only other irnrJortant minine activities are those of gold
silver conper and lead conducted by the South ~~erican Develoument ~
Company and the Cotapaxi Sxplora tion ConJ1any War-time lr oduction peaks
were 1942 for gold and CO)per 1944 for silver and lead Since these
resective peaks production has ~-~clined narticularly in copper and
lead although not to 1933 lsvels7
crude petroleum II II
1938 (millio~1s of 225 107
Production Exports Production refined petroleum 37
1947 barrels)
236 bull94
128 (See Table No_Jl_ Statistical Appendix
Production Gold (000 troy ounces) Silver (000 troy ounces) Co~per (000 pounds) Lead (000 pounds)
1938 445 82~0 27 21
War Peak l03tJ hhl3
96788 161-+88
19h7 5o5
1569 3316 h98h
-20-
58 Ecuadorian trade statistics list exports of crude pet~middotoleum
and minerals separately from that of other commodities even in aggre-
gate figures underlining the fact the exploitation is in foreign hands
and hence colonial in nature This aspect hmmiddotever is of di-1inishmiddot-
ing importance as now the foreign exchange realized from such mineral
exports accrues to the Central Bank and as in any event nineral ex-1)
ports form a diminishing proportion of the vhole 7
V ~JNUFACTURING PEODUCTION
59 There are virtually no stCltistics on manufacturing in Ecuador
and none which present any comprehensive view It is ho~middot-rever clear
that there is very Uttle industrial factory prJchJction and obser-
vation in the country leaves one with an impression of the nresent
igtilportance of handicraft production
60 The most inportant consuxner-good factory industrj_es are tex-
t~~~breweri~-~~ otheuro7r beveraces shoes ard leather _roduc~s buttons ~d~lttfr
and nails Textile production using domestically produced cotton pro-
duces cotton piece-goods and wool rayon and hemgt textiles supplying
almost all domestic demand for low-quality products The only irJDcrtant
producer-good factory industry is cement the plants being located near
Guayaquil Lack of domestic technical lmow-how and of capLtal and
the low level of domestic effective demand account for the sli~ht develop-
ment of faetory industries whose rrowth on any scale beloncs to a 1ter
stage of economic development
y Value of nineral exportsmiddot as nercentare of value of all exports 1929 260 nercent 1933 430 n 1939 397 1946 11~5 1947 69
Production and irrport statistics for cement tre civen in Table IJo bull 2__ Statistical Appendix
- 21-
61 Uuch of finished commodity ygtroduction is at the handicraft
stage both for nroducer and consumer goods In Quito and Guayaquil
one sees many small 11 shops11 producing metal leather and wood manushy
factures largely by manual methods It is an illuminating co~~entary
on the shallow growth of industrial specialization that the ll1ission
did not see any shops selling ready-made womens clothing All
womens clothing shops displayed only materials in the bolt as in
pioneer days elsewhere
62 One handicraft industry of great importance in exports is
the production of panama hats It has been estimated that 30000
families are occupied vrhole or art-time upon this nroduction and
at times (for example 1945) they have provided the largest single
export item by value The grmvth and treatment of the fiber and the
weaving of the hat is entirely an Indian handicraft industry the
Yteaving of a high-quality hat taking three months The fiber is erown
and the best hats woven in the lowlands Its future ir-mort nee is unshy
certain as the competition of Italy and the Fhilinpines is again felt
in low-_)rice woven hats the boom emjoyed during the war nay recede
63 Ecuador in its ~resent and foreseeable development is an
agricultural country with no immediate movement toward industrialization
EcuAdorians met by the Mission themselves stated this The growth of
factory industry will be slow that of small shop and handicraft manushy
facture somewhat less slow It vmuld seem as stressed later in this
report that there is room for grm~h of processing of agricultural
products Statistically such processing would be classed as industrial
production but is oroperly the finishing stage of agricultural productior
- 22-
to secure improved durability and portability of perishable products
This would increase effective demand imnacting upon the farm and ass1st
in stimulating agricultural development Some progress being made in
this direction notably in vegetable oil expressing plants Ihe only
non-agricultural project suggested by the -r~cuadorian Government has -eer
a cement plant located in the highlands at a foreign exchanr~e cost of
$2 rrillion the justification being both the saving of foreign exchange
expended upon cement imports and reduction of load upon the only railshy
way connecting lovrlands and hichlands Growth of cement use accompanies
economic development assessment of this project (engineering questions
apart) would involve tainly questions of timing location and finance
matters which are really all aspects of the single question whether
such a project may not be one for private direct investment Initial
expectation would be that were all factors favorable to the success of
the project it gtlould be readily undertaken by orivate enterprise
particularly when it is remembered that railway freiehts 1bullrould protect
highland production from lowland competition
6h No sueeestions regarding increase of electric power output
have come fror1 the Government indeed the official statistical services
have no data upon installed capacities and demand Cnly in Quito and
Guayaquil are present industrial uses of electric poler of any ir1portance
Elsewhere suIJply is from snall municipal plants (mainly therraal) for house-
hold consumption It appears that demand mar be ahead sunply in cost
towns very frequently voltages are maintained around 80 instead of the
rated 110
- 23 -
65 Shortage of electric nower is not however hamoering
economic development at this stage although it may soon do so in
sevral urban centers such as Qui to and Hiobamba Sone ttne i-1 the
iuture the possibility of large hydro-electric vrorks on the eastern 1
side of the Andes will merit attention
y Where the rivers are fast and clear on the western side they carry much silt
- 24-
VI DmIESTC THANSPORT AND COilERCE
66 The space devoted to agriculture in this report reflects its
importance in the Ecuadorian economy As has been said further developshy
ment will for sometime be mainly agricu1tural
67 Present restraints upon that development are not located
solely or perhaps even nrincipally on the farm there are many
features of the general economic environment which operate to hamper
even purely agricultural development There is great room for improveshy
ment of transport to knit the economy tocether and to encot1raee grovrth
of output
(a) Transport
68 Without roads there can be little regional or inter-regional
intergration Fithout that intergration (which for some regions and
some crops would open upon the world at the gatewa~r of a oort) there
can be but small inducement andlittle opportunity of increasing proshy
duction In much of Ecuador the principal transport vehicle is the mule
whose patience and endurance under heaJr load is matched by that of the
Indian
69 As regards roads the requirement is both more roads and
better roads capable of bearinr modern vehicular traffic The roads
traveled by the 1Jission are uniformly bad both slowing traffic and imshy
Ilosing extraordiPamiddoty vehicular de_reciation Ultimately no coubt
there vdll be an adequate system of all-rreather roads in Ecuador For
the immediate future the more modest tarset is to attain a reasonable
system of roads civine access to the creater art of roducine areas
- 25-
in the dry season At present the unsurfaced access roads are cut to
pieces by --vater erosion in the wet season and consolidated somew1at
traffic in the dry season A single eradinr operation smoothin thE
dirt surface at the end of the vret season would ci ve accelJtable usashy
bility in the dry )eriod v1hich in the populated coastal rovince of
icanabi for example is eight ~aonths of the year At -_resent the so1e
transport link for corunodities between loYrlands and the hihlands
is the Guayaquil to Quito (and beyond) railway This link is nrobaoly
nearing saturation point vdth present equipment and its strencthening
both by railway imJrovement and all-middotweather hichway construction is
obviously desirable it middotill probably become essential yri thin five
years
(b) Commerce
70 Physical transport alone hogtever is not the only ope c-ation
ofcarriaee required to intecrate a reeion internally and to bind toshy
cether the various regions There are also tL physical and the finanshy
cial aspects of comr1odity holdinr involving the storae and vrhere
necessaFJ the partial processing of products to reduce perishability
and the avail~bility of mechanisms of short-term finance extendine over
crop periods In Ecuador these tro aspects are closely related
71 Apart from some export crops there is virtually no crop or
food processinG undertaken And in the export crops processing
is the minimum necessary to secure portability Eice is nilled but not
polished cacao is sun dried coffee is dried and within only recent
years washed fruit is exported whole Some new e~Jor-ts may require
further processing and installation of plant starting or is in
- 26-
advanced discussion for example vegetable oil processing (although
for sometime no eXport surplus of vegetable oils is 11~11 and fish
canning
72 Nor is there any important ~recessing of domestic food pro-
duction for home consumption bull There is no freezing or canning of meat
which is taken to market on the hoof There are only two or three
very small butter factories and no whole milk orocessing Cereals
of course are not highly perishable but there are no silos or granarshy
ies and experience of similar situations elsewhere suzfests that losses
by deterioration and infestation may be significant no direct evishy
dence anthe incidence of this factor in Ecuador ~as obtained by the
Mission Thee is little storage of grass on the coast in silos or
as hay and in the dry season slaughter of cattle because of lack of
feed is at times necessary In short the situation is not so very
dissimilar to that ofmiddotmedieval Europe
73 Roads alone would not create an environment favorable to
change in this position although lack of roads nar well inlibi t change bull
In addition suitable credit facilities for the finance of co~~odity
holding through time are necessary
74 Hany complaints were voiced to the Hission reearding lack of
short-term banking credit for crop movement and storage and for medium
and long-term agricultural investment and no doubt there is signifi
cant lack of such credits But this is not the result of some simle
institutional defect of the b~~inc and credit structure even though
institutional improvement may be necessary It is fundamentally a
- 27-
reflection of the fact that Ecuador is extremely poor in disposable
capital available for even short-term investment ie vrorcing capi-
tal Improvement of short-term credit facilities for what in advanced
communities are regarded as purely commercial purposes would in effect
represent an increase of capital intensity in the Ecuadorian ecororny
To the extent that banks met more fully the gtJeak seasonal credit re-
quirements for croo movement and storage individual nrivate reoources
are relieved of the 1eak burden and available for other investments
75 Thus iorovement of the techanisr by 11hich the banking system
provides working capital for corrtercial or inciustrial (in the sense of
crop processing) purposes is itself an act of investment rather than
merely an institutional rationalization ilnd as such carry the
usual consequences of investment in an undevelogted economr with very
law voluntary savings To the extent that additional credits are not
matched by savings sewhere (either voluntary or forced through
taxation) they will be inflationary in effect just as an
additional act of long-term investment would be Increase of banki1g
nrovision of workinrr capital should keep step with totl capital for-_ - - 1 mation of which it is one aspect7
It is implicitly assumed in the foregoine that at nresent in Ecuador the amount of small voluntary savinrrs is neclicible It vrill presumably not alrmys remain so and ~Jart of the modifications of the bankin~ system shou1d be attract Clli1U1 atively such sav-ings in the fom of savinc do)Josi ts This 1muld increase the extent to which Danks can safely flovide capital It will be a much later before small private savincs are directly in-vested in commerce or industry throuh joint stock r1ethods There is no stock-exchance in Ecuador
-28-
76 It is of course just as important that the availabi lity of
working capital should not lag behind as it is that it should not run
ahead The Bank should ensure that any long-term investment projects it
may assist to finance do not effectively starve the rest of the econo~
of working capital in the process of avoiding inflation
77 There is also the question of the price of short-term lending
that is of the level of interest rates The Ecuadorian is a highshy
interest rate eoonomy The legal maximum for commercial short-term loans
is 10 per cent having recently been increased from 7 per cent legal
maximum rates however are not systematically enforced by commercial
banks themselves At a time when the legal maximum was 7 per cent
going rate for 90 day loans secured upon properly warehoused commodishy
ties and with third party endorsement was 12 pe+ cent
78 This very high structure of interest rates seems open to
obvious criticism but is in fact probably not Tiholly unjustifiable in
the present conditions of Ecuador It is the cumulative result of many
factors so that more official prescription of lower rates would be
quite ineffective These factors seem to be
(a) Interest proper~
(b) layment for risk bearing arising in part out of a
low rating upon individual credit and in part from
the institutional conditions (such as embryonic
commercial and financial ruarkets) which seriously
reduce the liquidity of any asset other than money
itself
-29
(c) An clcmmt 0f discount 111nn cyectcd luturc irf] utinn
reducing the real value of the pa~nent for lending
(d) An element of monopoly which upon purely subjective
judgment may be the least ilJI9ortant of these several 1
factors7
(e) The real shortace of capital whether short or long--
term~ reflecting in interest rates as a genuine
scarcity price
79bull Of those factors the di~ount upon expected future in-
flation increases prices at a rate of 12 ner cent per annum a money
interest rate of 12 per cent per annum is a real rate of zero If
therefore inflation could be controlled a substantial reduction of
money interest rates could be hoked for At the same tine while
inflation continues high interest rates probably have small influencemiddot
in encouraging money savings
80 Even without inflation ans until the su~1ly of available
real capital improves relatively high interest rates may well be
acceDtablemiddot as a price mechanisn nethod of selectin~ most urofitable y ~
uses of limited fundsbull middothere exoected urivate nrofit did not seem l - -
to parallel social desirability loans at lower rates (ie subsidized
terms) could be made perhaps through reconstituted Development Banks
Prima facie however such loans 1bullrould not be short-term
~I -Onthis interprepoundaion the situation in Ecuador differs signifishycantly from that in Peru
tt is suggested that a powerful point of intervention would be to limit commercial banking dividends distributed to not more than say 7 per cent The high profits nmv earned by commercial banks would then progressively accumulate until liberalization of lending becomes virtually forced by accumulation of funds representing genuine corporation saVings
- 30-
81 The discussion of private finance has so far upon
short-term credits there is an even larger nroblem in the
intermediate and long-term arricul tural credit It is not necessarr
to expand greatly upon this since it too is a consequence capi-
tal shortage
82 Imnrovement would seem to be alonrr the route - 1 of nroper UElte
of existing Development Banks (or their successors-) effectively
in the earlier stages as lending agencies of Government
VII OFFICIAL DEVLOPHl~NT FHmiddotIfJCE
83 In the circurnstances of a country like Ecuador the greater
part of domestic capital forr1ation requires official directly
or indirectly if it is to occur on any scale are too
small and too narrowly held to permit much -rowth this roL1te
andthose few who are able to save at any sinificant rate are larely
uninterested in the efficiency of ~reduction
84 Official finance may be either direct or indirect direct
throueh works executed by Government or 0JUblic bodies indirect
throueh lending institutions such as Dev~lopment Banlcs capitalized
from public funds In either case funds are diverted to investment
purposes by Govern~ent intervention
85 Thus Development Bank lending for productive purposes (for
example long-term acricul tural credit) is an item 1n ca9i tal formation
V There are thirteen reaional Development with an unirnJresstve record of manaeement Their possible reconstitution is under discussion
-31-
rather than a mere institutional rationalization of the credit mech-
anism Indeed as has been stressed in the last section even im-
proved su1nly of short-term credit gtrill in art rewesent
formation A developing economy which neclected these items in 11Cnn21~~
or forecastinc total caital investnent would be very vulnerable indeed
to inflation induced by over-investment
86 17here voluntary savings are Jow the only wmiddotamiddot to sirnificant
rate of capital formatton can emerge without inflation is an equi-
valent amount of savine forced throurh taxation One ould look for a
relatively hirsh level of taxation to national income and for a rela-
tively high proportion of exnenditures caDi tal purposes to total
Government expenditures On both these counts Ecuadorian elq)erience
seems irare s si ve
87 In 1946 total budretary and spedal revenue rms disclosed
as 5368 million sucres in the sa1le rear an estLnate middotJaced national
income at 20096 million sucres This a proym~tion of 27 middoter
come a proportion so hich that in fact it lacks credence In assess-
inc total tax burden part of the revenues of Government monorolies
and all of municial revenues should be included if this be done y
the proportion becomes 37 per cent In addition new exchance taxes
yielded 973 million sucres in 1947
Mono_)oly participations (ii direct disbursements for public _Jurposes) were 353 million sucres in 1946 munici~al income was 1803 million sucres in 1947 (1946 not available)
32-
88 It is very difficult to accept the conclusion that Ecuadorian
revenues form so high a proportion of national income it would seem
that the estimate of national income is too low Nevertheless tax
revenues are clearly a sizable percentace of national income
89 At the request of the Mission an official estimate of total
official expenditures on capital account was prepared Total income of
Government municipalities provincial councils and other public
entities was ~iven as 7S4 million sucres and total capital expenditure
from that income as 2237 million sucres or slichtlr over 30 per cent
of revenuesY It is difficult to feel confident that effective capi-
tal formation on this scale actually occurred certainly there is
little evidence visible to the eye of the t1middotaveler
90 Notwithstanding such doubts the fiscal evidence is of a
fairly hich proportion of tax revenues to national inco~e and of a
hich proportion of revenue allocated to capital investment It would
seem that the fiscal mechanism exists for domestic capital fo~~tion
what may be required is more effective expenditure of allocated funds-
Before a development plan envisa~ing the expenditure of still more funds
was adopted it would be desirable to examine closely administrative
and technical efficiency in the use of existing funds
91 On the side of revenue Treasurr officials informed the Mis-
sion that tax evasion was estirnated at some 30 per cent of ta revenues
1 This makes such capital expenditures 112) per cent of 1946 national income which a~ain seems very high indeed
The two largest items are Government public works (8)4 million sucres) and municipal works (900 million sucres)
- 33-
particularly in income and land tax It might well be advantareous
on the sides both of revenue and of expenditure for Ecuador to obtain
technical assistance of the tPe that the United Nations Department of
Economic Affairs rendered to Venezuela in 1947~Y involvinpound revision
of the structure of the budget of budcetary audit practices and the
like
f Report~d in UN Document ECN 1SubJfti 4 - 21 June 1948 lostricted)
- 34 -
VIII 001EHNl(iEi~T FINANCE AND INRATlON
92 What may be called 11multiple budget practices exist in Ecuador
as in other Latin American countries There is an annual Ordinary Budget
one or more Extraordinary Budgets( tro in 1947) end a number of Special
Accounts (twenty-five in 1946) not included in the general budgetary
accounts The State operates nxmopolies in tobacco liquor salt and
matches part of whose profits are taken into the ordinary budget as
revenue and part used directly for public purposes It is thus diffi-
cult to assesrmiddotgggregate Government revenues and expencii tures and vir-
tually impossible to detail the purposes of expenditure to ascertain
accurately public capital formation by way of public morks and the like
9 Taking the disclosed figures on the ordinary and extraordinary
budgets and tne special accounts there has been a net surplus over the
past ten years 1operations of 234 million sucres~ This however is
not an accurate reflection of the true aggregate position because the
Government operations are not ~holly included in these disclosed ac-
counts But since the Government has no source of internal funds other
than the Central Bank the net recourse of Government to Central BanJJI mirrors the over-all result of Government finance such recourse increased
In 1946 for example the monopolies contributed 5357 million sucres to the general revenue and disbursed 3526 million to municipalities (145 million on general participation and 1652 million sucres for 11 special participation of gthich an example is a new electricity plant at Ambato the state railways (92 million) etc
gj iiith only three years of disclosed deficit since 1938 See Table 12 in Statistical Appendix
2 Central Bank loans middotto Government less Govertllllent deposits in banks
- 35-
480 million sucres over the nine-year period 1939 to 1947 inelusivel
an average of 53 million sucres annually amplch averaging however con-
ceals very important differences between the three periods within the
nine years to tal
94 The table on the next page sumnari zes the factors causing in-
crease of domestic money supply It is computed by rearrangemm t of the
balance sheets of the Central Bank all commercial banks and all developshy
ment banks and is thus a table shoring changes in items in a rearranged
aggregate balance sheet of the Ecuadorian banking system
95bull The first t70 periods 1939-1943 end l943-l946f were both
periods of heavy inflation_ During the first five years notes in cir
culation and monetary deposits increased 3437 million sucres (or 255 per
cent) and in the next three )eera 2904 million sucres (or 61 per cent)
But the causal structure was quite different in the two periods
96 In the first inflation was almost wholly induced by external
factors (favorable balance of paYments causing increase of foreign exshy
change holdings) the major domestic factor being expansion of commercial
bank loans and investments in this period deficit Government finance
was not a causal factor
97 In the next three-year period 1943-1946 however the major
inflationary factors change deficit Government finance and expansi on of
f As calculated by IBRD Mission loans to Government including ali loans to official agencies A recent calculation by the IMF Research Departshyment covering Government operations only places the aggregate 9 years deficit at 345 million sucres~ See Table 12 in Statistical Appendix
- 36-
BANKING CHANGES ~0015 SucresJ
Jan 1939 Jan 1944 Jan 1947 Jan 1948 to to to tomiddot
Dec 1943 Dec 1946 nee 1947 June 19h8 t~ ~arsJ ~~ iears) trmiddot ~~r1 t~ mo~~h~2
Central rcrk loans tomiddotc~vt~ f 16174 f 160260 - 701p88 23695 Central B~r~ Loans to Public -1 6978 2_283 1- 67548 1- 39763 Commercial Bank Loans and
Investments J 187554 f 14624 88h4 1- 2~ ~49 Development Baru Loans and
J 14227 136818 ~ 644 1- 26090 Investments
1 224933 f 313985 11)40 1- 68107 Net Bank Foreign Exchange 260774 f 94662 - 53203 - u6 112
7 485707 7 408647 I
7 bull - 64543 21395
Notes in Circulation f 16o907 1-131729 - 23205 - 17290 Public Monetary Deposits -A 162868 1- 128914 - 68734 1- 19620 Government Deposits f 19968middot 29768 9050 2366
7 343743 7 290411 82889 - 36 Public Time Deposits 116834 ~ 42053 1~004 f 317j
y 7 46o517 7 3J2464 83893 ~ -- 3137
Absorbed by Banking System 1- 25130 middot~ 76183 1- 19350 18258 7 485707
11 f 4o8647 64543 I - 7 21395
Net Government Borrowing J 131492 from Banks 3794 - 79738 - 32745
Deposits in Central Bank in foreign money (not included above ex pressed in Sucres
Government ~ 4486 - 633 871 - 11059 Public 25242 J 78964 - 78814 J 4h97
T29J 728 7 I
7 IIIII middot~~ ~ I
78331 79685 31+38
y Made urt as Io11mlfs
Cas~ bullbullbullbullbullbullbullbullbullbullbullbullbullbull ~ bullbullbullbullbullbullbullbull - bullbullbullbull J 266 1- 367 - 22~7 99 Other assets less other liabilities~ ~ 4 330 ~ 293 ~ 18~8 Capital and Reserves~- bull bullbullbullbull 4 bullbull 52 bull 1 1- 79-9 26 o 278
7 I
7 7 I
7 bull Ill ri bullbullbull
251 762 194 18)
Subtract increase
37-
Davelopment Bank lending dominE)te the position Expansion of commercial
bank lending is relatively negligible while a comparatively small role is
played by balance of payment influences
98 From the end of 1946 the general financial situation deterior-ated
rapidly in five months from January 1947 to ~~ay 1947 net foreign exshy
change reserves of the Centrel Bank fell 935 million sucres or 7 7 mil-
lion dollars to a level of 2927 million sucres or 21 7 million dolJars
In litaY 1947 an IMF Mission arrived in Ecuador (at the request of the
Government) and in June 1947 a multiple exchange rate system with import
classification was introduced upon the advice and with the concurrence of
the Fund Operation of this system Jielded considerable profit n in
sucres it is in effect a new imposition of import taxes and such
11profits 11 are in reality additional fiscal revenueY It was of the
essence of the Emd s attitude in Ecnador that the exchange difficulties
bad arisen through domestic inflation and that these addi tiona reve-
nues should therefore be applied only in reduction of Government debt to
the Central Bank
99 The effect of such policy is clearly seen in the third column
of the table Inflation is checked notes in cirmlation and monetary
deposits falling 929 million sucres (or 11-per cent) i~ one year Alshy
thoUtgb however Central Bank loans to Government (and also colllWrci al
jJ At this point only the domestic aspects of this measure are emphashysized In a later section the external or balance of ~ent aspects will be taken up
Y Such revenue from exchange taxes yielded 975 million sucres in 1947 bull md in July 1948 was running at g to 10 jllillion sucres a month this revenue is not of course taken into the budgets bull
- 38 -
bank loans and investments) fell the actual deflation _was largely
caused through loss of foJeign exchange rather than over~all reduction
of domestic bank lending For in response to vigorous ~oilplaints of
credit shortage the Central Bank greatly increased its loans to the
public almost fully offsetting reduction of its loans to Government
In the first six months of 1948 there was no significant contraction
of money supply banking loans to the public eJggtanding to offset the
deflationary effects af an adverse balance of payments and of Government
debt reduction
100 The exchange surcharge multiple rate system was in operation
through August 1948 proceeds being devoted to reduction of Government
debt to the Central Bank~ But there has bean concern lest the resulting
deflation of domestic money supply would be too severe and the Central
Bank has in fact adopted a compensatory policy to prevent further reducshy
tion through continuing to expand lending to the public arid through
quasi-open-market pur~e of mortgage bonds to the amount of 17 million
sucres by July 10 19l8 when further purchases were discontinued
101 To avoid the netcessity for such compensatory policy the Cen-
tral Bank proposed to the Government that the destination of reveme from
exchange taxes should be changed Instead of being applied in reduction
of debt the proposal was that they should be useci instead to create a
development fund tt to be administered by the Cent~al Bank unless a
planned Development Institute or other competent authority is estabshy
lished In mid-September the Fund appro ved such cllanged dest ination of
these revenues 90 per cent of which will in future be applied in finance
of development and 10 per cent in stabilization of Government bond prices
-39-
This removes a check upon inflation which has operated for some fifteen
months unless Central and commercial bank lending policies recognize
this changed situation further inflation may follow even if the Budgetary
accounts run no deficit
102 At the same time this change does provide a source of local
currency finance for development projects
-40-
IX INTERNATIONAL TRAIE AND THE BALANCE OF PADlENTS
103 Ecuador exports agricultural products (rice cacao coffee
tropical fruits balsa wood) mineral products (crude petrolelUil gold
silver copper and lead) and handicraft products (panama hats)Y
lo4 Approximately one trird of Ecuadorian exports (including
minerals) go to the United States The proportion rose during the war
due to VmiddotIar-time demand for strategic raw materials but is now tending
to revert to pre-war levels Loss of European markets has been partly
compensated by gain of n$w export markets at least for a time and
especially for rice Countries in the Far East whose rice production
fell during war such as the Philippines and in Latin America whose
Eastern sources of supply were cut off such as Cuba and Venezuela
have provided demand for Ecuadorian rice This outlet however may not
last much longer
105 On an average of years 1938 to 1943 about 15 per cent of
Ecuadorian imports are foodstuffs wheat and lard being the largest
items and 85 per cent are manufactured goods and equipment Import
of foodstuffs is however gro1ing t-vith population and in the key pro-
ducts of wheat and fats would be expected to grow still faster if
econowic development raises n~ss living standards witl10ut increasing
domestic output of these prodvcts For increased consumption of wheat
products and fats is in part the definition of rising living standards
for a very poor population
fJ See Table No13 in Statistical Appendix for composition of exports
-41-
106bull Before the war (average of the years 1937 to 1933 ) the Americas
supplied 49 per cent of Ecuadorian imports by value the United States
alone supplying 41 per cent Germany provided 22 per cent of total
imports and the United Kingdom only 8 per cent Europe as a whole supshy
plying 45 per cent
107 In 1946 and 1947 the Americas provided 86 per cent of total
imports the United States supplying 66 per cent EUrope as a source of
imports fell to 12 per cent although the United Kingdom maintained its
relative position (7 per cent) Whether the United Kingdom can expand
its provision of imports for Ecuador JDaY be domiddotubtful on the one hand
the loss of Germany as a supplier pzo vides an opportunity on the
other the competitive industrial position of the United States may make
it difficult for the United Kingdom to fill this gap
No balmce of payments estimates eJd st for Ecuador1
Growth
of foreign exchange holdings over the war period however indicates a
strongly favorable balmce ~let reserves which were equivalent to 409
million sucres in December 1939 rose to 3962 million sucres (294 milshy
lion dollars) in December 1946
109 Official purchases and sales of exchange are shown in the fol-
lowing table together with corresponding movements of exchange reserves
The difference betRSen the balance on official transactions and the moveshy
ment in reserves arises from transactions on the free market
110 During the war import and exchange controls were nominal
there being no shortage of dollars nor any decrease of exchange reserves
jJ Except for the ~eriod January to May 1948
-42-
Loss of exchange reserves in 1945 led to a tightening of control on an
allocation of quotas smong users of exchange Import permi ts were
granted on the basis of former imports by merchants At the end of
1946 controls were relaxed on an extensive list of imports items and
the consequent loss of exchange has led to difficultieQ
Ul Official Official Balance Changes in Purchases Sales on Net
Official International Trans- Reserves actions
(Millions of u S Dollars)
1942 257 185 t 72
1943 35-5 279 t 1middot5 t Ul
1944 423 34~4 t 79 f 88
1945 353 394 - 41 - 7-2
1946 471 415 f 56 t 1 9
1947 488 579 - 91 38
112 From December 1946 to IVtay 1947 net foreign exchalge reserves
fell US$ 77 million from US$ 294 million to US$ 217 million In May
1947 the advice of the International More tary Fund was sought with reshy
sults summarized as follows in a recent Fund documentY
The lfund 1 s Mission arrived in Ecuador in Yay 1947 It was not advisable at that time to contemplate devaluation which would have made the inflationary situation worse An emergency program was therefore proposed Essential and semi-essential imports were to be distic5~ished and a surcharge of 5 sucres p3r dollar imposed on the semi-essential group as a check against their excessive import New decrees including many of the recomshymendations were issued in June
The main features of the new system were as follows
Y Economic SuVey of Ecuador RD 672 - P 43-44
- 43-
(a) The elimination of all quantitative import export or exchan~ restrictions licenses and quotas with the exception of a few absolute prohibitions of some luxury imports
(b) The checldng of excessive import demand through a fiveshysucre (33 per cent) surcharge on non-essential imports
(c) The suspension of nearly all exchange sales for nonshytrade transactions and the creation of a free market bull narrowly limited in volume and comprising mostly all transactions that are uncontrollable in practice plus a snall amount of domestically produced gold
(d) Exchange for a small amount of the least essential goods was made available in the free market
(e) One of the basic aspects of this plan was the steriliz~ tion of all proceeds from the import surcharge which was placed in a fund for the extraordinary amortization of the government debt to the Central Bank Tnis is still in operation
The beneficial effects of these reforms were felt immediately In June the trade deficit ~as reduced to only $07 million and in July to $06 million By August for the first time in 3 monthsl there was a small surplus In September the deficit was smci l -j)O 5 million In October there was a surplus of $15 million and in November and December there were small deficits of only $01 million and $07 million respectively
In short the deficit for the year was about $99 million in its gross gold and foreign exchange reserves During the same period international liabilities of the Central Bank showed a reduction of about $6 million Therefore~ the net deficit was around $39 million 95 per cent being in the first half-yeer and before advice had been received from the Fundrs Mission
113 It should be emphasized that this multiple-rate system of
exchange control is entirely freed cpentitative controls Excessive
import demand is checked by the higher rates upon imports deemed non-
essential the list of which is knollD and published Anyone presenting
sucres is provided with exchange at the appropriate rate upon list A and
B goods and the free rate is influenced by occasional releases of offi-
cial exchange into the free market The system that is utilizes the
inter-play of the price mechanism rather than the bWlilmlcracy of quanti-
tive controls or quotas
- u4-
114 Loss of exchange continues however despite considerable reduc-
tion of imports Gross international reserves declined US$ 18 million
and net reserves US$ 35 million in the first six months of 1948 Offishy
cial transactions January to June 1948 are surmrarized in the following
table~
Receipts From Exports From other Transactions (1)
Total
Payments For Imports For other Transactions
Total
Balance Change in Gross Reserves
1947 Jan to June
1948 Jan to June
(Millions of Dollnrs)
163 5 6
167 44
219 211
289 219 23 10
312 22 9
- 93 - 18
(l) Includes purchases of domestically produced gold deposits received in foreign currencies and borrowing from corres~ pondents abroad
115 Prospects for the remainder of the year moreover are not goo~
It is estimated that loss of international reserves over the whole year
may be aboat US$ 6 million Whether the deficit is in this region de-
pends largely upon actual export realizations for the remainder of the
year lhe most critical here is rice 11hose ygtrice is falling and the
crops accumulating in the rice millsplusmn Latest information is that
f Countries receiving allocations of Ecuadorian rice under International Emergency Food Council allocations have been requesting a change in source of supply owing to shortage of doJJers Thus France has asked for 6000 tons of rice from Indo-China instead of ~cuador and Greece for 2000 tons from kVPt in place of Ecuador as supplier A recent favorable sale of rice-to Haiti has somewhat improvea the cuITent position
-45-
plantings for the October crop are substantially reduced Wet weather bas
led to some loss of the cacao crop Receipts from exports in the follow-shy
ing official exchange budget may therefore have to be modified down- [l
ward on any pxuient calculation-
116 ~or Recei1ts and Sales of Foreign hchange
(Thousands of U S Iollars)
1948 1947 Estimated Actual
BECEIPTS
Worts Rice 13~ la4~ Cacao 11 l 2 Other products 10700 12371
Total Exports 354oo 42120
Foreign companies 5300 4842 Others 800 1883
41500 48845
SALES
Imports 44800 53499
Services 3200 4470
4B ooo 57969
117 In this situation of continuing presSlre one step has been
tken and others are under consideration The one taken relates to offishy
cial imports representing an average pf 20 per cent of total imports
Importation of cigarettes liquor matches and other things by the State
tionopolies is especiallyen significant These were formerly provided with
exchange tax-freebull ie at the ~owest rate of 1350 From July 26 they
afe required to pay the ordinary import rate of 15o4 on sll supplies for
J See note on page 47 -A
- 46-
their ovm use (such as office supplies) and the same rates as private
importers (ie 15o4 or 20o4) on all imports to be sold to the public
(such as wheat flour fats cigarettes etc) accord~ng to the classifi-
cation of the goods
118 Remaining possibilities seem to be a partial reclassification
of imports removing items from List A as essentials to List B as se~ishy
lwruriesY and or a chenge of nominal exchange parity vri th or mithout
a narrowing of the spread between the rates Here pressure from
exporters particularly from rice exporters may be hee~vily in favor of
an increase of the dollar buying rate with consequential changes of
selling rates
119 The present loss of foreign exchange is occurring ~rithout any
service being met upon defaulted foreign debt although service of Ex-Im
Bank loans is being made If it be assumed for purposes of calculation
that Ecuador reaches an agreed settlement identical to the Chilean sershy
vice would require exchange equivalent to US$ 378000 in 1949 (of which
US$ 368000 would be required in dollars) and would rise to US$ 4o20CO
in 1954 Adding service upon Ex-Im Bank loans outstanding on June 30
1948 and other known but small indebtedness total debt service would
increase to US$ 1410000 in 1949 rise to a second maxilliUID of US$ 1394000
in 1951 and then progressively decline Upon the assumption thet amp-Im
Bank loans undisbursed on June 30 1948 are all fully drawn before their
maturity total debt service charges would be US$ 1533000 in 1949 rise
On August 21 a number of import items were changed from List A to List B the aggregate import value (when granted exchange at List A rate) affected being US$ 7 million
-47-
to US$ 213431000 in 1952 and again would progressively decline These
last service charges rould be for 1949 3 1 per cent of 1947 actual
official foreign exchange receipts and 3 bull 7 per cent of estimated 1948
receipts and for 1952 48 per cent and 56 per cent of 1947 actual
and 1948 estimated exchange receipts respectively
120 Estimating prospects from this point in time Ecuador does not
seem to be a country able to afford assumption of any great additional
burden of debt service payable in dollars The amount that could wi thbull
out hardship or distortion be squeezed out of the balance of payments
by no means corresponds to the development needs of the country Any
start must therefore be modest and cumulative rather than spectacular
and precarious and this conclusion fits with other controlling factors
in the over-all situation notably the supply of administrative techshy
nical and managerial abi li ty
- 47-A -
Note on Official Exchange Transactions
Official exchange transactions for the firstsix months of
1948 are given on page 44 of this report Results for the full year
are now available and reveal that earlier expectations regarding the
probable 1948 balance of payments deficit were unduly nessimistic
Cacao export values have been lar~er than expected and in the last
period of the year there IBre some unexpectecily favorable rice eA-port
sales total export receipts were US$ 8 million larger than forecast
on page 45 Imports were held close to forecast
Receipts
Exports Foreign Co~anies Other
Payments
Imports Foreign Comoanies Other
Balance
Change in Grass Reserves
Official Exchange Transactions (full year - n~illions of dollars)
1947 -421
L18 19
488
535 06 149
580
y does not agree because of rounding
January 26 1949
1948 -436 h2 7
i85
Lt52 2
28
-oJ
-48-
X EXTERiJAL DEBT BEoomJ
121 The position of public long-term external bonded (excluding
inter-governmental) indebtedness of Ecuador is as follows
Amount in Default AmoUpt Outstandi~ ~ e Interest D~te
~In currmc1 (u s (us of p~t Dollars) Dollars)
Dollar obligations Gueyaquil amp Qui to Ry) $ 1226)000 12263000
286000 12263000
286000 123147
63047 Sterling obligations Franc obligations ( Oie
b 71000
Francaise de Chemin de Fer 1 lquateur ) Fcs 8386000 70000 70000
12619000 l26l9000
middotmiddot Note The Government of Ecuador oyenms about 75 per cent of the
stock of the Guayaquil and 1uito Railway and guarm tees the bonds and certificates which are largely held in England The franc obligations of the Cie Francaise de Chemin de Fer 11lquateur are not included in the offi cial statement of the public debt nevertheless the Government does recognize some liability for them and during the last few years has engaged in Degotiations for their retirement
Inter-governmental Debtsmiddot
122 Debts to the United States Government are of three types
63047
first the loans by the Export-Import ~which were outstanding on
June 30 1948 in the amount of $7 705606~ second the aJIDunts duemiddot
because of purchases of surplus property totaled $484 567 on March 31
1948 and third the obligations arising out of the lend-lease settleshy
ment the amount of 1fhich is not available (Total lend-lease assistance
j This section of the Report was prepared by Mr Paul Dickens
to Ecuador amounted to $7 bull 795000 )
123 In addition Ecuador is indebted to the Government of Venezuela
in connection with the establishment of a joint shipping company Late
data are not available but as of February 1947 $500000 ($1000000
authorized) was outstanding the total to be repaid by 1966
Debt History
l2ij Upon partition of the old Republic of Colombia~ middotEcuador was
apportioned 215 per cent of the original Colombian debt by the convershy
sion of l834a Between 1834 and 1854 no interest was paid The period
1855 to 1908 was marked by numerous adjustments and defaults
125 In 1898 the Guayaquil and Q]lito Railway Companyt s first mort-
gage 5 per cent loan of 1899 was issued It was expressed in dollars but
was in reality an English loan In 1908 a new (reemenJl was reachedbull
which was to be a final settlemet of all past disputes and controversies
between the Government and the Guayaquil end ~ito Railway Company and
the bondholders In 19~-10 the Government defaulted on the new agree-
ment In Novemberl9ll payments were resumed on the railway debt on)y
but a revolution caused a further suspension from December 1911 until
lfarch 1912 Subsequently service was partially resumed on the external
debt until July 1914
126 From August 1914 to July l9l8 no paYments were made on eny
foreign obligations except that service on the prior lien railway bonds
had been maintained up to and including the January 1915 coupon By
rf Negotiated settie~nt
-50-
1920 interest and sinking fund on the prior lien railway bonds had been
brought up to date but service on all other obligations ~ed in
arrears In 1926 interest on the salt loan of 1908 was brought up to
date but default took place on the coupon dueJam1ary 2 1927
127 The outstanding bonds of the prior lien issue were redeemed~~
January 1929 at VIhich time the January 1914 coupon was paid on the
5 per cent first mortgage bonds of 1897 In the case of the salt loan
of 1908 sinking fund was resumed in July 1928 and interest was paid
to Jazruary 1929 inclusive None thereafter Sums due from July 2 19C3
to January 2 1931 inclusive deposited with Central Bank in sucres
were used for governmental purposes after December 1931 No payments
were made after January 1929 on the external debt of Ecuador
128 Up to the end of 1948 no acceptable arrangement had been pro-
posed by the Ecuadorian Government for the resumption of interest and
sinking fund payments on external loans
-51-middot
XI bull POLITICAL
129bull Recent political history in Ecuador has been turbulent
although contest fo~ power at the top has not greatly affected the
bulk of the population Suffrage extends to all literate citizens 1
over twenty-one years of aee-but the requirement of literacy effect-
ively excludes the Indian bull T)tal votes cast in the recent Presidential
elections were 289164 from a total Population of some 35 million
130middot On May 28 1944 a few days prior to a scheduled ceneral
election an uprising occurred and Dr Jose Haria Velasco Ibarra
assumed office as President Dr Velasco had been President before
but following a coup dletat in August 1935 after he had been in
Presidential office less than a year he fled to Colombia and re-
mained in exile for several years On July 23 191-4 general elections
for a Constitutional Assembly to draft a new Constitution were held
Installed on August 10 the first Act of the new Assembl3r which was
predominantly Conservative was to confirm the legality of Dr
Velascos assumntion of the Presidency
131 On June 30 1946 new elections to the ronstitutional
Assembly middotwere held The only party particiJatine in these elections
was the Conservative The Liberals R~dicals Socialists and Commu-
nists abstained on the crounds that President Velasco did not offer
them sufficient guarantees On Aucust 3 1946 there vrere a number
of arrests following an abortive uprising and on Aueust 11 the Con-
stitutional Assembly re-elected Dr Velasco to the Presidency (by 43
to 10) for a term of office to last to September 1 1948
12bull Being compUisory for men voluntary for woraen -
132bull A new Constitution was promulgated in January 1947
133middot On August 23 194 7 a bloodless coup detat led by Colonel
Carlos Iancheno Minister of Defense in Dr Velascos Cabinet deposed
rresident Velasco who fled the country to Colombia for the second timebull
Next day Colonel Mancheno proclaimed himself Acting President and
formed a five-man Socialist-Liberal Cabinet despite the absolute
Conservative majority in the Assembly A week later however on
August 31 a counter-revolutionary military movemont broke out in the
north and the counter-revolutionaries captured Quito on September 2
134middot Colonel llancheno resigned the ActinG Presidency and dis
appeared the sa1ne day Dr Suarez Veintimilla who had been Vice
President under Dr Velasco and the former conservative Uinister
resumed control of the GoverPment Next day September 3 a Council
of State in Quito declared that Dr Velasco had by abandoning his
post terminated his functions as Chief of the State Dr Velasco
howeverJ vrho middotwas by this time in the Argentine declared that his
remo~al to Colombia had been forced and announced his intention of
returning to Ecuador to resume office
1~ On Seytember 15 1947 a Secial session of the Zcuadorian
Concress accepted the resignation of Dr Veintimilla and elected
Senor Carlos Julios Arosernena head of the Banco Ce Descuento at
Gua~raquil and a non-party man as Vice President with novers as
Acting President until September 1 1~48 Senor Arosemena formed a
mainly Liberal Cabinet with one representative each of the Consershy
vatives and the Socialists Coneress also ~onfinned the Council of
State 1 s view that Dr Velasco had forfeited the Presidency by abandoning
his postbull
136 On June 6 1948 Presidential elections were held The
three parties represented vere the Conservatives (Dr Manuel Elicio
Flor Torreo) the Liberals (Galo Plaza Lasso) and the Radical (Genera1
Alberto Enriques Gallo) Final results were announced as
Plaza 115835
Flor 112052
Enriques 53601
Invalid 27 676 289164
137 bull Doubt persisted until this month (August) as to who would
receive the election The Electoral College had been invalidating
votes on technical Grounds and as interim returns and invalidities
were announced it was noticed that the majority of the latter were
being deducted from the Plazavote After conferences the Electoral
College revalidated all votes and conducted a re-scrutiny on less
strict basis Senor Plaza has been declared to be the rfjSident-Elect
by the Ecuadorian Coneress and assumed power September 1 1948 The
middotpresidential term of office is four years
The Vice Presidential results were
Conservative 1anuel Sotomayor y Luna llu008
Liberal Dr Abel Gilbert 113213
Radical Dr Cueva Tamarz 5h07h 28129gt
139 Senor Plaza was born in Nmv York USA forty-two years
ago his fatter the late General Leonidas Plaz~ was President of
Ecuador in 1901-05 and 1912-16 middotSenor Plaz who had been taken to
Ecuador as an infant accomnanied his father in exile to the United
States and attended the University of California the University of
Maryland and the Georgetown School of Foreign Service in ~7ashington
l4o Senor Plaza returned to Ecuador in 1930 and for the next
fourteen years operated the family estates there reclaiming them from
virtual bankru~tcymiddot to prosperous and efficient state He has for
example been active in encouraging the breeding of new cattle strains
is President of the Ecuadorian Holstein-Friesian Association and oper-
ates a butter factory on his estates with a Danish ~anarer He was
ar Minister from 1938-40 and Ambassador to Cashington from 19h4-46
l In executing any policies he will of course be handishyt4
capped by the lack of a fully efficient Civil Service The position
in Ecuador is the same as that in othelmiddot Latin American countries
that the Civil Service is naid on low salary sca1e and lacks compe-
tent administrators Such lack is an aspect of the general shortage
of technical ability in the country
TABLE
1
2 bull
3 bull
4
middot 6
7 bull
8
9
10
11
lZ
13
14 bull
15
16
17
18
19
20
ECUADOR
STATISTICAL APPENDIX
Oil Production and Exports
Cement Production and Imports
Yfueat Production and Imports
Rice Production and Exports
Rice Exports by Destination
Cacao Production and Exports
Coffee Production and Exports
Cotton Tobacco amp Sugar Production amp Sugar Imports
State Railwaysmiddot Lines amp Rolling Stock
State Railways Merchandise Hauled
Population and Roads by Provinces
Budgetary Receipts and Expenditures
Exports of Principal Commodities Volume amp Value
Imports Classified by Groups Value
Exports by Destination Value
Imports by Source Value
Balance of Trade by Major Regions
Exehanee Reserves and Banking Position
Price middotIndices
Status of Ex-Im Ballilt Loans
ECUAIOR Table 1
Oil Production and Expomiddotrts
(thousands of American gallons)
Crude ou Gasoline Produced EJtported bullRefined middotproduced
1938 94586 78696 15500 41654
1939 97125 68819 17679 bull 141
194o 98654 70~99 23001 6162
1941 65382 38362 25914 6462
1942 95671 68516 29489 72l7
1943 97211 65003 34635 8076
1944 121469 82520 38083 8927
1945 109855 73897 38752 10059
1946 979+7 52412 45213 12271
1947 99140 39359 53949 16587
Source J3o1etin Banco Central del Ecuador
ECUADOR Table No 2
1929
1937
1938
1939
1940
1941
1942
1943
1944
1945
1946
1947
1948
l First six months
CEMEHT PRODUOTIOllT AliD IMlORlS (metric tons)
Production Imports
17782
15699 10082
14254 13373
14249 12013
16512 10935
17213 2_846
19802 so98
2756o 933
34691 1590
37504 953
38496 3114
33231 14941
20484JJ
Sources Production Eoletin Banco Central del Ecuador Trade Ministerio deEconomia
Total
25781
27627
26262
27447
20059
24900
28793
36281
38458
41610
ECUAJX)R Table J
Wheat and Wheat Flour Production and Irraquorts
(thousands of kilos)
Wheat
Production Imports Exports Consumption
194o 28120 bull 73 28o47 1941 24578 36 24542
1942 24265 bull 76 24189
1943 22034 22034
1944 23251 912 24175 1945 23115 2733 180 25667
1946 25852 4532 23 30361
1947 2lo66 494f)J 11
Vfueat Flour
1938 10743 9981 na
1939 7864 16638 na
1940 7996 8-592 275 16312
1941 7225 11823 286 18762
1942 7 161 23497 161 30498
1943 7461 9862 17322
1944 5216 24023 29239
1945 5174 25137 30311
1946 7~38 11313 g 18813
1947 5943 1886) 4Y
Less than 500 kilos Y First 6 months
Sources Ecuador en Cifres a~d Ministerio de Economia
~emiddot 1926-30
1931
1932
1933
1934
1935
1936
1937
1938
1939
1940 -middotmiddotmiddot
1941 ~ )~ (1
1942
1943
1944
1945
1946
1947
1948
~iiampn-sect00-lfmiddotks
-~Jrst~middot-nsmcnths
gJ Provisional
(B EQUOR
RI03 PRODUCTION ApoundP ~OR~S
Vo1wnfJ Production middot E~orts
(metric tons)
26)04
23584
29863
39270
39008
31699
39036
52136
44027
40144 ltit middotmiddot~ 0 56596
5873
100949
ao6o7
53168
102048
112711
047
8255
3842
6449
5282
22907
8734
12)3
2ooso
962
18343 t - ~ J
20546
32028
46992
64604
29318
66918
6~209fl middot tloo 1
$ bull
tt ( r t
z
Value 3xoorts
(thousand sucres)
1881
936
6667
10864
6555
14632 pound 170
23265
51460
93837
127105
60395
203243
2rfjuft
Sources Production Boletin Banco Central del 39uador~ Trade Ministerio de Econom1a~ ~r- ~fl ]r bull ~-middotmiddotmiddotmiddot f ~~middot~---i
Average Destination 1937-41
Cuba 2
Peru 13
Venezuela 6
Colombia 4
Panama 2
Jamaica 0
Philippines 0
India 0
Dominican Republic 0
Other Countries 4
TOTALS 31
Preliminary~
RIQ] EXlORTS (in million po~ds)
1943 1944 1945
81 88 5S
20 29 0
0 17 4
~ 0
Rf 2 hi 0 0 0
0 0 0
0 0 0
0 0 0
bullbull ~ 6 6
105 142 6S
R Less than )OOOOOpounds
Table No 5
1946 ~ Jan to~
1~ June-194
46 12 24
0 0 s 17 49 )j
2 13 2
5 4 1
16 1 0
20 0 0middot
0 38 0
0
1 f4~ 2
r middot I
130 13 34
sf Ineludes 6 million pounds to Mexico and 5 million tmiddoto Greece bull middot
1[0
supound~sect8_ Foreigl Crops and Markets Offiee of Foreign Agrtcultural Relations u bull Sll~artment of Agriculture May 3l 1948 bull p bull 402 First six months of 1948 from ibid August 16 1948 p bull 120
Average 191i-15
191620
l921-25
1926-30
1931-35
193640
1940
i941
1942
1943
1944
1945
1946
1947
tf I
ECUADOR
Cacao Production and ~orts
Volume
Estimated Production ~rts
(metric tons)
n (
12108
15middot330
14652
19030
15058
17759
17689
19459
4o625
43547
36825
21319
15980
174o4
11208
14433
13762
18161
13735
16827
16526
Exports ( 000 sucres)
186o9
26073
26746
27531
16647
37424
29354
34365
40327
51794
41985
53547
74935
188208
middot)(et) middot( middot
Sourcesmiddot Estimated production Ministerio de Economia E~orts to 193~ Estadisticas de las Exportaciones del
Ecuador 1940-1942 subsequently El Trimestie Estadistico del Ecuador Number 1
1 ~ Mini sterio de Economia -bull gt(
111 t bull r r (o J bull bullbullbull 1) ( bull
ECUADOR
Coffee Production and Exports
Volume Estimated Production EXports
(Metric TohS)
1921-25 average 5147
1926-30 II 7571
193D-35 10047
1936-40 II 13811
1940 16158 14571
1941 14260 11847
1942 9016 6140
1943 14144 12340
1944 16598 14458
1945 12999 10737
1946 9948 7636
1947 12522 8970
Table 7
Value
Exports 000 Sucres)
59~9
11530
10945
18546
16J83
23827
17278
33176
35626
33863
34839
43524
Source Estimated production - Ministerio de Economia
Exports t~ 1936-40 - Estadisticas de las Exportaciones del
Ecuador 1940-1942 - subsequently El
Tremestre Estadistico del Ecuador Number 1
and Ministerio de Economia
YEAR
1937
1938
1939
1940
1941
1942
1943
1944
1945
1946
1947
ECUADOR
Production of Cotton Tobacco amp Sugar amp Sugar Imports (000 Kilos)
Raw Cotton
9237
7213
7172
8165
PRODUCTION
Tobacco
1519
1106
1875
1028
1359
Sugar
17528
22950
26950
27835
30421
27858
26799
23151
32474
33544
33480
Table B
IMPORTS
Sugar
5310
11068
12387
38
6
33
184
784
21455
3060
Sources Production of Cotton and Tobacco Ecuador en Cifres 1942
Sugar Production and Imports Ministerio de Economia
ECUAOOR Table 9
State Railways
Length Locomotives Rolling Stock (Number)
(Kilometers) (number) 1relght Passenger
Gueyaquil-Qpito 452 39 319 41
Guayenaquil-SalinaJ 150 6 22 24
-~i to-CarcbiY 222 6 23 22
Bahia-Chone 78 3 12 g
Sibambo-Azogues 117 3 6 ll
Puerto Bolivar-Piedras 155l 7 21 10
Puerto Bolivar-Pasaje 55
1199 64 4oy llG
Narrow-gauge line
gj On uncompleted line ~ito-Esmeraldas
21 Of which 4 are rail-cars
jj Of Vihich 61 are rail-cars
Source lviinisteria de Economia
1938
1939
194ltgt
1941
1942
1943
1944
1945
1946
+947
ECUAOOR
Railway Transport
(thousands of metric tons)
Products
Agricultural Animal Mineral Forest Manufactures
1639 19 3 160 122 1034
1318 143 172 138 961middot
1714 144 233 219 1472
1613 184 277 209 1543
1809 224 280 272 1631
1841 280 35a4 376 193-3
2011 250 263 299 C5J7 3
1888 29-5 350 238 2234
1941 29-9 46 bull 4 258 2170
1787 299 51 0 180 2085
Source l3oletin Banco Ce~~nu del Ecuador
Table 10
Others Total
58 3205
58 279l
298 4oso
289 4115
328 4543
384 5168
352 5248
292 5296
37middot7 5508
419 5279
Table 11
Population and Boads
Poeation Roads (Kilometers) Province Jan 1 1948 Main Secondary In Construction
Care hi 86663 1744 1191 1050
Imbabura 158896 1818 2100 1810
Finchincha 350149 4)13 3703 670
Cotopaxi 215232 642 4o6o 970
Tungurahua 222963 2290 1810 300
Chimborazo 29864o 1664 3316 2740
Bolivar 121653 1877 1294 2045
Canar 133971 580 580 1300
AZUaY 284982 1053 2190 630
Loja 238705 1140 4s6o 1430
El Oro 93752 1005 2378 650
Quay as 482843 3900 3367 3700
Los Rios 148428 933 4632 1050
Manabi 381538 3627 1lo61 1970
Esmeraldas 664o5 50 19 0 2840
Frov Orientales 181071
465891 26636 46732 2t3l5bull5
Source Direccion General de Estadistica y Censos
1938
1939
1940
1941
1942
1943
1944
1945
1946
1947
Source
r
Table No 12 ECUADOR
DISOLOS3D BUDGETARY R303IFTS AlfD EXP3NpiTURES
(Total of ordinary and extra-ordinary budgets and special accounts)
thousand of sucres)
Total Receipts
1323204
131699 6
1262710
1547624
1667455
2112614
3145318
4051038
5367822
6696647 11 ~I JJ( middot
Total Expenditures
1429134
1267687
123135middot0
1586615
1489251
2101429
3031038
4174550
5352394
6593858 bull I
aoletin Banco Central del Ecuador
-middot middotmiddot
Diff~reuce
106830
j 49309
f 1360
- 38991
f 178204
j ltll8-5
f 114280
12351middot2
+ 15428
j 10278bull9 r 7
l I 1
L
ECUAOOR EXPORTS OF PRINCIPAL COMMODITIES 1937-47 Table 13
VOLUME (thousand metric tons)
1937 i98 1939 194o 1941 1942 1943 1944 1945 1946 194711
12 200 96 183 20 bull 5 320 47~0 646 293 669 66) 218 191 153 112 144 138 182 137 168 16 bull 5 203 14~ iJI 137 129 146 118 61 123 14 bull 5 107 76 90 48 55~5 53middot3 472 34 bull 2 226 158 1)9 178 35middot511 72 bull 5 345 19~2 251 183 14bull4 13 2 112 103 12~0 132 121 1-4 16 16 15 18 30 22 28 2~0 13 01 14 1middotmiddot9 2~2 21 47 90 136 93 74 28 na
~gt i824) (1387) (944) (1036) (1981) (2516) ( 2756) (4373) (4462) (4947) _01 2849 2454 2274 2201 1201 2167 2062 2513 2446 1640 1358
Ltrates 7~3 140 76 so 3~3 )9 26 10
VALUE (thousand sucres)
610 10864 6555 14632 23265 51460 93837 127105 60395 203242 201111 49985 39bull276 37bull033 29354 34364 40)26 51794 4lt985 53547 74935 188208 24613 16703 15227 16)84 23827 17278 33176 35~26 33863 4839 43 bull 524 5bull691 7558 7t006 6448 4658 _J 107 2159 1898 2872 738~- 24355
18242 7~146 9605 86o6 6120 201 6274 6209 9264 1)02 14994 4048 4300 4298 3~866 6979 35481 23316 38043 26553 15111 979 lt363 2~134 2724 3168 8450 25613 43419 31877 18 bull 509 7125 na 8048 6 234 4981 6509 16231 22121 25191 69033 69J87 81962 4662
21989 26374 25020 24862 13425 24820 23796 28788 28107 18253 15902 trates 10165 16090 13134 38609 27208 29013 18075 809 ates 18682 35297 41204 39907 29426 25374 27476 26457 15482 24858 25334
10774 13210 13495 3 950 16869 32775 2L068 32402 30902 38326 n bull a_
164_045 169096 167148 167851 199704 298690 393115 466631 377894 537131 619859 tmiddotbull bull
Note Dash (---) signifies zero or less than 50 metric tons nly or ~00 sucres ata expressed in quantities other than weight Sourcis 193 data from unpubli~hed Zcuadorian trado stati~tics
at US Department of Commerce 1938 nnd 1939 from partment of Commerce official data Direccion Nacional de Estadistica Eruad6r en Cifras ~7 from Banco Central Boletin 1940 and subsequont ~ears from Banco Centrll jto~n sterio de Economia and from M1nister1o c Economia data furn she
Mission July 1948
~ tobacco tone JgS
articles
11res ilk
al
value of Imports by Groups 1937-Lt-5 Volume and middot~alue of Selected Individual Imports 1937-46
(Value in thousand Sucre~)
1~37 1~38 1~39 1940 1941 ~942
19~731 20~ 375 24~874 16~)65 19043 37~540 5127 7194 1958 6~4e8 5t298 8 118
12888 13Jl5 14522 17702 19556 25~152 21627 25~272 21455 28532 21619 18923 20649 21~593 25559 29437 22636 19~$13 13~505 11961 12~654 15~976 15667 18899 5~829 7 bull 524 6066 9385 833 14353
22912 )0868 24~75 27 t 750 25993 42~916 9376 1028 10038 12118 11345 13932
-bull
131643 148320 1486o 173753 149499 199715 (Volume in thousand metric tons) (Value in thous~tnd sucres)
5middot3 111 124 194 5 bull 534 6385 26 4 24
os 246 -
122 ioo i66 86 118 235 8255 6)88 7449 5076 013 14609
19 07 11 11 14 29 2187 1824 2695 294-3 29J9 8182
101 i4 i2o i09 28 51 804 llJ)6 1667 1546 577 866
~ hides amp skins amp manufactures amp miScellaneous
~~43 1944 1945
33270 70915 82984 6717 8)69 904)
31~700 43196 32~830 17073 53~400 JBoo6 15447 32~624 38797 14~88 18~388 22895 14116 11a99 9812
68928 n~l79 69-113 15856 19186 20042
217983 33ltl56 323524
78 middot 0 2 215 130 12622
09 27 775 2290
99 240 bull 25~1 337 24070 26388
23 46 67 8853 146)1 21699
09 16 10 321 349 246
~s zero or less than 50 metric tons -middotNote Columns may not ahmys add to totals because of rounding Denartment of Commerce official sources - 19)8-42 Direccion Nacional de Estadistica Ecuador en Cifras [inisterio de Economia El Trimestre Estadistico del Ecuador
1946
)1 8135
4 bull 5 )842
114 13123
46 22709
)1 639
ECUAOOR Exports by Countries 197-47 (Value in thousand sucres) Table - 15
1937 1938 1939 1940 1941 1942 1943 1944 1945 1946 1947 --middot-------middot
80458 lt2865 116t-J78 150055 196953 293081 386483 46lt-909 372~549 463~378 sa4~68J 54422 63418 8)254 1t0496 145 bull 558 168585 2)9238 267105 218018 227291 262887
26 20 65 17 2228 78 124 7)41 17173 630 610 949 1281 1055 1)98 5~526 25686 78523 85382 61478 75890 23481
2899 4955 2109 3568 162 1163 4J54 2526 4197 44~ 1450 5027 6335 4972 5i92 5285 7425 4546 7379 10286 9798 15537
1 5 5 17 57 13 291 54 444 574 6996 8 662 9188 8714 13bull764 7238 15316 13900 11223 6~07l 14503 11717 2908 12544 5 730 7896 3767 21215 22608 29233 4243 6703 7965
51 15 24 8 532 3620 1603 539 2336 11579 3749 80 207 862 4070 9991 17096 1275 17~428 6~973 27431 80541
1943 2135 5229 6039 1965 5435 3021 4827 15~702 25~137 51~854 middot 667 740 991 zo83 3358 11412 4286 4282 3~-970 13064 5~864
1799 419 2218 875 2865 12299 9644 14900 13714 9653 11655 J 89 82 2527 1247 964 326 )24 250 41141 2~985
1024 1514 1068 2205 7173 2650 2 744 8871 7694 J2 5811 17 39~ 77029 61869 43688 11945 1503 5550 6335 4108 4075 36783 61998
32) 6)3 1187 490 58 186 2164 4021 J217 35974 29595 11277 69 - 29 4411 7909 6156 3477 1183 5492 4876 26)8 359 1860 7~467
489 255 J2 100 280 1155 1239 1265 3827 3~961 20539 13t521 10802 2254 5 706 4177 6313 2bull610 3615 4251 -middot 2842 13546 lBi 1415 3 758 822 6 188 12962 3592 2531 412~ 162 7~ 10052
8643 1693 3bull521 3~400 2751 320 40 118 231 222 5404 J 4894
6337 4201 6548 5478 1175 5 45 40 1611 50950 6261 4132 5386 5452 117) -
~l - - 15 45988 5 middotmiddot 7S 8 5 25 567 92S 11
33 ~- 76 18 966 151 150 3419
38 29 858 2 45 78 467
(continuation on next naee) middot
~GUJLOR ~xnorts by Countries 1937-47 (falue in thousPnd sucres) T~ble-15 continued
middot-~--- -~-middotmiddot -middot _ middot-- ~~---~~- ---- -middot--~middot--------middot- -middotmiddotmiddot--middotmiddot--193 1938 1939 1940 1941 1942 1943 1944 1945 1946 1947 _I --middot -middot- ---~- ------ middot- bull middotmiddot-middot -
4 7 5 5 5 219 1087
218 153 529 368 73 49 297 569 1230 35140 789 28137
207 144 379 J68 73 49 297 559 1104 605 11 9 10 126 43
150 6355 plusmn
353 54045 169096 167148 167851 199704 298690 39J115 466631 377894 537131 619859
~S Columns may not always add to totals because of rounding
Dash (-) signifies zero or less than 500 sucres
Primarily Guadeloupe and Jamacia
Primarily British West Indies and Netherlands West Indies
Primarily Denmark Spain and Norway
Primarily Java
~ces 1937 and 1947 from unpublished Ecuadorian Trade Statistics at U s Department of Commerce
1938-46 from Ecuador Ministerio de Economia data furnished IBIID rassion July 1948
Imports by Countr~es 1937-1947 Table-H)
ECUAOOR
l937 1938 1939 1940 1941 1942 1943 1944 1945 1946 1947 I (()
Value in thousand sucres) ~ + -gt L520 63151 83984 115382 128423 186958 200061 311989 302~329 363403 517582 j
u t 2086 51311 71950 103214 110422 138729 103583 173776 178821 240233 429906 0
Q) f
811 674 551 2436 1815 3J258 2150 5265 6538 12178 20912 d S Ugt ro c 1 n 4 4144 3042 8 99 14 23 295 178 8~011 210 h middot-1
(- 0
186 324 237 957 2~991 8492 18~376 15~239 17232 10~574 3121 4 middot-2375 2310 1959 2476 3016 4735 7930 7~696 11~201 15~564 14755 sectwfi
middot-1 1 fli 4 6 343 1~823 3J064 4110 3~612 60J5 h 0H
2739 2109 3789 174 2352 7949 9~934 17845 23~ 616 1559t 18~727 ~rld ()
328 164 457 2498 612 733 10892 10902 20003 16684 11981 oc ampl+lll
mmiddota J63 1297 1161 -- - 2 23 115 1~128 1192 d+gt-
2464 507 500 1438 5565 20668 39979 46654 33684 33034 6~486 15~~ (()
na 1 311 2297 5515 130 bull-I m rl bull +gt
15 31 68 245 995 1516 2804 25326 6124 5956 3472 Oltll~
149 280 269 332 550 208 270 389 707 839 655 a~ sect (1) Cl 4-209 72986 ~ 38 09 1433J 9813 16276 15885 1721~9 45194 80928 ~-g 1701 35767 2 7 7 33 1202 67 47 61 19 2 El 0 0 eo g 3250 11462 8094 12980 10124 8108 13634 12513 11984 28392 40983 cent1-t+l~
1803 718 1687 otmiddot r-
4-114 6465 7339 630 475 34 22 2 66 889 7279 t -P () ~led
36o 4685 1573 7144 308 12 682 4824 rlltll ltDno
1~896 2550 1466 1624 64 1 58 5090 bull-1
fJ ~ ~ 1052 1489 794 945 293 224 5 21 1373 9062 9 703 P + na 868 881 423 10 1 8 223 135 r- 0) u
1 r=l middotr-l
1162 4823 1264 1675 877 1017 1~52 2380 3129 4~326 6851 () l=l rl
7274 3074 2609 3595 980 349 1041 905 599 1~543 3~134 cn~oo bull t
724 11939 8983 19951 6239 2281 1439 304 3882 5478 5736 op a cent1-t ~sect rl
173 302 262 238 -w 14 276 -rr 472 ---s9l ctillmgt
259 10949 7810 18190 4414 170 16 4 5 +gtUd ~-- ~
935 712 728 1278 1281 1715 1314 2685 3185 4465 3151 +gtP t-1
530 105 143 221 306 240 95 89 582 541 2089 ~ (f)
1l 21 12 80 1f 196 122 169 125 1J n ~-T~
0
109 218 lllL 250 m 46 sect2 12_ 28 119 112 I ~ --sB_l_ 0 ---- -
643 148315 147860 17353 149499 199715 21 ~ 983 331156 323524 414266 604479 ms may not a1ways add up to t ta1s because of rounding Dash (-) signifies zero or less than 500 sucres ~ country breakdown not given in source g) of which 591 from Syria 2Z3 from China 264 from Straits Settlements 1 Sumatra and 264 from Iran
YEAR
1937l
1938t
1939~ -
1940amp
194H
1942
Exports Imports Balance
Exports Imports Balance
Exports Imports Balance
Exports Imports Balance
Exp(rts Imports Balance
Exports Imports Balance
ECUAroR Balance of Trade by Area 1937-47 (thousand sucres)
fRlSTERN HEMISPHERE including Philinuines
United States Other Total Eurone
54~lt-22 26~036 80~-~-sa 77~029 52086 9~434 61520 64~209 2336 16602 18938 12820
63418 39447 102~865 61869 51311 11840 63151 72~986 12107 27~607 39714 -11117
83254 33124 116~378 43688 71950 12034 83984 54505 11304 21090 32394 -10817
100496 49559 15Cl055 11945 103214 12~ 168 115382 38~090 -2718 37391 34 673 -26145
145 bull 558 51395 196953 1503 110422 18001 128 423 14333 35136 33394 68530 -12830
168585 124~496 293081 5t550 138~729 48229 186958 9 813 29856 76267 106123 -4263
Table 17
Other Countries World Total
6~559 164045 5-912 131643
647 32405
4361 169~096 12~ 178 148315
- 7817 20781
7082 167148 9372 147860
-2290 19288
5851 167851 20281 173753
-14430 - 5902
1248 199704 6743 149499
-5495 50205
59 298690 2944 199715
-2885 98975
NOTE Areas may not always add to world t~tals because of rounding
Source 1937 and 1947 frlttm unuublished Ecuadorian Trade Statistics at US Department of Commerce 1938-46 frem Ecuador Ministerio de Economia data furnished Mission July 1948
(Table 17 continued on next page)
YEAR
12J Exports Imports Balance
1944 Exports Imports Balance
125 Exports Imports Balance
1946l) Expltgtrts Imports Balance
12Z= Exports Imports Balance
ECUADOR~ Balance of Trade by Area 1937-47 (thousand sucres)
WESTERN HEMISPHEL~ (including Phili~ines United States Other Total EuroQe
239238 147~245 386~483 6335 103583 96~478 200~061 16276 135655 50769 186422 -9~941
267105 194804 461909 4~108 173776 138213 311989 15~885 93329 56591 149920 -11779
218018 154~531 372549 4075 178821 123508 302)29 17159 39197 31023 70220 -13084
227291 264224 49J515 36783 240~233 123170 36J403 45~194 -12942 141054 128112 -8411
262887 241796 504683 61998 429906 8676 517582 80928
-167019 154120 -12899 -18930
1 Only year in which substantial Philippine trade
NOTE Areas may not always add to world total becasue of rounding
Table 17 (oonttnued)
Other Countries World Total
29 393115 1646 217983
-1)49 15132
614 466~631 3~282 331~156
-2668 135475
1270 377894 4035 323524
-2765 54)70
8~833 537131 5670 414266 3163 122865
53179 619859 5969 60449
47210 15380
Sources 1937 and 1947 from unpublished Ecuadorian Trade Statistics at us Department of Commerce 1938-46 from Ecuador Ministerio de Economia data furnished IBRD Mission July 1948
~ EXCHANGJ-tAL BANK
ECUADOR Exchange Reserves amp Banking Position (million sucres)
r 4 bull TIC CQEDITS OF CENTRAL BAl~K Domestic Govt Official Bus Other Credits
MOliEY SUPELY Current AC
JJj To()2f (4) Entities Indvls Total Banks of O~mtl Currencl Denosits l (6) (7) (8) (10) (5) Banks amp 11
Indvls (9)
16 10 26 51 1 116 62 64 48 26 7 40 73 4 129 74 66 3middot7 )9 7 29 66 4 144 73 71 37 29 8 24 62 4 159 78 73 56 26 8 22 55 5 183 8l 103 81 37 28 2 8 201) 120 119
152 37 21 22 79 9 255 169 17~ 26) 34 27 22 83 13 378 ZJa 26e )4 60 37 20 117 9 385 295 308 Z5 105 73 11 189 26 493 321 312 282 153 81 10 244 24 536 35middot~ 354 242 104 44 93 241 2 565 329 284
221 110 51 99 260 2 56 313 278 215 102 47 101 250 2 573 )06 294 225 97 45 95 237 2 585 299 299 219 100 44 98 242 1 591 307 297 214 98 35 111 244 4 6)4 315 295
)20 295
on of $12500CC beginning in December 1946 bull
ars
Ttttal (12)
127 14) 144 151 183 239 345 492 602 634 704 613
591 599 597 604 610 614
ge liabilitieS but including Stabilization Fund in 1945 and GolC CertificCt in 194) bull ial banks and fomento banks ial bc1nkst and fomento banks sits of commercial banks and time deposits of fomento banks
Table 18
Govl t Den sits ~L
(lJ)
6 23 12 27 7 28 8 31 6 32
middotmiddot 11 )6 16 57 27 71 41 74 63 98 59 90 66 77
71 8 75 76 6 75 81 75 81 72
72
1 1 Boletin - Superintendencia de Bancos Boletin - Unpublished data furnish~d MF bY Banco Central of Ecuador
Table 19 ECUADOR
Price Indices
WHOLESALE Rents Export Fooa in
YEAR Goods and Quito - Coal ~1) (2) (3)
1937 100
1938 83 100
1939 95 100 153
19h0 95 106 16h
1941 96 113 150
1942 114 146 172
1943 114 183 187
19h4 118 218 219
1945 133 266 254
1946 203 320 315
1947 297 364 516
19h8 (March) 294 379
(liay) 416
(July) 389
llame l~umbar
Republic of Ecuador
Status of u s Export-Import Bank Loans to ~cuador
Purpose
gs of Junemiddot10omiddotl9ltsect
Gross Authorized
Cancel- Net lations Authorized Repeid
Amount Amount Outstandin~ Undisbursed
6J048 6J048
( 262 )16
Haterials equip amp services $ 6480000 $20810 $6459170 $1279775 ~)5-l19middot395 _____ _
ibulliunicipali ty of iui to (Republic of Ecuador)
ibullIunicipali ty of Guayaquil (Republic of Ecuador)
Republic of Ec~ador
Republic of Ecuador
Ecuador DeveloPIlent Corp
Pan-American Highray (Cuenca-Loja)
Agricultural Research amp Experiments
Raihray Equipment
5000000
12JOOOO
50000 200000
)28 Haterials equip ~~ 4000000 services - ater 1middot1orks
)28 iltiaterials equip amp services - ~~rater orks 4000000
J4J Pan-American High1middotray (Guamote-Tambo)
432 uevedo-Hanta Hightmiddotray (additional credit)
1980000
220000
$19180000
Of tlhich $2500000 tts used on the Quevedo-Ibullianta HighTaY
4000000 28880
4000000 167
-1 t-9amphOOO- -7500
220000
6o6120 -h365000-middot
41592 575-t 2-41
-l-y5Q2- 500 44Gooo
220000
IBRD Statistics Sectio spte~ber 24 1948
ECUADOR
ESSENTIAL STATISTICS
Area
Population
Currency Unit
~ Parrty
Trade Statistics
Total I~orts 1947
Total middotExports 1947
Official Exchange Transactionsmiddot on Account of
_Inports 1947 Exports 1947
National Income in 1946
Budget in 1947
Internal D3bt of National Government
ExternaJ Debt Principal in Default EX-Im Bank June I94S
Wholesale Prices 1939 middot ~1947 May 194S
Net Exchange Reserves
December 3l 1946 June 30 1946
~=m~g~ ~7947 middotQisbursed Ex-Im Bank
ans June 1948
150000 square miles
35 million
sucre 1350 sucres ~ $1 (us)
Equivalent to US$ 448 million (6o4 million sucres)
Equivalent to US$ 44 1 million (594 million sucres)
US$ 535 million US$ 470 million
Estimated roughly as equivalent to US$ 150 million (per capita US$ 43)
590 million sucres (US$ 437 million) Total national finances (including
extra-budgetary funds) in s~~lus in 1947
97 million sucres (US$ 7 2 million)
US$ 12619000 US$ 7705606
100 368 416
US$ 29~3 million US$ 227 million US$ 254 million US$ 219 million
US$ 10100241
I
II
III
IV
TABLE OF CONTEUTS
Page
Strclla~r bullbullbull bull bull bull bull bull bull bull bull bull bull bull bull bull bull bull bull bull bull bull bull bull bull bull bull bull bull bull bull bull bull bull bull bull bull bull bull bull bull bull bull bull bull bull bull i
GeogrSl)hiC bullbullbullbullbullbullbullbullbullbullbullbullbullbullbullbullbullbullbullbullbullbullbullbull
Occupations and Income bullbullbullbullbullbullbullbullbullbullbullbullbullbullbullbullbullbull
~icultural Production bullbullbullbullbullbullbullbullbullbullbullbullbullbullbullbullbullbullbull
(a)
(b)
The Sierra The Coast
Mineral Production
l
5
8
14
19
V Manufacturing Production bullbullbullbullbullbullbullbullbullbullbullbullbullbullbullbullbullbullbullbullbullbullbullbullbullbullbullbullbullbull 20
VI
VII
VIII
IX X
XI
Domestic Trensport and Commerce bullbullbullbullbullbullbullbullbullbullbullbullbullbullbullbull bullbullbullbullbull 24
(a) Tran~ort bullbullmiddotbullbullbullbullbullbullbullbullbullbullbullbullbullbullbullmiddotmiddotmiddotmiddot~middotmiddotbullbullbullbullbullbullbullbullbullbullbull 24
(b) Commerce bullbullbullbullbullbullbullbullbullbullbullbullbullbull bullbull ~middotmiddotmiddotmiddotmiddotmiddotmiddotmiddotmiddotmiddotmiddotmiddotmiddot~middotmiddotbullbullbull 25 Official Development Finance bullbullbullbullbullbullbullbullbullbullbullbullbullbullbullbullbullbullbullbullbullbullbullbullbullbull
Government Finance and Inflationmiddotmiddotmiddotmiddotmiddotmiddotmiddotmiddotmiddotmiddotmiddot~middotmiddotmiddotmiddotmiddotmiddotmiddotmiddotmiddotmiddot
International Trade and the Balance of Payments bull bullbullbullbullbullbull
External Debt Record bullbullbullbullbullbullbullbullbullbullbullbullbullbullbull bullbullbullbullbullbullbullbullbull
Political
Statistical Anpendix bullbullbullbullbullbullbullbullbullbullbullbullbullbullbullbullbullbullbullbullbullbullbullbullbullbullbullbullbullbullbullbullbull
30
34
4o
48
51
IT07E Sou~ce of E James Used by
r~~e fran nLatin 11middotterica1 - br PCPston co-rricht 112 by the y PYPSs Inc
sion
0
ECUADOR AND SOUTHERN COLOMBIA SU~fACE CONfiGURATION
~ANDES lf-IINTERMONT BASINS
E72j COASTAL HILLY BELT
1lt-J PLAINS AND LOWLANDS
A CHIEF VOLCANIC PEAKS
0 GUAVAS RIVER I
T TULCAN RIVER
Q SCALE 0 I
MILES
ECUADOR AND SOUTHERN COLOMBIA POPULATION
URBAN bull MORE THAN 100000 bull LESS THAN 100000
RURAL bull EACH DOT ~000
SCALE I
MILES
BBOdVAR LR LOS R (os
100 I
CAUCA
ORIENTE
middotmiddotmiddotmiddotmiddotmiddotmiddotmiddot
SUMMARY
1 In terms of national income per capita Ecuador is one of the
poorest countries of the world Nor are her known but unexploi ted natUro
resources strikingly rich Her best potential resources are agricultural
owing to geographical configuration she can obtain the output of temshy
perate agriculture for domestic consumption and of tropical agri~~ture
for both domestic consumption and export She might also be able to
d~velop a cattle industry for supply of neighboring republics
2 Although socially and culturally as old as other Spanish Americm
Republics Ecuador is very young economically~ The Panama Canal bringing
her close to the Eastern United States and Europe was opened only 34 years
ago She has very little of the techlical and administrative skills and
abilities that underlie modern economic processes She is very poor in
capital equipment of all types And her Government is inexperienced in
the exercise of the modern economic functions of the State
3 The population of Ecuador is nevertheless increasing at about
2 per cent per annum and in the Sierra where 6o per cent of the populashy
tion is locatedt is already pressing against local focd output The situashy
tion is one which may be temporarily eased but cannot be finally solved by
extension of arable area in the Sierra except where such extension is
accomplished througf) irrigation Of basic importance is improvemm t of
arable farming practice in the Sierra valleys to obtain ~better yields
from land already cultivated Use of agricultural machinery would
- i ~
probably not achieve this unless accompanied by other more fundamental
chanesp in seed types crop rotations and fertilizer use Unskillful
employment of heavy agricultural machinery to bring into use higher ground
now unutilized would carry considerable danger of soil destruction tnrough
wind and water erosion
4 Non-subsistence coastal agriculture is in part an important
foreign exchange earner and in part a source of products also imported such
as sugar cotton and tobacco No export crop other than cacao enjoys an
established position in overseas markets and cacao production has not
recovered from disease losses impacting in tne 1920s Rice exports
expanded greatly during the war but retention of roarkets is doubtful
Coffee expoi lts have been increasing in value but not in volULle rem--ining
agricultural exports are at present minor non-staples
5 Expansion of coastal agriculture is rather a matter of illproving
the farming environment (in transport crop processing and credit facilishy
ties) than farm practices themselves ~1ile the coastal area is relatively
thinly populated (particularly ~hen compared i th Far Eastern tropical
areas) it is not yet clear apart from a few crops how mechanization
could be applied to offset a small labor supply This may prove to be a
key technical question in the development of coastal agriculture lll
economic problem is to identify and foster the products of good ~~port
prospects rather than those of probable decline
6 Exports of minerals and petroleum are a ~inor item In 1947 they
represented only 45 per cent of total exports exports of petroleum have
declined steadily with increased do~estic consumption of petrol
- ii
7 Apart from a few important consumer-good industries such as tex-
tiles Ecuador is not an industrial country Her manufactures are largely
in a handicraft stage that of panama hats provides an important export
commodity Power prodllction while deficient does not at present seem a
real obstacle to economic development~ which at this stage is principally
an agricultural problem
8 Changes of farm practices will however take time partly be-
cause of the educational problem in Indian collliDllli ties partly because the
provision of improved seeds and the -working out of new safe tillage pracshy
tices carmot be quickly accomplished While the work rh ould be taken up
immediate action in stimulation of development would not center upon the
farm itself but rather upon improvemm t of services middotsurrounding the farm
notably roads irrigation crop processing and storage and rural credit
facilities
9 Such immediate action might be supported by establishment of
multi-purpose rural machinery pools equipped with machinery and personnel
to undertake not only farm operations but also local road-building end
irrigation works work upon the various activities being fitted into the
farming calendar The actual use opound farm machinery would then be conshy
trolled by experts whose ear~ work might be mainly experimental and
demonstrational
10 Voluntal saviftgs directed lnto productive use ere small and a
large part of domestic development axpendi tUes att necessarily by Govern
ment or through GoverrJ~DSnt agencies In con~nce thefe 11 constant pres
sure toward inflation pressure which in the GovemmeDl sector has beea
bull 111-
offset during the past sixtem months by application of special exchange
tax revenues in reduction of Government debt to the Central Bank Ver-J
recently however 90-rer cent of these revenues has been diverted to finarce
of development with consequent renewed danger of monetary inflation v1hen
total Government finances no longer run a surplus
11 These special exchange revenues derive from a multiple excharge
rate system installed in iilay 1947 (with IivF advice and concurrence) to
meet rapid loss of foreign exchange reserves The system has bern successshy
ful in slowing the rate of loss bull but not in colq)Jetely preventing it midshy
year expectat ions were for a loss of foreign exchange of some US$ 5 million
in 1948 Recent action reclassifyinamp i~crts may reduce this e~~ected loss
12 The balance of p~ents position at present difficult and no
great easement can be expected It is improbable that Ecuador could safoly
assume any large additional debt burdens At the same time her ability
effectively to absorb and use loans directed tmmiddot1ard increase of production
is limited bya present lack of technical and administrative abilities
Here iLiprovement though clillilllati ve is necessarily slow at first
- iv-
I GIDGRaPHIC
13 Ecuador has common boundaries with Colombia on the North and
Peru on the East and South The greater part of the country lies immeshy
diately south of the equator which passes 13 miles north of Quito The
area of the country has never been measured but is estimated as 150 COO
square miles ri thin the frontiers resulting fror1 the war with Peru in 1942
the area west of the Andean crest is about 60000 square miles
14 Ecuador is divided by nature into tru-ee separate reeions of
which only two are in effective occupation
(a) The sea-coast plain (about 28000 square miles and about 425
miles long by 62 miles in width) is composed partly of swampy
lowlands and partly of low hills most of the region being
less than 1000 feet in altitude I the north it shares tbe
double rainy season of Colombia and is covered with dense
forest Not far south of the borders of Colombia the double
rainy season ~ves way to a single rainy season from Decemshy
ber to June as one goes further south the rains begin later
and end sooner until at the extreme south desert conditions
begin stretching onward into Peru ald Chile As the rainfall
becomes less the vegetation changes from wet forest to dry
scrub forest and savanna until in the south settlement is
limited to irrigated areas
Temperatures in the region are modified by the cold-vater
-2-
Humboldt current and are more pleasant than latitude alone
would suggest
The coastal region produces almost all the export commodities
of Ecuador its people are largely mestizo strongly conscious
of nationality and commercially active Its major port
Guayaquil (population 1942 154000) is larger than ~ito
(population 1942 139000) and is the commercial capital
of the country
(b) The Andean Highlands or Sierra (about 25000 square miles)
comprises the second natural region and forms the physical
backbone of the country There are two high corderillas
surmounted by towering volcanoes and separated by a series
of ten large intermont basins lying in a north-south line
seven are linked to Guayequil by railway Each basin is
occupied by a dense JOpulation 1hich is almost pure Indim
Only in ~ito and Cuenca are there any important number
of people with Spanish ancestors and these are either
office-holders in the Government or landowners with large
private estates
(c) The Oriente (Amazonian region to the East of the Andes) is
not yet part of the effectively occupied area of Ecuador
Its jungle inhabitants from time to time spear the
agents of the Shell Oil Company who are prospecting
for oil
3
In 1942 official Government figures for these rerions were
Area Population middot Density Square of
Kilometers middotmiddotNumber middot Ponulation
Sierra 70344 23 11686748 61 268
Costa 68633 23 1JooOl8 33 14 6
Oriente 153143 51 189005 6 12
CalapagS Islands 7880 j 2192 a 0~2 -Miera tory 4115 a middot-
300000 100 3089078 100 102
15 Very little however of the total area is under cultivation
It was estimated in 1916 that about 90 ~)er cent of the coast and 60 per
cent of the Sierra was suitable for cultivation that is about 25000
and 1)000 square miles respectively Of the total of Loooo square
miles of cultivable land~ only about 1$000 was under cultivation in
1946~
16 No census of the population has ever been in Ecuador
In 1892 estimated nopulation was 127 million in 1942 309 million
and in January 1948 3L7 million with crude birth rate of 379 oor v ~ thousand and crude death rate of 201 per thousand in 1942- Estimated
composition of the 1942 population was
a less than 05
Yhi te Mestizo Indian Negro Iulatto Other
100 per cent l-t10 ner cent 390 per cent 50 ner cent 5 o Per cenmiddot~
1000 ner cent
Just over half these deaths oc~urred in the are rroun of 0-4 years in 1942
4-
17 At the same date the literacy rate was estimated at 20 pe~ qent
s~i~literacy at 20 per cent and illiteracy at 60 per cent
-5-
II OCCUPAmtOUS AND INCOivES
18 There having been no census there is no at~curate information
under this beading
19 The Economic Department of the Ecuadorian Central Bank has esti-
mated that of a total population of 334 million in 1946 1285000 or
J9o per cent were gainfully employed in the following occupations
Agriculture Forestry etc
Mining
Building and Repairing
Manufacturing and Processing
Services (communication comshymerce government etc)
820000
10000
6oooo 10000
325000
5 5
26
100
20 No valid estimate of national inco~e exists At the request of
tne International Monetary fund the Technical Adviser to the Central Bank
of Ecuador Mr L A Carbo estimated national inccue in 1946 as 20096
million sucres or US$ 149 million Although this estimate is probably too
low ] it is clear that national income is very small Ecuador is very
low on the list of income per head among Latin American countries its
income per head is in feet among the lowest of countries of the world
21 Income is very unevenly distributed A survey made in 1943
yielded the following picture
g lror reasons Sdvanceit below Paragraphs 87 and 88
~ pt WI
-6-
To tal Monthly Average Monthly Population Income Income per Fw~ly
Number of Amount t tount People (SUcres) (Sa~res)
Upper Cla~s 4oooo 133 28000000 144o 2300
Middle Class 96oooo 3200 96000000 4950 4 L ~ 00- middotJ~
Lower Class 2000000 6667 70000000 3610 140 -- -~
3000000 10000 194000000 10000 10000 yenSliP C_~ ~
Note At the ofDcial rat~ of 1350 suc~es to the US$ average monthly incomes per family are equivalent to approximately $2J7 $30 and $10 respectively
~ Uneven distribution of incoue is of course largely a conse-
quence of uneven distribution of property Some ideas of the distribution
of rural property is afforded by analysis of re~urns made in payment of
rural property tax Such tax was paid by only ll2l4o proprietors in 1944
whose holdings may be summarized as follows
Per cent of Value of Rural ProEerties Number of Proprietors
916 4o
29-33 llOO
3041 10400
2030 37200
1080 634oO
10000 112J4o
23 Such statistics do not of course carry one very far beyond
the general observation that income and wealth is very unevenly distributed
and that much is obvious from a little travel in the country But it should
-7-
be said that comparing observations in Ecuador vrith those made in Peru
and Bolivia Ecuador by subjective judgment compares very favorably with the
tvo latter The Ecuadorian Indian seems to be on a perceptibly higher stan-
dard of life both in the highlands and on the coast than the Indians seen
in Peru and Bolivia Vhile his land holding is small it yields somethi1e
he very freqjl ently possesses livestock such as pigs and chickens has cot-
ton clothing drying on a line a~d often cultivates flowers and keeps
pigeons By American standards he is undoubtedly on the poverty level by
Latin American standards he may be a little off it
24 At the other end of the scale the wealthy upper class are pro-
bably not as wealthy as the Peruvian upper clas~h and the Bolivian elite
in operating in poundcuadc~the upper class lacks the rich property of mines
Thus while income is of course unevenly distributed in Ecuador as else-
wnere the range between the wealthy and the InJian may well be less tban
elsewhere The line of income distribution is of aboat the same slope
but probably significantly srJOrterY
This conclusion cannot be demonstrated statistically It results from a 11feel 11 deri ved from personal observetions in the respective counshytries
-8-
III AGRICULTURAL lROIDCTION
25 Ecuadorian development is largely a matter of increasing the out-
put of and improving internal and external trade in agricultural products
There appears to be no enduring geographic or physical reason ~middotby this can
not be accomplished She possesses soils and climate ranging from the
tropical to the temperate soils which in some areas are very fertile and in
others are in danger of exhaustion To anticipate subsecpent conclusions
her problem of development through agricultural progress breaks doTltD into
separate aspects all involving improved technique
(a) increasing arable yields from areas already cultivated
(b) improving pastures and stock in grazing areas
(c) enlarging both arable and pastural areas (including irrigation)
(d) improving roads in rural areas
26 Achieving these objectives involves providing more adequate
domestic credit for short- medi~ and long-term agricultural requirements
27 In application however interpretation of these problems is very
different in the two occupied regions of the country the Sierra and the
Coastal Lovrlands no generalization can cover both
(a) TLe Sierra
28 The occupied inter-Andean valleys are a region of temperate
agriculture producing almost exclusively for local consumptionmiddot Their
pat tern of tilled fields grazing land trees and flowerJl is almost
Y Flowers bloom all year round The main tree is the eucalyptusmiddot introshyduced some 70 years ago end used for all purposes (~indbreaks fuel 1
and lumber) affording a striking example of the effect of introduction of one plant upon regional habitability-
-9-
Western liiuropean in appearance but not unfortunately in productivity
Agricultural Production of the Sierra
1939 194o 1941 1942 - -(Hundreds of pounds)
Theat 49QOOO 611300 534300 527499
Potatoes 1201000 1476400 1386120 1146000
Rye 72500 79900 159495 115000
Lentels 46000 424oO 37955 csooo Corn 816700 1349300 1308062 1315200
Barley 85)000 795700 903600 911000
Cotton 45000 42020
Kidney Beans 80000
29 In addition about 1000000 hectares (247 m~llion acres) are
devoted to pasture supporting epproximate1y 683000 cattle 145 million
sheEf 107000 STrrine and 320000 goats
30 Yields are low in all Sierrean agricultural activities the
standing VJheat and barley crops are so thin that the ground can be seen
through them Yet the greater part (some 6o per cent) of the people of
Ecuador live in the Sierra and population is increasing at about 2 per
cent per annum The effect upon land use under existing tecnniques is
clearly visible cultivated areas are being pushed higher and higner up
the hillsides (slopes of 30 to 40 degrees being used) and onto the
fJparamon the high plateau betvreen adjacent valleys at altitudes of
11000 feet and higher The result is a picturesque scene but one which
reveals a near Malthusian situation in the man-land ratio rbullrith static
-10-
technical practices It is a situation which cannot remain unchanged if
economic development is to occur in the region
31 There sean to be three possible lines of advance increase of
output from highland areas in present use the bringing into use of new
ground in the highlandsbull or a change to increasing reliance upon the outshy
put of non-highland areas
32 The third possibility is not one for the immediate future It
involves either large-scale migration from highland areas to lowland
regions or a large transport program linking highlands and lowlands
together with growth of non-~ricultural activities on the highlands to
provide a cash income with which to purchase 11 imported 11 foodstuffs This
second possibility may indeed be the trend of ultimate development but
offers no irmnediate easement Large-scale internal population movement
from highland to lowland is probably impossible since the Andean
Indian (of different stock to the coastal Indian) is fullf acclimatized
both mentally and physically to life at high and temperate altitudes and
little suited to life on tropical lowlands
33 The two remaining lines of advance would both seec to increase
highland agricultural output But there is an important difference beshy
tween increasing output from valley land in rr esent use and bringing new
and higher land into arable use The first is a complex problem suscepshy
tible only of relatively slow solution the second is seemingly simple
and capable of quick result yet basically less sound offering only
temporary improvement
34 The thurst onto higher ground is already evident and the area
-11-
taken in could probably be greatly enlarged by efficient use of tractors
and modern plows Such use of mechanical equipment would thus give quick
increase of agricultural output but it is very doubtful whether improveshy
ment induced by these means alone could be long maintained The greatest
~r particularly on sloping land is that deep plowing may lead to
soil erosion so serious that land becomes finally llilgtroductive To use
mecbanical equipment i thout at the same time adopting eqJally modern
methods of soil conservation way well be disastrous and that perhaps
within no long period
35 Even apart from this physical daneer there is the virtual cer-
tainty that new land however plowed would gradually sink in fertility
end hence output unless farmed by better agricultural practices than
those now followed in highland Ecuador The present attraction of the
higher land is principally good natural fertility beine virgin ground
On all other counts this higher land is less advMtageous than the valley
floors the va)ley sides are steeply sloping a1d the fl~t paramo is some
2000 feet higher bare windswept and devoid of habitation It would
seem obvious that it is pastoral rather than arable ground were it not
for the pressure upon arable output of the region
36 The pressure today however rises from the relation betwem
popUation and output rather than that betvreen population and arable
area Productivity in the Andean valley is low and can certainly be
improved If improved the pressgtlre which is causing the thrust to
higher ground is relieved until population increase again overtakes outshy
put Against that time however the higher ground vrould remain
-12-
availfibleY and other lower regions may be coming under effective use
37 To increase output of the populated valleys is not a simple mat-
ter responsive to single policies such as simple mechanization by tracshy
tors It will embrace the wlo le range of agricultural practices from
better seed types to crop rotation and fertilizers including in some
valleys irrigation It is a matter rrther of agricultural education
than of~dtlgagricultural appliances and probably experiment under
the peculiar regional conditions will need to precede education Improveshy
ment will necessarily be slov1 but along these lines it can be sound and
permanent
38 Wher~ lfL mere importation of mechanical methods Vi thout
understanding of their dangers in speeding soil destruction by wind and
water erosion may permanently damage the region The somewhat gradual
mechanization of agriculture is of course to be expected and not disshy
couraged but it is not the wlole answer to development in highland
Ecuador
39 It seems that there is at present no over-all agricultural
lfibor sl1ortage in the Sierra and mechanization is nOt therefore called
for to relieve an adverse manpower position It seems however that
some of the larger estates are experiencing difficulty in obtaining their
labor requirements because Indian tenants are viitblolding quasi-feudal
labor dues and devoting whole time to cultivation of their own plotsbull
As a result hacienda holders are attracted to mechanization as an
escape from growing difficulties in obtaining and supervising labor upon
Y As it would not if destructi ve1y formed at this stage
-13-
their ovm land To the extent they are successful the tendency for agrishy
cultural money vrages to rise is weakened
4o There vrould seem to be good possibilities of increasing pas-
toral agriculture in the highlands 1Jrith improvement in both numbers and
strains of cattle and sheep If adequate arable development occurred in
the valleys the main grazing grounds could be the higher land not then
required for arable purposes ~lith dairy cattle on the valley margins or
on valley ground not well suited to arable use Such pastoral development
would be desirable not only to imp1middotove nutrition in Ecuador itself 1 but
as a possible new export of meats fats and hides to meat deficient
Republics notably Peru Early export would probably be on the hoof
along the Andea1 ridge it self
41 The Ecuadorian Government has not included any explicit propo-
sals for highland agriculture (other than irrigation) in its present apshy
proach to the Bank It has however suggested the Bank finance $1 mil-
lion of agricultural tractors and equipment to be handled by agriculshy
tural stations located at strategic places both in the coastal
provinces and the highlands 11 without further elaboration of the
intended highland use of such ecp ipment The description given above
suggests that the usefulness of agriculture machire ry depends to a conshy
siderable extent on the place plan and purpose for rhich it is to be
used
42 In some of the highland valleys (for example in Cotopaxi end
~ound Biobamba) rainfall is deficient and irrigation would increase
valley output by bringing more valley ground into effective use This
- 14 ~-
is clearly sound for flat valley ground already populated is more useshy
ful than higher sloping and more exposed ground The Ecuadorian Govern
ment has included purchase of eq1 ipment for irrigtion works to the value
of $500000 in its present approach to the Barik Assessed against the
requirements for economic development the request is sound provided of
course such equipment is effectively used
(b) The Ooast
43 The condition and nationel significance of agriculture on the
tropical coastal plains is quite different from that ltNl the Sierra The
area as a whole is less densely populated and in some parts such as the
Province of Esmeraldas is very sparsely populated Its principal pro-
ducts are exported The population has more mixed blood than the highland
people and is oore corumercially active and minded There is little feel-
ing of community of interest with the highlmds the rrincipal coastal
city GuayaqJil is larger than Quito and less remote fror-1 outside
influence
44 In terms of reported area devoted to its cultivation cacao
is the principal crop of the coast The table on the following page
shows output of main crops
45 Cacao is not however the most important export crop by value
being surpassed by both rice and panama rats (a handicraft product of the
region) Nor does the table show those products which result from
gatherage of mild growth tagua kapok oil-bearing vegetable nuts
balsa rood rubber etc
Y For use by the Caja de Klaquogo as required both in tile highlands and on the lowlands
-15-
46 Agricultural Production of the Coast
1939 ~ 1941 1942
(limdreds of pounds)
Rice 957164 872890 12304oO 1610489
Cacao 392000 263300 333250 315782
Coffee 343800 369000 310000 190633
Bananas (1000 bunches) 4090 3913 4568 4265
Oranges (COOs) 103000 lQ96oO 80550 75000
Cotton 200800 156800 155910 111500
Tobacco 24o43 4o 765 22349 29539
47 It has been estimated that about 500000 hectares (1 235 500
acres) are devoted to pastures on the coast supporting approximately
425000 cattle and 36000 swine
48 There is no doubt that the coast is an extremely rich agricul-
tural area although toward the south it is increasingly hampered by
shortage of water in the dry season And rt is overwhelmingly the
principal foreign exchange producing region of the country Yet it is
largely undeveloped by any modern standards lacking roads and almost
all basic civic amenities (water supply sewage paved streets etc) in
the provincial towns The development of a tropical agricultural region
without large labor supply _rill raise many interesting and some new
J Irrigation ~rks are in execution and others planned in various places and the irrigation equipment which it has bee11 suggested the Bank might finance would presumably be used on the lovlands as well as the highlands
-16-
problems the solution of hlch in detail may lack precedentY The
suitability of cacao to Ecuadorian conditions arises in part from the very
small labor requirements of the crop At bottom advance will lie along
the route of crop improvement and mechanization the difficulty will be
the proper application of mechanization crop by crop Some tropical pro-
ducts may never be suitable for mechanical cultivation being those whicl
would require intensive hand cul ti vat ion and may therefore not be appro-
priate for Ecuadorian condttions Others r1JJi3 be suitable only if grown on
relatively large plantations
49 Clearly for the foreseeable future many lowland products will re-
main at the stage of gathering of nld natural growth rather than plantashy
tion enterprise The flow to market of such productswould be increased
by improved access notably road core truction anQ at the same time road
building ~~uld seem to be a condition precedent for spread of plantation
methods particularly plantations using mechanical equipment lilliE diate
measures for the over-all agricultural development of the region may not
be directly agricultural at ell they are rather the provision of roads
and transport facilities the provision of long and medium term agric-llshy
tural credits and in some areas) the institution of health services
With the opening up of the region in this manner iiould come more clearly
perceived opportunity for better agricultural use of the land particu-
larly if effective demand for the products is transmit ted back to the
cultivator through establishment of product processing plants where approshy
priate for example in vegetable oils and tagua (vegetable ivory)
] This is the situation which in Brazil for example in an earlier technical epoch was 11 solvedll by importation of Negro slave lebor
-17-
50 As in the Sierra there are good possibilities for pastoral
development on the lowlands Some progress is already being made in this
direction with experiment in breeding more suitable cattle types through
crossing 11Ji th imported Indian brahmin strains Grazing for beef is not
highly labor intensive and this development is very promising since
export to other Republics by sea llould be reltti vely easy In the first
stages export would presumably be upon the hoof ith later development
of meat packing
51 There seems to be no single bottleneck or restraint upon devel~
ment presently existing all other conditions being favorable If developshy
ment occurs it will be along many simultaneous fronts but the front iJhiclf
is lagging and Inayen continue to lag is the provision of basic social ccp ishy
tal (roads water supplies health services etc) that is of those
things which no single private individual or corporation can provide for
itself Given these and the institution of suitable domestic credit
fecilities the rest may be accomplished by private domestic ini tiat1ve
52 The development plans of the Ecuadorian Government as outlined
in a Memorandum dated April 8 give much weight to lowland agriculture
The establishment of agricultural stations to provide farmers wi~h
disease-resisting cacao plants~ tecl1nical advice and credit facilities
is CD ntemplated no foreign exchange would be recpired all funds being
local currency The rehabilitation of cacao formerly a leading export
crop is desirable although development of cacao sources elsewhere may
prev~nt recapture of the position formerly held by Ecuador
53 A proposed agricultural mechanization programwoUld total
- 18
$25 million in foreign exchange cost )J The bulk of this ($1 5 million)
is allocated to wechanization of rice cultivation alone the benefit being
principally in resulting improved export position The remainder $1 milshy
lion is for mechanization of other agricultural produc~s apparently
mainly lowland (those products specifically mentioned being 11cotton sugar
oil-bearing seeds and other specified products11) the exclwnge benefit
forecast being principally through reduction of import a
54 Different criteria ~~ould be used in assessment of these two
projects The judgment on that for rice will depend upon forecast of
world rice markets and in particular upon expectations regarding rorld
demand for rice from the dollar area The validity of mechanization in
cotton sugar oil-bearing seeds and other lowland products will depend
first upon the technical possibilities for such mechanization a matter
not yet fully explored If sudl technical possibilities are favorable
effective mechanization vOuld constitute sound development upon the low-
lands which are relatively sparsely populated
Y Some part of which would be for the benefit of highland agriculture if machinery stations be established there
--19 -
IV MI-~RAL PHODUCTION
55 Ecuadorian mineral nroduction covers only a few products and
important the wells of the lowlands being exploited by the nglo-
Ecuadorian Oil Comany Production of crude petrolewn shows a slicl1t
rising tendency while exnorts have declined steadily a~ more refined 1
products are consumed domestically
56 Oil exploration to the Iast opound the Andesin the Amazonian
region is proceedinc under concession to tl-1e Shell Oil Go1~1any
Three wells have been drilled without success and tvro arc beinc
deepened Cost of this exploration to ciate j_s around US)23 million
If oil is found its only outlet middotwill be a pipe line over Ue Ances
(estimated to cost USiD93 million) and this the comany is not -rE1inz
to undertake unless assured of an outnut of at least 100000 barrels a
day
57 The only other irnrJortant minine activities are those of gold
silver conper and lead conducted by the South ~~erican Develoument ~
Company and the Cotapaxi Sxplora tion ConJ1any War-time lr oduction peaks
were 1942 for gold and CO)per 1944 for silver and lead Since these
resective peaks production has ~-~clined narticularly in copper and
lead although not to 1933 lsvels7
crude petroleum II II
1938 (millio~1s of 225 107
Production Exports Production refined petroleum 37
1947 barrels)
236 bull94
128 (See Table No_Jl_ Statistical Appendix
Production Gold (000 troy ounces) Silver (000 troy ounces) Co~per (000 pounds) Lead (000 pounds)
1938 445 82~0 27 21
War Peak l03tJ hhl3
96788 161-+88
19h7 5o5
1569 3316 h98h
-20-
58 Ecuadorian trade statistics list exports of crude pet~middotoleum
and minerals separately from that of other commodities even in aggre-
gate figures underlining the fact the exploitation is in foreign hands
and hence colonial in nature This aspect hmmiddotever is of di-1inishmiddot-
ing importance as now the foreign exchange realized from such mineral
exports accrues to the Central Bank and as in any event nineral ex-1)
ports form a diminishing proportion of the vhole 7
V ~JNUFACTURING PEODUCTION
59 There are virtually no stCltistics on manufacturing in Ecuador
and none which present any comprehensive view It is ho~middot-rever clear
that there is very Uttle industrial factory prJchJction and obser-
vation in the country leaves one with an impression of the nresent
igtilportance of handicraft production
60 The most inportant consuxner-good factory industrj_es are tex-
t~~~breweri~-~~ otheuro7r beveraces shoes ard leather _roduc~s buttons ~d~lttfr
and nails Textile production using domestically produced cotton pro-
duces cotton piece-goods and wool rayon and hemgt textiles supplying
almost all domestic demand for low-quality products The only irJDcrtant
producer-good factory industry is cement the plants being located near
Guayaquil Lack of domestic technical lmow-how and of capLtal and
the low level of domestic effective demand account for the sli~ht develop-
ment of faetory industries whose rrowth on any scale beloncs to a 1ter
stage of economic development
y Value of nineral exportsmiddot as nercentare of value of all exports 1929 260 nercent 1933 430 n 1939 397 1946 11~5 1947 69
Production and irrport statistics for cement tre civen in Table IJo bull 2__ Statistical Appendix
- 21-
61 Uuch of finished commodity ygtroduction is at the handicraft
stage both for nroducer and consumer goods In Quito and Guayaquil
one sees many small 11 shops11 producing metal leather and wood manushy
factures largely by manual methods It is an illuminating co~~entary
on the shallow growth of industrial specialization that the ll1ission
did not see any shops selling ready-made womens clothing All
womens clothing shops displayed only materials in the bolt as in
pioneer days elsewhere
62 One handicraft industry of great importance in exports is
the production of panama hats It has been estimated that 30000
families are occupied vrhole or art-time upon this nroduction and
at times (for example 1945) they have provided the largest single
export item by value The grmvth and treatment of the fiber and the
weaving of the hat is entirely an Indian handicraft industry the
Yteaving of a high-quality hat taking three months The fiber is erown
and the best hats woven in the lowlands Its future ir-mort nee is unshy
certain as the competition of Italy and the Fhilinpines is again felt
in low-_)rice woven hats the boom emjoyed during the war nay recede
63 Ecuador in its ~resent and foreseeable development is an
agricultural country with no immediate movement toward industrialization
EcuAdorians met by the Mission themselves stated this The growth of
factory industry will be slow that of small shop and handicraft manushy
facture somewhat less slow It vmuld seem as stressed later in this
report that there is room for grm~h of processing of agricultural
products Statistically such processing would be classed as industrial
production but is oroperly the finishing stage of agricultural productior
- 22-
to secure improved durability and portability of perishable products
This would increase effective demand imnacting upon the farm and ass1st
in stimulating agricultural development Some progress being made in
this direction notably in vegetable oil expressing plants Ihe only
non-agricultural project suggested by the -r~cuadorian Government has -eer
a cement plant located in the highlands at a foreign exchanr~e cost of
$2 rrillion the justification being both the saving of foreign exchange
expended upon cement imports and reduction of load upon the only railshy
way connecting lovrlands and hichlands Growth of cement use accompanies
economic development assessment of this project (engineering questions
apart) would involve tainly questions of timing location and finance
matters which are really all aspects of the single question whether
such a project may not be one for private direct investment Initial
expectation would be that were all factors favorable to the success of
the project it gtlould be readily undertaken by orivate enterprise
particularly when it is remembered that railway freiehts 1bullrould protect
highland production from lowland competition
6h No sueeestions regarding increase of electric power output
have come fror1 the Government indeed the official statistical services
have no data upon installed capacities and demand Cnly in Quito and
Guayaquil are present industrial uses of electric poler of any ir1portance
Elsewhere suIJply is from snall municipal plants (mainly therraal) for house-
hold consumption It appears that demand mar be ahead sunply in cost
towns very frequently voltages are maintained around 80 instead of the
rated 110
- 23 -
65 Shortage of electric nower is not however hamoering
economic development at this stage although it may soon do so in
sevral urban centers such as Qui to and Hiobamba Sone ttne i-1 the
iuture the possibility of large hydro-electric vrorks on the eastern 1
side of the Andes will merit attention
y Where the rivers are fast and clear on the western side they carry much silt
- 24-
VI DmIESTC THANSPORT AND COilERCE
66 The space devoted to agriculture in this report reflects its
importance in the Ecuadorian economy As has been said further developshy
ment will for sometime be mainly agricu1tural
67 Present restraints upon that development are not located
solely or perhaps even nrincipally on the farm there are many
features of the general economic environment which operate to hamper
even purely agricultural development There is great room for improveshy
ment of transport to knit the economy tocether and to encot1raee grovrth
of output
(a) Transport
68 Without roads there can be little regional or inter-regional
intergration Fithout that intergration (which for some regions and
some crops would open upon the world at the gatewa~r of a oort) there
can be but small inducement andlittle opportunity of increasing proshy
duction In much of Ecuador the principal transport vehicle is the mule
whose patience and endurance under heaJr load is matched by that of the
Indian
69 As regards roads the requirement is both more roads and
better roads capable of bearinr modern vehicular traffic The roads
traveled by the 1Jission are uniformly bad both slowing traffic and imshy
Ilosing extraordiPamiddoty vehicular de_reciation Ultimately no coubt
there vdll be an adequate system of all-rreather roads in Ecuador For
the immediate future the more modest tarset is to attain a reasonable
system of roads civine access to the creater art of roducine areas
- 25-
in the dry season At present the unsurfaced access roads are cut to
pieces by --vater erosion in the wet season and consolidated somew1at
traffic in the dry season A single eradinr operation smoothin thE
dirt surface at the end of the vret season would ci ve accelJtable usashy
bility in the dry )eriod v1hich in the populated coastal rovince of
icanabi for example is eight ~aonths of the year At -_resent the so1e
transport link for corunodities between loYrlands and the hihlands
is the Guayaquil to Quito (and beyond) railway This link is nrobaoly
nearing saturation point vdth present equipment and its strencthening
both by railway imJrovement and all-middotweather hichway construction is
obviously desirable it middotill probably become essential yri thin five
years
(b) Commerce
70 Physical transport alone hogtever is not the only ope c-ation
ofcarriaee required to intecrate a reeion internally and to bind toshy
cether the various regions There are also tL physical and the finanshy
cial aspects of comr1odity holdinr involving the storae and vrhere
necessaFJ the partial processing of products to reduce perishability
and the avail~bility of mechanisms of short-term finance extendine over
crop periods In Ecuador these tro aspects are closely related
71 Apart from some export crops there is virtually no crop or
food processinG undertaken And in the export crops processing
is the minimum necessary to secure portability Eice is nilled but not
polished cacao is sun dried coffee is dried and within only recent
years washed fruit is exported whole Some new e~Jor-ts may require
further processing and installation of plant starting or is in
- 26-
advanced discussion for example vegetable oil processing (although
for sometime no eXport surplus of vegetable oils is 11~11 and fish
canning
72 Nor is there any important ~recessing of domestic food pro-
duction for home consumption bull There is no freezing or canning of meat
which is taken to market on the hoof There are only two or three
very small butter factories and no whole milk orocessing Cereals
of course are not highly perishable but there are no silos or granarshy
ies and experience of similar situations elsewhere suzfests that losses
by deterioration and infestation may be significant no direct evishy
dence anthe incidence of this factor in Ecuador ~as obtained by the
Mission Thee is little storage of grass on the coast in silos or
as hay and in the dry season slaughter of cattle because of lack of
feed is at times necessary In short the situation is not so very
dissimilar to that ofmiddotmedieval Europe
73 Roads alone would not create an environment favorable to
change in this position although lack of roads nar well inlibi t change bull
In addition suitable credit facilities for the finance of co~~odity
holding through time are necessary
74 Hany complaints were voiced to the Hission reearding lack of
short-term banking credit for crop movement and storage and for medium
and long-term agricultural investment and no doubt there is signifi
cant lack of such credits But this is not the result of some simle
institutional defect of the b~~inc and credit structure even though
institutional improvement may be necessary It is fundamentally a
- 27-
reflection of the fact that Ecuador is extremely poor in disposable
capital available for even short-term investment ie vrorcing capi-
tal Improvement of short-term credit facilities for what in advanced
communities are regarded as purely commercial purposes would in effect
represent an increase of capital intensity in the Ecuadorian ecororny
To the extent that banks met more fully the gtJeak seasonal credit re-
quirements for croo movement and storage individual nrivate reoources
are relieved of the 1eak burden and available for other investments
75 Thus iorovement of the techanisr by 11hich the banking system
provides working capital for corrtercial or inciustrial (in the sense of
crop processing) purposes is itself an act of investment rather than
merely an institutional rationalization ilnd as such carry the
usual consequences of investment in an undevelogted economr with very
law voluntary savings To the extent that additional credits are not
matched by savings sewhere (either voluntary or forced through
taxation) they will be inflationary in effect just as an
additional act of long-term investment would be Increase of banki1g
nrovision of workinrr capital should keep step with totl capital for-_ - - 1 mation of which it is one aspect7
It is implicitly assumed in the foregoine that at nresent in Ecuador the amount of small voluntary savinrrs is neclicible It vrill presumably not alrmys remain so and ~Jart of the modifications of the bankin~ system shou1d be attract Clli1U1 atively such sav-ings in the fom of savinc do)Josi ts This 1muld increase the extent to which Danks can safely flovide capital It will be a much later before small private savincs are directly in-vested in commerce or industry throuh joint stock r1ethods There is no stock-exchance in Ecuador
-28-
76 It is of course just as important that the availabi lity of
working capital should not lag behind as it is that it should not run
ahead The Bank should ensure that any long-term investment projects it
may assist to finance do not effectively starve the rest of the econo~
of working capital in the process of avoiding inflation
77 There is also the question of the price of short-term lending
that is of the level of interest rates The Ecuadorian is a highshy
interest rate eoonomy The legal maximum for commercial short-term loans
is 10 per cent having recently been increased from 7 per cent legal
maximum rates however are not systematically enforced by commercial
banks themselves At a time when the legal maximum was 7 per cent
going rate for 90 day loans secured upon properly warehoused commodishy
ties and with third party endorsement was 12 pe+ cent
78 This very high structure of interest rates seems open to
obvious criticism but is in fact probably not Tiholly unjustifiable in
the present conditions of Ecuador It is the cumulative result of many
factors so that more official prescription of lower rates would be
quite ineffective These factors seem to be
(a) Interest proper~
(b) layment for risk bearing arising in part out of a
low rating upon individual credit and in part from
the institutional conditions (such as embryonic
commercial and financial ruarkets) which seriously
reduce the liquidity of any asset other than money
itself
-29
(c) An clcmmt 0f discount 111nn cyectcd luturc irf] utinn
reducing the real value of the pa~nent for lending
(d) An element of monopoly which upon purely subjective
judgment may be the least ilJI9ortant of these several 1
factors7
(e) The real shortace of capital whether short or long--
term~ reflecting in interest rates as a genuine
scarcity price
79bull Of those factors the di~ount upon expected future in-
flation increases prices at a rate of 12 ner cent per annum a money
interest rate of 12 per cent per annum is a real rate of zero If
therefore inflation could be controlled a substantial reduction of
money interest rates could be hoked for At the same tine while
inflation continues high interest rates probably have small influencemiddot
in encouraging money savings
80 Even without inflation ans until the su~1ly of available
real capital improves relatively high interest rates may well be
acceDtablemiddot as a price mechanisn nethod of selectin~ most urofitable y ~
uses of limited fundsbull middothere exoected urivate nrofit did not seem l - -
to parallel social desirability loans at lower rates (ie subsidized
terms) could be made perhaps through reconstituted Development Banks
Prima facie however such loans 1bullrould not be short-term
~I -Onthis interprepoundaion the situation in Ecuador differs signifishycantly from that in Peru
tt is suggested that a powerful point of intervention would be to limit commercial banking dividends distributed to not more than say 7 per cent The high profits nmv earned by commercial banks would then progressively accumulate until liberalization of lending becomes virtually forced by accumulation of funds representing genuine corporation saVings
- 30-
81 The discussion of private finance has so far upon
short-term credits there is an even larger nroblem in the
intermediate and long-term arricul tural credit It is not necessarr
to expand greatly upon this since it too is a consequence capi-
tal shortage
82 Imnrovement would seem to be alonrr the route - 1 of nroper UElte
of existing Development Banks (or their successors-) effectively
in the earlier stages as lending agencies of Government
VII OFFICIAL DEVLOPHl~NT FHmiddotIfJCE
83 In the circurnstances of a country like Ecuador the greater
part of domestic capital forr1ation requires official directly
or indirectly if it is to occur on any scale are too
small and too narrowly held to permit much -rowth this roL1te
andthose few who are able to save at any sinificant rate are larely
uninterested in the efficiency of ~reduction
84 Official finance may be either direct or indirect direct
throueh works executed by Government or 0JUblic bodies indirect
throueh lending institutions such as Dev~lopment Banlcs capitalized
from public funds In either case funds are diverted to investment
purposes by Govern~ent intervention
85 Thus Development Bank lending for productive purposes (for
example long-term acricul tural credit) is an item 1n ca9i tal formation
V There are thirteen reaional Development with an unirnJresstve record of manaeement Their possible reconstitution is under discussion
-31-
rather than a mere institutional rationalization of the credit mech-
anism Indeed as has been stressed in the last section even im-
proved su1nly of short-term credit gtrill in art rewesent
formation A developing economy which neclected these items in 11Cnn21~~
or forecastinc total caital investnent would be very vulnerable indeed
to inflation induced by over-investment
86 17here voluntary savings are Jow the only wmiddotamiddot to sirnificant
rate of capital formatton can emerge without inflation is an equi-
valent amount of savine forced throurh taxation One ould look for a
relatively hirsh level of taxation to national income and for a rela-
tively high proportion of exnenditures caDi tal purposes to total
Government expenditures On both these counts Ecuadorian elq)erience
seems irare s si ve
87 In 1946 total budretary and spedal revenue rms disclosed
as 5368 million sucres in the sa1le rear an estLnate middotJaced national
income at 20096 million sucres This a proym~tion of 27 middoter
come a proportion so hich that in fact it lacks credence In assess-
inc total tax burden part of the revenues of Government monorolies
and all of municial revenues should be included if this be done y
the proportion becomes 37 per cent In addition new exchance taxes
yielded 973 million sucres in 1947
Mono_)oly participations (ii direct disbursements for public _Jurposes) were 353 million sucres in 1946 munici~al income was 1803 million sucres in 1947 (1946 not available)
32-
88 It is very difficult to accept the conclusion that Ecuadorian
revenues form so high a proportion of national income it would seem
that the estimate of national income is too low Nevertheless tax
revenues are clearly a sizable percentace of national income
89 At the request of the Mission an official estimate of total
official expenditures on capital account was prepared Total income of
Government municipalities provincial councils and other public
entities was ~iven as 7S4 million sucres and total capital expenditure
from that income as 2237 million sucres or slichtlr over 30 per cent
of revenuesY It is difficult to feel confident that effective capi-
tal formation on this scale actually occurred certainly there is
little evidence visible to the eye of the t1middotaveler
90 Notwithstanding such doubts the fiscal evidence is of a
fairly hich proportion of tax revenues to national inco~e and of a
hich proportion of revenue allocated to capital investment It would
seem that the fiscal mechanism exists for domestic capital fo~~tion
what may be required is more effective expenditure of allocated funds-
Before a development plan envisa~ing the expenditure of still more funds
was adopted it would be desirable to examine closely administrative
and technical efficiency in the use of existing funds
91 On the side of revenue Treasurr officials informed the Mis-
sion that tax evasion was estirnated at some 30 per cent of ta revenues
1 This makes such capital expenditures 112) per cent of 1946 national income which a~ain seems very high indeed
The two largest items are Government public works (8)4 million sucres) and municipal works (900 million sucres)
- 33-
particularly in income and land tax It might well be advantareous
on the sides both of revenue and of expenditure for Ecuador to obtain
technical assistance of the tPe that the United Nations Department of
Economic Affairs rendered to Venezuela in 1947~Y involvinpound revision
of the structure of the budget of budcetary audit practices and the
like
f Report~d in UN Document ECN 1SubJfti 4 - 21 June 1948 lostricted)
- 34 -
VIII 001EHNl(iEi~T FINANCE AND INRATlON
92 What may be called 11multiple budget practices exist in Ecuador
as in other Latin American countries There is an annual Ordinary Budget
one or more Extraordinary Budgets( tro in 1947) end a number of Special
Accounts (twenty-five in 1946) not included in the general budgetary
accounts The State operates nxmopolies in tobacco liquor salt and
matches part of whose profits are taken into the ordinary budget as
revenue and part used directly for public purposes It is thus diffi-
cult to assesrmiddotgggregate Government revenues and expencii tures and vir-
tually impossible to detail the purposes of expenditure to ascertain
accurately public capital formation by way of public morks and the like
9 Taking the disclosed figures on the ordinary and extraordinary
budgets and tne special accounts there has been a net surplus over the
past ten years 1operations of 234 million sucres~ This however is
not an accurate reflection of the true aggregate position because the
Government operations are not ~holly included in these disclosed ac-
counts But since the Government has no source of internal funds other
than the Central Bank the net recourse of Government to Central BanJJI mirrors the over-all result of Government finance such recourse increased
In 1946 for example the monopolies contributed 5357 million sucres to the general revenue and disbursed 3526 million to municipalities (145 million on general participation and 1652 million sucres for 11 special participation of gthich an example is a new electricity plant at Ambato the state railways (92 million) etc
gj iiith only three years of disclosed deficit since 1938 See Table 12 in Statistical Appendix
2 Central Bank loans middotto Government less Govertllllent deposits in banks
- 35-
480 million sucres over the nine-year period 1939 to 1947 inelusivel
an average of 53 million sucres annually amplch averaging however con-
ceals very important differences between the three periods within the
nine years to tal
94 The table on the next page sumnari zes the factors causing in-
crease of domestic money supply It is computed by rearrangemm t of the
balance sheets of the Central Bank all commercial banks and all developshy
ment banks and is thus a table shoring changes in items in a rearranged
aggregate balance sheet of the Ecuadorian banking system
95bull The first t70 periods 1939-1943 end l943-l946f were both
periods of heavy inflation_ During the first five years notes in cir
culation and monetary deposits increased 3437 million sucres (or 255 per
cent) and in the next three )eera 2904 million sucres (or 61 per cent)
But the causal structure was quite different in the two periods
96 In the first inflation was almost wholly induced by external
factors (favorable balance of paYments causing increase of foreign exshy
change holdings) the major domestic factor being expansion of commercial
bank loans and investments in this period deficit Government finance
was not a causal factor
97 In the next three-year period 1943-1946 however the major
inflationary factors change deficit Government finance and expansi on of
f As calculated by IBRD Mission loans to Government including ali loans to official agencies A recent calculation by the IMF Research Departshyment covering Government operations only places the aggregate 9 years deficit at 345 million sucres~ See Table 12 in Statistical Appendix
- 36-
BANKING CHANGES ~0015 SucresJ
Jan 1939 Jan 1944 Jan 1947 Jan 1948 to to to tomiddot
Dec 1943 Dec 1946 nee 1947 June 19h8 t~ ~arsJ ~~ iears) trmiddot ~~r1 t~ mo~~h~2
Central rcrk loans tomiddotc~vt~ f 16174 f 160260 - 701p88 23695 Central B~r~ Loans to Public -1 6978 2_283 1- 67548 1- 39763 Commercial Bank Loans and
Investments J 187554 f 14624 88h4 1- 2~ ~49 Development Baru Loans and
J 14227 136818 ~ 644 1- 26090 Investments
1 224933 f 313985 11)40 1- 68107 Net Bank Foreign Exchange 260774 f 94662 - 53203 - u6 112
7 485707 7 408647 I
7 bull - 64543 21395
Notes in Circulation f 16o907 1-131729 - 23205 - 17290 Public Monetary Deposits -A 162868 1- 128914 - 68734 1- 19620 Government Deposits f 19968middot 29768 9050 2366
7 343743 7 290411 82889 - 36 Public Time Deposits 116834 ~ 42053 1~004 f 317j
y 7 46o517 7 3J2464 83893 ~ -- 3137
Absorbed by Banking System 1- 25130 middot~ 76183 1- 19350 18258 7 485707
11 f 4o8647 64543 I - 7 21395
Net Government Borrowing J 131492 from Banks 3794 - 79738 - 32745
Deposits in Central Bank in foreign money (not included above ex pressed in Sucres
Government ~ 4486 - 633 871 - 11059 Public 25242 J 78964 - 78814 J 4h97
T29J 728 7 I
7 IIIII middot~~ ~ I
78331 79685 31+38
y Made urt as Io11mlfs
Cas~ bullbullbullbullbullbullbullbullbullbullbullbullbullbull ~ bullbullbullbullbullbullbullbull - bullbullbullbull J 266 1- 367 - 22~7 99 Other assets less other liabilities~ ~ 4 330 ~ 293 ~ 18~8 Capital and Reserves~- bull bullbullbullbull 4 bullbull 52 bull 1 1- 79-9 26 o 278
7 I
7 7 I
7 bull Ill ri bullbullbull
251 762 194 18)
Subtract increase
37-
Davelopment Bank lending dominE)te the position Expansion of commercial
bank lending is relatively negligible while a comparatively small role is
played by balance of payment influences
98 From the end of 1946 the general financial situation deterior-ated
rapidly in five months from January 1947 to ~~ay 1947 net foreign exshy
change reserves of the Centrel Bank fell 935 million sucres or 7 7 mil-
lion dollars to a level of 2927 million sucres or 21 7 million dolJars
In litaY 1947 an IMF Mission arrived in Ecuador (at the request of the
Government) and in June 1947 a multiple exchange rate system with import
classification was introduced upon the advice and with the concurrence of
the Fund Operation of this system Jielded considerable profit n in
sucres it is in effect a new imposition of import taxes and such
11profits 11 are in reality additional fiscal revenueY It was of the
essence of the Emd s attitude in Ecnador that the exchange difficulties
bad arisen through domestic inflation and that these addi tiona reve-
nues should therefore be applied only in reduction of Government debt to
the Central Bank
99 The effect of such policy is clearly seen in the third column
of the table Inflation is checked notes in cirmlation and monetary
deposits falling 929 million sucres (or 11-per cent) i~ one year Alshy
thoUtgb however Central Bank loans to Government (and also colllWrci al
jJ At this point only the domestic aspects of this measure are emphashysized In a later section the external or balance of ~ent aspects will be taken up
Y Such revenue from exchange taxes yielded 975 million sucres in 1947 bull md in July 1948 was running at g to 10 jllillion sucres a month this revenue is not of course taken into the budgets bull
- 38 -
bank loans and investments) fell the actual deflation _was largely
caused through loss of foJeign exchange rather than over~all reduction
of domestic bank lending For in response to vigorous ~oilplaints of
credit shortage the Central Bank greatly increased its loans to the
public almost fully offsetting reduction of its loans to Government
In the first six months of 1948 there was no significant contraction
of money supply banking loans to the public eJggtanding to offset the
deflationary effects af an adverse balance of payments and of Government
debt reduction
100 The exchange surcharge multiple rate system was in operation
through August 1948 proceeds being devoted to reduction of Government
debt to the Central Bank~ But there has bean concern lest the resulting
deflation of domestic money supply would be too severe and the Central
Bank has in fact adopted a compensatory policy to prevent further reducshy
tion through continuing to expand lending to the public arid through
quasi-open-market pur~e of mortgage bonds to the amount of 17 million
sucres by July 10 19l8 when further purchases were discontinued
101 To avoid the netcessity for such compensatory policy the Cen-
tral Bank proposed to the Government that the destination of reveme from
exchange taxes should be changed Instead of being applied in reduction
of debt the proposal was that they should be useci instead to create a
development fund tt to be administered by the Cent~al Bank unless a
planned Development Institute or other competent authority is estabshy
lished In mid-September the Fund appro ved such cllanged dest ination of
these revenues 90 per cent of which will in future be applied in finance
of development and 10 per cent in stabilization of Government bond prices
-39-
This removes a check upon inflation which has operated for some fifteen
months unless Central and commercial bank lending policies recognize
this changed situation further inflation may follow even if the Budgetary
accounts run no deficit
102 At the same time this change does provide a source of local
currency finance for development projects
-40-
IX INTERNATIONAL TRAIE AND THE BALANCE OF PADlENTS
103 Ecuador exports agricultural products (rice cacao coffee
tropical fruits balsa wood) mineral products (crude petrolelUil gold
silver copper and lead) and handicraft products (panama hats)Y
lo4 Approximately one trird of Ecuadorian exports (including
minerals) go to the United States The proportion rose during the war
due to VmiddotIar-time demand for strategic raw materials but is now tending
to revert to pre-war levels Loss of European markets has been partly
compensated by gain of n$w export markets at least for a time and
especially for rice Countries in the Far East whose rice production
fell during war such as the Philippines and in Latin America whose
Eastern sources of supply were cut off such as Cuba and Venezuela
have provided demand for Ecuadorian rice This outlet however may not
last much longer
105 On an average of years 1938 to 1943 about 15 per cent of
Ecuadorian imports are foodstuffs wheat and lard being the largest
items and 85 per cent are manufactured goods and equipment Import
of foodstuffs is however gro1ing t-vith population and in the key pro-
ducts of wheat and fats would be expected to grow still faster if
econowic development raises n~ss living standards witl10ut increasing
domestic output of these prodvcts For increased consumption of wheat
products and fats is in part the definition of rising living standards
for a very poor population
fJ See Table No13 in Statistical Appendix for composition of exports
-41-
106bull Before the war (average of the years 1937 to 1933 ) the Americas
supplied 49 per cent of Ecuadorian imports by value the United States
alone supplying 41 per cent Germany provided 22 per cent of total
imports and the United Kingdom only 8 per cent Europe as a whole supshy
plying 45 per cent
107 In 1946 and 1947 the Americas provided 86 per cent of total
imports the United States supplying 66 per cent EUrope as a source of
imports fell to 12 per cent although the United Kingdom maintained its
relative position (7 per cent) Whether the United Kingdom can expand
its provision of imports for Ecuador JDaY be domiddotubtful on the one hand
the loss of Germany as a supplier pzo vides an opportunity on the
other the competitive industrial position of the United States may make
it difficult for the United Kingdom to fill this gap
No balmce of payments estimates eJd st for Ecuador1
Growth
of foreign exchange holdings over the war period however indicates a
strongly favorable balmce ~let reserves which were equivalent to 409
million sucres in December 1939 rose to 3962 million sucres (294 milshy
lion dollars) in December 1946
109 Official purchases and sales of exchange are shown in the fol-
lowing table together with corresponding movements of exchange reserves
The difference betRSen the balance on official transactions and the moveshy
ment in reserves arises from transactions on the free market
110 During the war import and exchange controls were nominal
there being no shortage of dollars nor any decrease of exchange reserves
jJ Except for the ~eriod January to May 1948
-42-
Loss of exchange reserves in 1945 led to a tightening of control on an
allocation of quotas smong users of exchange Import permi ts were
granted on the basis of former imports by merchants At the end of
1946 controls were relaxed on an extensive list of imports items and
the consequent loss of exchange has led to difficultieQ
Ul Official Official Balance Changes in Purchases Sales on Net
Official International Trans- Reserves actions
(Millions of u S Dollars)
1942 257 185 t 72
1943 35-5 279 t 1middot5 t Ul
1944 423 34~4 t 79 f 88
1945 353 394 - 41 - 7-2
1946 471 415 f 56 t 1 9
1947 488 579 - 91 38
112 From December 1946 to IVtay 1947 net foreign exchalge reserves
fell US$ 77 million from US$ 294 million to US$ 217 million In May
1947 the advice of the International More tary Fund was sought with reshy
sults summarized as follows in a recent Fund documentY
The lfund 1 s Mission arrived in Ecuador in Yay 1947 It was not advisable at that time to contemplate devaluation which would have made the inflationary situation worse An emergency program was therefore proposed Essential and semi-essential imports were to be distic5~ished and a surcharge of 5 sucres p3r dollar imposed on the semi-essential group as a check against their excessive import New decrees including many of the recomshymendations were issued in June
The main features of the new system were as follows
Y Economic SuVey of Ecuador RD 672 - P 43-44
- 43-
(a) The elimination of all quantitative import export or exchan~ restrictions licenses and quotas with the exception of a few absolute prohibitions of some luxury imports
(b) The checldng of excessive import demand through a fiveshysucre (33 per cent) surcharge on non-essential imports
(c) The suspension of nearly all exchange sales for nonshytrade transactions and the creation of a free market bull narrowly limited in volume and comprising mostly all transactions that are uncontrollable in practice plus a snall amount of domestically produced gold
(d) Exchange for a small amount of the least essential goods was made available in the free market
(e) One of the basic aspects of this plan was the steriliz~ tion of all proceeds from the import surcharge which was placed in a fund for the extraordinary amortization of the government debt to the Central Bank Tnis is still in operation
The beneficial effects of these reforms were felt immediately In June the trade deficit ~as reduced to only $07 million and in July to $06 million By August for the first time in 3 monthsl there was a small surplus In September the deficit was smci l -j)O 5 million In October there was a surplus of $15 million and in November and December there were small deficits of only $01 million and $07 million respectively
In short the deficit for the year was about $99 million in its gross gold and foreign exchange reserves During the same period international liabilities of the Central Bank showed a reduction of about $6 million Therefore~ the net deficit was around $39 million 95 per cent being in the first half-yeer and before advice had been received from the Fundrs Mission
113 It should be emphasized that this multiple-rate system of
exchange control is entirely freed cpentitative controls Excessive
import demand is checked by the higher rates upon imports deemed non-
essential the list of which is knollD and published Anyone presenting
sucres is provided with exchange at the appropriate rate upon list A and
B goods and the free rate is influenced by occasional releases of offi-
cial exchange into the free market The system that is utilizes the
inter-play of the price mechanism rather than the bWlilmlcracy of quanti-
tive controls or quotas
- u4-
114 Loss of exchange continues however despite considerable reduc-
tion of imports Gross international reserves declined US$ 18 million
and net reserves US$ 35 million in the first six months of 1948 Offishy
cial transactions January to June 1948 are surmrarized in the following
table~
Receipts From Exports From other Transactions (1)
Total
Payments For Imports For other Transactions
Total
Balance Change in Gross Reserves
1947 Jan to June
1948 Jan to June
(Millions of Dollnrs)
163 5 6
167 44
219 211
289 219 23 10
312 22 9
- 93 - 18
(l) Includes purchases of domestically produced gold deposits received in foreign currencies and borrowing from corres~ pondents abroad
115 Prospects for the remainder of the year moreover are not goo~
It is estimated that loss of international reserves over the whole year
may be aboat US$ 6 million Whether the deficit is in this region de-
pends largely upon actual export realizations for the remainder of the
year lhe most critical here is rice 11hose ygtrice is falling and the
crops accumulating in the rice millsplusmn Latest information is that
f Countries receiving allocations of Ecuadorian rice under International Emergency Food Council allocations have been requesting a change in source of supply owing to shortage of doJJers Thus France has asked for 6000 tons of rice from Indo-China instead of ~cuador and Greece for 2000 tons from kVPt in place of Ecuador as supplier A recent favorable sale of rice-to Haiti has somewhat improvea the cuITent position
-45-
plantings for the October crop are substantially reduced Wet weather bas
led to some loss of the cacao crop Receipts from exports in the follow-shy
ing official exchange budget may therefore have to be modified down- [l
ward on any pxuient calculation-
116 ~or Recei1ts and Sales of Foreign hchange
(Thousands of U S Iollars)
1948 1947 Estimated Actual
BECEIPTS
Worts Rice 13~ la4~ Cacao 11 l 2 Other products 10700 12371
Total Exports 354oo 42120
Foreign companies 5300 4842 Others 800 1883
41500 48845
SALES
Imports 44800 53499
Services 3200 4470
4B ooo 57969
117 In this situation of continuing presSlre one step has been
tken and others are under consideration The one taken relates to offishy
cial imports representing an average pf 20 per cent of total imports
Importation of cigarettes liquor matches and other things by the State
tionopolies is especiallyen significant These were formerly provided with
exchange tax-freebull ie at the ~owest rate of 1350 From July 26 they
afe required to pay the ordinary import rate of 15o4 on sll supplies for
J See note on page 47 -A
- 46-
their ovm use (such as office supplies) and the same rates as private
importers (ie 15o4 or 20o4) on all imports to be sold to the public
(such as wheat flour fats cigarettes etc) accord~ng to the classifi-
cation of the goods
118 Remaining possibilities seem to be a partial reclassification
of imports removing items from List A as essentials to List B as se~ishy
lwruriesY and or a chenge of nominal exchange parity vri th or mithout
a narrowing of the spread between the rates Here pressure from
exporters particularly from rice exporters may be hee~vily in favor of
an increase of the dollar buying rate with consequential changes of
selling rates
119 The present loss of foreign exchange is occurring ~rithout any
service being met upon defaulted foreign debt although service of Ex-Im
Bank loans is being made If it be assumed for purposes of calculation
that Ecuador reaches an agreed settlement identical to the Chilean sershy
vice would require exchange equivalent to US$ 378000 in 1949 (of which
US$ 368000 would be required in dollars) and would rise to US$ 4o20CO
in 1954 Adding service upon Ex-Im Bank loans outstanding on June 30
1948 and other known but small indebtedness total debt service would
increase to US$ 1410000 in 1949 rise to a second maxilliUID of US$ 1394000
in 1951 and then progressively decline Upon the assumption thet amp-Im
Bank loans undisbursed on June 30 1948 are all fully drawn before their
maturity total debt service charges would be US$ 1533000 in 1949 rise
On August 21 a number of import items were changed from List A to List B the aggregate import value (when granted exchange at List A rate) affected being US$ 7 million
-47-
to US$ 213431000 in 1952 and again would progressively decline These
last service charges rould be for 1949 3 1 per cent of 1947 actual
official foreign exchange receipts and 3 bull 7 per cent of estimated 1948
receipts and for 1952 48 per cent and 56 per cent of 1947 actual
and 1948 estimated exchange receipts respectively
120 Estimating prospects from this point in time Ecuador does not
seem to be a country able to afford assumption of any great additional
burden of debt service payable in dollars The amount that could wi thbull
out hardship or distortion be squeezed out of the balance of payments
by no means corresponds to the development needs of the country Any
start must therefore be modest and cumulative rather than spectacular
and precarious and this conclusion fits with other controlling factors
in the over-all situation notably the supply of administrative techshy
nical and managerial abi li ty
- 47-A -
Note on Official Exchange Transactions
Official exchange transactions for the firstsix months of
1948 are given on page 44 of this report Results for the full year
are now available and reveal that earlier expectations regarding the
probable 1948 balance of payments deficit were unduly nessimistic
Cacao export values have been lar~er than expected and in the last
period of the year there IBre some unexpectecily favorable rice eA-port
sales total export receipts were US$ 8 million larger than forecast
on page 45 Imports were held close to forecast
Receipts
Exports Foreign Co~anies Other
Payments
Imports Foreign Comoanies Other
Balance
Change in Grass Reserves
Official Exchange Transactions (full year - n~illions of dollars)
1947 -421
L18 19
488
535 06 149
580
y does not agree because of rounding
January 26 1949
1948 -436 h2 7
i85
Lt52 2
28
-oJ
-48-
X EXTERiJAL DEBT BEoomJ
121 The position of public long-term external bonded (excluding
inter-governmental) indebtedness of Ecuador is as follows
Amount in Default AmoUpt Outstandi~ ~ e Interest D~te
~In currmc1 (u s (us of p~t Dollars) Dollars)
Dollar obligations Gueyaquil amp Qui to Ry) $ 1226)000 12263000
286000 12263000
286000 123147
63047 Sterling obligations Franc obligations ( Oie
b 71000
Francaise de Chemin de Fer 1 lquateur ) Fcs 8386000 70000 70000
12619000 l26l9000
middotmiddot Note The Government of Ecuador oyenms about 75 per cent of the
stock of the Guayaquil and 1uito Railway and guarm tees the bonds and certificates which are largely held in England The franc obligations of the Cie Francaise de Chemin de Fer 11lquateur are not included in the offi cial statement of the public debt nevertheless the Government does recognize some liability for them and during the last few years has engaged in Degotiations for their retirement
Inter-governmental Debtsmiddot
122 Debts to the United States Government are of three types
63047
first the loans by the Export-Import ~which were outstanding on
June 30 1948 in the amount of $7 705606~ second the aJIDunts duemiddot
because of purchases of surplus property totaled $484 567 on March 31
1948 and third the obligations arising out of the lend-lease settleshy
ment the amount of 1fhich is not available (Total lend-lease assistance
j This section of the Report was prepared by Mr Paul Dickens
to Ecuador amounted to $7 bull 795000 )
123 In addition Ecuador is indebted to the Government of Venezuela
in connection with the establishment of a joint shipping company Late
data are not available but as of February 1947 $500000 ($1000000
authorized) was outstanding the total to be repaid by 1966
Debt History
l2ij Upon partition of the old Republic of Colombia~ middotEcuador was
apportioned 215 per cent of the original Colombian debt by the convershy
sion of l834a Between 1834 and 1854 no interest was paid The period
1855 to 1908 was marked by numerous adjustments and defaults
125 In 1898 the Guayaquil and Q]lito Railway Companyt s first mort-
gage 5 per cent loan of 1899 was issued It was expressed in dollars but
was in reality an English loan In 1908 a new (reemenJl was reachedbull
which was to be a final settlemet of all past disputes and controversies
between the Government and the Guayaquil end ~ito Railway Company and
the bondholders In 19~-10 the Government defaulted on the new agree-
ment In Novemberl9ll payments were resumed on the railway debt on)y
but a revolution caused a further suspension from December 1911 until
lfarch 1912 Subsequently service was partially resumed on the external
debt until July 1914
126 From August 1914 to July l9l8 no paYments were made on eny
foreign obligations except that service on the prior lien railway bonds
had been maintained up to and including the January 1915 coupon By
rf Negotiated settie~nt
-50-
1920 interest and sinking fund on the prior lien railway bonds had been
brought up to date but service on all other obligations ~ed in
arrears In 1926 interest on the salt loan of 1908 was brought up to
date but default took place on the coupon dueJam1ary 2 1927
127 The outstanding bonds of the prior lien issue were redeemed~~
January 1929 at VIhich time the January 1914 coupon was paid on the
5 per cent first mortgage bonds of 1897 In the case of the salt loan
of 1908 sinking fund was resumed in July 1928 and interest was paid
to Jazruary 1929 inclusive None thereafter Sums due from July 2 19C3
to January 2 1931 inclusive deposited with Central Bank in sucres
were used for governmental purposes after December 1931 No payments
were made after January 1929 on the external debt of Ecuador
128 Up to the end of 1948 no acceptable arrangement had been pro-
posed by the Ecuadorian Government for the resumption of interest and
sinking fund payments on external loans
-51-middot
XI bull POLITICAL
129bull Recent political history in Ecuador has been turbulent
although contest fo~ power at the top has not greatly affected the
bulk of the population Suffrage extends to all literate citizens 1
over twenty-one years of aee-but the requirement of literacy effect-
ively excludes the Indian bull T)tal votes cast in the recent Presidential
elections were 289164 from a total Population of some 35 million
130middot On May 28 1944 a few days prior to a scheduled ceneral
election an uprising occurred and Dr Jose Haria Velasco Ibarra
assumed office as President Dr Velasco had been President before
but following a coup dletat in August 1935 after he had been in
Presidential office less than a year he fled to Colombia and re-
mained in exile for several years On July 23 191-4 general elections
for a Constitutional Assembly to draft a new Constitution were held
Installed on August 10 the first Act of the new Assembl3r which was
predominantly Conservative was to confirm the legality of Dr
Velascos assumntion of the Presidency
131 On June 30 1946 new elections to the ronstitutional
Assembly middotwere held The only party particiJatine in these elections
was the Conservative The Liberals R~dicals Socialists and Commu-
nists abstained on the crounds that President Velasco did not offer
them sufficient guarantees On Aucust 3 1946 there vrere a number
of arrests following an abortive uprising and on Aueust 11 the Con-
stitutional Assembly re-elected Dr Velasco to the Presidency (by 43
to 10) for a term of office to last to September 1 1948
12bull Being compUisory for men voluntary for woraen -
132bull A new Constitution was promulgated in January 1947
133middot On August 23 194 7 a bloodless coup detat led by Colonel
Carlos Iancheno Minister of Defense in Dr Velascos Cabinet deposed
rresident Velasco who fled the country to Colombia for the second timebull
Next day Colonel Mancheno proclaimed himself Acting President and
formed a five-man Socialist-Liberal Cabinet despite the absolute
Conservative majority in the Assembly A week later however on
August 31 a counter-revolutionary military movemont broke out in the
north and the counter-revolutionaries captured Quito on September 2
134middot Colonel llancheno resigned the ActinG Presidency and dis
appeared the sa1ne day Dr Suarez Veintimilla who had been Vice
President under Dr Velasco and the former conservative Uinister
resumed control of the GoverPment Next day September 3 a Council
of State in Quito declared that Dr Velasco had by abandoning his
post terminated his functions as Chief of the State Dr Velasco
howeverJ vrho middotwas by this time in the Argentine declared that his
remo~al to Colombia had been forced and announced his intention of
returning to Ecuador to resume office
1~ On Seytember 15 1947 a Secial session of the Zcuadorian
Concress accepted the resignation of Dr Veintimilla and elected
Senor Carlos Julios Arosernena head of the Banco Ce Descuento at
Gua~raquil and a non-party man as Vice President with novers as
Acting President until September 1 1~48 Senor Arosemena formed a
mainly Liberal Cabinet with one representative each of the Consershy
vatives and the Socialists Coneress also ~onfinned the Council of
State 1 s view that Dr Velasco had forfeited the Presidency by abandoning
his postbull
136 On June 6 1948 Presidential elections were held The
three parties represented vere the Conservatives (Dr Manuel Elicio
Flor Torreo) the Liberals (Galo Plaza Lasso) and the Radical (Genera1
Alberto Enriques Gallo) Final results were announced as
Plaza 115835
Flor 112052
Enriques 53601
Invalid 27 676 289164
137 bull Doubt persisted until this month (August) as to who would
receive the election The Electoral College had been invalidating
votes on technical Grounds and as interim returns and invalidities
were announced it was noticed that the majority of the latter were
being deducted from the Plazavote After conferences the Electoral
College revalidated all votes and conducted a re-scrutiny on less
strict basis Senor Plaza has been declared to be the rfjSident-Elect
by the Ecuadorian Coneress and assumed power September 1 1948 The
middotpresidential term of office is four years
The Vice Presidential results were
Conservative 1anuel Sotomayor y Luna llu008
Liberal Dr Abel Gilbert 113213
Radical Dr Cueva Tamarz 5h07h 28129gt
139 Senor Plaza was born in Nmv York USA forty-two years
ago his fatter the late General Leonidas Plaz~ was President of
Ecuador in 1901-05 and 1912-16 middotSenor Plaz who had been taken to
Ecuador as an infant accomnanied his father in exile to the United
States and attended the University of California the University of
Maryland and the Georgetown School of Foreign Service in ~7ashington
l4o Senor Plaza returned to Ecuador in 1930 and for the next
fourteen years operated the family estates there reclaiming them from
virtual bankru~tcymiddot to prosperous and efficient state He has for
example been active in encouraging the breeding of new cattle strains
is President of the Ecuadorian Holstein-Friesian Association and oper-
ates a butter factory on his estates with a Danish ~anarer He was
ar Minister from 1938-40 and Ambassador to Cashington from 19h4-46
l In executing any policies he will of course be handishyt4
capped by the lack of a fully efficient Civil Service The position
in Ecuador is the same as that in othelmiddot Latin American countries
that the Civil Service is naid on low salary sca1e and lacks compe-
tent administrators Such lack is an aspect of the general shortage
of technical ability in the country
TABLE
1
2 bull
3 bull
4
middot 6
7 bull
8
9
10
11
lZ
13
14 bull
15
16
17
18
19
20
ECUADOR
STATISTICAL APPENDIX
Oil Production and Exports
Cement Production and Imports
Yfueat Production and Imports
Rice Production and Exports
Rice Exports by Destination
Cacao Production and Exports
Coffee Production and Exports
Cotton Tobacco amp Sugar Production amp Sugar Imports
State Railwaysmiddot Lines amp Rolling Stock
State Railways Merchandise Hauled
Population and Roads by Provinces
Budgetary Receipts and Expenditures
Exports of Principal Commodities Volume amp Value
Imports Classified by Groups Value
Exports by Destination Value
Imports by Source Value
Balance of Trade by Major Regions
Exehanee Reserves and Banking Position
Price middotIndices
Status of Ex-Im Ballilt Loans
ECUAIOR Table 1
Oil Production and Expomiddotrts
(thousands of American gallons)
Crude ou Gasoline Produced EJtported bullRefined middotproduced
1938 94586 78696 15500 41654
1939 97125 68819 17679 bull 141
194o 98654 70~99 23001 6162
1941 65382 38362 25914 6462
1942 95671 68516 29489 72l7
1943 97211 65003 34635 8076
1944 121469 82520 38083 8927
1945 109855 73897 38752 10059
1946 979+7 52412 45213 12271
1947 99140 39359 53949 16587
Source J3o1etin Banco Central del Ecuador
ECUADOR Table No 2
1929
1937
1938
1939
1940
1941
1942
1943
1944
1945
1946
1947
1948
l First six months
CEMEHT PRODUOTIOllT AliD IMlORlS (metric tons)
Production Imports
17782
15699 10082
14254 13373
14249 12013
16512 10935
17213 2_846
19802 so98
2756o 933
34691 1590
37504 953
38496 3114
33231 14941
20484JJ
Sources Production Eoletin Banco Central del Ecuador Trade Ministerio deEconomia
Total
25781
27627
26262
27447
20059
24900
28793
36281
38458
41610
ECUAJX)R Table J
Wheat and Wheat Flour Production and Irraquorts
(thousands of kilos)
Wheat
Production Imports Exports Consumption
194o 28120 bull 73 28o47 1941 24578 36 24542
1942 24265 bull 76 24189
1943 22034 22034
1944 23251 912 24175 1945 23115 2733 180 25667
1946 25852 4532 23 30361
1947 2lo66 494f)J 11
Vfueat Flour
1938 10743 9981 na
1939 7864 16638 na
1940 7996 8-592 275 16312
1941 7225 11823 286 18762
1942 7 161 23497 161 30498
1943 7461 9862 17322
1944 5216 24023 29239
1945 5174 25137 30311
1946 7~38 11313 g 18813
1947 5943 1886) 4Y
Less than 500 kilos Y First 6 months
Sources Ecuador en Cifres a~d Ministerio de Economia
~emiddot 1926-30
1931
1932
1933
1934
1935
1936
1937
1938
1939
1940 -middotmiddotmiddot
1941 ~ )~ (1
1942
1943
1944
1945
1946
1947
1948
~iiampn-sect00-lfmiddotks
-~Jrst~middot-nsmcnths
gJ Provisional
(B EQUOR
RI03 PRODUCTION ApoundP ~OR~S
Vo1wnfJ Production middot E~orts
(metric tons)
26)04
23584
29863
39270
39008
31699
39036
52136
44027
40144 ltit middotmiddot~ 0 56596
5873
100949
ao6o7
53168
102048
112711
047
8255
3842
6449
5282
22907
8734
12)3
2ooso
962
18343 t - ~ J
20546
32028
46992
64604
29318
66918
6~209fl middot tloo 1
$ bull
tt ( r t
z
Value 3xoorts
(thousand sucres)
1881
936
6667
10864
6555
14632 pound 170
23265
51460
93837
127105
60395
203243
2rfjuft
Sources Production Boletin Banco Central del 39uador~ Trade Ministerio de Econom1a~ ~r- ~fl ]r bull ~-middotmiddotmiddotmiddot f ~~middot~---i
Average Destination 1937-41
Cuba 2
Peru 13
Venezuela 6
Colombia 4
Panama 2
Jamaica 0
Philippines 0
India 0
Dominican Republic 0
Other Countries 4
TOTALS 31
Preliminary~
RIQ] EXlORTS (in million po~ds)
1943 1944 1945
81 88 5S
20 29 0
0 17 4
~ 0
Rf 2 hi 0 0 0
0 0 0
0 0 0
0 0 0
bullbull ~ 6 6
105 142 6S
R Less than )OOOOOpounds
Table No 5
1946 ~ Jan to~
1~ June-194
46 12 24
0 0 s 17 49 )j
2 13 2
5 4 1
16 1 0
20 0 0middot
0 38 0
0
1 f4~ 2
r middot I
130 13 34
sf Ineludes 6 million pounds to Mexico and 5 million tmiddoto Greece bull middot
1[0
supound~sect8_ Foreigl Crops and Markets Offiee of Foreign Agrtcultural Relations u bull Sll~artment of Agriculture May 3l 1948 bull p bull 402 First six months of 1948 from ibid August 16 1948 p bull 120
Average 191i-15
191620
l921-25
1926-30
1931-35
193640
1940
i941
1942
1943
1944
1945
1946
1947
tf I
ECUADOR
Cacao Production and ~orts
Volume
Estimated Production ~rts
(metric tons)
n (
12108
15middot330
14652
19030
15058
17759
17689
19459
4o625
43547
36825
21319
15980
174o4
11208
14433
13762
18161
13735
16827
16526
Exports ( 000 sucres)
186o9
26073
26746
27531
16647
37424
29354
34365
40327
51794
41985
53547
74935
188208
middot)(et) middot( middot
Sourcesmiddot Estimated production Ministerio de Economia E~orts to 193~ Estadisticas de las Exportaciones del
Ecuador 1940-1942 subsequently El Trimestie Estadistico del Ecuador Number 1
1 ~ Mini sterio de Economia -bull gt(
111 t bull r r (o J bull bullbullbull 1) ( bull
ECUADOR
Coffee Production and Exports
Volume Estimated Production EXports
(Metric TohS)
1921-25 average 5147
1926-30 II 7571
193D-35 10047
1936-40 II 13811
1940 16158 14571
1941 14260 11847
1942 9016 6140
1943 14144 12340
1944 16598 14458
1945 12999 10737
1946 9948 7636
1947 12522 8970
Table 7
Value
Exports 000 Sucres)
59~9
11530
10945
18546
16J83
23827
17278
33176
35626
33863
34839
43524
Source Estimated production - Ministerio de Economia
Exports t~ 1936-40 - Estadisticas de las Exportaciones del
Ecuador 1940-1942 - subsequently El
Tremestre Estadistico del Ecuador Number 1
and Ministerio de Economia
YEAR
1937
1938
1939
1940
1941
1942
1943
1944
1945
1946
1947
ECUADOR
Production of Cotton Tobacco amp Sugar amp Sugar Imports (000 Kilos)
Raw Cotton
9237
7213
7172
8165
PRODUCTION
Tobacco
1519
1106
1875
1028
1359
Sugar
17528
22950
26950
27835
30421
27858
26799
23151
32474
33544
33480
Table B
IMPORTS
Sugar
5310
11068
12387
38
6
33
184
784
21455
3060
Sources Production of Cotton and Tobacco Ecuador en Cifres 1942
Sugar Production and Imports Ministerio de Economia
ECUAOOR Table 9
State Railways
Length Locomotives Rolling Stock (Number)
(Kilometers) (number) 1relght Passenger
Gueyaquil-Qpito 452 39 319 41
Guayenaquil-SalinaJ 150 6 22 24
-~i to-CarcbiY 222 6 23 22
Bahia-Chone 78 3 12 g
Sibambo-Azogues 117 3 6 ll
Puerto Bolivar-Piedras 155l 7 21 10
Puerto Bolivar-Pasaje 55
1199 64 4oy llG
Narrow-gauge line
gj On uncompleted line ~ito-Esmeraldas
21 Of which 4 are rail-cars
jj Of Vihich 61 are rail-cars
Source lviinisteria de Economia
1938
1939
194ltgt
1941
1942
1943
1944
1945
1946
+947
ECUAOOR
Railway Transport
(thousands of metric tons)
Products
Agricultural Animal Mineral Forest Manufactures
1639 19 3 160 122 1034
1318 143 172 138 961middot
1714 144 233 219 1472
1613 184 277 209 1543
1809 224 280 272 1631
1841 280 35a4 376 193-3
2011 250 263 299 C5J7 3
1888 29-5 350 238 2234
1941 29-9 46 bull 4 258 2170
1787 299 51 0 180 2085
Source l3oletin Banco Ce~~nu del Ecuador
Table 10
Others Total
58 3205
58 279l
298 4oso
289 4115
328 4543
384 5168
352 5248
292 5296
37middot7 5508
419 5279
Table 11
Population and Boads
Poeation Roads (Kilometers) Province Jan 1 1948 Main Secondary In Construction
Care hi 86663 1744 1191 1050
Imbabura 158896 1818 2100 1810
Finchincha 350149 4)13 3703 670
Cotopaxi 215232 642 4o6o 970
Tungurahua 222963 2290 1810 300
Chimborazo 29864o 1664 3316 2740
Bolivar 121653 1877 1294 2045
Canar 133971 580 580 1300
AZUaY 284982 1053 2190 630
Loja 238705 1140 4s6o 1430
El Oro 93752 1005 2378 650
Quay as 482843 3900 3367 3700
Los Rios 148428 933 4632 1050
Manabi 381538 3627 1lo61 1970
Esmeraldas 664o5 50 19 0 2840
Frov Orientales 181071
465891 26636 46732 2t3l5bull5
Source Direccion General de Estadistica y Censos
1938
1939
1940
1941
1942
1943
1944
1945
1946
1947
Source
r
Table No 12 ECUADOR
DISOLOS3D BUDGETARY R303IFTS AlfD EXP3NpiTURES
(Total of ordinary and extra-ordinary budgets and special accounts)
thousand of sucres)
Total Receipts
1323204
131699 6
1262710
1547624
1667455
2112614
3145318
4051038
5367822
6696647 11 ~I JJ( middot
Total Expenditures
1429134
1267687
123135middot0
1586615
1489251
2101429
3031038
4174550
5352394
6593858 bull I
aoletin Banco Central del Ecuador
-middot middotmiddot
Diff~reuce
106830
j 49309
f 1360
- 38991
f 178204
j ltll8-5
f 114280
12351middot2
+ 15428
j 10278bull9 r 7
l I 1
L
ECUAOOR EXPORTS OF PRINCIPAL COMMODITIES 1937-47 Table 13
VOLUME (thousand metric tons)
1937 i98 1939 194o 1941 1942 1943 1944 1945 1946 194711
12 200 96 183 20 bull 5 320 47~0 646 293 669 66) 218 191 153 112 144 138 182 137 168 16 bull 5 203 14~ iJI 137 129 146 118 61 123 14 bull 5 107 76 90 48 55~5 53middot3 472 34 bull 2 226 158 1)9 178 35middot511 72 bull 5 345 19~2 251 183 14bull4 13 2 112 103 12~0 132 121 1-4 16 16 15 18 30 22 28 2~0 13 01 14 1middotmiddot9 2~2 21 47 90 136 93 74 28 na
~gt i824) (1387) (944) (1036) (1981) (2516) ( 2756) (4373) (4462) (4947) _01 2849 2454 2274 2201 1201 2167 2062 2513 2446 1640 1358
Ltrates 7~3 140 76 so 3~3 )9 26 10
VALUE (thousand sucres)
610 10864 6555 14632 23265 51460 93837 127105 60395 203242 201111 49985 39bull276 37bull033 29354 34364 40)26 51794 4lt985 53547 74935 188208 24613 16703 15227 16)84 23827 17278 33176 35~26 33863 4839 43 bull 524 5bull691 7558 7t006 6448 4658 _J 107 2159 1898 2872 738~- 24355
18242 7~146 9605 86o6 6120 201 6274 6209 9264 1)02 14994 4048 4300 4298 3~866 6979 35481 23316 38043 26553 15111 979 lt363 2~134 2724 3168 8450 25613 43419 31877 18 bull 509 7125 na 8048 6 234 4981 6509 16231 22121 25191 69033 69J87 81962 4662
21989 26374 25020 24862 13425 24820 23796 28788 28107 18253 15902 trates 10165 16090 13134 38609 27208 29013 18075 809 ates 18682 35297 41204 39907 29426 25374 27476 26457 15482 24858 25334
10774 13210 13495 3 950 16869 32775 2L068 32402 30902 38326 n bull a_
164_045 169096 167148 167851 199704 298690 393115 466631 377894 537131 619859 tmiddotbull bull
Note Dash (---) signifies zero or less than 50 metric tons nly or ~00 sucres ata expressed in quantities other than weight Sourcis 193 data from unpubli~hed Zcuadorian trado stati~tics
at US Department of Commerce 1938 nnd 1939 from partment of Commerce official data Direccion Nacional de Estadistica Eruad6r en Cifras ~7 from Banco Central Boletin 1940 and subsequont ~ears from Banco Centrll jto~n sterio de Economia and from M1nister1o c Economia data furn she
Mission July 1948
~ tobacco tone JgS
articles
11res ilk
al
value of Imports by Groups 1937-Lt-5 Volume and middot~alue of Selected Individual Imports 1937-46
(Value in thousand Sucre~)
1~37 1~38 1~39 1940 1941 ~942
19~731 20~ 375 24~874 16~)65 19043 37~540 5127 7194 1958 6~4e8 5t298 8 118
12888 13Jl5 14522 17702 19556 25~152 21627 25~272 21455 28532 21619 18923 20649 21~593 25559 29437 22636 19~$13 13~505 11961 12~654 15~976 15667 18899 5~829 7 bull 524 6066 9385 833 14353
22912 )0868 24~75 27 t 750 25993 42~916 9376 1028 10038 12118 11345 13932
-bull
131643 148320 1486o 173753 149499 199715 (Volume in thousand metric tons) (Value in thous~tnd sucres)
5middot3 111 124 194 5 bull 534 6385 26 4 24
os 246 -
122 ioo i66 86 118 235 8255 6)88 7449 5076 013 14609
19 07 11 11 14 29 2187 1824 2695 294-3 29J9 8182
101 i4 i2o i09 28 51 804 llJ)6 1667 1546 577 866
~ hides amp skins amp manufactures amp miScellaneous
~~43 1944 1945
33270 70915 82984 6717 8)69 904)
31~700 43196 32~830 17073 53~400 JBoo6 15447 32~624 38797 14~88 18~388 22895 14116 11a99 9812
68928 n~l79 69-113 15856 19186 20042
217983 33ltl56 323524
78 middot 0 2 215 130 12622
09 27 775 2290
99 240 bull 25~1 337 24070 26388
23 46 67 8853 146)1 21699
09 16 10 321 349 246
~s zero or less than 50 metric tons -middotNote Columns may not ahmys add to totals because of rounding Denartment of Commerce official sources - 19)8-42 Direccion Nacional de Estadistica Ecuador en Cifras [inisterio de Economia El Trimestre Estadistico del Ecuador
1946
)1 8135
4 bull 5 )842
114 13123
46 22709
)1 639
ECUAOOR Exports by Countries 197-47 (Value in thousand sucres) Table - 15
1937 1938 1939 1940 1941 1942 1943 1944 1945 1946 1947 --middot-------middot
80458 lt2865 116t-J78 150055 196953 293081 386483 46lt-909 372~549 463~378 sa4~68J 54422 63418 8)254 1t0496 145 bull 558 168585 2)9238 267105 218018 227291 262887
26 20 65 17 2228 78 124 7)41 17173 630 610 949 1281 1055 1)98 5~526 25686 78523 85382 61478 75890 23481
2899 4955 2109 3568 162 1163 4J54 2526 4197 44~ 1450 5027 6335 4972 5i92 5285 7425 4546 7379 10286 9798 15537
1 5 5 17 57 13 291 54 444 574 6996 8 662 9188 8714 13bull764 7238 15316 13900 11223 6~07l 14503 11717 2908 12544 5 730 7896 3767 21215 22608 29233 4243 6703 7965
51 15 24 8 532 3620 1603 539 2336 11579 3749 80 207 862 4070 9991 17096 1275 17~428 6~973 27431 80541
1943 2135 5229 6039 1965 5435 3021 4827 15~702 25~137 51~854 middot 667 740 991 zo83 3358 11412 4286 4282 3~-970 13064 5~864
1799 419 2218 875 2865 12299 9644 14900 13714 9653 11655 J 89 82 2527 1247 964 326 )24 250 41141 2~985
1024 1514 1068 2205 7173 2650 2 744 8871 7694 J2 5811 17 39~ 77029 61869 43688 11945 1503 5550 6335 4108 4075 36783 61998
32) 6)3 1187 490 58 186 2164 4021 J217 35974 29595 11277 69 - 29 4411 7909 6156 3477 1183 5492 4876 26)8 359 1860 7~467
489 255 J2 100 280 1155 1239 1265 3827 3~961 20539 13t521 10802 2254 5 706 4177 6313 2bull610 3615 4251 -middot 2842 13546 lBi 1415 3 758 822 6 188 12962 3592 2531 412~ 162 7~ 10052
8643 1693 3bull521 3~400 2751 320 40 118 231 222 5404 J 4894
6337 4201 6548 5478 1175 5 45 40 1611 50950 6261 4132 5386 5452 117) -
~l - - 15 45988 5 middotmiddot 7S 8 5 25 567 92S 11
33 ~- 76 18 966 151 150 3419
38 29 858 2 45 78 467
(continuation on next naee) middot
~GUJLOR ~xnorts by Countries 1937-47 (falue in thousPnd sucres) T~ble-15 continued
middot-~--- -~-middotmiddot -middot _ middot-- ~~---~~- ---- -middot--~middot--------middot- -middotmiddotmiddot--middotmiddot--193 1938 1939 1940 1941 1942 1943 1944 1945 1946 1947 _I --middot -middot- ---~- ------ middot- bull middotmiddot-middot -
4 7 5 5 5 219 1087
218 153 529 368 73 49 297 569 1230 35140 789 28137
207 144 379 J68 73 49 297 559 1104 605 11 9 10 126 43
150 6355 plusmn
353 54045 169096 167148 167851 199704 298690 39J115 466631 377894 537131 619859
~S Columns may not always add to totals because of rounding
Dash (-) signifies zero or less than 500 sucres
Primarily Guadeloupe and Jamacia
Primarily British West Indies and Netherlands West Indies
Primarily Denmark Spain and Norway
Primarily Java
~ces 1937 and 1947 from unpublished Ecuadorian Trade Statistics at U s Department of Commerce
1938-46 from Ecuador Ministerio de Economia data furnished IBIID rassion July 1948
Imports by Countr~es 1937-1947 Table-H)
ECUAOOR
l937 1938 1939 1940 1941 1942 1943 1944 1945 1946 1947 I (()
Value in thousand sucres) ~ + -gt L520 63151 83984 115382 128423 186958 200061 311989 302~329 363403 517582 j
u t 2086 51311 71950 103214 110422 138729 103583 173776 178821 240233 429906 0
Q) f
811 674 551 2436 1815 3J258 2150 5265 6538 12178 20912 d S Ugt ro c 1 n 4 4144 3042 8 99 14 23 295 178 8~011 210 h middot-1
(- 0
186 324 237 957 2~991 8492 18~376 15~239 17232 10~574 3121 4 middot-2375 2310 1959 2476 3016 4735 7930 7~696 11~201 15~564 14755 sectwfi
middot-1 1 fli 4 6 343 1~823 3J064 4110 3~612 60J5 h 0H
2739 2109 3789 174 2352 7949 9~934 17845 23~ 616 1559t 18~727 ~rld ()
328 164 457 2498 612 733 10892 10902 20003 16684 11981 oc ampl+lll
mmiddota J63 1297 1161 -- - 2 23 115 1~128 1192 d+gt-
2464 507 500 1438 5565 20668 39979 46654 33684 33034 6~486 15~~ (()
na 1 311 2297 5515 130 bull-I m rl bull +gt
15 31 68 245 995 1516 2804 25326 6124 5956 3472 Oltll~
149 280 269 332 550 208 270 389 707 839 655 a~ sect (1) Cl 4-209 72986 ~ 38 09 1433J 9813 16276 15885 1721~9 45194 80928 ~-g 1701 35767 2 7 7 33 1202 67 47 61 19 2 El 0 0 eo g 3250 11462 8094 12980 10124 8108 13634 12513 11984 28392 40983 cent1-t+l~
1803 718 1687 otmiddot r-
4-114 6465 7339 630 475 34 22 2 66 889 7279 t -P () ~led
36o 4685 1573 7144 308 12 682 4824 rlltll ltDno
1~896 2550 1466 1624 64 1 58 5090 bull-1
fJ ~ ~ 1052 1489 794 945 293 224 5 21 1373 9062 9 703 P + na 868 881 423 10 1 8 223 135 r- 0) u
1 r=l middotr-l
1162 4823 1264 1675 877 1017 1~52 2380 3129 4~326 6851 () l=l rl
7274 3074 2609 3595 980 349 1041 905 599 1~543 3~134 cn~oo bull t
724 11939 8983 19951 6239 2281 1439 304 3882 5478 5736 op a cent1-t ~sect rl
173 302 262 238 -w 14 276 -rr 472 ---s9l ctillmgt
259 10949 7810 18190 4414 170 16 4 5 +gtUd ~-- ~
935 712 728 1278 1281 1715 1314 2685 3185 4465 3151 +gtP t-1
530 105 143 221 306 240 95 89 582 541 2089 ~ (f)
1l 21 12 80 1f 196 122 169 125 1J n ~-T~
0
109 218 lllL 250 m 46 sect2 12_ 28 119 112 I ~ --sB_l_ 0 ---- -
643 148315 147860 17353 149499 199715 21 ~ 983 331156 323524 414266 604479 ms may not a1ways add up to t ta1s because of rounding Dash (-) signifies zero or less than 500 sucres ~ country breakdown not given in source g) of which 591 from Syria 2Z3 from China 264 from Straits Settlements 1 Sumatra and 264 from Iran
YEAR
1937l
1938t
1939~ -
1940amp
194H
1942
Exports Imports Balance
Exports Imports Balance
Exports Imports Balance
Exports Imports Balance
Exp(rts Imports Balance
Exports Imports Balance
ECUAroR Balance of Trade by Area 1937-47 (thousand sucres)
fRlSTERN HEMISPHERE including Philinuines
United States Other Total Eurone
54~lt-22 26~036 80~-~-sa 77~029 52086 9~434 61520 64~209 2336 16602 18938 12820
63418 39447 102~865 61869 51311 11840 63151 72~986 12107 27~607 39714 -11117
83254 33124 116~378 43688 71950 12034 83984 54505 11304 21090 32394 -10817
100496 49559 15Cl055 11945 103214 12~ 168 115382 38~090 -2718 37391 34 673 -26145
145 bull 558 51395 196953 1503 110422 18001 128 423 14333 35136 33394 68530 -12830
168585 124~496 293081 5t550 138~729 48229 186958 9 813 29856 76267 106123 -4263
Table 17
Other Countries World Total
6~559 164045 5-912 131643
647 32405
4361 169~096 12~ 178 148315
- 7817 20781
7082 167148 9372 147860
-2290 19288
5851 167851 20281 173753
-14430 - 5902
1248 199704 6743 149499
-5495 50205
59 298690 2944 199715
-2885 98975
NOTE Areas may not always add to world t~tals because of rounding
Source 1937 and 1947 frlttm unuublished Ecuadorian Trade Statistics at US Department of Commerce 1938-46 frem Ecuador Ministerio de Economia data furnished Mission July 1948
(Table 17 continued on next page)
YEAR
12J Exports Imports Balance
1944 Exports Imports Balance
125 Exports Imports Balance
1946l) Expltgtrts Imports Balance
12Z= Exports Imports Balance
ECUADOR~ Balance of Trade by Area 1937-47 (thousand sucres)
WESTERN HEMISPHEL~ (including Phili~ines United States Other Total EuroQe
239238 147~245 386~483 6335 103583 96~478 200~061 16276 135655 50769 186422 -9~941
267105 194804 461909 4~108 173776 138213 311989 15~885 93329 56591 149920 -11779
218018 154~531 372549 4075 178821 123508 302)29 17159 39197 31023 70220 -13084
227291 264224 49J515 36783 240~233 123170 36J403 45~194 -12942 141054 128112 -8411
262887 241796 504683 61998 429906 8676 517582 80928
-167019 154120 -12899 -18930
1 Only year in which substantial Philippine trade
NOTE Areas may not always add to world total becasue of rounding
Table 17 (oonttnued)
Other Countries World Total
29 393115 1646 217983
-1)49 15132
614 466~631 3~282 331~156
-2668 135475
1270 377894 4035 323524
-2765 54)70
8~833 537131 5670 414266 3163 122865
53179 619859 5969 60449
47210 15380
Sources 1937 and 1947 from unpublished Ecuadorian Trade Statistics at us Department of Commerce 1938-46 from Ecuador Ministerio de Economia data furnished IBRD Mission July 1948
~ EXCHANGJ-tAL BANK
ECUADOR Exchange Reserves amp Banking Position (million sucres)
r 4 bull TIC CQEDITS OF CENTRAL BAl~K Domestic Govt Official Bus Other Credits
MOliEY SUPELY Current AC
JJj To()2f (4) Entities Indvls Total Banks of O~mtl Currencl Denosits l (6) (7) (8) (10) (5) Banks amp 11
Indvls (9)
16 10 26 51 1 116 62 64 48 26 7 40 73 4 129 74 66 3middot7 )9 7 29 66 4 144 73 71 37 29 8 24 62 4 159 78 73 56 26 8 22 55 5 183 8l 103 81 37 28 2 8 201) 120 119
152 37 21 22 79 9 255 169 17~ 26) 34 27 22 83 13 378 ZJa 26e )4 60 37 20 117 9 385 295 308 Z5 105 73 11 189 26 493 321 312 282 153 81 10 244 24 536 35middot~ 354 242 104 44 93 241 2 565 329 284
221 110 51 99 260 2 56 313 278 215 102 47 101 250 2 573 )06 294 225 97 45 95 237 2 585 299 299 219 100 44 98 242 1 591 307 297 214 98 35 111 244 4 6)4 315 295
)20 295
on of $12500CC beginning in December 1946 bull
ars
Ttttal (12)
127 14) 144 151 183 239 345 492 602 634 704 613
591 599 597 604 610 614
ge liabilitieS but including Stabilization Fund in 1945 and GolC CertificCt in 194) bull ial banks and fomento banks ial bc1nkst and fomento banks sits of commercial banks and time deposits of fomento banks
Table 18
Govl t Den sits ~L
(lJ)
6 23 12 27 7 28 8 31 6 32
middotmiddot 11 )6 16 57 27 71 41 74 63 98 59 90 66 77
71 8 75 76 6 75 81 75 81 72
72
1 1 Boletin - Superintendencia de Bancos Boletin - Unpublished data furnish~d MF bY Banco Central of Ecuador
Table 19 ECUADOR
Price Indices
WHOLESALE Rents Export Fooa in
YEAR Goods and Quito - Coal ~1) (2) (3)
1937 100
1938 83 100
1939 95 100 153
19h0 95 106 16h
1941 96 113 150
1942 114 146 172
1943 114 183 187
19h4 118 218 219
1945 133 266 254
1946 203 320 315
1947 297 364 516
19h8 (March) 294 379
(liay) 416
(July) 389
llame l~umbar
Republic of Ecuador
Status of u s Export-Import Bank Loans to ~cuador
Purpose
gs of Junemiddot10omiddotl9ltsect
Gross Authorized
Cancel- Net lations Authorized Repeid
Amount Amount Outstandin~ Undisbursed
6J048 6J048
( 262 )16
Haterials equip amp services $ 6480000 $20810 $6459170 $1279775 ~)5-l19middot395 _____ _
ibulliunicipali ty of iui to (Republic of Ecuador)
ibullIunicipali ty of Guayaquil (Republic of Ecuador)
Republic of Ec~ador
Republic of Ecuador
Ecuador DeveloPIlent Corp
Pan-American Highray (Cuenca-Loja)
Agricultural Research amp Experiments
Raihray Equipment
5000000
12JOOOO
50000 200000
)28 Haterials equip ~~ 4000000 services - ater 1middot1orks
)28 iltiaterials equip amp services - ~~rater orks 4000000
J4J Pan-American High1middotray (Guamote-Tambo)
432 uevedo-Hanta Hightmiddotray (additional credit)
1980000
220000
$19180000
Of tlhich $2500000 tts used on the Quevedo-Ibullianta HighTaY
4000000 28880
4000000 167
-1 t-9amphOOO- -7500
220000
6o6120 -h365000-middot
41592 575-t 2-41
-l-y5Q2- 500 44Gooo
220000
IBRD Statistics Sectio spte~ber 24 1948
I
II
III
IV
TABLE OF CONTEUTS
Page
Strclla~r bullbullbull bull bull bull bull bull bull bull bull bull bull bull bull bull bull bull bull bull bull bull bull bull bull bull bull bull bull bull bull bull bull bull bull bull bull bull bull bull bull bull bull bull bull bull bull i
GeogrSl)hiC bullbullbullbullbullbullbullbullbullbullbullbullbullbullbullbullbullbullbullbullbullbullbullbull
Occupations and Income bullbullbullbullbullbullbullbullbullbullbullbullbullbullbullbullbullbull
~icultural Production bullbullbullbullbullbullbullbullbullbullbullbullbullbullbullbullbullbullbull
(a)
(b)
The Sierra The Coast
Mineral Production
l
5
8
14
19
V Manufacturing Production bullbullbullbullbullbullbullbullbullbullbullbullbullbullbullbullbullbullbullbullbullbullbullbullbullbullbullbullbullbull 20
VI
VII
VIII
IX X
XI
Domestic Trensport and Commerce bullbullbullbullbullbullbullbullbullbullbullbullbullbullbullbull bullbullbullbullbull 24
(a) Tran~ort bullbullmiddotbullbullbullbullbullbullbullbullbullbullbullbullbullbullbullmiddotmiddotmiddotmiddot~middotmiddotbullbullbullbullbullbullbullbullbullbullbull 24
(b) Commerce bullbullbullbullbullbullbullbullbullbullbullbullbullbull bullbull ~middotmiddotmiddotmiddotmiddotmiddotmiddotmiddotmiddotmiddotmiddotmiddotmiddot~middotmiddotbullbullbull 25 Official Development Finance bullbullbullbullbullbullbullbullbullbullbullbullbullbullbullbullbullbullbullbullbullbullbullbullbullbull
Government Finance and Inflationmiddotmiddotmiddotmiddotmiddotmiddotmiddotmiddotmiddotmiddotmiddot~middotmiddotmiddotmiddotmiddotmiddotmiddotmiddotmiddotmiddot
International Trade and the Balance of Payments bull bullbullbullbullbullbull
External Debt Record bullbullbullbullbullbullbullbullbullbullbullbullbullbullbull bullbullbullbullbullbullbullbullbull
Political
Statistical Anpendix bullbullbullbullbullbullbullbullbullbullbullbullbullbullbullbullbullbullbullbullbullbullbullbullbullbullbullbullbullbullbullbullbull
30
34
4o
48
51
IT07E Sou~ce of E James Used by
r~~e fran nLatin 11middotterica1 - br PCPston co-rricht 112 by the y PYPSs Inc
sion
0
ECUADOR AND SOUTHERN COLOMBIA SU~fACE CONfiGURATION
~ANDES lf-IINTERMONT BASINS
E72j COASTAL HILLY BELT
1lt-J PLAINS AND LOWLANDS
A CHIEF VOLCANIC PEAKS
0 GUAVAS RIVER I
T TULCAN RIVER
Q SCALE 0 I
MILES
ECUADOR AND SOUTHERN COLOMBIA POPULATION
URBAN bull MORE THAN 100000 bull LESS THAN 100000
RURAL bull EACH DOT ~000
SCALE I
MILES
BBOdVAR LR LOS R (os
100 I
CAUCA
ORIENTE
middotmiddotmiddotmiddotmiddotmiddotmiddotmiddot
SUMMARY
1 In terms of national income per capita Ecuador is one of the
poorest countries of the world Nor are her known but unexploi ted natUro
resources strikingly rich Her best potential resources are agricultural
owing to geographical configuration she can obtain the output of temshy
perate agriculture for domestic consumption and of tropical agri~~ture
for both domestic consumption and export She might also be able to
d~velop a cattle industry for supply of neighboring republics
2 Although socially and culturally as old as other Spanish Americm
Republics Ecuador is very young economically~ The Panama Canal bringing
her close to the Eastern United States and Europe was opened only 34 years
ago She has very little of the techlical and administrative skills and
abilities that underlie modern economic processes She is very poor in
capital equipment of all types And her Government is inexperienced in
the exercise of the modern economic functions of the State
3 The population of Ecuador is nevertheless increasing at about
2 per cent per annum and in the Sierra where 6o per cent of the populashy
tion is locatedt is already pressing against local focd output The situashy
tion is one which may be temporarily eased but cannot be finally solved by
extension of arable area in the Sierra except where such extension is
accomplished througf) irrigation Of basic importance is improvemm t of
arable farming practice in the Sierra valleys to obtain ~better yields
from land already cultivated Use of agricultural machinery would
- i ~
probably not achieve this unless accompanied by other more fundamental
chanesp in seed types crop rotations and fertilizer use Unskillful
employment of heavy agricultural machinery to bring into use higher ground
now unutilized would carry considerable danger of soil destruction tnrough
wind and water erosion
4 Non-subsistence coastal agriculture is in part an important
foreign exchange earner and in part a source of products also imported such
as sugar cotton and tobacco No export crop other than cacao enjoys an
established position in overseas markets and cacao production has not
recovered from disease losses impacting in tne 1920s Rice exports
expanded greatly during the war but retention of roarkets is doubtful
Coffee expoi lts have been increasing in value but not in volULle rem--ining
agricultural exports are at present minor non-staples
5 Expansion of coastal agriculture is rather a matter of illproving
the farming environment (in transport crop processing and credit facilishy
ties) than farm practices themselves ~1ile the coastal area is relatively
thinly populated (particularly ~hen compared i th Far Eastern tropical
areas) it is not yet clear apart from a few crops how mechanization
could be applied to offset a small labor supply This may prove to be a
key technical question in the development of coastal agriculture lll
economic problem is to identify and foster the products of good ~~port
prospects rather than those of probable decline
6 Exports of minerals and petroleum are a ~inor item In 1947 they
represented only 45 per cent of total exports exports of petroleum have
declined steadily with increased do~estic consumption of petrol
- ii
7 Apart from a few important consumer-good industries such as tex-
tiles Ecuador is not an industrial country Her manufactures are largely
in a handicraft stage that of panama hats provides an important export
commodity Power prodllction while deficient does not at present seem a
real obstacle to economic development~ which at this stage is principally
an agricultural problem
8 Changes of farm practices will however take time partly be-
cause of the educational problem in Indian collliDllli ties partly because the
provision of improved seeds and the -working out of new safe tillage pracshy
tices carmot be quickly accomplished While the work rh ould be taken up
immediate action in stimulation of development would not center upon the
farm itself but rather upon improvemm t of services middotsurrounding the farm
notably roads irrigation crop processing and storage and rural credit
facilities
9 Such immediate action might be supported by establishment of
multi-purpose rural machinery pools equipped with machinery and personnel
to undertake not only farm operations but also local road-building end
irrigation works work upon the various activities being fitted into the
farming calendar The actual use opound farm machinery would then be conshy
trolled by experts whose ear~ work might be mainly experimental and
demonstrational
10 Voluntal saviftgs directed lnto productive use ere small and a
large part of domestic development axpendi tUes att necessarily by Govern
ment or through GoverrJ~DSnt agencies In con~nce thefe 11 constant pres
sure toward inflation pressure which in the GovemmeDl sector has beea
bull 111-
offset during the past sixtem months by application of special exchange
tax revenues in reduction of Government debt to the Central Bank Ver-J
recently however 90-rer cent of these revenues has been diverted to finarce
of development with consequent renewed danger of monetary inflation v1hen
total Government finances no longer run a surplus
11 These special exchange revenues derive from a multiple excharge
rate system installed in iilay 1947 (with IivF advice and concurrence) to
meet rapid loss of foreign exchange reserves The system has bern successshy
ful in slowing the rate of loss bull but not in colq)Jetely preventing it midshy
year expectat ions were for a loss of foreign exchange of some US$ 5 million
in 1948 Recent action reclassifyinamp i~crts may reduce this e~~ected loss
12 The balance of p~ents position at present difficult and no
great easement can be expected It is improbable that Ecuador could safoly
assume any large additional debt burdens At the same time her ability
effectively to absorb and use loans directed tmmiddot1ard increase of production
is limited bya present lack of technical and administrative abilities
Here iLiprovement though clillilllati ve is necessarily slow at first
- iv-
I GIDGRaPHIC
13 Ecuador has common boundaries with Colombia on the North and
Peru on the East and South The greater part of the country lies immeshy
diately south of the equator which passes 13 miles north of Quito The
area of the country has never been measured but is estimated as 150 COO
square miles ri thin the frontiers resulting fror1 the war with Peru in 1942
the area west of the Andean crest is about 60000 square miles
14 Ecuador is divided by nature into tru-ee separate reeions of
which only two are in effective occupation
(a) The sea-coast plain (about 28000 square miles and about 425
miles long by 62 miles in width) is composed partly of swampy
lowlands and partly of low hills most of the region being
less than 1000 feet in altitude I the north it shares tbe
double rainy season of Colombia and is covered with dense
forest Not far south of the borders of Colombia the double
rainy season ~ves way to a single rainy season from Decemshy
ber to June as one goes further south the rains begin later
and end sooner until at the extreme south desert conditions
begin stretching onward into Peru ald Chile As the rainfall
becomes less the vegetation changes from wet forest to dry
scrub forest and savanna until in the south settlement is
limited to irrigated areas
Temperatures in the region are modified by the cold-vater
-2-
Humboldt current and are more pleasant than latitude alone
would suggest
The coastal region produces almost all the export commodities
of Ecuador its people are largely mestizo strongly conscious
of nationality and commercially active Its major port
Guayaquil (population 1942 154000) is larger than ~ito
(population 1942 139000) and is the commercial capital
of the country
(b) The Andean Highlands or Sierra (about 25000 square miles)
comprises the second natural region and forms the physical
backbone of the country There are two high corderillas
surmounted by towering volcanoes and separated by a series
of ten large intermont basins lying in a north-south line
seven are linked to Guayequil by railway Each basin is
occupied by a dense JOpulation 1hich is almost pure Indim
Only in ~ito and Cuenca are there any important number
of people with Spanish ancestors and these are either
office-holders in the Government or landowners with large
private estates
(c) The Oriente (Amazonian region to the East of the Andes) is
not yet part of the effectively occupied area of Ecuador
Its jungle inhabitants from time to time spear the
agents of the Shell Oil Company who are prospecting
for oil
3
In 1942 official Government figures for these rerions were
Area Population middot Density Square of
Kilometers middotmiddotNumber middot Ponulation
Sierra 70344 23 11686748 61 268
Costa 68633 23 1JooOl8 33 14 6
Oriente 153143 51 189005 6 12
CalapagS Islands 7880 j 2192 a 0~2 -Miera tory 4115 a middot-
300000 100 3089078 100 102
15 Very little however of the total area is under cultivation
It was estimated in 1916 that about 90 ~)er cent of the coast and 60 per
cent of the Sierra was suitable for cultivation that is about 25000
and 1)000 square miles respectively Of the total of Loooo square
miles of cultivable land~ only about 1$000 was under cultivation in
1946~
16 No census of the population has ever been in Ecuador
In 1892 estimated nopulation was 127 million in 1942 309 million
and in January 1948 3L7 million with crude birth rate of 379 oor v ~ thousand and crude death rate of 201 per thousand in 1942- Estimated
composition of the 1942 population was
a less than 05
Yhi te Mestizo Indian Negro Iulatto Other
100 per cent l-t10 ner cent 390 per cent 50 ner cent 5 o Per cenmiddot~
1000 ner cent
Just over half these deaths oc~urred in the are rroun of 0-4 years in 1942
4-
17 At the same date the literacy rate was estimated at 20 pe~ qent
s~i~literacy at 20 per cent and illiteracy at 60 per cent
-5-
II OCCUPAmtOUS AND INCOivES
18 There having been no census there is no at~curate information
under this beading
19 The Economic Department of the Ecuadorian Central Bank has esti-
mated that of a total population of 334 million in 1946 1285000 or
J9o per cent were gainfully employed in the following occupations
Agriculture Forestry etc
Mining
Building and Repairing
Manufacturing and Processing
Services (communication comshymerce government etc)
820000
10000
6oooo 10000
325000
5 5
26
100
20 No valid estimate of national inco~e exists At the request of
tne International Monetary fund the Technical Adviser to the Central Bank
of Ecuador Mr L A Carbo estimated national inccue in 1946 as 20096
million sucres or US$ 149 million Although this estimate is probably too
low ] it is clear that national income is very small Ecuador is very
low on the list of income per head among Latin American countries its
income per head is in feet among the lowest of countries of the world
21 Income is very unevenly distributed A survey made in 1943
yielded the following picture
g lror reasons Sdvanceit below Paragraphs 87 and 88
~ pt WI
-6-
To tal Monthly Average Monthly Population Income Income per Fw~ly
Number of Amount t tount People (SUcres) (Sa~res)
Upper Cla~s 4oooo 133 28000000 144o 2300
Middle Class 96oooo 3200 96000000 4950 4 L ~ 00- middotJ~
Lower Class 2000000 6667 70000000 3610 140 -- -~
3000000 10000 194000000 10000 10000 yenSliP C_~ ~
Note At the ofDcial rat~ of 1350 suc~es to the US$ average monthly incomes per family are equivalent to approximately $2J7 $30 and $10 respectively
~ Uneven distribution of incoue is of course largely a conse-
quence of uneven distribution of property Some ideas of the distribution
of rural property is afforded by analysis of re~urns made in payment of
rural property tax Such tax was paid by only ll2l4o proprietors in 1944
whose holdings may be summarized as follows
Per cent of Value of Rural ProEerties Number of Proprietors
916 4o
29-33 llOO
3041 10400
2030 37200
1080 634oO
10000 112J4o
23 Such statistics do not of course carry one very far beyond
the general observation that income and wealth is very unevenly distributed
and that much is obvious from a little travel in the country But it should
-7-
be said that comparing observations in Ecuador vrith those made in Peru
and Bolivia Ecuador by subjective judgment compares very favorably with the
tvo latter The Ecuadorian Indian seems to be on a perceptibly higher stan-
dard of life both in the highlands and on the coast than the Indians seen
in Peru and Bolivia Vhile his land holding is small it yields somethi1e
he very freqjl ently possesses livestock such as pigs and chickens has cot-
ton clothing drying on a line a~d often cultivates flowers and keeps
pigeons By American standards he is undoubtedly on the poverty level by
Latin American standards he may be a little off it
24 At the other end of the scale the wealthy upper class are pro-
bably not as wealthy as the Peruvian upper clas~h and the Bolivian elite
in operating in poundcuadc~the upper class lacks the rich property of mines
Thus while income is of course unevenly distributed in Ecuador as else-
wnere the range between the wealthy and the InJian may well be less tban
elsewhere The line of income distribution is of aboat the same slope
but probably significantly srJOrterY
This conclusion cannot be demonstrated statistically It results from a 11feel 11 deri ved from personal observetions in the respective counshytries
-8-
III AGRICULTURAL lROIDCTION
25 Ecuadorian development is largely a matter of increasing the out-
put of and improving internal and external trade in agricultural products
There appears to be no enduring geographic or physical reason ~middotby this can
not be accomplished She possesses soils and climate ranging from the
tropical to the temperate soils which in some areas are very fertile and in
others are in danger of exhaustion To anticipate subsecpent conclusions
her problem of development through agricultural progress breaks doTltD into
separate aspects all involving improved technique
(a) increasing arable yields from areas already cultivated
(b) improving pastures and stock in grazing areas
(c) enlarging both arable and pastural areas (including irrigation)
(d) improving roads in rural areas
26 Achieving these objectives involves providing more adequate
domestic credit for short- medi~ and long-term agricultural requirements
27 In application however interpretation of these problems is very
different in the two occupied regions of the country the Sierra and the
Coastal Lovrlands no generalization can cover both
(a) TLe Sierra
28 The occupied inter-Andean valleys are a region of temperate
agriculture producing almost exclusively for local consumptionmiddot Their
pat tern of tilled fields grazing land trees and flowerJl is almost
Y Flowers bloom all year round The main tree is the eucalyptusmiddot introshyduced some 70 years ago end used for all purposes (~indbreaks fuel 1
and lumber) affording a striking example of the effect of introduction of one plant upon regional habitability-
-9-
Western liiuropean in appearance but not unfortunately in productivity
Agricultural Production of the Sierra
1939 194o 1941 1942 - -(Hundreds of pounds)
Theat 49QOOO 611300 534300 527499
Potatoes 1201000 1476400 1386120 1146000
Rye 72500 79900 159495 115000
Lentels 46000 424oO 37955 csooo Corn 816700 1349300 1308062 1315200
Barley 85)000 795700 903600 911000
Cotton 45000 42020
Kidney Beans 80000
29 In addition about 1000000 hectares (247 m~llion acres) are
devoted to pasture supporting epproximate1y 683000 cattle 145 million
sheEf 107000 STrrine and 320000 goats
30 Yields are low in all Sierrean agricultural activities the
standing VJheat and barley crops are so thin that the ground can be seen
through them Yet the greater part (some 6o per cent) of the people of
Ecuador live in the Sierra and population is increasing at about 2 per
cent per annum The effect upon land use under existing tecnniques is
clearly visible cultivated areas are being pushed higher and higner up
the hillsides (slopes of 30 to 40 degrees being used) and onto the
fJparamon the high plateau betvreen adjacent valleys at altitudes of
11000 feet and higher The result is a picturesque scene but one which
reveals a near Malthusian situation in the man-land ratio rbullrith static
-10-
technical practices It is a situation which cannot remain unchanged if
economic development is to occur in the region
31 There sean to be three possible lines of advance increase of
output from highland areas in present use the bringing into use of new
ground in the highlandsbull or a change to increasing reliance upon the outshy
put of non-highland areas
32 The third possibility is not one for the immediate future It
involves either large-scale migration from highland areas to lowland
regions or a large transport program linking highlands and lowlands
together with growth of non-~ricultural activities on the highlands to
provide a cash income with which to purchase 11 imported 11 foodstuffs This
second possibility may indeed be the trend of ultimate development but
offers no irmnediate easement Large-scale internal population movement
from highland to lowland is probably impossible since the Andean
Indian (of different stock to the coastal Indian) is fullf acclimatized
both mentally and physically to life at high and temperate altitudes and
little suited to life on tropical lowlands
33 The two remaining lines of advance would both seec to increase
highland agricultural output But there is an important difference beshy
tween increasing output from valley land in rr esent use and bringing new
and higher land into arable use The first is a complex problem suscepshy
tible only of relatively slow solution the second is seemingly simple
and capable of quick result yet basically less sound offering only
temporary improvement
34 The thurst onto higher ground is already evident and the area
-11-
taken in could probably be greatly enlarged by efficient use of tractors
and modern plows Such use of mechanical equipment would thus give quick
increase of agricultural output but it is very doubtful whether improveshy
ment induced by these means alone could be long maintained The greatest
~r particularly on sloping land is that deep plowing may lead to
soil erosion so serious that land becomes finally llilgtroductive To use
mecbanical equipment i thout at the same time adopting eqJally modern
methods of soil conservation way well be disastrous and that perhaps
within no long period
35 Even apart from this physical daneer there is the virtual cer-
tainty that new land however plowed would gradually sink in fertility
end hence output unless farmed by better agricultural practices than
those now followed in highland Ecuador The present attraction of the
higher land is principally good natural fertility beine virgin ground
On all other counts this higher land is less advMtageous than the valley
floors the va)ley sides are steeply sloping a1d the fl~t paramo is some
2000 feet higher bare windswept and devoid of habitation It would
seem obvious that it is pastoral rather than arable ground were it not
for the pressure upon arable output of the region
36 The pressure today however rises from the relation betwem
popUation and output rather than that betvreen population and arable
area Productivity in the Andean valley is low and can certainly be
improved If improved the pressgtlre which is causing the thrust to
higher ground is relieved until population increase again overtakes outshy
put Against that time however the higher ground vrould remain
-12-
availfibleY and other lower regions may be coming under effective use
37 To increase output of the populated valleys is not a simple mat-
ter responsive to single policies such as simple mechanization by tracshy
tors It will embrace the wlo le range of agricultural practices from
better seed types to crop rotation and fertilizers including in some
valleys irrigation It is a matter rrther of agricultural education
than of~dtlgagricultural appliances and probably experiment under
the peculiar regional conditions will need to precede education Improveshy
ment will necessarily be slov1 but along these lines it can be sound and
permanent
38 Wher~ lfL mere importation of mechanical methods Vi thout
understanding of their dangers in speeding soil destruction by wind and
water erosion may permanently damage the region The somewhat gradual
mechanization of agriculture is of course to be expected and not disshy
couraged but it is not the wlole answer to development in highland
Ecuador
39 It seems that there is at present no over-all agricultural
lfibor sl1ortage in the Sierra and mechanization is nOt therefore called
for to relieve an adverse manpower position It seems however that
some of the larger estates are experiencing difficulty in obtaining their
labor requirements because Indian tenants are viitblolding quasi-feudal
labor dues and devoting whole time to cultivation of their own plotsbull
As a result hacienda holders are attracted to mechanization as an
escape from growing difficulties in obtaining and supervising labor upon
Y As it would not if destructi ve1y formed at this stage
-13-
their ovm land To the extent they are successful the tendency for agrishy
cultural money vrages to rise is weakened
4o There vrould seem to be good possibilities of increasing pas-
toral agriculture in the highlands 1Jrith improvement in both numbers and
strains of cattle and sheep If adequate arable development occurred in
the valleys the main grazing grounds could be the higher land not then
required for arable purposes ~lith dairy cattle on the valley margins or
on valley ground not well suited to arable use Such pastoral development
would be desirable not only to imp1middotove nutrition in Ecuador itself 1 but
as a possible new export of meats fats and hides to meat deficient
Republics notably Peru Early export would probably be on the hoof
along the Andea1 ridge it self
41 The Ecuadorian Government has not included any explicit propo-
sals for highland agriculture (other than irrigation) in its present apshy
proach to the Bank It has however suggested the Bank finance $1 mil-
lion of agricultural tractors and equipment to be handled by agriculshy
tural stations located at strategic places both in the coastal
provinces and the highlands 11 without further elaboration of the
intended highland use of such ecp ipment The description given above
suggests that the usefulness of agriculture machire ry depends to a conshy
siderable extent on the place plan and purpose for rhich it is to be
used
42 In some of the highland valleys (for example in Cotopaxi end
~ound Biobamba) rainfall is deficient and irrigation would increase
valley output by bringing more valley ground into effective use This
- 14 ~-
is clearly sound for flat valley ground already populated is more useshy
ful than higher sloping and more exposed ground The Ecuadorian Govern
ment has included purchase of eq1 ipment for irrigtion works to the value
of $500000 in its present approach to the Barik Assessed against the
requirements for economic development the request is sound provided of
course such equipment is effectively used
(b) The Ooast
43 The condition and nationel significance of agriculture on the
tropical coastal plains is quite different from that ltNl the Sierra The
area as a whole is less densely populated and in some parts such as the
Province of Esmeraldas is very sparsely populated Its principal pro-
ducts are exported The population has more mixed blood than the highland
people and is oore corumercially active and minded There is little feel-
ing of community of interest with the highlmds the rrincipal coastal
city GuayaqJil is larger than Quito and less remote fror-1 outside
influence
44 In terms of reported area devoted to its cultivation cacao
is the principal crop of the coast The table on the following page
shows output of main crops
45 Cacao is not however the most important export crop by value
being surpassed by both rice and panama rats (a handicraft product of the
region) Nor does the table show those products which result from
gatherage of mild growth tagua kapok oil-bearing vegetable nuts
balsa rood rubber etc
Y For use by the Caja de Klaquogo as required both in tile highlands and on the lowlands
-15-
46 Agricultural Production of the Coast
1939 ~ 1941 1942
(limdreds of pounds)
Rice 957164 872890 12304oO 1610489
Cacao 392000 263300 333250 315782
Coffee 343800 369000 310000 190633
Bananas (1000 bunches) 4090 3913 4568 4265
Oranges (COOs) 103000 lQ96oO 80550 75000
Cotton 200800 156800 155910 111500
Tobacco 24o43 4o 765 22349 29539
47 It has been estimated that about 500000 hectares (1 235 500
acres) are devoted to pastures on the coast supporting approximately
425000 cattle and 36000 swine
48 There is no doubt that the coast is an extremely rich agricul-
tural area although toward the south it is increasingly hampered by
shortage of water in the dry season And rt is overwhelmingly the
principal foreign exchange producing region of the country Yet it is
largely undeveloped by any modern standards lacking roads and almost
all basic civic amenities (water supply sewage paved streets etc) in
the provincial towns The development of a tropical agricultural region
without large labor supply _rill raise many interesting and some new
J Irrigation ~rks are in execution and others planned in various places and the irrigation equipment which it has bee11 suggested the Bank might finance would presumably be used on the lovlands as well as the highlands
-16-
problems the solution of hlch in detail may lack precedentY The
suitability of cacao to Ecuadorian conditions arises in part from the very
small labor requirements of the crop At bottom advance will lie along
the route of crop improvement and mechanization the difficulty will be
the proper application of mechanization crop by crop Some tropical pro-
ducts may never be suitable for mechanical cultivation being those whicl
would require intensive hand cul ti vat ion and may therefore not be appro-
priate for Ecuadorian condttions Others r1JJi3 be suitable only if grown on
relatively large plantations
49 Clearly for the foreseeable future many lowland products will re-
main at the stage of gathering of nld natural growth rather than plantashy
tion enterprise The flow to market of such productswould be increased
by improved access notably road core truction anQ at the same time road
building ~~uld seem to be a condition precedent for spread of plantation
methods particularly plantations using mechanical equipment lilliE diate
measures for the over-all agricultural development of the region may not
be directly agricultural at ell they are rather the provision of roads
and transport facilities the provision of long and medium term agric-llshy
tural credits and in some areas) the institution of health services
With the opening up of the region in this manner iiould come more clearly
perceived opportunity for better agricultural use of the land particu-
larly if effective demand for the products is transmit ted back to the
cultivator through establishment of product processing plants where approshy
priate for example in vegetable oils and tagua (vegetable ivory)
] This is the situation which in Brazil for example in an earlier technical epoch was 11 solvedll by importation of Negro slave lebor
-17-
50 As in the Sierra there are good possibilities for pastoral
development on the lowlands Some progress is already being made in this
direction with experiment in breeding more suitable cattle types through
crossing 11Ji th imported Indian brahmin strains Grazing for beef is not
highly labor intensive and this development is very promising since
export to other Republics by sea llould be reltti vely easy In the first
stages export would presumably be upon the hoof ith later development
of meat packing
51 There seems to be no single bottleneck or restraint upon devel~
ment presently existing all other conditions being favorable If developshy
ment occurs it will be along many simultaneous fronts but the front iJhiclf
is lagging and Inayen continue to lag is the provision of basic social ccp ishy
tal (roads water supplies health services etc) that is of those
things which no single private individual or corporation can provide for
itself Given these and the institution of suitable domestic credit
fecilities the rest may be accomplished by private domestic ini tiat1ve
52 The development plans of the Ecuadorian Government as outlined
in a Memorandum dated April 8 give much weight to lowland agriculture
The establishment of agricultural stations to provide farmers wi~h
disease-resisting cacao plants~ tecl1nical advice and credit facilities
is CD ntemplated no foreign exchange would be recpired all funds being
local currency The rehabilitation of cacao formerly a leading export
crop is desirable although development of cacao sources elsewhere may
prev~nt recapture of the position formerly held by Ecuador
53 A proposed agricultural mechanization programwoUld total
- 18
$25 million in foreign exchange cost )J The bulk of this ($1 5 million)
is allocated to wechanization of rice cultivation alone the benefit being
principally in resulting improved export position The remainder $1 milshy
lion is for mechanization of other agricultural produc~s apparently
mainly lowland (those products specifically mentioned being 11cotton sugar
oil-bearing seeds and other specified products11) the exclwnge benefit
forecast being principally through reduction of import a
54 Different criteria ~~ould be used in assessment of these two
projects The judgment on that for rice will depend upon forecast of
world rice markets and in particular upon expectations regarding rorld
demand for rice from the dollar area The validity of mechanization in
cotton sugar oil-bearing seeds and other lowland products will depend
first upon the technical possibilities for such mechanization a matter
not yet fully explored If sudl technical possibilities are favorable
effective mechanization vOuld constitute sound development upon the low-
lands which are relatively sparsely populated
Y Some part of which would be for the benefit of highland agriculture if machinery stations be established there
--19 -
IV MI-~RAL PHODUCTION
55 Ecuadorian mineral nroduction covers only a few products and
important the wells of the lowlands being exploited by the nglo-
Ecuadorian Oil Comany Production of crude petrolewn shows a slicl1t
rising tendency while exnorts have declined steadily a~ more refined 1
products are consumed domestically
56 Oil exploration to the Iast opound the Andesin the Amazonian
region is proceedinc under concession to tl-1e Shell Oil Go1~1any
Three wells have been drilled without success and tvro arc beinc
deepened Cost of this exploration to ciate j_s around US)23 million
If oil is found its only outlet middotwill be a pipe line over Ue Ances
(estimated to cost USiD93 million) and this the comany is not -rE1inz
to undertake unless assured of an outnut of at least 100000 barrels a
day
57 The only other irnrJortant minine activities are those of gold
silver conper and lead conducted by the South ~~erican Develoument ~
Company and the Cotapaxi Sxplora tion ConJ1any War-time lr oduction peaks
were 1942 for gold and CO)per 1944 for silver and lead Since these
resective peaks production has ~-~clined narticularly in copper and
lead although not to 1933 lsvels7
crude petroleum II II
1938 (millio~1s of 225 107
Production Exports Production refined petroleum 37
1947 barrels)
236 bull94
128 (See Table No_Jl_ Statistical Appendix
Production Gold (000 troy ounces) Silver (000 troy ounces) Co~per (000 pounds) Lead (000 pounds)
1938 445 82~0 27 21
War Peak l03tJ hhl3
96788 161-+88
19h7 5o5
1569 3316 h98h
-20-
58 Ecuadorian trade statistics list exports of crude pet~middotoleum
and minerals separately from that of other commodities even in aggre-
gate figures underlining the fact the exploitation is in foreign hands
and hence colonial in nature This aspect hmmiddotever is of di-1inishmiddot-
ing importance as now the foreign exchange realized from such mineral
exports accrues to the Central Bank and as in any event nineral ex-1)
ports form a diminishing proportion of the vhole 7
V ~JNUFACTURING PEODUCTION
59 There are virtually no stCltistics on manufacturing in Ecuador
and none which present any comprehensive view It is ho~middot-rever clear
that there is very Uttle industrial factory prJchJction and obser-
vation in the country leaves one with an impression of the nresent
igtilportance of handicraft production
60 The most inportant consuxner-good factory industrj_es are tex-
t~~~breweri~-~~ otheuro7r beveraces shoes ard leather _roduc~s buttons ~d~lttfr
and nails Textile production using domestically produced cotton pro-
duces cotton piece-goods and wool rayon and hemgt textiles supplying
almost all domestic demand for low-quality products The only irJDcrtant
producer-good factory industry is cement the plants being located near
Guayaquil Lack of domestic technical lmow-how and of capLtal and
the low level of domestic effective demand account for the sli~ht develop-
ment of faetory industries whose rrowth on any scale beloncs to a 1ter
stage of economic development
y Value of nineral exportsmiddot as nercentare of value of all exports 1929 260 nercent 1933 430 n 1939 397 1946 11~5 1947 69
Production and irrport statistics for cement tre civen in Table IJo bull 2__ Statistical Appendix
- 21-
61 Uuch of finished commodity ygtroduction is at the handicraft
stage both for nroducer and consumer goods In Quito and Guayaquil
one sees many small 11 shops11 producing metal leather and wood manushy
factures largely by manual methods It is an illuminating co~~entary
on the shallow growth of industrial specialization that the ll1ission
did not see any shops selling ready-made womens clothing All
womens clothing shops displayed only materials in the bolt as in
pioneer days elsewhere
62 One handicraft industry of great importance in exports is
the production of panama hats It has been estimated that 30000
families are occupied vrhole or art-time upon this nroduction and
at times (for example 1945) they have provided the largest single
export item by value The grmvth and treatment of the fiber and the
weaving of the hat is entirely an Indian handicraft industry the
Yteaving of a high-quality hat taking three months The fiber is erown
and the best hats woven in the lowlands Its future ir-mort nee is unshy
certain as the competition of Italy and the Fhilinpines is again felt
in low-_)rice woven hats the boom emjoyed during the war nay recede
63 Ecuador in its ~resent and foreseeable development is an
agricultural country with no immediate movement toward industrialization
EcuAdorians met by the Mission themselves stated this The growth of
factory industry will be slow that of small shop and handicraft manushy
facture somewhat less slow It vmuld seem as stressed later in this
report that there is room for grm~h of processing of agricultural
products Statistically such processing would be classed as industrial
production but is oroperly the finishing stage of agricultural productior
- 22-
to secure improved durability and portability of perishable products
This would increase effective demand imnacting upon the farm and ass1st
in stimulating agricultural development Some progress being made in
this direction notably in vegetable oil expressing plants Ihe only
non-agricultural project suggested by the -r~cuadorian Government has -eer
a cement plant located in the highlands at a foreign exchanr~e cost of
$2 rrillion the justification being both the saving of foreign exchange
expended upon cement imports and reduction of load upon the only railshy
way connecting lovrlands and hichlands Growth of cement use accompanies
economic development assessment of this project (engineering questions
apart) would involve tainly questions of timing location and finance
matters which are really all aspects of the single question whether
such a project may not be one for private direct investment Initial
expectation would be that were all factors favorable to the success of
the project it gtlould be readily undertaken by orivate enterprise
particularly when it is remembered that railway freiehts 1bullrould protect
highland production from lowland competition
6h No sueeestions regarding increase of electric power output
have come fror1 the Government indeed the official statistical services
have no data upon installed capacities and demand Cnly in Quito and
Guayaquil are present industrial uses of electric poler of any ir1portance
Elsewhere suIJply is from snall municipal plants (mainly therraal) for house-
hold consumption It appears that demand mar be ahead sunply in cost
towns very frequently voltages are maintained around 80 instead of the
rated 110
- 23 -
65 Shortage of electric nower is not however hamoering
economic development at this stage although it may soon do so in
sevral urban centers such as Qui to and Hiobamba Sone ttne i-1 the
iuture the possibility of large hydro-electric vrorks on the eastern 1
side of the Andes will merit attention
y Where the rivers are fast and clear on the western side they carry much silt
- 24-
VI DmIESTC THANSPORT AND COilERCE
66 The space devoted to agriculture in this report reflects its
importance in the Ecuadorian economy As has been said further developshy
ment will for sometime be mainly agricu1tural
67 Present restraints upon that development are not located
solely or perhaps even nrincipally on the farm there are many
features of the general economic environment which operate to hamper
even purely agricultural development There is great room for improveshy
ment of transport to knit the economy tocether and to encot1raee grovrth
of output
(a) Transport
68 Without roads there can be little regional or inter-regional
intergration Fithout that intergration (which for some regions and
some crops would open upon the world at the gatewa~r of a oort) there
can be but small inducement andlittle opportunity of increasing proshy
duction In much of Ecuador the principal transport vehicle is the mule
whose patience and endurance under heaJr load is matched by that of the
Indian
69 As regards roads the requirement is both more roads and
better roads capable of bearinr modern vehicular traffic The roads
traveled by the 1Jission are uniformly bad both slowing traffic and imshy
Ilosing extraordiPamiddoty vehicular de_reciation Ultimately no coubt
there vdll be an adequate system of all-rreather roads in Ecuador For
the immediate future the more modest tarset is to attain a reasonable
system of roads civine access to the creater art of roducine areas
- 25-
in the dry season At present the unsurfaced access roads are cut to
pieces by --vater erosion in the wet season and consolidated somew1at
traffic in the dry season A single eradinr operation smoothin thE
dirt surface at the end of the vret season would ci ve accelJtable usashy
bility in the dry )eriod v1hich in the populated coastal rovince of
icanabi for example is eight ~aonths of the year At -_resent the so1e
transport link for corunodities between loYrlands and the hihlands
is the Guayaquil to Quito (and beyond) railway This link is nrobaoly
nearing saturation point vdth present equipment and its strencthening
both by railway imJrovement and all-middotweather hichway construction is
obviously desirable it middotill probably become essential yri thin five
years
(b) Commerce
70 Physical transport alone hogtever is not the only ope c-ation
ofcarriaee required to intecrate a reeion internally and to bind toshy
cether the various regions There are also tL physical and the finanshy
cial aspects of comr1odity holdinr involving the storae and vrhere
necessaFJ the partial processing of products to reduce perishability
and the avail~bility of mechanisms of short-term finance extendine over
crop periods In Ecuador these tro aspects are closely related
71 Apart from some export crops there is virtually no crop or
food processinG undertaken And in the export crops processing
is the minimum necessary to secure portability Eice is nilled but not
polished cacao is sun dried coffee is dried and within only recent
years washed fruit is exported whole Some new e~Jor-ts may require
further processing and installation of plant starting or is in
- 26-
advanced discussion for example vegetable oil processing (although
for sometime no eXport surplus of vegetable oils is 11~11 and fish
canning
72 Nor is there any important ~recessing of domestic food pro-
duction for home consumption bull There is no freezing or canning of meat
which is taken to market on the hoof There are only two or three
very small butter factories and no whole milk orocessing Cereals
of course are not highly perishable but there are no silos or granarshy
ies and experience of similar situations elsewhere suzfests that losses
by deterioration and infestation may be significant no direct evishy
dence anthe incidence of this factor in Ecuador ~as obtained by the
Mission Thee is little storage of grass on the coast in silos or
as hay and in the dry season slaughter of cattle because of lack of
feed is at times necessary In short the situation is not so very
dissimilar to that ofmiddotmedieval Europe
73 Roads alone would not create an environment favorable to
change in this position although lack of roads nar well inlibi t change bull
In addition suitable credit facilities for the finance of co~~odity
holding through time are necessary
74 Hany complaints were voiced to the Hission reearding lack of
short-term banking credit for crop movement and storage and for medium
and long-term agricultural investment and no doubt there is signifi
cant lack of such credits But this is not the result of some simle
institutional defect of the b~~inc and credit structure even though
institutional improvement may be necessary It is fundamentally a
- 27-
reflection of the fact that Ecuador is extremely poor in disposable
capital available for even short-term investment ie vrorcing capi-
tal Improvement of short-term credit facilities for what in advanced
communities are regarded as purely commercial purposes would in effect
represent an increase of capital intensity in the Ecuadorian ecororny
To the extent that banks met more fully the gtJeak seasonal credit re-
quirements for croo movement and storage individual nrivate reoources
are relieved of the 1eak burden and available for other investments
75 Thus iorovement of the techanisr by 11hich the banking system
provides working capital for corrtercial or inciustrial (in the sense of
crop processing) purposes is itself an act of investment rather than
merely an institutional rationalization ilnd as such carry the
usual consequences of investment in an undevelogted economr with very
law voluntary savings To the extent that additional credits are not
matched by savings sewhere (either voluntary or forced through
taxation) they will be inflationary in effect just as an
additional act of long-term investment would be Increase of banki1g
nrovision of workinrr capital should keep step with totl capital for-_ - - 1 mation of which it is one aspect7
It is implicitly assumed in the foregoine that at nresent in Ecuador the amount of small voluntary savinrrs is neclicible It vrill presumably not alrmys remain so and ~Jart of the modifications of the bankin~ system shou1d be attract Clli1U1 atively such sav-ings in the fom of savinc do)Josi ts This 1muld increase the extent to which Danks can safely flovide capital It will be a much later before small private savincs are directly in-vested in commerce or industry throuh joint stock r1ethods There is no stock-exchance in Ecuador
-28-
76 It is of course just as important that the availabi lity of
working capital should not lag behind as it is that it should not run
ahead The Bank should ensure that any long-term investment projects it
may assist to finance do not effectively starve the rest of the econo~
of working capital in the process of avoiding inflation
77 There is also the question of the price of short-term lending
that is of the level of interest rates The Ecuadorian is a highshy
interest rate eoonomy The legal maximum for commercial short-term loans
is 10 per cent having recently been increased from 7 per cent legal
maximum rates however are not systematically enforced by commercial
banks themselves At a time when the legal maximum was 7 per cent
going rate for 90 day loans secured upon properly warehoused commodishy
ties and with third party endorsement was 12 pe+ cent
78 This very high structure of interest rates seems open to
obvious criticism but is in fact probably not Tiholly unjustifiable in
the present conditions of Ecuador It is the cumulative result of many
factors so that more official prescription of lower rates would be
quite ineffective These factors seem to be
(a) Interest proper~
(b) layment for risk bearing arising in part out of a
low rating upon individual credit and in part from
the institutional conditions (such as embryonic
commercial and financial ruarkets) which seriously
reduce the liquidity of any asset other than money
itself
-29
(c) An clcmmt 0f discount 111nn cyectcd luturc irf] utinn
reducing the real value of the pa~nent for lending
(d) An element of monopoly which upon purely subjective
judgment may be the least ilJI9ortant of these several 1
factors7
(e) The real shortace of capital whether short or long--
term~ reflecting in interest rates as a genuine
scarcity price
79bull Of those factors the di~ount upon expected future in-
flation increases prices at a rate of 12 ner cent per annum a money
interest rate of 12 per cent per annum is a real rate of zero If
therefore inflation could be controlled a substantial reduction of
money interest rates could be hoked for At the same tine while
inflation continues high interest rates probably have small influencemiddot
in encouraging money savings
80 Even without inflation ans until the su~1ly of available
real capital improves relatively high interest rates may well be
acceDtablemiddot as a price mechanisn nethod of selectin~ most urofitable y ~
uses of limited fundsbull middothere exoected urivate nrofit did not seem l - -
to parallel social desirability loans at lower rates (ie subsidized
terms) could be made perhaps through reconstituted Development Banks
Prima facie however such loans 1bullrould not be short-term
~I -Onthis interprepoundaion the situation in Ecuador differs signifishycantly from that in Peru
tt is suggested that a powerful point of intervention would be to limit commercial banking dividends distributed to not more than say 7 per cent The high profits nmv earned by commercial banks would then progressively accumulate until liberalization of lending becomes virtually forced by accumulation of funds representing genuine corporation saVings
- 30-
81 The discussion of private finance has so far upon
short-term credits there is an even larger nroblem in the
intermediate and long-term arricul tural credit It is not necessarr
to expand greatly upon this since it too is a consequence capi-
tal shortage
82 Imnrovement would seem to be alonrr the route - 1 of nroper UElte
of existing Development Banks (or their successors-) effectively
in the earlier stages as lending agencies of Government
VII OFFICIAL DEVLOPHl~NT FHmiddotIfJCE
83 In the circurnstances of a country like Ecuador the greater
part of domestic capital forr1ation requires official directly
or indirectly if it is to occur on any scale are too
small and too narrowly held to permit much -rowth this roL1te
andthose few who are able to save at any sinificant rate are larely
uninterested in the efficiency of ~reduction
84 Official finance may be either direct or indirect direct
throueh works executed by Government or 0JUblic bodies indirect
throueh lending institutions such as Dev~lopment Banlcs capitalized
from public funds In either case funds are diverted to investment
purposes by Govern~ent intervention
85 Thus Development Bank lending for productive purposes (for
example long-term acricul tural credit) is an item 1n ca9i tal formation
V There are thirteen reaional Development with an unirnJresstve record of manaeement Their possible reconstitution is under discussion
-31-
rather than a mere institutional rationalization of the credit mech-
anism Indeed as has been stressed in the last section even im-
proved su1nly of short-term credit gtrill in art rewesent
formation A developing economy which neclected these items in 11Cnn21~~
or forecastinc total caital investnent would be very vulnerable indeed
to inflation induced by over-investment
86 17here voluntary savings are Jow the only wmiddotamiddot to sirnificant
rate of capital formatton can emerge without inflation is an equi-
valent amount of savine forced throurh taxation One ould look for a
relatively hirsh level of taxation to national income and for a rela-
tively high proportion of exnenditures caDi tal purposes to total
Government expenditures On both these counts Ecuadorian elq)erience
seems irare s si ve
87 In 1946 total budretary and spedal revenue rms disclosed
as 5368 million sucres in the sa1le rear an estLnate middotJaced national
income at 20096 million sucres This a proym~tion of 27 middoter
come a proportion so hich that in fact it lacks credence In assess-
inc total tax burden part of the revenues of Government monorolies
and all of municial revenues should be included if this be done y
the proportion becomes 37 per cent In addition new exchance taxes
yielded 973 million sucres in 1947
Mono_)oly participations (ii direct disbursements for public _Jurposes) were 353 million sucres in 1946 munici~al income was 1803 million sucres in 1947 (1946 not available)
32-
88 It is very difficult to accept the conclusion that Ecuadorian
revenues form so high a proportion of national income it would seem
that the estimate of national income is too low Nevertheless tax
revenues are clearly a sizable percentace of national income
89 At the request of the Mission an official estimate of total
official expenditures on capital account was prepared Total income of
Government municipalities provincial councils and other public
entities was ~iven as 7S4 million sucres and total capital expenditure
from that income as 2237 million sucres or slichtlr over 30 per cent
of revenuesY It is difficult to feel confident that effective capi-
tal formation on this scale actually occurred certainly there is
little evidence visible to the eye of the t1middotaveler
90 Notwithstanding such doubts the fiscal evidence is of a
fairly hich proportion of tax revenues to national inco~e and of a
hich proportion of revenue allocated to capital investment It would
seem that the fiscal mechanism exists for domestic capital fo~~tion
what may be required is more effective expenditure of allocated funds-
Before a development plan envisa~ing the expenditure of still more funds
was adopted it would be desirable to examine closely administrative
and technical efficiency in the use of existing funds
91 On the side of revenue Treasurr officials informed the Mis-
sion that tax evasion was estirnated at some 30 per cent of ta revenues
1 This makes such capital expenditures 112) per cent of 1946 national income which a~ain seems very high indeed
The two largest items are Government public works (8)4 million sucres) and municipal works (900 million sucres)
- 33-
particularly in income and land tax It might well be advantareous
on the sides both of revenue and of expenditure for Ecuador to obtain
technical assistance of the tPe that the United Nations Department of
Economic Affairs rendered to Venezuela in 1947~Y involvinpound revision
of the structure of the budget of budcetary audit practices and the
like
f Report~d in UN Document ECN 1SubJfti 4 - 21 June 1948 lostricted)
- 34 -
VIII 001EHNl(iEi~T FINANCE AND INRATlON
92 What may be called 11multiple budget practices exist in Ecuador
as in other Latin American countries There is an annual Ordinary Budget
one or more Extraordinary Budgets( tro in 1947) end a number of Special
Accounts (twenty-five in 1946) not included in the general budgetary
accounts The State operates nxmopolies in tobacco liquor salt and
matches part of whose profits are taken into the ordinary budget as
revenue and part used directly for public purposes It is thus diffi-
cult to assesrmiddotgggregate Government revenues and expencii tures and vir-
tually impossible to detail the purposes of expenditure to ascertain
accurately public capital formation by way of public morks and the like
9 Taking the disclosed figures on the ordinary and extraordinary
budgets and tne special accounts there has been a net surplus over the
past ten years 1operations of 234 million sucres~ This however is
not an accurate reflection of the true aggregate position because the
Government operations are not ~holly included in these disclosed ac-
counts But since the Government has no source of internal funds other
than the Central Bank the net recourse of Government to Central BanJJI mirrors the over-all result of Government finance such recourse increased
In 1946 for example the monopolies contributed 5357 million sucres to the general revenue and disbursed 3526 million to municipalities (145 million on general participation and 1652 million sucres for 11 special participation of gthich an example is a new electricity plant at Ambato the state railways (92 million) etc
gj iiith only three years of disclosed deficit since 1938 See Table 12 in Statistical Appendix
2 Central Bank loans middotto Government less Govertllllent deposits in banks
- 35-
480 million sucres over the nine-year period 1939 to 1947 inelusivel
an average of 53 million sucres annually amplch averaging however con-
ceals very important differences between the three periods within the
nine years to tal
94 The table on the next page sumnari zes the factors causing in-
crease of domestic money supply It is computed by rearrangemm t of the
balance sheets of the Central Bank all commercial banks and all developshy
ment banks and is thus a table shoring changes in items in a rearranged
aggregate balance sheet of the Ecuadorian banking system
95bull The first t70 periods 1939-1943 end l943-l946f were both
periods of heavy inflation_ During the first five years notes in cir
culation and monetary deposits increased 3437 million sucres (or 255 per
cent) and in the next three )eera 2904 million sucres (or 61 per cent)
But the causal structure was quite different in the two periods
96 In the first inflation was almost wholly induced by external
factors (favorable balance of paYments causing increase of foreign exshy
change holdings) the major domestic factor being expansion of commercial
bank loans and investments in this period deficit Government finance
was not a causal factor
97 In the next three-year period 1943-1946 however the major
inflationary factors change deficit Government finance and expansi on of
f As calculated by IBRD Mission loans to Government including ali loans to official agencies A recent calculation by the IMF Research Departshyment covering Government operations only places the aggregate 9 years deficit at 345 million sucres~ See Table 12 in Statistical Appendix
- 36-
BANKING CHANGES ~0015 SucresJ
Jan 1939 Jan 1944 Jan 1947 Jan 1948 to to to tomiddot
Dec 1943 Dec 1946 nee 1947 June 19h8 t~ ~arsJ ~~ iears) trmiddot ~~r1 t~ mo~~h~2
Central rcrk loans tomiddotc~vt~ f 16174 f 160260 - 701p88 23695 Central B~r~ Loans to Public -1 6978 2_283 1- 67548 1- 39763 Commercial Bank Loans and
Investments J 187554 f 14624 88h4 1- 2~ ~49 Development Baru Loans and
J 14227 136818 ~ 644 1- 26090 Investments
1 224933 f 313985 11)40 1- 68107 Net Bank Foreign Exchange 260774 f 94662 - 53203 - u6 112
7 485707 7 408647 I
7 bull - 64543 21395
Notes in Circulation f 16o907 1-131729 - 23205 - 17290 Public Monetary Deposits -A 162868 1- 128914 - 68734 1- 19620 Government Deposits f 19968middot 29768 9050 2366
7 343743 7 290411 82889 - 36 Public Time Deposits 116834 ~ 42053 1~004 f 317j
y 7 46o517 7 3J2464 83893 ~ -- 3137
Absorbed by Banking System 1- 25130 middot~ 76183 1- 19350 18258 7 485707
11 f 4o8647 64543 I - 7 21395
Net Government Borrowing J 131492 from Banks 3794 - 79738 - 32745
Deposits in Central Bank in foreign money (not included above ex pressed in Sucres
Government ~ 4486 - 633 871 - 11059 Public 25242 J 78964 - 78814 J 4h97
T29J 728 7 I
7 IIIII middot~~ ~ I
78331 79685 31+38
y Made urt as Io11mlfs
Cas~ bullbullbullbullbullbullbullbullbullbullbullbullbullbull ~ bullbullbullbullbullbullbullbull - bullbullbullbull J 266 1- 367 - 22~7 99 Other assets less other liabilities~ ~ 4 330 ~ 293 ~ 18~8 Capital and Reserves~- bull bullbullbullbull 4 bullbull 52 bull 1 1- 79-9 26 o 278
7 I
7 7 I
7 bull Ill ri bullbullbull
251 762 194 18)
Subtract increase
37-
Davelopment Bank lending dominE)te the position Expansion of commercial
bank lending is relatively negligible while a comparatively small role is
played by balance of payment influences
98 From the end of 1946 the general financial situation deterior-ated
rapidly in five months from January 1947 to ~~ay 1947 net foreign exshy
change reserves of the Centrel Bank fell 935 million sucres or 7 7 mil-
lion dollars to a level of 2927 million sucres or 21 7 million dolJars
In litaY 1947 an IMF Mission arrived in Ecuador (at the request of the
Government) and in June 1947 a multiple exchange rate system with import
classification was introduced upon the advice and with the concurrence of
the Fund Operation of this system Jielded considerable profit n in
sucres it is in effect a new imposition of import taxes and such
11profits 11 are in reality additional fiscal revenueY It was of the
essence of the Emd s attitude in Ecnador that the exchange difficulties
bad arisen through domestic inflation and that these addi tiona reve-
nues should therefore be applied only in reduction of Government debt to
the Central Bank
99 The effect of such policy is clearly seen in the third column
of the table Inflation is checked notes in cirmlation and monetary
deposits falling 929 million sucres (or 11-per cent) i~ one year Alshy
thoUtgb however Central Bank loans to Government (and also colllWrci al
jJ At this point only the domestic aspects of this measure are emphashysized In a later section the external or balance of ~ent aspects will be taken up
Y Such revenue from exchange taxes yielded 975 million sucres in 1947 bull md in July 1948 was running at g to 10 jllillion sucres a month this revenue is not of course taken into the budgets bull
- 38 -
bank loans and investments) fell the actual deflation _was largely
caused through loss of foJeign exchange rather than over~all reduction
of domestic bank lending For in response to vigorous ~oilplaints of
credit shortage the Central Bank greatly increased its loans to the
public almost fully offsetting reduction of its loans to Government
In the first six months of 1948 there was no significant contraction
of money supply banking loans to the public eJggtanding to offset the
deflationary effects af an adverse balance of payments and of Government
debt reduction
100 The exchange surcharge multiple rate system was in operation
through August 1948 proceeds being devoted to reduction of Government
debt to the Central Bank~ But there has bean concern lest the resulting
deflation of domestic money supply would be too severe and the Central
Bank has in fact adopted a compensatory policy to prevent further reducshy
tion through continuing to expand lending to the public arid through
quasi-open-market pur~e of mortgage bonds to the amount of 17 million
sucres by July 10 19l8 when further purchases were discontinued
101 To avoid the netcessity for such compensatory policy the Cen-
tral Bank proposed to the Government that the destination of reveme from
exchange taxes should be changed Instead of being applied in reduction
of debt the proposal was that they should be useci instead to create a
development fund tt to be administered by the Cent~al Bank unless a
planned Development Institute or other competent authority is estabshy
lished In mid-September the Fund appro ved such cllanged dest ination of
these revenues 90 per cent of which will in future be applied in finance
of development and 10 per cent in stabilization of Government bond prices
-39-
This removes a check upon inflation which has operated for some fifteen
months unless Central and commercial bank lending policies recognize
this changed situation further inflation may follow even if the Budgetary
accounts run no deficit
102 At the same time this change does provide a source of local
currency finance for development projects
-40-
IX INTERNATIONAL TRAIE AND THE BALANCE OF PADlENTS
103 Ecuador exports agricultural products (rice cacao coffee
tropical fruits balsa wood) mineral products (crude petrolelUil gold
silver copper and lead) and handicraft products (panama hats)Y
lo4 Approximately one trird of Ecuadorian exports (including
minerals) go to the United States The proportion rose during the war
due to VmiddotIar-time demand for strategic raw materials but is now tending
to revert to pre-war levels Loss of European markets has been partly
compensated by gain of n$w export markets at least for a time and
especially for rice Countries in the Far East whose rice production
fell during war such as the Philippines and in Latin America whose
Eastern sources of supply were cut off such as Cuba and Venezuela
have provided demand for Ecuadorian rice This outlet however may not
last much longer
105 On an average of years 1938 to 1943 about 15 per cent of
Ecuadorian imports are foodstuffs wheat and lard being the largest
items and 85 per cent are manufactured goods and equipment Import
of foodstuffs is however gro1ing t-vith population and in the key pro-
ducts of wheat and fats would be expected to grow still faster if
econowic development raises n~ss living standards witl10ut increasing
domestic output of these prodvcts For increased consumption of wheat
products and fats is in part the definition of rising living standards
for a very poor population
fJ See Table No13 in Statistical Appendix for composition of exports
-41-
106bull Before the war (average of the years 1937 to 1933 ) the Americas
supplied 49 per cent of Ecuadorian imports by value the United States
alone supplying 41 per cent Germany provided 22 per cent of total
imports and the United Kingdom only 8 per cent Europe as a whole supshy
plying 45 per cent
107 In 1946 and 1947 the Americas provided 86 per cent of total
imports the United States supplying 66 per cent EUrope as a source of
imports fell to 12 per cent although the United Kingdom maintained its
relative position (7 per cent) Whether the United Kingdom can expand
its provision of imports for Ecuador JDaY be domiddotubtful on the one hand
the loss of Germany as a supplier pzo vides an opportunity on the
other the competitive industrial position of the United States may make
it difficult for the United Kingdom to fill this gap
No balmce of payments estimates eJd st for Ecuador1
Growth
of foreign exchange holdings over the war period however indicates a
strongly favorable balmce ~let reserves which were equivalent to 409
million sucres in December 1939 rose to 3962 million sucres (294 milshy
lion dollars) in December 1946
109 Official purchases and sales of exchange are shown in the fol-
lowing table together with corresponding movements of exchange reserves
The difference betRSen the balance on official transactions and the moveshy
ment in reserves arises from transactions on the free market
110 During the war import and exchange controls were nominal
there being no shortage of dollars nor any decrease of exchange reserves
jJ Except for the ~eriod January to May 1948
-42-
Loss of exchange reserves in 1945 led to a tightening of control on an
allocation of quotas smong users of exchange Import permi ts were
granted on the basis of former imports by merchants At the end of
1946 controls were relaxed on an extensive list of imports items and
the consequent loss of exchange has led to difficultieQ
Ul Official Official Balance Changes in Purchases Sales on Net
Official International Trans- Reserves actions
(Millions of u S Dollars)
1942 257 185 t 72
1943 35-5 279 t 1middot5 t Ul
1944 423 34~4 t 79 f 88
1945 353 394 - 41 - 7-2
1946 471 415 f 56 t 1 9
1947 488 579 - 91 38
112 From December 1946 to IVtay 1947 net foreign exchalge reserves
fell US$ 77 million from US$ 294 million to US$ 217 million In May
1947 the advice of the International More tary Fund was sought with reshy
sults summarized as follows in a recent Fund documentY
The lfund 1 s Mission arrived in Ecuador in Yay 1947 It was not advisable at that time to contemplate devaluation which would have made the inflationary situation worse An emergency program was therefore proposed Essential and semi-essential imports were to be distic5~ished and a surcharge of 5 sucres p3r dollar imposed on the semi-essential group as a check against their excessive import New decrees including many of the recomshymendations were issued in June
The main features of the new system were as follows
Y Economic SuVey of Ecuador RD 672 - P 43-44
- 43-
(a) The elimination of all quantitative import export or exchan~ restrictions licenses and quotas with the exception of a few absolute prohibitions of some luxury imports
(b) The checldng of excessive import demand through a fiveshysucre (33 per cent) surcharge on non-essential imports
(c) The suspension of nearly all exchange sales for nonshytrade transactions and the creation of a free market bull narrowly limited in volume and comprising mostly all transactions that are uncontrollable in practice plus a snall amount of domestically produced gold
(d) Exchange for a small amount of the least essential goods was made available in the free market
(e) One of the basic aspects of this plan was the steriliz~ tion of all proceeds from the import surcharge which was placed in a fund for the extraordinary amortization of the government debt to the Central Bank Tnis is still in operation
The beneficial effects of these reforms were felt immediately In June the trade deficit ~as reduced to only $07 million and in July to $06 million By August for the first time in 3 monthsl there was a small surplus In September the deficit was smci l -j)O 5 million In October there was a surplus of $15 million and in November and December there were small deficits of only $01 million and $07 million respectively
In short the deficit for the year was about $99 million in its gross gold and foreign exchange reserves During the same period international liabilities of the Central Bank showed a reduction of about $6 million Therefore~ the net deficit was around $39 million 95 per cent being in the first half-yeer and before advice had been received from the Fundrs Mission
113 It should be emphasized that this multiple-rate system of
exchange control is entirely freed cpentitative controls Excessive
import demand is checked by the higher rates upon imports deemed non-
essential the list of which is knollD and published Anyone presenting
sucres is provided with exchange at the appropriate rate upon list A and
B goods and the free rate is influenced by occasional releases of offi-
cial exchange into the free market The system that is utilizes the
inter-play of the price mechanism rather than the bWlilmlcracy of quanti-
tive controls or quotas
- u4-
114 Loss of exchange continues however despite considerable reduc-
tion of imports Gross international reserves declined US$ 18 million
and net reserves US$ 35 million in the first six months of 1948 Offishy
cial transactions January to June 1948 are surmrarized in the following
table~
Receipts From Exports From other Transactions (1)
Total
Payments For Imports For other Transactions
Total
Balance Change in Gross Reserves
1947 Jan to June
1948 Jan to June
(Millions of Dollnrs)
163 5 6
167 44
219 211
289 219 23 10
312 22 9
- 93 - 18
(l) Includes purchases of domestically produced gold deposits received in foreign currencies and borrowing from corres~ pondents abroad
115 Prospects for the remainder of the year moreover are not goo~
It is estimated that loss of international reserves over the whole year
may be aboat US$ 6 million Whether the deficit is in this region de-
pends largely upon actual export realizations for the remainder of the
year lhe most critical here is rice 11hose ygtrice is falling and the
crops accumulating in the rice millsplusmn Latest information is that
f Countries receiving allocations of Ecuadorian rice under International Emergency Food Council allocations have been requesting a change in source of supply owing to shortage of doJJers Thus France has asked for 6000 tons of rice from Indo-China instead of ~cuador and Greece for 2000 tons from kVPt in place of Ecuador as supplier A recent favorable sale of rice-to Haiti has somewhat improvea the cuITent position
-45-
plantings for the October crop are substantially reduced Wet weather bas
led to some loss of the cacao crop Receipts from exports in the follow-shy
ing official exchange budget may therefore have to be modified down- [l
ward on any pxuient calculation-
116 ~or Recei1ts and Sales of Foreign hchange
(Thousands of U S Iollars)
1948 1947 Estimated Actual
BECEIPTS
Worts Rice 13~ la4~ Cacao 11 l 2 Other products 10700 12371
Total Exports 354oo 42120
Foreign companies 5300 4842 Others 800 1883
41500 48845
SALES
Imports 44800 53499
Services 3200 4470
4B ooo 57969
117 In this situation of continuing presSlre one step has been
tken and others are under consideration The one taken relates to offishy
cial imports representing an average pf 20 per cent of total imports
Importation of cigarettes liquor matches and other things by the State
tionopolies is especiallyen significant These were formerly provided with
exchange tax-freebull ie at the ~owest rate of 1350 From July 26 they
afe required to pay the ordinary import rate of 15o4 on sll supplies for
J See note on page 47 -A
- 46-
their ovm use (such as office supplies) and the same rates as private
importers (ie 15o4 or 20o4) on all imports to be sold to the public
(such as wheat flour fats cigarettes etc) accord~ng to the classifi-
cation of the goods
118 Remaining possibilities seem to be a partial reclassification
of imports removing items from List A as essentials to List B as se~ishy
lwruriesY and or a chenge of nominal exchange parity vri th or mithout
a narrowing of the spread between the rates Here pressure from
exporters particularly from rice exporters may be hee~vily in favor of
an increase of the dollar buying rate with consequential changes of
selling rates
119 The present loss of foreign exchange is occurring ~rithout any
service being met upon defaulted foreign debt although service of Ex-Im
Bank loans is being made If it be assumed for purposes of calculation
that Ecuador reaches an agreed settlement identical to the Chilean sershy
vice would require exchange equivalent to US$ 378000 in 1949 (of which
US$ 368000 would be required in dollars) and would rise to US$ 4o20CO
in 1954 Adding service upon Ex-Im Bank loans outstanding on June 30
1948 and other known but small indebtedness total debt service would
increase to US$ 1410000 in 1949 rise to a second maxilliUID of US$ 1394000
in 1951 and then progressively decline Upon the assumption thet amp-Im
Bank loans undisbursed on June 30 1948 are all fully drawn before their
maturity total debt service charges would be US$ 1533000 in 1949 rise
On August 21 a number of import items were changed from List A to List B the aggregate import value (when granted exchange at List A rate) affected being US$ 7 million
-47-
to US$ 213431000 in 1952 and again would progressively decline These
last service charges rould be for 1949 3 1 per cent of 1947 actual
official foreign exchange receipts and 3 bull 7 per cent of estimated 1948
receipts and for 1952 48 per cent and 56 per cent of 1947 actual
and 1948 estimated exchange receipts respectively
120 Estimating prospects from this point in time Ecuador does not
seem to be a country able to afford assumption of any great additional
burden of debt service payable in dollars The amount that could wi thbull
out hardship or distortion be squeezed out of the balance of payments
by no means corresponds to the development needs of the country Any
start must therefore be modest and cumulative rather than spectacular
and precarious and this conclusion fits with other controlling factors
in the over-all situation notably the supply of administrative techshy
nical and managerial abi li ty
- 47-A -
Note on Official Exchange Transactions
Official exchange transactions for the firstsix months of
1948 are given on page 44 of this report Results for the full year
are now available and reveal that earlier expectations regarding the
probable 1948 balance of payments deficit were unduly nessimistic
Cacao export values have been lar~er than expected and in the last
period of the year there IBre some unexpectecily favorable rice eA-port
sales total export receipts were US$ 8 million larger than forecast
on page 45 Imports were held close to forecast
Receipts
Exports Foreign Co~anies Other
Payments
Imports Foreign Comoanies Other
Balance
Change in Grass Reserves
Official Exchange Transactions (full year - n~illions of dollars)
1947 -421
L18 19
488
535 06 149
580
y does not agree because of rounding
January 26 1949
1948 -436 h2 7
i85
Lt52 2
28
-oJ
-48-
X EXTERiJAL DEBT BEoomJ
121 The position of public long-term external bonded (excluding
inter-governmental) indebtedness of Ecuador is as follows
Amount in Default AmoUpt Outstandi~ ~ e Interest D~te
~In currmc1 (u s (us of p~t Dollars) Dollars)
Dollar obligations Gueyaquil amp Qui to Ry) $ 1226)000 12263000
286000 12263000
286000 123147
63047 Sterling obligations Franc obligations ( Oie
b 71000
Francaise de Chemin de Fer 1 lquateur ) Fcs 8386000 70000 70000
12619000 l26l9000
middotmiddot Note The Government of Ecuador oyenms about 75 per cent of the
stock of the Guayaquil and 1uito Railway and guarm tees the bonds and certificates which are largely held in England The franc obligations of the Cie Francaise de Chemin de Fer 11lquateur are not included in the offi cial statement of the public debt nevertheless the Government does recognize some liability for them and during the last few years has engaged in Degotiations for their retirement
Inter-governmental Debtsmiddot
122 Debts to the United States Government are of three types
63047
first the loans by the Export-Import ~which were outstanding on
June 30 1948 in the amount of $7 705606~ second the aJIDunts duemiddot
because of purchases of surplus property totaled $484 567 on March 31
1948 and third the obligations arising out of the lend-lease settleshy
ment the amount of 1fhich is not available (Total lend-lease assistance
j This section of the Report was prepared by Mr Paul Dickens
to Ecuador amounted to $7 bull 795000 )
123 In addition Ecuador is indebted to the Government of Venezuela
in connection with the establishment of a joint shipping company Late
data are not available but as of February 1947 $500000 ($1000000
authorized) was outstanding the total to be repaid by 1966
Debt History
l2ij Upon partition of the old Republic of Colombia~ middotEcuador was
apportioned 215 per cent of the original Colombian debt by the convershy
sion of l834a Between 1834 and 1854 no interest was paid The period
1855 to 1908 was marked by numerous adjustments and defaults
125 In 1898 the Guayaquil and Q]lito Railway Companyt s first mort-
gage 5 per cent loan of 1899 was issued It was expressed in dollars but
was in reality an English loan In 1908 a new (reemenJl was reachedbull
which was to be a final settlemet of all past disputes and controversies
between the Government and the Guayaquil end ~ito Railway Company and
the bondholders In 19~-10 the Government defaulted on the new agree-
ment In Novemberl9ll payments were resumed on the railway debt on)y
but a revolution caused a further suspension from December 1911 until
lfarch 1912 Subsequently service was partially resumed on the external
debt until July 1914
126 From August 1914 to July l9l8 no paYments were made on eny
foreign obligations except that service on the prior lien railway bonds
had been maintained up to and including the January 1915 coupon By
rf Negotiated settie~nt
-50-
1920 interest and sinking fund on the prior lien railway bonds had been
brought up to date but service on all other obligations ~ed in
arrears In 1926 interest on the salt loan of 1908 was brought up to
date but default took place on the coupon dueJam1ary 2 1927
127 The outstanding bonds of the prior lien issue were redeemed~~
January 1929 at VIhich time the January 1914 coupon was paid on the
5 per cent first mortgage bonds of 1897 In the case of the salt loan
of 1908 sinking fund was resumed in July 1928 and interest was paid
to Jazruary 1929 inclusive None thereafter Sums due from July 2 19C3
to January 2 1931 inclusive deposited with Central Bank in sucres
were used for governmental purposes after December 1931 No payments
were made after January 1929 on the external debt of Ecuador
128 Up to the end of 1948 no acceptable arrangement had been pro-
posed by the Ecuadorian Government for the resumption of interest and
sinking fund payments on external loans
-51-middot
XI bull POLITICAL
129bull Recent political history in Ecuador has been turbulent
although contest fo~ power at the top has not greatly affected the
bulk of the population Suffrage extends to all literate citizens 1
over twenty-one years of aee-but the requirement of literacy effect-
ively excludes the Indian bull T)tal votes cast in the recent Presidential
elections were 289164 from a total Population of some 35 million
130middot On May 28 1944 a few days prior to a scheduled ceneral
election an uprising occurred and Dr Jose Haria Velasco Ibarra
assumed office as President Dr Velasco had been President before
but following a coup dletat in August 1935 after he had been in
Presidential office less than a year he fled to Colombia and re-
mained in exile for several years On July 23 191-4 general elections
for a Constitutional Assembly to draft a new Constitution were held
Installed on August 10 the first Act of the new Assembl3r which was
predominantly Conservative was to confirm the legality of Dr
Velascos assumntion of the Presidency
131 On June 30 1946 new elections to the ronstitutional
Assembly middotwere held The only party particiJatine in these elections
was the Conservative The Liberals R~dicals Socialists and Commu-
nists abstained on the crounds that President Velasco did not offer
them sufficient guarantees On Aucust 3 1946 there vrere a number
of arrests following an abortive uprising and on Aueust 11 the Con-
stitutional Assembly re-elected Dr Velasco to the Presidency (by 43
to 10) for a term of office to last to September 1 1948
12bull Being compUisory for men voluntary for woraen -
132bull A new Constitution was promulgated in January 1947
133middot On August 23 194 7 a bloodless coup detat led by Colonel
Carlos Iancheno Minister of Defense in Dr Velascos Cabinet deposed
rresident Velasco who fled the country to Colombia for the second timebull
Next day Colonel Mancheno proclaimed himself Acting President and
formed a five-man Socialist-Liberal Cabinet despite the absolute
Conservative majority in the Assembly A week later however on
August 31 a counter-revolutionary military movemont broke out in the
north and the counter-revolutionaries captured Quito on September 2
134middot Colonel llancheno resigned the ActinG Presidency and dis
appeared the sa1ne day Dr Suarez Veintimilla who had been Vice
President under Dr Velasco and the former conservative Uinister
resumed control of the GoverPment Next day September 3 a Council
of State in Quito declared that Dr Velasco had by abandoning his
post terminated his functions as Chief of the State Dr Velasco
howeverJ vrho middotwas by this time in the Argentine declared that his
remo~al to Colombia had been forced and announced his intention of
returning to Ecuador to resume office
1~ On Seytember 15 1947 a Secial session of the Zcuadorian
Concress accepted the resignation of Dr Veintimilla and elected
Senor Carlos Julios Arosernena head of the Banco Ce Descuento at
Gua~raquil and a non-party man as Vice President with novers as
Acting President until September 1 1~48 Senor Arosemena formed a
mainly Liberal Cabinet with one representative each of the Consershy
vatives and the Socialists Coneress also ~onfinned the Council of
State 1 s view that Dr Velasco had forfeited the Presidency by abandoning
his postbull
136 On June 6 1948 Presidential elections were held The
three parties represented vere the Conservatives (Dr Manuel Elicio
Flor Torreo) the Liberals (Galo Plaza Lasso) and the Radical (Genera1
Alberto Enriques Gallo) Final results were announced as
Plaza 115835
Flor 112052
Enriques 53601
Invalid 27 676 289164
137 bull Doubt persisted until this month (August) as to who would
receive the election The Electoral College had been invalidating
votes on technical Grounds and as interim returns and invalidities
were announced it was noticed that the majority of the latter were
being deducted from the Plazavote After conferences the Electoral
College revalidated all votes and conducted a re-scrutiny on less
strict basis Senor Plaza has been declared to be the rfjSident-Elect
by the Ecuadorian Coneress and assumed power September 1 1948 The
middotpresidential term of office is four years
The Vice Presidential results were
Conservative 1anuel Sotomayor y Luna llu008
Liberal Dr Abel Gilbert 113213
Radical Dr Cueva Tamarz 5h07h 28129gt
139 Senor Plaza was born in Nmv York USA forty-two years
ago his fatter the late General Leonidas Plaz~ was President of
Ecuador in 1901-05 and 1912-16 middotSenor Plaz who had been taken to
Ecuador as an infant accomnanied his father in exile to the United
States and attended the University of California the University of
Maryland and the Georgetown School of Foreign Service in ~7ashington
l4o Senor Plaza returned to Ecuador in 1930 and for the next
fourteen years operated the family estates there reclaiming them from
virtual bankru~tcymiddot to prosperous and efficient state He has for
example been active in encouraging the breeding of new cattle strains
is President of the Ecuadorian Holstein-Friesian Association and oper-
ates a butter factory on his estates with a Danish ~anarer He was
ar Minister from 1938-40 and Ambassador to Cashington from 19h4-46
l In executing any policies he will of course be handishyt4
capped by the lack of a fully efficient Civil Service The position
in Ecuador is the same as that in othelmiddot Latin American countries
that the Civil Service is naid on low salary sca1e and lacks compe-
tent administrators Such lack is an aspect of the general shortage
of technical ability in the country
TABLE
1
2 bull
3 bull
4
middot 6
7 bull
8
9
10
11
lZ
13
14 bull
15
16
17
18
19
20
ECUADOR
STATISTICAL APPENDIX
Oil Production and Exports
Cement Production and Imports
Yfueat Production and Imports
Rice Production and Exports
Rice Exports by Destination
Cacao Production and Exports
Coffee Production and Exports
Cotton Tobacco amp Sugar Production amp Sugar Imports
State Railwaysmiddot Lines amp Rolling Stock
State Railways Merchandise Hauled
Population and Roads by Provinces
Budgetary Receipts and Expenditures
Exports of Principal Commodities Volume amp Value
Imports Classified by Groups Value
Exports by Destination Value
Imports by Source Value
Balance of Trade by Major Regions
Exehanee Reserves and Banking Position
Price middotIndices
Status of Ex-Im Ballilt Loans
ECUAIOR Table 1
Oil Production and Expomiddotrts
(thousands of American gallons)
Crude ou Gasoline Produced EJtported bullRefined middotproduced
1938 94586 78696 15500 41654
1939 97125 68819 17679 bull 141
194o 98654 70~99 23001 6162
1941 65382 38362 25914 6462
1942 95671 68516 29489 72l7
1943 97211 65003 34635 8076
1944 121469 82520 38083 8927
1945 109855 73897 38752 10059
1946 979+7 52412 45213 12271
1947 99140 39359 53949 16587
Source J3o1etin Banco Central del Ecuador
ECUADOR Table No 2
1929
1937
1938
1939
1940
1941
1942
1943
1944
1945
1946
1947
1948
l First six months
CEMEHT PRODUOTIOllT AliD IMlORlS (metric tons)
Production Imports
17782
15699 10082
14254 13373
14249 12013
16512 10935
17213 2_846
19802 so98
2756o 933
34691 1590
37504 953
38496 3114
33231 14941
20484JJ
Sources Production Eoletin Banco Central del Ecuador Trade Ministerio deEconomia
Total
25781
27627
26262
27447
20059
24900
28793
36281
38458
41610
ECUAJX)R Table J
Wheat and Wheat Flour Production and Irraquorts
(thousands of kilos)
Wheat
Production Imports Exports Consumption
194o 28120 bull 73 28o47 1941 24578 36 24542
1942 24265 bull 76 24189
1943 22034 22034
1944 23251 912 24175 1945 23115 2733 180 25667
1946 25852 4532 23 30361
1947 2lo66 494f)J 11
Vfueat Flour
1938 10743 9981 na
1939 7864 16638 na
1940 7996 8-592 275 16312
1941 7225 11823 286 18762
1942 7 161 23497 161 30498
1943 7461 9862 17322
1944 5216 24023 29239
1945 5174 25137 30311
1946 7~38 11313 g 18813
1947 5943 1886) 4Y
Less than 500 kilos Y First 6 months
Sources Ecuador en Cifres a~d Ministerio de Economia
~emiddot 1926-30
1931
1932
1933
1934
1935
1936
1937
1938
1939
1940 -middotmiddotmiddot
1941 ~ )~ (1
1942
1943
1944
1945
1946
1947
1948
~iiampn-sect00-lfmiddotks
-~Jrst~middot-nsmcnths
gJ Provisional
(B EQUOR
RI03 PRODUCTION ApoundP ~OR~S
Vo1wnfJ Production middot E~orts
(metric tons)
26)04
23584
29863
39270
39008
31699
39036
52136
44027
40144 ltit middotmiddot~ 0 56596
5873
100949
ao6o7
53168
102048
112711
047
8255
3842
6449
5282
22907
8734
12)3
2ooso
962
18343 t - ~ J
20546
32028
46992
64604
29318
66918
6~209fl middot tloo 1
$ bull
tt ( r t
z
Value 3xoorts
(thousand sucres)
1881
936
6667
10864
6555
14632 pound 170
23265
51460
93837
127105
60395
203243
2rfjuft
Sources Production Boletin Banco Central del 39uador~ Trade Ministerio de Econom1a~ ~r- ~fl ]r bull ~-middotmiddotmiddotmiddot f ~~middot~---i
Average Destination 1937-41
Cuba 2
Peru 13
Venezuela 6
Colombia 4
Panama 2
Jamaica 0
Philippines 0
India 0
Dominican Republic 0
Other Countries 4
TOTALS 31
Preliminary~
RIQ] EXlORTS (in million po~ds)
1943 1944 1945
81 88 5S
20 29 0
0 17 4
~ 0
Rf 2 hi 0 0 0
0 0 0
0 0 0
0 0 0
bullbull ~ 6 6
105 142 6S
R Less than )OOOOOpounds
Table No 5
1946 ~ Jan to~
1~ June-194
46 12 24
0 0 s 17 49 )j
2 13 2
5 4 1
16 1 0
20 0 0middot
0 38 0
0
1 f4~ 2
r middot I
130 13 34
sf Ineludes 6 million pounds to Mexico and 5 million tmiddoto Greece bull middot
1[0
supound~sect8_ Foreigl Crops and Markets Offiee of Foreign Agrtcultural Relations u bull Sll~artment of Agriculture May 3l 1948 bull p bull 402 First six months of 1948 from ibid August 16 1948 p bull 120
Average 191i-15
191620
l921-25
1926-30
1931-35
193640
1940
i941
1942
1943
1944
1945
1946
1947
tf I
ECUADOR
Cacao Production and ~orts
Volume
Estimated Production ~rts
(metric tons)
n (
12108
15middot330
14652
19030
15058
17759
17689
19459
4o625
43547
36825
21319
15980
174o4
11208
14433
13762
18161
13735
16827
16526
Exports ( 000 sucres)
186o9
26073
26746
27531
16647
37424
29354
34365
40327
51794
41985
53547
74935
188208
middot)(et) middot( middot
Sourcesmiddot Estimated production Ministerio de Economia E~orts to 193~ Estadisticas de las Exportaciones del
Ecuador 1940-1942 subsequently El Trimestie Estadistico del Ecuador Number 1
1 ~ Mini sterio de Economia -bull gt(
111 t bull r r (o J bull bullbullbull 1) ( bull
ECUADOR
Coffee Production and Exports
Volume Estimated Production EXports
(Metric TohS)
1921-25 average 5147
1926-30 II 7571
193D-35 10047
1936-40 II 13811
1940 16158 14571
1941 14260 11847
1942 9016 6140
1943 14144 12340
1944 16598 14458
1945 12999 10737
1946 9948 7636
1947 12522 8970
Table 7
Value
Exports 000 Sucres)
59~9
11530
10945
18546
16J83
23827
17278
33176
35626
33863
34839
43524
Source Estimated production - Ministerio de Economia
Exports t~ 1936-40 - Estadisticas de las Exportaciones del
Ecuador 1940-1942 - subsequently El
Tremestre Estadistico del Ecuador Number 1
and Ministerio de Economia
YEAR
1937
1938
1939
1940
1941
1942
1943
1944
1945
1946
1947
ECUADOR
Production of Cotton Tobacco amp Sugar amp Sugar Imports (000 Kilos)
Raw Cotton
9237
7213
7172
8165
PRODUCTION
Tobacco
1519
1106
1875
1028
1359
Sugar
17528
22950
26950
27835
30421
27858
26799
23151
32474
33544
33480
Table B
IMPORTS
Sugar
5310
11068
12387
38
6
33
184
784
21455
3060
Sources Production of Cotton and Tobacco Ecuador en Cifres 1942
Sugar Production and Imports Ministerio de Economia
ECUAOOR Table 9
State Railways
Length Locomotives Rolling Stock (Number)
(Kilometers) (number) 1relght Passenger
Gueyaquil-Qpito 452 39 319 41
Guayenaquil-SalinaJ 150 6 22 24
-~i to-CarcbiY 222 6 23 22
Bahia-Chone 78 3 12 g
Sibambo-Azogues 117 3 6 ll
Puerto Bolivar-Piedras 155l 7 21 10
Puerto Bolivar-Pasaje 55
1199 64 4oy llG
Narrow-gauge line
gj On uncompleted line ~ito-Esmeraldas
21 Of which 4 are rail-cars
jj Of Vihich 61 are rail-cars
Source lviinisteria de Economia
1938
1939
194ltgt
1941
1942
1943
1944
1945
1946
+947
ECUAOOR
Railway Transport
(thousands of metric tons)
Products
Agricultural Animal Mineral Forest Manufactures
1639 19 3 160 122 1034
1318 143 172 138 961middot
1714 144 233 219 1472
1613 184 277 209 1543
1809 224 280 272 1631
1841 280 35a4 376 193-3
2011 250 263 299 C5J7 3
1888 29-5 350 238 2234
1941 29-9 46 bull 4 258 2170
1787 299 51 0 180 2085
Source l3oletin Banco Ce~~nu del Ecuador
Table 10
Others Total
58 3205
58 279l
298 4oso
289 4115
328 4543
384 5168
352 5248
292 5296
37middot7 5508
419 5279
Table 11
Population and Boads
Poeation Roads (Kilometers) Province Jan 1 1948 Main Secondary In Construction
Care hi 86663 1744 1191 1050
Imbabura 158896 1818 2100 1810
Finchincha 350149 4)13 3703 670
Cotopaxi 215232 642 4o6o 970
Tungurahua 222963 2290 1810 300
Chimborazo 29864o 1664 3316 2740
Bolivar 121653 1877 1294 2045
Canar 133971 580 580 1300
AZUaY 284982 1053 2190 630
Loja 238705 1140 4s6o 1430
El Oro 93752 1005 2378 650
Quay as 482843 3900 3367 3700
Los Rios 148428 933 4632 1050
Manabi 381538 3627 1lo61 1970
Esmeraldas 664o5 50 19 0 2840
Frov Orientales 181071
465891 26636 46732 2t3l5bull5
Source Direccion General de Estadistica y Censos
1938
1939
1940
1941
1942
1943
1944
1945
1946
1947
Source
r
Table No 12 ECUADOR
DISOLOS3D BUDGETARY R303IFTS AlfD EXP3NpiTURES
(Total of ordinary and extra-ordinary budgets and special accounts)
thousand of sucres)
Total Receipts
1323204
131699 6
1262710
1547624
1667455
2112614
3145318
4051038
5367822
6696647 11 ~I JJ( middot
Total Expenditures
1429134
1267687
123135middot0
1586615
1489251
2101429
3031038
4174550
5352394
6593858 bull I
aoletin Banco Central del Ecuador
-middot middotmiddot
Diff~reuce
106830
j 49309
f 1360
- 38991
f 178204
j ltll8-5
f 114280
12351middot2
+ 15428
j 10278bull9 r 7
l I 1
L
ECUAOOR EXPORTS OF PRINCIPAL COMMODITIES 1937-47 Table 13
VOLUME (thousand metric tons)
1937 i98 1939 194o 1941 1942 1943 1944 1945 1946 194711
12 200 96 183 20 bull 5 320 47~0 646 293 669 66) 218 191 153 112 144 138 182 137 168 16 bull 5 203 14~ iJI 137 129 146 118 61 123 14 bull 5 107 76 90 48 55~5 53middot3 472 34 bull 2 226 158 1)9 178 35middot511 72 bull 5 345 19~2 251 183 14bull4 13 2 112 103 12~0 132 121 1-4 16 16 15 18 30 22 28 2~0 13 01 14 1middotmiddot9 2~2 21 47 90 136 93 74 28 na
~gt i824) (1387) (944) (1036) (1981) (2516) ( 2756) (4373) (4462) (4947) _01 2849 2454 2274 2201 1201 2167 2062 2513 2446 1640 1358
Ltrates 7~3 140 76 so 3~3 )9 26 10
VALUE (thousand sucres)
610 10864 6555 14632 23265 51460 93837 127105 60395 203242 201111 49985 39bull276 37bull033 29354 34364 40)26 51794 4lt985 53547 74935 188208 24613 16703 15227 16)84 23827 17278 33176 35~26 33863 4839 43 bull 524 5bull691 7558 7t006 6448 4658 _J 107 2159 1898 2872 738~- 24355
18242 7~146 9605 86o6 6120 201 6274 6209 9264 1)02 14994 4048 4300 4298 3~866 6979 35481 23316 38043 26553 15111 979 lt363 2~134 2724 3168 8450 25613 43419 31877 18 bull 509 7125 na 8048 6 234 4981 6509 16231 22121 25191 69033 69J87 81962 4662
21989 26374 25020 24862 13425 24820 23796 28788 28107 18253 15902 trates 10165 16090 13134 38609 27208 29013 18075 809 ates 18682 35297 41204 39907 29426 25374 27476 26457 15482 24858 25334
10774 13210 13495 3 950 16869 32775 2L068 32402 30902 38326 n bull a_
164_045 169096 167148 167851 199704 298690 393115 466631 377894 537131 619859 tmiddotbull bull
Note Dash (---) signifies zero or less than 50 metric tons nly or ~00 sucres ata expressed in quantities other than weight Sourcis 193 data from unpubli~hed Zcuadorian trado stati~tics
at US Department of Commerce 1938 nnd 1939 from partment of Commerce official data Direccion Nacional de Estadistica Eruad6r en Cifras ~7 from Banco Central Boletin 1940 and subsequont ~ears from Banco Centrll jto~n sterio de Economia and from M1nister1o c Economia data furn she
Mission July 1948
~ tobacco tone JgS
articles
11res ilk
al
value of Imports by Groups 1937-Lt-5 Volume and middot~alue of Selected Individual Imports 1937-46
(Value in thousand Sucre~)
1~37 1~38 1~39 1940 1941 ~942
19~731 20~ 375 24~874 16~)65 19043 37~540 5127 7194 1958 6~4e8 5t298 8 118
12888 13Jl5 14522 17702 19556 25~152 21627 25~272 21455 28532 21619 18923 20649 21~593 25559 29437 22636 19~$13 13~505 11961 12~654 15~976 15667 18899 5~829 7 bull 524 6066 9385 833 14353
22912 )0868 24~75 27 t 750 25993 42~916 9376 1028 10038 12118 11345 13932
-bull
131643 148320 1486o 173753 149499 199715 (Volume in thousand metric tons) (Value in thous~tnd sucres)
5middot3 111 124 194 5 bull 534 6385 26 4 24
os 246 -
122 ioo i66 86 118 235 8255 6)88 7449 5076 013 14609
19 07 11 11 14 29 2187 1824 2695 294-3 29J9 8182
101 i4 i2o i09 28 51 804 llJ)6 1667 1546 577 866
~ hides amp skins amp manufactures amp miScellaneous
~~43 1944 1945
33270 70915 82984 6717 8)69 904)
31~700 43196 32~830 17073 53~400 JBoo6 15447 32~624 38797 14~88 18~388 22895 14116 11a99 9812
68928 n~l79 69-113 15856 19186 20042
217983 33ltl56 323524
78 middot 0 2 215 130 12622
09 27 775 2290
99 240 bull 25~1 337 24070 26388
23 46 67 8853 146)1 21699
09 16 10 321 349 246
~s zero or less than 50 metric tons -middotNote Columns may not ahmys add to totals because of rounding Denartment of Commerce official sources - 19)8-42 Direccion Nacional de Estadistica Ecuador en Cifras [inisterio de Economia El Trimestre Estadistico del Ecuador
1946
)1 8135
4 bull 5 )842
114 13123
46 22709
)1 639
ECUAOOR Exports by Countries 197-47 (Value in thousand sucres) Table - 15
1937 1938 1939 1940 1941 1942 1943 1944 1945 1946 1947 --middot-------middot
80458 lt2865 116t-J78 150055 196953 293081 386483 46lt-909 372~549 463~378 sa4~68J 54422 63418 8)254 1t0496 145 bull 558 168585 2)9238 267105 218018 227291 262887
26 20 65 17 2228 78 124 7)41 17173 630 610 949 1281 1055 1)98 5~526 25686 78523 85382 61478 75890 23481
2899 4955 2109 3568 162 1163 4J54 2526 4197 44~ 1450 5027 6335 4972 5i92 5285 7425 4546 7379 10286 9798 15537
1 5 5 17 57 13 291 54 444 574 6996 8 662 9188 8714 13bull764 7238 15316 13900 11223 6~07l 14503 11717 2908 12544 5 730 7896 3767 21215 22608 29233 4243 6703 7965
51 15 24 8 532 3620 1603 539 2336 11579 3749 80 207 862 4070 9991 17096 1275 17~428 6~973 27431 80541
1943 2135 5229 6039 1965 5435 3021 4827 15~702 25~137 51~854 middot 667 740 991 zo83 3358 11412 4286 4282 3~-970 13064 5~864
1799 419 2218 875 2865 12299 9644 14900 13714 9653 11655 J 89 82 2527 1247 964 326 )24 250 41141 2~985
1024 1514 1068 2205 7173 2650 2 744 8871 7694 J2 5811 17 39~ 77029 61869 43688 11945 1503 5550 6335 4108 4075 36783 61998
32) 6)3 1187 490 58 186 2164 4021 J217 35974 29595 11277 69 - 29 4411 7909 6156 3477 1183 5492 4876 26)8 359 1860 7~467
489 255 J2 100 280 1155 1239 1265 3827 3~961 20539 13t521 10802 2254 5 706 4177 6313 2bull610 3615 4251 -middot 2842 13546 lBi 1415 3 758 822 6 188 12962 3592 2531 412~ 162 7~ 10052
8643 1693 3bull521 3~400 2751 320 40 118 231 222 5404 J 4894
6337 4201 6548 5478 1175 5 45 40 1611 50950 6261 4132 5386 5452 117) -
~l - - 15 45988 5 middotmiddot 7S 8 5 25 567 92S 11
33 ~- 76 18 966 151 150 3419
38 29 858 2 45 78 467
(continuation on next naee) middot
~GUJLOR ~xnorts by Countries 1937-47 (falue in thousPnd sucres) T~ble-15 continued
middot-~--- -~-middotmiddot -middot _ middot-- ~~---~~- ---- -middot--~middot--------middot- -middotmiddotmiddot--middotmiddot--193 1938 1939 1940 1941 1942 1943 1944 1945 1946 1947 _I --middot -middot- ---~- ------ middot- bull middotmiddot-middot -
4 7 5 5 5 219 1087
218 153 529 368 73 49 297 569 1230 35140 789 28137
207 144 379 J68 73 49 297 559 1104 605 11 9 10 126 43
150 6355 plusmn
353 54045 169096 167148 167851 199704 298690 39J115 466631 377894 537131 619859
~S Columns may not always add to totals because of rounding
Dash (-) signifies zero or less than 500 sucres
Primarily Guadeloupe and Jamacia
Primarily British West Indies and Netherlands West Indies
Primarily Denmark Spain and Norway
Primarily Java
~ces 1937 and 1947 from unpublished Ecuadorian Trade Statistics at U s Department of Commerce
1938-46 from Ecuador Ministerio de Economia data furnished IBIID rassion July 1948
Imports by Countr~es 1937-1947 Table-H)
ECUAOOR
l937 1938 1939 1940 1941 1942 1943 1944 1945 1946 1947 I (()
Value in thousand sucres) ~ + -gt L520 63151 83984 115382 128423 186958 200061 311989 302~329 363403 517582 j
u t 2086 51311 71950 103214 110422 138729 103583 173776 178821 240233 429906 0
Q) f
811 674 551 2436 1815 3J258 2150 5265 6538 12178 20912 d S Ugt ro c 1 n 4 4144 3042 8 99 14 23 295 178 8~011 210 h middot-1
(- 0
186 324 237 957 2~991 8492 18~376 15~239 17232 10~574 3121 4 middot-2375 2310 1959 2476 3016 4735 7930 7~696 11~201 15~564 14755 sectwfi
middot-1 1 fli 4 6 343 1~823 3J064 4110 3~612 60J5 h 0H
2739 2109 3789 174 2352 7949 9~934 17845 23~ 616 1559t 18~727 ~rld ()
328 164 457 2498 612 733 10892 10902 20003 16684 11981 oc ampl+lll
mmiddota J63 1297 1161 -- - 2 23 115 1~128 1192 d+gt-
2464 507 500 1438 5565 20668 39979 46654 33684 33034 6~486 15~~ (()
na 1 311 2297 5515 130 bull-I m rl bull +gt
15 31 68 245 995 1516 2804 25326 6124 5956 3472 Oltll~
149 280 269 332 550 208 270 389 707 839 655 a~ sect (1) Cl 4-209 72986 ~ 38 09 1433J 9813 16276 15885 1721~9 45194 80928 ~-g 1701 35767 2 7 7 33 1202 67 47 61 19 2 El 0 0 eo g 3250 11462 8094 12980 10124 8108 13634 12513 11984 28392 40983 cent1-t+l~
1803 718 1687 otmiddot r-
4-114 6465 7339 630 475 34 22 2 66 889 7279 t -P () ~led
36o 4685 1573 7144 308 12 682 4824 rlltll ltDno
1~896 2550 1466 1624 64 1 58 5090 bull-1
fJ ~ ~ 1052 1489 794 945 293 224 5 21 1373 9062 9 703 P + na 868 881 423 10 1 8 223 135 r- 0) u
1 r=l middotr-l
1162 4823 1264 1675 877 1017 1~52 2380 3129 4~326 6851 () l=l rl
7274 3074 2609 3595 980 349 1041 905 599 1~543 3~134 cn~oo bull t
724 11939 8983 19951 6239 2281 1439 304 3882 5478 5736 op a cent1-t ~sect rl
173 302 262 238 -w 14 276 -rr 472 ---s9l ctillmgt
259 10949 7810 18190 4414 170 16 4 5 +gtUd ~-- ~
935 712 728 1278 1281 1715 1314 2685 3185 4465 3151 +gtP t-1
530 105 143 221 306 240 95 89 582 541 2089 ~ (f)
1l 21 12 80 1f 196 122 169 125 1J n ~-T~
0
109 218 lllL 250 m 46 sect2 12_ 28 119 112 I ~ --sB_l_ 0 ---- -
643 148315 147860 17353 149499 199715 21 ~ 983 331156 323524 414266 604479 ms may not a1ways add up to t ta1s because of rounding Dash (-) signifies zero or less than 500 sucres ~ country breakdown not given in source g) of which 591 from Syria 2Z3 from China 264 from Straits Settlements 1 Sumatra and 264 from Iran
YEAR
1937l
1938t
1939~ -
1940amp
194H
1942
Exports Imports Balance
Exports Imports Balance
Exports Imports Balance
Exports Imports Balance
Exp(rts Imports Balance
Exports Imports Balance
ECUAroR Balance of Trade by Area 1937-47 (thousand sucres)
fRlSTERN HEMISPHERE including Philinuines
United States Other Total Eurone
54~lt-22 26~036 80~-~-sa 77~029 52086 9~434 61520 64~209 2336 16602 18938 12820
63418 39447 102~865 61869 51311 11840 63151 72~986 12107 27~607 39714 -11117
83254 33124 116~378 43688 71950 12034 83984 54505 11304 21090 32394 -10817
100496 49559 15Cl055 11945 103214 12~ 168 115382 38~090 -2718 37391 34 673 -26145
145 bull 558 51395 196953 1503 110422 18001 128 423 14333 35136 33394 68530 -12830
168585 124~496 293081 5t550 138~729 48229 186958 9 813 29856 76267 106123 -4263
Table 17
Other Countries World Total
6~559 164045 5-912 131643
647 32405
4361 169~096 12~ 178 148315
- 7817 20781
7082 167148 9372 147860
-2290 19288
5851 167851 20281 173753
-14430 - 5902
1248 199704 6743 149499
-5495 50205
59 298690 2944 199715
-2885 98975
NOTE Areas may not always add to world t~tals because of rounding
Source 1937 and 1947 frlttm unuublished Ecuadorian Trade Statistics at US Department of Commerce 1938-46 frem Ecuador Ministerio de Economia data furnished Mission July 1948
(Table 17 continued on next page)
YEAR
12J Exports Imports Balance
1944 Exports Imports Balance
125 Exports Imports Balance
1946l) Expltgtrts Imports Balance
12Z= Exports Imports Balance
ECUADOR~ Balance of Trade by Area 1937-47 (thousand sucres)
WESTERN HEMISPHEL~ (including Phili~ines United States Other Total EuroQe
239238 147~245 386~483 6335 103583 96~478 200~061 16276 135655 50769 186422 -9~941
267105 194804 461909 4~108 173776 138213 311989 15~885 93329 56591 149920 -11779
218018 154~531 372549 4075 178821 123508 302)29 17159 39197 31023 70220 -13084
227291 264224 49J515 36783 240~233 123170 36J403 45~194 -12942 141054 128112 -8411
262887 241796 504683 61998 429906 8676 517582 80928
-167019 154120 -12899 -18930
1 Only year in which substantial Philippine trade
NOTE Areas may not always add to world total becasue of rounding
Table 17 (oonttnued)
Other Countries World Total
29 393115 1646 217983
-1)49 15132
614 466~631 3~282 331~156
-2668 135475
1270 377894 4035 323524
-2765 54)70
8~833 537131 5670 414266 3163 122865
53179 619859 5969 60449
47210 15380
Sources 1937 and 1947 from unpublished Ecuadorian Trade Statistics at us Department of Commerce 1938-46 from Ecuador Ministerio de Economia data furnished IBRD Mission July 1948
~ EXCHANGJ-tAL BANK
ECUADOR Exchange Reserves amp Banking Position (million sucres)
r 4 bull TIC CQEDITS OF CENTRAL BAl~K Domestic Govt Official Bus Other Credits
MOliEY SUPELY Current AC
JJj To()2f (4) Entities Indvls Total Banks of O~mtl Currencl Denosits l (6) (7) (8) (10) (5) Banks amp 11
Indvls (9)
16 10 26 51 1 116 62 64 48 26 7 40 73 4 129 74 66 3middot7 )9 7 29 66 4 144 73 71 37 29 8 24 62 4 159 78 73 56 26 8 22 55 5 183 8l 103 81 37 28 2 8 201) 120 119
152 37 21 22 79 9 255 169 17~ 26) 34 27 22 83 13 378 ZJa 26e )4 60 37 20 117 9 385 295 308 Z5 105 73 11 189 26 493 321 312 282 153 81 10 244 24 536 35middot~ 354 242 104 44 93 241 2 565 329 284
221 110 51 99 260 2 56 313 278 215 102 47 101 250 2 573 )06 294 225 97 45 95 237 2 585 299 299 219 100 44 98 242 1 591 307 297 214 98 35 111 244 4 6)4 315 295
)20 295
on of $12500CC beginning in December 1946 bull
ars
Ttttal (12)
127 14) 144 151 183 239 345 492 602 634 704 613
591 599 597 604 610 614
ge liabilitieS but including Stabilization Fund in 1945 and GolC CertificCt in 194) bull ial banks and fomento banks ial bc1nkst and fomento banks sits of commercial banks and time deposits of fomento banks
Table 18
Govl t Den sits ~L
(lJ)
6 23 12 27 7 28 8 31 6 32
middotmiddot 11 )6 16 57 27 71 41 74 63 98 59 90 66 77
71 8 75 76 6 75 81 75 81 72
72
1 1 Boletin - Superintendencia de Bancos Boletin - Unpublished data furnish~d MF bY Banco Central of Ecuador
Table 19 ECUADOR
Price Indices
WHOLESALE Rents Export Fooa in
YEAR Goods and Quito - Coal ~1) (2) (3)
1937 100
1938 83 100
1939 95 100 153
19h0 95 106 16h
1941 96 113 150
1942 114 146 172
1943 114 183 187
19h4 118 218 219
1945 133 266 254
1946 203 320 315
1947 297 364 516
19h8 (March) 294 379
(liay) 416
(July) 389
llame l~umbar
Republic of Ecuador
Status of u s Export-Import Bank Loans to ~cuador
Purpose
gs of Junemiddot10omiddotl9ltsect
Gross Authorized
Cancel- Net lations Authorized Repeid
Amount Amount Outstandin~ Undisbursed
6J048 6J048
( 262 )16
Haterials equip amp services $ 6480000 $20810 $6459170 $1279775 ~)5-l19middot395 _____ _
ibulliunicipali ty of iui to (Republic of Ecuador)
ibullIunicipali ty of Guayaquil (Republic of Ecuador)
Republic of Ec~ador
Republic of Ecuador
Ecuador DeveloPIlent Corp
Pan-American Highray (Cuenca-Loja)
Agricultural Research amp Experiments
Raihray Equipment
5000000
12JOOOO
50000 200000
)28 Haterials equip ~~ 4000000 services - ater 1middot1orks
)28 iltiaterials equip amp services - ~~rater orks 4000000
J4J Pan-American High1middotray (Guamote-Tambo)
432 uevedo-Hanta Hightmiddotray (additional credit)
1980000
220000
$19180000
Of tlhich $2500000 tts used on the Quevedo-Ibullianta HighTaY
4000000 28880
4000000 167
-1 t-9amphOOO- -7500
220000
6o6120 -h365000-middot
41592 575-t 2-41
-l-y5Q2- 500 44Gooo
220000
IBRD Statistics Sectio spte~ber 24 1948
0
ECUADOR AND SOUTHERN COLOMBIA SU~fACE CONfiGURATION
~ANDES lf-IINTERMONT BASINS
E72j COASTAL HILLY BELT
1lt-J PLAINS AND LOWLANDS
A CHIEF VOLCANIC PEAKS
0 GUAVAS RIVER I
T TULCAN RIVER
Q SCALE 0 I
MILES
ECUADOR AND SOUTHERN COLOMBIA POPULATION
URBAN bull MORE THAN 100000 bull LESS THAN 100000
RURAL bull EACH DOT ~000
SCALE I
MILES
BBOdVAR LR LOS R (os
100 I
CAUCA
ORIENTE
middotmiddotmiddotmiddotmiddotmiddotmiddotmiddot
SUMMARY
1 In terms of national income per capita Ecuador is one of the
poorest countries of the world Nor are her known but unexploi ted natUro
resources strikingly rich Her best potential resources are agricultural
owing to geographical configuration she can obtain the output of temshy
perate agriculture for domestic consumption and of tropical agri~~ture
for both domestic consumption and export She might also be able to
d~velop a cattle industry for supply of neighboring republics
2 Although socially and culturally as old as other Spanish Americm
Republics Ecuador is very young economically~ The Panama Canal bringing
her close to the Eastern United States and Europe was opened only 34 years
ago She has very little of the techlical and administrative skills and
abilities that underlie modern economic processes She is very poor in
capital equipment of all types And her Government is inexperienced in
the exercise of the modern economic functions of the State
3 The population of Ecuador is nevertheless increasing at about
2 per cent per annum and in the Sierra where 6o per cent of the populashy
tion is locatedt is already pressing against local focd output The situashy
tion is one which may be temporarily eased but cannot be finally solved by
extension of arable area in the Sierra except where such extension is
accomplished througf) irrigation Of basic importance is improvemm t of
arable farming practice in the Sierra valleys to obtain ~better yields
from land already cultivated Use of agricultural machinery would
- i ~
probably not achieve this unless accompanied by other more fundamental
chanesp in seed types crop rotations and fertilizer use Unskillful
employment of heavy agricultural machinery to bring into use higher ground
now unutilized would carry considerable danger of soil destruction tnrough
wind and water erosion
4 Non-subsistence coastal agriculture is in part an important
foreign exchange earner and in part a source of products also imported such
as sugar cotton and tobacco No export crop other than cacao enjoys an
established position in overseas markets and cacao production has not
recovered from disease losses impacting in tne 1920s Rice exports
expanded greatly during the war but retention of roarkets is doubtful
Coffee expoi lts have been increasing in value but not in volULle rem--ining
agricultural exports are at present minor non-staples
5 Expansion of coastal agriculture is rather a matter of illproving
the farming environment (in transport crop processing and credit facilishy
ties) than farm practices themselves ~1ile the coastal area is relatively
thinly populated (particularly ~hen compared i th Far Eastern tropical
areas) it is not yet clear apart from a few crops how mechanization
could be applied to offset a small labor supply This may prove to be a
key technical question in the development of coastal agriculture lll
economic problem is to identify and foster the products of good ~~port
prospects rather than those of probable decline
6 Exports of minerals and petroleum are a ~inor item In 1947 they
represented only 45 per cent of total exports exports of petroleum have
declined steadily with increased do~estic consumption of petrol
- ii
7 Apart from a few important consumer-good industries such as tex-
tiles Ecuador is not an industrial country Her manufactures are largely
in a handicraft stage that of panama hats provides an important export
commodity Power prodllction while deficient does not at present seem a
real obstacle to economic development~ which at this stage is principally
an agricultural problem
8 Changes of farm practices will however take time partly be-
cause of the educational problem in Indian collliDllli ties partly because the
provision of improved seeds and the -working out of new safe tillage pracshy
tices carmot be quickly accomplished While the work rh ould be taken up
immediate action in stimulation of development would not center upon the
farm itself but rather upon improvemm t of services middotsurrounding the farm
notably roads irrigation crop processing and storage and rural credit
facilities
9 Such immediate action might be supported by establishment of
multi-purpose rural machinery pools equipped with machinery and personnel
to undertake not only farm operations but also local road-building end
irrigation works work upon the various activities being fitted into the
farming calendar The actual use opound farm machinery would then be conshy
trolled by experts whose ear~ work might be mainly experimental and
demonstrational
10 Voluntal saviftgs directed lnto productive use ere small and a
large part of domestic development axpendi tUes att necessarily by Govern
ment or through GoverrJ~DSnt agencies In con~nce thefe 11 constant pres
sure toward inflation pressure which in the GovemmeDl sector has beea
bull 111-
offset during the past sixtem months by application of special exchange
tax revenues in reduction of Government debt to the Central Bank Ver-J
recently however 90-rer cent of these revenues has been diverted to finarce
of development with consequent renewed danger of monetary inflation v1hen
total Government finances no longer run a surplus
11 These special exchange revenues derive from a multiple excharge
rate system installed in iilay 1947 (with IivF advice and concurrence) to
meet rapid loss of foreign exchange reserves The system has bern successshy
ful in slowing the rate of loss bull but not in colq)Jetely preventing it midshy
year expectat ions were for a loss of foreign exchange of some US$ 5 million
in 1948 Recent action reclassifyinamp i~crts may reduce this e~~ected loss
12 The balance of p~ents position at present difficult and no
great easement can be expected It is improbable that Ecuador could safoly
assume any large additional debt burdens At the same time her ability
effectively to absorb and use loans directed tmmiddot1ard increase of production
is limited bya present lack of technical and administrative abilities
Here iLiprovement though clillilllati ve is necessarily slow at first
- iv-
I GIDGRaPHIC
13 Ecuador has common boundaries with Colombia on the North and
Peru on the East and South The greater part of the country lies immeshy
diately south of the equator which passes 13 miles north of Quito The
area of the country has never been measured but is estimated as 150 COO
square miles ri thin the frontiers resulting fror1 the war with Peru in 1942
the area west of the Andean crest is about 60000 square miles
14 Ecuador is divided by nature into tru-ee separate reeions of
which only two are in effective occupation
(a) The sea-coast plain (about 28000 square miles and about 425
miles long by 62 miles in width) is composed partly of swampy
lowlands and partly of low hills most of the region being
less than 1000 feet in altitude I the north it shares tbe
double rainy season of Colombia and is covered with dense
forest Not far south of the borders of Colombia the double
rainy season ~ves way to a single rainy season from Decemshy
ber to June as one goes further south the rains begin later
and end sooner until at the extreme south desert conditions
begin stretching onward into Peru ald Chile As the rainfall
becomes less the vegetation changes from wet forest to dry
scrub forest and savanna until in the south settlement is
limited to irrigated areas
Temperatures in the region are modified by the cold-vater
-2-
Humboldt current and are more pleasant than latitude alone
would suggest
The coastal region produces almost all the export commodities
of Ecuador its people are largely mestizo strongly conscious
of nationality and commercially active Its major port
Guayaquil (population 1942 154000) is larger than ~ito
(population 1942 139000) and is the commercial capital
of the country
(b) The Andean Highlands or Sierra (about 25000 square miles)
comprises the second natural region and forms the physical
backbone of the country There are two high corderillas
surmounted by towering volcanoes and separated by a series
of ten large intermont basins lying in a north-south line
seven are linked to Guayequil by railway Each basin is
occupied by a dense JOpulation 1hich is almost pure Indim
Only in ~ito and Cuenca are there any important number
of people with Spanish ancestors and these are either
office-holders in the Government or landowners with large
private estates
(c) The Oriente (Amazonian region to the East of the Andes) is
not yet part of the effectively occupied area of Ecuador
Its jungle inhabitants from time to time spear the
agents of the Shell Oil Company who are prospecting
for oil
3
In 1942 official Government figures for these rerions were
Area Population middot Density Square of
Kilometers middotmiddotNumber middot Ponulation
Sierra 70344 23 11686748 61 268
Costa 68633 23 1JooOl8 33 14 6
Oriente 153143 51 189005 6 12
CalapagS Islands 7880 j 2192 a 0~2 -Miera tory 4115 a middot-
300000 100 3089078 100 102
15 Very little however of the total area is under cultivation
It was estimated in 1916 that about 90 ~)er cent of the coast and 60 per
cent of the Sierra was suitable for cultivation that is about 25000
and 1)000 square miles respectively Of the total of Loooo square
miles of cultivable land~ only about 1$000 was under cultivation in
1946~
16 No census of the population has ever been in Ecuador
In 1892 estimated nopulation was 127 million in 1942 309 million
and in January 1948 3L7 million with crude birth rate of 379 oor v ~ thousand and crude death rate of 201 per thousand in 1942- Estimated
composition of the 1942 population was
a less than 05
Yhi te Mestizo Indian Negro Iulatto Other
100 per cent l-t10 ner cent 390 per cent 50 ner cent 5 o Per cenmiddot~
1000 ner cent
Just over half these deaths oc~urred in the are rroun of 0-4 years in 1942
4-
17 At the same date the literacy rate was estimated at 20 pe~ qent
s~i~literacy at 20 per cent and illiteracy at 60 per cent
-5-
II OCCUPAmtOUS AND INCOivES
18 There having been no census there is no at~curate information
under this beading
19 The Economic Department of the Ecuadorian Central Bank has esti-
mated that of a total population of 334 million in 1946 1285000 or
J9o per cent were gainfully employed in the following occupations
Agriculture Forestry etc
Mining
Building and Repairing
Manufacturing and Processing
Services (communication comshymerce government etc)
820000
10000
6oooo 10000
325000
5 5
26
100
20 No valid estimate of national inco~e exists At the request of
tne International Monetary fund the Technical Adviser to the Central Bank
of Ecuador Mr L A Carbo estimated national inccue in 1946 as 20096
million sucres or US$ 149 million Although this estimate is probably too
low ] it is clear that national income is very small Ecuador is very
low on the list of income per head among Latin American countries its
income per head is in feet among the lowest of countries of the world
21 Income is very unevenly distributed A survey made in 1943
yielded the following picture
g lror reasons Sdvanceit below Paragraphs 87 and 88
~ pt WI
-6-
To tal Monthly Average Monthly Population Income Income per Fw~ly
Number of Amount t tount People (SUcres) (Sa~res)
Upper Cla~s 4oooo 133 28000000 144o 2300
Middle Class 96oooo 3200 96000000 4950 4 L ~ 00- middotJ~
Lower Class 2000000 6667 70000000 3610 140 -- -~
3000000 10000 194000000 10000 10000 yenSliP C_~ ~
Note At the ofDcial rat~ of 1350 suc~es to the US$ average monthly incomes per family are equivalent to approximately $2J7 $30 and $10 respectively
~ Uneven distribution of incoue is of course largely a conse-
quence of uneven distribution of property Some ideas of the distribution
of rural property is afforded by analysis of re~urns made in payment of
rural property tax Such tax was paid by only ll2l4o proprietors in 1944
whose holdings may be summarized as follows
Per cent of Value of Rural ProEerties Number of Proprietors
916 4o
29-33 llOO
3041 10400
2030 37200
1080 634oO
10000 112J4o
23 Such statistics do not of course carry one very far beyond
the general observation that income and wealth is very unevenly distributed
and that much is obvious from a little travel in the country But it should
-7-
be said that comparing observations in Ecuador vrith those made in Peru
and Bolivia Ecuador by subjective judgment compares very favorably with the
tvo latter The Ecuadorian Indian seems to be on a perceptibly higher stan-
dard of life both in the highlands and on the coast than the Indians seen
in Peru and Bolivia Vhile his land holding is small it yields somethi1e
he very freqjl ently possesses livestock such as pigs and chickens has cot-
ton clothing drying on a line a~d often cultivates flowers and keeps
pigeons By American standards he is undoubtedly on the poverty level by
Latin American standards he may be a little off it
24 At the other end of the scale the wealthy upper class are pro-
bably not as wealthy as the Peruvian upper clas~h and the Bolivian elite
in operating in poundcuadc~the upper class lacks the rich property of mines
Thus while income is of course unevenly distributed in Ecuador as else-
wnere the range between the wealthy and the InJian may well be less tban
elsewhere The line of income distribution is of aboat the same slope
but probably significantly srJOrterY
This conclusion cannot be demonstrated statistically It results from a 11feel 11 deri ved from personal observetions in the respective counshytries
-8-
III AGRICULTURAL lROIDCTION
25 Ecuadorian development is largely a matter of increasing the out-
put of and improving internal and external trade in agricultural products
There appears to be no enduring geographic or physical reason ~middotby this can
not be accomplished She possesses soils and climate ranging from the
tropical to the temperate soils which in some areas are very fertile and in
others are in danger of exhaustion To anticipate subsecpent conclusions
her problem of development through agricultural progress breaks doTltD into
separate aspects all involving improved technique
(a) increasing arable yields from areas already cultivated
(b) improving pastures and stock in grazing areas
(c) enlarging both arable and pastural areas (including irrigation)
(d) improving roads in rural areas
26 Achieving these objectives involves providing more adequate
domestic credit for short- medi~ and long-term agricultural requirements
27 In application however interpretation of these problems is very
different in the two occupied regions of the country the Sierra and the
Coastal Lovrlands no generalization can cover both
(a) TLe Sierra
28 The occupied inter-Andean valleys are a region of temperate
agriculture producing almost exclusively for local consumptionmiddot Their
pat tern of tilled fields grazing land trees and flowerJl is almost
Y Flowers bloom all year round The main tree is the eucalyptusmiddot introshyduced some 70 years ago end used for all purposes (~indbreaks fuel 1
and lumber) affording a striking example of the effect of introduction of one plant upon regional habitability-
-9-
Western liiuropean in appearance but not unfortunately in productivity
Agricultural Production of the Sierra
1939 194o 1941 1942 - -(Hundreds of pounds)
Theat 49QOOO 611300 534300 527499
Potatoes 1201000 1476400 1386120 1146000
Rye 72500 79900 159495 115000
Lentels 46000 424oO 37955 csooo Corn 816700 1349300 1308062 1315200
Barley 85)000 795700 903600 911000
Cotton 45000 42020
Kidney Beans 80000
29 In addition about 1000000 hectares (247 m~llion acres) are
devoted to pasture supporting epproximate1y 683000 cattle 145 million
sheEf 107000 STrrine and 320000 goats
30 Yields are low in all Sierrean agricultural activities the
standing VJheat and barley crops are so thin that the ground can be seen
through them Yet the greater part (some 6o per cent) of the people of
Ecuador live in the Sierra and population is increasing at about 2 per
cent per annum The effect upon land use under existing tecnniques is
clearly visible cultivated areas are being pushed higher and higner up
the hillsides (slopes of 30 to 40 degrees being used) and onto the
fJparamon the high plateau betvreen adjacent valleys at altitudes of
11000 feet and higher The result is a picturesque scene but one which
reveals a near Malthusian situation in the man-land ratio rbullrith static
-10-
technical practices It is a situation which cannot remain unchanged if
economic development is to occur in the region
31 There sean to be three possible lines of advance increase of
output from highland areas in present use the bringing into use of new
ground in the highlandsbull or a change to increasing reliance upon the outshy
put of non-highland areas
32 The third possibility is not one for the immediate future It
involves either large-scale migration from highland areas to lowland
regions or a large transport program linking highlands and lowlands
together with growth of non-~ricultural activities on the highlands to
provide a cash income with which to purchase 11 imported 11 foodstuffs This
second possibility may indeed be the trend of ultimate development but
offers no irmnediate easement Large-scale internal population movement
from highland to lowland is probably impossible since the Andean
Indian (of different stock to the coastal Indian) is fullf acclimatized
both mentally and physically to life at high and temperate altitudes and
little suited to life on tropical lowlands
33 The two remaining lines of advance would both seec to increase
highland agricultural output But there is an important difference beshy
tween increasing output from valley land in rr esent use and bringing new
and higher land into arable use The first is a complex problem suscepshy
tible only of relatively slow solution the second is seemingly simple
and capable of quick result yet basically less sound offering only
temporary improvement
34 The thurst onto higher ground is already evident and the area
-11-
taken in could probably be greatly enlarged by efficient use of tractors
and modern plows Such use of mechanical equipment would thus give quick
increase of agricultural output but it is very doubtful whether improveshy
ment induced by these means alone could be long maintained The greatest
~r particularly on sloping land is that deep plowing may lead to
soil erosion so serious that land becomes finally llilgtroductive To use
mecbanical equipment i thout at the same time adopting eqJally modern
methods of soil conservation way well be disastrous and that perhaps
within no long period
35 Even apart from this physical daneer there is the virtual cer-
tainty that new land however plowed would gradually sink in fertility
end hence output unless farmed by better agricultural practices than
those now followed in highland Ecuador The present attraction of the
higher land is principally good natural fertility beine virgin ground
On all other counts this higher land is less advMtageous than the valley
floors the va)ley sides are steeply sloping a1d the fl~t paramo is some
2000 feet higher bare windswept and devoid of habitation It would
seem obvious that it is pastoral rather than arable ground were it not
for the pressure upon arable output of the region
36 The pressure today however rises from the relation betwem
popUation and output rather than that betvreen population and arable
area Productivity in the Andean valley is low and can certainly be
improved If improved the pressgtlre which is causing the thrust to
higher ground is relieved until population increase again overtakes outshy
put Against that time however the higher ground vrould remain
-12-
availfibleY and other lower regions may be coming under effective use
37 To increase output of the populated valleys is not a simple mat-
ter responsive to single policies such as simple mechanization by tracshy
tors It will embrace the wlo le range of agricultural practices from
better seed types to crop rotation and fertilizers including in some
valleys irrigation It is a matter rrther of agricultural education
than of~dtlgagricultural appliances and probably experiment under
the peculiar regional conditions will need to precede education Improveshy
ment will necessarily be slov1 but along these lines it can be sound and
permanent
38 Wher~ lfL mere importation of mechanical methods Vi thout
understanding of their dangers in speeding soil destruction by wind and
water erosion may permanently damage the region The somewhat gradual
mechanization of agriculture is of course to be expected and not disshy
couraged but it is not the wlole answer to development in highland
Ecuador
39 It seems that there is at present no over-all agricultural
lfibor sl1ortage in the Sierra and mechanization is nOt therefore called
for to relieve an adverse manpower position It seems however that
some of the larger estates are experiencing difficulty in obtaining their
labor requirements because Indian tenants are viitblolding quasi-feudal
labor dues and devoting whole time to cultivation of their own plotsbull
As a result hacienda holders are attracted to mechanization as an
escape from growing difficulties in obtaining and supervising labor upon
Y As it would not if destructi ve1y formed at this stage
-13-
their ovm land To the extent they are successful the tendency for agrishy
cultural money vrages to rise is weakened
4o There vrould seem to be good possibilities of increasing pas-
toral agriculture in the highlands 1Jrith improvement in both numbers and
strains of cattle and sheep If adequate arable development occurred in
the valleys the main grazing grounds could be the higher land not then
required for arable purposes ~lith dairy cattle on the valley margins or
on valley ground not well suited to arable use Such pastoral development
would be desirable not only to imp1middotove nutrition in Ecuador itself 1 but
as a possible new export of meats fats and hides to meat deficient
Republics notably Peru Early export would probably be on the hoof
along the Andea1 ridge it self
41 The Ecuadorian Government has not included any explicit propo-
sals for highland agriculture (other than irrigation) in its present apshy
proach to the Bank It has however suggested the Bank finance $1 mil-
lion of agricultural tractors and equipment to be handled by agriculshy
tural stations located at strategic places both in the coastal
provinces and the highlands 11 without further elaboration of the
intended highland use of such ecp ipment The description given above
suggests that the usefulness of agriculture machire ry depends to a conshy
siderable extent on the place plan and purpose for rhich it is to be
used
42 In some of the highland valleys (for example in Cotopaxi end
~ound Biobamba) rainfall is deficient and irrigation would increase
valley output by bringing more valley ground into effective use This
- 14 ~-
is clearly sound for flat valley ground already populated is more useshy
ful than higher sloping and more exposed ground The Ecuadorian Govern
ment has included purchase of eq1 ipment for irrigtion works to the value
of $500000 in its present approach to the Barik Assessed against the
requirements for economic development the request is sound provided of
course such equipment is effectively used
(b) The Ooast
43 The condition and nationel significance of agriculture on the
tropical coastal plains is quite different from that ltNl the Sierra The
area as a whole is less densely populated and in some parts such as the
Province of Esmeraldas is very sparsely populated Its principal pro-
ducts are exported The population has more mixed blood than the highland
people and is oore corumercially active and minded There is little feel-
ing of community of interest with the highlmds the rrincipal coastal
city GuayaqJil is larger than Quito and less remote fror-1 outside
influence
44 In terms of reported area devoted to its cultivation cacao
is the principal crop of the coast The table on the following page
shows output of main crops
45 Cacao is not however the most important export crop by value
being surpassed by both rice and panama rats (a handicraft product of the
region) Nor does the table show those products which result from
gatherage of mild growth tagua kapok oil-bearing vegetable nuts
balsa rood rubber etc
Y For use by the Caja de Klaquogo as required both in tile highlands and on the lowlands
-15-
46 Agricultural Production of the Coast
1939 ~ 1941 1942
(limdreds of pounds)
Rice 957164 872890 12304oO 1610489
Cacao 392000 263300 333250 315782
Coffee 343800 369000 310000 190633
Bananas (1000 bunches) 4090 3913 4568 4265
Oranges (COOs) 103000 lQ96oO 80550 75000
Cotton 200800 156800 155910 111500
Tobacco 24o43 4o 765 22349 29539
47 It has been estimated that about 500000 hectares (1 235 500
acres) are devoted to pastures on the coast supporting approximately
425000 cattle and 36000 swine
48 There is no doubt that the coast is an extremely rich agricul-
tural area although toward the south it is increasingly hampered by
shortage of water in the dry season And rt is overwhelmingly the
principal foreign exchange producing region of the country Yet it is
largely undeveloped by any modern standards lacking roads and almost
all basic civic amenities (water supply sewage paved streets etc) in
the provincial towns The development of a tropical agricultural region
without large labor supply _rill raise many interesting and some new
J Irrigation ~rks are in execution and others planned in various places and the irrigation equipment which it has bee11 suggested the Bank might finance would presumably be used on the lovlands as well as the highlands
-16-
problems the solution of hlch in detail may lack precedentY The
suitability of cacao to Ecuadorian conditions arises in part from the very
small labor requirements of the crop At bottom advance will lie along
the route of crop improvement and mechanization the difficulty will be
the proper application of mechanization crop by crop Some tropical pro-
ducts may never be suitable for mechanical cultivation being those whicl
would require intensive hand cul ti vat ion and may therefore not be appro-
priate for Ecuadorian condttions Others r1JJi3 be suitable only if grown on
relatively large plantations
49 Clearly for the foreseeable future many lowland products will re-
main at the stage of gathering of nld natural growth rather than plantashy
tion enterprise The flow to market of such productswould be increased
by improved access notably road core truction anQ at the same time road
building ~~uld seem to be a condition precedent for spread of plantation
methods particularly plantations using mechanical equipment lilliE diate
measures for the over-all agricultural development of the region may not
be directly agricultural at ell they are rather the provision of roads
and transport facilities the provision of long and medium term agric-llshy
tural credits and in some areas) the institution of health services
With the opening up of the region in this manner iiould come more clearly
perceived opportunity for better agricultural use of the land particu-
larly if effective demand for the products is transmit ted back to the
cultivator through establishment of product processing plants where approshy
priate for example in vegetable oils and tagua (vegetable ivory)
] This is the situation which in Brazil for example in an earlier technical epoch was 11 solvedll by importation of Negro slave lebor
-17-
50 As in the Sierra there are good possibilities for pastoral
development on the lowlands Some progress is already being made in this
direction with experiment in breeding more suitable cattle types through
crossing 11Ji th imported Indian brahmin strains Grazing for beef is not
highly labor intensive and this development is very promising since
export to other Republics by sea llould be reltti vely easy In the first
stages export would presumably be upon the hoof ith later development
of meat packing
51 There seems to be no single bottleneck or restraint upon devel~
ment presently existing all other conditions being favorable If developshy
ment occurs it will be along many simultaneous fronts but the front iJhiclf
is lagging and Inayen continue to lag is the provision of basic social ccp ishy
tal (roads water supplies health services etc) that is of those
things which no single private individual or corporation can provide for
itself Given these and the institution of suitable domestic credit
fecilities the rest may be accomplished by private domestic ini tiat1ve
52 The development plans of the Ecuadorian Government as outlined
in a Memorandum dated April 8 give much weight to lowland agriculture
The establishment of agricultural stations to provide farmers wi~h
disease-resisting cacao plants~ tecl1nical advice and credit facilities
is CD ntemplated no foreign exchange would be recpired all funds being
local currency The rehabilitation of cacao formerly a leading export
crop is desirable although development of cacao sources elsewhere may
prev~nt recapture of the position formerly held by Ecuador
53 A proposed agricultural mechanization programwoUld total
- 18
$25 million in foreign exchange cost )J The bulk of this ($1 5 million)
is allocated to wechanization of rice cultivation alone the benefit being
principally in resulting improved export position The remainder $1 milshy
lion is for mechanization of other agricultural produc~s apparently
mainly lowland (those products specifically mentioned being 11cotton sugar
oil-bearing seeds and other specified products11) the exclwnge benefit
forecast being principally through reduction of import a
54 Different criteria ~~ould be used in assessment of these two
projects The judgment on that for rice will depend upon forecast of
world rice markets and in particular upon expectations regarding rorld
demand for rice from the dollar area The validity of mechanization in
cotton sugar oil-bearing seeds and other lowland products will depend
first upon the technical possibilities for such mechanization a matter
not yet fully explored If sudl technical possibilities are favorable
effective mechanization vOuld constitute sound development upon the low-
lands which are relatively sparsely populated
Y Some part of which would be for the benefit of highland agriculture if machinery stations be established there
--19 -
IV MI-~RAL PHODUCTION
55 Ecuadorian mineral nroduction covers only a few products and
important the wells of the lowlands being exploited by the nglo-
Ecuadorian Oil Comany Production of crude petrolewn shows a slicl1t
rising tendency while exnorts have declined steadily a~ more refined 1
products are consumed domestically
56 Oil exploration to the Iast opound the Andesin the Amazonian
region is proceedinc under concession to tl-1e Shell Oil Go1~1any
Three wells have been drilled without success and tvro arc beinc
deepened Cost of this exploration to ciate j_s around US)23 million
If oil is found its only outlet middotwill be a pipe line over Ue Ances
(estimated to cost USiD93 million) and this the comany is not -rE1inz
to undertake unless assured of an outnut of at least 100000 barrels a
day
57 The only other irnrJortant minine activities are those of gold
silver conper and lead conducted by the South ~~erican Develoument ~
Company and the Cotapaxi Sxplora tion ConJ1any War-time lr oduction peaks
were 1942 for gold and CO)per 1944 for silver and lead Since these
resective peaks production has ~-~clined narticularly in copper and
lead although not to 1933 lsvels7
crude petroleum II II
1938 (millio~1s of 225 107
Production Exports Production refined petroleum 37
1947 barrels)
236 bull94
128 (See Table No_Jl_ Statistical Appendix
Production Gold (000 troy ounces) Silver (000 troy ounces) Co~per (000 pounds) Lead (000 pounds)
1938 445 82~0 27 21
War Peak l03tJ hhl3
96788 161-+88
19h7 5o5
1569 3316 h98h
-20-
58 Ecuadorian trade statistics list exports of crude pet~middotoleum
and minerals separately from that of other commodities even in aggre-
gate figures underlining the fact the exploitation is in foreign hands
and hence colonial in nature This aspect hmmiddotever is of di-1inishmiddot-
ing importance as now the foreign exchange realized from such mineral
exports accrues to the Central Bank and as in any event nineral ex-1)
ports form a diminishing proportion of the vhole 7
V ~JNUFACTURING PEODUCTION
59 There are virtually no stCltistics on manufacturing in Ecuador
and none which present any comprehensive view It is ho~middot-rever clear
that there is very Uttle industrial factory prJchJction and obser-
vation in the country leaves one with an impression of the nresent
igtilportance of handicraft production
60 The most inportant consuxner-good factory industrj_es are tex-
t~~~breweri~-~~ otheuro7r beveraces shoes ard leather _roduc~s buttons ~d~lttfr
and nails Textile production using domestically produced cotton pro-
duces cotton piece-goods and wool rayon and hemgt textiles supplying
almost all domestic demand for low-quality products The only irJDcrtant
producer-good factory industry is cement the plants being located near
Guayaquil Lack of domestic technical lmow-how and of capLtal and
the low level of domestic effective demand account for the sli~ht develop-
ment of faetory industries whose rrowth on any scale beloncs to a 1ter
stage of economic development
y Value of nineral exportsmiddot as nercentare of value of all exports 1929 260 nercent 1933 430 n 1939 397 1946 11~5 1947 69
Production and irrport statistics for cement tre civen in Table IJo bull 2__ Statistical Appendix
- 21-
61 Uuch of finished commodity ygtroduction is at the handicraft
stage both for nroducer and consumer goods In Quito and Guayaquil
one sees many small 11 shops11 producing metal leather and wood manushy
factures largely by manual methods It is an illuminating co~~entary
on the shallow growth of industrial specialization that the ll1ission
did not see any shops selling ready-made womens clothing All
womens clothing shops displayed only materials in the bolt as in
pioneer days elsewhere
62 One handicraft industry of great importance in exports is
the production of panama hats It has been estimated that 30000
families are occupied vrhole or art-time upon this nroduction and
at times (for example 1945) they have provided the largest single
export item by value The grmvth and treatment of the fiber and the
weaving of the hat is entirely an Indian handicraft industry the
Yteaving of a high-quality hat taking three months The fiber is erown
and the best hats woven in the lowlands Its future ir-mort nee is unshy
certain as the competition of Italy and the Fhilinpines is again felt
in low-_)rice woven hats the boom emjoyed during the war nay recede
63 Ecuador in its ~resent and foreseeable development is an
agricultural country with no immediate movement toward industrialization
EcuAdorians met by the Mission themselves stated this The growth of
factory industry will be slow that of small shop and handicraft manushy
facture somewhat less slow It vmuld seem as stressed later in this
report that there is room for grm~h of processing of agricultural
products Statistically such processing would be classed as industrial
production but is oroperly the finishing stage of agricultural productior
- 22-
to secure improved durability and portability of perishable products
This would increase effective demand imnacting upon the farm and ass1st
in stimulating agricultural development Some progress being made in
this direction notably in vegetable oil expressing plants Ihe only
non-agricultural project suggested by the -r~cuadorian Government has -eer
a cement plant located in the highlands at a foreign exchanr~e cost of
$2 rrillion the justification being both the saving of foreign exchange
expended upon cement imports and reduction of load upon the only railshy
way connecting lovrlands and hichlands Growth of cement use accompanies
economic development assessment of this project (engineering questions
apart) would involve tainly questions of timing location and finance
matters which are really all aspects of the single question whether
such a project may not be one for private direct investment Initial
expectation would be that were all factors favorable to the success of
the project it gtlould be readily undertaken by orivate enterprise
particularly when it is remembered that railway freiehts 1bullrould protect
highland production from lowland competition
6h No sueeestions regarding increase of electric power output
have come fror1 the Government indeed the official statistical services
have no data upon installed capacities and demand Cnly in Quito and
Guayaquil are present industrial uses of electric poler of any ir1portance
Elsewhere suIJply is from snall municipal plants (mainly therraal) for house-
hold consumption It appears that demand mar be ahead sunply in cost
towns very frequently voltages are maintained around 80 instead of the
rated 110
- 23 -
65 Shortage of electric nower is not however hamoering
economic development at this stage although it may soon do so in
sevral urban centers such as Qui to and Hiobamba Sone ttne i-1 the
iuture the possibility of large hydro-electric vrorks on the eastern 1
side of the Andes will merit attention
y Where the rivers are fast and clear on the western side they carry much silt
- 24-
VI DmIESTC THANSPORT AND COilERCE
66 The space devoted to agriculture in this report reflects its
importance in the Ecuadorian economy As has been said further developshy
ment will for sometime be mainly agricu1tural
67 Present restraints upon that development are not located
solely or perhaps even nrincipally on the farm there are many
features of the general economic environment which operate to hamper
even purely agricultural development There is great room for improveshy
ment of transport to knit the economy tocether and to encot1raee grovrth
of output
(a) Transport
68 Without roads there can be little regional or inter-regional
intergration Fithout that intergration (which for some regions and
some crops would open upon the world at the gatewa~r of a oort) there
can be but small inducement andlittle opportunity of increasing proshy
duction In much of Ecuador the principal transport vehicle is the mule
whose patience and endurance under heaJr load is matched by that of the
Indian
69 As regards roads the requirement is both more roads and
better roads capable of bearinr modern vehicular traffic The roads
traveled by the 1Jission are uniformly bad both slowing traffic and imshy
Ilosing extraordiPamiddoty vehicular de_reciation Ultimately no coubt
there vdll be an adequate system of all-rreather roads in Ecuador For
the immediate future the more modest tarset is to attain a reasonable
system of roads civine access to the creater art of roducine areas
- 25-
in the dry season At present the unsurfaced access roads are cut to
pieces by --vater erosion in the wet season and consolidated somew1at
traffic in the dry season A single eradinr operation smoothin thE
dirt surface at the end of the vret season would ci ve accelJtable usashy
bility in the dry )eriod v1hich in the populated coastal rovince of
icanabi for example is eight ~aonths of the year At -_resent the so1e
transport link for corunodities between loYrlands and the hihlands
is the Guayaquil to Quito (and beyond) railway This link is nrobaoly
nearing saturation point vdth present equipment and its strencthening
both by railway imJrovement and all-middotweather hichway construction is
obviously desirable it middotill probably become essential yri thin five
years
(b) Commerce
70 Physical transport alone hogtever is not the only ope c-ation
ofcarriaee required to intecrate a reeion internally and to bind toshy
cether the various regions There are also tL physical and the finanshy
cial aspects of comr1odity holdinr involving the storae and vrhere
necessaFJ the partial processing of products to reduce perishability
and the avail~bility of mechanisms of short-term finance extendine over
crop periods In Ecuador these tro aspects are closely related
71 Apart from some export crops there is virtually no crop or
food processinG undertaken And in the export crops processing
is the minimum necessary to secure portability Eice is nilled but not
polished cacao is sun dried coffee is dried and within only recent
years washed fruit is exported whole Some new e~Jor-ts may require
further processing and installation of plant starting or is in
- 26-
advanced discussion for example vegetable oil processing (although
for sometime no eXport surplus of vegetable oils is 11~11 and fish
canning
72 Nor is there any important ~recessing of domestic food pro-
duction for home consumption bull There is no freezing or canning of meat
which is taken to market on the hoof There are only two or three
very small butter factories and no whole milk orocessing Cereals
of course are not highly perishable but there are no silos or granarshy
ies and experience of similar situations elsewhere suzfests that losses
by deterioration and infestation may be significant no direct evishy
dence anthe incidence of this factor in Ecuador ~as obtained by the
Mission Thee is little storage of grass on the coast in silos or
as hay and in the dry season slaughter of cattle because of lack of
feed is at times necessary In short the situation is not so very
dissimilar to that ofmiddotmedieval Europe
73 Roads alone would not create an environment favorable to
change in this position although lack of roads nar well inlibi t change bull
In addition suitable credit facilities for the finance of co~~odity
holding through time are necessary
74 Hany complaints were voiced to the Hission reearding lack of
short-term banking credit for crop movement and storage and for medium
and long-term agricultural investment and no doubt there is signifi
cant lack of such credits But this is not the result of some simle
institutional defect of the b~~inc and credit structure even though
institutional improvement may be necessary It is fundamentally a
- 27-
reflection of the fact that Ecuador is extremely poor in disposable
capital available for even short-term investment ie vrorcing capi-
tal Improvement of short-term credit facilities for what in advanced
communities are regarded as purely commercial purposes would in effect
represent an increase of capital intensity in the Ecuadorian ecororny
To the extent that banks met more fully the gtJeak seasonal credit re-
quirements for croo movement and storage individual nrivate reoources
are relieved of the 1eak burden and available for other investments
75 Thus iorovement of the techanisr by 11hich the banking system
provides working capital for corrtercial or inciustrial (in the sense of
crop processing) purposes is itself an act of investment rather than
merely an institutional rationalization ilnd as such carry the
usual consequences of investment in an undevelogted economr with very
law voluntary savings To the extent that additional credits are not
matched by savings sewhere (either voluntary or forced through
taxation) they will be inflationary in effect just as an
additional act of long-term investment would be Increase of banki1g
nrovision of workinrr capital should keep step with totl capital for-_ - - 1 mation of which it is one aspect7
It is implicitly assumed in the foregoine that at nresent in Ecuador the amount of small voluntary savinrrs is neclicible It vrill presumably not alrmys remain so and ~Jart of the modifications of the bankin~ system shou1d be attract Clli1U1 atively such sav-ings in the fom of savinc do)Josi ts This 1muld increase the extent to which Danks can safely flovide capital It will be a much later before small private savincs are directly in-vested in commerce or industry throuh joint stock r1ethods There is no stock-exchance in Ecuador
-28-
76 It is of course just as important that the availabi lity of
working capital should not lag behind as it is that it should not run
ahead The Bank should ensure that any long-term investment projects it
may assist to finance do not effectively starve the rest of the econo~
of working capital in the process of avoiding inflation
77 There is also the question of the price of short-term lending
that is of the level of interest rates The Ecuadorian is a highshy
interest rate eoonomy The legal maximum for commercial short-term loans
is 10 per cent having recently been increased from 7 per cent legal
maximum rates however are not systematically enforced by commercial
banks themselves At a time when the legal maximum was 7 per cent
going rate for 90 day loans secured upon properly warehoused commodishy
ties and with third party endorsement was 12 pe+ cent
78 This very high structure of interest rates seems open to
obvious criticism but is in fact probably not Tiholly unjustifiable in
the present conditions of Ecuador It is the cumulative result of many
factors so that more official prescription of lower rates would be
quite ineffective These factors seem to be
(a) Interest proper~
(b) layment for risk bearing arising in part out of a
low rating upon individual credit and in part from
the institutional conditions (such as embryonic
commercial and financial ruarkets) which seriously
reduce the liquidity of any asset other than money
itself
-29
(c) An clcmmt 0f discount 111nn cyectcd luturc irf] utinn
reducing the real value of the pa~nent for lending
(d) An element of monopoly which upon purely subjective
judgment may be the least ilJI9ortant of these several 1
factors7
(e) The real shortace of capital whether short or long--
term~ reflecting in interest rates as a genuine
scarcity price
79bull Of those factors the di~ount upon expected future in-
flation increases prices at a rate of 12 ner cent per annum a money
interest rate of 12 per cent per annum is a real rate of zero If
therefore inflation could be controlled a substantial reduction of
money interest rates could be hoked for At the same tine while
inflation continues high interest rates probably have small influencemiddot
in encouraging money savings
80 Even without inflation ans until the su~1ly of available
real capital improves relatively high interest rates may well be
acceDtablemiddot as a price mechanisn nethod of selectin~ most urofitable y ~
uses of limited fundsbull middothere exoected urivate nrofit did not seem l - -
to parallel social desirability loans at lower rates (ie subsidized
terms) could be made perhaps through reconstituted Development Banks
Prima facie however such loans 1bullrould not be short-term
~I -Onthis interprepoundaion the situation in Ecuador differs signifishycantly from that in Peru
tt is suggested that a powerful point of intervention would be to limit commercial banking dividends distributed to not more than say 7 per cent The high profits nmv earned by commercial banks would then progressively accumulate until liberalization of lending becomes virtually forced by accumulation of funds representing genuine corporation saVings
- 30-
81 The discussion of private finance has so far upon
short-term credits there is an even larger nroblem in the
intermediate and long-term arricul tural credit It is not necessarr
to expand greatly upon this since it too is a consequence capi-
tal shortage
82 Imnrovement would seem to be alonrr the route - 1 of nroper UElte
of existing Development Banks (or their successors-) effectively
in the earlier stages as lending agencies of Government
VII OFFICIAL DEVLOPHl~NT FHmiddotIfJCE
83 In the circurnstances of a country like Ecuador the greater
part of domestic capital forr1ation requires official directly
or indirectly if it is to occur on any scale are too
small and too narrowly held to permit much -rowth this roL1te
andthose few who are able to save at any sinificant rate are larely
uninterested in the efficiency of ~reduction
84 Official finance may be either direct or indirect direct
throueh works executed by Government or 0JUblic bodies indirect
throueh lending institutions such as Dev~lopment Banlcs capitalized
from public funds In either case funds are diverted to investment
purposes by Govern~ent intervention
85 Thus Development Bank lending for productive purposes (for
example long-term acricul tural credit) is an item 1n ca9i tal formation
V There are thirteen reaional Development with an unirnJresstve record of manaeement Their possible reconstitution is under discussion
-31-
rather than a mere institutional rationalization of the credit mech-
anism Indeed as has been stressed in the last section even im-
proved su1nly of short-term credit gtrill in art rewesent
formation A developing economy which neclected these items in 11Cnn21~~
or forecastinc total caital investnent would be very vulnerable indeed
to inflation induced by over-investment
86 17here voluntary savings are Jow the only wmiddotamiddot to sirnificant
rate of capital formatton can emerge without inflation is an equi-
valent amount of savine forced throurh taxation One ould look for a
relatively hirsh level of taxation to national income and for a rela-
tively high proportion of exnenditures caDi tal purposes to total
Government expenditures On both these counts Ecuadorian elq)erience
seems irare s si ve
87 In 1946 total budretary and spedal revenue rms disclosed
as 5368 million sucres in the sa1le rear an estLnate middotJaced national
income at 20096 million sucres This a proym~tion of 27 middoter
come a proportion so hich that in fact it lacks credence In assess-
inc total tax burden part of the revenues of Government monorolies
and all of municial revenues should be included if this be done y
the proportion becomes 37 per cent In addition new exchance taxes
yielded 973 million sucres in 1947
Mono_)oly participations (ii direct disbursements for public _Jurposes) were 353 million sucres in 1946 munici~al income was 1803 million sucres in 1947 (1946 not available)
32-
88 It is very difficult to accept the conclusion that Ecuadorian
revenues form so high a proportion of national income it would seem
that the estimate of national income is too low Nevertheless tax
revenues are clearly a sizable percentace of national income
89 At the request of the Mission an official estimate of total
official expenditures on capital account was prepared Total income of
Government municipalities provincial councils and other public
entities was ~iven as 7S4 million sucres and total capital expenditure
from that income as 2237 million sucres or slichtlr over 30 per cent
of revenuesY It is difficult to feel confident that effective capi-
tal formation on this scale actually occurred certainly there is
little evidence visible to the eye of the t1middotaveler
90 Notwithstanding such doubts the fiscal evidence is of a
fairly hich proportion of tax revenues to national inco~e and of a
hich proportion of revenue allocated to capital investment It would
seem that the fiscal mechanism exists for domestic capital fo~~tion
what may be required is more effective expenditure of allocated funds-
Before a development plan envisa~ing the expenditure of still more funds
was adopted it would be desirable to examine closely administrative
and technical efficiency in the use of existing funds
91 On the side of revenue Treasurr officials informed the Mis-
sion that tax evasion was estirnated at some 30 per cent of ta revenues
1 This makes such capital expenditures 112) per cent of 1946 national income which a~ain seems very high indeed
The two largest items are Government public works (8)4 million sucres) and municipal works (900 million sucres)
- 33-
particularly in income and land tax It might well be advantareous
on the sides both of revenue and of expenditure for Ecuador to obtain
technical assistance of the tPe that the United Nations Department of
Economic Affairs rendered to Venezuela in 1947~Y involvinpound revision
of the structure of the budget of budcetary audit practices and the
like
f Report~d in UN Document ECN 1SubJfti 4 - 21 June 1948 lostricted)
- 34 -
VIII 001EHNl(iEi~T FINANCE AND INRATlON
92 What may be called 11multiple budget practices exist in Ecuador
as in other Latin American countries There is an annual Ordinary Budget
one or more Extraordinary Budgets( tro in 1947) end a number of Special
Accounts (twenty-five in 1946) not included in the general budgetary
accounts The State operates nxmopolies in tobacco liquor salt and
matches part of whose profits are taken into the ordinary budget as
revenue and part used directly for public purposes It is thus diffi-
cult to assesrmiddotgggregate Government revenues and expencii tures and vir-
tually impossible to detail the purposes of expenditure to ascertain
accurately public capital formation by way of public morks and the like
9 Taking the disclosed figures on the ordinary and extraordinary
budgets and tne special accounts there has been a net surplus over the
past ten years 1operations of 234 million sucres~ This however is
not an accurate reflection of the true aggregate position because the
Government operations are not ~holly included in these disclosed ac-
counts But since the Government has no source of internal funds other
than the Central Bank the net recourse of Government to Central BanJJI mirrors the over-all result of Government finance such recourse increased
In 1946 for example the monopolies contributed 5357 million sucres to the general revenue and disbursed 3526 million to municipalities (145 million on general participation and 1652 million sucres for 11 special participation of gthich an example is a new electricity plant at Ambato the state railways (92 million) etc
gj iiith only three years of disclosed deficit since 1938 See Table 12 in Statistical Appendix
2 Central Bank loans middotto Government less Govertllllent deposits in banks
- 35-
480 million sucres over the nine-year period 1939 to 1947 inelusivel
an average of 53 million sucres annually amplch averaging however con-
ceals very important differences between the three periods within the
nine years to tal
94 The table on the next page sumnari zes the factors causing in-
crease of domestic money supply It is computed by rearrangemm t of the
balance sheets of the Central Bank all commercial banks and all developshy
ment banks and is thus a table shoring changes in items in a rearranged
aggregate balance sheet of the Ecuadorian banking system
95bull The first t70 periods 1939-1943 end l943-l946f were both
periods of heavy inflation_ During the first five years notes in cir
culation and monetary deposits increased 3437 million sucres (or 255 per
cent) and in the next three )eera 2904 million sucres (or 61 per cent)
But the causal structure was quite different in the two periods
96 In the first inflation was almost wholly induced by external
factors (favorable balance of paYments causing increase of foreign exshy
change holdings) the major domestic factor being expansion of commercial
bank loans and investments in this period deficit Government finance
was not a causal factor
97 In the next three-year period 1943-1946 however the major
inflationary factors change deficit Government finance and expansi on of
f As calculated by IBRD Mission loans to Government including ali loans to official agencies A recent calculation by the IMF Research Departshyment covering Government operations only places the aggregate 9 years deficit at 345 million sucres~ See Table 12 in Statistical Appendix
- 36-
BANKING CHANGES ~0015 SucresJ
Jan 1939 Jan 1944 Jan 1947 Jan 1948 to to to tomiddot
Dec 1943 Dec 1946 nee 1947 June 19h8 t~ ~arsJ ~~ iears) trmiddot ~~r1 t~ mo~~h~2
Central rcrk loans tomiddotc~vt~ f 16174 f 160260 - 701p88 23695 Central B~r~ Loans to Public -1 6978 2_283 1- 67548 1- 39763 Commercial Bank Loans and
Investments J 187554 f 14624 88h4 1- 2~ ~49 Development Baru Loans and
J 14227 136818 ~ 644 1- 26090 Investments
1 224933 f 313985 11)40 1- 68107 Net Bank Foreign Exchange 260774 f 94662 - 53203 - u6 112
7 485707 7 408647 I
7 bull - 64543 21395
Notes in Circulation f 16o907 1-131729 - 23205 - 17290 Public Monetary Deposits -A 162868 1- 128914 - 68734 1- 19620 Government Deposits f 19968middot 29768 9050 2366
7 343743 7 290411 82889 - 36 Public Time Deposits 116834 ~ 42053 1~004 f 317j
y 7 46o517 7 3J2464 83893 ~ -- 3137
Absorbed by Banking System 1- 25130 middot~ 76183 1- 19350 18258 7 485707
11 f 4o8647 64543 I - 7 21395
Net Government Borrowing J 131492 from Banks 3794 - 79738 - 32745
Deposits in Central Bank in foreign money (not included above ex pressed in Sucres
Government ~ 4486 - 633 871 - 11059 Public 25242 J 78964 - 78814 J 4h97
T29J 728 7 I
7 IIIII middot~~ ~ I
78331 79685 31+38
y Made urt as Io11mlfs
Cas~ bullbullbullbullbullbullbullbullbullbullbullbullbullbull ~ bullbullbullbullbullbullbullbull - bullbullbullbull J 266 1- 367 - 22~7 99 Other assets less other liabilities~ ~ 4 330 ~ 293 ~ 18~8 Capital and Reserves~- bull bullbullbullbull 4 bullbull 52 bull 1 1- 79-9 26 o 278
7 I
7 7 I
7 bull Ill ri bullbullbull
251 762 194 18)
Subtract increase
37-
Davelopment Bank lending dominE)te the position Expansion of commercial
bank lending is relatively negligible while a comparatively small role is
played by balance of payment influences
98 From the end of 1946 the general financial situation deterior-ated
rapidly in five months from January 1947 to ~~ay 1947 net foreign exshy
change reserves of the Centrel Bank fell 935 million sucres or 7 7 mil-
lion dollars to a level of 2927 million sucres or 21 7 million dolJars
In litaY 1947 an IMF Mission arrived in Ecuador (at the request of the
Government) and in June 1947 a multiple exchange rate system with import
classification was introduced upon the advice and with the concurrence of
the Fund Operation of this system Jielded considerable profit n in
sucres it is in effect a new imposition of import taxes and such
11profits 11 are in reality additional fiscal revenueY It was of the
essence of the Emd s attitude in Ecnador that the exchange difficulties
bad arisen through domestic inflation and that these addi tiona reve-
nues should therefore be applied only in reduction of Government debt to
the Central Bank
99 The effect of such policy is clearly seen in the third column
of the table Inflation is checked notes in cirmlation and monetary
deposits falling 929 million sucres (or 11-per cent) i~ one year Alshy
thoUtgb however Central Bank loans to Government (and also colllWrci al
jJ At this point only the domestic aspects of this measure are emphashysized In a later section the external or balance of ~ent aspects will be taken up
Y Such revenue from exchange taxes yielded 975 million sucres in 1947 bull md in July 1948 was running at g to 10 jllillion sucres a month this revenue is not of course taken into the budgets bull
- 38 -
bank loans and investments) fell the actual deflation _was largely
caused through loss of foJeign exchange rather than over~all reduction
of domestic bank lending For in response to vigorous ~oilplaints of
credit shortage the Central Bank greatly increased its loans to the
public almost fully offsetting reduction of its loans to Government
In the first six months of 1948 there was no significant contraction
of money supply banking loans to the public eJggtanding to offset the
deflationary effects af an adverse balance of payments and of Government
debt reduction
100 The exchange surcharge multiple rate system was in operation
through August 1948 proceeds being devoted to reduction of Government
debt to the Central Bank~ But there has bean concern lest the resulting
deflation of domestic money supply would be too severe and the Central
Bank has in fact adopted a compensatory policy to prevent further reducshy
tion through continuing to expand lending to the public arid through
quasi-open-market pur~e of mortgage bonds to the amount of 17 million
sucres by July 10 19l8 when further purchases were discontinued
101 To avoid the netcessity for such compensatory policy the Cen-
tral Bank proposed to the Government that the destination of reveme from
exchange taxes should be changed Instead of being applied in reduction
of debt the proposal was that they should be useci instead to create a
development fund tt to be administered by the Cent~al Bank unless a
planned Development Institute or other competent authority is estabshy
lished In mid-September the Fund appro ved such cllanged dest ination of
these revenues 90 per cent of which will in future be applied in finance
of development and 10 per cent in stabilization of Government bond prices
-39-
This removes a check upon inflation which has operated for some fifteen
months unless Central and commercial bank lending policies recognize
this changed situation further inflation may follow even if the Budgetary
accounts run no deficit
102 At the same time this change does provide a source of local
currency finance for development projects
-40-
IX INTERNATIONAL TRAIE AND THE BALANCE OF PADlENTS
103 Ecuador exports agricultural products (rice cacao coffee
tropical fruits balsa wood) mineral products (crude petrolelUil gold
silver copper and lead) and handicraft products (panama hats)Y
lo4 Approximately one trird of Ecuadorian exports (including
minerals) go to the United States The proportion rose during the war
due to VmiddotIar-time demand for strategic raw materials but is now tending
to revert to pre-war levels Loss of European markets has been partly
compensated by gain of n$w export markets at least for a time and
especially for rice Countries in the Far East whose rice production
fell during war such as the Philippines and in Latin America whose
Eastern sources of supply were cut off such as Cuba and Venezuela
have provided demand for Ecuadorian rice This outlet however may not
last much longer
105 On an average of years 1938 to 1943 about 15 per cent of
Ecuadorian imports are foodstuffs wheat and lard being the largest
items and 85 per cent are manufactured goods and equipment Import
of foodstuffs is however gro1ing t-vith population and in the key pro-
ducts of wheat and fats would be expected to grow still faster if
econowic development raises n~ss living standards witl10ut increasing
domestic output of these prodvcts For increased consumption of wheat
products and fats is in part the definition of rising living standards
for a very poor population
fJ See Table No13 in Statistical Appendix for composition of exports
-41-
106bull Before the war (average of the years 1937 to 1933 ) the Americas
supplied 49 per cent of Ecuadorian imports by value the United States
alone supplying 41 per cent Germany provided 22 per cent of total
imports and the United Kingdom only 8 per cent Europe as a whole supshy
plying 45 per cent
107 In 1946 and 1947 the Americas provided 86 per cent of total
imports the United States supplying 66 per cent EUrope as a source of
imports fell to 12 per cent although the United Kingdom maintained its
relative position (7 per cent) Whether the United Kingdom can expand
its provision of imports for Ecuador JDaY be domiddotubtful on the one hand
the loss of Germany as a supplier pzo vides an opportunity on the
other the competitive industrial position of the United States may make
it difficult for the United Kingdom to fill this gap
No balmce of payments estimates eJd st for Ecuador1
Growth
of foreign exchange holdings over the war period however indicates a
strongly favorable balmce ~let reserves which were equivalent to 409
million sucres in December 1939 rose to 3962 million sucres (294 milshy
lion dollars) in December 1946
109 Official purchases and sales of exchange are shown in the fol-
lowing table together with corresponding movements of exchange reserves
The difference betRSen the balance on official transactions and the moveshy
ment in reserves arises from transactions on the free market
110 During the war import and exchange controls were nominal
there being no shortage of dollars nor any decrease of exchange reserves
jJ Except for the ~eriod January to May 1948
-42-
Loss of exchange reserves in 1945 led to a tightening of control on an
allocation of quotas smong users of exchange Import permi ts were
granted on the basis of former imports by merchants At the end of
1946 controls were relaxed on an extensive list of imports items and
the consequent loss of exchange has led to difficultieQ
Ul Official Official Balance Changes in Purchases Sales on Net
Official International Trans- Reserves actions
(Millions of u S Dollars)
1942 257 185 t 72
1943 35-5 279 t 1middot5 t Ul
1944 423 34~4 t 79 f 88
1945 353 394 - 41 - 7-2
1946 471 415 f 56 t 1 9
1947 488 579 - 91 38
112 From December 1946 to IVtay 1947 net foreign exchalge reserves
fell US$ 77 million from US$ 294 million to US$ 217 million In May
1947 the advice of the International More tary Fund was sought with reshy
sults summarized as follows in a recent Fund documentY
The lfund 1 s Mission arrived in Ecuador in Yay 1947 It was not advisable at that time to contemplate devaluation which would have made the inflationary situation worse An emergency program was therefore proposed Essential and semi-essential imports were to be distic5~ished and a surcharge of 5 sucres p3r dollar imposed on the semi-essential group as a check against their excessive import New decrees including many of the recomshymendations were issued in June
The main features of the new system were as follows
Y Economic SuVey of Ecuador RD 672 - P 43-44
- 43-
(a) The elimination of all quantitative import export or exchan~ restrictions licenses and quotas with the exception of a few absolute prohibitions of some luxury imports
(b) The checldng of excessive import demand through a fiveshysucre (33 per cent) surcharge on non-essential imports
(c) The suspension of nearly all exchange sales for nonshytrade transactions and the creation of a free market bull narrowly limited in volume and comprising mostly all transactions that are uncontrollable in practice plus a snall amount of domestically produced gold
(d) Exchange for a small amount of the least essential goods was made available in the free market
(e) One of the basic aspects of this plan was the steriliz~ tion of all proceeds from the import surcharge which was placed in a fund for the extraordinary amortization of the government debt to the Central Bank Tnis is still in operation
The beneficial effects of these reforms were felt immediately In June the trade deficit ~as reduced to only $07 million and in July to $06 million By August for the first time in 3 monthsl there was a small surplus In September the deficit was smci l -j)O 5 million In October there was a surplus of $15 million and in November and December there were small deficits of only $01 million and $07 million respectively
In short the deficit for the year was about $99 million in its gross gold and foreign exchange reserves During the same period international liabilities of the Central Bank showed a reduction of about $6 million Therefore~ the net deficit was around $39 million 95 per cent being in the first half-yeer and before advice had been received from the Fundrs Mission
113 It should be emphasized that this multiple-rate system of
exchange control is entirely freed cpentitative controls Excessive
import demand is checked by the higher rates upon imports deemed non-
essential the list of which is knollD and published Anyone presenting
sucres is provided with exchange at the appropriate rate upon list A and
B goods and the free rate is influenced by occasional releases of offi-
cial exchange into the free market The system that is utilizes the
inter-play of the price mechanism rather than the bWlilmlcracy of quanti-
tive controls or quotas
- u4-
114 Loss of exchange continues however despite considerable reduc-
tion of imports Gross international reserves declined US$ 18 million
and net reserves US$ 35 million in the first six months of 1948 Offishy
cial transactions January to June 1948 are surmrarized in the following
table~
Receipts From Exports From other Transactions (1)
Total
Payments For Imports For other Transactions
Total
Balance Change in Gross Reserves
1947 Jan to June
1948 Jan to June
(Millions of Dollnrs)
163 5 6
167 44
219 211
289 219 23 10
312 22 9
- 93 - 18
(l) Includes purchases of domestically produced gold deposits received in foreign currencies and borrowing from corres~ pondents abroad
115 Prospects for the remainder of the year moreover are not goo~
It is estimated that loss of international reserves over the whole year
may be aboat US$ 6 million Whether the deficit is in this region de-
pends largely upon actual export realizations for the remainder of the
year lhe most critical here is rice 11hose ygtrice is falling and the
crops accumulating in the rice millsplusmn Latest information is that
f Countries receiving allocations of Ecuadorian rice under International Emergency Food Council allocations have been requesting a change in source of supply owing to shortage of doJJers Thus France has asked for 6000 tons of rice from Indo-China instead of ~cuador and Greece for 2000 tons from kVPt in place of Ecuador as supplier A recent favorable sale of rice-to Haiti has somewhat improvea the cuITent position
-45-
plantings for the October crop are substantially reduced Wet weather bas
led to some loss of the cacao crop Receipts from exports in the follow-shy
ing official exchange budget may therefore have to be modified down- [l
ward on any pxuient calculation-
116 ~or Recei1ts and Sales of Foreign hchange
(Thousands of U S Iollars)
1948 1947 Estimated Actual
BECEIPTS
Worts Rice 13~ la4~ Cacao 11 l 2 Other products 10700 12371
Total Exports 354oo 42120
Foreign companies 5300 4842 Others 800 1883
41500 48845
SALES
Imports 44800 53499
Services 3200 4470
4B ooo 57969
117 In this situation of continuing presSlre one step has been
tken and others are under consideration The one taken relates to offishy
cial imports representing an average pf 20 per cent of total imports
Importation of cigarettes liquor matches and other things by the State
tionopolies is especiallyen significant These were formerly provided with
exchange tax-freebull ie at the ~owest rate of 1350 From July 26 they
afe required to pay the ordinary import rate of 15o4 on sll supplies for
J See note on page 47 -A
- 46-
their ovm use (such as office supplies) and the same rates as private
importers (ie 15o4 or 20o4) on all imports to be sold to the public
(such as wheat flour fats cigarettes etc) accord~ng to the classifi-
cation of the goods
118 Remaining possibilities seem to be a partial reclassification
of imports removing items from List A as essentials to List B as se~ishy
lwruriesY and or a chenge of nominal exchange parity vri th or mithout
a narrowing of the spread between the rates Here pressure from
exporters particularly from rice exporters may be hee~vily in favor of
an increase of the dollar buying rate with consequential changes of
selling rates
119 The present loss of foreign exchange is occurring ~rithout any
service being met upon defaulted foreign debt although service of Ex-Im
Bank loans is being made If it be assumed for purposes of calculation
that Ecuador reaches an agreed settlement identical to the Chilean sershy
vice would require exchange equivalent to US$ 378000 in 1949 (of which
US$ 368000 would be required in dollars) and would rise to US$ 4o20CO
in 1954 Adding service upon Ex-Im Bank loans outstanding on June 30
1948 and other known but small indebtedness total debt service would
increase to US$ 1410000 in 1949 rise to a second maxilliUID of US$ 1394000
in 1951 and then progressively decline Upon the assumption thet amp-Im
Bank loans undisbursed on June 30 1948 are all fully drawn before their
maturity total debt service charges would be US$ 1533000 in 1949 rise
On August 21 a number of import items were changed from List A to List B the aggregate import value (when granted exchange at List A rate) affected being US$ 7 million
-47-
to US$ 213431000 in 1952 and again would progressively decline These
last service charges rould be for 1949 3 1 per cent of 1947 actual
official foreign exchange receipts and 3 bull 7 per cent of estimated 1948
receipts and for 1952 48 per cent and 56 per cent of 1947 actual
and 1948 estimated exchange receipts respectively
120 Estimating prospects from this point in time Ecuador does not
seem to be a country able to afford assumption of any great additional
burden of debt service payable in dollars The amount that could wi thbull
out hardship or distortion be squeezed out of the balance of payments
by no means corresponds to the development needs of the country Any
start must therefore be modest and cumulative rather than spectacular
and precarious and this conclusion fits with other controlling factors
in the over-all situation notably the supply of administrative techshy
nical and managerial abi li ty
- 47-A -
Note on Official Exchange Transactions
Official exchange transactions for the firstsix months of
1948 are given on page 44 of this report Results for the full year
are now available and reveal that earlier expectations regarding the
probable 1948 balance of payments deficit were unduly nessimistic
Cacao export values have been lar~er than expected and in the last
period of the year there IBre some unexpectecily favorable rice eA-port
sales total export receipts were US$ 8 million larger than forecast
on page 45 Imports were held close to forecast
Receipts
Exports Foreign Co~anies Other
Payments
Imports Foreign Comoanies Other
Balance
Change in Grass Reserves
Official Exchange Transactions (full year - n~illions of dollars)
1947 -421
L18 19
488
535 06 149
580
y does not agree because of rounding
January 26 1949
1948 -436 h2 7
i85
Lt52 2
28
-oJ
-48-
X EXTERiJAL DEBT BEoomJ
121 The position of public long-term external bonded (excluding
inter-governmental) indebtedness of Ecuador is as follows
Amount in Default AmoUpt Outstandi~ ~ e Interest D~te
~In currmc1 (u s (us of p~t Dollars) Dollars)
Dollar obligations Gueyaquil amp Qui to Ry) $ 1226)000 12263000
286000 12263000
286000 123147
63047 Sterling obligations Franc obligations ( Oie
b 71000
Francaise de Chemin de Fer 1 lquateur ) Fcs 8386000 70000 70000
12619000 l26l9000
middotmiddot Note The Government of Ecuador oyenms about 75 per cent of the
stock of the Guayaquil and 1uito Railway and guarm tees the bonds and certificates which are largely held in England The franc obligations of the Cie Francaise de Chemin de Fer 11lquateur are not included in the offi cial statement of the public debt nevertheless the Government does recognize some liability for them and during the last few years has engaged in Degotiations for their retirement
Inter-governmental Debtsmiddot
122 Debts to the United States Government are of three types
63047
first the loans by the Export-Import ~which were outstanding on
June 30 1948 in the amount of $7 705606~ second the aJIDunts duemiddot
because of purchases of surplus property totaled $484 567 on March 31
1948 and third the obligations arising out of the lend-lease settleshy
ment the amount of 1fhich is not available (Total lend-lease assistance
j This section of the Report was prepared by Mr Paul Dickens
to Ecuador amounted to $7 bull 795000 )
123 In addition Ecuador is indebted to the Government of Venezuela
in connection with the establishment of a joint shipping company Late
data are not available but as of February 1947 $500000 ($1000000
authorized) was outstanding the total to be repaid by 1966
Debt History
l2ij Upon partition of the old Republic of Colombia~ middotEcuador was
apportioned 215 per cent of the original Colombian debt by the convershy
sion of l834a Between 1834 and 1854 no interest was paid The period
1855 to 1908 was marked by numerous adjustments and defaults
125 In 1898 the Guayaquil and Q]lito Railway Companyt s first mort-
gage 5 per cent loan of 1899 was issued It was expressed in dollars but
was in reality an English loan In 1908 a new (reemenJl was reachedbull
which was to be a final settlemet of all past disputes and controversies
between the Government and the Guayaquil end ~ito Railway Company and
the bondholders In 19~-10 the Government defaulted on the new agree-
ment In Novemberl9ll payments were resumed on the railway debt on)y
but a revolution caused a further suspension from December 1911 until
lfarch 1912 Subsequently service was partially resumed on the external
debt until July 1914
126 From August 1914 to July l9l8 no paYments were made on eny
foreign obligations except that service on the prior lien railway bonds
had been maintained up to and including the January 1915 coupon By
rf Negotiated settie~nt
-50-
1920 interest and sinking fund on the prior lien railway bonds had been
brought up to date but service on all other obligations ~ed in
arrears In 1926 interest on the salt loan of 1908 was brought up to
date but default took place on the coupon dueJam1ary 2 1927
127 The outstanding bonds of the prior lien issue were redeemed~~
January 1929 at VIhich time the January 1914 coupon was paid on the
5 per cent first mortgage bonds of 1897 In the case of the salt loan
of 1908 sinking fund was resumed in July 1928 and interest was paid
to Jazruary 1929 inclusive None thereafter Sums due from July 2 19C3
to January 2 1931 inclusive deposited with Central Bank in sucres
were used for governmental purposes after December 1931 No payments
were made after January 1929 on the external debt of Ecuador
128 Up to the end of 1948 no acceptable arrangement had been pro-
posed by the Ecuadorian Government for the resumption of interest and
sinking fund payments on external loans
-51-middot
XI bull POLITICAL
129bull Recent political history in Ecuador has been turbulent
although contest fo~ power at the top has not greatly affected the
bulk of the population Suffrage extends to all literate citizens 1
over twenty-one years of aee-but the requirement of literacy effect-
ively excludes the Indian bull T)tal votes cast in the recent Presidential
elections were 289164 from a total Population of some 35 million
130middot On May 28 1944 a few days prior to a scheduled ceneral
election an uprising occurred and Dr Jose Haria Velasco Ibarra
assumed office as President Dr Velasco had been President before
but following a coup dletat in August 1935 after he had been in
Presidential office less than a year he fled to Colombia and re-
mained in exile for several years On July 23 191-4 general elections
for a Constitutional Assembly to draft a new Constitution were held
Installed on August 10 the first Act of the new Assembl3r which was
predominantly Conservative was to confirm the legality of Dr
Velascos assumntion of the Presidency
131 On June 30 1946 new elections to the ronstitutional
Assembly middotwere held The only party particiJatine in these elections
was the Conservative The Liberals R~dicals Socialists and Commu-
nists abstained on the crounds that President Velasco did not offer
them sufficient guarantees On Aucust 3 1946 there vrere a number
of arrests following an abortive uprising and on Aueust 11 the Con-
stitutional Assembly re-elected Dr Velasco to the Presidency (by 43
to 10) for a term of office to last to September 1 1948
12bull Being compUisory for men voluntary for woraen -
132bull A new Constitution was promulgated in January 1947
133middot On August 23 194 7 a bloodless coup detat led by Colonel
Carlos Iancheno Minister of Defense in Dr Velascos Cabinet deposed
rresident Velasco who fled the country to Colombia for the second timebull
Next day Colonel Mancheno proclaimed himself Acting President and
formed a five-man Socialist-Liberal Cabinet despite the absolute
Conservative majority in the Assembly A week later however on
August 31 a counter-revolutionary military movemont broke out in the
north and the counter-revolutionaries captured Quito on September 2
134middot Colonel llancheno resigned the ActinG Presidency and dis
appeared the sa1ne day Dr Suarez Veintimilla who had been Vice
President under Dr Velasco and the former conservative Uinister
resumed control of the GoverPment Next day September 3 a Council
of State in Quito declared that Dr Velasco had by abandoning his
post terminated his functions as Chief of the State Dr Velasco
howeverJ vrho middotwas by this time in the Argentine declared that his
remo~al to Colombia had been forced and announced his intention of
returning to Ecuador to resume office
1~ On Seytember 15 1947 a Secial session of the Zcuadorian
Concress accepted the resignation of Dr Veintimilla and elected
Senor Carlos Julios Arosernena head of the Banco Ce Descuento at
Gua~raquil and a non-party man as Vice President with novers as
Acting President until September 1 1~48 Senor Arosemena formed a
mainly Liberal Cabinet with one representative each of the Consershy
vatives and the Socialists Coneress also ~onfinned the Council of
State 1 s view that Dr Velasco had forfeited the Presidency by abandoning
his postbull
136 On June 6 1948 Presidential elections were held The
three parties represented vere the Conservatives (Dr Manuel Elicio
Flor Torreo) the Liberals (Galo Plaza Lasso) and the Radical (Genera1
Alberto Enriques Gallo) Final results were announced as
Plaza 115835
Flor 112052
Enriques 53601
Invalid 27 676 289164
137 bull Doubt persisted until this month (August) as to who would
receive the election The Electoral College had been invalidating
votes on technical Grounds and as interim returns and invalidities
were announced it was noticed that the majority of the latter were
being deducted from the Plazavote After conferences the Electoral
College revalidated all votes and conducted a re-scrutiny on less
strict basis Senor Plaza has been declared to be the rfjSident-Elect
by the Ecuadorian Coneress and assumed power September 1 1948 The
middotpresidential term of office is four years
The Vice Presidential results were
Conservative 1anuel Sotomayor y Luna llu008
Liberal Dr Abel Gilbert 113213
Radical Dr Cueva Tamarz 5h07h 28129gt
139 Senor Plaza was born in Nmv York USA forty-two years
ago his fatter the late General Leonidas Plaz~ was President of
Ecuador in 1901-05 and 1912-16 middotSenor Plaz who had been taken to
Ecuador as an infant accomnanied his father in exile to the United
States and attended the University of California the University of
Maryland and the Georgetown School of Foreign Service in ~7ashington
l4o Senor Plaza returned to Ecuador in 1930 and for the next
fourteen years operated the family estates there reclaiming them from
virtual bankru~tcymiddot to prosperous and efficient state He has for
example been active in encouraging the breeding of new cattle strains
is President of the Ecuadorian Holstein-Friesian Association and oper-
ates a butter factory on his estates with a Danish ~anarer He was
ar Minister from 1938-40 and Ambassador to Cashington from 19h4-46
l In executing any policies he will of course be handishyt4
capped by the lack of a fully efficient Civil Service The position
in Ecuador is the same as that in othelmiddot Latin American countries
that the Civil Service is naid on low salary sca1e and lacks compe-
tent administrators Such lack is an aspect of the general shortage
of technical ability in the country
TABLE
1
2 bull
3 bull
4
middot 6
7 bull
8
9
10
11
lZ
13
14 bull
15
16
17
18
19
20
ECUADOR
STATISTICAL APPENDIX
Oil Production and Exports
Cement Production and Imports
Yfueat Production and Imports
Rice Production and Exports
Rice Exports by Destination
Cacao Production and Exports
Coffee Production and Exports
Cotton Tobacco amp Sugar Production amp Sugar Imports
State Railwaysmiddot Lines amp Rolling Stock
State Railways Merchandise Hauled
Population and Roads by Provinces
Budgetary Receipts and Expenditures
Exports of Principal Commodities Volume amp Value
Imports Classified by Groups Value
Exports by Destination Value
Imports by Source Value
Balance of Trade by Major Regions
Exehanee Reserves and Banking Position
Price middotIndices
Status of Ex-Im Ballilt Loans
ECUAIOR Table 1
Oil Production and Expomiddotrts
(thousands of American gallons)
Crude ou Gasoline Produced EJtported bullRefined middotproduced
1938 94586 78696 15500 41654
1939 97125 68819 17679 bull 141
194o 98654 70~99 23001 6162
1941 65382 38362 25914 6462
1942 95671 68516 29489 72l7
1943 97211 65003 34635 8076
1944 121469 82520 38083 8927
1945 109855 73897 38752 10059
1946 979+7 52412 45213 12271
1947 99140 39359 53949 16587
Source J3o1etin Banco Central del Ecuador
ECUADOR Table No 2
1929
1937
1938
1939
1940
1941
1942
1943
1944
1945
1946
1947
1948
l First six months
CEMEHT PRODUOTIOllT AliD IMlORlS (metric tons)
Production Imports
17782
15699 10082
14254 13373
14249 12013
16512 10935
17213 2_846
19802 so98
2756o 933
34691 1590
37504 953
38496 3114
33231 14941
20484JJ
Sources Production Eoletin Banco Central del Ecuador Trade Ministerio deEconomia
Total
25781
27627
26262
27447
20059
24900
28793
36281
38458
41610
ECUAJX)R Table J
Wheat and Wheat Flour Production and Irraquorts
(thousands of kilos)
Wheat
Production Imports Exports Consumption
194o 28120 bull 73 28o47 1941 24578 36 24542
1942 24265 bull 76 24189
1943 22034 22034
1944 23251 912 24175 1945 23115 2733 180 25667
1946 25852 4532 23 30361
1947 2lo66 494f)J 11
Vfueat Flour
1938 10743 9981 na
1939 7864 16638 na
1940 7996 8-592 275 16312
1941 7225 11823 286 18762
1942 7 161 23497 161 30498
1943 7461 9862 17322
1944 5216 24023 29239
1945 5174 25137 30311
1946 7~38 11313 g 18813
1947 5943 1886) 4Y
Less than 500 kilos Y First 6 months
Sources Ecuador en Cifres a~d Ministerio de Economia
~emiddot 1926-30
1931
1932
1933
1934
1935
1936
1937
1938
1939
1940 -middotmiddotmiddot
1941 ~ )~ (1
1942
1943
1944
1945
1946
1947
1948
~iiampn-sect00-lfmiddotks
-~Jrst~middot-nsmcnths
gJ Provisional
(B EQUOR
RI03 PRODUCTION ApoundP ~OR~S
Vo1wnfJ Production middot E~orts
(metric tons)
26)04
23584
29863
39270
39008
31699
39036
52136
44027
40144 ltit middotmiddot~ 0 56596
5873
100949
ao6o7
53168
102048
112711
047
8255
3842
6449
5282
22907
8734
12)3
2ooso
962
18343 t - ~ J
20546
32028
46992
64604
29318
66918
6~209fl middot tloo 1
$ bull
tt ( r t
z
Value 3xoorts
(thousand sucres)
1881
936
6667
10864
6555
14632 pound 170
23265
51460
93837
127105
60395
203243
2rfjuft
Sources Production Boletin Banco Central del 39uador~ Trade Ministerio de Econom1a~ ~r- ~fl ]r bull ~-middotmiddotmiddotmiddot f ~~middot~---i
Average Destination 1937-41
Cuba 2
Peru 13
Venezuela 6
Colombia 4
Panama 2
Jamaica 0
Philippines 0
India 0
Dominican Republic 0
Other Countries 4
TOTALS 31
Preliminary~
RIQ] EXlORTS (in million po~ds)
1943 1944 1945
81 88 5S
20 29 0
0 17 4
~ 0
Rf 2 hi 0 0 0
0 0 0
0 0 0
0 0 0
bullbull ~ 6 6
105 142 6S
R Less than )OOOOOpounds
Table No 5
1946 ~ Jan to~
1~ June-194
46 12 24
0 0 s 17 49 )j
2 13 2
5 4 1
16 1 0
20 0 0middot
0 38 0
0
1 f4~ 2
r middot I
130 13 34
sf Ineludes 6 million pounds to Mexico and 5 million tmiddoto Greece bull middot
1[0
supound~sect8_ Foreigl Crops and Markets Offiee of Foreign Agrtcultural Relations u bull Sll~artment of Agriculture May 3l 1948 bull p bull 402 First six months of 1948 from ibid August 16 1948 p bull 120
Average 191i-15
191620
l921-25
1926-30
1931-35
193640
1940
i941
1942
1943
1944
1945
1946
1947
tf I
ECUADOR
Cacao Production and ~orts
Volume
Estimated Production ~rts
(metric tons)
n (
12108
15middot330
14652
19030
15058
17759
17689
19459
4o625
43547
36825
21319
15980
174o4
11208
14433
13762
18161
13735
16827
16526
Exports ( 000 sucres)
186o9
26073
26746
27531
16647
37424
29354
34365
40327
51794
41985
53547
74935
188208
middot)(et) middot( middot
Sourcesmiddot Estimated production Ministerio de Economia E~orts to 193~ Estadisticas de las Exportaciones del
Ecuador 1940-1942 subsequently El Trimestie Estadistico del Ecuador Number 1
1 ~ Mini sterio de Economia -bull gt(
111 t bull r r (o J bull bullbullbull 1) ( bull
ECUADOR
Coffee Production and Exports
Volume Estimated Production EXports
(Metric TohS)
1921-25 average 5147
1926-30 II 7571
193D-35 10047
1936-40 II 13811
1940 16158 14571
1941 14260 11847
1942 9016 6140
1943 14144 12340
1944 16598 14458
1945 12999 10737
1946 9948 7636
1947 12522 8970
Table 7
Value
Exports 000 Sucres)
59~9
11530
10945
18546
16J83
23827
17278
33176
35626
33863
34839
43524
Source Estimated production - Ministerio de Economia
Exports t~ 1936-40 - Estadisticas de las Exportaciones del
Ecuador 1940-1942 - subsequently El
Tremestre Estadistico del Ecuador Number 1
and Ministerio de Economia
YEAR
1937
1938
1939
1940
1941
1942
1943
1944
1945
1946
1947
ECUADOR
Production of Cotton Tobacco amp Sugar amp Sugar Imports (000 Kilos)
Raw Cotton
9237
7213
7172
8165
PRODUCTION
Tobacco
1519
1106
1875
1028
1359
Sugar
17528
22950
26950
27835
30421
27858
26799
23151
32474
33544
33480
Table B
IMPORTS
Sugar
5310
11068
12387
38
6
33
184
784
21455
3060
Sources Production of Cotton and Tobacco Ecuador en Cifres 1942
Sugar Production and Imports Ministerio de Economia
ECUAOOR Table 9
State Railways
Length Locomotives Rolling Stock (Number)
(Kilometers) (number) 1relght Passenger
Gueyaquil-Qpito 452 39 319 41
Guayenaquil-SalinaJ 150 6 22 24
-~i to-CarcbiY 222 6 23 22
Bahia-Chone 78 3 12 g
Sibambo-Azogues 117 3 6 ll
Puerto Bolivar-Piedras 155l 7 21 10
Puerto Bolivar-Pasaje 55
1199 64 4oy llG
Narrow-gauge line
gj On uncompleted line ~ito-Esmeraldas
21 Of which 4 are rail-cars
jj Of Vihich 61 are rail-cars
Source lviinisteria de Economia
1938
1939
194ltgt
1941
1942
1943
1944
1945
1946
+947
ECUAOOR
Railway Transport
(thousands of metric tons)
Products
Agricultural Animal Mineral Forest Manufactures
1639 19 3 160 122 1034
1318 143 172 138 961middot
1714 144 233 219 1472
1613 184 277 209 1543
1809 224 280 272 1631
1841 280 35a4 376 193-3
2011 250 263 299 C5J7 3
1888 29-5 350 238 2234
1941 29-9 46 bull 4 258 2170
1787 299 51 0 180 2085
Source l3oletin Banco Ce~~nu del Ecuador
Table 10
Others Total
58 3205
58 279l
298 4oso
289 4115
328 4543
384 5168
352 5248
292 5296
37middot7 5508
419 5279
Table 11
Population and Boads
Poeation Roads (Kilometers) Province Jan 1 1948 Main Secondary In Construction
Care hi 86663 1744 1191 1050
Imbabura 158896 1818 2100 1810
Finchincha 350149 4)13 3703 670
Cotopaxi 215232 642 4o6o 970
Tungurahua 222963 2290 1810 300
Chimborazo 29864o 1664 3316 2740
Bolivar 121653 1877 1294 2045
Canar 133971 580 580 1300
AZUaY 284982 1053 2190 630
Loja 238705 1140 4s6o 1430
El Oro 93752 1005 2378 650
Quay as 482843 3900 3367 3700
Los Rios 148428 933 4632 1050
Manabi 381538 3627 1lo61 1970
Esmeraldas 664o5 50 19 0 2840
Frov Orientales 181071
465891 26636 46732 2t3l5bull5
Source Direccion General de Estadistica y Censos
1938
1939
1940
1941
1942
1943
1944
1945
1946
1947
Source
r
Table No 12 ECUADOR
DISOLOS3D BUDGETARY R303IFTS AlfD EXP3NpiTURES
(Total of ordinary and extra-ordinary budgets and special accounts)
thousand of sucres)
Total Receipts
1323204
131699 6
1262710
1547624
1667455
2112614
3145318
4051038
5367822
6696647 11 ~I JJ( middot
Total Expenditures
1429134
1267687
123135middot0
1586615
1489251
2101429
3031038
4174550
5352394
6593858 bull I
aoletin Banco Central del Ecuador
-middot middotmiddot
Diff~reuce
106830
j 49309
f 1360
- 38991
f 178204
j ltll8-5
f 114280
12351middot2
+ 15428
j 10278bull9 r 7
l I 1
L
ECUAOOR EXPORTS OF PRINCIPAL COMMODITIES 1937-47 Table 13
VOLUME (thousand metric tons)
1937 i98 1939 194o 1941 1942 1943 1944 1945 1946 194711
12 200 96 183 20 bull 5 320 47~0 646 293 669 66) 218 191 153 112 144 138 182 137 168 16 bull 5 203 14~ iJI 137 129 146 118 61 123 14 bull 5 107 76 90 48 55~5 53middot3 472 34 bull 2 226 158 1)9 178 35middot511 72 bull 5 345 19~2 251 183 14bull4 13 2 112 103 12~0 132 121 1-4 16 16 15 18 30 22 28 2~0 13 01 14 1middotmiddot9 2~2 21 47 90 136 93 74 28 na
~gt i824) (1387) (944) (1036) (1981) (2516) ( 2756) (4373) (4462) (4947) _01 2849 2454 2274 2201 1201 2167 2062 2513 2446 1640 1358
Ltrates 7~3 140 76 so 3~3 )9 26 10
VALUE (thousand sucres)
610 10864 6555 14632 23265 51460 93837 127105 60395 203242 201111 49985 39bull276 37bull033 29354 34364 40)26 51794 4lt985 53547 74935 188208 24613 16703 15227 16)84 23827 17278 33176 35~26 33863 4839 43 bull 524 5bull691 7558 7t006 6448 4658 _J 107 2159 1898 2872 738~- 24355
18242 7~146 9605 86o6 6120 201 6274 6209 9264 1)02 14994 4048 4300 4298 3~866 6979 35481 23316 38043 26553 15111 979 lt363 2~134 2724 3168 8450 25613 43419 31877 18 bull 509 7125 na 8048 6 234 4981 6509 16231 22121 25191 69033 69J87 81962 4662
21989 26374 25020 24862 13425 24820 23796 28788 28107 18253 15902 trates 10165 16090 13134 38609 27208 29013 18075 809 ates 18682 35297 41204 39907 29426 25374 27476 26457 15482 24858 25334
10774 13210 13495 3 950 16869 32775 2L068 32402 30902 38326 n bull a_
164_045 169096 167148 167851 199704 298690 393115 466631 377894 537131 619859 tmiddotbull bull
Note Dash (---) signifies zero or less than 50 metric tons nly or ~00 sucres ata expressed in quantities other than weight Sourcis 193 data from unpubli~hed Zcuadorian trado stati~tics
at US Department of Commerce 1938 nnd 1939 from partment of Commerce official data Direccion Nacional de Estadistica Eruad6r en Cifras ~7 from Banco Central Boletin 1940 and subsequont ~ears from Banco Centrll jto~n sterio de Economia and from M1nister1o c Economia data furn she
Mission July 1948
~ tobacco tone JgS
articles
11res ilk
al
value of Imports by Groups 1937-Lt-5 Volume and middot~alue of Selected Individual Imports 1937-46
(Value in thousand Sucre~)
1~37 1~38 1~39 1940 1941 ~942
19~731 20~ 375 24~874 16~)65 19043 37~540 5127 7194 1958 6~4e8 5t298 8 118
12888 13Jl5 14522 17702 19556 25~152 21627 25~272 21455 28532 21619 18923 20649 21~593 25559 29437 22636 19~$13 13~505 11961 12~654 15~976 15667 18899 5~829 7 bull 524 6066 9385 833 14353
22912 )0868 24~75 27 t 750 25993 42~916 9376 1028 10038 12118 11345 13932
-bull
131643 148320 1486o 173753 149499 199715 (Volume in thousand metric tons) (Value in thous~tnd sucres)
5middot3 111 124 194 5 bull 534 6385 26 4 24
os 246 -
122 ioo i66 86 118 235 8255 6)88 7449 5076 013 14609
19 07 11 11 14 29 2187 1824 2695 294-3 29J9 8182
101 i4 i2o i09 28 51 804 llJ)6 1667 1546 577 866
~ hides amp skins amp manufactures amp miScellaneous
~~43 1944 1945
33270 70915 82984 6717 8)69 904)
31~700 43196 32~830 17073 53~400 JBoo6 15447 32~624 38797 14~88 18~388 22895 14116 11a99 9812
68928 n~l79 69-113 15856 19186 20042
217983 33ltl56 323524
78 middot 0 2 215 130 12622
09 27 775 2290
99 240 bull 25~1 337 24070 26388
23 46 67 8853 146)1 21699
09 16 10 321 349 246
~s zero or less than 50 metric tons -middotNote Columns may not ahmys add to totals because of rounding Denartment of Commerce official sources - 19)8-42 Direccion Nacional de Estadistica Ecuador en Cifras [inisterio de Economia El Trimestre Estadistico del Ecuador
1946
)1 8135
4 bull 5 )842
114 13123
46 22709
)1 639
ECUAOOR Exports by Countries 197-47 (Value in thousand sucres) Table - 15
1937 1938 1939 1940 1941 1942 1943 1944 1945 1946 1947 --middot-------middot
80458 lt2865 116t-J78 150055 196953 293081 386483 46lt-909 372~549 463~378 sa4~68J 54422 63418 8)254 1t0496 145 bull 558 168585 2)9238 267105 218018 227291 262887
26 20 65 17 2228 78 124 7)41 17173 630 610 949 1281 1055 1)98 5~526 25686 78523 85382 61478 75890 23481
2899 4955 2109 3568 162 1163 4J54 2526 4197 44~ 1450 5027 6335 4972 5i92 5285 7425 4546 7379 10286 9798 15537
1 5 5 17 57 13 291 54 444 574 6996 8 662 9188 8714 13bull764 7238 15316 13900 11223 6~07l 14503 11717 2908 12544 5 730 7896 3767 21215 22608 29233 4243 6703 7965
51 15 24 8 532 3620 1603 539 2336 11579 3749 80 207 862 4070 9991 17096 1275 17~428 6~973 27431 80541
1943 2135 5229 6039 1965 5435 3021 4827 15~702 25~137 51~854 middot 667 740 991 zo83 3358 11412 4286 4282 3~-970 13064 5~864
1799 419 2218 875 2865 12299 9644 14900 13714 9653 11655 J 89 82 2527 1247 964 326 )24 250 41141 2~985
1024 1514 1068 2205 7173 2650 2 744 8871 7694 J2 5811 17 39~ 77029 61869 43688 11945 1503 5550 6335 4108 4075 36783 61998
32) 6)3 1187 490 58 186 2164 4021 J217 35974 29595 11277 69 - 29 4411 7909 6156 3477 1183 5492 4876 26)8 359 1860 7~467
489 255 J2 100 280 1155 1239 1265 3827 3~961 20539 13t521 10802 2254 5 706 4177 6313 2bull610 3615 4251 -middot 2842 13546 lBi 1415 3 758 822 6 188 12962 3592 2531 412~ 162 7~ 10052
8643 1693 3bull521 3~400 2751 320 40 118 231 222 5404 J 4894
6337 4201 6548 5478 1175 5 45 40 1611 50950 6261 4132 5386 5452 117) -
~l - - 15 45988 5 middotmiddot 7S 8 5 25 567 92S 11
33 ~- 76 18 966 151 150 3419
38 29 858 2 45 78 467
(continuation on next naee) middot
~GUJLOR ~xnorts by Countries 1937-47 (falue in thousPnd sucres) T~ble-15 continued
middot-~--- -~-middotmiddot -middot _ middot-- ~~---~~- ---- -middot--~middot--------middot- -middotmiddotmiddot--middotmiddot--193 1938 1939 1940 1941 1942 1943 1944 1945 1946 1947 _I --middot -middot- ---~- ------ middot- bull middotmiddot-middot -
4 7 5 5 5 219 1087
218 153 529 368 73 49 297 569 1230 35140 789 28137
207 144 379 J68 73 49 297 559 1104 605 11 9 10 126 43
150 6355 plusmn
353 54045 169096 167148 167851 199704 298690 39J115 466631 377894 537131 619859
~S Columns may not always add to totals because of rounding
Dash (-) signifies zero or less than 500 sucres
Primarily Guadeloupe and Jamacia
Primarily British West Indies and Netherlands West Indies
Primarily Denmark Spain and Norway
Primarily Java
~ces 1937 and 1947 from unpublished Ecuadorian Trade Statistics at U s Department of Commerce
1938-46 from Ecuador Ministerio de Economia data furnished IBIID rassion July 1948
Imports by Countr~es 1937-1947 Table-H)
ECUAOOR
l937 1938 1939 1940 1941 1942 1943 1944 1945 1946 1947 I (()
Value in thousand sucres) ~ + -gt L520 63151 83984 115382 128423 186958 200061 311989 302~329 363403 517582 j
u t 2086 51311 71950 103214 110422 138729 103583 173776 178821 240233 429906 0
Q) f
811 674 551 2436 1815 3J258 2150 5265 6538 12178 20912 d S Ugt ro c 1 n 4 4144 3042 8 99 14 23 295 178 8~011 210 h middot-1
(- 0
186 324 237 957 2~991 8492 18~376 15~239 17232 10~574 3121 4 middot-2375 2310 1959 2476 3016 4735 7930 7~696 11~201 15~564 14755 sectwfi
middot-1 1 fli 4 6 343 1~823 3J064 4110 3~612 60J5 h 0H
2739 2109 3789 174 2352 7949 9~934 17845 23~ 616 1559t 18~727 ~rld ()
328 164 457 2498 612 733 10892 10902 20003 16684 11981 oc ampl+lll
mmiddota J63 1297 1161 -- - 2 23 115 1~128 1192 d+gt-
2464 507 500 1438 5565 20668 39979 46654 33684 33034 6~486 15~~ (()
na 1 311 2297 5515 130 bull-I m rl bull +gt
15 31 68 245 995 1516 2804 25326 6124 5956 3472 Oltll~
149 280 269 332 550 208 270 389 707 839 655 a~ sect (1) Cl 4-209 72986 ~ 38 09 1433J 9813 16276 15885 1721~9 45194 80928 ~-g 1701 35767 2 7 7 33 1202 67 47 61 19 2 El 0 0 eo g 3250 11462 8094 12980 10124 8108 13634 12513 11984 28392 40983 cent1-t+l~
1803 718 1687 otmiddot r-
4-114 6465 7339 630 475 34 22 2 66 889 7279 t -P () ~led
36o 4685 1573 7144 308 12 682 4824 rlltll ltDno
1~896 2550 1466 1624 64 1 58 5090 bull-1
fJ ~ ~ 1052 1489 794 945 293 224 5 21 1373 9062 9 703 P + na 868 881 423 10 1 8 223 135 r- 0) u
1 r=l middotr-l
1162 4823 1264 1675 877 1017 1~52 2380 3129 4~326 6851 () l=l rl
7274 3074 2609 3595 980 349 1041 905 599 1~543 3~134 cn~oo bull t
724 11939 8983 19951 6239 2281 1439 304 3882 5478 5736 op a cent1-t ~sect rl
173 302 262 238 -w 14 276 -rr 472 ---s9l ctillmgt
259 10949 7810 18190 4414 170 16 4 5 +gtUd ~-- ~
935 712 728 1278 1281 1715 1314 2685 3185 4465 3151 +gtP t-1
530 105 143 221 306 240 95 89 582 541 2089 ~ (f)
1l 21 12 80 1f 196 122 169 125 1J n ~-T~
0
109 218 lllL 250 m 46 sect2 12_ 28 119 112 I ~ --sB_l_ 0 ---- -
643 148315 147860 17353 149499 199715 21 ~ 983 331156 323524 414266 604479 ms may not a1ways add up to t ta1s because of rounding Dash (-) signifies zero or less than 500 sucres ~ country breakdown not given in source g) of which 591 from Syria 2Z3 from China 264 from Straits Settlements 1 Sumatra and 264 from Iran
YEAR
1937l
1938t
1939~ -
1940amp
194H
1942
Exports Imports Balance
Exports Imports Balance
Exports Imports Balance
Exports Imports Balance
Exp(rts Imports Balance
Exports Imports Balance
ECUAroR Balance of Trade by Area 1937-47 (thousand sucres)
fRlSTERN HEMISPHERE including Philinuines
United States Other Total Eurone
54~lt-22 26~036 80~-~-sa 77~029 52086 9~434 61520 64~209 2336 16602 18938 12820
63418 39447 102~865 61869 51311 11840 63151 72~986 12107 27~607 39714 -11117
83254 33124 116~378 43688 71950 12034 83984 54505 11304 21090 32394 -10817
100496 49559 15Cl055 11945 103214 12~ 168 115382 38~090 -2718 37391 34 673 -26145
145 bull 558 51395 196953 1503 110422 18001 128 423 14333 35136 33394 68530 -12830
168585 124~496 293081 5t550 138~729 48229 186958 9 813 29856 76267 106123 -4263
Table 17
Other Countries World Total
6~559 164045 5-912 131643
647 32405
4361 169~096 12~ 178 148315
- 7817 20781
7082 167148 9372 147860
-2290 19288
5851 167851 20281 173753
-14430 - 5902
1248 199704 6743 149499
-5495 50205
59 298690 2944 199715
-2885 98975
NOTE Areas may not always add to world t~tals because of rounding
Source 1937 and 1947 frlttm unuublished Ecuadorian Trade Statistics at US Department of Commerce 1938-46 frem Ecuador Ministerio de Economia data furnished Mission July 1948
(Table 17 continued on next page)
YEAR
12J Exports Imports Balance
1944 Exports Imports Balance
125 Exports Imports Balance
1946l) Expltgtrts Imports Balance
12Z= Exports Imports Balance
ECUADOR~ Balance of Trade by Area 1937-47 (thousand sucres)
WESTERN HEMISPHEL~ (including Phili~ines United States Other Total EuroQe
239238 147~245 386~483 6335 103583 96~478 200~061 16276 135655 50769 186422 -9~941
267105 194804 461909 4~108 173776 138213 311989 15~885 93329 56591 149920 -11779
218018 154~531 372549 4075 178821 123508 302)29 17159 39197 31023 70220 -13084
227291 264224 49J515 36783 240~233 123170 36J403 45~194 -12942 141054 128112 -8411
262887 241796 504683 61998 429906 8676 517582 80928
-167019 154120 -12899 -18930
1 Only year in which substantial Philippine trade
NOTE Areas may not always add to world total becasue of rounding
Table 17 (oonttnued)
Other Countries World Total
29 393115 1646 217983
-1)49 15132
614 466~631 3~282 331~156
-2668 135475
1270 377894 4035 323524
-2765 54)70
8~833 537131 5670 414266 3163 122865
53179 619859 5969 60449
47210 15380
Sources 1937 and 1947 from unpublished Ecuadorian Trade Statistics at us Department of Commerce 1938-46 from Ecuador Ministerio de Economia data furnished IBRD Mission July 1948
~ EXCHANGJ-tAL BANK
ECUADOR Exchange Reserves amp Banking Position (million sucres)
r 4 bull TIC CQEDITS OF CENTRAL BAl~K Domestic Govt Official Bus Other Credits
MOliEY SUPELY Current AC
JJj To()2f (4) Entities Indvls Total Banks of O~mtl Currencl Denosits l (6) (7) (8) (10) (5) Banks amp 11
Indvls (9)
16 10 26 51 1 116 62 64 48 26 7 40 73 4 129 74 66 3middot7 )9 7 29 66 4 144 73 71 37 29 8 24 62 4 159 78 73 56 26 8 22 55 5 183 8l 103 81 37 28 2 8 201) 120 119
152 37 21 22 79 9 255 169 17~ 26) 34 27 22 83 13 378 ZJa 26e )4 60 37 20 117 9 385 295 308 Z5 105 73 11 189 26 493 321 312 282 153 81 10 244 24 536 35middot~ 354 242 104 44 93 241 2 565 329 284
221 110 51 99 260 2 56 313 278 215 102 47 101 250 2 573 )06 294 225 97 45 95 237 2 585 299 299 219 100 44 98 242 1 591 307 297 214 98 35 111 244 4 6)4 315 295
)20 295
on of $12500CC beginning in December 1946 bull
ars
Ttttal (12)
127 14) 144 151 183 239 345 492 602 634 704 613
591 599 597 604 610 614
ge liabilitieS but including Stabilization Fund in 1945 and GolC CertificCt in 194) bull ial banks and fomento banks ial bc1nkst and fomento banks sits of commercial banks and time deposits of fomento banks
Table 18
Govl t Den sits ~L
(lJ)
6 23 12 27 7 28 8 31 6 32
middotmiddot 11 )6 16 57 27 71 41 74 63 98 59 90 66 77
71 8 75 76 6 75 81 75 81 72
72
1 1 Boletin - Superintendencia de Bancos Boletin - Unpublished data furnish~d MF bY Banco Central of Ecuador
Table 19 ECUADOR
Price Indices
WHOLESALE Rents Export Fooa in
YEAR Goods and Quito - Coal ~1) (2) (3)
1937 100
1938 83 100
1939 95 100 153
19h0 95 106 16h
1941 96 113 150
1942 114 146 172
1943 114 183 187
19h4 118 218 219
1945 133 266 254
1946 203 320 315
1947 297 364 516
19h8 (March) 294 379
(liay) 416
(July) 389
llame l~umbar
Republic of Ecuador
Status of u s Export-Import Bank Loans to ~cuador
Purpose
gs of Junemiddot10omiddotl9ltsect
Gross Authorized
Cancel- Net lations Authorized Repeid
Amount Amount Outstandin~ Undisbursed
6J048 6J048
( 262 )16
Haterials equip amp services $ 6480000 $20810 $6459170 $1279775 ~)5-l19middot395 _____ _
ibulliunicipali ty of iui to (Republic of Ecuador)
ibullIunicipali ty of Guayaquil (Republic of Ecuador)
Republic of Ec~ador
Republic of Ecuador
Ecuador DeveloPIlent Corp
Pan-American Highray (Cuenca-Loja)
Agricultural Research amp Experiments
Raihray Equipment
5000000
12JOOOO
50000 200000
)28 Haterials equip ~~ 4000000 services - ater 1middot1orks
)28 iltiaterials equip amp services - ~~rater orks 4000000
J4J Pan-American High1middotray (Guamote-Tambo)
432 uevedo-Hanta Hightmiddotray (additional credit)
1980000
220000
$19180000
Of tlhich $2500000 tts used on the Quevedo-Ibullianta HighTaY
4000000 28880
4000000 167
-1 t-9amphOOO- -7500
220000
6o6120 -h365000-middot
41592 575-t 2-41
-l-y5Q2- 500 44Gooo
220000
IBRD Statistics Sectio spte~ber 24 1948
ECUADOR AND SOUTHERN COLOMBIA POPULATION
URBAN bull MORE THAN 100000 bull LESS THAN 100000
RURAL bull EACH DOT ~000
SCALE I
MILES
BBOdVAR LR LOS R (os
100 I
CAUCA
ORIENTE
middotmiddotmiddotmiddotmiddotmiddotmiddotmiddot
SUMMARY
1 In terms of national income per capita Ecuador is one of the
poorest countries of the world Nor are her known but unexploi ted natUro
resources strikingly rich Her best potential resources are agricultural
owing to geographical configuration she can obtain the output of temshy
perate agriculture for domestic consumption and of tropical agri~~ture
for both domestic consumption and export She might also be able to
d~velop a cattle industry for supply of neighboring republics
2 Although socially and culturally as old as other Spanish Americm
Republics Ecuador is very young economically~ The Panama Canal bringing
her close to the Eastern United States and Europe was opened only 34 years
ago She has very little of the techlical and administrative skills and
abilities that underlie modern economic processes She is very poor in
capital equipment of all types And her Government is inexperienced in
the exercise of the modern economic functions of the State
3 The population of Ecuador is nevertheless increasing at about
2 per cent per annum and in the Sierra where 6o per cent of the populashy
tion is locatedt is already pressing against local focd output The situashy
tion is one which may be temporarily eased but cannot be finally solved by
extension of arable area in the Sierra except where such extension is
accomplished througf) irrigation Of basic importance is improvemm t of
arable farming practice in the Sierra valleys to obtain ~better yields
from land already cultivated Use of agricultural machinery would
- i ~
probably not achieve this unless accompanied by other more fundamental
chanesp in seed types crop rotations and fertilizer use Unskillful
employment of heavy agricultural machinery to bring into use higher ground
now unutilized would carry considerable danger of soil destruction tnrough
wind and water erosion
4 Non-subsistence coastal agriculture is in part an important
foreign exchange earner and in part a source of products also imported such
as sugar cotton and tobacco No export crop other than cacao enjoys an
established position in overseas markets and cacao production has not
recovered from disease losses impacting in tne 1920s Rice exports
expanded greatly during the war but retention of roarkets is doubtful
Coffee expoi lts have been increasing in value but not in volULle rem--ining
agricultural exports are at present minor non-staples
5 Expansion of coastal agriculture is rather a matter of illproving
the farming environment (in transport crop processing and credit facilishy
ties) than farm practices themselves ~1ile the coastal area is relatively
thinly populated (particularly ~hen compared i th Far Eastern tropical
areas) it is not yet clear apart from a few crops how mechanization
could be applied to offset a small labor supply This may prove to be a
key technical question in the development of coastal agriculture lll
economic problem is to identify and foster the products of good ~~port
prospects rather than those of probable decline
6 Exports of minerals and petroleum are a ~inor item In 1947 they
represented only 45 per cent of total exports exports of petroleum have
declined steadily with increased do~estic consumption of petrol
- ii
7 Apart from a few important consumer-good industries such as tex-
tiles Ecuador is not an industrial country Her manufactures are largely
in a handicraft stage that of panama hats provides an important export
commodity Power prodllction while deficient does not at present seem a
real obstacle to economic development~ which at this stage is principally
an agricultural problem
8 Changes of farm practices will however take time partly be-
cause of the educational problem in Indian collliDllli ties partly because the
provision of improved seeds and the -working out of new safe tillage pracshy
tices carmot be quickly accomplished While the work rh ould be taken up
immediate action in stimulation of development would not center upon the
farm itself but rather upon improvemm t of services middotsurrounding the farm
notably roads irrigation crop processing and storage and rural credit
facilities
9 Such immediate action might be supported by establishment of
multi-purpose rural machinery pools equipped with machinery and personnel
to undertake not only farm operations but also local road-building end
irrigation works work upon the various activities being fitted into the
farming calendar The actual use opound farm machinery would then be conshy
trolled by experts whose ear~ work might be mainly experimental and
demonstrational
10 Voluntal saviftgs directed lnto productive use ere small and a
large part of domestic development axpendi tUes att necessarily by Govern
ment or through GoverrJ~DSnt agencies In con~nce thefe 11 constant pres
sure toward inflation pressure which in the GovemmeDl sector has beea
bull 111-
offset during the past sixtem months by application of special exchange
tax revenues in reduction of Government debt to the Central Bank Ver-J
recently however 90-rer cent of these revenues has been diverted to finarce
of development with consequent renewed danger of monetary inflation v1hen
total Government finances no longer run a surplus
11 These special exchange revenues derive from a multiple excharge
rate system installed in iilay 1947 (with IivF advice and concurrence) to
meet rapid loss of foreign exchange reserves The system has bern successshy
ful in slowing the rate of loss bull but not in colq)Jetely preventing it midshy
year expectat ions were for a loss of foreign exchange of some US$ 5 million
in 1948 Recent action reclassifyinamp i~crts may reduce this e~~ected loss
12 The balance of p~ents position at present difficult and no
great easement can be expected It is improbable that Ecuador could safoly
assume any large additional debt burdens At the same time her ability
effectively to absorb and use loans directed tmmiddot1ard increase of production
is limited bya present lack of technical and administrative abilities
Here iLiprovement though clillilllati ve is necessarily slow at first
- iv-
I GIDGRaPHIC
13 Ecuador has common boundaries with Colombia on the North and
Peru on the East and South The greater part of the country lies immeshy
diately south of the equator which passes 13 miles north of Quito The
area of the country has never been measured but is estimated as 150 COO
square miles ri thin the frontiers resulting fror1 the war with Peru in 1942
the area west of the Andean crest is about 60000 square miles
14 Ecuador is divided by nature into tru-ee separate reeions of
which only two are in effective occupation
(a) The sea-coast plain (about 28000 square miles and about 425
miles long by 62 miles in width) is composed partly of swampy
lowlands and partly of low hills most of the region being
less than 1000 feet in altitude I the north it shares tbe
double rainy season of Colombia and is covered with dense
forest Not far south of the borders of Colombia the double
rainy season ~ves way to a single rainy season from Decemshy
ber to June as one goes further south the rains begin later
and end sooner until at the extreme south desert conditions
begin stretching onward into Peru ald Chile As the rainfall
becomes less the vegetation changes from wet forest to dry
scrub forest and savanna until in the south settlement is
limited to irrigated areas
Temperatures in the region are modified by the cold-vater
-2-
Humboldt current and are more pleasant than latitude alone
would suggest
The coastal region produces almost all the export commodities
of Ecuador its people are largely mestizo strongly conscious
of nationality and commercially active Its major port
Guayaquil (population 1942 154000) is larger than ~ito
(population 1942 139000) and is the commercial capital
of the country
(b) The Andean Highlands or Sierra (about 25000 square miles)
comprises the second natural region and forms the physical
backbone of the country There are two high corderillas
surmounted by towering volcanoes and separated by a series
of ten large intermont basins lying in a north-south line
seven are linked to Guayequil by railway Each basin is
occupied by a dense JOpulation 1hich is almost pure Indim
Only in ~ito and Cuenca are there any important number
of people with Spanish ancestors and these are either
office-holders in the Government or landowners with large
private estates
(c) The Oriente (Amazonian region to the East of the Andes) is
not yet part of the effectively occupied area of Ecuador
Its jungle inhabitants from time to time spear the
agents of the Shell Oil Company who are prospecting
for oil
3
In 1942 official Government figures for these rerions were
Area Population middot Density Square of
Kilometers middotmiddotNumber middot Ponulation
Sierra 70344 23 11686748 61 268
Costa 68633 23 1JooOl8 33 14 6
Oriente 153143 51 189005 6 12
CalapagS Islands 7880 j 2192 a 0~2 -Miera tory 4115 a middot-
300000 100 3089078 100 102
15 Very little however of the total area is under cultivation
It was estimated in 1916 that about 90 ~)er cent of the coast and 60 per
cent of the Sierra was suitable for cultivation that is about 25000
and 1)000 square miles respectively Of the total of Loooo square
miles of cultivable land~ only about 1$000 was under cultivation in
1946~
16 No census of the population has ever been in Ecuador
In 1892 estimated nopulation was 127 million in 1942 309 million
and in January 1948 3L7 million with crude birth rate of 379 oor v ~ thousand and crude death rate of 201 per thousand in 1942- Estimated
composition of the 1942 population was
a less than 05
Yhi te Mestizo Indian Negro Iulatto Other
100 per cent l-t10 ner cent 390 per cent 50 ner cent 5 o Per cenmiddot~
1000 ner cent
Just over half these deaths oc~urred in the are rroun of 0-4 years in 1942
4-
17 At the same date the literacy rate was estimated at 20 pe~ qent
s~i~literacy at 20 per cent and illiteracy at 60 per cent
-5-
II OCCUPAmtOUS AND INCOivES
18 There having been no census there is no at~curate information
under this beading
19 The Economic Department of the Ecuadorian Central Bank has esti-
mated that of a total population of 334 million in 1946 1285000 or
J9o per cent were gainfully employed in the following occupations
Agriculture Forestry etc
Mining
Building and Repairing
Manufacturing and Processing
Services (communication comshymerce government etc)
820000
10000
6oooo 10000
325000
5 5
26
100
20 No valid estimate of national inco~e exists At the request of
tne International Monetary fund the Technical Adviser to the Central Bank
of Ecuador Mr L A Carbo estimated national inccue in 1946 as 20096
million sucres or US$ 149 million Although this estimate is probably too
low ] it is clear that national income is very small Ecuador is very
low on the list of income per head among Latin American countries its
income per head is in feet among the lowest of countries of the world
21 Income is very unevenly distributed A survey made in 1943
yielded the following picture
g lror reasons Sdvanceit below Paragraphs 87 and 88
~ pt WI
-6-
To tal Monthly Average Monthly Population Income Income per Fw~ly
Number of Amount t tount People (SUcres) (Sa~res)
Upper Cla~s 4oooo 133 28000000 144o 2300
Middle Class 96oooo 3200 96000000 4950 4 L ~ 00- middotJ~
Lower Class 2000000 6667 70000000 3610 140 -- -~
3000000 10000 194000000 10000 10000 yenSliP C_~ ~
Note At the ofDcial rat~ of 1350 suc~es to the US$ average monthly incomes per family are equivalent to approximately $2J7 $30 and $10 respectively
~ Uneven distribution of incoue is of course largely a conse-
quence of uneven distribution of property Some ideas of the distribution
of rural property is afforded by analysis of re~urns made in payment of
rural property tax Such tax was paid by only ll2l4o proprietors in 1944
whose holdings may be summarized as follows
Per cent of Value of Rural ProEerties Number of Proprietors
916 4o
29-33 llOO
3041 10400
2030 37200
1080 634oO
10000 112J4o
23 Such statistics do not of course carry one very far beyond
the general observation that income and wealth is very unevenly distributed
and that much is obvious from a little travel in the country But it should
-7-
be said that comparing observations in Ecuador vrith those made in Peru
and Bolivia Ecuador by subjective judgment compares very favorably with the
tvo latter The Ecuadorian Indian seems to be on a perceptibly higher stan-
dard of life both in the highlands and on the coast than the Indians seen
in Peru and Bolivia Vhile his land holding is small it yields somethi1e
he very freqjl ently possesses livestock such as pigs and chickens has cot-
ton clothing drying on a line a~d often cultivates flowers and keeps
pigeons By American standards he is undoubtedly on the poverty level by
Latin American standards he may be a little off it
24 At the other end of the scale the wealthy upper class are pro-
bably not as wealthy as the Peruvian upper clas~h and the Bolivian elite
in operating in poundcuadc~the upper class lacks the rich property of mines
Thus while income is of course unevenly distributed in Ecuador as else-
wnere the range between the wealthy and the InJian may well be less tban
elsewhere The line of income distribution is of aboat the same slope
but probably significantly srJOrterY
This conclusion cannot be demonstrated statistically It results from a 11feel 11 deri ved from personal observetions in the respective counshytries
-8-
III AGRICULTURAL lROIDCTION
25 Ecuadorian development is largely a matter of increasing the out-
put of and improving internal and external trade in agricultural products
There appears to be no enduring geographic or physical reason ~middotby this can
not be accomplished She possesses soils and climate ranging from the
tropical to the temperate soils which in some areas are very fertile and in
others are in danger of exhaustion To anticipate subsecpent conclusions
her problem of development through agricultural progress breaks doTltD into
separate aspects all involving improved technique
(a) increasing arable yields from areas already cultivated
(b) improving pastures and stock in grazing areas
(c) enlarging both arable and pastural areas (including irrigation)
(d) improving roads in rural areas
26 Achieving these objectives involves providing more adequate
domestic credit for short- medi~ and long-term agricultural requirements
27 In application however interpretation of these problems is very
different in the two occupied regions of the country the Sierra and the
Coastal Lovrlands no generalization can cover both
(a) TLe Sierra
28 The occupied inter-Andean valleys are a region of temperate
agriculture producing almost exclusively for local consumptionmiddot Their
pat tern of tilled fields grazing land trees and flowerJl is almost
Y Flowers bloom all year round The main tree is the eucalyptusmiddot introshyduced some 70 years ago end used for all purposes (~indbreaks fuel 1
and lumber) affording a striking example of the effect of introduction of one plant upon regional habitability-
-9-
Western liiuropean in appearance but not unfortunately in productivity
Agricultural Production of the Sierra
1939 194o 1941 1942 - -(Hundreds of pounds)
Theat 49QOOO 611300 534300 527499
Potatoes 1201000 1476400 1386120 1146000
Rye 72500 79900 159495 115000
Lentels 46000 424oO 37955 csooo Corn 816700 1349300 1308062 1315200
Barley 85)000 795700 903600 911000
Cotton 45000 42020
Kidney Beans 80000
29 In addition about 1000000 hectares (247 m~llion acres) are
devoted to pasture supporting epproximate1y 683000 cattle 145 million
sheEf 107000 STrrine and 320000 goats
30 Yields are low in all Sierrean agricultural activities the
standing VJheat and barley crops are so thin that the ground can be seen
through them Yet the greater part (some 6o per cent) of the people of
Ecuador live in the Sierra and population is increasing at about 2 per
cent per annum The effect upon land use under existing tecnniques is
clearly visible cultivated areas are being pushed higher and higner up
the hillsides (slopes of 30 to 40 degrees being used) and onto the
fJparamon the high plateau betvreen adjacent valleys at altitudes of
11000 feet and higher The result is a picturesque scene but one which
reveals a near Malthusian situation in the man-land ratio rbullrith static
-10-
technical practices It is a situation which cannot remain unchanged if
economic development is to occur in the region
31 There sean to be three possible lines of advance increase of
output from highland areas in present use the bringing into use of new
ground in the highlandsbull or a change to increasing reliance upon the outshy
put of non-highland areas
32 The third possibility is not one for the immediate future It
involves either large-scale migration from highland areas to lowland
regions or a large transport program linking highlands and lowlands
together with growth of non-~ricultural activities on the highlands to
provide a cash income with which to purchase 11 imported 11 foodstuffs This
second possibility may indeed be the trend of ultimate development but
offers no irmnediate easement Large-scale internal population movement
from highland to lowland is probably impossible since the Andean
Indian (of different stock to the coastal Indian) is fullf acclimatized
both mentally and physically to life at high and temperate altitudes and
little suited to life on tropical lowlands
33 The two remaining lines of advance would both seec to increase
highland agricultural output But there is an important difference beshy
tween increasing output from valley land in rr esent use and bringing new
and higher land into arable use The first is a complex problem suscepshy
tible only of relatively slow solution the second is seemingly simple
and capable of quick result yet basically less sound offering only
temporary improvement
34 The thurst onto higher ground is already evident and the area
-11-
taken in could probably be greatly enlarged by efficient use of tractors
and modern plows Such use of mechanical equipment would thus give quick
increase of agricultural output but it is very doubtful whether improveshy
ment induced by these means alone could be long maintained The greatest
~r particularly on sloping land is that deep plowing may lead to
soil erosion so serious that land becomes finally llilgtroductive To use
mecbanical equipment i thout at the same time adopting eqJally modern
methods of soil conservation way well be disastrous and that perhaps
within no long period
35 Even apart from this physical daneer there is the virtual cer-
tainty that new land however plowed would gradually sink in fertility
end hence output unless farmed by better agricultural practices than
those now followed in highland Ecuador The present attraction of the
higher land is principally good natural fertility beine virgin ground
On all other counts this higher land is less advMtageous than the valley
floors the va)ley sides are steeply sloping a1d the fl~t paramo is some
2000 feet higher bare windswept and devoid of habitation It would
seem obvious that it is pastoral rather than arable ground were it not
for the pressure upon arable output of the region
36 The pressure today however rises from the relation betwem
popUation and output rather than that betvreen population and arable
area Productivity in the Andean valley is low and can certainly be
improved If improved the pressgtlre which is causing the thrust to
higher ground is relieved until population increase again overtakes outshy
put Against that time however the higher ground vrould remain
-12-
availfibleY and other lower regions may be coming under effective use
37 To increase output of the populated valleys is not a simple mat-
ter responsive to single policies such as simple mechanization by tracshy
tors It will embrace the wlo le range of agricultural practices from
better seed types to crop rotation and fertilizers including in some
valleys irrigation It is a matter rrther of agricultural education
than of~dtlgagricultural appliances and probably experiment under
the peculiar regional conditions will need to precede education Improveshy
ment will necessarily be slov1 but along these lines it can be sound and
permanent
38 Wher~ lfL mere importation of mechanical methods Vi thout
understanding of their dangers in speeding soil destruction by wind and
water erosion may permanently damage the region The somewhat gradual
mechanization of agriculture is of course to be expected and not disshy
couraged but it is not the wlole answer to development in highland
Ecuador
39 It seems that there is at present no over-all agricultural
lfibor sl1ortage in the Sierra and mechanization is nOt therefore called
for to relieve an adverse manpower position It seems however that
some of the larger estates are experiencing difficulty in obtaining their
labor requirements because Indian tenants are viitblolding quasi-feudal
labor dues and devoting whole time to cultivation of their own plotsbull
As a result hacienda holders are attracted to mechanization as an
escape from growing difficulties in obtaining and supervising labor upon
Y As it would not if destructi ve1y formed at this stage
-13-
their ovm land To the extent they are successful the tendency for agrishy
cultural money vrages to rise is weakened
4o There vrould seem to be good possibilities of increasing pas-
toral agriculture in the highlands 1Jrith improvement in both numbers and
strains of cattle and sheep If adequate arable development occurred in
the valleys the main grazing grounds could be the higher land not then
required for arable purposes ~lith dairy cattle on the valley margins or
on valley ground not well suited to arable use Such pastoral development
would be desirable not only to imp1middotove nutrition in Ecuador itself 1 but
as a possible new export of meats fats and hides to meat deficient
Republics notably Peru Early export would probably be on the hoof
along the Andea1 ridge it self
41 The Ecuadorian Government has not included any explicit propo-
sals for highland agriculture (other than irrigation) in its present apshy
proach to the Bank It has however suggested the Bank finance $1 mil-
lion of agricultural tractors and equipment to be handled by agriculshy
tural stations located at strategic places both in the coastal
provinces and the highlands 11 without further elaboration of the
intended highland use of such ecp ipment The description given above
suggests that the usefulness of agriculture machire ry depends to a conshy
siderable extent on the place plan and purpose for rhich it is to be
used
42 In some of the highland valleys (for example in Cotopaxi end
~ound Biobamba) rainfall is deficient and irrigation would increase
valley output by bringing more valley ground into effective use This
- 14 ~-
is clearly sound for flat valley ground already populated is more useshy
ful than higher sloping and more exposed ground The Ecuadorian Govern
ment has included purchase of eq1 ipment for irrigtion works to the value
of $500000 in its present approach to the Barik Assessed against the
requirements for economic development the request is sound provided of
course such equipment is effectively used
(b) The Ooast
43 The condition and nationel significance of agriculture on the
tropical coastal plains is quite different from that ltNl the Sierra The
area as a whole is less densely populated and in some parts such as the
Province of Esmeraldas is very sparsely populated Its principal pro-
ducts are exported The population has more mixed blood than the highland
people and is oore corumercially active and minded There is little feel-
ing of community of interest with the highlmds the rrincipal coastal
city GuayaqJil is larger than Quito and less remote fror-1 outside
influence
44 In terms of reported area devoted to its cultivation cacao
is the principal crop of the coast The table on the following page
shows output of main crops
45 Cacao is not however the most important export crop by value
being surpassed by both rice and panama rats (a handicraft product of the
region) Nor does the table show those products which result from
gatherage of mild growth tagua kapok oil-bearing vegetable nuts
balsa rood rubber etc
Y For use by the Caja de Klaquogo as required both in tile highlands and on the lowlands
-15-
46 Agricultural Production of the Coast
1939 ~ 1941 1942
(limdreds of pounds)
Rice 957164 872890 12304oO 1610489
Cacao 392000 263300 333250 315782
Coffee 343800 369000 310000 190633
Bananas (1000 bunches) 4090 3913 4568 4265
Oranges (COOs) 103000 lQ96oO 80550 75000
Cotton 200800 156800 155910 111500
Tobacco 24o43 4o 765 22349 29539
47 It has been estimated that about 500000 hectares (1 235 500
acres) are devoted to pastures on the coast supporting approximately
425000 cattle and 36000 swine
48 There is no doubt that the coast is an extremely rich agricul-
tural area although toward the south it is increasingly hampered by
shortage of water in the dry season And rt is overwhelmingly the
principal foreign exchange producing region of the country Yet it is
largely undeveloped by any modern standards lacking roads and almost
all basic civic amenities (water supply sewage paved streets etc) in
the provincial towns The development of a tropical agricultural region
without large labor supply _rill raise many interesting and some new
J Irrigation ~rks are in execution and others planned in various places and the irrigation equipment which it has bee11 suggested the Bank might finance would presumably be used on the lovlands as well as the highlands
-16-
problems the solution of hlch in detail may lack precedentY The
suitability of cacao to Ecuadorian conditions arises in part from the very
small labor requirements of the crop At bottom advance will lie along
the route of crop improvement and mechanization the difficulty will be
the proper application of mechanization crop by crop Some tropical pro-
ducts may never be suitable for mechanical cultivation being those whicl
would require intensive hand cul ti vat ion and may therefore not be appro-
priate for Ecuadorian condttions Others r1JJi3 be suitable only if grown on
relatively large plantations
49 Clearly for the foreseeable future many lowland products will re-
main at the stage of gathering of nld natural growth rather than plantashy
tion enterprise The flow to market of such productswould be increased
by improved access notably road core truction anQ at the same time road
building ~~uld seem to be a condition precedent for spread of plantation
methods particularly plantations using mechanical equipment lilliE diate
measures for the over-all agricultural development of the region may not
be directly agricultural at ell they are rather the provision of roads
and transport facilities the provision of long and medium term agric-llshy
tural credits and in some areas) the institution of health services
With the opening up of the region in this manner iiould come more clearly
perceived opportunity for better agricultural use of the land particu-
larly if effective demand for the products is transmit ted back to the
cultivator through establishment of product processing plants where approshy
priate for example in vegetable oils and tagua (vegetable ivory)
] This is the situation which in Brazil for example in an earlier technical epoch was 11 solvedll by importation of Negro slave lebor
-17-
50 As in the Sierra there are good possibilities for pastoral
development on the lowlands Some progress is already being made in this
direction with experiment in breeding more suitable cattle types through
crossing 11Ji th imported Indian brahmin strains Grazing for beef is not
highly labor intensive and this development is very promising since
export to other Republics by sea llould be reltti vely easy In the first
stages export would presumably be upon the hoof ith later development
of meat packing
51 There seems to be no single bottleneck or restraint upon devel~
ment presently existing all other conditions being favorable If developshy
ment occurs it will be along many simultaneous fronts but the front iJhiclf
is lagging and Inayen continue to lag is the provision of basic social ccp ishy
tal (roads water supplies health services etc) that is of those
things which no single private individual or corporation can provide for
itself Given these and the institution of suitable domestic credit
fecilities the rest may be accomplished by private domestic ini tiat1ve
52 The development plans of the Ecuadorian Government as outlined
in a Memorandum dated April 8 give much weight to lowland agriculture
The establishment of agricultural stations to provide farmers wi~h
disease-resisting cacao plants~ tecl1nical advice and credit facilities
is CD ntemplated no foreign exchange would be recpired all funds being
local currency The rehabilitation of cacao formerly a leading export
crop is desirable although development of cacao sources elsewhere may
prev~nt recapture of the position formerly held by Ecuador
53 A proposed agricultural mechanization programwoUld total
- 18
$25 million in foreign exchange cost )J The bulk of this ($1 5 million)
is allocated to wechanization of rice cultivation alone the benefit being
principally in resulting improved export position The remainder $1 milshy
lion is for mechanization of other agricultural produc~s apparently
mainly lowland (those products specifically mentioned being 11cotton sugar
oil-bearing seeds and other specified products11) the exclwnge benefit
forecast being principally through reduction of import a
54 Different criteria ~~ould be used in assessment of these two
projects The judgment on that for rice will depend upon forecast of
world rice markets and in particular upon expectations regarding rorld
demand for rice from the dollar area The validity of mechanization in
cotton sugar oil-bearing seeds and other lowland products will depend
first upon the technical possibilities for such mechanization a matter
not yet fully explored If sudl technical possibilities are favorable
effective mechanization vOuld constitute sound development upon the low-
lands which are relatively sparsely populated
Y Some part of which would be for the benefit of highland agriculture if machinery stations be established there
--19 -
IV MI-~RAL PHODUCTION
55 Ecuadorian mineral nroduction covers only a few products and
important the wells of the lowlands being exploited by the nglo-
Ecuadorian Oil Comany Production of crude petrolewn shows a slicl1t
rising tendency while exnorts have declined steadily a~ more refined 1
products are consumed domestically
56 Oil exploration to the Iast opound the Andesin the Amazonian
region is proceedinc under concession to tl-1e Shell Oil Go1~1any
Three wells have been drilled without success and tvro arc beinc
deepened Cost of this exploration to ciate j_s around US)23 million
If oil is found its only outlet middotwill be a pipe line over Ue Ances
(estimated to cost USiD93 million) and this the comany is not -rE1inz
to undertake unless assured of an outnut of at least 100000 barrels a
day
57 The only other irnrJortant minine activities are those of gold
silver conper and lead conducted by the South ~~erican Develoument ~
Company and the Cotapaxi Sxplora tion ConJ1any War-time lr oduction peaks
were 1942 for gold and CO)per 1944 for silver and lead Since these
resective peaks production has ~-~clined narticularly in copper and
lead although not to 1933 lsvels7
crude petroleum II II
1938 (millio~1s of 225 107
Production Exports Production refined petroleum 37
1947 barrels)
236 bull94
128 (See Table No_Jl_ Statistical Appendix
Production Gold (000 troy ounces) Silver (000 troy ounces) Co~per (000 pounds) Lead (000 pounds)
1938 445 82~0 27 21
War Peak l03tJ hhl3
96788 161-+88
19h7 5o5
1569 3316 h98h
-20-
58 Ecuadorian trade statistics list exports of crude pet~middotoleum
and minerals separately from that of other commodities even in aggre-
gate figures underlining the fact the exploitation is in foreign hands
and hence colonial in nature This aspect hmmiddotever is of di-1inishmiddot-
ing importance as now the foreign exchange realized from such mineral
exports accrues to the Central Bank and as in any event nineral ex-1)
ports form a diminishing proportion of the vhole 7
V ~JNUFACTURING PEODUCTION
59 There are virtually no stCltistics on manufacturing in Ecuador
and none which present any comprehensive view It is ho~middot-rever clear
that there is very Uttle industrial factory prJchJction and obser-
vation in the country leaves one with an impression of the nresent
igtilportance of handicraft production
60 The most inportant consuxner-good factory industrj_es are tex-
t~~~breweri~-~~ otheuro7r beveraces shoes ard leather _roduc~s buttons ~d~lttfr
and nails Textile production using domestically produced cotton pro-
duces cotton piece-goods and wool rayon and hemgt textiles supplying
almost all domestic demand for low-quality products The only irJDcrtant
producer-good factory industry is cement the plants being located near
Guayaquil Lack of domestic technical lmow-how and of capLtal and
the low level of domestic effective demand account for the sli~ht develop-
ment of faetory industries whose rrowth on any scale beloncs to a 1ter
stage of economic development
y Value of nineral exportsmiddot as nercentare of value of all exports 1929 260 nercent 1933 430 n 1939 397 1946 11~5 1947 69
Production and irrport statistics for cement tre civen in Table IJo bull 2__ Statistical Appendix
- 21-
61 Uuch of finished commodity ygtroduction is at the handicraft
stage both for nroducer and consumer goods In Quito and Guayaquil
one sees many small 11 shops11 producing metal leather and wood manushy
factures largely by manual methods It is an illuminating co~~entary
on the shallow growth of industrial specialization that the ll1ission
did not see any shops selling ready-made womens clothing All
womens clothing shops displayed only materials in the bolt as in
pioneer days elsewhere
62 One handicraft industry of great importance in exports is
the production of panama hats It has been estimated that 30000
families are occupied vrhole or art-time upon this nroduction and
at times (for example 1945) they have provided the largest single
export item by value The grmvth and treatment of the fiber and the
weaving of the hat is entirely an Indian handicraft industry the
Yteaving of a high-quality hat taking three months The fiber is erown
and the best hats woven in the lowlands Its future ir-mort nee is unshy
certain as the competition of Italy and the Fhilinpines is again felt
in low-_)rice woven hats the boom emjoyed during the war nay recede
63 Ecuador in its ~resent and foreseeable development is an
agricultural country with no immediate movement toward industrialization
EcuAdorians met by the Mission themselves stated this The growth of
factory industry will be slow that of small shop and handicraft manushy
facture somewhat less slow It vmuld seem as stressed later in this
report that there is room for grm~h of processing of agricultural
products Statistically such processing would be classed as industrial
production but is oroperly the finishing stage of agricultural productior
- 22-
to secure improved durability and portability of perishable products
This would increase effective demand imnacting upon the farm and ass1st
in stimulating agricultural development Some progress being made in
this direction notably in vegetable oil expressing plants Ihe only
non-agricultural project suggested by the -r~cuadorian Government has -eer
a cement plant located in the highlands at a foreign exchanr~e cost of
$2 rrillion the justification being both the saving of foreign exchange
expended upon cement imports and reduction of load upon the only railshy
way connecting lovrlands and hichlands Growth of cement use accompanies
economic development assessment of this project (engineering questions
apart) would involve tainly questions of timing location and finance
matters which are really all aspects of the single question whether
such a project may not be one for private direct investment Initial
expectation would be that were all factors favorable to the success of
the project it gtlould be readily undertaken by orivate enterprise
particularly when it is remembered that railway freiehts 1bullrould protect
highland production from lowland competition
6h No sueeestions regarding increase of electric power output
have come fror1 the Government indeed the official statistical services
have no data upon installed capacities and demand Cnly in Quito and
Guayaquil are present industrial uses of electric poler of any ir1portance
Elsewhere suIJply is from snall municipal plants (mainly therraal) for house-
hold consumption It appears that demand mar be ahead sunply in cost
towns very frequently voltages are maintained around 80 instead of the
rated 110
- 23 -
65 Shortage of electric nower is not however hamoering
economic development at this stage although it may soon do so in
sevral urban centers such as Qui to and Hiobamba Sone ttne i-1 the
iuture the possibility of large hydro-electric vrorks on the eastern 1
side of the Andes will merit attention
y Where the rivers are fast and clear on the western side they carry much silt
- 24-
VI DmIESTC THANSPORT AND COilERCE
66 The space devoted to agriculture in this report reflects its
importance in the Ecuadorian economy As has been said further developshy
ment will for sometime be mainly agricu1tural
67 Present restraints upon that development are not located
solely or perhaps even nrincipally on the farm there are many
features of the general economic environment which operate to hamper
even purely agricultural development There is great room for improveshy
ment of transport to knit the economy tocether and to encot1raee grovrth
of output
(a) Transport
68 Without roads there can be little regional or inter-regional
intergration Fithout that intergration (which for some regions and
some crops would open upon the world at the gatewa~r of a oort) there
can be but small inducement andlittle opportunity of increasing proshy
duction In much of Ecuador the principal transport vehicle is the mule
whose patience and endurance under heaJr load is matched by that of the
Indian
69 As regards roads the requirement is both more roads and
better roads capable of bearinr modern vehicular traffic The roads
traveled by the 1Jission are uniformly bad both slowing traffic and imshy
Ilosing extraordiPamiddoty vehicular de_reciation Ultimately no coubt
there vdll be an adequate system of all-rreather roads in Ecuador For
the immediate future the more modest tarset is to attain a reasonable
system of roads civine access to the creater art of roducine areas
- 25-
in the dry season At present the unsurfaced access roads are cut to
pieces by --vater erosion in the wet season and consolidated somew1at
traffic in the dry season A single eradinr operation smoothin thE
dirt surface at the end of the vret season would ci ve accelJtable usashy
bility in the dry )eriod v1hich in the populated coastal rovince of
icanabi for example is eight ~aonths of the year At -_resent the so1e
transport link for corunodities between loYrlands and the hihlands
is the Guayaquil to Quito (and beyond) railway This link is nrobaoly
nearing saturation point vdth present equipment and its strencthening
both by railway imJrovement and all-middotweather hichway construction is
obviously desirable it middotill probably become essential yri thin five
years
(b) Commerce
70 Physical transport alone hogtever is not the only ope c-ation
ofcarriaee required to intecrate a reeion internally and to bind toshy
cether the various regions There are also tL physical and the finanshy
cial aspects of comr1odity holdinr involving the storae and vrhere
necessaFJ the partial processing of products to reduce perishability
and the avail~bility of mechanisms of short-term finance extendine over
crop periods In Ecuador these tro aspects are closely related
71 Apart from some export crops there is virtually no crop or
food processinG undertaken And in the export crops processing
is the minimum necessary to secure portability Eice is nilled but not
polished cacao is sun dried coffee is dried and within only recent
years washed fruit is exported whole Some new e~Jor-ts may require
further processing and installation of plant starting or is in
- 26-
advanced discussion for example vegetable oil processing (although
for sometime no eXport surplus of vegetable oils is 11~11 and fish
canning
72 Nor is there any important ~recessing of domestic food pro-
duction for home consumption bull There is no freezing or canning of meat
which is taken to market on the hoof There are only two or three
very small butter factories and no whole milk orocessing Cereals
of course are not highly perishable but there are no silos or granarshy
ies and experience of similar situations elsewhere suzfests that losses
by deterioration and infestation may be significant no direct evishy
dence anthe incidence of this factor in Ecuador ~as obtained by the
Mission Thee is little storage of grass on the coast in silos or
as hay and in the dry season slaughter of cattle because of lack of
feed is at times necessary In short the situation is not so very
dissimilar to that ofmiddotmedieval Europe
73 Roads alone would not create an environment favorable to
change in this position although lack of roads nar well inlibi t change bull
In addition suitable credit facilities for the finance of co~~odity
holding through time are necessary
74 Hany complaints were voiced to the Hission reearding lack of
short-term banking credit for crop movement and storage and for medium
and long-term agricultural investment and no doubt there is signifi
cant lack of such credits But this is not the result of some simle
institutional defect of the b~~inc and credit structure even though
institutional improvement may be necessary It is fundamentally a
- 27-
reflection of the fact that Ecuador is extremely poor in disposable
capital available for even short-term investment ie vrorcing capi-
tal Improvement of short-term credit facilities for what in advanced
communities are regarded as purely commercial purposes would in effect
represent an increase of capital intensity in the Ecuadorian ecororny
To the extent that banks met more fully the gtJeak seasonal credit re-
quirements for croo movement and storage individual nrivate reoources
are relieved of the 1eak burden and available for other investments
75 Thus iorovement of the techanisr by 11hich the banking system
provides working capital for corrtercial or inciustrial (in the sense of
crop processing) purposes is itself an act of investment rather than
merely an institutional rationalization ilnd as such carry the
usual consequences of investment in an undevelogted economr with very
law voluntary savings To the extent that additional credits are not
matched by savings sewhere (either voluntary or forced through
taxation) they will be inflationary in effect just as an
additional act of long-term investment would be Increase of banki1g
nrovision of workinrr capital should keep step with totl capital for-_ - - 1 mation of which it is one aspect7
It is implicitly assumed in the foregoine that at nresent in Ecuador the amount of small voluntary savinrrs is neclicible It vrill presumably not alrmys remain so and ~Jart of the modifications of the bankin~ system shou1d be attract Clli1U1 atively such sav-ings in the fom of savinc do)Josi ts This 1muld increase the extent to which Danks can safely flovide capital It will be a much later before small private savincs are directly in-vested in commerce or industry throuh joint stock r1ethods There is no stock-exchance in Ecuador
-28-
76 It is of course just as important that the availabi lity of
working capital should not lag behind as it is that it should not run
ahead The Bank should ensure that any long-term investment projects it
may assist to finance do not effectively starve the rest of the econo~
of working capital in the process of avoiding inflation
77 There is also the question of the price of short-term lending
that is of the level of interest rates The Ecuadorian is a highshy
interest rate eoonomy The legal maximum for commercial short-term loans
is 10 per cent having recently been increased from 7 per cent legal
maximum rates however are not systematically enforced by commercial
banks themselves At a time when the legal maximum was 7 per cent
going rate for 90 day loans secured upon properly warehoused commodishy
ties and with third party endorsement was 12 pe+ cent
78 This very high structure of interest rates seems open to
obvious criticism but is in fact probably not Tiholly unjustifiable in
the present conditions of Ecuador It is the cumulative result of many
factors so that more official prescription of lower rates would be
quite ineffective These factors seem to be
(a) Interest proper~
(b) layment for risk bearing arising in part out of a
low rating upon individual credit and in part from
the institutional conditions (such as embryonic
commercial and financial ruarkets) which seriously
reduce the liquidity of any asset other than money
itself
-29
(c) An clcmmt 0f discount 111nn cyectcd luturc irf] utinn
reducing the real value of the pa~nent for lending
(d) An element of monopoly which upon purely subjective
judgment may be the least ilJI9ortant of these several 1
factors7
(e) The real shortace of capital whether short or long--
term~ reflecting in interest rates as a genuine
scarcity price
79bull Of those factors the di~ount upon expected future in-
flation increases prices at a rate of 12 ner cent per annum a money
interest rate of 12 per cent per annum is a real rate of zero If
therefore inflation could be controlled a substantial reduction of
money interest rates could be hoked for At the same tine while
inflation continues high interest rates probably have small influencemiddot
in encouraging money savings
80 Even without inflation ans until the su~1ly of available
real capital improves relatively high interest rates may well be
acceDtablemiddot as a price mechanisn nethod of selectin~ most urofitable y ~
uses of limited fundsbull middothere exoected urivate nrofit did not seem l - -
to parallel social desirability loans at lower rates (ie subsidized
terms) could be made perhaps through reconstituted Development Banks
Prima facie however such loans 1bullrould not be short-term
~I -Onthis interprepoundaion the situation in Ecuador differs signifishycantly from that in Peru
tt is suggested that a powerful point of intervention would be to limit commercial banking dividends distributed to not more than say 7 per cent The high profits nmv earned by commercial banks would then progressively accumulate until liberalization of lending becomes virtually forced by accumulation of funds representing genuine corporation saVings
- 30-
81 The discussion of private finance has so far upon
short-term credits there is an even larger nroblem in the
intermediate and long-term arricul tural credit It is not necessarr
to expand greatly upon this since it too is a consequence capi-
tal shortage
82 Imnrovement would seem to be alonrr the route - 1 of nroper UElte
of existing Development Banks (or their successors-) effectively
in the earlier stages as lending agencies of Government
VII OFFICIAL DEVLOPHl~NT FHmiddotIfJCE
83 In the circurnstances of a country like Ecuador the greater
part of domestic capital forr1ation requires official directly
or indirectly if it is to occur on any scale are too
small and too narrowly held to permit much -rowth this roL1te
andthose few who are able to save at any sinificant rate are larely
uninterested in the efficiency of ~reduction
84 Official finance may be either direct or indirect direct
throueh works executed by Government or 0JUblic bodies indirect
throueh lending institutions such as Dev~lopment Banlcs capitalized
from public funds In either case funds are diverted to investment
purposes by Govern~ent intervention
85 Thus Development Bank lending for productive purposes (for
example long-term acricul tural credit) is an item 1n ca9i tal formation
V There are thirteen reaional Development with an unirnJresstve record of manaeement Their possible reconstitution is under discussion
-31-
rather than a mere institutional rationalization of the credit mech-
anism Indeed as has been stressed in the last section even im-
proved su1nly of short-term credit gtrill in art rewesent
formation A developing economy which neclected these items in 11Cnn21~~
or forecastinc total caital investnent would be very vulnerable indeed
to inflation induced by over-investment
86 17here voluntary savings are Jow the only wmiddotamiddot to sirnificant
rate of capital formatton can emerge without inflation is an equi-
valent amount of savine forced throurh taxation One ould look for a
relatively hirsh level of taxation to national income and for a rela-
tively high proportion of exnenditures caDi tal purposes to total
Government expenditures On both these counts Ecuadorian elq)erience
seems irare s si ve
87 In 1946 total budretary and spedal revenue rms disclosed
as 5368 million sucres in the sa1le rear an estLnate middotJaced national
income at 20096 million sucres This a proym~tion of 27 middoter
come a proportion so hich that in fact it lacks credence In assess-
inc total tax burden part of the revenues of Government monorolies
and all of municial revenues should be included if this be done y
the proportion becomes 37 per cent In addition new exchance taxes
yielded 973 million sucres in 1947
Mono_)oly participations (ii direct disbursements for public _Jurposes) were 353 million sucres in 1946 munici~al income was 1803 million sucres in 1947 (1946 not available)
32-
88 It is very difficult to accept the conclusion that Ecuadorian
revenues form so high a proportion of national income it would seem
that the estimate of national income is too low Nevertheless tax
revenues are clearly a sizable percentace of national income
89 At the request of the Mission an official estimate of total
official expenditures on capital account was prepared Total income of
Government municipalities provincial councils and other public
entities was ~iven as 7S4 million sucres and total capital expenditure
from that income as 2237 million sucres or slichtlr over 30 per cent
of revenuesY It is difficult to feel confident that effective capi-
tal formation on this scale actually occurred certainly there is
little evidence visible to the eye of the t1middotaveler
90 Notwithstanding such doubts the fiscal evidence is of a
fairly hich proportion of tax revenues to national inco~e and of a
hich proportion of revenue allocated to capital investment It would
seem that the fiscal mechanism exists for domestic capital fo~~tion
what may be required is more effective expenditure of allocated funds-
Before a development plan envisa~ing the expenditure of still more funds
was adopted it would be desirable to examine closely administrative
and technical efficiency in the use of existing funds
91 On the side of revenue Treasurr officials informed the Mis-
sion that tax evasion was estirnated at some 30 per cent of ta revenues
1 This makes such capital expenditures 112) per cent of 1946 national income which a~ain seems very high indeed
The two largest items are Government public works (8)4 million sucres) and municipal works (900 million sucres)
- 33-
particularly in income and land tax It might well be advantareous
on the sides both of revenue and of expenditure for Ecuador to obtain
technical assistance of the tPe that the United Nations Department of
Economic Affairs rendered to Venezuela in 1947~Y involvinpound revision
of the structure of the budget of budcetary audit practices and the
like
f Report~d in UN Document ECN 1SubJfti 4 - 21 June 1948 lostricted)
- 34 -
VIII 001EHNl(iEi~T FINANCE AND INRATlON
92 What may be called 11multiple budget practices exist in Ecuador
as in other Latin American countries There is an annual Ordinary Budget
one or more Extraordinary Budgets( tro in 1947) end a number of Special
Accounts (twenty-five in 1946) not included in the general budgetary
accounts The State operates nxmopolies in tobacco liquor salt and
matches part of whose profits are taken into the ordinary budget as
revenue and part used directly for public purposes It is thus diffi-
cult to assesrmiddotgggregate Government revenues and expencii tures and vir-
tually impossible to detail the purposes of expenditure to ascertain
accurately public capital formation by way of public morks and the like
9 Taking the disclosed figures on the ordinary and extraordinary
budgets and tne special accounts there has been a net surplus over the
past ten years 1operations of 234 million sucres~ This however is
not an accurate reflection of the true aggregate position because the
Government operations are not ~holly included in these disclosed ac-
counts But since the Government has no source of internal funds other
than the Central Bank the net recourse of Government to Central BanJJI mirrors the over-all result of Government finance such recourse increased
In 1946 for example the monopolies contributed 5357 million sucres to the general revenue and disbursed 3526 million to municipalities (145 million on general participation and 1652 million sucres for 11 special participation of gthich an example is a new electricity plant at Ambato the state railways (92 million) etc
gj iiith only three years of disclosed deficit since 1938 See Table 12 in Statistical Appendix
2 Central Bank loans middotto Government less Govertllllent deposits in banks
- 35-
480 million sucres over the nine-year period 1939 to 1947 inelusivel
an average of 53 million sucres annually amplch averaging however con-
ceals very important differences between the three periods within the
nine years to tal
94 The table on the next page sumnari zes the factors causing in-
crease of domestic money supply It is computed by rearrangemm t of the
balance sheets of the Central Bank all commercial banks and all developshy
ment banks and is thus a table shoring changes in items in a rearranged
aggregate balance sheet of the Ecuadorian banking system
95bull The first t70 periods 1939-1943 end l943-l946f were both
periods of heavy inflation_ During the first five years notes in cir
culation and monetary deposits increased 3437 million sucres (or 255 per
cent) and in the next three )eera 2904 million sucres (or 61 per cent)
But the causal structure was quite different in the two periods
96 In the first inflation was almost wholly induced by external
factors (favorable balance of paYments causing increase of foreign exshy
change holdings) the major domestic factor being expansion of commercial
bank loans and investments in this period deficit Government finance
was not a causal factor
97 In the next three-year period 1943-1946 however the major
inflationary factors change deficit Government finance and expansi on of
f As calculated by IBRD Mission loans to Government including ali loans to official agencies A recent calculation by the IMF Research Departshyment covering Government operations only places the aggregate 9 years deficit at 345 million sucres~ See Table 12 in Statistical Appendix
- 36-
BANKING CHANGES ~0015 SucresJ
Jan 1939 Jan 1944 Jan 1947 Jan 1948 to to to tomiddot
Dec 1943 Dec 1946 nee 1947 June 19h8 t~ ~arsJ ~~ iears) trmiddot ~~r1 t~ mo~~h~2
Central rcrk loans tomiddotc~vt~ f 16174 f 160260 - 701p88 23695 Central B~r~ Loans to Public -1 6978 2_283 1- 67548 1- 39763 Commercial Bank Loans and
Investments J 187554 f 14624 88h4 1- 2~ ~49 Development Baru Loans and
J 14227 136818 ~ 644 1- 26090 Investments
1 224933 f 313985 11)40 1- 68107 Net Bank Foreign Exchange 260774 f 94662 - 53203 - u6 112
7 485707 7 408647 I
7 bull - 64543 21395
Notes in Circulation f 16o907 1-131729 - 23205 - 17290 Public Monetary Deposits -A 162868 1- 128914 - 68734 1- 19620 Government Deposits f 19968middot 29768 9050 2366
7 343743 7 290411 82889 - 36 Public Time Deposits 116834 ~ 42053 1~004 f 317j
y 7 46o517 7 3J2464 83893 ~ -- 3137
Absorbed by Banking System 1- 25130 middot~ 76183 1- 19350 18258 7 485707
11 f 4o8647 64543 I - 7 21395
Net Government Borrowing J 131492 from Banks 3794 - 79738 - 32745
Deposits in Central Bank in foreign money (not included above ex pressed in Sucres
Government ~ 4486 - 633 871 - 11059 Public 25242 J 78964 - 78814 J 4h97
T29J 728 7 I
7 IIIII middot~~ ~ I
78331 79685 31+38
y Made urt as Io11mlfs
Cas~ bullbullbullbullbullbullbullbullbullbullbullbullbullbull ~ bullbullbullbullbullbullbullbull - bullbullbullbull J 266 1- 367 - 22~7 99 Other assets less other liabilities~ ~ 4 330 ~ 293 ~ 18~8 Capital and Reserves~- bull bullbullbullbull 4 bullbull 52 bull 1 1- 79-9 26 o 278
7 I
7 7 I
7 bull Ill ri bullbullbull
251 762 194 18)
Subtract increase
37-
Davelopment Bank lending dominE)te the position Expansion of commercial
bank lending is relatively negligible while a comparatively small role is
played by balance of payment influences
98 From the end of 1946 the general financial situation deterior-ated
rapidly in five months from January 1947 to ~~ay 1947 net foreign exshy
change reserves of the Centrel Bank fell 935 million sucres or 7 7 mil-
lion dollars to a level of 2927 million sucres or 21 7 million dolJars
In litaY 1947 an IMF Mission arrived in Ecuador (at the request of the
Government) and in June 1947 a multiple exchange rate system with import
classification was introduced upon the advice and with the concurrence of
the Fund Operation of this system Jielded considerable profit n in
sucres it is in effect a new imposition of import taxes and such
11profits 11 are in reality additional fiscal revenueY It was of the
essence of the Emd s attitude in Ecnador that the exchange difficulties
bad arisen through domestic inflation and that these addi tiona reve-
nues should therefore be applied only in reduction of Government debt to
the Central Bank
99 The effect of such policy is clearly seen in the third column
of the table Inflation is checked notes in cirmlation and monetary
deposits falling 929 million sucres (or 11-per cent) i~ one year Alshy
thoUtgb however Central Bank loans to Government (and also colllWrci al
jJ At this point only the domestic aspects of this measure are emphashysized In a later section the external or balance of ~ent aspects will be taken up
Y Such revenue from exchange taxes yielded 975 million sucres in 1947 bull md in July 1948 was running at g to 10 jllillion sucres a month this revenue is not of course taken into the budgets bull
- 38 -
bank loans and investments) fell the actual deflation _was largely
caused through loss of foJeign exchange rather than over~all reduction
of domestic bank lending For in response to vigorous ~oilplaints of
credit shortage the Central Bank greatly increased its loans to the
public almost fully offsetting reduction of its loans to Government
In the first six months of 1948 there was no significant contraction
of money supply banking loans to the public eJggtanding to offset the
deflationary effects af an adverse balance of payments and of Government
debt reduction
100 The exchange surcharge multiple rate system was in operation
through August 1948 proceeds being devoted to reduction of Government
debt to the Central Bank~ But there has bean concern lest the resulting
deflation of domestic money supply would be too severe and the Central
Bank has in fact adopted a compensatory policy to prevent further reducshy
tion through continuing to expand lending to the public arid through
quasi-open-market pur~e of mortgage bonds to the amount of 17 million
sucres by July 10 19l8 when further purchases were discontinued
101 To avoid the netcessity for such compensatory policy the Cen-
tral Bank proposed to the Government that the destination of reveme from
exchange taxes should be changed Instead of being applied in reduction
of debt the proposal was that they should be useci instead to create a
development fund tt to be administered by the Cent~al Bank unless a
planned Development Institute or other competent authority is estabshy
lished In mid-September the Fund appro ved such cllanged dest ination of
these revenues 90 per cent of which will in future be applied in finance
of development and 10 per cent in stabilization of Government bond prices
-39-
This removes a check upon inflation which has operated for some fifteen
months unless Central and commercial bank lending policies recognize
this changed situation further inflation may follow even if the Budgetary
accounts run no deficit
102 At the same time this change does provide a source of local
currency finance for development projects
-40-
IX INTERNATIONAL TRAIE AND THE BALANCE OF PADlENTS
103 Ecuador exports agricultural products (rice cacao coffee
tropical fruits balsa wood) mineral products (crude petrolelUil gold
silver copper and lead) and handicraft products (panama hats)Y
lo4 Approximately one trird of Ecuadorian exports (including
minerals) go to the United States The proportion rose during the war
due to VmiddotIar-time demand for strategic raw materials but is now tending
to revert to pre-war levels Loss of European markets has been partly
compensated by gain of n$w export markets at least for a time and
especially for rice Countries in the Far East whose rice production
fell during war such as the Philippines and in Latin America whose
Eastern sources of supply were cut off such as Cuba and Venezuela
have provided demand for Ecuadorian rice This outlet however may not
last much longer
105 On an average of years 1938 to 1943 about 15 per cent of
Ecuadorian imports are foodstuffs wheat and lard being the largest
items and 85 per cent are manufactured goods and equipment Import
of foodstuffs is however gro1ing t-vith population and in the key pro-
ducts of wheat and fats would be expected to grow still faster if
econowic development raises n~ss living standards witl10ut increasing
domestic output of these prodvcts For increased consumption of wheat
products and fats is in part the definition of rising living standards
for a very poor population
fJ See Table No13 in Statistical Appendix for composition of exports
-41-
106bull Before the war (average of the years 1937 to 1933 ) the Americas
supplied 49 per cent of Ecuadorian imports by value the United States
alone supplying 41 per cent Germany provided 22 per cent of total
imports and the United Kingdom only 8 per cent Europe as a whole supshy
plying 45 per cent
107 In 1946 and 1947 the Americas provided 86 per cent of total
imports the United States supplying 66 per cent EUrope as a source of
imports fell to 12 per cent although the United Kingdom maintained its
relative position (7 per cent) Whether the United Kingdom can expand
its provision of imports for Ecuador JDaY be domiddotubtful on the one hand
the loss of Germany as a supplier pzo vides an opportunity on the
other the competitive industrial position of the United States may make
it difficult for the United Kingdom to fill this gap
No balmce of payments estimates eJd st for Ecuador1
Growth
of foreign exchange holdings over the war period however indicates a
strongly favorable balmce ~let reserves which were equivalent to 409
million sucres in December 1939 rose to 3962 million sucres (294 milshy
lion dollars) in December 1946
109 Official purchases and sales of exchange are shown in the fol-
lowing table together with corresponding movements of exchange reserves
The difference betRSen the balance on official transactions and the moveshy
ment in reserves arises from transactions on the free market
110 During the war import and exchange controls were nominal
there being no shortage of dollars nor any decrease of exchange reserves
jJ Except for the ~eriod January to May 1948
-42-
Loss of exchange reserves in 1945 led to a tightening of control on an
allocation of quotas smong users of exchange Import permi ts were
granted on the basis of former imports by merchants At the end of
1946 controls were relaxed on an extensive list of imports items and
the consequent loss of exchange has led to difficultieQ
Ul Official Official Balance Changes in Purchases Sales on Net
Official International Trans- Reserves actions
(Millions of u S Dollars)
1942 257 185 t 72
1943 35-5 279 t 1middot5 t Ul
1944 423 34~4 t 79 f 88
1945 353 394 - 41 - 7-2
1946 471 415 f 56 t 1 9
1947 488 579 - 91 38
112 From December 1946 to IVtay 1947 net foreign exchalge reserves
fell US$ 77 million from US$ 294 million to US$ 217 million In May
1947 the advice of the International More tary Fund was sought with reshy
sults summarized as follows in a recent Fund documentY
The lfund 1 s Mission arrived in Ecuador in Yay 1947 It was not advisable at that time to contemplate devaluation which would have made the inflationary situation worse An emergency program was therefore proposed Essential and semi-essential imports were to be distic5~ished and a surcharge of 5 sucres p3r dollar imposed on the semi-essential group as a check against their excessive import New decrees including many of the recomshymendations were issued in June
The main features of the new system were as follows
Y Economic SuVey of Ecuador RD 672 - P 43-44
- 43-
(a) The elimination of all quantitative import export or exchan~ restrictions licenses and quotas with the exception of a few absolute prohibitions of some luxury imports
(b) The checldng of excessive import demand through a fiveshysucre (33 per cent) surcharge on non-essential imports
(c) The suspension of nearly all exchange sales for nonshytrade transactions and the creation of a free market bull narrowly limited in volume and comprising mostly all transactions that are uncontrollable in practice plus a snall amount of domestically produced gold
(d) Exchange for a small amount of the least essential goods was made available in the free market
(e) One of the basic aspects of this plan was the steriliz~ tion of all proceeds from the import surcharge which was placed in a fund for the extraordinary amortization of the government debt to the Central Bank Tnis is still in operation
The beneficial effects of these reforms were felt immediately In June the trade deficit ~as reduced to only $07 million and in July to $06 million By August for the first time in 3 monthsl there was a small surplus In September the deficit was smci l -j)O 5 million In October there was a surplus of $15 million and in November and December there were small deficits of only $01 million and $07 million respectively
In short the deficit for the year was about $99 million in its gross gold and foreign exchange reserves During the same period international liabilities of the Central Bank showed a reduction of about $6 million Therefore~ the net deficit was around $39 million 95 per cent being in the first half-yeer and before advice had been received from the Fundrs Mission
113 It should be emphasized that this multiple-rate system of
exchange control is entirely freed cpentitative controls Excessive
import demand is checked by the higher rates upon imports deemed non-
essential the list of which is knollD and published Anyone presenting
sucres is provided with exchange at the appropriate rate upon list A and
B goods and the free rate is influenced by occasional releases of offi-
cial exchange into the free market The system that is utilizes the
inter-play of the price mechanism rather than the bWlilmlcracy of quanti-
tive controls or quotas
- u4-
114 Loss of exchange continues however despite considerable reduc-
tion of imports Gross international reserves declined US$ 18 million
and net reserves US$ 35 million in the first six months of 1948 Offishy
cial transactions January to June 1948 are surmrarized in the following
table~
Receipts From Exports From other Transactions (1)
Total
Payments For Imports For other Transactions
Total
Balance Change in Gross Reserves
1947 Jan to June
1948 Jan to June
(Millions of Dollnrs)
163 5 6
167 44
219 211
289 219 23 10
312 22 9
- 93 - 18
(l) Includes purchases of domestically produced gold deposits received in foreign currencies and borrowing from corres~ pondents abroad
115 Prospects for the remainder of the year moreover are not goo~
It is estimated that loss of international reserves over the whole year
may be aboat US$ 6 million Whether the deficit is in this region de-
pends largely upon actual export realizations for the remainder of the
year lhe most critical here is rice 11hose ygtrice is falling and the
crops accumulating in the rice millsplusmn Latest information is that
f Countries receiving allocations of Ecuadorian rice under International Emergency Food Council allocations have been requesting a change in source of supply owing to shortage of doJJers Thus France has asked for 6000 tons of rice from Indo-China instead of ~cuador and Greece for 2000 tons from kVPt in place of Ecuador as supplier A recent favorable sale of rice-to Haiti has somewhat improvea the cuITent position
-45-
plantings for the October crop are substantially reduced Wet weather bas
led to some loss of the cacao crop Receipts from exports in the follow-shy
ing official exchange budget may therefore have to be modified down- [l
ward on any pxuient calculation-
116 ~or Recei1ts and Sales of Foreign hchange
(Thousands of U S Iollars)
1948 1947 Estimated Actual
BECEIPTS
Worts Rice 13~ la4~ Cacao 11 l 2 Other products 10700 12371
Total Exports 354oo 42120
Foreign companies 5300 4842 Others 800 1883
41500 48845
SALES
Imports 44800 53499
Services 3200 4470
4B ooo 57969
117 In this situation of continuing presSlre one step has been
tken and others are under consideration The one taken relates to offishy
cial imports representing an average pf 20 per cent of total imports
Importation of cigarettes liquor matches and other things by the State
tionopolies is especiallyen significant These were formerly provided with
exchange tax-freebull ie at the ~owest rate of 1350 From July 26 they
afe required to pay the ordinary import rate of 15o4 on sll supplies for
J See note on page 47 -A
- 46-
their ovm use (such as office supplies) and the same rates as private
importers (ie 15o4 or 20o4) on all imports to be sold to the public
(such as wheat flour fats cigarettes etc) accord~ng to the classifi-
cation of the goods
118 Remaining possibilities seem to be a partial reclassification
of imports removing items from List A as essentials to List B as se~ishy
lwruriesY and or a chenge of nominal exchange parity vri th or mithout
a narrowing of the spread between the rates Here pressure from
exporters particularly from rice exporters may be hee~vily in favor of
an increase of the dollar buying rate with consequential changes of
selling rates
119 The present loss of foreign exchange is occurring ~rithout any
service being met upon defaulted foreign debt although service of Ex-Im
Bank loans is being made If it be assumed for purposes of calculation
that Ecuador reaches an agreed settlement identical to the Chilean sershy
vice would require exchange equivalent to US$ 378000 in 1949 (of which
US$ 368000 would be required in dollars) and would rise to US$ 4o20CO
in 1954 Adding service upon Ex-Im Bank loans outstanding on June 30
1948 and other known but small indebtedness total debt service would
increase to US$ 1410000 in 1949 rise to a second maxilliUID of US$ 1394000
in 1951 and then progressively decline Upon the assumption thet amp-Im
Bank loans undisbursed on June 30 1948 are all fully drawn before their
maturity total debt service charges would be US$ 1533000 in 1949 rise
On August 21 a number of import items were changed from List A to List B the aggregate import value (when granted exchange at List A rate) affected being US$ 7 million
-47-
to US$ 213431000 in 1952 and again would progressively decline These
last service charges rould be for 1949 3 1 per cent of 1947 actual
official foreign exchange receipts and 3 bull 7 per cent of estimated 1948
receipts and for 1952 48 per cent and 56 per cent of 1947 actual
and 1948 estimated exchange receipts respectively
120 Estimating prospects from this point in time Ecuador does not
seem to be a country able to afford assumption of any great additional
burden of debt service payable in dollars The amount that could wi thbull
out hardship or distortion be squeezed out of the balance of payments
by no means corresponds to the development needs of the country Any
start must therefore be modest and cumulative rather than spectacular
and precarious and this conclusion fits with other controlling factors
in the over-all situation notably the supply of administrative techshy
nical and managerial abi li ty
- 47-A -
Note on Official Exchange Transactions
Official exchange transactions for the firstsix months of
1948 are given on page 44 of this report Results for the full year
are now available and reveal that earlier expectations regarding the
probable 1948 balance of payments deficit were unduly nessimistic
Cacao export values have been lar~er than expected and in the last
period of the year there IBre some unexpectecily favorable rice eA-port
sales total export receipts were US$ 8 million larger than forecast
on page 45 Imports were held close to forecast
Receipts
Exports Foreign Co~anies Other
Payments
Imports Foreign Comoanies Other
Balance
Change in Grass Reserves
Official Exchange Transactions (full year - n~illions of dollars)
1947 -421
L18 19
488
535 06 149
580
y does not agree because of rounding
January 26 1949
1948 -436 h2 7
i85
Lt52 2
28
-oJ
-48-
X EXTERiJAL DEBT BEoomJ
121 The position of public long-term external bonded (excluding
inter-governmental) indebtedness of Ecuador is as follows
Amount in Default AmoUpt Outstandi~ ~ e Interest D~te
~In currmc1 (u s (us of p~t Dollars) Dollars)
Dollar obligations Gueyaquil amp Qui to Ry) $ 1226)000 12263000
286000 12263000
286000 123147
63047 Sterling obligations Franc obligations ( Oie
b 71000
Francaise de Chemin de Fer 1 lquateur ) Fcs 8386000 70000 70000
12619000 l26l9000
middotmiddot Note The Government of Ecuador oyenms about 75 per cent of the
stock of the Guayaquil and 1uito Railway and guarm tees the bonds and certificates which are largely held in England The franc obligations of the Cie Francaise de Chemin de Fer 11lquateur are not included in the offi cial statement of the public debt nevertheless the Government does recognize some liability for them and during the last few years has engaged in Degotiations for their retirement
Inter-governmental Debtsmiddot
122 Debts to the United States Government are of three types
63047
first the loans by the Export-Import ~which were outstanding on
June 30 1948 in the amount of $7 705606~ second the aJIDunts duemiddot
because of purchases of surplus property totaled $484 567 on March 31
1948 and third the obligations arising out of the lend-lease settleshy
ment the amount of 1fhich is not available (Total lend-lease assistance
j This section of the Report was prepared by Mr Paul Dickens
to Ecuador amounted to $7 bull 795000 )
123 In addition Ecuador is indebted to the Government of Venezuela
in connection with the establishment of a joint shipping company Late
data are not available but as of February 1947 $500000 ($1000000
authorized) was outstanding the total to be repaid by 1966
Debt History
l2ij Upon partition of the old Republic of Colombia~ middotEcuador was
apportioned 215 per cent of the original Colombian debt by the convershy
sion of l834a Between 1834 and 1854 no interest was paid The period
1855 to 1908 was marked by numerous adjustments and defaults
125 In 1898 the Guayaquil and Q]lito Railway Companyt s first mort-
gage 5 per cent loan of 1899 was issued It was expressed in dollars but
was in reality an English loan In 1908 a new (reemenJl was reachedbull
which was to be a final settlemet of all past disputes and controversies
between the Government and the Guayaquil end ~ito Railway Company and
the bondholders In 19~-10 the Government defaulted on the new agree-
ment In Novemberl9ll payments were resumed on the railway debt on)y
but a revolution caused a further suspension from December 1911 until
lfarch 1912 Subsequently service was partially resumed on the external
debt until July 1914
126 From August 1914 to July l9l8 no paYments were made on eny
foreign obligations except that service on the prior lien railway bonds
had been maintained up to and including the January 1915 coupon By
rf Negotiated settie~nt
-50-
1920 interest and sinking fund on the prior lien railway bonds had been
brought up to date but service on all other obligations ~ed in
arrears In 1926 interest on the salt loan of 1908 was brought up to
date but default took place on the coupon dueJam1ary 2 1927
127 The outstanding bonds of the prior lien issue were redeemed~~
January 1929 at VIhich time the January 1914 coupon was paid on the
5 per cent first mortgage bonds of 1897 In the case of the salt loan
of 1908 sinking fund was resumed in July 1928 and interest was paid
to Jazruary 1929 inclusive None thereafter Sums due from July 2 19C3
to January 2 1931 inclusive deposited with Central Bank in sucres
were used for governmental purposes after December 1931 No payments
were made after January 1929 on the external debt of Ecuador
128 Up to the end of 1948 no acceptable arrangement had been pro-
posed by the Ecuadorian Government for the resumption of interest and
sinking fund payments on external loans
-51-middot
XI bull POLITICAL
129bull Recent political history in Ecuador has been turbulent
although contest fo~ power at the top has not greatly affected the
bulk of the population Suffrage extends to all literate citizens 1
over twenty-one years of aee-but the requirement of literacy effect-
ively excludes the Indian bull T)tal votes cast in the recent Presidential
elections were 289164 from a total Population of some 35 million
130middot On May 28 1944 a few days prior to a scheduled ceneral
election an uprising occurred and Dr Jose Haria Velasco Ibarra
assumed office as President Dr Velasco had been President before
but following a coup dletat in August 1935 after he had been in
Presidential office less than a year he fled to Colombia and re-
mained in exile for several years On July 23 191-4 general elections
for a Constitutional Assembly to draft a new Constitution were held
Installed on August 10 the first Act of the new Assembl3r which was
predominantly Conservative was to confirm the legality of Dr
Velascos assumntion of the Presidency
131 On June 30 1946 new elections to the ronstitutional
Assembly middotwere held The only party particiJatine in these elections
was the Conservative The Liberals R~dicals Socialists and Commu-
nists abstained on the crounds that President Velasco did not offer
them sufficient guarantees On Aucust 3 1946 there vrere a number
of arrests following an abortive uprising and on Aueust 11 the Con-
stitutional Assembly re-elected Dr Velasco to the Presidency (by 43
to 10) for a term of office to last to September 1 1948
12bull Being compUisory for men voluntary for woraen -
132bull A new Constitution was promulgated in January 1947
133middot On August 23 194 7 a bloodless coup detat led by Colonel
Carlos Iancheno Minister of Defense in Dr Velascos Cabinet deposed
rresident Velasco who fled the country to Colombia for the second timebull
Next day Colonel Mancheno proclaimed himself Acting President and
formed a five-man Socialist-Liberal Cabinet despite the absolute
Conservative majority in the Assembly A week later however on
August 31 a counter-revolutionary military movemont broke out in the
north and the counter-revolutionaries captured Quito on September 2
134middot Colonel llancheno resigned the ActinG Presidency and dis
appeared the sa1ne day Dr Suarez Veintimilla who had been Vice
President under Dr Velasco and the former conservative Uinister
resumed control of the GoverPment Next day September 3 a Council
of State in Quito declared that Dr Velasco had by abandoning his
post terminated his functions as Chief of the State Dr Velasco
howeverJ vrho middotwas by this time in the Argentine declared that his
remo~al to Colombia had been forced and announced his intention of
returning to Ecuador to resume office
1~ On Seytember 15 1947 a Secial session of the Zcuadorian
Concress accepted the resignation of Dr Veintimilla and elected
Senor Carlos Julios Arosernena head of the Banco Ce Descuento at
Gua~raquil and a non-party man as Vice President with novers as
Acting President until September 1 1~48 Senor Arosemena formed a
mainly Liberal Cabinet with one representative each of the Consershy
vatives and the Socialists Coneress also ~onfinned the Council of
State 1 s view that Dr Velasco had forfeited the Presidency by abandoning
his postbull
136 On June 6 1948 Presidential elections were held The
three parties represented vere the Conservatives (Dr Manuel Elicio
Flor Torreo) the Liberals (Galo Plaza Lasso) and the Radical (Genera1
Alberto Enriques Gallo) Final results were announced as
Plaza 115835
Flor 112052
Enriques 53601
Invalid 27 676 289164
137 bull Doubt persisted until this month (August) as to who would
receive the election The Electoral College had been invalidating
votes on technical Grounds and as interim returns and invalidities
were announced it was noticed that the majority of the latter were
being deducted from the Plazavote After conferences the Electoral
College revalidated all votes and conducted a re-scrutiny on less
strict basis Senor Plaza has been declared to be the rfjSident-Elect
by the Ecuadorian Coneress and assumed power September 1 1948 The
middotpresidential term of office is four years
The Vice Presidential results were
Conservative 1anuel Sotomayor y Luna llu008
Liberal Dr Abel Gilbert 113213
Radical Dr Cueva Tamarz 5h07h 28129gt
139 Senor Plaza was born in Nmv York USA forty-two years
ago his fatter the late General Leonidas Plaz~ was President of
Ecuador in 1901-05 and 1912-16 middotSenor Plaz who had been taken to
Ecuador as an infant accomnanied his father in exile to the United
States and attended the University of California the University of
Maryland and the Georgetown School of Foreign Service in ~7ashington
l4o Senor Plaza returned to Ecuador in 1930 and for the next
fourteen years operated the family estates there reclaiming them from
virtual bankru~tcymiddot to prosperous and efficient state He has for
example been active in encouraging the breeding of new cattle strains
is President of the Ecuadorian Holstein-Friesian Association and oper-
ates a butter factory on his estates with a Danish ~anarer He was
ar Minister from 1938-40 and Ambassador to Cashington from 19h4-46
l In executing any policies he will of course be handishyt4
capped by the lack of a fully efficient Civil Service The position
in Ecuador is the same as that in othelmiddot Latin American countries
that the Civil Service is naid on low salary sca1e and lacks compe-
tent administrators Such lack is an aspect of the general shortage
of technical ability in the country
TABLE
1
2 bull
3 bull
4
middot 6
7 bull
8
9
10
11
lZ
13
14 bull
15
16
17
18
19
20
ECUADOR
STATISTICAL APPENDIX
Oil Production and Exports
Cement Production and Imports
Yfueat Production and Imports
Rice Production and Exports
Rice Exports by Destination
Cacao Production and Exports
Coffee Production and Exports
Cotton Tobacco amp Sugar Production amp Sugar Imports
State Railwaysmiddot Lines amp Rolling Stock
State Railways Merchandise Hauled
Population and Roads by Provinces
Budgetary Receipts and Expenditures
Exports of Principal Commodities Volume amp Value
Imports Classified by Groups Value
Exports by Destination Value
Imports by Source Value
Balance of Trade by Major Regions
Exehanee Reserves and Banking Position
Price middotIndices
Status of Ex-Im Ballilt Loans
ECUAIOR Table 1
Oil Production and Expomiddotrts
(thousands of American gallons)
Crude ou Gasoline Produced EJtported bullRefined middotproduced
1938 94586 78696 15500 41654
1939 97125 68819 17679 bull 141
194o 98654 70~99 23001 6162
1941 65382 38362 25914 6462
1942 95671 68516 29489 72l7
1943 97211 65003 34635 8076
1944 121469 82520 38083 8927
1945 109855 73897 38752 10059
1946 979+7 52412 45213 12271
1947 99140 39359 53949 16587
Source J3o1etin Banco Central del Ecuador
ECUADOR Table No 2
1929
1937
1938
1939
1940
1941
1942
1943
1944
1945
1946
1947
1948
l First six months
CEMEHT PRODUOTIOllT AliD IMlORlS (metric tons)
Production Imports
17782
15699 10082
14254 13373
14249 12013
16512 10935
17213 2_846
19802 so98
2756o 933
34691 1590
37504 953
38496 3114
33231 14941
20484JJ
Sources Production Eoletin Banco Central del Ecuador Trade Ministerio deEconomia
Total
25781
27627
26262
27447
20059
24900
28793
36281
38458
41610
ECUAJX)R Table J
Wheat and Wheat Flour Production and Irraquorts
(thousands of kilos)
Wheat
Production Imports Exports Consumption
194o 28120 bull 73 28o47 1941 24578 36 24542
1942 24265 bull 76 24189
1943 22034 22034
1944 23251 912 24175 1945 23115 2733 180 25667
1946 25852 4532 23 30361
1947 2lo66 494f)J 11
Vfueat Flour
1938 10743 9981 na
1939 7864 16638 na
1940 7996 8-592 275 16312
1941 7225 11823 286 18762
1942 7 161 23497 161 30498
1943 7461 9862 17322
1944 5216 24023 29239
1945 5174 25137 30311
1946 7~38 11313 g 18813
1947 5943 1886) 4Y
Less than 500 kilos Y First 6 months
Sources Ecuador en Cifres a~d Ministerio de Economia
~emiddot 1926-30
1931
1932
1933
1934
1935
1936
1937
1938
1939
1940 -middotmiddotmiddot
1941 ~ )~ (1
1942
1943
1944
1945
1946
1947
1948
~iiampn-sect00-lfmiddotks
-~Jrst~middot-nsmcnths
gJ Provisional
(B EQUOR
RI03 PRODUCTION ApoundP ~OR~S
Vo1wnfJ Production middot E~orts
(metric tons)
26)04
23584
29863
39270
39008
31699
39036
52136
44027
40144 ltit middotmiddot~ 0 56596
5873
100949
ao6o7
53168
102048
112711
047
8255
3842
6449
5282
22907
8734
12)3
2ooso
962
18343 t - ~ J
20546
32028
46992
64604
29318
66918
6~209fl middot tloo 1
$ bull
tt ( r t
z
Value 3xoorts
(thousand sucres)
1881
936
6667
10864
6555
14632 pound 170
23265
51460
93837
127105
60395
203243
2rfjuft
Sources Production Boletin Banco Central del 39uador~ Trade Ministerio de Econom1a~ ~r- ~fl ]r bull ~-middotmiddotmiddotmiddot f ~~middot~---i
Average Destination 1937-41
Cuba 2
Peru 13
Venezuela 6
Colombia 4
Panama 2
Jamaica 0
Philippines 0
India 0
Dominican Republic 0
Other Countries 4
TOTALS 31
Preliminary~
RIQ] EXlORTS (in million po~ds)
1943 1944 1945
81 88 5S
20 29 0
0 17 4
~ 0
Rf 2 hi 0 0 0
0 0 0
0 0 0
0 0 0
bullbull ~ 6 6
105 142 6S
R Less than )OOOOOpounds
Table No 5
1946 ~ Jan to~
1~ June-194
46 12 24
0 0 s 17 49 )j
2 13 2
5 4 1
16 1 0
20 0 0middot
0 38 0
0
1 f4~ 2
r middot I
130 13 34
sf Ineludes 6 million pounds to Mexico and 5 million tmiddoto Greece bull middot
1[0
supound~sect8_ Foreigl Crops and Markets Offiee of Foreign Agrtcultural Relations u bull Sll~artment of Agriculture May 3l 1948 bull p bull 402 First six months of 1948 from ibid August 16 1948 p bull 120
Average 191i-15
191620
l921-25
1926-30
1931-35
193640
1940
i941
1942
1943
1944
1945
1946
1947
tf I
ECUADOR
Cacao Production and ~orts
Volume
Estimated Production ~rts
(metric tons)
n (
12108
15middot330
14652
19030
15058
17759
17689
19459
4o625
43547
36825
21319
15980
174o4
11208
14433
13762
18161
13735
16827
16526
Exports ( 000 sucres)
186o9
26073
26746
27531
16647
37424
29354
34365
40327
51794
41985
53547
74935
188208
middot)(et) middot( middot
Sourcesmiddot Estimated production Ministerio de Economia E~orts to 193~ Estadisticas de las Exportaciones del
Ecuador 1940-1942 subsequently El Trimestie Estadistico del Ecuador Number 1
1 ~ Mini sterio de Economia -bull gt(
111 t bull r r (o J bull bullbullbull 1) ( bull
ECUADOR
Coffee Production and Exports
Volume Estimated Production EXports
(Metric TohS)
1921-25 average 5147
1926-30 II 7571
193D-35 10047
1936-40 II 13811
1940 16158 14571
1941 14260 11847
1942 9016 6140
1943 14144 12340
1944 16598 14458
1945 12999 10737
1946 9948 7636
1947 12522 8970
Table 7
Value
Exports 000 Sucres)
59~9
11530
10945
18546
16J83
23827
17278
33176
35626
33863
34839
43524
Source Estimated production - Ministerio de Economia
Exports t~ 1936-40 - Estadisticas de las Exportaciones del
Ecuador 1940-1942 - subsequently El
Tremestre Estadistico del Ecuador Number 1
and Ministerio de Economia
YEAR
1937
1938
1939
1940
1941
1942
1943
1944
1945
1946
1947
ECUADOR
Production of Cotton Tobacco amp Sugar amp Sugar Imports (000 Kilos)
Raw Cotton
9237
7213
7172
8165
PRODUCTION
Tobacco
1519
1106
1875
1028
1359
Sugar
17528
22950
26950
27835
30421
27858
26799
23151
32474
33544
33480
Table B
IMPORTS
Sugar
5310
11068
12387
38
6
33
184
784
21455
3060
Sources Production of Cotton and Tobacco Ecuador en Cifres 1942
Sugar Production and Imports Ministerio de Economia
ECUAOOR Table 9
State Railways
Length Locomotives Rolling Stock (Number)
(Kilometers) (number) 1relght Passenger
Gueyaquil-Qpito 452 39 319 41
Guayenaquil-SalinaJ 150 6 22 24
-~i to-CarcbiY 222 6 23 22
Bahia-Chone 78 3 12 g
Sibambo-Azogues 117 3 6 ll
Puerto Bolivar-Piedras 155l 7 21 10
Puerto Bolivar-Pasaje 55
1199 64 4oy llG
Narrow-gauge line
gj On uncompleted line ~ito-Esmeraldas
21 Of which 4 are rail-cars
jj Of Vihich 61 are rail-cars
Source lviinisteria de Economia
1938
1939
194ltgt
1941
1942
1943
1944
1945
1946
+947
ECUAOOR
Railway Transport
(thousands of metric tons)
Products
Agricultural Animal Mineral Forest Manufactures
1639 19 3 160 122 1034
1318 143 172 138 961middot
1714 144 233 219 1472
1613 184 277 209 1543
1809 224 280 272 1631
1841 280 35a4 376 193-3
2011 250 263 299 C5J7 3
1888 29-5 350 238 2234
1941 29-9 46 bull 4 258 2170
1787 299 51 0 180 2085
Source l3oletin Banco Ce~~nu del Ecuador
Table 10
Others Total
58 3205
58 279l
298 4oso
289 4115
328 4543
384 5168
352 5248
292 5296
37middot7 5508
419 5279
Table 11
Population and Boads
Poeation Roads (Kilometers) Province Jan 1 1948 Main Secondary In Construction
Care hi 86663 1744 1191 1050
Imbabura 158896 1818 2100 1810
Finchincha 350149 4)13 3703 670
Cotopaxi 215232 642 4o6o 970
Tungurahua 222963 2290 1810 300
Chimborazo 29864o 1664 3316 2740
Bolivar 121653 1877 1294 2045
Canar 133971 580 580 1300
AZUaY 284982 1053 2190 630
Loja 238705 1140 4s6o 1430
El Oro 93752 1005 2378 650
Quay as 482843 3900 3367 3700
Los Rios 148428 933 4632 1050
Manabi 381538 3627 1lo61 1970
Esmeraldas 664o5 50 19 0 2840
Frov Orientales 181071
465891 26636 46732 2t3l5bull5
Source Direccion General de Estadistica y Censos
1938
1939
1940
1941
1942
1943
1944
1945
1946
1947
Source
r
Table No 12 ECUADOR
DISOLOS3D BUDGETARY R303IFTS AlfD EXP3NpiTURES
(Total of ordinary and extra-ordinary budgets and special accounts)
thousand of sucres)
Total Receipts
1323204
131699 6
1262710
1547624
1667455
2112614
3145318
4051038
5367822
6696647 11 ~I JJ( middot
Total Expenditures
1429134
1267687
123135middot0
1586615
1489251
2101429
3031038
4174550
5352394
6593858 bull I
aoletin Banco Central del Ecuador
-middot middotmiddot
Diff~reuce
106830
j 49309
f 1360
- 38991
f 178204
j ltll8-5
f 114280
12351middot2
+ 15428
j 10278bull9 r 7
l I 1
L
ECUAOOR EXPORTS OF PRINCIPAL COMMODITIES 1937-47 Table 13
VOLUME (thousand metric tons)
1937 i98 1939 194o 1941 1942 1943 1944 1945 1946 194711
12 200 96 183 20 bull 5 320 47~0 646 293 669 66) 218 191 153 112 144 138 182 137 168 16 bull 5 203 14~ iJI 137 129 146 118 61 123 14 bull 5 107 76 90 48 55~5 53middot3 472 34 bull 2 226 158 1)9 178 35middot511 72 bull 5 345 19~2 251 183 14bull4 13 2 112 103 12~0 132 121 1-4 16 16 15 18 30 22 28 2~0 13 01 14 1middotmiddot9 2~2 21 47 90 136 93 74 28 na
~gt i824) (1387) (944) (1036) (1981) (2516) ( 2756) (4373) (4462) (4947) _01 2849 2454 2274 2201 1201 2167 2062 2513 2446 1640 1358
Ltrates 7~3 140 76 so 3~3 )9 26 10
VALUE (thousand sucres)
610 10864 6555 14632 23265 51460 93837 127105 60395 203242 201111 49985 39bull276 37bull033 29354 34364 40)26 51794 4lt985 53547 74935 188208 24613 16703 15227 16)84 23827 17278 33176 35~26 33863 4839 43 bull 524 5bull691 7558 7t006 6448 4658 _J 107 2159 1898 2872 738~- 24355
18242 7~146 9605 86o6 6120 201 6274 6209 9264 1)02 14994 4048 4300 4298 3~866 6979 35481 23316 38043 26553 15111 979 lt363 2~134 2724 3168 8450 25613 43419 31877 18 bull 509 7125 na 8048 6 234 4981 6509 16231 22121 25191 69033 69J87 81962 4662
21989 26374 25020 24862 13425 24820 23796 28788 28107 18253 15902 trates 10165 16090 13134 38609 27208 29013 18075 809 ates 18682 35297 41204 39907 29426 25374 27476 26457 15482 24858 25334
10774 13210 13495 3 950 16869 32775 2L068 32402 30902 38326 n bull a_
164_045 169096 167148 167851 199704 298690 393115 466631 377894 537131 619859 tmiddotbull bull
Note Dash (---) signifies zero or less than 50 metric tons nly or ~00 sucres ata expressed in quantities other than weight Sourcis 193 data from unpubli~hed Zcuadorian trado stati~tics
at US Department of Commerce 1938 nnd 1939 from partment of Commerce official data Direccion Nacional de Estadistica Eruad6r en Cifras ~7 from Banco Central Boletin 1940 and subsequont ~ears from Banco Centrll jto~n sterio de Economia and from M1nister1o c Economia data furn she
Mission July 1948
~ tobacco tone JgS
articles
11res ilk
al
value of Imports by Groups 1937-Lt-5 Volume and middot~alue of Selected Individual Imports 1937-46
(Value in thousand Sucre~)
1~37 1~38 1~39 1940 1941 ~942
19~731 20~ 375 24~874 16~)65 19043 37~540 5127 7194 1958 6~4e8 5t298 8 118
12888 13Jl5 14522 17702 19556 25~152 21627 25~272 21455 28532 21619 18923 20649 21~593 25559 29437 22636 19~$13 13~505 11961 12~654 15~976 15667 18899 5~829 7 bull 524 6066 9385 833 14353
22912 )0868 24~75 27 t 750 25993 42~916 9376 1028 10038 12118 11345 13932
-bull
131643 148320 1486o 173753 149499 199715 (Volume in thousand metric tons) (Value in thous~tnd sucres)
5middot3 111 124 194 5 bull 534 6385 26 4 24
os 246 -
122 ioo i66 86 118 235 8255 6)88 7449 5076 013 14609
19 07 11 11 14 29 2187 1824 2695 294-3 29J9 8182
101 i4 i2o i09 28 51 804 llJ)6 1667 1546 577 866
~ hides amp skins amp manufactures amp miScellaneous
~~43 1944 1945
33270 70915 82984 6717 8)69 904)
31~700 43196 32~830 17073 53~400 JBoo6 15447 32~624 38797 14~88 18~388 22895 14116 11a99 9812
68928 n~l79 69-113 15856 19186 20042
217983 33ltl56 323524
78 middot 0 2 215 130 12622
09 27 775 2290
99 240 bull 25~1 337 24070 26388
23 46 67 8853 146)1 21699
09 16 10 321 349 246
~s zero or less than 50 metric tons -middotNote Columns may not ahmys add to totals because of rounding Denartment of Commerce official sources - 19)8-42 Direccion Nacional de Estadistica Ecuador en Cifras [inisterio de Economia El Trimestre Estadistico del Ecuador
1946
)1 8135
4 bull 5 )842
114 13123
46 22709
)1 639
ECUAOOR Exports by Countries 197-47 (Value in thousand sucres) Table - 15
1937 1938 1939 1940 1941 1942 1943 1944 1945 1946 1947 --middot-------middot
80458 lt2865 116t-J78 150055 196953 293081 386483 46lt-909 372~549 463~378 sa4~68J 54422 63418 8)254 1t0496 145 bull 558 168585 2)9238 267105 218018 227291 262887
26 20 65 17 2228 78 124 7)41 17173 630 610 949 1281 1055 1)98 5~526 25686 78523 85382 61478 75890 23481
2899 4955 2109 3568 162 1163 4J54 2526 4197 44~ 1450 5027 6335 4972 5i92 5285 7425 4546 7379 10286 9798 15537
1 5 5 17 57 13 291 54 444 574 6996 8 662 9188 8714 13bull764 7238 15316 13900 11223 6~07l 14503 11717 2908 12544 5 730 7896 3767 21215 22608 29233 4243 6703 7965
51 15 24 8 532 3620 1603 539 2336 11579 3749 80 207 862 4070 9991 17096 1275 17~428 6~973 27431 80541
1943 2135 5229 6039 1965 5435 3021 4827 15~702 25~137 51~854 middot 667 740 991 zo83 3358 11412 4286 4282 3~-970 13064 5~864
1799 419 2218 875 2865 12299 9644 14900 13714 9653 11655 J 89 82 2527 1247 964 326 )24 250 41141 2~985
1024 1514 1068 2205 7173 2650 2 744 8871 7694 J2 5811 17 39~ 77029 61869 43688 11945 1503 5550 6335 4108 4075 36783 61998
32) 6)3 1187 490 58 186 2164 4021 J217 35974 29595 11277 69 - 29 4411 7909 6156 3477 1183 5492 4876 26)8 359 1860 7~467
489 255 J2 100 280 1155 1239 1265 3827 3~961 20539 13t521 10802 2254 5 706 4177 6313 2bull610 3615 4251 -middot 2842 13546 lBi 1415 3 758 822 6 188 12962 3592 2531 412~ 162 7~ 10052
8643 1693 3bull521 3~400 2751 320 40 118 231 222 5404 J 4894
6337 4201 6548 5478 1175 5 45 40 1611 50950 6261 4132 5386 5452 117) -
~l - - 15 45988 5 middotmiddot 7S 8 5 25 567 92S 11
33 ~- 76 18 966 151 150 3419
38 29 858 2 45 78 467
(continuation on next naee) middot
~GUJLOR ~xnorts by Countries 1937-47 (falue in thousPnd sucres) T~ble-15 continued
middot-~--- -~-middotmiddot -middot _ middot-- ~~---~~- ---- -middot--~middot--------middot- -middotmiddotmiddot--middotmiddot--193 1938 1939 1940 1941 1942 1943 1944 1945 1946 1947 _I --middot -middot- ---~- ------ middot- bull middotmiddot-middot -
4 7 5 5 5 219 1087
218 153 529 368 73 49 297 569 1230 35140 789 28137
207 144 379 J68 73 49 297 559 1104 605 11 9 10 126 43
150 6355 plusmn
353 54045 169096 167148 167851 199704 298690 39J115 466631 377894 537131 619859
~S Columns may not always add to totals because of rounding
Dash (-) signifies zero or less than 500 sucres
Primarily Guadeloupe and Jamacia
Primarily British West Indies and Netherlands West Indies
Primarily Denmark Spain and Norway
Primarily Java
~ces 1937 and 1947 from unpublished Ecuadorian Trade Statistics at U s Department of Commerce
1938-46 from Ecuador Ministerio de Economia data furnished IBIID rassion July 1948
Imports by Countr~es 1937-1947 Table-H)
ECUAOOR
l937 1938 1939 1940 1941 1942 1943 1944 1945 1946 1947 I (()
Value in thousand sucres) ~ + -gt L520 63151 83984 115382 128423 186958 200061 311989 302~329 363403 517582 j
u t 2086 51311 71950 103214 110422 138729 103583 173776 178821 240233 429906 0
Q) f
811 674 551 2436 1815 3J258 2150 5265 6538 12178 20912 d S Ugt ro c 1 n 4 4144 3042 8 99 14 23 295 178 8~011 210 h middot-1
(- 0
186 324 237 957 2~991 8492 18~376 15~239 17232 10~574 3121 4 middot-2375 2310 1959 2476 3016 4735 7930 7~696 11~201 15~564 14755 sectwfi
middot-1 1 fli 4 6 343 1~823 3J064 4110 3~612 60J5 h 0H
2739 2109 3789 174 2352 7949 9~934 17845 23~ 616 1559t 18~727 ~rld ()
328 164 457 2498 612 733 10892 10902 20003 16684 11981 oc ampl+lll
mmiddota J63 1297 1161 -- - 2 23 115 1~128 1192 d+gt-
2464 507 500 1438 5565 20668 39979 46654 33684 33034 6~486 15~~ (()
na 1 311 2297 5515 130 bull-I m rl bull +gt
15 31 68 245 995 1516 2804 25326 6124 5956 3472 Oltll~
149 280 269 332 550 208 270 389 707 839 655 a~ sect (1) Cl 4-209 72986 ~ 38 09 1433J 9813 16276 15885 1721~9 45194 80928 ~-g 1701 35767 2 7 7 33 1202 67 47 61 19 2 El 0 0 eo g 3250 11462 8094 12980 10124 8108 13634 12513 11984 28392 40983 cent1-t+l~
1803 718 1687 otmiddot r-
4-114 6465 7339 630 475 34 22 2 66 889 7279 t -P () ~led
36o 4685 1573 7144 308 12 682 4824 rlltll ltDno
1~896 2550 1466 1624 64 1 58 5090 bull-1
fJ ~ ~ 1052 1489 794 945 293 224 5 21 1373 9062 9 703 P + na 868 881 423 10 1 8 223 135 r- 0) u
1 r=l middotr-l
1162 4823 1264 1675 877 1017 1~52 2380 3129 4~326 6851 () l=l rl
7274 3074 2609 3595 980 349 1041 905 599 1~543 3~134 cn~oo bull t
724 11939 8983 19951 6239 2281 1439 304 3882 5478 5736 op a cent1-t ~sect rl
173 302 262 238 -w 14 276 -rr 472 ---s9l ctillmgt
259 10949 7810 18190 4414 170 16 4 5 +gtUd ~-- ~
935 712 728 1278 1281 1715 1314 2685 3185 4465 3151 +gtP t-1
530 105 143 221 306 240 95 89 582 541 2089 ~ (f)
1l 21 12 80 1f 196 122 169 125 1J n ~-T~
0
109 218 lllL 250 m 46 sect2 12_ 28 119 112 I ~ --sB_l_ 0 ---- -
643 148315 147860 17353 149499 199715 21 ~ 983 331156 323524 414266 604479 ms may not a1ways add up to t ta1s because of rounding Dash (-) signifies zero or less than 500 sucres ~ country breakdown not given in source g) of which 591 from Syria 2Z3 from China 264 from Straits Settlements 1 Sumatra and 264 from Iran
YEAR
1937l
1938t
1939~ -
1940amp
194H
1942
Exports Imports Balance
Exports Imports Balance
Exports Imports Balance
Exports Imports Balance
Exp(rts Imports Balance
Exports Imports Balance
ECUAroR Balance of Trade by Area 1937-47 (thousand sucres)
fRlSTERN HEMISPHERE including Philinuines
United States Other Total Eurone
54~lt-22 26~036 80~-~-sa 77~029 52086 9~434 61520 64~209 2336 16602 18938 12820
63418 39447 102~865 61869 51311 11840 63151 72~986 12107 27~607 39714 -11117
83254 33124 116~378 43688 71950 12034 83984 54505 11304 21090 32394 -10817
100496 49559 15Cl055 11945 103214 12~ 168 115382 38~090 -2718 37391 34 673 -26145
145 bull 558 51395 196953 1503 110422 18001 128 423 14333 35136 33394 68530 -12830
168585 124~496 293081 5t550 138~729 48229 186958 9 813 29856 76267 106123 -4263
Table 17
Other Countries World Total
6~559 164045 5-912 131643
647 32405
4361 169~096 12~ 178 148315
- 7817 20781
7082 167148 9372 147860
-2290 19288
5851 167851 20281 173753
-14430 - 5902
1248 199704 6743 149499
-5495 50205
59 298690 2944 199715
-2885 98975
NOTE Areas may not always add to world t~tals because of rounding
Source 1937 and 1947 frlttm unuublished Ecuadorian Trade Statistics at US Department of Commerce 1938-46 frem Ecuador Ministerio de Economia data furnished Mission July 1948
(Table 17 continued on next page)
YEAR
12J Exports Imports Balance
1944 Exports Imports Balance
125 Exports Imports Balance
1946l) Expltgtrts Imports Balance
12Z= Exports Imports Balance
ECUADOR~ Balance of Trade by Area 1937-47 (thousand sucres)
WESTERN HEMISPHEL~ (including Phili~ines United States Other Total EuroQe
239238 147~245 386~483 6335 103583 96~478 200~061 16276 135655 50769 186422 -9~941
267105 194804 461909 4~108 173776 138213 311989 15~885 93329 56591 149920 -11779
218018 154~531 372549 4075 178821 123508 302)29 17159 39197 31023 70220 -13084
227291 264224 49J515 36783 240~233 123170 36J403 45~194 -12942 141054 128112 -8411
262887 241796 504683 61998 429906 8676 517582 80928
-167019 154120 -12899 -18930
1 Only year in which substantial Philippine trade
NOTE Areas may not always add to world total becasue of rounding
Table 17 (oonttnued)
Other Countries World Total
29 393115 1646 217983
-1)49 15132
614 466~631 3~282 331~156
-2668 135475
1270 377894 4035 323524
-2765 54)70
8~833 537131 5670 414266 3163 122865
53179 619859 5969 60449
47210 15380
Sources 1937 and 1947 from unpublished Ecuadorian Trade Statistics at us Department of Commerce 1938-46 from Ecuador Ministerio de Economia data furnished IBRD Mission July 1948
~ EXCHANGJ-tAL BANK
ECUADOR Exchange Reserves amp Banking Position (million sucres)
r 4 bull TIC CQEDITS OF CENTRAL BAl~K Domestic Govt Official Bus Other Credits
MOliEY SUPELY Current AC
JJj To()2f (4) Entities Indvls Total Banks of O~mtl Currencl Denosits l (6) (7) (8) (10) (5) Banks amp 11
Indvls (9)
16 10 26 51 1 116 62 64 48 26 7 40 73 4 129 74 66 3middot7 )9 7 29 66 4 144 73 71 37 29 8 24 62 4 159 78 73 56 26 8 22 55 5 183 8l 103 81 37 28 2 8 201) 120 119
152 37 21 22 79 9 255 169 17~ 26) 34 27 22 83 13 378 ZJa 26e )4 60 37 20 117 9 385 295 308 Z5 105 73 11 189 26 493 321 312 282 153 81 10 244 24 536 35middot~ 354 242 104 44 93 241 2 565 329 284
221 110 51 99 260 2 56 313 278 215 102 47 101 250 2 573 )06 294 225 97 45 95 237 2 585 299 299 219 100 44 98 242 1 591 307 297 214 98 35 111 244 4 6)4 315 295
)20 295
on of $12500CC beginning in December 1946 bull
ars
Ttttal (12)
127 14) 144 151 183 239 345 492 602 634 704 613
591 599 597 604 610 614
ge liabilitieS but including Stabilization Fund in 1945 and GolC CertificCt in 194) bull ial banks and fomento banks ial bc1nkst and fomento banks sits of commercial banks and time deposits of fomento banks
Table 18
Govl t Den sits ~L
(lJ)
6 23 12 27 7 28 8 31 6 32
middotmiddot 11 )6 16 57 27 71 41 74 63 98 59 90 66 77
71 8 75 76 6 75 81 75 81 72
72
1 1 Boletin - Superintendencia de Bancos Boletin - Unpublished data furnish~d MF bY Banco Central of Ecuador
Table 19 ECUADOR
Price Indices
WHOLESALE Rents Export Fooa in
YEAR Goods and Quito - Coal ~1) (2) (3)
1937 100
1938 83 100
1939 95 100 153
19h0 95 106 16h
1941 96 113 150
1942 114 146 172
1943 114 183 187
19h4 118 218 219
1945 133 266 254
1946 203 320 315
1947 297 364 516
19h8 (March) 294 379
(liay) 416
(July) 389
llame l~umbar
Republic of Ecuador
Status of u s Export-Import Bank Loans to ~cuador
Purpose
gs of Junemiddot10omiddotl9ltsect
Gross Authorized
Cancel- Net lations Authorized Repeid
Amount Amount Outstandin~ Undisbursed
6J048 6J048
( 262 )16
Haterials equip amp services $ 6480000 $20810 $6459170 $1279775 ~)5-l19middot395 _____ _
ibulliunicipali ty of iui to (Republic of Ecuador)
ibullIunicipali ty of Guayaquil (Republic of Ecuador)
Republic of Ec~ador
Republic of Ecuador
Ecuador DeveloPIlent Corp
Pan-American Highray (Cuenca-Loja)
Agricultural Research amp Experiments
Raihray Equipment
5000000
12JOOOO
50000 200000
)28 Haterials equip ~~ 4000000 services - ater 1middot1orks
)28 iltiaterials equip amp services - ~~rater orks 4000000
J4J Pan-American High1middotray (Guamote-Tambo)
432 uevedo-Hanta Hightmiddotray (additional credit)
1980000
220000
$19180000
Of tlhich $2500000 tts used on the Quevedo-Ibullianta HighTaY
4000000 28880
4000000 167
-1 t-9amphOOO- -7500
220000
6o6120 -h365000-middot
41592 575-t 2-41
-l-y5Q2- 500 44Gooo
220000
IBRD Statistics Sectio spte~ber 24 1948
SUMMARY
1 In terms of national income per capita Ecuador is one of the
poorest countries of the world Nor are her known but unexploi ted natUro
resources strikingly rich Her best potential resources are agricultural
owing to geographical configuration she can obtain the output of temshy
perate agriculture for domestic consumption and of tropical agri~~ture
for both domestic consumption and export She might also be able to
d~velop a cattle industry for supply of neighboring republics
2 Although socially and culturally as old as other Spanish Americm
Republics Ecuador is very young economically~ The Panama Canal bringing
her close to the Eastern United States and Europe was opened only 34 years
ago She has very little of the techlical and administrative skills and
abilities that underlie modern economic processes She is very poor in
capital equipment of all types And her Government is inexperienced in
the exercise of the modern economic functions of the State
3 The population of Ecuador is nevertheless increasing at about
2 per cent per annum and in the Sierra where 6o per cent of the populashy
tion is locatedt is already pressing against local focd output The situashy
tion is one which may be temporarily eased but cannot be finally solved by
extension of arable area in the Sierra except where such extension is
accomplished througf) irrigation Of basic importance is improvemm t of
arable farming practice in the Sierra valleys to obtain ~better yields
from land already cultivated Use of agricultural machinery would
- i ~
probably not achieve this unless accompanied by other more fundamental
chanesp in seed types crop rotations and fertilizer use Unskillful
employment of heavy agricultural machinery to bring into use higher ground
now unutilized would carry considerable danger of soil destruction tnrough
wind and water erosion
4 Non-subsistence coastal agriculture is in part an important
foreign exchange earner and in part a source of products also imported such
as sugar cotton and tobacco No export crop other than cacao enjoys an
established position in overseas markets and cacao production has not
recovered from disease losses impacting in tne 1920s Rice exports
expanded greatly during the war but retention of roarkets is doubtful
Coffee expoi lts have been increasing in value but not in volULle rem--ining
agricultural exports are at present minor non-staples
5 Expansion of coastal agriculture is rather a matter of illproving
the farming environment (in transport crop processing and credit facilishy
ties) than farm practices themselves ~1ile the coastal area is relatively
thinly populated (particularly ~hen compared i th Far Eastern tropical
areas) it is not yet clear apart from a few crops how mechanization
could be applied to offset a small labor supply This may prove to be a
key technical question in the development of coastal agriculture lll
economic problem is to identify and foster the products of good ~~port
prospects rather than those of probable decline
6 Exports of minerals and petroleum are a ~inor item In 1947 they
represented only 45 per cent of total exports exports of petroleum have
declined steadily with increased do~estic consumption of petrol
- ii
7 Apart from a few important consumer-good industries such as tex-
tiles Ecuador is not an industrial country Her manufactures are largely
in a handicraft stage that of panama hats provides an important export
commodity Power prodllction while deficient does not at present seem a
real obstacle to economic development~ which at this stage is principally
an agricultural problem
8 Changes of farm practices will however take time partly be-
cause of the educational problem in Indian collliDllli ties partly because the
provision of improved seeds and the -working out of new safe tillage pracshy
tices carmot be quickly accomplished While the work rh ould be taken up
immediate action in stimulation of development would not center upon the
farm itself but rather upon improvemm t of services middotsurrounding the farm
notably roads irrigation crop processing and storage and rural credit
facilities
9 Such immediate action might be supported by establishment of
multi-purpose rural machinery pools equipped with machinery and personnel
to undertake not only farm operations but also local road-building end
irrigation works work upon the various activities being fitted into the
farming calendar The actual use opound farm machinery would then be conshy
trolled by experts whose ear~ work might be mainly experimental and
demonstrational
10 Voluntal saviftgs directed lnto productive use ere small and a
large part of domestic development axpendi tUes att necessarily by Govern
ment or through GoverrJ~DSnt agencies In con~nce thefe 11 constant pres
sure toward inflation pressure which in the GovemmeDl sector has beea
bull 111-
offset during the past sixtem months by application of special exchange
tax revenues in reduction of Government debt to the Central Bank Ver-J
recently however 90-rer cent of these revenues has been diverted to finarce
of development with consequent renewed danger of monetary inflation v1hen
total Government finances no longer run a surplus
11 These special exchange revenues derive from a multiple excharge
rate system installed in iilay 1947 (with IivF advice and concurrence) to
meet rapid loss of foreign exchange reserves The system has bern successshy
ful in slowing the rate of loss bull but not in colq)Jetely preventing it midshy
year expectat ions were for a loss of foreign exchange of some US$ 5 million
in 1948 Recent action reclassifyinamp i~crts may reduce this e~~ected loss
12 The balance of p~ents position at present difficult and no
great easement can be expected It is improbable that Ecuador could safoly
assume any large additional debt burdens At the same time her ability
effectively to absorb and use loans directed tmmiddot1ard increase of production
is limited bya present lack of technical and administrative abilities
Here iLiprovement though clillilllati ve is necessarily slow at first
- iv-
I GIDGRaPHIC
13 Ecuador has common boundaries with Colombia on the North and
Peru on the East and South The greater part of the country lies immeshy
diately south of the equator which passes 13 miles north of Quito The
area of the country has never been measured but is estimated as 150 COO
square miles ri thin the frontiers resulting fror1 the war with Peru in 1942
the area west of the Andean crest is about 60000 square miles
14 Ecuador is divided by nature into tru-ee separate reeions of
which only two are in effective occupation
(a) The sea-coast plain (about 28000 square miles and about 425
miles long by 62 miles in width) is composed partly of swampy
lowlands and partly of low hills most of the region being
less than 1000 feet in altitude I the north it shares tbe
double rainy season of Colombia and is covered with dense
forest Not far south of the borders of Colombia the double
rainy season ~ves way to a single rainy season from Decemshy
ber to June as one goes further south the rains begin later
and end sooner until at the extreme south desert conditions
begin stretching onward into Peru ald Chile As the rainfall
becomes less the vegetation changes from wet forest to dry
scrub forest and savanna until in the south settlement is
limited to irrigated areas
Temperatures in the region are modified by the cold-vater
-2-
Humboldt current and are more pleasant than latitude alone
would suggest
The coastal region produces almost all the export commodities
of Ecuador its people are largely mestizo strongly conscious
of nationality and commercially active Its major port
Guayaquil (population 1942 154000) is larger than ~ito
(population 1942 139000) and is the commercial capital
of the country
(b) The Andean Highlands or Sierra (about 25000 square miles)
comprises the second natural region and forms the physical
backbone of the country There are two high corderillas
surmounted by towering volcanoes and separated by a series
of ten large intermont basins lying in a north-south line
seven are linked to Guayequil by railway Each basin is
occupied by a dense JOpulation 1hich is almost pure Indim
Only in ~ito and Cuenca are there any important number
of people with Spanish ancestors and these are either
office-holders in the Government or landowners with large
private estates
(c) The Oriente (Amazonian region to the East of the Andes) is
not yet part of the effectively occupied area of Ecuador
Its jungle inhabitants from time to time spear the
agents of the Shell Oil Company who are prospecting
for oil
3
In 1942 official Government figures for these rerions were
Area Population middot Density Square of
Kilometers middotmiddotNumber middot Ponulation
Sierra 70344 23 11686748 61 268
Costa 68633 23 1JooOl8 33 14 6
Oriente 153143 51 189005 6 12
CalapagS Islands 7880 j 2192 a 0~2 -Miera tory 4115 a middot-
300000 100 3089078 100 102
15 Very little however of the total area is under cultivation
It was estimated in 1916 that about 90 ~)er cent of the coast and 60 per
cent of the Sierra was suitable for cultivation that is about 25000
and 1)000 square miles respectively Of the total of Loooo square
miles of cultivable land~ only about 1$000 was under cultivation in
1946~
16 No census of the population has ever been in Ecuador
In 1892 estimated nopulation was 127 million in 1942 309 million
and in January 1948 3L7 million with crude birth rate of 379 oor v ~ thousand and crude death rate of 201 per thousand in 1942- Estimated
composition of the 1942 population was
a less than 05
Yhi te Mestizo Indian Negro Iulatto Other
100 per cent l-t10 ner cent 390 per cent 50 ner cent 5 o Per cenmiddot~
1000 ner cent
Just over half these deaths oc~urred in the are rroun of 0-4 years in 1942
4-
17 At the same date the literacy rate was estimated at 20 pe~ qent
s~i~literacy at 20 per cent and illiteracy at 60 per cent
-5-
II OCCUPAmtOUS AND INCOivES
18 There having been no census there is no at~curate information
under this beading
19 The Economic Department of the Ecuadorian Central Bank has esti-
mated that of a total population of 334 million in 1946 1285000 or
J9o per cent were gainfully employed in the following occupations
Agriculture Forestry etc
Mining
Building and Repairing
Manufacturing and Processing
Services (communication comshymerce government etc)
820000
10000
6oooo 10000
325000
5 5
26
100
20 No valid estimate of national inco~e exists At the request of
tne International Monetary fund the Technical Adviser to the Central Bank
of Ecuador Mr L A Carbo estimated national inccue in 1946 as 20096
million sucres or US$ 149 million Although this estimate is probably too
low ] it is clear that national income is very small Ecuador is very
low on the list of income per head among Latin American countries its
income per head is in feet among the lowest of countries of the world
21 Income is very unevenly distributed A survey made in 1943
yielded the following picture
g lror reasons Sdvanceit below Paragraphs 87 and 88
~ pt WI
-6-
To tal Monthly Average Monthly Population Income Income per Fw~ly
Number of Amount t tount People (SUcres) (Sa~res)
Upper Cla~s 4oooo 133 28000000 144o 2300
Middle Class 96oooo 3200 96000000 4950 4 L ~ 00- middotJ~
Lower Class 2000000 6667 70000000 3610 140 -- -~
3000000 10000 194000000 10000 10000 yenSliP C_~ ~
Note At the ofDcial rat~ of 1350 suc~es to the US$ average monthly incomes per family are equivalent to approximately $2J7 $30 and $10 respectively
~ Uneven distribution of incoue is of course largely a conse-
quence of uneven distribution of property Some ideas of the distribution
of rural property is afforded by analysis of re~urns made in payment of
rural property tax Such tax was paid by only ll2l4o proprietors in 1944
whose holdings may be summarized as follows
Per cent of Value of Rural ProEerties Number of Proprietors
916 4o
29-33 llOO
3041 10400
2030 37200
1080 634oO
10000 112J4o
23 Such statistics do not of course carry one very far beyond
the general observation that income and wealth is very unevenly distributed
and that much is obvious from a little travel in the country But it should
-7-
be said that comparing observations in Ecuador vrith those made in Peru
and Bolivia Ecuador by subjective judgment compares very favorably with the
tvo latter The Ecuadorian Indian seems to be on a perceptibly higher stan-
dard of life both in the highlands and on the coast than the Indians seen
in Peru and Bolivia Vhile his land holding is small it yields somethi1e
he very freqjl ently possesses livestock such as pigs and chickens has cot-
ton clothing drying on a line a~d often cultivates flowers and keeps
pigeons By American standards he is undoubtedly on the poverty level by
Latin American standards he may be a little off it
24 At the other end of the scale the wealthy upper class are pro-
bably not as wealthy as the Peruvian upper clas~h and the Bolivian elite
in operating in poundcuadc~the upper class lacks the rich property of mines
Thus while income is of course unevenly distributed in Ecuador as else-
wnere the range between the wealthy and the InJian may well be less tban
elsewhere The line of income distribution is of aboat the same slope
but probably significantly srJOrterY
This conclusion cannot be demonstrated statistically It results from a 11feel 11 deri ved from personal observetions in the respective counshytries
-8-
III AGRICULTURAL lROIDCTION
25 Ecuadorian development is largely a matter of increasing the out-
put of and improving internal and external trade in agricultural products
There appears to be no enduring geographic or physical reason ~middotby this can
not be accomplished She possesses soils and climate ranging from the
tropical to the temperate soils which in some areas are very fertile and in
others are in danger of exhaustion To anticipate subsecpent conclusions
her problem of development through agricultural progress breaks doTltD into
separate aspects all involving improved technique
(a) increasing arable yields from areas already cultivated
(b) improving pastures and stock in grazing areas
(c) enlarging both arable and pastural areas (including irrigation)
(d) improving roads in rural areas
26 Achieving these objectives involves providing more adequate
domestic credit for short- medi~ and long-term agricultural requirements
27 In application however interpretation of these problems is very
different in the two occupied regions of the country the Sierra and the
Coastal Lovrlands no generalization can cover both
(a) TLe Sierra
28 The occupied inter-Andean valleys are a region of temperate
agriculture producing almost exclusively for local consumptionmiddot Their
pat tern of tilled fields grazing land trees and flowerJl is almost
Y Flowers bloom all year round The main tree is the eucalyptusmiddot introshyduced some 70 years ago end used for all purposes (~indbreaks fuel 1
and lumber) affording a striking example of the effect of introduction of one plant upon regional habitability-
-9-
Western liiuropean in appearance but not unfortunately in productivity
Agricultural Production of the Sierra
1939 194o 1941 1942 - -(Hundreds of pounds)
Theat 49QOOO 611300 534300 527499
Potatoes 1201000 1476400 1386120 1146000
Rye 72500 79900 159495 115000
Lentels 46000 424oO 37955 csooo Corn 816700 1349300 1308062 1315200
Barley 85)000 795700 903600 911000
Cotton 45000 42020
Kidney Beans 80000
29 In addition about 1000000 hectares (247 m~llion acres) are
devoted to pasture supporting epproximate1y 683000 cattle 145 million
sheEf 107000 STrrine and 320000 goats
30 Yields are low in all Sierrean agricultural activities the
standing VJheat and barley crops are so thin that the ground can be seen
through them Yet the greater part (some 6o per cent) of the people of
Ecuador live in the Sierra and population is increasing at about 2 per
cent per annum The effect upon land use under existing tecnniques is
clearly visible cultivated areas are being pushed higher and higner up
the hillsides (slopes of 30 to 40 degrees being used) and onto the
fJparamon the high plateau betvreen adjacent valleys at altitudes of
11000 feet and higher The result is a picturesque scene but one which
reveals a near Malthusian situation in the man-land ratio rbullrith static
-10-
technical practices It is a situation which cannot remain unchanged if
economic development is to occur in the region
31 There sean to be three possible lines of advance increase of
output from highland areas in present use the bringing into use of new
ground in the highlandsbull or a change to increasing reliance upon the outshy
put of non-highland areas
32 The third possibility is not one for the immediate future It
involves either large-scale migration from highland areas to lowland
regions or a large transport program linking highlands and lowlands
together with growth of non-~ricultural activities on the highlands to
provide a cash income with which to purchase 11 imported 11 foodstuffs This
second possibility may indeed be the trend of ultimate development but
offers no irmnediate easement Large-scale internal population movement
from highland to lowland is probably impossible since the Andean
Indian (of different stock to the coastal Indian) is fullf acclimatized
both mentally and physically to life at high and temperate altitudes and
little suited to life on tropical lowlands
33 The two remaining lines of advance would both seec to increase
highland agricultural output But there is an important difference beshy
tween increasing output from valley land in rr esent use and bringing new
and higher land into arable use The first is a complex problem suscepshy
tible only of relatively slow solution the second is seemingly simple
and capable of quick result yet basically less sound offering only
temporary improvement
34 The thurst onto higher ground is already evident and the area
-11-
taken in could probably be greatly enlarged by efficient use of tractors
and modern plows Such use of mechanical equipment would thus give quick
increase of agricultural output but it is very doubtful whether improveshy
ment induced by these means alone could be long maintained The greatest
~r particularly on sloping land is that deep plowing may lead to
soil erosion so serious that land becomes finally llilgtroductive To use
mecbanical equipment i thout at the same time adopting eqJally modern
methods of soil conservation way well be disastrous and that perhaps
within no long period
35 Even apart from this physical daneer there is the virtual cer-
tainty that new land however plowed would gradually sink in fertility
end hence output unless farmed by better agricultural practices than
those now followed in highland Ecuador The present attraction of the
higher land is principally good natural fertility beine virgin ground
On all other counts this higher land is less advMtageous than the valley
floors the va)ley sides are steeply sloping a1d the fl~t paramo is some
2000 feet higher bare windswept and devoid of habitation It would
seem obvious that it is pastoral rather than arable ground were it not
for the pressure upon arable output of the region
36 The pressure today however rises from the relation betwem
popUation and output rather than that betvreen population and arable
area Productivity in the Andean valley is low and can certainly be
improved If improved the pressgtlre which is causing the thrust to
higher ground is relieved until population increase again overtakes outshy
put Against that time however the higher ground vrould remain
-12-
availfibleY and other lower regions may be coming under effective use
37 To increase output of the populated valleys is not a simple mat-
ter responsive to single policies such as simple mechanization by tracshy
tors It will embrace the wlo le range of agricultural practices from
better seed types to crop rotation and fertilizers including in some
valleys irrigation It is a matter rrther of agricultural education
than of~dtlgagricultural appliances and probably experiment under
the peculiar regional conditions will need to precede education Improveshy
ment will necessarily be slov1 but along these lines it can be sound and
permanent
38 Wher~ lfL mere importation of mechanical methods Vi thout
understanding of their dangers in speeding soil destruction by wind and
water erosion may permanently damage the region The somewhat gradual
mechanization of agriculture is of course to be expected and not disshy
couraged but it is not the wlole answer to development in highland
Ecuador
39 It seems that there is at present no over-all agricultural
lfibor sl1ortage in the Sierra and mechanization is nOt therefore called
for to relieve an adverse manpower position It seems however that
some of the larger estates are experiencing difficulty in obtaining their
labor requirements because Indian tenants are viitblolding quasi-feudal
labor dues and devoting whole time to cultivation of their own plotsbull
As a result hacienda holders are attracted to mechanization as an
escape from growing difficulties in obtaining and supervising labor upon
Y As it would not if destructi ve1y formed at this stage
-13-
their ovm land To the extent they are successful the tendency for agrishy
cultural money vrages to rise is weakened
4o There vrould seem to be good possibilities of increasing pas-
toral agriculture in the highlands 1Jrith improvement in both numbers and
strains of cattle and sheep If adequate arable development occurred in
the valleys the main grazing grounds could be the higher land not then
required for arable purposes ~lith dairy cattle on the valley margins or
on valley ground not well suited to arable use Such pastoral development
would be desirable not only to imp1middotove nutrition in Ecuador itself 1 but
as a possible new export of meats fats and hides to meat deficient
Republics notably Peru Early export would probably be on the hoof
along the Andea1 ridge it self
41 The Ecuadorian Government has not included any explicit propo-
sals for highland agriculture (other than irrigation) in its present apshy
proach to the Bank It has however suggested the Bank finance $1 mil-
lion of agricultural tractors and equipment to be handled by agriculshy
tural stations located at strategic places both in the coastal
provinces and the highlands 11 without further elaboration of the
intended highland use of such ecp ipment The description given above
suggests that the usefulness of agriculture machire ry depends to a conshy
siderable extent on the place plan and purpose for rhich it is to be
used
42 In some of the highland valleys (for example in Cotopaxi end
~ound Biobamba) rainfall is deficient and irrigation would increase
valley output by bringing more valley ground into effective use This
- 14 ~-
is clearly sound for flat valley ground already populated is more useshy
ful than higher sloping and more exposed ground The Ecuadorian Govern
ment has included purchase of eq1 ipment for irrigtion works to the value
of $500000 in its present approach to the Barik Assessed against the
requirements for economic development the request is sound provided of
course such equipment is effectively used
(b) The Ooast
43 The condition and nationel significance of agriculture on the
tropical coastal plains is quite different from that ltNl the Sierra The
area as a whole is less densely populated and in some parts such as the
Province of Esmeraldas is very sparsely populated Its principal pro-
ducts are exported The population has more mixed blood than the highland
people and is oore corumercially active and minded There is little feel-
ing of community of interest with the highlmds the rrincipal coastal
city GuayaqJil is larger than Quito and less remote fror-1 outside
influence
44 In terms of reported area devoted to its cultivation cacao
is the principal crop of the coast The table on the following page
shows output of main crops
45 Cacao is not however the most important export crop by value
being surpassed by both rice and panama rats (a handicraft product of the
region) Nor does the table show those products which result from
gatherage of mild growth tagua kapok oil-bearing vegetable nuts
balsa rood rubber etc
Y For use by the Caja de Klaquogo as required both in tile highlands and on the lowlands
-15-
46 Agricultural Production of the Coast
1939 ~ 1941 1942
(limdreds of pounds)
Rice 957164 872890 12304oO 1610489
Cacao 392000 263300 333250 315782
Coffee 343800 369000 310000 190633
Bananas (1000 bunches) 4090 3913 4568 4265
Oranges (COOs) 103000 lQ96oO 80550 75000
Cotton 200800 156800 155910 111500
Tobacco 24o43 4o 765 22349 29539
47 It has been estimated that about 500000 hectares (1 235 500
acres) are devoted to pastures on the coast supporting approximately
425000 cattle and 36000 swine
48 There is no doubt that the coast is an extremely rich agricul-
tural area although toward the south it is increasingly hampered by
shortage of water in the dry season And rt is overwhelmingly the
principal foreign exchange producing region of the country Yet it is
largely undeveloped by any modern standards lacking roads and almost
all basic civic amenities (water supply sewage paved streets etc) in
the provincial towns The development of a tropical agricultural region
without large labor supply _rill raise many interesting and some new
J Irrigation ~rks are in execution and others planned in various places and the irrigation equipment which it has bee11 suggested the Bank might finance would presumably be used on the lovlands as well as the highlands
-16-
problems the solution of hlch in detail may lack precedentY The
suitability of cacao to Ecuadorian conditions arises in part from the very
small labor requirements of the crop At bottom advance will lie along
the route of crop improvement and mechanization the difficulty will be
the proper application of mechanization crop by crop Some tropical pro-
ducts may never be suitable for mechanical cultivation being those whicl
would require intensive hand cul ti vat ion and may therefore not be appro-
priate for Ecuadorian condttions Others r1JJi3 be suitable only if grown on
relatively large plantations
49 Clearly for the foreseeable future many lowland products will re-
main at the stage of gathering of nld natural growth rather than plantashy
tion enterprise The flow to market of such productswould be increased
by improved access notably road core truction anQ at the same time road
building ~~uld seem to be a condition precedent for spread of plantation
methods particularly plantations using mechanical equipment lilliE diate
measures for the over-all agricultural development of the region may not
be directly agricultural at ell they are rather the provision of roads
and transport facilities the provision of long and medium term agric-llshy
tural credits and in some areas) the institution of health services
With the opening up of the region in this manner iiould come more clearly
perceived opportunity for better agricultural use of the land particu-
larly if effective demand for the products is transmit ted back to the
cultivator through establishment of product processing plants where approshy
priate for example in vegetable oils and tagua (vegetable ivory)
] This is the situation which in Brazil for example in an earlier technical epoch was 11 solvedll by importation of Negro slave lebor
-17-
50 As in the Sierra there are good possibilities for pastoral
development on the lowlands Some progress is already being made in this
direction with experiment in breeding more suitable cattle types through
crossing 11Ji th imported Indian brahmin strains Grazing for beef is not
highly labor intensive and this development is very promising since
export to other Republics by sea llould be reltti vely easy In the first
stages export would presumably be upon the hoof ith later development
of meat packing
51 There seems to be no single bottleneck or restraint upon devel~
ment presently existing all other conditions being favorable If developshy
ment occurs it will be along many simultaneous fronts but the front iJhiclf
is lagging and Inayen continue to lag is the provision of basic social ccp ishy
tal (roads water supplies health services etc) that is of those
things which no single private individual or corporation can provide for
itself Given these and the institution of suitable domestic credit
fecilities the rest may be accomplished by private domestic ini tiat1ve
52 The development plans of the Ecuadorian Government as outlined
in a Memorandum dated April 8 give much weight to lowland agriculture
The establishment of agricultural stations to provide farmers wi~h
disease-resisting cacao plants~ tecl1nical advice and credit facilities
is CD ntemplated no foreign exchange would be recpired all funds being
local currency The rehabilitation of cacao formerly a leading export
crop is desirable although development of cacao sources elsewhere may
prev~nt recapture of the position formerly held by Ecuador
53 A proposed agricultural mechanization programwoUld total
- 18
$25 million in foreign exchange cost )J The bulk of this ($1 5 million)
is allocated to wechanization of rice cultivation alone the benefit being
principally in resulting improved export position The remainder $1 milshy
lion is for mechanization of other agricultural produc~s apparently
mainly lowland (those products specifically mentioned being 11cotton sugar
oil-bearing seeds and other specified products11) the exclwnge benefit
forecast being principally through reduction of import a
54 Different criteria ~~ould be used in assessment of these two
projects The judgment on that for rice will depend upon forecast of
world rice markets and in particular upon expectations regarding rorld
demand for rice from the dollar area The validity of mechanization in
cotton sugar oil-bearing seeds and other lowland products will depend
first upon the technical possibilities for such mechanization a matter
not yet fully explored If sudl technical possibilities are favorable
effective mechanization vOuld constitute sound development upon the low-
lands which are relatively sparsely populated
Y Some part of which would be for the benefit of highland agriculture if machinery stations be established there
--19 -
IV MI-~RAL PHODUCTION
55 Ecuadorian mineral nroduction covers only a few products and
important the wells of the lowlands being exploited by the nglo-
Ecuadorian Oil Comany Production of crude petrolewn shows a slicl1t
rising tendency while exnorts have declined steadily a~ more refined 1
products are consumed domestically
56 Oil exploration to the Iast opound the Andesin the Amazonian
region is proceedinc under concession to tl-1e Shell Oil Go1~1any
Three wells have been drilled without success and tvro arc beinc
deepened Cost of this exploration to ciate j_s around US)23 million
If oil is found its only outlet middotwill be a pipe line over Ue Ances
(estimated to cost USiD93 million) and this the comany is not -rE1inz
to undertake unless assured of an outnut of at least 100000 barrels a
day
57 The only other irnrJortant minine activities are those of gold
silver conper and lead conducted by the South ~~erican Develoument ~
Company and the Cotapaxi Sxplora tion ConJ1any War-time lr oduction peaks
were 1942 for gold and CO)per 1944 for silver and lead Since these
resective peaks production has ~-~clined narticularly in copper and
lead although not to 1933 lsvels7
crude petroleum II II
1938 (millio~1s of 225 107
Production Exports Production refined petroleum 37
1947 barrels)
236 bull94
128 (See Table No_Jl_ Statistical Appendix
Production Gold (000 troy ounces) Silver (000 troy ounces) Co~per (000 pounds) Lead (000 pounds)
1938 445 82~0 27 21
War Peak l03tJ hhl3
96788 161-+88
19h7 5o5
1569 3316 h98h
-20-
58 Ecuadorian trade statistics list exports of crude pet~middotoleum
and minerals separately from that of other commodities even in aggre-
gate figures underlining the fact the exploitation is in foreign hands
and hence colonial in nature This aspect hmmiddotever is of di-1inishmiddot-
ing importance as now the foreign exchange realized from such mineral
exports accrues to the Central Bank and as in any event nineral ex-1)
ports form a diminishing proportion of the vhole 7
V ~JNUFACTURING PEODUCTION
59 There are virtually no stCltistics on manufacturing in Ecuador
and none which present any comprehensive view It is ho~middot-rever clear
that there is very Uttle industrial factory prJchJction and obser-
vation in the country leaves one with an impression of the nresent
igtilportance of handicraft production
60 The most inportant consuxner-good factory industrj_es are tex-
t~~~breweri~-~~ otheuro7r beveraces shoes ard leather _roduc~s buttons ~d~lttfr
and nails Textile production using domestically produced cotton pro-
duces cotton piece-goods and wool rayon and hemgt textiles supplying
almost all domestic demand for low-quality products The only irJDcrtant
producer-good factory industry is cement the plants being located near
Guayaquil Lack of domestic technical lmow-how and of capLtal and
the low level of domestic effective demand account for the sli~ht develop-
ment of faetory industries whose rrowth on any scale beloncs to a 1ter
stage of economic development
y Value of nineral exportsmiddot as nercentare of value of all exports 1929 260 nercent 1933 430 n 1939 397 1946 11~5 1947 69
Production and irrport statistics for cement tre civen in Table IJo bull 2__ Statistical Appendix
- 21-
61 Uuch of finished commodity ygtroduction is at the handicraft
stage both for nroducer and consumer goods In Quito and Guayaquil
one sees many small 11 shops11 producing metal leather and wood manushy
factures largely by manual methods It is an illuminating co~~entary
on the shallow growth of industrial specialization that the ll1ission
did not see any shops selling ready-made womens clothing All
womens clothing shops displayed only materials in the bolt as in
pioneer days elsewhere
62 One handicraft industry of great importance in exports is
the production of panama hats It has been estimated that 30000
families are occupied vrhole or art-time upon this nroduction and
at times (for example 1945) they have provided the largest single
export item by value The grmvth and treatment of the fiber and the
weaving of the hat is entirely an Indian handicraft industry the
Yteaving of a high-quality hat taking three months The fiber is erown
and the best hats woven in the lowlands Its future ir-mort nee is unshy
certain as the competition of Italy and the Fhilinpines is again felt
in low-_)rice woven hats the boom emjoyed during the war nay recede
63 Ecuador in its ~resent and foreseeable development is an
agricultural country with no immediate movement toward industrialization
EcuAdorians met by the Mission themselves stated this The growth of
factory industry will be slow that of small shop and handicraft manushy
facture somewhat less slow It vmuld seem as stressed later in this
report that there is room for grm~h of processing of agricultural
products Statistically such processing would be classed as industrial
production but is oroperly the finishing stage of agricultural productior
- 22-
to secure improved durability and portability of perishable products
This would increase effective demand imnacting upon the farm and ass1st
in stimulating agricultural development Some progress being made in
this direction notably in vegetable oil expressing plants Ihe only
non-agricultural project suggested by the -r~cuadorian Government has -eer
a cement plant located in the highlands at a foreign exchanr~e cost of
$2 rrillion the justification being both the saving of foreign exchange
expended upon cement imports and reduction of load upon the only railshy
way connecting lovrlands and hichlands Growth of cement use accompanies
economic development assessment of this project (engineering questions
apart) would involve tainly questions of timing location and finance
matters which are really all aspects of the single question whether
such a project may not be one for private direct investment Initial
expectation would be that were all factors favorable to the success of
the project it gtlould be readily undertaken by orivate enterprise
particularly when it is remembered that railway freiehts 1bullrould protect
highland production from lowland competition
6h No sueeestions regarding increase of electric power output
have come fror1 the Government indeed the official statistical services
have no data upon installed capacities and demand Cnly in Quito and
Guayaquil are present industrial uses of electric poler of any ir1portance
Elsewhere suIJply is from snall municipal plants (mainly therraal) for house-
hold consumption It appears that demand mar be ahead sunply in cost
towns very frequently voltages are maintained around 80 instead of the
rated 110
- 23 -
65 Shortage of electric nower is not however hamoering
economic development at this stage although it may soon do so in
sevral urban centers such as Qui to and Hiobamba Sone ttne i-1 the
iuture the possibility of large hydro-electric vrorks on the eastern 1
side of the Andes will merit attention
y Where the rivers are fast and clear on the western side they carry much silt
- 24-
VI DmIESTC THANSPORT AND COilERCE
66 The space devoted to agriculture in this report reflects its
importance in the Ecuadorian economy As has been said further developshy
ment will for sometime be mainly agricu1tural
67 Present restraints upon that development are not located
solely or perhaps even nrincipally on the farm there are many
features of the general economic environment which operate to hamper
even purely agricultural development There is great room for improveshy
ment of transport to knit the economy tocether and to encot1raee grovrth
of output
(a) Transport
68 Without roads there can be little regional or inter-regional
intergration Fithout that intergration (which for some regions and
some crops would open upon the world at the gatewa~r of a oort) there
can be but small inducement andlittle opportunity of increasing proshy
duction In much of Ecuador the principal transport vehicle is the mule
whose patience and endurance under heaJr load is matched by that of the
Indian
69 As regards roads the requirement is both more roads and
better roads capable of bearinr modern vehicular traffic The roads
traveled by the 1Jission are uniformly bad both slowing traffic and imshy
Ilosing extraordiPamiddoty vehicular de_reciation Ultimately no coubt
there vdll be an adequate system of all-rreather roads in Ecuador For
the immediate future the more modest tarset is to attain a reasonable
system of roads civine access to the creater art of roducine areas
- 25-
in the dry season At present the unsurfaced access roads are cut to
pieces by --vater erosion in the wet season and consolidated somew1at
traffic in the dry season A single eradinr operation smoothin thE
dirt surface at the end of the vret season would ci ve accelJtable usashy
bility in the dry )eriod v1hich in the populated coastal rovince of
icanabi for example is eight ~aonths of the year At -_resent the so1e
transport link for corunodities between loYrlands and the hihlands
is the Guayaquil to Quito (and beyond) railway This link is nrobaoly
nearing saturation point vdth present equipment and its strencthening
both by railway imJrovement and all-middotweather hichway construction is
obviously desirable it middotill probably become essential yri thin five
years
(b) Commerce
70 Physical transport alone hogtever is not the only ope c-ation
ofcarriaee required to intecrate a reeion internally and to bind toshy
cether the various regions There are also tL physical and the finanshy
cial aspects of comr1odity holdinr involving the storae and vrhere
necessaFJ the partial processing of products to reduce perishability
and the avail~bility of mechanisms of short-term finance extendine over
crop periods In Ecuador these tro aspects are closely related
71 Apart from some export crops there is virtually no crop or
food processinG undertaken And in the export crops processing
is the minimum necessary to secure portability Eice is nilled but not
polished cacao is sun dried coffee is dried and within only recent
years washed fruit is exported whole Some new e~Jor-ts may require
further processing and installation of plant starting or is in
- 26-
advanced discussion for example vegetable oil processing (although
for sometime no eXport surplus of vegetable oils is 11~11 and fish
canning
72 Nor is there any important ~recessing of domestic food pro-
duction for home consumption bull There is no freezing or canning of meat
which is taken to market on the hoof There are only two or three
very small butter factories and no whole milk orocessing Cereals
of course are not highly perishable but there are no silos or granarshy
ies and experience of similar situations elsewhere suzfests that losses
by deterioration and infestation may be significant no direct evishy
dence anthe incidence of this factor in Ecuador ~as obtained by the
Mission Thee is little storage of grass on the coast in silos or
as hay and in the dry season slaughter of cattle because of lack of
feed is at times necessary In short the situation is not so very
dissimilar to that ofmiddotmedieval Europe
73 Roads alone would not create an environment favorable to
change in this position although lack of roads nar well inlibi t change bull
In addition suitable credit facilities for the finance of co~~odity
holding through time are necessary
74 Hany complaints were voiced to the Hission reearding lack of
short-term banking credit for crop movement and storage and for medium
and long-term agricultural investment and no doubt there is signifi
cant lack of such credits But this is not the result of some simle
institutional defect of the b~~inc and credit structure even though
institutional improvement may be necessary It is fundamentally a
- 27-
reflection of the fact that Ecuador is extremely poor in disposable
capital available for even short-term investment ie vrorcing capi-
tal Improvement of short-term credit facilities for what in advanced
communities are regarded as purely commercial purposes would in effect
represent an increase of capital intensity in the Ecuadorian ecororny
To the extent that banks met more fully the gtJeak seasonal credit re-
quirements for croo movement and storage individual nrivate reoources
are relieved of the 1eak burden and available for other investments
75 Thus iorovement of the techanisr by 11hich the banking system
provides working capital for corrtercial or inciustrial (in the sense of
crop processing) purposes is itself an act of investment rather than
merely an institutional rationalization ilnd as such carry the
usual consequences of investment in an undevelogted economr with very
law voluntary savings To the extent that additional credits are not
matched by savings sewhere (either voluntary or forced through
taxation) they will be inflationary in effect just as an
additional act of long-term investment would be Increase of banki1g
nrovision of workinrr capital should keep step with totl capital for-_ - - 1 mation of which it is one aspect7
It is implicitly assumed in the foregoine that at nresent in Ecuador the amount of small voluntary savinrrs is neclicible It vrill presumably not alrmys remain so and ~Jart of the modifications of the bankin~ system shou1d be attract Clli1U1 atively such sav-ings in the fom of savinc do)Josi ts This 1muld increase the extent to which Danks can safely flovide capital It will be a much later before small private savincs are directly in-vested in commerce or industry throuh joint stock r1ethods There is no stock-exchance in Ecuador
-28-
76 It is of course just as important that the availabi lity of
working capital should not lag behind as it is that it should not run
ahead The Bank should ensure that any long-term investment projects it
may assist to finance do not effectively starve the rest of the econo~
of working capital in the process of avoiding inflation
77 There is also the question of the price of short-term lending
that is of the level of interest rates The Ecuadorian is a highshy
interest rate eoonomy The legal maximum for commercial short-term loans
is 10 per cent having recently been increased from 7 per cent legal
maximum rates however are not systematically enforced by commercial
banks themselves At a time when the legal maximum was 7 per cent
going rate for 90 day loans secured upon properly warehoused commodishy
ties and with third party endorsement was 12 pe+ cent
78 This very high structure of interest rates seems open to
obvious criticism but is in fact probably not Tiholly unjustifiable in
the present conditions of Ecuador It is the cumulative result of many
factors so that more official prescription of lower rates would be
quite ineffective These factors seem to be
(a) Interest proper~
(b) layment for risk bearing arising in part out of a
low rating upon individual credit and in part from
the institutional conditions (such as embryonic
commercial and financial ruarkets) which seriously
reduce the liquidity of any asset other than money
itself
-29
(c) An clcmmt 0f discount 111nn cyectcd luturc irf] utinn
reducing the real value of the pa~nent for lending
(d) An element of monopoly which upon purely subjective
judgment may be the least ilJI9ortant of these several 1
factors7
(e) The real shortace of capital whether short or long--
term~ reflecting in interest rates as a genuine
scarcity price
79bull Of those factors the di~ount upon expected future in-
flation increases prices at a rate of 12 ner cent per annum a money
interest rate of 12 per cent per annum is a real rate of zero If
therefore inflation could be controlled a substantial reduction of
money interest rates could be hoked for At the same tine while
inflation continues high interest rates probably have small influencemiddot
in encouraging money savings
80 Even without inflation ans until the su~1ly of available
real capital improves relatively high interest rates may well be
acceDtablemiddot as a price mechanisn nethod of selectin~ most urofitable y ~
uses of limited fundsbull middothere exoected urivate nrofit did not seem l - -
to parallel social desirability loans at lower rates (ie subsidized
terms) could be made perhaps through reconstituted Development Banks
Prima facie however such loans 1bullrould not be short-term
~I -Onthis interprepoundaion the situation in Ecuador differs signifishycantly from that in Peru
tt is suggested that a powerful point of intervention would be to limit commercial banking dividends distributed to not more than say 7 per cent The high profits nmv earned by commercial banks would then progressively accumulate until liberalization of lending becomes virtually forced by accumulation of funds representing genuine corporation saVings
- 30-
81 The discussion of private finance has so far upon
short-term credits there is an even larger nroblem in the
intermediate and long-term arricul tural credit It is not necessarr
to expand greatly upon this since it too is a consequence capi-
tal shortage
82 Imnrovement would seem to be alonrr the route - 1 of nroper UElte
of existing Development Banks (or their successors-) effectively
in the earlier stages as lending agencies of Government
VII OFFICIAL DEVLOPHl~NT FHmiddotIfJCE
83 In the circurnstances of a country like Ecuador the greater
part of domestic capital forr1ation requires official directly
or indirectly if it is to occur on any scale are too
small and too narrowly held to permit much -rowth this roL1te
andthose few who are able to save at any sinificant rate are larely
uninterested in the efficiency of ~reduction
84 Official finance may be either direct or indirect direct
throueh works executed by Government or 0JUblic bodies indirect
throueh lending institutions such as Dev~lopment Banlcs capitalized
from public funds In either case funds are diverted to investment
purposes by Govern~ent intervention
85 Thus Development Bank lending for productive purposes (for
example long-term acricul tural credit) is an item 1n ca9i tal formation
V There are thirteen reaional Development with an unirnJresstve record of manaeement Their possible reconstitution is under discussion
-31-
rather than a mere institutional rationalization of the credit mech-
anism Indeed as has been stressed in the last section even im-
proved su1nly of short-term credit gtrill in art rewesent
formation A developing economy which neclected these items in 11Cnn21~~
or forecastinc total caital investnent would be very vulnerable indeed
to inflation induced by over-investment
86 17here voluntary savings are Jow the only wmiddotamiddot to sirnificant
rate of capital formatton can emerge without inflation is an equi-
valent amount of savine forced throurh taxation One ould look for a
relatively hirsh level of taxation to national income and for a rela-
tively high proportion of exnenditures caDi tal purposes to total
Government expenditures On both these counts Ecuadorian elq)erience
seems irare s si ve
87 In 1946 total budretary and spedal revenue rms disclosed
as 5368 million sucres in the sa1le rear an estLnate middotJaced national
income at 20096 million sucres This a proym~tion of 27 middoter
come a proportion so hich that in fact it lacks credence In assess-
inc total tax burden part of the revenues of Government monorolies
and all of municial revenues should be included if this be done y
the proportion becomes 37 per cent In addition new exchance taxes
yielded 973 million sucres in 1947
Mono_)oly participations (ii direct disbursements for public _Jurposes) were 353 million sucres in 1946 munici~al income was 1803 million sucres in 1947 (1946 not available)
32-
88 It is very difficult to accept the conclusion that Ecuadorian
revenues form so high a proportion of national income it would seem
that the estimate of national income is too low Nevertheless tax
revenues are clearly a sizable percentace of national income
89 At the request of the Mission an official estimate of total
official expenditures on capital account was prepared Total income of
Government municipalities provincial councils and other public
entities was ~iven as 7S4 million sucres and total capital expenditure
from that income as 2237 million sucres or slichtlr over 30 per cent
of revenuesY It is difficult to feel confident that effective capi-
tal formation on this scale actually occurred certainly there is
little evidence visible to the eye of the t1middotaveler
90 Notwithstanding such doubts the fiscal evidence is of a
fairly hich proportion of tax revenues to national inco~e and of a
hich proportion of revenue allocated to capital investment It would
seem that the fiscal mechanism exists for domestic capital fo~~tion
what may be required is more effective expenditure of allocated funds-
Before a development plan envisa~ing the expenditure of still more funds
was adopted it would be desirable to examine closely administrative
and technical efficiency in the use of existing funds
91 On the side of revenue Treasurr officials informed the Mis-
sion that tax evasion was estirnated at some 30 per cent of ta revenues
1 This makes such capital expenditures 112) per cent of 1946 national income which a~ain seems very high indeed
The two largest items are Government public works (8)4 million sucres) and municipal works (900 million sucres)
- 33-
particularly in income and land tax It might well be advantareous
on the sides both of revenue and of expenditure for Ecuador to obtain
technical assistance of the tPe that the United Nations Department of
Economic Affairs rendered to Venezuela in 1947~Y involvinpound revision
of the structure of the budget of budcetary audit practices and the
like
f Report~d in UN Document ECN 1SubJfti 4 - 21 June 1948 lostricted)
- 34 -
VIII 001EHNl(iEi~T FINANCE AND INRATlON
92 What may be called 11multiple budget practices exist in Ecuador
as in other Latin American countries There is an annual Ordinary Budget
one or more Extraordinary Budgets( tro in 1947) end a number of Special
Accounts (twenty-five in 1946) not included in the general budgetary
accounts The State operates nxmopolies in tobacco liquor salt and
matches part of whose profits are taken into the ordinary budget as
revenue and part used directly for public purposes It is thus diffi-
cult to assesrmiddotgggregate Government revenues and expencii tures and vir-
tually impossible to detail the purposes of expenditure to ascertain
accurately public capital formation by way of public morks and the like
9 Taking the disclosed figures on the ordinary and extraordinary
budgets and tne special accounts there has been a net surplus over the
past ten years 1operations of 234 million sucres~ This however is
not an accurate reflection of the true aggregate position because the
Government operations are not ~holly included in these disclosed ac-
counts But since the Government has no source of internal funds other
than the Central Bank the net recourse of Government to Central BanJJI mirrors the over-all result of Government finance such recourse increased
In 1946 for example the monopolies contributed 5357 million sucres to the general revenue and disbursed 3526 million to municipalities (145 million on general participation and 1652 million sucres for 11 special participation of gthich an example is a new electricity plant at Ambato the state railways (92 million) etc
gj iiith only three years of disclosed deficit since 1938 See Table 12 in Statistical Appendix
2 Central Bank loans middotto Government less Govertllllent deposits in banks
- 35-
480 million sucres over the nine-year period 1939 to 1947 inelusivel
an average of 53 million sucres annually amplch averaging however con-
ceals very important differences between the three periods within the
nine years to tal
94 The table on the next page sumnari zes the factors causing in-
crease of domestic money supply It is computed by rearrangemm t of the
balance sheets of the Central Bank all commercial banks and all developshy
ment banks and is thus a table shoring changes in items in a rearranged
aggregate balance sheet of the Ecuadorian banking system
95bull The first t70 periods 1939-1943 end l943-l946f were both
periods of heavy inflation_ During the first five years notes in cir
culation and monetary deposits increased 3437 million sucres (or 255 per
cent) and in the next three )eera 2904 million sucres (or 61 per cent)
But the causal structure was quite different in the two periods
96 In the first inflation was almost wholly induced by external
factors (favorable balance of paYments causing increase of foreign exshy
change holdings) the major domestic factor being expansion of commercial
bank loans and investments in this period deficit Government finance
was not a causal factor
97 In the next three-year period 1943-1946 however the major
inflationary factors change deficit Government finance and expansi on of
f As calculated by IBRD Mission loans to Government including ali loans to official agencies A recent calculation by the IMF Research Departshyment covering Government operations only places the aggregate 9 years deficit at 345 million sucres~ See Table 12 in Statistical Appendix
- 36-
BANKING CHANGES ~0015 SucresJ
Jan 1939 Jan 1944 Jan 1947 Jan 1948 to to to tomiddot
Dec 1943 Dec 1946 nee 1947 June 19h8 t~ ~arsJ ~~ iears) trmiddot ~~r1 t~ mo~~h~2
Central rcrk loans tomiddotc~vt~ f 16174 f 160260 - 701p88 23695 Central B~r~ Loans to Public -1 6978 2_283 1- 67548 1- 39763 Commercial Bank Loans and
Investments J 187554 f 14624 88h4 1- 2~ ~49 Development Baru Loans and
J 14227 136818 ~ 644 1- 26090 Investments
1 224933 f 313985 11)40 1- 68107 Net Bank Foreign Exchange 260774 f 94662 - 53203 - u6 112
7 485707 7 408647 I
7 bull - 64543 21395
Notes in Circulation f 16o907 1-131729 - 23205 - 17290 Public Monetary Deposits -A 162868 1- 128914 - 68734 1- 19620 Government Deposits f 19968middot 29768 9050 2366
7 343743 7 290411 82889 - 36 Public Time Deposits 116834 ~ 42053 1~004 f 317j
y 7 46o517 7 3J2464 83893 ~ -- 3137
Absorbed by Banking System 1- 25130 middot~ 76183 1- 19350 18258 7 485707
11 f 4o8647 64543 I - 7 21395
Net Government Borrowing J 131492 from Banks 3794 - 79738 - 32745
Deposits in Central Bank in foreign money (not included above ex pressed in Sucres
Government ~ 4486 - 633 871 - 11059 Public 25242 J 78964 - 78814 J 4h97
T29J 728 7 I
7 IIIII middot~~ ~ I
78331 79685 31+38
y Made urt as Io11mlfs
Cas~ bullbullbullbullbullbullbullbullbullbullbullbullbullbull ~ bullbullbullbullbullbullbullbull - bullbullbullbull J 266 1- 367 - 22~7 99 Other assets less other liabilities~ ~ 4 330 ~ 293 ~ 18~8 Capital and Reserves~- bull bullbullbullbull 4 bullbull 52 bull 1 1- 79-9 26 o 278
7 I
7 7 I
7 bull Ill ri bullbullbull
251 762 194 18)
Subtract increase
37-
Davelopment Bank lending dominE)te the position Expansion of commercial
bank lending is relatively negligible while a comparatively small role is
played by balance of payment influences
98 From the end of 1946 the general financial situation deterior-ated
rapidly in five months from January 1947 to ~~ay 1947 net foreign exshy
change reserves of the Centrel Bank fell 935 million sucres or 7 7 mil-
lion dollars to a level of 2927 million sucres or 21 7 million dolJars
In litaY 1947 an IMF Mission arrived in Ecuador (at the request of the
Government) and in June 1947 a multiple exchange rate system with import
classification was introduced upon the advice and with the concurrence of
the Fund Operation of this system Jielded considerable profit n in
sucres it is in effect a new imposition of import taxes and such
11profits 11 are in reality additional fiscal revenueY It was of the
essence of the Emd s attitude in Ecnador that the exchange difficulties
bad arisen through domestic inflation and that these addi tiona reve-
nues should therefore be applied only in reduction of Government debt to
the Central Bank
99 The effect of such policy is clearly seen in the third column
of the table Inflation is checked notes in cirmlation and monetary
deposits falling 929 million sucres (or 11-per cent) i~ one year Alshy
thoUtgb however Central Bank loans to Government (and also colllWrci al
jJ At this point only the domestic aspects of this measure are emphashysized In a later section the external or balance of ~ent aspects will be taken up
Y Such revenue from exchange taxes yielded 975 million sucres in 1947 bull md in July 1948 was running at g to 10 jllillion sucres a month this revenue is not of course taken into the budgets bull
- 38 -
bank loans and investments) fell the actual deflation _was largely
caused through loss of foJeign exchange rather than over~all reduction
of domestic bank lending For in response to vigorous ~oilplaints of
credit shortage the Central Bank greatly increased its loans to the
public almost fully offsetting reduction of its loans to Government
In the first six months of 1948 there was no significant contraction
of money supply banking loans to the public eJggtanding to offset the
deflationary effects af an adverse balance of payments and of Government
debt reduction
100 The exchange surcharge multiple rate system was in operation
through August 1948 proceeds being devoted to reduction of Government
debt to the Central Bank~ But there has bean concern lest the resulting
deflation of domestic money supply would be too severe and the Central
Bank has in fact adopted a compensatory policy to prevent further reducshy
tion through continuing to expand lending to the public arid through
quasi-open-market pur~e of mortgage bonds to the amount of 17 million
sucres by July 10 19l8 when further purchases were discontinued
101 To avoid the netcessity for such compensatory policy the Cen-
tral Bank proposed to the Government that the destination of reveme from
exchange taxes should be changed Instead of being applied in reduction
of debt the proposal was that they should be useci instead to create a
development fund tt to be administered by the Cent~al Bank unless a
planned Development Institute or other competent authority is estabshy
lished In mid-September the Fund appro ved such cllanged dest ination of
these revenues 90 per cent of which will in future be applied in finance
of development and 10 per cent in stabilization of Government bond prices
-39-
This removes a check upon inflation which has operated for some fifteen
months unless Central and commercial bank lending policies recognize
this changed situation further inflation may follow even if the Budgetary
accounts run no deficit
102 At the same time this change does provide a source of local
currency finance for development projects
-40-
IX INTERNATIONAL TRAIE AND THE BALANCE OF PADlENTS
103 Ecuador exports agricultural products (rice cacao coffee
tropical fruits balsa wood) mineral products (crude petrolelUil gold
silver copper and lead) and handicraft products (panama hats)Y
lo4 Approximately one trird of Ecuadorian exports (including
minerals) go to the United States The proportion rose during the war
due to VmiddotIar-time demand for strategic raw materials but is now tending
to revert to pre-war levels Loss of European markets has been partly
compensated by gain of n$w export markets at least for a time and
especially for rice Countries in the Far East whose rice production
fell during war such as the Philippines and in Latin America whose
Eastern sources of supply were cut off such as Cuba and Venezuela
have provided demand for Ecuadorian rice This outlet however may not
last much longer
105 On an average of years 1938 to 1943 about 15 per cent of
Ecuadorian imports are foodstuffs wheat and lard being the largest
items and 85 per cent are manufactured goods and equipment Import
of foodstuffs is however gro1ing t-vith population and in the key pro-
ducts of wheat and fats would be expected to grow still faster if
econowic development raises n~ss living standards witl10ut increasing
domestic output of these prodvcts For increased consumption of wheat
products and fats is in part the definition of rising living standards
for a very poor population
fJ See Table No13 in Statistical Appendix for composition of exports
-41-
106bull Before the war (average of the years 1937 to 1933 ) the Americas
supplied 49 per cent of Ecuadorian imports by value the United States
alone supplying 41 per cent Germany provided 22 per cent of total
imports and the United Kingdom only 8 per cent Europe as a whole supshy
plying 45 per cent
107 In 1946 and 1947 the Americas provided 86 per cent of total
imports the United States supplying 66 per cent EUrope as a source of
imports fell to 12 per cent although the United Kingdom maintained its
relative position (7 per cent) Whether the United Kingdom can expand
its provision of imports for Ecuador JDaY be domiddotubtful on the one hand
the loss of Germany as a supplier pzo vides an opportunity on the
other the competitive industrial position of the United States may make
it difficult for the United Kingdom to fill this gap
No balmce of payments estimates eJd st for Ecuador1
Growth
of foreign exchange holdings over the war period however indicates a
strongly favorable balmce ~let reserves which were equivalent to 409
million sucres in December 1939 rose to 3962 million sucres (294 milshy
lion dollars) in December 1946
109 Official purchases and sales of exchange are shown in the fol-
lowing table together with corresponding movements of exchange reserves
The difference betRSen the balance on official transactions and the moveshy
ment in reserves arises from transactions on the free market
110 During the war import and exchange controls were nominal
there being no shortage of dollars nor any decrease of exchange reserves
jJ Except for the ~eriod January to May 1948
-42-
Loss of exchange reserves in 1945 led to a tightening of control on an
allocation of quotas smong users of exchange Import permi ts were
granted on the basis of former imports by merchants At the end of
1946 controls were relaxed on an extensive list of imports items and
the consequent loss of exchange has led to difficultieQ
Ul Official Official Balance Changes in Purchases Sales on Net
Official International Trans- Reserves actions
(Millions of u S Dollars)
1942 257 185 t 72
1943 35-5 279 t 1middot5 t Ul
1944 423 34~4 t 79 f 88
1945 353 394 - 41 - 7-2
1946 471 415 f 56 t 1 9
1947 488 579 - 91 38
112 From December 1946 to IVtay 1947 net foreign exchalge reserves
fell US$ 77 million from US$ 294 million to US$ 217 million In May
1947 the advice of the International More tary Fund was sought with reshy
sults summarized as follows in a recent Fund documentY
The lfund 1 s Mission arrived in Ecuador in Yay 1947 It was not advisable at that time to contemplate devaluation which would have made the inflationary situation worse An emergency program was therefore proposed Essential and semi-essential imports were to be distic5~ished and a surcharge of 5 sucres p3r dollar imposed on the semi-essential group as a check against their excessive import New decrees including many of the recomshymendations were issued in June
The main features of the new system were as follows
Y Economic SuVey of Ecuador RD 672 - P 43-44
- 43-
(a) The elimination of all quantitative import export or exchan~ restrictions licenses and quotas with the exception of a few absolute prohibitions of some luxury imports
(b) The checldng of excessive import demand through a fiveshysucre (33 per cent) surcharge on non-essential imports
(c) The suspension of nearly all exchange sales for nonshytrade transactions and the creation of a free market bull narrowly limited in volume and comprising mostly all transactions that are uncontrollable in practice plus a snall amount of domestically produced gold
(d) Exchange for a small amount of the least essential goods was made available in the free market
(e) One of the basic aspects of this plan was the steriliz~ tion of all proceeds from the import surcharge which was placed in a fund for the extraordinary amortization of the government debt to the Central Bank Tnis is still in operation
The beneficial effects of these reforms were felt immediately In June the trade deficit ~as reduced to only $07 million and in July to $06 million By August for the first time in 3 monthsl there was a small surplus In September the deficit was smci l -j)O 5 million In October there was a surplus of $15 million and in November and December there were small deficits of only $01 million and $07 million respectively
In short the deficit for the year was about $99 million in its gross gold and foreign exchange reserves During the same period international liabilities of the Central Bank showed a reduction of about $6 million Therefore~ the net deficit was around $39 million 95 per cent being in the first half-yeer and before advice had been received from the Fundrs Mission
113 It should be emphasized that this multiple-rate system of
exchange control is entirely freed cpentitative controls Excessive
import demand is checked by the higher rates upon imports deemed non-
essential the list of which is knollD and published Anyone presenting
sucres is provided with exchange at the appropriate rate upon list A and
B goods and the free rate is influenced by occasional releases of offi-
cial exchange into the free market The system that is utilizes the
inter-play of the price mechanism rather than the bWlilmlcracy of quanti-
tive controls or quotas
- u4-
114 Loss of exchange continues however despite considerable reduc-
tion of imports Gross international reserves declined US$ 18 million
and net reserves US$ 35 million in the first six months of 1948 Offishy
cial transactions January to June 1948 are surmrarized in the following
table~
Receipts From Exports From other Transactions (1)
Total
Payments For Imports For other Transactions
Total
Balance Change in Gross Reserves
1947 Jan to June
1948 Jan to June
(Millions of Dollnrs)
163 5 6
167 44
219 211
289 219 23 10
312 22 9
- 93 - 18
(l) Includes purchases of domestically produced gold deposits received in foreign currencies and borrowing from corres~ pondents abroad
115 Prospects for the remainder of the year moreover are not goo~
It is estimated that loss of international reserves over the whole year
may be aboat US$ 6 million Whether the deficit is in this region de-
pends largely upon actual export realizations for the remainder of the
year lhe most critical here is rice 11hose ygtrice is falling and the
crops accumulating in the rice millsplusmn Latest information is that
f Countries receiving allocations of Ecuadorian rice under International Emergency Food Council allocations have been requesting a change in source of supply owing to shortage of doJJers Thus France has asked for 6000 tons of rice from Indo-China instead of ~cuador and Greece for 2000 tons from kVPt in place of Ecuador as supplier A recent favorable sale of rice-to Haiti has somewhat improvea the cuITent position
-45-
plantings for the October crop are substantially reduced Wet weather bas
led to some loss of the cacao crop Receipts from exports in the follow-shy
ing official exchange budget may therefore have to be modified down- [l
ward on any pxuient calculation-
116 ~or Recei1ts and Sales of Foreign hchange
(Thousands of U S Iollars)
1948 1947 Estimated Actual
BECEIPTS
Worts Rice 13~ la4~ Cacao 11 l 2 Other products 10700 12371
Total Exports 354oo 42120
Foreign companies 5300 4842 Others 800 1883
41500 48845
SALES
Imports 44800 53499
Services 3200 4470
4B ooo 57969
117 In this situation of continuing presSlre one step has been
tken and others are under consideration The one taken relates to offishy
cial imports representing an average pf 20 per cent of total imports
Importation of cigarettes liquor matches and other things by the State
tionopolies is especiallyen significant These were formerly provided with
exchange tax-freebull ie at the ~owest rate of 1350 From July 26 they
afe required to pay the ordinary import rate of 15o4 on sll supplies for
J See note on page 47 -A
- 46-
their ovm use (such as office supplies) and the same rates as private
importers (ie 15o4 or 20o4) on all imports to be sold to the public
(such as wheat flour fats cigarettes etc) accord~ng to the classifi-
cation of the goods
118 Remaining possibilities seem to be a partial reclassification
of imports removing items from List A as essentials to List B as se~ishy
lwruriesY and or a chenge of nominal exchange parity vri th or mithout
a narrowing of the spread between the rates Here pressure from
exporters particularly from rice exporters may be hee~vily in favor of
an increase of the dollar buying rate with consequential changes of
selling rates
119 The present loss of foreign exchange is occurring ~rithout any
service being met upon defaulted foreign debt although service of Ex-Im
Bank loans is being made If it be assumed for purposes of calculation
that Ecuador reaches an agreed settlement identical to the Chilean sershy
vice would require exchange equivalent to US$ 378000 in 1949 (of which
US$ 368000 would be required in dollars) and would rise to US$ 4o20CO
in 1954 Adding service upon Ex-Im Bank loans outstanding on June 30
1948 and other known but small indebtedness total debt service would
increase to US$ 1410000 in 1949 rise to a second maxilliUID of US$ 1394000
in 1951 and then progressively decline Upon the assumption thet amp-Im
Bank loans undisbursed on June 30 1948 are all fully drawn before their
maturity total debt service charges would be US$ 1533000 in 1949 rise
On August 21 a number of import items were changed from List A to List B the aggregate import value (when granted exchange at List A rate) affected being US$ 7 million
-47-
to US$ 213431000 in 1952 and again would progressively decline These
last service charges rould be for 1949 3 1 per cent of 1947 actual
official foreign exchange receipts and 3 bull 7 per cent of estimated 1948
receipts and for 1952 48 per cent and 56 per cent of 1947 actual
and 1948 estimated exchange receipts respectively
120 Estimating prospects from this point in time Ecuador does not
seem to be a country able to afford assumption of any great additional
burden of debt service payable in dollars The amount that could wi thbull
out hardship or distortion be squeezed out of the balance of payments
by no means corresponds to the development needs of the country Any
start must therefore be modest and cumulative rather than spectacular
and precarious and this conclusion fits with other controlling factors
in the over-all situation notably the supply of administrative techshy
nical and managerial abi li ty
- 47-A -
Note on Official Exchange Transactions
Official exchange transactions for the firstsix months of
1948 are given on page 44 of this report Results for the full year
are now available and reveal that earlier expectations regarding the
probable 1948 balance of payments deficit were unduly nessimistic
Cacao export values have been lar~er than expected and in the last
period of the year there IBre some unexpectecily favorable rice eA-port
sales total export receipts were US$ 8 million larger than forecast
on page 45 Imports were held close to forecast
Receipts
Exports Foreign Co~anies Other
Payments
Imports Foreign Comoanies Other
Balance
Change in Grass Reserves
Official Exchange Transactions (full year - n~illions of dollars)
1947 -421
L18 19
488
535 06 149
580
y does not agree because of rounding
January 26 1949
1948 -436 h2 7
i85
Lt52 2
28
-oJ
-48-
X EXTERiJAL DEBT BEoomJ
121 The position of public long-term external bonded (excluding
inter-governmental) indebtedness of Ecuador is as follows
Amount in Default AmoUpt Outstandi~ ~ e Interest D~te
~In currmc1 (u s (us of p~t Dollars) Dollars)
Dollar obligations Gueyaquil amp Qui to Ry) $ 1226)000 12263000
286000 12263000
286000 123147
63047 Sterling obligations Franc obligations ( Oie
b 71000
Francaise de Chemin de Fer 1 lquateur ) Fcs 8386000 70000 70000
12619000 l26l9000
middotmiddot Note The Government of Ecuador oyenms about 75 per cent of the
stock of the Guayaquil and 1uito Railway and guarm tees the bonds and certificates which are largely held in England The franc obligations of the Cie Francaise de Chemin de Fer 11lquateur are not included in the offi cial statement of the public debt nevertheless the Government does recognize some liability for them and during the last few years has engaged in Degotiations for their retirement
Inter-governmental Debtsmiddot
122 Debts to the United States Government are of three types
63047
first the loans by the Export-Import ~which were outstanding on
June 30 1948 in the amount of $7 705606~ second the aJIDunts duemiddot
because of purchases of surplus property totaled $484 567 on March 31
1948 and third the obligations arising out of the lend-lease settleshy
ment the amount of 1fhich is not available (Total lend-lease assistance
j This section of the Report was prepared by Mr Paul Dickens
to Ecuador amounted to $7 bull 795000 )
123 In addition Ecuador is indebted to the Government of Venezuela
in connection with the establishment of a joint shipping company Late
data are not available but as of February 1947 $500000 ($1000000
authorized) was outstanding the total to be repaid by 1966
Debt History
l2ij Upon partition of the old Republic of Colombia~ middotEcuador was
apportioned 215 per cent of the original Colombian debt by the convershy
sion of l834a Between 1834 and 1854 no interest was paid The period
1855 to 1908 was marked by numerous adjustments and defaults
125 In 1898 the Guayaquil and Q]lito Railway Companyt s first mort-
gage 5 per cent loan of 1899 was issued It was expressed in dollars but
was in reality an English loan In 1908 a new (reemenJl was reachedbull
which was to be a final settlemet of all past disputes and controversies
between the Government and the Guayaquil end ~ito Railway Company and
the bondholders In 19~-10 the Government defaulted on the new agree-
ment In Novemberl9ll payments were resumed on the railway debt on)y
but a revolution caused a further suspension from December 1911 until
lfarch 1912 Subsequently service was partially resumed on the external
debt until July 1914
126 From August 1914 to July l9l8 no paYments were made on eny
foreign obligations except that service on the prior lien railway bonds
had been maintained up to and including the January 1915 coupon By
rf Negotiated settie~nt
-50-
1920 interest and sinking fund on the prior lien railway bonds had been
brought up to date but service on all other obligations ~ed in
arrears In 1926 interest on the salt loan of 1908 was brought up to
date but default took place on the coupon dueJam1ary 2 1927
127 The outstanding bonds of the prior lien issue were redeemed~~
January 1929 at VIhich time the January 1914 coupon was paid on the
5 per cent first mortgage bonds of 1897 In the case of the salt loan
of 1908 sinking fund was resumed in July 1928 and interest was paid
to Jazruary 1929 inclusive None thereafter Sums due from July 2 19C3
to January 2 1931 inclusive deposited with Central Bank in sucres
were used for governmental purposes after December 1931 No payments
were made after January 1929 on the external debt of Ecuador
128 Up to the end of 1948 no acceptable arrangement had been pro-
posed by the Ecuadorian Government for the resumption of interest and
sinking fund payments on external loans
-51-middot
XI bull POLITICAL
129bull Recent political history in Ecuador has been turbulent
although contest fo~ power at the top has not greatly affected the
bulk of the population Suffrage extends to all literate citizens 1
over twenty-one years of aee-but the requirement of literacy effect-
ively excludes the Indian bull T)tal votes cast in the recent Presidential
elections were 289164 from a total Population of some 35 million
130middot On May 28 1944 a few days prior to a scheduled ceneral
election an uprising occurred and Dr Jose Haria Velasco Ibarra
assumed office as President Dr Velasco had been President before
but following a coup dletat in August 1935 after he had been in
Presidential office less than a year he fled to Colombia and re-
mained in exile for several years On July 23 191-4 general elections
for a Constitutional Assembly to draft a new Constitution were held
Installed on August 10 the first Act of the new Assembl3r which was
predominantly Conservative was to confirm the legality of Dr
Velascos assumntion of the Presidency
131 On June 30 1946 new elections to the ronstitutional
Assembly middotwere held The only party particiJatine in these elections
was the Conservative The Liberals R~dicals Socialists and Commu-
nists abstained on the crounds that President Velasco did not offer
them sufficient guarantees On Aucust 3 1946 there vrere a number
of arrests following an abortive uprising and on Aueust 11 the Con-
stitutional Assembly re-elected Dr Velasco to the Presidency (by 43
to 10) for a term of office to last to September 1 1948
12bull Being compUisory for men voluntary for woraen -
132bull A new Constitution was promulgated in January 1947
133middot On August 23 194 7 a bloodless coup detat led by Colonel
Carlos Iancheno Minister of Defense in Dr Velascos Cabinet deposed
rresident Velasco who fled the country to Colombia for the second timebull
Next day Colonel Mancheno proclaimed himself Acting President and
formed a five-man Socialist-Liberal Cabinet despite the absolute
Conservative majority in the Assembly A week later however on
August 31 a counter-revolutionary military movemont broke out in the
north and the counter-revolutionaries captured Quito on September 2
134middot Colonel llancheno resigned the ActinG Presidency and dis
appeared the sa1ne day Dr Suarez Veintimilla who had been Vice
President under Dr Velasco and the former conservative Uinister
resumed control of the GoverPment Next day September 3 a Council
of State in Quito declared that Dr Velasco had by abandoning his
post terminated his functions as Chief of the State Dr Velasco
howeverJ vrho middotwas by this time in the Argentine declared that his
remo~al to Colombia had been forced and announced his intention of
returning to Ecuador to resume office
1~ On Seytember 15 1947 a Secial session of the Zcuadorian
Concress accepted the resignation of Dr Veintimilla and elected
Senor Carlos Julios Arosernena head of the Banco Ce Descuento at
Gua~raquil and a non-party man as Vice President with novers as
Acting President until September 1 1~48 Senor Arosemena formed a
mainly Liberal Cabinet with one representative each of the Consershy
vatives and the Socialists Coneress also ~onfinned the Council of
State 1 s view that Dr Velasco had forfeited the Presidency by abandoning
his postbull
136 On June 6 1948 Presidential elections were held The
three parties represented vere the Conservatives (Dr Manuel Elicio
Flor Torreo) the Liberals (Galo Plaza Lasso) and the Radical (Genera1
Alberto Enriques Gallo) Final results were announced as
Plaza 115835
Flor 112052
Enriques 53601
Invalid 27 676 289164
137 bull Doubt persisted until this month (August) as to who would
receive the election The Electoral College had been invalidating
votes on technical Grounds and as interim returns and invalidities
were announced it was noticed that the majority of the latter were
being deducted from the Plazavote After conferences the Electoral
College revalidated all votes and conducted a re-scrutiny on less
strict basis Senor Plaza has been declared to be the rfjSident-Elect
by the Ecuadorian Coneress and assumed power September 1 1948 The
middotpresidential term of office is four years
The Vice Presidential results were
Conservative 1anuel Sotomayor y Luna llu008
Liberal Dr Abel Gilbert 113213
Radical Dr Cueva Tamarz 5h07h 28129gt
139 Senor Plaza was born in Nmv York USA forty-two years
ago his fatter the late General Leonidas Plaz~ was President of
Ecuador in 1901-05 and 1912-16 middotSenor Plaz who had been taken to
Ecuador as an infant accomnanied his father in exile to the United
States and attended the University of California the University of
Maryland and the Georgetown School of Foreign Service in ~7ashington
l4o Senor Plaza returned to Ecuador in 1930 and for the next
fourteen years operated the family estates there reclaiming them from
virtual bankru~tcymiddot to prosperous and efficient state He has for
example been active in encouraging the breeding of new cattle strains
is President of the Ecuadorian Holstein-Friesian Association and oper-
ates a butter factory on his estates with a Danish ~anarer He was
ar Minister from 1938-40 and Ambassador to Cashington from 19h4-46
l In executing any policies he will of course be handishyt4
capped by the lack of a fully efficient Civil Service The position
in Ecuador is the same as that in othelmiddot Latin American countries
that the Civil Service is naid on low salary sca1e and lacks compe-
tent administrators Such lack is an aspect of the general shortage
of technical ability in the country
TABLE
1
2 bull
3 bull
4
middot 6
7 bull
8
9
10
11
lZ
13
14 bull
15
16
17
18
19
20
ECUADOR
STATISTICAL APPENDIX
Oil Production and Exports
Cement Production and Imports
Yfueat Production and Imports
Rice Production and Exports
Rice Exports by Destination
Cacao Production and Exports
Coffee Production and Exports
Cotton Tobacco amp Sugar Production amp Sugar Imports
State Railwaysmiddot Lines amp Rolling Stock
State Railways Merchandise Hauled
Population and Roads by Provinces
Budgetary Receipts and Expenditures
Exports of Principal Commodities Volume amp Value
Imports Classified by Groups Value
Exports by Destination Value
Imports by Source Value
Balance of Trade by Major Regions
Exehanee Reserves and Banking Position
Price middotIndices
Status of Ex-Im Ballilt Loans
ECUAIOR Table 1
Oil Production and Expomiddotrts
(thousands of American gallons)
Crude ou Gasoline Produced EJtported bullRefined middotproduced
1938 94586 78696 15500 41654
1939 97125 68819 17679 bull 141
194o 98654 70~99 23001 6162
1941 65382 38362 25914 6462
1942 95671 68516 29489 72l7
1943 97211 65003 34635 8076
1944 121469 82520 38083 8927
1945 109855 73897 38752 10059
1946 979+7 52412 45213 12271
1947 99140 39359 53949 16587
Source J3o1etin Banco Central del Ecuador
ECUADOR Table No 2
1929
1937
1938
1939
1940
1941
1942
1943
1944
1945
1946
1947
1948
l First six months
CEMEHT PRODUOTIOllT AliD IMlORlS (metric tons)
Production Imports
17782
15699 10082
14254 13373
14249 12013
16512 10935
17213 2_846
19802 so98
2756o 933
34691 1590
37504 953
38496 3114
33231 14941
20484JJ
Sources Production Eoletin Banco Central del Ecuador Trade Ministerio deEconomia
Total
25781
27627
26262
27447
20059
24900
28793
36281
38458
41610
ECUAJX)R Table J
Wheat and Wheat Flour Production and Irraquorts
(thousands of kilos)
Wheat
Production Imports Exports Consumption
194o 28120 bull 73 28o47 1941 24578 36 24542
1942 24265 bull 76 24189
1943 22034 22034
1944 23251 912 24175 1945 23115 2733 180 25667
1946 25852 4532 23 30361
1947 2lo66 494f)J 11
Vfueat Flour
1938 10743 9981 na
1939 7864 16638 na
1940 7996 8-592 275 16312
1941 7225 11823 286 18762
1942 7 161 23497 161 30498
1943 7461 9862 17322
1944 5216 24023 29239
1945 5174 25137 30311
1946 7~38 11313 g 18813
1947 5943 1886) 4Y
Less than 500 kilos Y First 6 months
Sources Ecuador en Cifres a~d Ministerio de Economia
~emiddot 1926-30
1931
1932
1933
1934
1935
1936
1937
1938
1939
1940 -middotmiddotmiddot
1941 ~ )~ (1
1942
1943
1944
1945
1946
1947
1948
~iiampn-sect00-lfmiddotks
-~Jrst~middot-nsmcnths
gJ Provisional
(B EQUOR
RI03 PRODUCTION ApoundP ~OR~S
Vo1wnfJ Production middot E~orts
(metric tons)
26)04
23584
29863
39270
39008
31699
39036
52136
44027
40144 ltit middotmiddot~ 0 56596
5873
100949
ao6o7
53168
102048
112711
047
8255
3842
6449
5282
22907
8734
12)3
2ooso
962
18343 t - ~ J
20546
32028
46992
64604
29318
66918
6~209fl middot tloo 1
$ bull
tt ( r t
z
Value 3xoorts
(thousand sucres)
1881
936
6667
10864
6555
14632 pound 170
23265
51460
93837
127105
60395
203243
2rfjuft
Sources Production Boletin Banco Central del 39uador~ Trade Ministerio de Econom1a~ ~r- ~fl ]r bull ~-middotmiddotmiddotmiddot f ~~middot~---i
Average Destination 1937-41
Cuba 2
Peru 13
Venezuela 6
Colombia 4
Panama 2
Jamaica 0
Philippines 0
India 0
Dominican Republic 0
Other Countries 4
TOTALS 31
Preliminary~
RIQ] EXlORTS (in million po~ds)
1943 1944 1945
81 88 5S
20 29 0
0 17 4
~ 0
Rf 2 hi 0 0 0
0 0 0
0 0 0
0 0 0
bullbull ~ 6 6
105 142 6S
R Less than )OOOOOpounds
Table No 5
1946 ~ Jan to~
1~ June-194
46 12 24
0 0 s 17 49 )j
2 13 2
5 4 1
16 1 0
20 0 0middot
0 38 0
0
1 f4~ 2
r middot I
130 13 34
sf Ineludes 6 million pounds to Mexico and 5 million tmiddoto Greece bull middot
1[0
supound~sect8_ Foreigl Crops and Markets Offiee of Foreign Agrtcultural Relations u bull Sll~artment of Agriculture May 3l 1948 bull p bull 402 First six months of 1948 from ibid August 16 1948 p bull 120
Average 191i-15
191620
l921-25
1926-30
1931-35
193640
1940
i941
1942
1943
1944
1945
1946
1947
tf I
ECUADOR
Cacao Production and ~orts
Volume
Estimated Production ~rts
(metric tons)
n (
12108
15middot330
14652
19030
15058
17759
17689
19459
4o625
43547
36825
21319
15980
174o4
11208
14433
13762
18161
13735
16827
16526
Exports ( 000 sucres)
186o9
26073
26746
27531
16647
37424
29354
34365
40327
51794
41985
53547
74935
188208
middot)(et) middot( middot
Sourcesmiddot Estimated production Ministerio de Economia E~orts to 193~ Estadisticas de las Exportaciones del
Ecuador 1940-1942 subsequently El Trimestie Estadistico del Ecuador Number 1
1 ~ Mini sterio de Economia -bull gt(
111 t bull r r (o J bull bullbullbull 1) ( bull
ECUADOR
Coffee Production and Exports
Volume Estimated Production EXports
(Metric TohS)
1921-25 average 5147
1926-30 II 7571
193D-35 10047
1936-40 II 13811
1940 16158 14571
1941 14260 11847
1942 9016 6140
1943 14144 12340
1944 16598 14458
1945 12999 10737
1946 9948 7636
1947 12522 8970
Table 7
Value
Exports 000 Sucres)
59~9
11530
10945
18546
16J83
23827
17278
33176
35626
33863
34839
43524
Source Estimated production - Ministerio de Economia
Exports t~ 1936-40 - Estadisticas de las Exportaciones del
Ecuador 1940-1942 - subsequently El
Tremestre Estadistico del Ecuador Number 1
and Ministerio de Economia
YEAR
1937
1938
1939
1940
1941
1942
1943
1944
1945
1946
1947
ECUADOR
Production of Cotton Tobacco amp Sugar amp Sugar Imports (000 Kilos)
Raw Cotton
9237
7213
7172
8165
PRODUCTION
Tobacco
1519
1106
1875
1028
1359
Sugar
17528
22950
26950
27835
30421
27858
26799
23151
32474
33544
33480
Table B
IMPORTS
Sugar
5310
11068
12387
38
6
33
184
784
21455
3060
Sources Production of Cotton and Tobacco Ecuador en Cifres 1942
Sugar Production and Imports Ministerio de Economia
ECUAOOR Table 9
State Railways
Length Locomotives Rolling Stock (Number)
(Kilometers) (number) 1relght Passenger
Gueyaquil-Qpito 452 39 319 41
Guayenaquil-SalinaJ 150 6 22 24
-~i to-CarcbiY 222 6 23 22
Bahia-Chone 78 3 12 g
Sibambo-Azogues 117 3 6 ll
Puerto Bolivar-Piedras 155l 7 21 10
Puerto Bolivar-Pasaje 55
1199 64 4oy llG
Narrow-gauge line
gj On uncompleted line ~ito-Esmeraldas
21 Of which 4 are rail-cars
jj Of Vihich 61 are rail-cars
Source lviinisteria de Economia
1938
1939
194ltgt
1941
1942
1943
1944
1945
1946
+947
ECUAOOR
Railway Transport
(thousands of metric tons)
Products
Agricultural Animal Mineral Forest Manufactures
1639 19 3 160 122 1034
1318 143 172 138 961middot
1714 144 233 219 1472
1613 184 277 209 1543
1809 224 280 272 1631
1841 280 35a4 376 193-3
2011 250 263 299 C5J7 3
1888 29-5 350 238 2234
1941 29-9 46 bull 4 258 2170
1787 299 51 0 180 2085
Source l3oletin Banco Ce~~nu del Ecuador
Table 10
Others Total
58 3205
58 279l
298 4oso
289 4115
328 4543
384 5168
352 5248
292 5296
37middot7 5508
419 5279
Table 11
Population and Boads
Poeation Roads (Kilometers) Province Jan 1 1948 Main Secondary In Construction
Care hi 86663 1744 1191 1050
Imbabura 158896 1818 2100 1810
Finchincha 350149 4)13 3703 670
Cotopaxi 215232 642 4o6o 970
Tungurahua 222963 2290 1810 300
Chimborazo 29864o 1664 3316 2740
Bolivar 121653 1877 1294 2045
Canar 133971 580 580 1300
AZUaY 284982 1053 2190 630
Loja 238705 1140 4s6o 1430
El Oro 93752 1005 2378 650
Quay as 482843 3900 3367 3700
Los Rios 148428 933 4632 1050
Manabi 381538 3627 1lo61 1970
Esmeraldas 664o5 50 19 0 2840
Frov Orientales 181071
465891 26636 46732 2t3l5bull5
Source Direccion General de Estadistica y Censos
1938
1939
1940
1941
1942
1943
1944
1945
1946
1947
Source
r
Table No 12 ECUADOR
DISOLOS3D BUDGETARY R303IFTS AlfD EXP3NpiTURES
(Total of ordinary and extra-ordinary budgets and special accounts)
thousand of sucres)
Total Receipts
1323204
131699 6
1262710
1547624
1667455
2112614
3145318
4051038
5367822
6696647 11 ~I JJ( middot
Total Expenditures
1429134
1267687
123135middot0
1586615
1489251
2101429
3031038
4174550
5352394
6593858 bull I
aoletin Banco Central del Ecuador
-middot middotmiddot
Diff~reuce
106830
j 49309
f 1360
- 38991
f 178204
j ltll8-5
f 114280
12351middot2
+ 15428
j 10278bull9 r 7
l I 1
L
ECUAOOR EXPORTS OF PRINCIPAL COMMODITIES 1937-47 Table 13
VOLUME (thousand metric tons)
1937 i98 1939 194o 1941 1942 1943 1944 1945 1946 194711
12 200 96 183 20 bull 5 320 47~0 646 293 669 66) 218 191 153 112 144 138 182 137 168 16 bull 5 203 14~ iJI 137 129 146 118 61 123 14 bull 5 107 76 90 48 55~5 53middot3 472 34 bull 2 226 158 1)9 178 35middot511 72 bull 5 345 19~2 251 183 14bull4 13 2 112 103 12~0 132 121 1-4 16 16 15 18 30 22 28 2~0 13 01 14 1middotmiddot9 2~2 21 47 90 136 93 74 28 na
~gt i824) (1387) (944) (1036) (1981) (2516) ( 2756) (4373) (4462) (4947) _01 2849 2454 2274 2201 1201 2167 2062 2513 2446 1640 1358
Ltrates 7~3 140 76 so 3~3 )9 26 10
VALUE (thousand sucres)
610 10864 6555 14632 23265 51460 93837 127105 60395 203242 201111 49985 39bull276 37bull033 29354 34364 40)26 51794 4lt985 53547 74935 188208 24613 16703 15227 16)84 23827 17278 33176 35~26 33863 4839 43 bull 524 5bull691 7558 7t006 6448 4658 _J 107 2159 1898 2872 738~- 24355
18242 7~146 9605 86o6 6120 201 6274 6209 9264 1)02 14994 4048 4300 4298 3~866 6979 35481 23316 38043 26553 15111 979 lt363 2~134 2724 3168 8450 25613 43419 31877 18 bull 509 7125 na 8048 6 234 4981 6509 16231 22121 25191 69033 69J87 81962 4662
21989 26374 25020 24862 13425 24820 23796 28788 28107 18253 15902 trates 10165 16090 13134 38609 27208 29013 18075 809 ates 18682 35297 41204 39907 29426 25374 27476 26457 15482 24858 25334
10774 13210 13495 3 950 16869 32775 2L068 32402 30902 38326 n bull a_
164_045 169096 167148 167851 199704 298690 393115 466631 377894 537131 619859 tmiddotbull bull
Note Dash (---) signifies zero or less than 50 metric tons nly or ~00 sucres ata expressed in quantities other than weight Sourcis 193 data from unpubli~hed Zcuadorian trado stati~tics
at US Department of Commerce 1938 nnd 1939 from partment of Commerce official data Direccion Nacional de Estadistica Eruad6r en Cifras ~7 from Banco Central Boletin 1940 and subsequont ~ears from Banco Centrll jto~n sterio de Economia and from M1nister1o c Economia data furn she
Mission July 1948
~ tobacco tone JgS
articles
11res ilk
al
value of Imports by Groups 1937-Lt-5 Volume and middot~alue of Selected Individual Imports 1937-46
(Value in thousand Sucre~)
1~37 1~38 1~39 1940 1941 ~942
19~731 20~ 375 24~874 16~)65 19043 37~540 5127 7194 1958 6~4e8 5t298 8 118
12888 13Jl5 14522 17702 19556 25~152 21627 25~272 21455 28532 21619 18923 20649 21~593 25559 29437 22636 19~$13 13~505 11961 12~654 15~976 15667 18899 5~829 7 bull 524 6066 9385 833 14353
22912 )0868 24~75 27 t 750 25993 42~916 9376 1028 10038 12118 11345 13932
-bull
131643 148320 1486o 173753 149499 199715 (Volume in thousand metric tons) (Value in thous~tnd sucres)
5middot3 111 124 194 5 bull 534 6385 26 4 24
os 246 -
122 ioo i66 86 118 235 8255 6)88 7449 5076 013 14609
19 07 11 11 14 29 2187 1824 2695 294-3 29J9 8182
101 i4 i2o i09 28 51 804 llJ)6 1667 1546 577 866
~ hides amp skins amp manufactures amp miScellaneous
~~43 1944 1945
33270 70915 82984 6717 8)69 904)
31~700 43196 32~830 17073 53~400 JBoo6 15447 32~624 38797 14~88 18~388 22895 14116 11a99 9812
68928 n~l79 69-113 15856 19186 20042
217983 33ltl56 323524
78 middot 0 2 215 130 12622
09 27 775 2290
99 240 bull 25~1 337 24070 26388
23 46 67 8853 146)1 21699
09 16 10 321 349 246
~s zero or less than 50 metric tons -middotNote Columns may not ahmys add to totals because of rounding Denartment of Commerce official sources - 19)8-42 Direccion Nacional de Estadistica Ecuador en Cifras [inisterio de Economia El Trimestre Estadistico del Ecuador
1946
)1 8135
4 bull 5 )842
114 13123
46 22709
)1 639
ECUAOOR Exports by Countries 197-47 (Value in thousand sucres) Table - 15
1937 1938 1939 1940 1941 1942 1943 1944 1945 1946 1947 --middot-------middot
80458 lt2865 116t-J78 150055 196953 293081 386483 46lt-909 372~549 463~378 sa4~68J 54422 63418 8)254 1t0496 145 bull 558 168585 2)9238 267105 218018 227291 262887
26 20 65 17 2228 78 124 7)41 17173 630 610 949 1281 1055 1)98 5~526 25686 78523 85382 61478 75890 23481
2899 4955 2109 3568 162 1163 4J54 2526 4197 44~ 1450 5027 6335 4972 5i92 5285 7425 4546 7379 10286 9798 15537
1 5 5 17 57 13 291 54 444 574 6996 8 662 9188 8714 13bull764 7238 15316 13900 11223 6~07l 14503 11717 2908 12544 5 730 7896 3767 21215 22608 29233 4243 6703 7965
51 15 24 8 532 3620 1603 539 2336 11579 3749 80 207 862 4070 9991 17096 1275 17~428 6~973 27431 80541
1943 2135 5229 6039 1965 5435 3021 4827 15~702 25~137 51~854 middot 667 740 991 zo83 3358 11412 4286 4282 3~-970 13064 5~864
1799 419 2218 875 2865 12299 9644 14900 13714 9653 11655 J 89 82 2527 1247 964 326 )24 250 41141 2~985
1024 1514 1068 2205 7173 2650 2 744 8871 7694 J2 5811 17 39~ 77029 61869 43688 11945 1503 5550 6335 4108 4075 36783 61998
32) 6)3 1187 490 58 186 2164 4021 J217 35974 29595 11277 69 - 29 4411 7909 6156 3477 1183 5492 4876 26)8 359 1860 7~467
489 255 J2 100 280 1155 1239 1265 3827 3~961 20539 13t521 10802 2254 5 706 4177 6313 2bull610 3615 4251 -middot 2842 13546 lBi 1415 3 758 822 6 188 12962 3592 2531 412~ 162 7~ 10052
8643 1693 3bull521 3~400 2751 320 40 118 231 222 5404 J 4894
6337 4201 6548 5478 1175 5 45 40 1611 50950 6261 4132 5386 5452 117) -
~l - - 15 45988 5 middotmiddot 7S 8 5 25 567 92S 11
33 ~- 76 18 966 151 150 3419
38 29 858 2 45 78 467
(continuation on next naee) middot
~GUJLOR ~xnorts by Countries 1937-47 (falue in thousPnd sucres) T~ble-15 continued
middot-~--- -~-middotmiddot -middot _ middot-- ~~---~~- ---- -middot--~middot--------middot- -middotmiddotmiddot--middotmiddot--193 1938 1939 1940 1941 1942 1943 1944 1945 1946 1947 _I --middot -middot- ---~- ------ middot- bull middotmiddot-middot -
4 7 5 5 5 219 1087
218 153 529 368 73 49 297 569 1230 35140 789 28137
207 144 379 J68 73 49 297 559 1104 605 11 9 10 126 43
150 6355 plusmn
353 54045 169096 167148 167851 199704 298690 39J115 466631 377894 537131 619859
~S Columns may not always add to totals because of rounding
Dash (-) signifies zero or less than 500 sucres
Primarily Guadeloupe and Jamacia
Primarily British West Indies and Netherlands West Indies
Primarily Denmark Spain and Norway
Primarily Java
~ces 1937 and 1947 from unpublished Ecuadorian Trade Statistics at U s Department of Commerce
1938-46 from Ecuador Ministerio de Economia data furnished IBIID rassion July 1948
Imports by Countr~es 1937-1947 Table-H)
ECUAOOR
l937 1938 1939 1940 1941 1942 1943 1944 1945 1946 1947 I (()
Value in thousand sucres) ~ + -gt L520 63151 83984 115382 128423 186958 200061 311989 302~329 363403 517582 j
u t 2086 51311 71950 103214 110422 138729 103583 173776 178821 240233 429906 0
Q) f
811 674 551 2436 1815 3J258 2150 5265 6538 12178 20912 d S Ugt ro c 1 n 4 4144 3042 8 99 14 23 295 178 8~011 210 h middot-1
(- 0
186 324 237 957 2~991 8492 18~376 15~239 17232 10~574 3121 4 middot-2375 2310 1959 2476 3016 4735 7930 7~696 11~201 15~564 14755 sectwfi
middot-1 1 fli 4 6 343 1~823 3J064 4110 3~612 60J5 h 0H
2739 2109 3789 174 2352 7949 9~934 17845 23~ 616 1559t 18~727 ~rld ()
328 164 457 2498 612 733 10892 10902 20003 16684 11981 oc ampl+lll
mmiddota J63 1297 1161 -- - 2 23 115 1~128 1192 d+gt-
2464 507 500 1438 5565 20668 39979 46654 33684 33034 6~486 15~~ (()
na 1 311 2297 5515 130 bull-I m rl bull +gt
15 31 68 245 995 1516 2804 25326 6124 5956 3472 Oltll~
149 280 269 332 550 208 270 389 707 839 655 a~ sect (1) Cl 4-209 72986 ~ 38 09 1433J 9813 16276 15885 1721~9 45194 80928 ~-g 1701 35767 2 7 7 33 1202 67 47 61 19 2 El 0 0 eo g 3250 11462 8094 12980 10124 8108 13634 12513 11984 28392 40983 cent1-t+l~
1803 718 1687 otmiddot r-
4-114 6465 7339 630 475 34 22 2 66 889 7279 t -P () ~led
36o 4685 1573 7144 308 12 682 4824 rlltll ltDno
1~896 2550 1466 1624 64 1 58 5090 bull-1
fJ ~ ~ 1052 1489 794 945 293 224 5 21 1373 9062 9 703 P + na 868 881 423 10 1 8 223 135 r- 0) u
1 r=l middotr-l
1162 4823 1264 1675 877 1017 1~52 2380 3129 4~326 6851 () l=l rl
7274 3074 2609 3595 980 349 1041 905 599 1~543 3~134 cn~oo bull t
724 11939 8983 19951 6239 2281 1439 304 3882 5478 5736 op a cent1-t ~sect rl
173 302 262 238 -w 14 276 -rr 472 ---s9l ctillmgt
259 10949 7810 18190 4414 170 16 4 5 +gtUd ~-- ~
935 712 728 1278 1281 1715 1314 2685 3185 4465 3151 +gtP t-1
530 105 143 221 306 240 95 89 582 541 2089 ~ (f)
1l 21 12 80 1f 196 122 169 125 1J n ~-T~
0
109 218 lllL 250 m 46 sect2 12_ 28 119 112 I ~ --sB_l_ 0 ---- -
643 148315 147860 17353 149499 199715 21 ~ 983 331156 323524 414266 604479 ms may not a1ways add up to t ta1s because of rounding Dash (-) signifies zero or less than 500 sucres ~ country breakdown not given in source g) of which 591 from Syria 2Z3 from China 264 from Straits Settlements 1 Sumatra and 264 from Iran
YEAR
1937l
1938t
1939~ -
1940amp
194H
1942
Exports Imports Balance
Exports Imports Balance
Exports Imports Balance
Exports Imports Balance
Exp(rts Imports Balance
Exports Imports Balance
ECUAroR Balance of Trade by Area 1937-47 (thousand sucres)
fRlSTERN HEMISPHERE including Philinuines
United States Other Total Eurone
54~lt-22 26~036 80~-~-sa 77~029 52086 9~434 61520 64~209 2336 16602 18938 12820
63418 39447 102~865 61869 51311 11840 63151 72~986 12107 27~607 39714 -11117
83254 33124 116~378 43688 71950 12034 83984 54505 11304 21090 32394 -10817
100496 49559 15Cl055 11945 103214 12~ 168 115382 38~090 -2718 37391 34 673 -26145
145 bull 558 51395 196953 1503 110422 18001 128 423 14333 35136 33394 68530 -12830
168585 124~496 293081 5t550 138~729 48229 186958 9 813 29856 76267 106123 -4263
Table 17
Other Countries World Total
6~559 164045 5-912 131643
647 32405
4361 169~096 12~ 178 148315
- 7817 20781
7082 167148 9372 147860
-2290 19288
5851 167851 20281 173753
-14430 - 5902
1248 199704 6743 149499
-5495 50205
59 298690 2944 199715
-2885 98975
NOTE Areas may not always add to world t~tals because of rounding
Source 1937 and 1947 frlttm unuublished Ecuadorian Trade Statistics at US Department of Commerce 1938-46 frem Ecuador Ministerio de Economia data furnished Mission July 1948
(Table 17 continued on next page)
YEAR
12J Exports Imports Balance
1944 Exports Imports Balance
125 Exports Imports Balance
1946l) Expltgtrts Imports Balance
12Z= Exports Imports Balance
ECUADOR~ Balance of Trade by Area 1937-47 (thousand sucres)
WESTERN HEMISPHEL~ (including Phili~ines United States Other Total EuroQe
239238 147~245 386~483 6335 103583 96~478 200~061 16276 135655 50769 186422 -9~941
267105 194804 461909 4~108 173776 138213 311989 15~885 93329 56591 149920 -11779
218018 154~531 372549 4075 178821 123508 302)29 17159 39197 31023 70220 -13084
227291 264224 49J515 36783 240~233 123170 36J403 45~194 -12942 141054 128112 -8411
262887 241796 504683 61998 429906 8676 517582 80928
-167019 154120 -12899 -18930
1 Only year in which substantial Philippine trade
NOTE Areas may not always add to world total becasue of rounding
Table 17 (oonttnued)
Other Countries World Total
29 393115 1646 217983
-1)49 15132
614 466~631 3~282 331~156
-2668 135475
1270 377894 4035 323524
-2765 54)70
8~833 537131 5670 414266 3163 122865
53179 619859 5969 60449
47210 15380
Sources 1937 and 1947 from unpublished Ecuadorian Trade Statistics at us Department of Commerce 1938-46 from Ecuador Ministerio de Economia data furnished IBRD Mission July 1948
~ EXCHANGJ-tAL BANK
ECUADOR Exchange Reserves amp Banking Position (million sucres)
r 4 bull TIC CQEDITS OF CENTRAL BAl~K Domestic Govt Official Bus Other Credits
MOliEY SUPELY Current AC
JJj To()2f (4) Entities Indvls Total Banks of O~mtl Currencl Denosits l (6) (7) (8) (10) (5) Banks amp 11
Indvls (9)
16 10 26 51 1 116 62 64 48 26 7 40 73 4 129 74 66 3middot7 )9 7 29 66 4 144 73 71 37 29 8 24 62 4 159 78 73 56 26 8 22 55 5 183 8l 103 81 37 28 2 8 201) 120 119
152 37 21 22 79 9 255 169 17~ 26) 34 27 22 83 13 378 ZJa 26e )4 60 37 20 117 9 385 295 308 Z5 105 73 11 189 26 493 321 312 282 153 81 10 244 24 536 35middot~ 354 242 104 44 93 241 2 565 329 284
221 110 51 99 260 2 56 313 278 215 102 47 101 250 2 573 )06 294 225 97 45 95 237 2 585 299 299 219 100 44 98 242 1 591 307 297 214 98 35 111 244 4 6)4 315 295
)20 295
on of $12500CC beginning in December 1946 bull
ars
Ttttal (12)
127 14) 144 151 183 239 345 492 602 634 704 613
591 599 597 604 610 614
ge liabilitieS but including Stabilization Fund in 1945 and GolC CertificCt in 194) bull ial banks and fomento banks ial bc1nkst and fomento banks sits of commercial banks and time deposits of fomento banks
Table 18
Govl t Den sits ~L
(lJ)
6 23 12 27 7 28 8 31 6 32
middotmiddot 11 )6 16 57 27 71 41 74 63 98 59 90 66 77
71 8 75 76 6 75 81 75 81 72
72
1 1 Boletin - Superintendencia de Bancos Boletin - Unpublished data furnish~d MF bY Banco Central of Ecuador
Table 19 ECUADOR
Price Indices
WHOLESALE Rents Export Fooa in
YEAR Goods and Quito - Coal ~1) (2) (3)
1937 100
1938 83 100
1939 95 100 153
19h0 95 106 16h
1941 96 113 150
1942 114 146 172
1943 114 183 187
19h4 118 218 219
1945 133 266 254
1946 203 320 315
1947 297 364 516
19h8 (March) 294 379
(liay) 416
(July) 389
llame l~umbar
Republic of Ecuador
Status of u s Export-Import Bank Loans to ~cuador
Purpose
gs of Junemiddot10omiddotl9ltsect
Gross Authorized
Cancel- Net lations Authorized Repeid
Amount Amount Outstandin~ Undisbursed
6J048 6J048
( 262 )16
Haterials equip amp services $ 6480000 $20810 $6459170 $1279775 ~)5-l19middot395 _____ _
ibulliunicipali ty of iui to (Republic of Ecuador)
ibullIunicipali ty of Guayaquil (Republic of Ecuador)
Republic of Ec~ador
Republic of Ecuador
Ecuador DeveloPIlent Corp
Pan-American Highray (Cuenca-Loja)
Agricultural Research amp Experiments
Raihray Equipment
5000000
12JOOOO
50000 200000
)28 Haterials equip ~~ 4000000 services - ater 1middot1orks
)28 iltiaterials equip amp services - ~~rater orks 4000000
J4J Pan-American High1middotray (Guamote-Tambo)
432 uevedo-Hanta Hightmiddotray (additional credit)
1980000
220000
$19180000
Of tlhich $2500000 tts used on the Quevedo-Ibullianta HighTaY
4000000 28880
4000000 167
-1 t-9amphOOO- -7500
220000
6o6120 -h365000-middot
41592 575-t 2-41
-l-y5Q2- 500 44Gooo
220000
IBRD Statistics Sectio spte~ber 24 1948
probably not achieve this unless accompanied by other more fundamental
chanesp in seed types crop rotations and fertilizer use Unskillful
employment of heavy agricultural machinery to bring into use higher ground
now unutilized would carry considerable danger of soil destruction tnrough
wind and water erosion
4 Non-subsistence coastal agriculture is in part an important
foreign exchange earner and in part a source of products also imported such
as sugar cotton and tobacco No export crop other than cacao enjoys an
established position in overseas markets and cacao production has not
recovered from disease losses impacting in tne 1920s Rice exports
expanded greatly during the war but retention of roarkets is doubtful
Coffee expoi lts have been increasing in value but not in volULle rem--ining
agricultural exports are at present minor non-staples
5 Expansion of coastal agriculture is rather a matter of illproving
the farming environment (in transport crop processing and credit facilishy
ties) than farm practices themselves ~1ile the coastal area is relatively
thinly populated (particularly ~hen compared i th Far Eastern tropical
areas) it is not yet clear apart from a few crops how mechanization
could be applied to offset a small labor supply This may prove to be a
key technical question in the development of coastal agriculture lll
economic problem is to identify and foster the products of good ~~port
prospects rather than those of probable decline
6 Exports of minerals and petroleum are a ~inor item In 1947 they
represented only 45 per cent of total exports exports of petroleum have
declined steadily with increased do~estic consumption of petrol
- ii
7 Apart from a few important consumer-good industries such as tex-
tiles Ecuador is not an industrial country Her manufactures are largely
in a handicraft stage that of panama hats provides an important export
commodity Power prodllction while deficient does not at present seem a
real obstacle to economic development~ which at this stage is principally
an agricultural problem
8 Changes of farm practices will however take time partly be-
cause of the educational problem in Indian collliDllli ties partly because the
provision of improved seeds and the -working out of new safe tillage pracshy
tices carmot be quickly accomplished While the work rh ould be taken up
immediate action in stimulation of development would not center upon the
farm itself but rather upon improvemm t of services middotsurrounding the farm
notably roads irrigation crop processing and storage and rural credit
facilities
9 Such immediate action might be supported by establishment of
multi-purpose rural machinery pools equipped with machinery and personnel
to undertake not only farm operations but also local road-building end
irrigation works work upon the various activities being fitted into the
farming calendar The actual use opound farm machinery would then be conshy
trolled by experts whose ear~ work might be mainly experimental and
demonstrational
10 Voluntal saviftgs directed lnto productive use ere small and a
large part of domestic development axpendi tUes att necessarily by Govern
ment or through GoverrJ~DSnt agencies In con~nce thefe 11 constant pres
sure toward inflation pressure which in the GovemmeDl sector has beea
bull 111-
offset during the past sixtem months by application of special exchange
tax revenues in reduction of Government debt to the Central Bank Ver-J
recently however 90-rer cent of these revenues has been diverted to finarce
of development with consequent renewed danger of monetary inflation v1hen
total Government finances no longer run a surplus
11 These special exchange revenues derive from a multiple excharge
rate system installed in iilay 1947 (with IivF advice and concurrence) to
meet rapid loss of foreign exchange reserves The system has bern successshy
ful in slowing the rate of loss bull but not in colq)Jetely preventing it midshy
year expectat ions were for a loss of foreign exchange of some US$ 5 million
in 1948 Recent action reclassifyinamp i~crts may reduce this e~~ected loss
12 The balance of p~ents position at present difficult and no
great easement can be expected It is improbable that Ecuador could safoly
assume any large additional debt burdens At the same time her ability
effectively to absorb and use loans directed tmmiddot1ard increase of production
is limited bya present lack of technical and administrative abilities
Here iLiprovement though clillilllati ve is necessarily slow at first
- iv-
I GIDGRaPHIC
13 Ecuador has common boundaries with Colombia on the North and
Peru on the East and South The greater part of the country lies immeshy
diately south of the equator which passes 13 miles north of Quito The
area of the country has never been measured but is estimated as 150 COO
square miles ri thin the frontiers resulting fror1 the war with Peru in 1942
the area west of the Andean crest is about 60000 square miles
14 Ecuador is divided by nature into tru-ee separate reeions of
which only two are in effective occupation
(a) The sea-coast plain (about 28000 square miles and about 425
miles long by 62 miles in width) is composed partly of swampy
lowlands and partly of low hills most of the region being
less than 1000 feet in altitude I the north it shares tbe
double rainy season of Colombia and is covered with dense
forest Not far south of the borders of Colombia the double
rainy season ~ves way to a single rainy season from Decemshy
ber to June as one goes further south the rains begin later
and end sooner until at the extreme south desert conditions
begin stretching onward into Peru ald Chile As the rainfall
becomes less the vegetation changes from wet forest to dry
scrub forest and savanna until in the south settlement is
limited to irrigated areas
Temperatures in the region are modified by the cold-vater
-2-
Humboldt current and are more pleasant than latitude alone
would suggest
The coastal region produces almost all the export commodities
of Ecuador its people are largely mestizo strongly conscious
of nationality and commercially active Its major port
Guayaquil (population 1942 154000) is larger than ~ito
(population 1942 139000) and is the commercial capital
of the country
(b) The Andean Highlands or Sierra (about 25000 square miles)
comprises the second natural region and forms the physical
backbone of the country There are two high corderillas
surmounted by towering volcanoes and separated by a series
of ten large intermont basins lying in a north-south line
seven are linked to Guayequil by railway Each basin is
occupied by a dense JOpulation 1hich is almost pure Indim
Only in ~ito and Cuenca are there any important number
of people with Spanish ancestors and these are either
office-holders in the Government or landowners with large
private estates
(c) The Oriente (Amazonian region to the East of the Andes) is
not yet part of the effectively occupied area of Ecuador
Its jungle inhabitants from time to time spear the
agents of the Shell Oil Company who are prospecting
for oil
3
In 1942 official Government figures for these rerions were
Area Population middot Density Square of
Kilometers middotmiddotNumber middot Ponulation
Sierra 70344 23 11686748 61 268
Costa 68633 23 1JooOl8 33 14 6
Oriente 153143 51 189005 6 12
CalapagS Islands 7880 j 2192 a 0~2 -Miera tory 4115 a middot-
300000 100 3089078 100 102
15 Very little however of the total area is under cultivation
It was estimated in 1916 that about 90 ~)er cent of the coast and 60 per
cent of the Sierra was suitable for cultivation that is about 25000
and 1)000 square miles respectively Of the total of Loooo square
miles of cultivable land~ only about 1$000 was under cultivation in
1946~
16 No census of the population has ever been in Ecuador
In 1892 estimated nopulation was 127 million in 1942 309 million
and in January 1948 3L7 million with crude birth rate of 379 oor v ~ thousand and crude death rate of 201 per thousand in 1942- Estimated
composition of the 1942 population was
a less than 05
Yhi te Mestizo Indian Negro Iulatto Other
100 per cent l-t10 ner cent 390 per cent 50 ner cent 5 o Per cenmiddot~
1000 ner cent
Just over half these deaths oc~urred in the are rroun of 0-4 years in 1942
4-
17 At the same date the literacy rate was estimated at 20 pe~ qent
s~i~literacy at 20 per cent and illiteracy at 60 per cent
-5-
II OCCUPAmtOUS AND INCOivES
18 There having been no census there is no at~curate information
under this beading
19 The Economic Department of the Ecuadorian Central Bank has esti-
mated that of a total population of 334 million in 1946 1285000 or
J9o per cent were gainfully employed in the following occupations
Agriculture Forestry etc
Mining
Building and Repairing
Manufacturing and Processing
Services (communication comshymerce government etc)
820000
10000
6oooo 10000
325000
5 5
26
100
20 No valid estimate of national inco~e exists At the request of
tne International Monetary fund the Technical Adviser to the Central Bank
of Ecuador Mr L A Carbo estimated national inccue in 1946 as 20096
million sucres or US$ 149 million Although this estimate is probably too
low ] it is clear that national income is very small Ecuador is very
low on the list of income per head among Latin American countries its
income per head is in feet among the lowest of countries of the world
21 Income is very unevenly distributed A survey made in 1943
yielded the following picture
g lror reasons Sdvanceit below Paragraphs 87 and 88
~ pt WI
-6-
To tal Monthly Average Monthly Population Income Income per Fw~ly
Number of Amount t tount People (SUcres) (Sa~res)
Upper Cla~s 4oooo 133 28000000 144o 2300
Middle Class 96oooo 3200 96000000 4950 4 L ~ 00- middotJ~
Lower Class 2000000 6667 70000000 3610 140 -- -~
3000000 10000 194000000 10000 10000 yenSliP C_~ ~
Note At the ofDcial rat~ of 1350 suc~es to the US$ average monthly incomes per family are equivalent to approximately $2J7 $30 and $10 respectively
~ Uneven distribution of incoue is of course largely a conse-
quence of uneven distribution of property Some ideas of the distribution
of rural property is afforded by analysis of re~urns made in payment of
rural property tax Such tax was paid by only ll2l4o proprietors in 1944
whose holdings may be summarized as follows
Per cent of Value of Rural ProEerties Number of Proprietors
916 4o
29-33 llOO
3041 10400
2030 37200
1080 634oO
10000 112J4o
23 Such statistics do not of course carry one very far beyond
the general observation that income and wealth is very unevenly distributed
and that much is obvious from a little travel in the country But it should
-7-
be said that comparing observations in Ecuador vrith those made in Peru
and Bolivia Ecuador by subjective judgment compares very favorably with the
tvo latter The Ecuadorian Indian seems to be on a perceptibly higher stan-
dard of life both in the highlands and on the coast than the Indians seen
in Peru and Bolivia Vhile his land holding is small it yields somethi1e
he very freqjl ently possesses livestock such as pigs and chickens has cot-
ton clothing drying on a line a~d often cultivates flowers and keeps
pigeons By American standards he is undoubtedly on the poverty level by
Latin American standards he may be a little off it
24 At the other end of the scale the wealthy upper class are pro-
bably not as wealthy as the Peruvian upper clas~h and the Bolivian elite
in operating in poundcuadc~the upper class lacks the rich property of mines
Thus while income is of course unevenly distributed in Ecuador as else-
wnere the range between the wealthy and the InJian may well be less tban
elsewhere The line of income distribution is of aboat the same slope
but probably significantly srJOrterY
This conclusion cannot be demonstrated statistically It results from a 11feel 11 deri ved from personal observetions in the respective counshytries
-8-
III AGRICULTURAL lROIDCTION
25 Ecuadorian development is largely a matter of increasing the out-
put of and improving internal and external trade in agricultural products
There appears to be no enduring geographic or physical reason ~middotby this can
not be accomplished She possesses soils and climate ranging from the
tropical to the temperate soils which in some areas are very fertile and in
others are in danger of exhaustion To anticipate subsecpent conclusions
her problem of development through agricultural progress breaks doTltD into
separate aspects all involving improved technique
(a) increasing arable yields from areas already cultivated
(b) improving pastures and stock in grazing areas
(c) enlarging both arable and pastural areas (including irrigation)
(d) improving roads in rural areas
26 Achieving these objectives involves providing more adequate
domestic credit for short- medi~ and long-term agricultural requirements
27 In application however interpretation of these problems is very
different in the two occupied regions of the country the Sierra and the
Coastal Lovrlands no generalization can cover both
(a) TLe Sierra
28 The occupied inter-Andean valleys are a region of temperate
agriculture producing almost exclusively for local consumptionmiddot Their
pat tern of tilled fields grazing land trees and flowerJl is almost
Y Flowers bloom all year round The main tree is the eucalyptusmiddot introshyduced some 70 years ago end used for all purposes (~indbreaks fuel 1
and lumber) affording a striking example of the effect of introduction of one plant upon regional habitability-
-9-
Western liiuropean in appearance but not unfortunately in productivity
Agricultural Production of the Sierra
1939 194o 1941 1942 - -(Hundreds of pounds)
Theat 49QOOO 611300 534300 527499
Potatoes 1201000 1476400 1386120 1146000
Rye 72500 79900 159495 115000
Lentels 46000 424oO 37955 csooo Corn 816700 1349300 1308062 1315200
Barley 85)000 795700 903600 911000
Cotton 45000 42020
Kidney Beans 80000
29 In addition about 1000000 hectares (247 m~llion acres) are
devoted to pasture supporting epproximate1y 683000 cattle 145 million
sheEf 107000 STrrine and 320000 goats
30 Yields are low in all Sierrean agricultural activities the
standing VJheat and barley crops are so thin that the ground can be seen
through them Yet the greater part (some 6o per cent) of the people of
Ecuador live in the Sierra and population is increasing at about 2 per
cent per annum The effect upon land use under existing tecnniques is
clearly visible cultivated areas are being pushed higher and higner up
the hillsides (slopes of 30 to 40 degrees being used) and onto the
fJparamon the high plateau betvreen adjacent valleys at altitudes of
11000 feet and higher The result is a picturesque scene but one which
reveals a near Malthusian situation in the man-land ratio rbullrith static
-10-
technical practices It is a situation which cannot remain unchanged if
economic development is to occur in the region
31 There sean to be three possible lines of advance increase of
output from highland areas in present use the bringing into use of new
ground in the highlandsbull or a change to increasing reliance upon the outshy
put of non-highland areas
32 The third possibility is not one for the immediate future It
involves either large-scale migration from highland areas to lowland
regions or a large transport program linking highlands and lowlands
together with growth of non-~ricultural activities on the highlands to
provide a cash income with which to purchase 11 imported 11 foodstuffs This
second possibility may indeed be the trend of ultimate development but
offers no irmnediate easement Large-scale internal population movement
from highland to lowland is probably impossible since the Andean
Indian (of different stock to the coastal Indian) is fullf acclimatized
both mentally and physically to life at high and temperate altitudes and
little suited to life on tropical lowlands
33 The two remaining lines of advance would both seec to increase
highland agricultural output But there is an important difference beshy
tween increasing output from valley land in rr esent use and bringing new
and higher land into arable use The first is a complex problem suscepshy
tible only of relatively slow solution the second is seemingly simple
and capable of quick result yet basically less sound offering only
temporary improvement
34 The thurst onto higher ground is already evident and the area
-11-
taken in could probably be greatly enlarged by efficient use of tractors
and modern plows Such use of mechanical equipment would thus give quick
increase of agricultural output but it is very doubtful whether improveshy
ment induced by these means alone could be long maintained The greatest
~r particularly on sloping land is that deep plowing may lead to
soil erosion so serious that land becomes finally llilgtroductive To use
mecbanical equipment i thout at the same time adopting eqJally modern
methods of soil conservation way well be disastrous and that perhaps
within no long period
35 Even apart from this physical daneer there is the virtual cer-
tainty that new land however plowed would gradually sink in fertility
end hence output unless farmed by better agricultural practices than
those now followed in highland Ecuador The present attraction of the
higher land is principally good natural fertility beine virgin ground
On all other counts this higher land is less advMtageous than the valley
floors the va)ley sides are steeply sloping a1d the fl~t paramo is some
2000 feet higher bare windswept and devoid of habitation It would
seem obvious that it is pastoral rather than arable ground were it not
for the pressure upon arable output of the region
36 The pressure today however rises from the relation betwem
popUation and output rather than that betvreen population and arable
area Productivity in the Andean valley is low and can certainly be
improved If improved the pressgtlre which is causing the thrust to
higher ground is relieved until population increase again overtakes outshy
put Against that time however the higher ground vrould remain
-12-
availfibleY and other lower regions may be coming under effective use
37 To increase output of the populated valleys is not a simple mat-
ter responsive to single policies such as simple mechanization by tracshy
tors It will embrace the wlo le range of agricultural practices from
better seed types to crop rotation and fertilizers including in some
valleys irrigation It is a matter rrther of agricultural education
than of~dtlgagricultural appliances and probably experiment under
the peculiar regional conditions will need to precede education Improveshy
ment will necessarily be slov1 but along these lines it can be sound and
permanent
38 Wher~ lfL mere importation of mechanical methods Vi thout
understanding of their dangers in speeding soil destruction by wind and
water erosion may permanently damage the region The somewhat gradual
mechanization of agriculture is of course to be expected and not disshy
couraged but it is not the wlole answer to development in highland
Ecuador
39 It seems that there is at present no over-all agricultural
lfibor sl1ortage in the Sierra and mechanization is nOt therefore called
for to relieve an adverse manpower position It seems however that
some of the larger estates are experiencing difficulty in obtaining their
labor requirements because Indian tenants are viitblolding quasi-feudal
labor dues and devoting whole time to cultivation of their own plotsbull
As a result hacienda holders are attracted to mechanization as an
escape from growing difficulties in obtaining and supervising labor upon
Y As it would not if destructi ve1y formed at this stage
-13-
their ovm land To the extent they are successful the tendency for agrishy
cultural money vrages to rise is weakened
4o There vrould seem to be good possibilities of increasing pas-
toral agriculture in the highlands 1Jrith improvement in both numbers and
strains of cattle and sheep If adequate arable development occurred in
the valleys the main grazing grounds could be the higher land not then
required for arable purposes ~lith dairy cattle on the valley margins or
on valley ground not well suited to arable use Such pastoral development
would be desirable not only to imp1middotove nutrition in Ecuador itself 1 but
as a possible new export of meats fats and hides to meat deficient
Republics notably Peru Early export would probably be on the hoof
along the Andea1 ridge it self
41 The Ecuadorian Government has not included any explicit propo-
sals for highland agriculture (other than irrigation) in its present apshy
proach to the Bank It has however suggested the Bank finance $1 mil-
lion of agricultural tractors and equipment to be handled by agriculshy
tural stations located at strategic places both in the coastal
provinces and the highlands 11 without further elaboration of the
intended highland use of such ecp ipment The description given above
suggests that the usefulness of agriculture machire ry depends to a conshy
siderable extent on the place plan and purpose for rhich it is to be
used
42 In some of the highland valleys (for example in Cotopaxi end
~ound Biobamba) rainfall is deficient and irrigation would increase
valley output by bringing more valley ground into effective use This
- 14 ~-
is clearly sound for flat valley ground already populated is more useshy
ful than higher sloping and more exposed ground The Ecuadorian Govern
ment has included purchase of eq1 ipment for irrigtion works to the value
of $500000 in its present approach to the Barik Assessed against the
requirements for economic development the request is sound provided of
course such equipment is effectively used
(b) The Ooast
43 The condition and nationel significance of agriculture on the
tropical coastal plains is quite different from that ltNl the Sierra The
area as a whole is less densely populated and in some parts such as the
Province of Esmeraldas is very sparsely populated Its principal pro-
ducts are exported The population has more mixed blood than the highland
people and is oore corumercially active and minded There is little feel-
ing of community of interest with the highlmds the rrincipal coastal
city GuayaqJil is larger than Quito and less remote fror-1 outside
influence
44 In terms of reported area devoted to its cultivation cacao
is the principal crop of the coast The table on the following page
shows output of main crops
45 Cacao is not however the most important export crop by value
being surpassed by both rice and panama rats (a handicraft product of the
region) Nor does the table show those products which result from
gatherage of mild growth tagua kapok oil-bearing vegetable nuts
balsa rood rubber etc
Y For use by the Caja de Klaquogo as required both in tile highlands and on the lowlands
-15-
46 Agricultural Production of the Coast
1939 ~ 1941 1942
(limdreds of pounds)
Rice 957164 872890 12304oO 1610489
Cacao 392000 263300 333250 315782
Coffee 343800 369000 310000 190633
Bananas (1000 bunches) 4090 3913 4568 4265
Oranges (COOs) 103000 lQ96oO 80550 75000
Cotton 200800 156800 155910 111500
Tobacco 24o43 4o 765 22349 29539
47 It has been estimated that about 500000 hectares (1 235 500
acres) are devoted to pastures on the coast supporting approximately
425000 cattle and 36000 swine
48 There is no doubt that the coast is an extremely rich agricul-
tural area although toward the south it is increasingly hampered by
shortage of water in the dry season And rt is overwhelmingly the
principal foreign exchange producing region of the country Yet it is
largely undeveloped by any modern standards lacking roads and almost
all basic civic amenities (water supply sewage paved streets etc) in
the provincial towns The development of a tropical agricultural region
without large labor supply _rill raise many interesting and some new
J Irrigation ~rks are in execution and others planned in various places and the irrigation equipment which it has bee11 suggested the Bank might finance would presumably be used on the lovlands as well as the highlands
-16-
problems the solution of hlch in detail may lack precedentY The
suitability of cacao to Ecuadorian conditions arises in part from the very
small labor requirements of the crop At bottom advance will lie along
the route of crop improvement and mechanization the difficulty will be
the proper application of mechanization crop by crop Some tropical pro-
ducts may never be suitable for mechanical cultivation being those whicl
would require intensive hand cul ti vat ion and may therefore not be appro-
priate for Ecuadorian condttions Others r1JJi3 be suitable only if grown on
relatively large plantations
49 Clearly for the foreseeable future many lowland products will re-
main at the stage of gathering of nld natural growth rather than plantashy
tion enterprise The flow to market of such productswould be increased
by improved access notably road core truction anQ at the same time road
building ~~uld seem to be a condition precedent for spread of plantation
methods particularly plantations using mechanical equipment lilliE diate
measures for the over-all agricultural development of the region may not
be directly agricultural at ell they are rather the provision of roads
and transport facilities the provision of long and medium term agric-llshy
tural credits and in some areas) the institution of health services
With the opening up of the region in this manner iiould come more clearly
perceived opportunity for better agricultural use of the land particu-
larly if effective demand for the products is transmit ted back to the
cultivator through establishment of product processing plants where approshy
priate for example in vegetable oils and tagua (vegetable ivory)
] This is the situation which in Brazil for example in an earlier technical epoch was 11 solvedll by importation of Negro slave lebor
-17-
50 As in the Sierra there are good possibilities for pastoral
development on the lowlands Some progress is already being made in this
direction with experiment in breeding more suitable cattle types through
crossing 11Ji th imported Indian brahmin strains Grazing for beef is not
highly labor intensive and this development is very promising since
export to other Republics by sea llould be reltti vely easy In the first
stages export would presumably be upon the hoof ith later development
of meat packing
51 There seems to be no single bottleneck or restraint upon devel~
ment presently existing all other conditions being favorable If developshy
ment occurs it will be along many simultaneous fronts but the front iJhiclf
is lagging and Inayen continue to lag is the provision of basic social ccp ishy
tal (roads water supplies health services etc) that is of those
things which no single private individual or corporation can provide for
itself Given these and the institution of suitable domestic credit
fecilities the rest may be accomplished by private domestic ini tiat1ve
52 The development plans of the Ecuadorian Government as outlined
in a Memorandum dated April 8 give much weight to lowland agriculture
The establishment of agricultural stations to provide farmers wi~h
disease-resisting cacao plants~ tecl1nical advice and credit facilities
is CD ntemplated no foreign exchange would be recpired all funds being
local currency The rehabilitation of cacao formerly a leading export
crop is desirable although development of cacao sources elsewhere may
prev~nt recapture of the position formerly held by Ecuador
53 A proposed agricultural mechanization programwoUld total
- 18
$25 million in foreign exchange cost )J The bulk of this ($1 5 million)
is allocated to wechanization of rice cultivation alone the benefit being
principally in resulting improved export position The remainder $1 milshy
lion is for mechanization of other agricultural produc~s apparently
mainly lowland (those products specifically mentioned being 11cotton sugar
oil-bearing seeds and other specified products11) the exclwnge benefit
forecast being principally through reduction of import a
54 Different criteria ~~ould be used in assessment of these two
projects The judgment on that for rice will depend upon forecast of
world rice markets and in particular upon expectations regarding rorld
demand for rice from the dollar area The validity of mechanization in
cotton sugar oil-bearing seeds and other lowland products will depend
first upon the technical possibilities for such mechanization a matter
not yet fully explored If sudl technical possibilities are favorable
effective mechanization vOuld constitute sound development upon the low-
lands which are relatively sparsely populated
Y Some part of which would be for the benefit of highland agriculture if machinery stations be established there
--19 -
IV MI-~RAL PHODUCTION
55 Ecuadorian mineral nroduction covers only a few products and
important the wells of the lowlands being exploited by the nglo-
Ecuadorian Oil Comany Production of crude petrolewn shows a slicl1t
rising tendency while exnorts have declined steadily a~ more refined 1
products are consumed domestically
56 Oil exploration to the Iast opound the Andesin the Amazonian
region is proceedinc under concession to tl-1e Shell Oil Go1~1any
Three wells have been drilled without success and tvro arc beinc
deepened Cost of this exploration to ciate j_s around US)23 million
If oil is found its only outlet middotwill be a pipe line over Ue Ances
(estimated to cost USiD93 million) and this the comany is not -rE1inz
to undertake unless assured of an outnut of at least 100000 barrels a
day
57 The only other irnrJortant minine activities are those of gold
silver conper and lead conducted by the South ~~erican Develoument ~
Company and the Cotapaxi Sxplora tion ConJ1any War-time lr oduction peaks
were 1942 for gold and CO)per 1944 for silver and lead Since these
resective peaks production has ~-~clined narticularly in copper and
lead although not to 1933 lsvels7
crude petroleum II II
1938 (millio~1s of 225 107
Production Exports Production refined petroleum 37
1947 barrels)
236 bull94
128 (See Table No_Jl_ Statistical Appendix
Production Gold (000 troy ounces) Silver (000 troy ounces) Co~per (000 pounds) Lead (000 pounds)
1938 445 82~0 27 21
War Peak l03tJ hhl3
96788 161-+88
19h7 5o5
1569 3316 h98h
-20-
58 Ecuadorian trade statistics list exports of crude pet~middotoleum
and minerals separately from that of other commodities even in aggre-
gate figures underlining the fact the exploitation is in foreign hands
and hence colonial in nature This aspect hmmiddotever is of di-1inishmiddot-
ing importance as now the foreign exchange realized from such mineral
exports accrues to the Central Bank and as in any event nineral ex-1)
ports form a diminishing proportion of the vhole 7
V ~JNUFACTURING PEODUCTION
59 There are virtually no stCltistics on manufacturing in Ecuador
and none which present any comprehensive view It is ho~middot-rever clear
that there is very Uttle industrial factory prJchJction and obser-
vation in the country leaves one with an impression of the nresent
igtilportance of handicraft production
60 The most inportant consuxner-good factory industrj_es are tex-
t~~~breweri~-~~ otheuro7r beveraces shoes ard leather _roduc~s buttons ~d~lttfr
and nails Textile production using domestically produced cotton pro-
duces cotton piece-goods and wool rayon and hemgt textiles supplying
almost all domestic demand for low-quality products The only irJDcrtant
producer-good factory industry is cement the plants being located near
Guayaquil Lack of domestic technical lmow-how and of capLtal and
the low level of domestic effective demand account for the sli~ht develop-
ment of faetory industries whose rrowth on any scale beloncs to a 1ter
stage of economic development
y Value of nineral exportsmiddot as nercentare of value of all exports 1929 260 nercent 1933 430 n 1939 397 1946 11~5 1947 69
Production and irrport statistics for cement tre civen in Table IJo bull 2__ Statistical Appendix
- 21-
61 Uuch of finished commodity ygtroduction is at the handicraft
stage both for nroducer and consumer goods In Quito and Guayaquil
one sees many small 11 shops11 producing metal leather and wood manushy
factures largely by manual methods It is an illuminating co~~entary
on the shallow growth of industrial specialization that the ll1ission
did not see any shops selling ready-made womens clothing All
womens clothing shops displayed only materials in the bolt as in
pioneer days elsewhere
62 One handicraft industry of great importance in exports is
the production of panama hats It has been estimated that 30000
families are occupied vrhole or art-time upon this nroduction and
at times (for example 1945) they have provided the largest single
export item by value The grmvth and treatment of the fiber and the
weaving of the hat is entirely an Indian handicraft industry the
Yteaving of a high-quality hat taking three months The fiber is erown
and the best hats woven in the lowlands Its future ir-mort nee is unshy
certain as the competition of Italy and the Fhilinpines is again felt
in low-_)rice woven hats the boom emjoyed during the war nay recede
63 Ecuador in its ~resent and foreseeable development is an
agricultural country with no immediate movement toward industrialization
EcuAdorians met by the Mission themselves stated this The growth of
factory industry will be slow that of small shop and handicraft manushy
facture somewhat less slow It vmuld seem as stressed later in this
report that there is room for grm~h of processing of agricultural
products Statistically such processing would be classed as industrial
production but is oroperly the finishing stage of agricultural productior
- 22-
to secure improved durability and portability of perishable products
This would increase effective demand imnacting upon the farm and ass1st
in stimulating agricultural development Some progress being made in
this direction notably in vegetable oil expressing plants Ihe only
non-agricultural project suggested by the -r~cuadorian Government has -eer
a cement plant located in the highlands at a foreign exchanr~e cost of
$2 rrillion the justification being both the saving of foreign exchange
expended upon cement imports and reduction of load upon the only railshy
way connecting lovrlands and hichlands Growth of cement use accompanies
economic development assessment of this project (engineering questions
apart) would involve tainly questions of timing location and finance
matters which are really all aspects of the single question whether
such a project may not be one for private direct investment Initial
expectation would be that were all factors favorable to the success of
the project it gtlould be readily undertaken by orivate enterprise
particularly when it is remembered that railway freiehts 1bullrould protect
highland production from lowland competition
6h No sueeestions regarding increase of electric power output
have come fror1 the Government indeed the official statistical services
have no data upon installed capacities and demand Cnly in Quito and
Guayaquil are present industrial uses of electric poler of any ir1portance
Elsewhere suIJply is from snall municipal plants (mainly therraal) for house-
hold consumption It appears that demand mar be ahead sunply in cost
towns very frequently voltages are maintained around 80 instead of the
rated 110
- 23 -
65 Shortage of electric nower is not however hamoering
economic development at this stage although it may soon do so in
sevral urban centers such as Qui to and Hiobamba Sone ttne i-1 the
iuture the possibility of large hydro-electric vrorks on the eastern 1
side of the Andes will merit attention
y Where the rivers are fast and clear on the western side they carry much silt
- 24-
VI DmIESTC THANSPORT AND COilERCE
66 The space devoted to agriculture in this report reflects its
importance in the Ecuadorian economy As has been said further developshy
ment will for sometime be mainly agricu1tural
67 Present restraints upon that development are not located
solely or perhaps even nrincipally on the farm there are many
features of the general economic environment which operate to hamper
even purely agricultural development There is great room for improveshy
ment of transport to knit the economy tocether and to encot1raee grovrth
of output
(a) Transport
68 Without roads there can be little regional or inter-regional
intergration Fithout that intergration (which for some regions and
some crops would open upon the world at the gatewa~r of a oort) there
can be but small inducement andlittle opportunity of increasing proshy
duction In much of Ecuador the principal transport vehicle is the mule
whose patience and endurance under heaJr load is matched by that of the
Indian
69 As regards roads the requirement is both more roads and
better roads capable of bearinr modern vehicular traffic The roads
traveled by the 1Jission are uniformly bad both slowing traffic and imshy
Ilosing extraordiPamiddoty vehicular de_reciation Ultimately no coubt
there vdll be an adequate system of all-rreather roads in Ecuador For
the immediate future the more modest tarset is to attain a reasonable
system of roads civine access to the creater art of roducine areas
- 25-
in the dry season At present the unsurfaced access roads are cut to
pieces by --vater erosion in the wet season and consolidated somew1at
traffic in the dry season A single eradinr operation smoothin thE
dirt surface at the end of the vret season would ci ve accelJtable usashy
bility in the dry )eriod v1hich in the populated coastal rovince of
icanabi for example is eight ~aonths of the year At -_resent the so1e
transport link for corunodities between loYrlands and the hihlands
is the Guayaquil to Quito (and beyond) railway This link is nrobaoly
nearing saturation point vdth present equipment and its strencthening
both by railway imJrovement and all-middotweather hichway construction is
obviously desirable it middotill probably become essential yri thin five
years
(b) Commerce
70 Physical transport alone hogtever is not the only ope c-ation
ofcarriaee required to intecrate a reeion internally and to bind toshy
cether the various regions There are also tL physical and the finanshy
cial aspects of comr1odity holdinr involving the storae and vrhere
necessaFJ the partial processing of products to reduce perishability
and the avail~bility of mechanisms of short-term finance extendine over
crop periods In Ecuador these tro aspects are closely related
71 Apart from some export crops there is virtually no crop or
food processinG undertaken And in the export crops processing
is the minimum necessary to secure portability Eice is nilled but not
polished cacao is sun dried coffee is dried and within only recent
years washed fruit is exported whole Some new e~Jor-ts may require
further processing and installation of plant starting or is in
- 26-
advanced discussion for example vegetable oil processing (although
for sometime no eXport surplus of vegetable oils is 11~11 and fish
canning
72 Nor is there any important ~recessing of domestic food pro-
duction for home consumption bull There is no freezing or canning of meat
which is taken to market on the hoof There are only two or three
very small butter factories and no whole milk orocessing Cereals
of course are not highly perishable but there are no silos or granarshy
ies and experience of similar situations elsewhere suzfests that losses
by deterioration and infestation may be significant no direct evishy
dence anthe incidence of this factor in Ecuador ~as obtained by the
Mission Thee is little storage of grass on the coast in silos or
as hay and in the dry season slaughter of cattle because of lack of
feed is at times necessary In short the situation is not so very
dissimilar to that ofmiddotmedieval Europe
73 Roads alone would not create an environment favorable to
change in this position although lack of roads nar well inlibi t change bull
In addition suitable credit facilities for the finance of co~~odity
holding through time are necessary
74 Hany complaints were voiced to the Hission reearding lack of
short-term banking credit for crop movement and storage and for medium
and long-term agricultural investment and no doubt there is signifi
cant lack of such credits But this is not the result of some simle
institutional defect of the b~~inc and credit structure even though
institutional improvement may be necessary It is fundamentally a
- 27-
reflection of the fact that Ecuador is extremely poor in disposable
capital available for even short-term investment ie vrorcing capi-
tal Improvement of short-term credit facilities for what in advanced
communities are regarded as purely commercial purposes would in effect
represent an increase of capital intensity in the Ecuadorian ecororny
To the extent that banks met more fully the gtJeak seasonal credit re-
quirements for croo movement and storage individual nrivate reoources
are relieved of the 1eak burden and available for other investments
75 Thus iorovement of the techanisr by 11hich the banking system
provides working capital for corrtercial or inciustrial (in the sense of
crop processing) purposes is itself an act of investment rather than
merely an institutional rationalization ilnd as such carry the
usual consequences of investment in an undevelogted economr with very
law voluntary savings To the extent that additional credits are not
matched by savings sewhere (either voluntary or forced through
taxation) they will be inflationary in effect just as an
additional act of long-term investment would be Increase of banki1g
nrovision of workinrr capital should keep step with totl capital for-_ - - 1 mation of which it is one aspect7
It is implicitly assumed in the foregoine that at nresent in Ecuador the amount of small voluntary savinrrs is neclicible It vrill presumably not alrmys remain so and ~Jart of the modifications of the bankin~ system shou1d be attract Clli1U1 atively such sav-ings in the fom of savinc do)Josi ts This 1muld increase the extent to which Danks can safely flovide capital It will be a much later before small private savincs are directly in-vested in commerce or industry throuh joint stock r1ethods There is no stock-exchance in Ecuador
-28-
76 It is of course just as important that the availabi lity of
working capital should not lag behind as it is that it should not run
ahead The Bank should ensure that any long-term investment projects it
may assist to finance do not effectively starve the rest of the econo~
of working capital in the process of avoiding inflation
77 There is also the question of the price of short-term lending
that is of the level of interest rates The Ecuadorian is a highshy
interest rate eoonomy The legal maximum for commercial short-term loans
is 10 per cent having recently been increased from 7 per cent legal
maximum rates however are not systematically enforced by commercial
banks themselves At a time when the legal maximum was 7 per cent
going rate for 90 day loans secured upon properly warehoused commodishy
ties and with third party endorsement was 12 pe+ cent
78 This very high structure of interest rates seems open to
obvious criticism but is in fact probably not Tiholly unjustifiable in
the present conditions of Ecuador It is the cumulative result of many
factors so that more official prescription of lower rates would be
quite ineffective These factors seem to be
(a) Interest proper~
(b) layment for risk bearing arising in part out of a
low rating upon individual credit and in part from
the institutional conditions (such as embryonic
commercial and financial ruarkets) which seriously
reduce the liquidity of any asset other than money
itself
-29
(c) An clcmmt 0f discount 111nn cyectcd luturc irf] utinn
reducing the real value of the pa~nent for lending
(d) An element of monopoly which upon purely subjective
judgment may be the least ilJI9ortant of these several 1
factors7
(e) The real shortace of capital whether short or long--
term~ reflecting in interest rates as a genuine
scarcity price
79bull Of those factors the di~ount upon expected future in-
flation increases prices at a rate of 12 ner cent per annum a money
interest rate of 12 per cent per annum is a real rate of zero If
therefore inflation could be controlled a substantial reduction of
money interest rates could be hoked for At the same tine while
inflation continues high interest rates probably have small influencemiddot
in encouraging money savings
80 Even without inflation ans until the su~1ly of available
real capital improves relatively high interest rates may well be
acceDtablemiddot as a price mechanisn nethod of selectin~ most urofitable y ~
uses of limited fundsbull middothere exoected urivate nrofit did not seem l - -
to parallel social desirability loans at lower rates (ie subsidized
terms) could be made perhaps through reconstituted Development Banks
Prima facie however such loans 1bullrould not be short-term
~I -Onthis interprepoundaion the situation in Ecuador differs signifishycantly from that in Peru
tt is suggested that a powerful point of intervention would be to limit commercial banking dividends distributed to not more than say 7 per cent The high profits nmv earned by commercial banks would then progressively accumulate until liberalization of lending becomes virtually forced by accumulation of funds representing genuine corporation saVings
- 30-
81 The discussion of private finance has so far upon
short-term credits there is an even larger nroblem in the
intermediate and long-term arricul tural credit It is not necessarr
to expand greatly upon this since it too is a consequence capi-
tal shortage
82 Imnrovement would seem to be alonrr the route - 1 of nroper UElte
of existing Development Banks (or their successors-) effectively
in the earlier stages as lending agencies of Government
VII OFFICIAL DEVLOPHl~NT FHmiddotIfJCE
83 In the circurnstances of a country like Ecuador the greater
part of domestic capital forr1ation requires official directly
or indirectly if it is to occur on any scale are too
small and too narrowly held to permit much -rowth this roL1te
andthose few who are able to save at any sinificant rate are larely
uninterested in the efficiency of ~reduction
84 Official finance may be either direct or indirect direct
throueh works executed by Government or 0JUblic bodies indirect
throueh lending institutions such as Dev~lopment Banlcs capitalized
from public funds In either case funds are diverted to investment
purposes by Govern~ent intervention
85 Thus Development Bank lending for productive purposes (for
example long-term acricul tural credit) is an item 1n ca9i tal formation
V There are thirteen reaional Development with an unirnJresstve record of manaeement Their possible reconstitution is under discussion
-31-
rather than a mere institutional rationalization of the credit mech-
anism Indeed as has been stressed in the last section even im-
proved su1nly of short-term credit gtrill in art rewesent
formation A developing economy which neclected these items in 11Cnn21~~
or forecastinc total caital investnent would be very vulnerable indeed
to inflation induced by over-investment
86 17here voluntary savings are Jow the only wmiddotamiddot to sirnificant
rate of capital formatton can emerge without inflation is an equi-
valent amount of savine forced throurh taxation One ould look for a
relatively hirsh level of taxation to national income and for a rela-
tively high proportion of exnenditures caDi tal purposes to total
Government expenditures On both these counts Ecuadorian elq)erience
seems irare s si ve
87 In 1946 total budretary and spedal revenue rms disclosed
as 5368 million sucres in the sa1le rear an estLnate middotJaced national
income at 20096 million sucres This a proym~tion of 27 middoter
come a proportion so hich that in fact it lacks credence In assess-
inc total tax burden part of the revenues of Government monorolies
and all of municial revenues should be included if this be done y
the proportion becomes 37 per cent In addition new exchance taxes
yielded 973 million sucres in 1947
Mono_)oly participations (ii direct disbursements for public _Jurposes) were 353 million sucres in 1946 munici~al income was 1803 million sucres in 1947 (1946 not available)
32-
88 It is very difficult to accept the conclusion that Ecuadorian
revenues form so high a proportion of national income it would seem
that the estimate of national income is too low Nevertheless tax
revenues are clearly a sizable percentace of national income
89 At the request of the Mission an official estimate of total
official expenditures on capital account was prepared Total income of
Government municipalities provincial councils and other public
entities was ~iven as 7S4 million sucres and total capital expenditure
from that income as 2237 million sucres or slichtlr over 30 per cent
of revenuesY It is difficult to feel confident that effective capi-
tal formation on this scale actually occurred certainly there is
little evidence visible to the eye of the t1middotaveler
90 Notwithstanding such doubts the fiscal evidence is of a
fairly hich proportion of tax revenues to national inco~e and of a
hich proportion of revenue allocated to capital investment It would
seem that the fiscal mechanism exists for domestic capital fo~~tion
what may be required is more effective expenditure of allocated funds-
Before a development plan envisa~ing the expenditure of still more funds
was adopted it would be desirable to examine closely administrative
and technical efficiency in the use of existing funds
91 On the side of revenue Treasurr officials informed the Mis-
sion that tax evasion was estirnated at some 30 per cent of ta revenues
1 This makes such capital expenditures 112) per cent of 1946 national income which a~ain seems very high indeed
The two largest items are Government public works (8)4 million sucres) and municipal works (900 million sucres)
- 33-
particularly in income and land tax It might well be advantareous
on the sides both of revenue and of expenditure for Ecuador to obtain
technical assistance of the tPe that the United Nations Department of
Economic Affairs rendered to Venezuela in 1947~Y involvinpound revision
of the structure of the budget of budcetary audit practices and the
like
f Report~d in UN Document ECN 1SubJfti 4 - 21 June 1948 lostricted)
- 34 -
VIII 001EHNl(iEi~T FINANCE AND INRATlON
92 What may be called 11multiple budget practices exist in Ecuador
as in other Latin American countries There is an annual Ordinary Budget
one or more Extraordinary Budgets( tro in 1947) end a number of Special
Accounts (twenty-five in 1946) not included in the general budgetary
accounts The State operates nxmopolies in tobacco liquor salt and
matches part of whose profits are taken into the ordinary budget as
revenue and part used directly for public purposes It is thus diffi-
cult to assesrmiddotgggregate Government revenues and expencii tures and vir-
tually impossible to detail the purposes of expenditure to ascertain
accurately public capital formation by way of public morks and the like
9 Taking the disclosed figures on the ordinary and extraordinary
budgets and tne special accounts there has been a net surplus over the
past ten years 1operations of 234 million sucres~ This however is
not an accurate reflection of the true aggregate position because the
Government operations are not ~holly included in these disclosed ac-
counts But since the Government has no source of internal funds other
than the Central Bank the net recourse of Government to Central BanJJI mirrors the over-all result of Government finance such recourse increased
In 1946 for example the monopolies contributed 5357 million sucres to the general revenue and disbursed 3526 million to municipalities (145 million on general participation and 1652 million sucres for 11 special participation of gthich an example is a new electricity plant at Ambato the state railways (92 million) etc
gj iiith only three years of disclosed deficit since 1938 See Table 12 in Statistical Appendix
2 Central Bank loans middotto Government less Govertllllent deposits in banks
- 35-
480 million sucres over the nine-year period 1939 to 1947 inelusivel
an average of 53 million sucres annually amplch averaging however con-
ceals very important differences between the three periods within the
nine years to tal
94 The table on the next page sumnari zes the factors causing in-
crease of domestic money supply It is computed by rearrangemm t of the
balance sheets of the Central Bank all commercial banks and all developshy
ment banks and is thus a table shoring changes in items in a rearranged
aggregate balance sheet of the Ecuadorian banking system
95bull The first t70 periods 1939-1943 end l943-l946f were both
periods of heavy inflation_ During the first five years notes in cir
culation and monetary deposits increased 3437 million sucres (or 255 per
cent) and in the next three )eera 2904 million sucres (or 61 per cent)
But the causal structure was quite different in the two periods
96 In the first inflation was almost wholly induced by external
factors (favorable balance of paYments causing increase of foreign exshy
change holdings) the major domestic factor being expansion of commercial
bank loans and investments in this period deficit Government finance
was not a causal factor
97 In the next three-year period 1943-1946 however the major
inflationary factors change deficit Government finance and expansi on of
f As calculated by IBRD Mission loans to Government including ali loans to official agencies A recent calculation by the IMF Research Departshyment covering Government operations only places the aggregate 9 years deficit at 345 million sucres~ See Table 12 in Statistical Appendix
- 36-
BANKING CHANGES ~0015 SucresJ
Jan 1939 Jan 1944 Jan 1947 Jan 1948 to to to tomiddot
Dec 1943 Dec 1946 nee 1947 June 19h8 t~ ~arsJ ~~ iears) trmiddot ~~r1 t~ mo~~h~2
Central rcrk loans tomiddotc~vt~ f 16174 f 160260 - 701p88 23695 Central B~r~ Loans to Public -1 6978 2_283 1- 67548 1- 39763 Commercial Bank Loans and
Investments J 187554 f 14624 88h4 1- 2~ ~49 Development Baru Loans and
J 14227 136818 ~ 644 1- 26090 Investments
1 224933 f 313985 11)40 1- 68107 Net Bank Foreign Exchange 260774 f 94662 - 53203 - u6 112
7 485707 7 408647 I
7 bull - 64543 21395
Notes in Circulation f 16o907 1-131729 - 23205 - 17290 Public Monetary Deposits -A 162868 1- 128914 - 68734 1- 19620 Government Deposits f 19968middot 29768 9050 2366
7 343743 7 290411 82889 - 36 Public Time Deposits 116834 ~ 42053 1~004 f 317j
y 7 46o517 7 3J2464 83893 ~ -- 3137
Absorbed by Banking System 1- 25130 middot~ 76183 1- 19350 18258 7 485707
11 f 4o8647 64543 I - 7 21395
Net Government Borrowing J 131492 from Banks 3794 - 79738 - 32745
Deposits in Central Bank in foreign money (not included above ex pressed in Sucres
Government ~ 4486 - 633 871 - 11059 Public 25242 J 78964 - 78814 J 4h97
T29J 728 7 I
7 IIIII middot~~ ~ I
78331 79685 31+38
y Made urt as Io11mlfs
Cas~ bullbullbullbullbullbullbullbullbullbullbullbullbullbull ~ bullbullbullbullbullbullbullbull - bullbullbullbull J 266 1- 367 - 22~7 99 Other assets less other liabilities~ ~ 4 330 ~ 293 ~ 18~8 Capital and Reserves~- bull bullbullbullbull 4 bullbull 52 bull 1 1- 79-9 26 o 278
7 I
7 7 I
7 bull Ill ri bullbullbull
251 762 194 18)
Subtract increase
37-
Davelopment Bank lending dominE)te the position Expansion of commercial
bank lending is relatively negligible while a comparatively small role is
played by balance of payment influences
98 From the end of 1946 the general financial situation deterior-ated
rapidly in five months from January 1947 to ~~ay 1947 net foreign exshy
change reserves of the Centrel Bank fell 935 million sucres or 7 7 mil-
lion dollars to a level of 2927 million sucres or 21 7 million dolJars
In litaY 1947 an IMF Mission arrived in Ecuador (at the request of the
Government) and in June 1947 a multiple exchange rate system with import
classification was introduced upon the advice and with the concurrence of
the Fund Operation of this system Jielded considerable profit n in
sucres it is in effect a new imposition of import taxes and such
11profits 11 are in reality additional fiscal revenueY It was of the
essence of the Emd s attitude in Ecnador that the exchange difficulties
bad arisen through domestic inflation and that these addi tiona reve-
nues should therefore be applied only in reduction of Government debt to
the Central Bank
99 The effect of such policy is clearly seen in the third column
of the table Inflation is checked notes in cirmlation and monetary
deposits falling 929 million sucres (or 11-per cent) i~ one year Alshy
thoUtgb however Central Bank loans to Government (and also colllWrci al
jJ At this point only the domestic aspects of this measure are emphashysized In a later section the external or balance of ~ent aspects will be taken up
Y Such revenue from exchange taxes yielded 975 million sucres in 1947 bull md in July 1948 was running at g to 10 jllillion sucres a month this revenue is not of course taken into the budgets bull
- 38 -
bank loans and investments) fell the actual deflation _was largely
caused through loss of foJeign exchange rather than over~all reduction
of domestic bank lending For in response to vigorous ~oilplaints of
credit shortage the Central Bank greatly increased its loans to the
public almost fully offsetting reduction of its loans to Government
In the first six months of 1948 there was no significant contraction
of money supply banking loans to the public eJggtanding to offset the
deflationary effects af an adverse balance of payments and of Government
debt reduction
100 The exchange surcharge multiple rate system was in operation
through August 1948 proceeds being devoted to reduction of Government
debt to the Central Bank~ But there has bean concern lest the resulting
deflation of domestic money supply would be too severe and the Central
Bank has in fact adopted a compensatory policy to prevent further reducshy
tion through continuing to expand lending to the public arid through
quasi-open-market pur~e of mortgage bonds to the amount of 17 million
sucres by July 10 19l8 when further purchases were discontinued
101 To avoid the netcessity for such compensatory policy the Cen-
tral Bank proposed to the Government that the destination of reveme from
exchange taxes should be changed Instead of being applied in reduction
of debt the proposal was that they should be useci instead to create a
development fund tt to be administered by the Cent~al Bank unless a
planned Development Institute or other competent authority is estabshy
lished In mid-September the Fund appro ved such cllanged dest ination of
these revenues 90 per cent of which will in future be applied in finance
of development and 10 per cent in stabilization of Government bond prices
-39-
This removes a check upon inflation which has operated for some fifteen
months unless Central and commercial bank lending policies recognize
this changed situation further inflation may follow even if the Budgetary
accounts run no deficit
102 At the same time this change does provide a source of local
currency finance for development projects
-40-
IX INTERNATIONAL TRAIE AND THE BALANCE OF PADlENTS
103 Ecuador exports agricultural products (rice cacao coffee
tropical fruits balsa wood) mineral products (crude petrolelUil gold
silver copper and lead) and handicraft products (panama hats)Y
lo4 Approximately one trird of Ecuadorian exports (including
minerals) go to the United States The proportion rose during the war
due to VmiddotIar-time demand for strategic raw materials but is now tending
to revert to pre-war levels Loss of European markets has been partly
compensated by gain of n$w export markets at least for a time and
especially for rice Countries in the Far East whose rice production
fell during war such as the Philippines and in Latin America whose
Eastern sources of supply were cut off such as Cuba and Venezuela
have provided demand for Ecuadorian rice This outlet however may not
last much longer
105 On an average of years 1938 to 1943 about 15 per cent of
Ecuadorian imports are foodstuffs wheat and lard being the largest
items and 85 per cent are manufactured goods and equipment Import
of foodstuffs is however gro1ing t-vith population and in the key pro-
ducts of wheat and fats would be expected to grow still faster if
econowic development raises n~ss living standards witl10ut increasing
domestic output of these prodvcts For increased consumption of wheat
products and fats is in part the definition of rising living standards
for a very poor population
fJ See Table No13 in Statistical Appendix for composition of exports
-41-
106bull Before the war (average of the years 1937 to 1933 ) the Americas
supplied 49 per cent of Ecuadorian imports by value the United States
alone supplying 41 per cent Germany provided 22 per cent of total
imports and the United Kingdom only 8 per cent Europe as a whole supshy
plying 45 per cent
107 In 1946 and 1947 the Americas provided 86 per cent of total
imports the United States supplying 66 per cent EUrope as a source of
imports fell to 12 per cent although the United Kingdom maintained its
relative position (7 per cent) Whether the United Kingdom can expand
its provision of imports for Ecuador JDaY be domiddotubtful on the one hand
the loss of Germany as a supplier pzo vides an opportunity on the
other the competitive industrial position of the United States may make
it difficult for the United Kingdom to fill this gap
No balmce of payments estimates eJd st for Ecuador1
Growth
of foreign exchange holdings over the war period however indicates a
strongly favorable balmce ~let reserves which were equivalent to 409
million sucres in December 1939 rose to 3962 million sucres (294 milshy
lion dollars) in December 1946
109 Official purchases and sales of exchange are shown in the fol-
lowing table together with corresponding movements of exchange reserves
The difference betRSen the balance on official transactions and the moveshy
ment in reserves arises from transactions on the free market
110 During the war import and exchange controls were nominal
there being no shortage of dollars nor any decrease of exchange reserves
jJ Except for the ~eriod January to May 1948
-42-
Loss of exchange reserves in 1945 led to a tightening of control on an
allocation of quotas smong users of exchange Import permi ts were
granted on the basis of former imports by merchants At the end of
1946 controls were relaxed on an extensive list of imports items and
the consequent loss of exchange has led to difficultieQ
Ul Official Official Balance Changes in Purchases Sales on Net
Official International Trans- Reserves actions
(Millions of u S Dollars)
1942 257 185 t 72
1943 35-5 279 t 1middot5 t Ul
1944 423 34~4 t 79 f 88
1945 353 394 - 41 - 7-2
1946 471 415 f 56 t 1 9
1947 488 579 - 91 38
112 From December 1946 to IVtay 1947 net foreign exchalge reserves
fell US$ 77 million from US$ 294 million to US$ 217 million In May
1947 the advice of the International More tary Fund was sought with reshy
sults summarized as follows in a recent Fund documentY
The lfund 1 s Mission arrived in Ecuador in Yay 1947 It was not advisable at that time to contemplate devaluation which would have made the inflationary situation worse An emergency program was therefore proposed Essential and semi-essential imports were to be distic5~ished and a surcharge of 5 sucres p3r dollar imposed on the semi-essential group as a check against their excessive import New decrees including many of the recomshymendations were issued in June
The main features of the new system were as follows
Y Economic SuVey of Ecuador RD 672 - P 43-44
- 43-
(a) The elimination of all quantitative import export or exchan~ restrictions licenses and quotas with the exception of a few absolute prohibitions of some luxury imports
(b) The checldng of excessive import demand through a fiveshysucre (33 per cent) surcharge on non-essential imports
(c) The suspension of nearly all exchange sales for nonshytrade transactions and the creation of a free market bull narrowly limited in volume and comprising mostly all transactions that are uncontrollable in practice plus a snall amount of domestically produced gold
(d) Exchange for a small amount of the least essential goods was made available in the free market
(e) One of the basic aspects of this plan was the steriliz~ tion of all proceeds from the import surcharge which was placed in a fund for the extraordinary amortization of the government debt to the Central Bank Tnis is still in operation
The beneficial effects of these reforms were felt immediately In June the trade deficit ~as reduced to only $07 million and in July to $06 million By August for the first time in 3 monthsl there was a small surplus In September the deficit was smci l -j)O 5 million In October there was a surplus of $15 million and in November and December there were small deficits of only $01 million and $07 million respectively
In short the deficit for the year was about $99 million in its gross gold and foreign exchange reserves During the same period international liabilities of the Central Bank showed a reduction of about $6 million Therefore~ the net deficit was around $39 million 95 per cent being in the first half-yeer and before advice had been received from the Fundrs Mission
113 It should be emphasized that this multiple-rate system of
exchange control is entirely freed cpentitative controls Excessive
import demand is checked by the higher rates upon imports deemed non-
essential the list of which is knollD and published Anyone presenting
sucres is provided with exchange at the appropriate rate upon list A and
B goods and the free rate is influenced by occasional releases of offi-
cial exchange into the free market The system that is utilizes the
inter-play of the price mechanism rather than the bWlilmlcracy of quanti-
tive controls or quotas
- u4-
114 Loss of exchange continues however despite considerable reduc-
tion of imports Gross international reserves declined US$ 18 million
and net reserves US$ 35 million in the first six months of 1948 Offishy
cial transactions January to June 1948 are surmrarized in the following
table~
Receipts From Exports From other Transactions (1)
Total
Payments For Imports For other Transactions
Total
Balance Change in Gross Reserves
1947 Jan to June
1948 Jan to June
(Millions of Dollnrs)
163 5 6
167 44
219 211
289 219 23 10
312 22 9
- 93 - 18
(l) Includes purchases of domestically produced gold deposits received in foreign currencies and borrowing from corres~ pondents abroad
115 Prospects for the remainder of the year moreover are not goo~
It is estimated that loss of international reserves over the whole year
may be aboat US$ 6 million Whether the deficit is in this region de-
pends largely upon actual export realizations for the remainder of the
year lhe most critical here is rice 11hose ygtrice is falling and the
crops accumulating in the rice millsplusmn Latest information is that
f Countries receiving allocations of Ecuadorian rice under International Emergency Food Council allocations have been requesting a change in source of supply owing to shortage of doJJers Thus France has asked for 6000 tons of rice from Indo-China instead of ~cuador and Greece for 2000 tons from kVPt in place of Ecuador as supplier A recent favorable sale of rice-to Haiti has somewhat improvea the cuITent position
-45-
plantings for the October crop are substantially reduced Wet weather bas
led to some loss of the cacao crop Receipts from exports in the follow-shy
ing official exchange budget may therefore have to be modified down- [l
ward on any pxuient calculation-
116 ~or Recei1ts and Sales of Foreign hchange
(Thousands of U S Iollars)
1948 1947 Estimated Actual
BECEIPTS
Worts Rice 13~ la4~ Cacao 11 l 2 Other products 10700 12371
Total Exports 354oo 42120
Foreign companies 5300 4842 Others 800 1883
41500 48845
SALES
Imports 44800 53499
Services 3200 4470
4B ooo 57969
117 In this situation of continuing presSlre one step has been
tken and others are under consideration The one taken relates to offishy
cial imports representing an average pf 20 per cent of total imports
Importation of cigarettes liquor matches and other things by the State
tionopolies is especiallyen significant These were formerly provided with
exchange tax-freebull ie at the ~owest rate of 1350 From July 26 they
afe required to pay the ordinary import rate of 15o4 on sll supplies for
J See note on page 47 -A
- 46-
their ovm use (such as office supplies) and the same rates as private
importers (ie 15o4 or 20o4) on all imports to be sold to the public
(such as wheat flour fats cigarettes etc) accord~ng to the classifi-
cation of the goods
118 Remaining possibilities seem to be a partial reclassification
of imports removing items from List A as essentials to List B as se~ishy
lwruriesY and or a chenge of nominal exchange parity vri th or mithout
a narrowing of the spread between the rates Here pressure from
exporters particularly from rice exporters may be hee~vily in favor of
an increase of the dollar buying rate with consequential changes of
selling rates
119 The present loss of foreign exchange is occurring ~rithout any
service being met upon defaulted foreign debt although service of Ex-Im
Bank loans is being made If it be assumed for purposes of calculation
that Ecuador reaches an agreed settlement identical to the Chilean sershy
vice would require exchange equivalent to US$ 378000 in 1949 (of which
US$ 368000 would be required in dollars) and would rise to US$ 4o20CO
in 1954 Adding service upon Ex-Im Bank loans outstanding on June 30
1948 and other known but small indebtedness total debt service would
increase to US$ 1410000 in 1949 rise to a second maxilliUID of US$ 1394000
in 1951 and then progressively decline Upon the assumption thet amp-Im
Bank loans undisbursed on June 30 1948 are all fully drawn before their
maturity total debt service charges would be US$ 1533000 in 1949 rise
On August 21 a number of import items were changed from List A to List B the aggregate import value (when granted exchange at List A rate) affected being US$ 7 million
-47-
to US$ 213431000 in 1952 and again would progressively decline These
last service charges rould be for 1949 3 1 per cent of 1947 actual
official foreign exchange receipts and 3 bull 7 per cent of estimated 1948
receipts and for 1952 48 per cent and 56 per cent of 1947 actual
and 1948 estimated exchange receipts respectively
120 Estimating prospects from this point in time Ecuador does not
seem to be a country able to afford assumption of any great additional
burden of debt service payable in dollars The amount that could wi thbull
out hardship or distortion be squeezed out of the balance of payments
by no means corresponds to the development needs of the country Any
start must therefore be modest and cumulative rather than spectacular
and precarious and this conclusion fits with other controlling factors
in the over-all situation notably the supply of administrative techshy
nical and managerial abi li ty
- 47-A -
Note on Official Exchange Transactions
Official exchange transactions for the firstsix months of
1948 are given on page 44 of this report Results for the full year
are now available and reveal that earlier expectations regarding the
probable 1948 balance of payments deficit were unduly nessimistic
Cacao export values have been lar~er than expected and in the last
period of the year there IBre some unexpectecily favorable rice eA-port
sales total export receipts were US$ 8 million larger than forecast
on page 45 Imports were held close to forecast
Receipts
Exports Foreign Co~anies Other
Payments
Imports Foreign Comoanies Other
Balance
Change in Grass Reserves
Official Exchange Transactions (full year - n~illions of dollars)
1947 -421
L18 19
488
535 06 149
580
y does not agree because of rounding
January 26 1949
1948 -436 h2 7
i85
Lt52 2
28
-oJ
-48-
X EXTERiJAL DEBT BEoomJ
121 The position of public long-term external bonded (excluding
inter-governmental) indebtedness of Ecuador is as follows
Amount in Default AmoUpt Outstandi~ ~ e Interest D~te
~In currmc1 (u s (us of p~t Dollars) Dollars)
Dollar obligations Gueyaquil amp Qui to Ry) $ 1226)000 12263000
286000 12263000
286000 123147
63047 Sterling obligations Franc obligations ( Oie
b 71000
Francaise de Chemin de Fer 1 lquateur ) Fcs 8386000 70000 70000
12619000 l26l9000
middotmiddot Note The Government of Ecuador oyenms about 75 per cent of the
stock of the Guayaquil and 1uito Railway and guarm tees the bonds and certificates which are largely held in England The franc obligations of the Cie Francaise de Chemin de Fer 11lquateur are not included in the offi cial statement of the public debt nevertheless the Government does recognize some liability for them and during the last few years has engaged in Degotiations for their retirement
Inter-governmental Debtsmiddot
122 Debts to the United States Government are of three types
63047
first the loans by the Export-Import ~which were outstanding on
June 30 1948 in the amount of $7 705606~ second the aJIDunts duemiddot
because of purchases of surplus property totaled $484 567 on March 31
1948 and third the obligations arising out of the lend-lease settleshy
ment the amount of 1fhich is not available (Total lend-lease assistance
j This section of the Report was prepared by Mr Paul Dickens
to Ecuador amounted to $7 bull 795000 )
123 In addition Ecuador is indebted to the Government of Venezuela
in connection with the establishment of a joint shipping company Late
data are not available but as of February 1947 $500000 ($1000000
authorized) was outstanding the total to be repaid by 1966
Debt History
l2ij Upon partition of the old Republic of Colombia~ middotEcuador was
apportioned 215 per cent of the original Colombian debt by the convershy
sion of l834a Between 1834 and 1854 no interest was paid The period
1855 to 1908 was marked by numerous adjustments and defaults
125 In 1898 the Guayaquil and Q]lito Railway Companyt s first mort-
gage 5 per cent loan of 1899 was issued It was expressed in dollars but
was in reality an English loan In 1908 a new (reemenJl was reachedbull
which was to be a final settlemet of all past disputes and controversies
between the Government and the Guayaquil end ~ito Railway Company and
the bondholders In 19~-10 the Government defaulted on the new agree-
ment In Novemberl9ll payments were resumed on the railway debt on)y
but a revolution caused a further suspension from December 1911 until
lfarch 1912 Subsequently service was partially resumed on the external
debt until July 1914
126 From August 1914 to July l9l8 no paYments were made on eny
foreign obligations except that service on the prior lien railway bonds
had been maintained up to and including the January 1915 coupon By
rf Negotiated settie~nt
-50-
1920 interest and sinking fund on the prior lien railway bonds had been
brought up to date but service on all other obligations ~ed in
arrears In 1926 interest on the salt loan of 1908 was brought up to
date but default took place on the coupon dueJam1ary 2 1927
127 The outstanding bonds of the prior lien issue were redeemed~~
January 1929 at VIhich time the January 1914 coupon was paid on the
5 per cent first mortgage bonds of 1897 In the case of the salt loan
of 1908 sinking fund was resumed in July 1928 and interest was paid
to Jazruary 1929 inclusive None thereafter Sums due from July 2 19C3
to January 2 1931 inclusive deposited with Central Bank in sucres
were used for governmental purposes after December 1931 No payments
were made after January 1929 on the external debt of Ecuador
128 Up to the end of 1948 no acceptable arrangement had been pro-
posed by the Ecuadorian Government for the resumption of interest and
sinking fund payments on external loans
-51-middot
XI bull POLITICAL
129bull Recent political history in Ecuador has been turbulent
although contest fo~ power at the top has not greatly affected the
bulk of the population Suffrage extends to all literate citizens 1
over twenty-one years of aee-but the requirement of literacy effect-
ively excludes the Indian bull T)tal votes cast in the recent Presidential
elections were 289164 from a total Population of some 35 million
130middot On May 28 1944 a few days prior to a scheduled ceneral
election an uprising occurred and Dr Jose Haria Velasco Ibarra
assumed office as President Dr Velasco had been President before
but following a coup dletat in August 1935 after he had been in
Presidential office less than a year he fled to Colombia and re-
mained in exile for several years On July 23 191-4 general elections
for a Constitutional Assembly to draft a new Constitution were held
Installed on August 10 the first Act of the new Assembl3r which was
predominantly Conservative was to confirm the legality of Dr
Velascos assumntion of the Presidency
131 On June 30 1946 new elections to the ronstitutional
Assembly middotwere held The only party particiJatine in these elections
was the Conservative The Liberals R~dicals Socialists and Commu-
nists abstained on the crounds that President Velasco did not offer
them sufficient guarantees On Aucust 3 1946 there vrere a number
of arrests following an abortive uprising and on Aueust 11 the Con-
stitutional Assembly re-elected Dr Velasco to the Presidency (by 43
to 10) for a term of office to last to September 1 1948
12bull Being compUisory for men voluntary for woraen -
132bull A new Constitution was promulgated in January 1947
133middot On August 23 194 7 a bloodless coup detat led by Colonel
Carlos Iancheno Minister of Defense in Dr Velascos Cabinet deposed
rresident Velasco who fled the country to Colombia for the second timebull
Next day Colonel Mancheno proclaimed himself Acting President and
formed a five-man Socialist-Liberal Cabinet despite the absolute
Conservative majority in the Assembly A week later however on
August 31 a counter-revolutionary military movemont broke out in the
north and the counter-revolutionaries captured Quito on September 2
134middot Colonel llancheno resigned the ActinG Presidency and dis
appeared the sa1ne day Dr Suarez Veintimilla who had been Vice
President under Dr Velasco and the former conservative Uinister
resumed control of the GoverPment Next day September 3 a Council
of State in Quito declared that Dr Velasco had by abandoning his
post terminated his functions as Chief of the State Dr Velasco
howeverJ vrho middotwas by this time in the Argentine declared that his
remo~al to Colombia had been forced and announced his intention of
returning to Ecuador to resume office
1~ On Seytember 15 1947 a Secial session of the Zcuadorian
Concress accepted the resignation of Dr Veintimilla and elected
Senor Carlos Julios Arosernena head of the Banco Ce Descuento at
Gua~raquil and a non-party man as Vice President with novers as
Acting President until September 1 1~48 Senor Arosemena formed a
mainly Liberal Cabinet with one representative each of the Consershy
vatives and the Socialists Coneress also ~onfinned the Council of
State 1 s view that Dr Velasco had forfeited the Presidency by abandoning
his postbull
136 On June 6 1948 Presidential elections were held The
three parties represented vere the Conservatives (Dr Manuel Elicio
Flor Torreo) the Liberals (Galo Plaza Lasso) and the Radical (Genera1
Alberto Enriques Gallo) Final results were announced as
Plaza 115835
Flor 112052
Enriques 53601
Invalid 27 676 289164
137 bull Doubt persisted until this month (August) as to who would
receive the election The Electoral College had been invalidating
votes on technical Grounds and as interim returns and invalidities
were announced it was noticed that the majority of the latter were
being deducted from the Plazavote After conferences the Electoral
College revalidated all votes and conducted a re-scrutiny on less
strict basis Senor Plaza has been declared to be the rfjSident-Elect
by the Ecuadorian Coneress and assumed power September 1 1948 The
middotpresidential term of office is four years
The Vice Presidential results were
Conservative 1anuel Sotomayor y Luna llu008
Liberal Dr Abel Gilbert 113213
Radical Dr Cueva Tamarz 5h07h 28129gt
139 Senor Plaza was born in Nmv York USA forty-two years
ago his fatter the late General Leonidas Plaz~ was President of
Ecuador in 1901-05 and 1912-16 middotSenor Plaz who had been taken to
Ecuador as an infant accomnanied his father in exile to the United
States and attended the University of California the University of
Maryland and the Georgetown School of Foreign Service in ~7ashington
l4o Senor Plaza returned to Ecuador in 1930 and for the next
fourteen years operated the family estates there reclaiming them from
virtual bankru~tcymiddot to prosperous and efficient state He has for
example been active in encouraging the breeding of new cattle strains
is President of the Ecuadorian Holstein-Friesian Association and oper-
ates a butter factory on his estates with a Danish ~anarer He was
ar Minister from 1938-40 and Ambassador to Cashington from 19h4-46
l In executing any policies he will of course be handishyt4
capped by the lack of a fully efficient Civil Service The position
in Ecuador is the same as that in othelmiddot Latin American countries
that the Civil Service is naid on low salary sca1e and lacks compe-
tent administrators Such lack is an aspect of the general shortage
of technical ability in the country
TABLE
1
2 bull
3 bull
4
middot 6
7 bull
8
9
10
11
lZ
13
14 bull
15
16
17
18
19
20
ECUADOR
STATISTICAL APPENDIX
Oil Production and Exports
Cement Production and Imports
Yfueat Production and Imports
Rice Production and Exports
Rice Exports by Destination
Cacao Production and Exports
Coffee Production and Exports
Cotton Tobacco amp Sugar Production amp Sugar Imports
State Railwaysmiddot Lines amp Rolling Stock
State Railways Merchandise Hauled
Population and Roads by Provinces
Budgetary Receipts and Expenditures
Exports of Principal Commodities Volume amp Value
Imports Classified by Groups Value
Exports by Destination Value
Imports by Source Value
Balance of Trade by Major Regions
Exehanee Reserves and Banking Position
Price middotIndices
Status of Ex-Im Ballilt Loans
ECUAIOR Table 1
Oil Production and Expomiddotrts
(thousands of American gallons)
Crude ou Gasoline Produced EJtported bullRefined middotproduced
1938 94586 78696 15500 41654
1939 97125 68819 17679 bull 141
194o 98654 70~99 23001 6162
1941 65382 38362 25914 6462
1942 95671 68516 29489 72l7
1943 97211 65003 34635 8076
1944 121469 82520 38083 8927
1945 109855 73897 38752 10059
1946 979+7 52412 45213 12271
1947 99140 39359 53949 16587
Source J3o1etin Banco Central del Ecuador
ECUADOR Table No 2
1929
1937
1938
1939
1940
1941
1942
1943
1944
1945
1946
1947
1948
l First six months
CEMEHT PRODUOTIOllT AliD IMlORlS (metric tons)
Production Imports
17782
15699 10082
14254 13373
14249 12013
16512 10935
17213 2_846
19802 so98
2756o 933
34691 1590
37504 953
38496 3114
33231 14941
20484JJ
Sources Production Eoletin Banco Central del Ecuador Trade Ministerio deEconomia
Total
25781
27627
26262
27447
20059
24900
28793
36281
38458
41610
ECUAJX)R Table J
Wheat and Wheat Flour Production and Irraquorts
(thousands of kilos)
Wheat
Production Imports Exports Consumption
194o 28120 bull 73 28o47 1941 24578 36 24542
1942 24265 bull 76 24189
1943 22034 22034
1944 23251 912 24175 1945 23115 2733 180 25667
1946 25852 4532 23 30361
1947 2lo66 494f)J 11
Vfueat Flour
1938 10743 9981 na
1939 7864 16638 na
1940 7996 8-592 275 16312
1941 7225 11823 286 18762
1942 7 161 23497 161 30498
1943 7461 9862 17322
1944 5216 24023 29239
1945 5174 25137 30311
1946 7~38 11313 g 18813
1947 5943 1886) 4Y
Less than 500 kilos Y First 6 months
Sources Ecuador en Cifres a~d Ministerio de Economia
~emiddot 1926-30
1931
1932
1933
1934
1935
1936
1937
1938
1939
1940 -middotmiddotmiddot
1941 ~ )~ (1
1942
1943
1944
1945
1946
1947
1948
~iiampn-sect00-lfmiddotks
-~Jrst~middot-nsmcnths
gJ Provisional
(B EQUOR
RI03 PRODUCTION ApoundP ~OR~S
Vo1wnfJ Production middot E~orts
(metric tons)
26)04
23584
29863
39270
39008
31699
39036
52136
44027
40144 ltit middotmiddot~ 0 56596
5873
100949
ao6o7
53168
102048
112711
047
8255
3842
6449
5282
22907
8734
12)3
2ooso
962
18343 t - ~ J
20546
32028
46992
64604
29318
66918
6~209fl middot tloo 1
$ bull
tt ( r t
z
Value 3xoorts
(thousand sucres)
1881
936
6667
10864
6555
14632 pound 170
23265
51460
93837
127105
60395
203243
2rfjuft
Sources Production Boletin Banco Central del 39uador~ Trade Ministerio de Econom1a~ ~r- ~fl ]r bull ~-middotmiddotmiddotmiddot f ~~middot~---i
Average Destination 1937-41
Cuba 2
Peru 13
Venezuela 6
Colombia 4
Panama 2
Jamaica 0
Philippines 0
India 0
Dominican Republic 0
Other Countries 4
TOTALS 31
Preliminary~
RIQ] EXlORTS (in million po~ds)
1943 1944 1945
81 88 5S
20 29 0
0 17 4
~ 0
Rf 2 hi 0 0 0
0 0 0
0 0 0
0 0 0
bullbull ~ 6 6
105 142 6S
R Less than )OOOOOpounds
Table No 5
1946 ~ Jan to~
1~ June-194
46 12 24
0 0 s 17 49 )j
2 13 2
5 4 1
16 1 0
20 0 0middot
0 38 0
0
1 f4~ 2
r middot I
130 13 34
sf Ineludes 6 million pounds to Mexico and 5 million tmiddoto Greece bull middot
1[0
supound~sect8_ Foreigl Crops and Markets Offiee of Foreign Agrtcultural Relations u bull Sll~artment of Agriculture May 3l 1948 bull p bull 402 First six months of 1948 from ibid August 16 1948 p bull 120
Average 191i-15
191620
l921-25
1926-30
1931-35
193640
1940
i941
1942
1943
1944
1945
1946
1947
tf I
ECUADOR
Cacao Production and ~orts
Volume
Estimated Production ~rts
(metric tons)
n (
12108
15middot330
14652
19030
15058
17759
17689
19459
4o625
43547
36825
21319
15980
174o4
11208
14433
13762
18161
13735
16827
16526
Exports ( 000 sucres)
186o9
26073
26746
27531
16647
37424
29354
34365
40327
51794
41985
53547
74935
188208
middot)(et) middot( middot
Sourcesmiddot Estimated production Ministerio de Economia E~orts to 193~ Estadisticas de las Exportaciones del
Ecuador 1940-1942 subsequently El Trimestie Estadistico del Ecuador Number 1
1 ~ Mini sterio de Economia -bull gt(
111 t bull r r (o J bull bullbullbull 1) ( bull
ECUADOR
Coffee Production and Exports
Volume Estimated Production EXports
(Metric TohS)
1921-25 average 5147
1926-30 II 7571
193D-35 10047
1936-40 II 13811
1940 16158 14571
1941 14260 11847
1942 9016 6140
1943 14144 12340
1944 16598 14458
1945 12999 10737
1946 9948 7636
1947 12522 8970
Table 7
Value
Exports 000 Sucres)
59~9
11530
10945
18546
16J83
23827
17278
33176
35626
33863
34839
43524
Source Estimated production - Ministerio de Economia
Exports t~ 1936-40 - Estadisticas de las Exportaciones del
Ecuador 1940-1942 - subsequently El
Tremestre Estadistico del Ecuador Number 1
and Ministerio de Economia
YEAR
1937
1938
1939
1940
1941
1942
1943
1944
1945
1946
1947
ECUADOR
Production of Cotton Tobacco amp Sugar amp Sugar Imports (000 Kilos)
Raw Cotton
9237
7213
7172
8165
PRODUCTION
Tobacco
1519
1106
1875
1028
1359
Sugar
17528
22950
26950
27835
30421
27858
26799
23151
32474
33544
33480
Table B
IMPORTS
Sugar
5310
11068
12387
38
6
33
184
784
21455
3060
Sources Production of Cotton and Tobacco Ecuador en Cifres 1942
Sugar Production and Imports Ministerio de Economia
ECUAOOR Table 9
State Railways
Length Locomotives Rolling Stock (Number)
(Kilometers) (number) 1relght Passenger
Gueyaquil-Qpito 452 39 319 41
Guayenaquil-SalinaJ 150 6 22 24
-~i to-CarcbiY 222 6 23 22
Bahia-Chone 78 3 12 g
Sibambo-Azogues 117 3 6 ll
Puerto Bolivar-Piedras 155l 7 21 10
Puerto Bolivar-Pasaje 55
1199 64 4oy llG
Narrow-gauge line
gj On uncompleted line ~ito-Esmeraldas
21 Of which 4 are rail-cars
jj Of Vihich 61 are rail-cars
Source lviinisteria de Economia
1938
1939
194ltgt
1941
1942
1943
1944
1945
1946
+947
ECUAOOR
Railway Transport
(thousands of metric tons)
Products
Agricultural Animal Mineral Forest Manufactures
1639 19 3 160 122 1034
1318 143 172 138 961middot
1714 144 233 219 1472
1613 184 277 209 1543
1809 224 280 272 1631
1841 280 35a4 376 193-3
2011 250 263 299 C5J7 3
1888 29-5 350 238 2234
1941 29-9 46 bull 4 258 2170
1787 299 51 0 180 2085
Source l3oletin Banco Ce~~nu del Ecuador
Table 10
Others Total
58 3205
58 279l
298 4oso
289 4115
328 4543
384 5168
352 5248
292 5296
37middot7 5508
419 5279
Table 11
Population and Boads
Poeation Roads (Kilometers) Province Jan 1 1948 Main Secondary In Construction
Care hi 86663 1744 1191 1050
Imbabura 158896 1818 2100 1810
Finchincha 350149 4)13 3703 670
Cotopaxi 215232 642 4o6o 970
Tungurahua 222963 2290 1810 300
Chimborazo 29864o 1664 3316 2740
Bolivar 121653 1877 1294 2045
Canar 133971 580 580 1300
AZUaY 284982 1053 2190 630
Loja 238705 1140 4s6o 1430
El Oro 93752 1005 2378 650
Quay as 482843 3900 3367 3700
Los Rios 148428 933 4632 1050
Manabi 381538 3627 1lo61 1970
Esmeraldas 664o5 50 19 0 2840
Frov Orientales 181071
465891 26636 46732 2t3l5bull5
Source Direccion General de Estadistica y Censos
1938
1939
1940
1941
1942
1943
1944
1945
1946
1947
Source
r
Table No 12 ECUADOR
DISOLOS3D BUDGETARY R303IFTS AlfD EXP3NpiTURES
(Total of ordinary and extra-ordinary budgets and special accounts)
thousand of sucres)
Total Receipts
1323204
131699 6
1262710
1547624
1667455
2112614
3145318
4051038
5367822
6696647 11 ~I JJ( middot
Total Expenditures
1429134
1267687
123135middot0
1586615
1489251
2101429
3031038
4174550
5352394
6593858 bull I
aoletin Banco Central del Ecuador
-middot middotmiddot
Diff~reuce
106830
j 49309
f 1360
- 38991
f 178204
j ltll8-5
f 114280
12351middot2
+ 15428
j 10278bull9 r 7
l I 1
L
ECUAOOR EXPORTS OF PRINCIPAL COMMODITIES 1937-47 Table 13
VOLUME (thousand metric tons)
1937 i98 1939 194o 1941 1942 1943 1944 1945 1946 194711
12 200 96 183 20 bull 5 320 47~0 646 293 669 66) 218 191 153 112 144 138 182 137 168 16 bull 5 203 14~ iJI 137 129 146 118 61 123 14 bull 5 107 76 90 48 55~5 53middot3 472 34 bull 2 226 158 1)9 178 35middot511 72 bull 5 345 19~2 251 183 14bull4 13 2 112 103 12~0 132 121 1-4 16 16 15 18 30 22 28 2~0 13 01 14 1middotmiddot9 2~2 21 47 90 136 93 74 28 na
~gt i824) (1387) (944) (1036) (1981) (2516) ( 2756) (4373) (4462) (4947) _01 2849 2454 2274 2201 1201 2167 2062 2513 2446 1640 1358
Ltrates 7~3 140 76 so 3~3 )9 26 10
VALUE (thousand sucres)
610 10864 6555 14632 23265 51460 93837 127105 60395 203242 201111 49985 39bull276 37bull033 29354 34364 40)26 51794 4lt985 53547 74935 188208 24613 16703 15227 16)84 23827 17278 33176 35~26 33863 4839 43 bull 524 5bull691 7558 7t006 6448 4658 _J 107 2159 1898 2872 738~- 24355
18242 7~146 9605 86o6 6120 201 6274 6209 9264 1)02 14994 4048 4300 4298 3~866 6979 35481 23316 38043 26553 15111 979 lt363 2~134 2724 3168 8450 25613 43419 31877 18 bull 509 7125 na 8048 6 234 4981 6509 16231 22121 25191 69033 69J87 81962 4662
21989 26374 25020 24862 13425 24820 23796 28788 28107 18253 15902 trates 10165 16090 13134 38609 27208 29013 18075 809 ates 18682 35297 41204 39907 29426 25374 27476 26457 15482 24858 25334
10774 13210 13495 3 950 16869 32775 2L068 32402 30902 38326 n bull a_
164_045 169096 167148 167851 199704 298690 393115 466631 377894 537131 619859 tmiddotbull bull
Note Dash (---) signifies zero or less than 50 metric tons nly or ~00 sucres ata expressed in quantities other than weight Sourcis 193 data from unpubli~hed Zcuadorian trado stati~tics
at US Department of Commerce 1938 nnd 1939 from partment of Commerce official data Direccion Nacional de Estadistica Eruad6r en Cifras ~7 from Banco Central Boletin 1940 and subsequont ~ears from Banco Centrll jto~n sterio de Economia and from M1nister1o c Economia data furn she
Mission July 1948
~ tobacco tone JgS
articles
11res ilk
al
value of Imports by Groups 1937-Lt-5 Volume and middot~alue of Selected Individual Imports 1937-46
(Value in thousand Sucre~)
1~37 1~38 1~39 1940 1941 ~942
19~731 20~ 375 24~874 16~)65 19043 37~540 5127 7194 1958 6~4e8 5t298 8 118
12888 13Jl5 14522 17702 19556 25~152 21627 25~272 21455 28532 21619 18923 20649 21~593 25559 29437 22636 19~$13 13~505 11961 12~654 15~976 15667 18899 5~829 7 bull 524 6066 9385 833 14353
22912 )0868 24~75 27 t 750 25993 42~916 9376 1028 10038 12118 11345 13932
-bull
131643 148320 1486o 173753 149499 199715 (Volume in thousand metric tons) (Value in thous~tnd sucres)
5middot3 111 124 194 5 bull 534 6385 26 4 24
os 246 -
122 ioo i66 86 118 235 8255 6)88 7449 5076 013 14609
19 07 11 11 14 29 2187 1824 2695 294-3 29J9 8182
101 i4 i2o i09 28 51 804 llJ)6 1667 1546 577 866
~ hides amp skins amp manufactures amp miScellaneous
~~43 1944 1945
33270 70915 82984 6717 8)69 904)
31~700 43196 32~830 17073 53~400 JBoo6 15447 32~624 38797 14~88 18~388 22895 14116 11a99 9812
68928 n~l79 69-113 15856 19186 20042
217983 33ltl56 323524
78 middot 0 2 215 130 12622
09 27 775 2290
99 240 bull 25~1 337 24070 26388
23 46 67 8853 146)1 21699
09 16 10 321 349 246
~s zero or less than 50 metric tons -middotNote Columns may not ahmys add to totals because of rounding Denartment of Commerce official sources - 19)8-42 Direccion Nacional de Estadistica Ecuador en Cifras [inisterio de Economia El Trimestre Estadistico del Ecuador
1946
)1 8135
4 bull 5 )842
114 13123
46 22709
)1 639
ECUAOOR Exports by Countries 197-47 (Value in thousand sucres) Table - 15
1937 1938 1939 1940 1941 1942 1943 1944 1945 1946 1947 --middot-------middot
80458 lt2865 116t-J78 150055 196953 293081 386483 46lt-909 372~549 463~378 sa4~68J 54422 63418 8)254 1t0496 145 bull 558 168585 2)9238 267105 218018 227291 262887
26 20 65 17 2228 78 124 7)41 17173 630 610 949 1281 1055 1)98 5~526 25686 78523 85382 61478 75890 23481
2899 4955 2109 3568 162 1163 4J54 2526 4197 44~ 1450 5027 6335 4972 5i92 5285 7425 4546 7379 10286 9798 15537
1 5 5 17 57 13 291 54 444 574 6996 8 662 9188 8714 13bull764 7238 15316 13900 11223 6~07l 14503 11717 2908 12544 5 730 7896 3767 21215 22608 29233 4243 6703 7965
51 15 24 8 532 3620 1603 539 2336 11579 3749 80 207 862 4070 9991 17096 1275 17~428 6~973 27431 80541
1943 2135 5229 6039 1965 5435 3021 4827 15~702 25~137 51~854 middot 667 740 991 zo83 3358 11412 4286 4282 3~-970 13064 5~864
1799 419 2218 875 2865 12299 9644 14900 13714 9653 11655 J 89 82 2527 1247 964 326 )24 250 41141 2~985
1024 1514 1068 2205 7173 2650 2 744 8871 7694 J2 5811 17 39~ 77029 61869 43688 11945 1503 5550 6335 4108 4075 36783 61998
32) 6)3 1187 490 58 186 2164 4021 J217 35974 29595 11277 69 - 29 4411 7909 6156 3477 1183 5492 4876 26)8 359 1860 7~467
489 255 J2 100 280 1155 1239 1265 3827 3~961 20539 13t521 10802 2254 5 706 4177 6313 2bull610 3615 4251 -middot 2842 13546 lBi 1415 3 758 822 6 188 12962 3592 2531 412~ 162 7~ 10052
8643 1693 3bull521 3~400 2751 320 40 118 231 222 5404 J 4894
6337 4201 6548 5478 1175 5 45 40 1611 50950 6261 4132 5386 5452 117) -
~l - - 15 45988 5 middotmiddot 7S 8 5 25 567 92S 11
33 ~- 76 18 966 151 150 3419
38 29 858 2 45 78 467
(continuation on next naee) middot
~GUJLOR ~xnorts by Countries 1937-47 (falue in thousPnd sucres) T~ble-15 continued
middot-~--- -~-middotmiddot -middot _ middot-- ~~---~~- ---- -middot--~middot--------middot- -middotmiddotmiddot--middotmiddot--193 1938 1939 1940 1941 1942 1943 1944 1945 1946 1947 _I --middot -middot- ---~- ------ middot- bull middotmiddot-middot -
4 7 5 5 5 219 1087
218 153 529 368 73 49 297 569 1230 35140 789 28137
207 144 379 J68 73 49 297 559 1104 605 11 9 10 126 43
150 6355 plusmn
353 54045 169096 167148 167851 199704 298690 39J115 466631 377894 537131 619859
~S Columns may not always add to totals because of rounding
Dash (-) signifies zero or less than 500 sucres
Primarily Guadeloupe and Jamacia
Primarily British West Indies and Netherlands West Indies
Primarily Denmark Spain and Norway
Primarily Java
~ces 1937 and 1947 from unpublished Ecuadorian Trade Statistics at U s Department of Commerce
1938-46 from Ecuador Ministerio de Economia data furnished IBIID rassion July 1948
Imports by Countr~es 1937-1947 Table-H)
ECUAOOR
l937 1938 1939 1940 1941 1942 1943 1944 1945 1946 1947 I (()
Value in thousand sucres) ~ + -gt L520 63151 83984 115382 128423 186958 200061 311989 302~329 363403 517582 j
u t 2086 51311 71950 103214 110422 138729 103583 173776 178821 240233 429906 0
Q) f
811 674 551 2436 1815 3J258 2150 5265 6538 12178 20912 d S Ugt ro c 1 n 4 4144 3042 8 99 14 23 295 178 8~011 210 h middot-1
(- 0
186 324 237 957 2~991 8492 18~376 15~239 17232 10~574 3121 4 middot-2375 2310 1959 2476 3016 4735 7930 7~696 11~201 15~564 14755 sectwfi
middot-1 1 fli 4 6 343 1~823 3J064 4110 3~612 60J5 h 0H
2739 2109 3789 174 2352 7949 9~934 17845 23~ 616 1559t 18~727 ~rld ()
328 164 457 2498 612 733 10892 10902 20003 16684 11981 oc ampl+lll
mmiddota J63 1297 1161 -- - 2 23 115 1~128 1192 d+gt-
2464 507 500 1438 5565 20668 39979 46654 33684 33034 6~486 15~~ (()
na 1 311 2297 5515 130 bull-I m rl bull +gt
15 31 68 245 995 1516 2804 25326 6124 5956 3472 Oltll~
149 280 269 332 550 208 270 389 707 839 655 a~ sect (1) Cl 4-209 72986 ~ 38 09 1433J 9813 16276 15885 1721~9 45194 80928 ~-g 1701 35767 2 7 7 33 1202 67 47 61 19 2 El 0 0 eo g 3250 11462 8094 12980 10124 8108 13634 12513 11984 28392 40983 cent1-t+l~
1803 718 1687 otmiddot r-
4-114 6465 7339 630 475 34 22 2 66 889 7279 t -P () ~led
36o 4685 1573 7144 308 12 682 4824 rlltll ltDno
1~896 2550 1466 1624 64 1 58 5090 bull-1
fJ ~ ~ 1052 1489 794 945 293 224 5 21 1373 9062 9 703 P + na 868 881 423 10 1 8 223 135 r- 0) u
1 r=l middotr-l
1162 4823 1264 1675 877 1017 1~52 2380 3129 4~326 6851 () l=l rl
7274 3074 2609 3595 980 349 1041 905 599 1~543 3~134 cn~oo bull t
724 11939 8983 19951 6239 2281 1439 304 3882 5478 5736 op a cent1-t ~sect rl
173 302 262 238 -w 14 276 -rr 472 ---s9l ctillmgt
259 10949 7810 18190 4414 170 16 4 5 +gtUd ~-- ~
935 712 728 1278 1281 1715 1314 2685 3185 4465 3151 +gtP t-1
530 105 143 221 306 240 95 89 582 541 2089 ~ (f)
1l 21 12 80 1f 196 122 169 125 1J n ~-T~
0
109 218 lllL 250 m 46 sect2 12_ 28 119 112 I ~ --sB_l_ 0 ---- -
643 148315 147860 17353 149499 199715 21 ~ 983 331156 323524 414266 604479 ms may not a1ways add up to t ta1s because of rounding Dash (-) signifies zero or less than 500 sucres ~ country breakdown not given in source g) of which 591 from Syria 2Z3 from China 264 from Straits Settlements 1 Sumatra and 264 from Iran
YEAR
1937l
1938t
1939~ -
1940amp
194H
1942
Exports Imports Balance
Exports Imports Balance
Exports Imports Balance
Exports Imports Balance
Exp(rts Imports Balance
Exports Imports Balance
ECUAroR Balance of Trade by Area 1937-47 (thousand sucres)
fRlSTERN HEMISPHERE including Philinuines
United States Other Total Eurone
54~lt-22 26~036 80~-~-sa 77~029 52086 9~434 61520 64~209 2336 16602 18938 12820
63418 39447 102~865 61869 51311 11840 63151 72~986 12107 27~607 39714 -11117
83254 33124 116~378 43688 71950 12034 83984 54505 11304 21090 32394 -10817
100496 49559 15Cl055 11945 103214 12~ 168 115382 38~090 -2718 37391 34 673 -26145
145 bull 558 51395 196953 1503 110422 18001 128 423 14333 35136 33394 68530 -12830
168585 124~496 293081 5t550 138~729 48229 186958 9 813 29856 76267 106123 -4263
Table 17
Other Countries World Total
6~559 164045 5-912 131643
647 32405
4361 169~096 12~ 178 148315
- 7817 20781
7082 167148 9372 147860
-2290 19288
5851 167851 20281 173753
-14430 - 5902
1248 199704 6743 149499
-5495 50205
59 298690 2944 199715
-2885 98975
NOTE Areas may not always add to world t~tals because of rounding
Source 1937 and 1947 frlttm unuublished Ecuadorian Trade Statistics at US Department of Commerce 1938-46 frem Ecuador Ministerio de Economia data furnished Mission July 1948
(Table 17 continued on next page)
YEAR
12J Exports Imports Balance
1944 Exports Imports Balance
125 Exports Imports Balance
1946l) Expltgtrts Imports Balance
12Z= Exports Imports Balance
ECUADOR~ Balance of Trade by Area 1937-47 (thousand sucres)
WESTERN HEMISPHEL~ (including Phili~ines United States Other Total EuroQe
239238 147~245 386~483 6335 103583 96~478 200~061 16276 135655 50769 186422 -9~941
267105 194804 461909 4~108 173776 138213 311989 15~885 93329 56591 149920 -11779
218018 154~531 372549 4075 178821 123508 302)29 17159 39197 31023 70220 -13084
227291 264224 49J515 36783 240~233 123170 36J403 45~194 -12942 141054 128112 -8411
262887 241796 504683 61998 429906 8676 517582 80928
-167019 154120 -12899 -18930
1 Only year in which substantial Philippine trade
NOTE Areas may not always add to world total becasue of rounding
Table 17 (oonttnued)
Other Countries World Total
29 393115 1646 217983
-1)49 15132
614 466~631 3~282 331~156
-2668 135475
1270 377894 4035 323524
-2765 54)70
8~833 537131 5670 414266 3163 122865
53179 619859 5969 60449
47210 15380
Sources 1937 and 1947 from unpublished Ecuadorian Trade Statistics at us Department of Commerce 1938-46 from Ecuador Ministerio de Economia data furnished IBRD Mission July 1948
~ EXCHANGJ-tAL BANK
ECUADOR Exchange Reserves amp Banking Position (million sucres)
r 4 bull TIC CQEDITS OF CENTRAL BAl~K Domestic Govt Official Bus Other Credits
MOliEY SUPELY Current AC
JJj To()2f (4) Entities Indvls Total Banks of O~mtl Currencl Denosits l (6) (7) (8) (10) (5) Banks amp 11
Indvls (9)
16 10 26 51 1 116 62 64 48 26 7 40 73 4 129 74 66 3middot7 )9 7 29 66 4 144 73 71 37 29 8 24 62 4 159 78 73 56 26 8 22 55 5 183 8l 103 81 37 28 2 8 201) 120 119
152 37 21 22 79 9 255 169 17~ 26) 34 27 22 83 13 378 ZJa 26e )4 60 37 20 117 9 385 295 308 Z5 105 73 11 189 26 493 321 312 282 153 81 10 244 24 536 35middot~ 354 242 104 44 93 241 2 565 329 284
221 110 51 99 260 2 56 313 278 215 102 47 101 250 2 573 )06 294 225 97 45 95 237 2 585 299 299 219 100 44 98 242 1 591 307 297 214 98 35 111 244 4 6)4 315 295
)20 295
on of $12500CC beginning in December 1946 bull
ars
Ttttal (12)
127 14) 144 151 183 239 345 492 602 634 704 613
591 599 597 604 610 614
ge liabilitieS but including Stabilization Fund in 1945 and GolC CertificCt in 194) bull ial banks and fomento banks ial bc1nkst and fomento banks sits of commercial banks and time deposits of fomento banks
Table 18
Govl t Den sits ~L
(lJ)
6 23 12 27 7 28 8 31 6 32
middotmiddot 11 )6 16 57 27 71 41 74 63 98 59 90 66 77
71 8 75 76 6 75 81 75 81 72
72
1 1 Boletin - Superintendencia de Bancos Boletin - Unpublished data furnish~d MF bY Banco Central of Ecuador
Table 19 ECUADOR
Price Indices
WHOLESALE Rents Export Fooa in
YEAR Goods and Quito - Coal ~1) (2) (3)
1937 100
1938 83 100
1939 95 100 153
19h0 95 106 16h
1941 96 113 150
1942 114 146 172
1943 114 183 187
19h4 118 218 219
1945 133 266 254
1946 203 320 315
1947 297 364 516
19h8 (March) 294 379
(liay) 416
(July) 389
llame l~umbar
Republic of Ecuador
Status of u s Export-Import Bank Loans to ~cuador
Purpose
gs of Junemiddot10omiddotl9ltsect
Gross Authorized
Cancel- Net lations Authorized Repeid
Amount Amount Outstandin~ Undisbursed
6J048 6J048
( 262 )16
Haterials equip amp services $ 6480000 $20810 $6459170 $1279775 ~)5-l19middot395 _____ _
ibulliunicipali ty of iui to (Republic of Ecuador)
ibullIunicipali ty of Guayaquil (Republic of Ecuador)
Republic of Ec~ador
Republic of Ecuador
Ecuador DeveloPIlent Corp
Pan-American Highray (Cuenca-Loja)
Agricultural Research amp Experiments
Raihray Equipment
5000000
12JOOOO
50000 200000
)28 Haterials equip ~~ 4000000 services - ater 1middot1orks
)28 iltiaterials equip amp services - ~~rater orks 4000000
J4J Pan-American High1middotray (Guamote-Tambo)
432 uevedo-Hanta Hightmiddotray (additional credit)
1980000
220000
$19180000
Of tlhich $2500000 tts used on the Quevedo-Ibullianta HighTaY
4000000 28880
4000000 167
-1 t-9amphOOO- -7500
220000
6o6120 -h365000-middot
41592 575-t 2-41
-l-y5Q2- 500 44Gooo
220000
IBRD Statistics Sectio spte~ber 24 1948
7 Apart from a few important consumer-good industries such as tex-
tiles Ecuador is not an industrial country Her manufactures are largely
in a handicraft stage that of panama hats provides an important export
commodity Power prodllction while deficient does not at present seem a
real obstacle to economic development~ which at this stage is principally
an agricultural problem
8 Changes of farm practices will however take time partly be-
cause of the educational problem in Indian collliDllli ties partly because the
provision of improved seeds and the -working out of new safe tillage pracshy
tices carmot be quickly accomplished While the work rh ould be taken up
immediate action in stimulation of development would not center upon the
farm itself but rather upon improvemm t of services middotsurrounding the farm
notably roads irrigation crop processing and storage and rural credit
facilities
9 Such immediate action might be supported by establishment of
multi-purpose rural machinery pools equipped with machinery and personnel
to undertake not only farm operations but also local road-building end
irrigation works work upon the various activities being fitted into the
farming calendar The actual use opound farm machinery would then be conshy
trolled by experts whose ear~ work might be mainly experimental and
demonstrational
10 Voluntal saviftgs directed lnto productive use ere small and a
large part of domestic development axpendi tUes att necessarily by Govern
ment or through GoverrJ~DSnt agencies In con~nce thefe 11 constant pres
sure toward inflation pressure which in the GovemmeDl sector has beea
bull 111-
offset during the past sixtem months by application of special exchange
tax revenues in reduction of Government debt to the Central Bank Ver-J
recently however 90-rer cent of these revenues has been diverted to finarce
of development with consequent renewed danger of monetary inflation v1hen
total Government finances no longer run a surplus
11 These special exchange revenues derive from a multiple excharge
rate system installed in iilay 1947 (with IivF advice and concurrence) to
meet rapid loss of foreign exchange reserves The system has bern successshy
ful in slowing the rate of loss bull but not in colq)Jetely preventing it midshy
year expectat ions were for a loss of foreign exchange of some US$ 5 million
in 1948 Recent action reclassifyinamp i~crts may reduce this e~~ected loss
12 The balance of p~ents position at present difficult and no
great easement can be expected It is improbable that Ecuador could safoly
assume any large additional debt burdens At the same time her ability
effectively to absorb and use loans directed tmmiddot1ard increase of production
is limited bya present lack of technical and administrative abilities
Here iLiprovement though clillilllati ve is necessarily slow at first
- iv-
I GIDGRaPHIC
13 Ecuador has common boundaries with Colombia on the North and
Peru on the East and South The greater part of the country lies immeshy
diately south of the equator which passes 13 miles north of Quito The
area of the country has never been measured but is estimated as 150 COO
square miles ri thin the frontiers resulting fror1 the war with Peru in 1942
the area west of the Andean crest is about 60000 square miles
14 Ecuador is divided by nature into tru-ee separate reeions of
which only two are in effective occupation
(a) The sea-coast plain (about 28000 square miles and about 425
miles long by 62 miles in width) is composed partly of swampy
lowlands and partly of low hills most of the region being
less than 1000 feet in altitude I the north it shares tbe
double rainy season of Colombia and is covered with dense
forest Not far south of the borders of Colombia the double
rainy season ~ves way to a single rainy season from Decemshy
ber to June as one goes further south the rains begin later
and end sooner until at the extreme south desert conditions
begin stretching onward into Peru ald Chile As the rainfall
becomes less the vegetation changes from wet forest to dry
scrub forest and savanna until in the south settlement is
limited to irrigated areas
Temperatures in the region are modified by the cold-vater
-2-
Humboldt current and are more pleasant than latitude alone
would suggest
The coastal region produces almost all the export commodities
of Ecuador its people are largely mestizo strongly conscious
of nationality and commercially active Its major port
Guayaquil (population 1942 154000) is larger than ~ito
(population 1942 139000) and is the commercial capital
of the country
(b) The Andean Highlands or Sierra (about 25000 square miles)
comprises the second natural region and forms the physical
backbone of the country There are two high corderillas
surmounted by towering volcanoes and separated by a series
of ten large intermont basins lying in a north-south line
seven are linked to Guayequil by railway Each basin is
occupied by a dense JOpulation 1hich is almost pure Indim
Only in ~ito and Cuenca are there any important number
of people with Spanish ancestors and these are either
office-holders in the Government or landowners with large
private estates
(c) The Oriente (Amazonian region to the East of the Andes) is
not yet part of the effectively occupied area of Ecuador
Its jungle inhabitants from time to time spear the
agents of the Shell Oil Company who are prospecting
for oil
3
In 1942 official Government figures for these rerions were
Area Population middot Density Square of
Kilometers middotmiddotNumber middot Ponulation
Sierra 70344 23 11686748 61 268
Costa 68633 23 1JooOl8 33 14 6
Oriente 153143 51 189005 6 12
CalapagS Islands 7880 j 2192 a 0~2 -Miera tory 4115 a middot-
300000 100 3089078 100 102
15 Very little however of the total area is under cultivation
It was estimated in 1916 that about 90 ~)er cent of the coast and 60 per
cent of the Sierra was suitable for cultivation that is about 25000
and 1)000 square miles respectively Of the total of Loooo square
miles of cultivable land~ only about 1$000 was under cultivation in
1946~
16 No census of the population has ever been in Ecuador
In 1892 estimated nopulation was 127 million in 1942 309 million
and in January 1948 3L7 million with crude birth rate of 379 oor v ~ thousand and crude death rate of 201 per thousand in 1942- Estimated
composition of the 1942 population was
a less than 05
Yhi te Mestizo Indian Negro Iulatto Other
100 per cent l-t10 ner cent 390 per cent 50 ner cent 5 o Per cenmiddot~
1000 ner cent
Just over half these deaths oc~urred in the are rroun of 0-4 years in 1942
4-
17 At the same date the literacy rate was estimated at 20 pe~ qent
s~i~literacy at 20 per cent and illiteracy at 60 per cent
-5-
II OCCUPAmtOUS AND INCOivES
18 There having been no census there is no at~curate information
under this beading
19 The Economic Department of the Ecuadorian Central Bank has esti-
mated that of a total population of 334 million in 1946 1285000 or
J9o per cent were gainfully employed in the following occupations
Agriculture Forestry etc
Mining
Building and Repairing
Manufacturing and Processing
Services (communication comshymerce government etc)
820000
10000
6oooo 10000
325000
5 5
26
100
20 No valid estimate of national inco~e exists At the request of
tne International Monetary fund the Technical Adviser to the Central Bank
of Ecuador Mr L A Carbo estimated national inccue in 1946 as 20096
million sucres or US$ 149 million Although this estimate is probably too
low ] it is clear that national income is very small Ecuador is very
low on the list of income per head among Latin American countries its
income per head is in feet among the lowest of countries of the world
21 Income is very unevenly distributed A survey made in 1943
yielded the following picture
g lror reasons Sdvanceit below Paragraphs 87 and 88
~ pt WI
-6-
To tal Monthly Average Monthly Population Income Income per Fw~ly
Number of Amount t tount People (SUcres) (Sa~res)
Upper Cla~s 4oooo 133 28000000 144o 2300
Middle Class 96oooo 3200 96000000 4950 4 L ~ 00- middotJ~
Lower Class 2000000 6667 70000000 3610 140 -- -~
3000000 10000 194000000 10000 10000 yenSliP C_~ ~
Note At the ofDcial rat~ of 1350 suc~es to the US$ average monthly incomes per family are equivalent to approximately $2J7 $30 and $10 respectively
~ Uneven distribution of incoue is of course largely a conse-
quence of uneven distribution of property Some ideas of the distribution
of rural property is afforded by analysis of re~urns made in payment of
rural property tax Such tax was paid by only ll2l4o proprietors in 1944
whose holdings may be summarized as follows
Per cent of Value of Rural ProEerties Number of Proprietors
916 4o
29-33 llOO
3041 10400
2030 37200
1080 634oO
10000 112J4o
23 Such statistics do not of course carry one very far beyond
the general observation that income and wealth is very unevenly distributed
and that much is obvious from a little travel in the country But it should
-7-
be said that comparing observations in Ecuador vrith those made in Peru
and Bolivia Ecuador by subjective judgment compares very favorably with the
tvo latter The Ecuadorian Indian seems to be on a perceptibly higher stan-
dard of life both in the highlands and on the coast than the Indians seen
in Peru and Bolivia Vhile his land holding is small it yields somethi1e
he very freqjl ently possesses livestock such as pigs and chickens has cot-
ton clothing drying on a line a~d often cultivates flowers and keeps
pigeons By American standards he is undoubtedly on the poverty level by
Latin American standards he may be a little off it
24 At the other end of the scale the wealthy upper class are pro-
bably not as wealthy as the Peruvian upper clas~h and the Bolivian elite
in operating in poundcuadc~the upper class lacks the rich property of mines
Thus while income is of course unevenly distributed in Ecuador as else-
wnere the range between the wealthy and the InJian may well be less tban
elsewhere The line of income distribution is of aboat the same slope
but probably significantly srJOrterY
This conclusion cannot be demonstrated statistically It results from a 11feel 11 deri ved from personal observetions in the respective counshytries
-8-
III AGRICULTURAL lROIDCTION
25 Ecuadorian development is largely a matter of increasing the out-
put of and improving internal and external trade in agricultural products
There appears to be no enduring geographic or physical reason ~middotby this can
not be accomplished She possesses soils and climate ranging from the
tropical to the temperate soils which in some areas are very fertile and in
others are in danger of exhaustion To anticipate subsecpent conclusions
her problem of development through agricultural progress breaks doTltD into
separate aspects all involving improved technique
(a) increasing arable yields from areas already cultivated
(b) improving pastures and stock in grazing areas
(c) enlarging both arable and pastural areas (including irrigation)
(d) improving roads in rural areas
26 Achieving these objectives involves providing more adequate
domestic credit for short- medi~ and long-term agricultural requirements
27 In application however interpretation of these problems is very
different in the two occupied regions of the country the Sierra and the
Coastal Lovrlands no generalization can cover both
(a) TLe Sierra
28 The occupied inter-Andean valleys are a region of temperate
agriculture producing almost exclusively for local consumptionmiddot Their
pat tern of tilled fields grazing land trees and flowerJl is almost
Y Flowers bloom all year round The main tree is the eucalyptusmiddot introshyduced some 70 years ago end used for all purposes (~indbreaks fuel 1
and lumber) affording a striking example of the effect of introduction of one plant upon regional habitability-
-9-
Western liiuropean in appearance but not unfortunately in productivity
Agricultural Production of the Sierra
1939 194o 1941 1942 - -(Hundreds of pounds)
Theat 49QOOO 611300 534300 527499
Potatoes 1201000 1476400 1386120 1146000
Rye 72500 79900 159495 115000
Lentels 46000 424oO 37955 csooo Corn 816700 1349300 1308062 1315200
Barley 85)000 795700 903600 911000
Cotton 45000 42020
Kidney Beans 80000
29 In addition about 1000000 hectares (247 m~llion acres) are
devoted to pasture supporting epproximate1y 683000 cattle 145 million
sheEf 107000 STrrine and 320000 goats
30 Yields are low in all Sierrean agricultural activities the
standing VJheat and barley crops are so thin that the ground can be seen
through them Yet the greater part (some 6o per cent) of the people of
Ecuador live in the Sierra and population is increasing at about 2 per
cent per annum The effect upon land use under existing tecnniques is
clearly visible cultivated areas are being pushed higher and higner up
the hillsides (slopes of 30 to 40 degrees being used) and onto the
fJparamon the high plateau betvreen adjacent valleys at altitudes of
11000 feet and higher The result is a picturesque scene but one which
reveals a near Malthusian situation in the man-land ratio rbullrith static
-10-
technical practices It is a situation which cannot remain unchanged if
economic development is to occur in the region
31 There sean to be three possible lines of advance increase of
output from highland areas in present use the bringing into use of new
ground in the highlandsbull or a change to increasing reliance upon the outshy
put of non-highland areas
32 The third possibility is not one for the immediate future It
involves either large-scale migration from highland areas to lowland
regions or a large transport program linking highlands and lowlands
together with growth of non-~ricultural activities on the highlands to
provide a cash income with which to purchase 11 imported 11 foodstuffs This
second possibility may indeed be the trend of ultimate development but
offers no irmnediate easement Large-scale internal population movement
from highland to lowland is probably impossible since the Andean
Indian (of different stock to the coastal Indian) is fullf acclimatized
both mentally and physically to life at high and temperate altitudes and
little suited to life on tropical lowlands
33 The two remaining lines of advance would both seec to increase
highland agricultural output But there is an important difference beshy
tween increasing output from valley land in rr esent use and bringing new
and higher land into arable use The first is a complex problem suscepshy
tible only of relatively slow solution the second is seemingly simple
and capable of quick result yet basically less sound offering only
temporary improvement
34 The thurst onto higher ground is already evident and the area
-11-
taken in could probably be greatly enlarged by efficient use of tractors
and modern plows Such use of mechanical equipment would thus give quick
increase of agricultural output but it is very doubtful whether improveshy
ment induced by these means alone could be long maintained The greatest
~r particularly on sloping land is that deep plowing may lead to
soil erosion so serious that land becomes finally llilgtroductive To use
mecbanical equipment i thout at the same time adopting eqJally modern
methods of soil conservation way well be disastrous and that perhaps
within no long period
35 Even apart from this physical daneer there is the virtual cer-
tainty that new land however plowed would gradually sink in fertility
end hence output unless farmed by better agricultural practices than
those now followed in highland Ecuador The present attraction of the
higher land is principally good natural fertility beine virgin ground
On all other counts this higher land is less advMtageous than the valley
floors the va)ley sides are steeply sloping a1d the fl~t paramo is some
2000 feet higher bare windswept and devoid of habitation It would
seem obvious that it is pastoral rather than arable ground were it not
for the pressure upon arable output of the region
36 The pressure today however rises from the relation betwem
popUation and output rather than that betvreen population and arable
area Productivity in the Andean valley is low and can certainly be
improved If improved the pressgtlre which is causing the thrust to
higher ground is relieved until population increase again overtakes outshy
put Against that time however the higher ground vrould remain
-12-
availfibleY and other lower regions may be coming under effective use
37 To increase output of the populated valleys is not a simple mat-
ter responsive to single policies such as simple mechanization by tracshy
tors It will embrace the wlo le range of agricultural practices from
better seed types to crop rotation and fertilizers including in some
valleys irrigation It is a matter rrther of agricultural education
than of~dtlgagricultural appliances and probably experiment under
the peculiar regional conditions will need to precede education Improveshy
ment will necessarily be slov1 but along these lines it can be sound and
permanent
38 Wher~ lfL mere importation of mechanical methods Vi thout
understanding of their dangers in speeding soil destruction by wind and
water erosion may permanently damage the region The somewhat gradual
mechanization of agriculture is of course to be expected and not disshy
couraged but it is not the wlole answer to development in highland
Ecuador
39 It seems that there is at present no over-all agricultural
lfibor sl1ortage in the Sierra and mechanization is nOt therefore called
for to relieve an adverse manpower position It seems however that
some of the larger estates are experiencing difficulty in obtaining their
labor requirements because Indian tenants are viitblolding quasi-feudal
labor dues and devoting whole time to cultivation of their own plotsbull
As a result hacienda holders are attracted to mechanization as an
escape from growing difficulties in obtaining and supervising labor upon
Y As it would not if destructi ve1y formed at this stage
-13-
their ovm land To the extent they are successful the tendency for agrishy
cultural money vrages to rise is weakened
4o There vrould seem to be good possibilities of increasing pas-
toral agriculture in the highlands 1Jrith improvement in both numbers and
strains of cattle and sheep If adequate arable development occurred in
the valleys the main grazing grounds could be the higher land not then
required for arable purposes ~lith dairy cattle on the valley margins or
on valley ground not well suited to arable use Such pastoral development
would be desirable not only to imp1middotove nutrition in Ecuador itself 1 but
as a possible new export of meats fats and hides to meat deficient
Republics notably Peru Early export would probably be on the hoof
along the Andea1 ridge it self
41 The Ecuadorian Government has not included any explicit propo-
sals for highland agriculture (other than irrigation) in its present apshy
proach to the Bank It has however suggested the Bank finance $1 mil-
lion of agricultural tractors and equipment to be handled by agriculshy
tural stations located at strategic places both in the coastal
provinces and the highlands 11 without further elaboration of the
intended highland use of such ecp ipment The description given above
suggests that the usefulness of agriculture machire ry depends to a conshy
siderable extent on the place plan and purpose for rhich it is to be
used
42 In some of the highland valleys (for example in Cotopaxi end
~ound Biobamba) rainfall is deficient and irrigation would increase
valley output by bringing more valley ground into effective use This
- 14 ~-
is clearly sound for flat valley ground already populated is more useshy
ful than higher sloping and more exposed ground The Ecuadorian Govern
ment has included purchase of eq1 ipment for irrigtion works to the value
of $500000 in its present approach to the Barik Assessed against the
requirements for economic development the request is sound provided of
course such equipment is effectively used
(b) The Ooast
43 The condition and nationel significance of agriculture on the
tropical coastal plains is quite different from that ltNl the Sierra The
area as a whole is less densely populated and in some parts such as the
Province of Esmeraldas is very sparsely populated Its principal pro-
ducts are exported The population has more mixed blood than the highland
people and is oore corumercially active and minded There is little feel-
ing of community of interest with the highlmds the rrincipal coastal
city GuayaqJil is larger than Quito and less remote fror-1 outside
influence
44 In terms of reported area devoted to its cultivation cacao
is the principal crop of the coast The table on the following page
shows output of main crops
45 Cacao is not however the most important export crop by value
being surpassed by both rice and panama rats (a handicraft product of the
region) Nor does the table show those products which result from
gatherage of mild growth tagua kapok oil-bearing vegetable nuts
balsa rood rubber etc
Y For use by the Caja de Klaquogo as required both in tile highlands and on the lowlands
-15-
46 Agricultural Production of the Coast
1939 ~ 1941 1942
(limdreds of pounds)
Rice 957164 872890 12304oO 1610489
Cacao 392000 263300 333250 315782
Coffee 343800 369000 310000 190633
Bananas (1000 bunches) 4090 3913 4568 4265
Oranges (COOs) 103000 lQ96oO 80550 75000
Cotton 200800 156800 155910 111500
Tobacco 24o43 4o 765 22349 29539
47 It has been estimated that about 500000 hectares (1 235 500
acres) are devoted to pastures on the coast supporting approximately
425000 cattle and 36000 swine
48 There is no doubt that the coast is an extremely rich agricul-
tural area although toward the south it is increasingly hampered by
shortage of water in the dry season And rt is overwhelmingly the
principal foreign exchange producing region of the country Yet it is
largely undeveloped by any modern standards lacking roads and almost
all basic civic amenities (water supply sewage paved streets etc) in
the provincial towns The development of a tropical agricultural region
without large labor supply _rill raise many interesting and some new
J Irrigation ~rks are in execution and others planned in various places and the irrigation equipment which it has bee11 suggested the Bank might finance would presumably be used on the lovlands as well as the highlands
-16-
problems the solution of hlch in detail may lack precedentY The
suitability of cacao to Ecuadorian conditions arises in part from the very
small labor requirements of the crop At bottom advance will lie along
the route of crop improvement and mechanization the difficulty will be
the proper application of mechanization crop by crop Some tropical pro-
ducts may never be suitable for mechanical cultivation being those whicl
would require intensive hand cul ti vat ion and may therefore not be appro-
priate for Ecuadorian condttions Others r1JJi3 be suitable only if grown on
relatively large plantations
49 Clearly for the foreseeable future many lowland products will re-
main at the stage of gathering of nld natural growth rather than plantashy
tion enterprise The flow to market of such productswould be increased
by improved access notably road core truction anQ at the same time road
building ~~uld seem to be a condition precedent for spread of plantation
methods particularly plantations using mechanical equipment lilliE diate
measures for the over-all agricultural development of the region may not
be directly agricultural at ell they are rather the provision of roads
and transport facilities the provision of long and medium term agric-llshy
tural credits and in some areas) the institution of health services
With the opening up of the region in this manner iiould come more clearly
perceived opportunity for better agricultural use of the land particu-
larly if effective demand for the products is transmit ted back to the
cultivator through establishment of product processing plants where approshy
priate for example in vegetable oils and tagua (vegetable ivory)
] This is the situation which in Brazil for example in an earlier technical epoch was 11 solvedll by importation of Negro slave lebor
-17-
50 As in the Sierra there are good possibilities for pastoral
development on the lowlands Some progress is already being made in this
direction with experiment in breeding more suitable cattle types through
crossing 11Ji th imported Indian brahmin strains Grazing for beef is not
highly labor intensive and this development is very promising since
export to other Republics by sea llould be reltti vely easy In the first
stages export would presumably be upon the hoof ith later development
of meat packing
51 There seems to be no single bottleneck or restraint upon devel~
ment presently existing all other conditions being favorable If developshy
ment occurs it will be along many simultaneous fronts but the front iJhiclf
is lagging and Inayen continue to lag is the provision of basic social ccp ishy
tal (roads water supplies health services etc) that is of those
things which no single private individual or corporation can provide for
itself Given these and the institution of suitable domestic credit
fecilities the rest may be accomplished by private domestic ini tiat1ve
52 The development plans of the Ecuadorian Government as outlined
in a Memorandum dated April 8 give much weight to lowland agriculture
The establishment of agricultural stations to provide farmers wi~h
disease-resisting cacao plants~ tecl1nical advice and credit facilities
is CD ntemplated no foreign exchange would be recpired all funds being
local currency The rehabilitation of cacao formerly a leading export
crop is desirable although development of cacao sources elsewhere may
prev~nt recapture of the position formerly held by Ecuador
53 A proposed agricultural mechanization programwoUld total
- 18
$25 million in foreign exchange cost )J The bulk of this ($1 5 million)
is allocated to wechanization of rice cultivation alone the benefit being
principally in resulting improved export position The remainder $1 milshy
lion is for mechanization of other agricultural produc~s apparently
mainly lowland (those products specifically mentioned being 11cotton sugar
oil-bearing seeds and other specified products11) the exclwnge benefit
forecast being principally through reduction of import a
54 Different criteria ~~ould be used in assessment of these two
projects The judgment on that for rice will depend upon forecast of
world rice markets and in particular upon expectations regarding rorld
demand for rice from the dollar area The validity of mechanization in
cotton sugar oil-bearing seeds and other lowland products will depend
first upon the technical possibilities for such mechanization a matter
not yet fully explored If sudl technical possibilities are favorable
effective mechanization vOuld constitute sound development upon the low-
lands which are relatively sparsely populated
Y Some part of which would be for the benefit of highland agriculture if machinery stations be established there
--19 -
IV MI-~RAL PHODUCTION
55 Ecuadorian mineral nroduction covers only a few products and
important the wells of the lowlands being exploited by the nglo-
Ecuadorian Oil Comany Production of crude petrolewn shows a slicl1t
rising tendency while exnorts have declined steadily a~ more refined 1
products are consumed domestically
56 Oil exploration to the Iast opound the Andesin the Amazonian
region is proceedinc under concession to tl-1e Shell Oil Go1~1any
Three wells have been drilled without success and tvro arc beinc
deepened Cost of this exploration to ciate j_s around US)23 million
If oil is found its only outlet middotwill be a pipe line over Ue Ances
(estimated to cost USiD93 million) and this the comany is not -rE1inz
to undertake unless assured of an outnut of at least 100000 barrels a
day
57 The only other irnrJortant minine activities are those of gold
silver conper and lead conducted by the South ~~erican Develoument ~
Company and the Cotapaxi Sxplora tion ConJ1any War-time lr oduction peaks
were 1942 for gold and CO)per 1944 for silver and lead Since these
resective peaks production has ~-~clined narticularly in copper and
lead although not to 1933 lsvels7
crude petroleum II II
1938 (millio~1s of 225 107
Production Exports Production refined petroleum 37
1947 barrels)
236 bull94
128 (See Table No_Jl_ Statistical Appendix
Production Gold (000 troy ounces) Silver (000 troy ounces) Co~per (000 pounds) Lead (000 pounds)
1938 445 82~0 27 21
War Peak l03tJ hhl3
96788 161-+88
19h7 5o5
1569 3316 h98h
-20-
58 Ecuadorian trade statistics list exports of crude pet~middotoleum
and minerals separately from that of other commodities even in aggre-
gate figures underlining the fact the exploitation is in foreign hands
and hence colonial in nature This aspect hmmiddotever is of di-1inishmiddot-
ing importance as now the foreign exchange realized from such mineral
exports accrues to the Central Bank and as in any event nineral ex-1)
ports form a diminishing proportion of the vhole 7
V ~JNUFACTURING PEODUCTION
59 There are virtually no stCltistics on manufacturing in Ecuador
and none which present any comprehensive view It is ho~middot-rever clear
that there is very Uttle industrial factory prJchJction and obser-
vation in the country leaves one with an impression of the nresent
igtilportance of handicraft production
60 The most inportant consuxner-good factory industrj_es are tex-
t~~~breweri~-~~ otheuro7r beveraces shoes ard leather _roduc~s buttons ~d~lttfr
and nails Textile production using domestically produced cotton pro-
duces cotton piece-goods and wool rayon and hemgt textiles supplying
almost all domestic demand for low-quality products The only irJDcrtant
producer-good factory industry is cement the plants being located near
Guayaquil Lack of domestic technical lmow-how and of capLtal and
the low level of domestic effective demand account for the sli~ht develop-
ment of faetory industries whose rrowth on any scale beloncs to a 1ter
stage of economic development
y Value of nineral exportsmiddot as nercentare of value of all exports 1929 260 nercent 1933 430 n 1939 397 1946 11~5 1947 69
Production and irrport statistics for cement tre civen in Table IJo bull 2__ Statistical Appendix
- 21-
61 Uuch of finished commodity ygtroduction is at the handicraft
stage both for nroducer and consumer goods In Quito and Guayaquil
one sees many small 11 shops11 producing metal leather and wood manushy
factures largely by manual methods It is an illuminating co~~entary
on the shallow growth of industrial specialization that the ll1ission
did not see any shops selling ready-made womens clothing All
womens clothing shops displayed only materials in the bolt as in
pioneer days elsewhere
62 One handicraft industry of great importance in exports is
the production of panama hats It has been estimated that 30000
families are occupied vrhole or art-time upon this nroduction and
at times (for example 1945) they have provided the largest single
export item by value The grmvth and treatment of the fiber and the
weaving of the hat is entirely an Indian handicraft industry the
Yteaving of a high-quality hat taking three months The fiber is erown
and the best hats woven in the lowlands Its future ir-mort nee is unshy
certain as the competition of Italy and the Fhilinpines is again felt
in low-_)rice woven hats the boom emjoyed during the war nay recede
63 Ecuador in its ~resent and foreseeable development is an
agricultural country with no immediate movement toward industrialization
EcuAdorians met by the Mission themselves stated this The growth of
factory industry will be slow that of small shop and handicraft manushy
facture somewhat less slow It vmuld seem as stressed later in this
report that there is room for grm~h of processing of agricultural
products Statistically such processing would be classed as industrial
production but is oroperly the finishing stage of agricultural productior
- 22-
to secure improved durability and portability of perishable products
This would increase effective demand imnacting upon the farm and ass1st
in stimulating agricultural development Some progress being made in
this direction notably in vegetable oil expressing plants Ihe only
non-agricultural project suggested by the -r~cuadorian Government has -eer
a cement plant located in the highlands at a foreign exchanr~e cost of
$2 rrillion the justification being both the saving of foreign exchange
expended upon cement imports and reduction of load upon the only railshy
way connecting lovrlands and hichlands Growth of cement use accompanies
economic development assessment of this project (engineering questions
apart) would involve tainly questions of timing location and finance
matters which are really all aspects of the single question whether
such a project may not be one for private direct investment Initial
expectation would be that were all factors favorable to the success of
the project it gtlould be readily undertaken by orivate enterprise
particularly when it is remembered that railway freiehts 1bullrould protect
highland production from lowland competition
6h No sueeestions regarding increase of electric power output
have come fror1 the Government indeed the official statistical services
have no data upon installed capacities and demand Cnly in Quito and
Guayaquil are present industrial uses of electric poler of any ir1portance
Elsewhere suIJply is from snall municipal plants (mainly therraal) for house-
hold consumption It appears that demand mar be ahead sunply in cost
towns very frequently voltages are maintained around 80 instead of the
rated 110
- 23 -
65 Shortage of electric nower is not however hamoering
economic development at this stage although it may soon do so in
sevral urban centers such as Qui to and Hiobamba Sone ttne i-1 the
iuture the possibility of large hydro-electric vrorks on the eastern 1
side of the Andes will merit attention
y Where the rivers are fast and clear on the western side they carry much silt
- 24-
VI DmIESTC THANSPORT AND COilERCE
66 The space devoted to agriculture in this report reflects its
importance in the Ecuadorian economy As has been said further developshy
ment will for sometime be mainly agricu1tural
67 Present restraints upon that development are not located
solely or perhaps even nrincipally on the farm there are many
features of the general economic environment which operate to hamper
even purely agricultural development There is great room for improveshy
ment of transport to knit the economy tocether and to encot1raee grovrth
of output
(a) Transport
68 Without roads there can be little regional or inter-regional
intergration Fithout that intergration (which for some regions and
some crops would open upon the world at the gatewa~r of a oort) there
can be but small inducement andlittle opportunity of increasing proshy
duction In much of Ecuador the principal transport vehicle is the mule
whose patience and endurance under heaJr load is matched by that of the
Indian
69 As regards roads the requirement is both more roads and
better roads capable of bearinr modern vehicular traffic The roads
traveled by the 1Jission are uniformly bad both slowing traffic and imshy
Ilosing extraordiPamiddoty vehicular de_reciation Ultimately no coubt
there vdll be an adequate system of all-rreather roads in Ecuador For
the immediate future the more modest tarset is to attain a reasonable
system of roads civine access to the creater art of roducine areas
- 25-
in the dry season At present the unsurfaced access roads are cut to
pieces by --vater erosion in the wet season and consolidated somew1at
traffic in the dry season A single eradinr operation smoothin thE
dirt surface at the end of the vret season would ci ve accelJtable usashy
bility in the dry )eriod v1hich in the populated coastal rovince of
icanabi for example is eight ~aonths of the year At -_resent the so1e
transport link for corunodities between loYrlands and the hihlands
is the Guayaquil to Quito (and beyond) railway This link is nrobaoly
nearing saturation point vdth present equipment and its strencthening
both by railway imJrovement and all-middotweather hichway construction is
obviously desirable it middotill probably become essential yri thin five
years
(b) Commerce
70 Physical transport alone hogtever is not the only ope c-ation
ofcarriaee required to intecrate a reeion internally and to bind toshy
cether the various regions There are also tL physical and the finanshy
cial aspects of comr1odity holdinr involving the storae and vrhere
necessaFJ the partial processing of products to reduce perishability
and the avail~bility of mechanisms of short-term finance extendine over
crop periods In Ecuador these tro aspects are closely related
71 Apart from some export crops there is virtually no crop or
food processinG undertaken And in the export crops processing
is the minimum necessary to secure portability Eice is nilled but not
polished cacao is sun dried coffee is dried and within only recent
years washed fruit is exported whole Some new e~Jor-ts may require
further processing and installation of plant starting or is in
- 26-
advanced discussion for example vegetable oil processing (although
for sometime no eXport surplus of vegetable oils is 11~11 and fish
canning
72 Nor is there any important ~recessing of domestic food pro-
duction for home consumption bull There is no freezing or canning of meat
which is taken to market on the hoof There are only two or three
very small butter factories and no whole milk orocessing Cereals
of course are not highly perishable but there are no silos or granarshy
ies and experience of similar situations elsewhere suzfests that losses
by deterioration and infestation may be significant no direct evishy
dence anthe incidence of this factor in Ecuador ~as obtained by the
Mission Thee is little storage of grass on the coast in silos or
as hay and in the dry season slaughter of cattle because of lack of
feed is at times necessary In short the situation is not so very
dissimilar to that ofmiddotmedieval Europe
73 Roads alone would not create an environment favorable to
change in this position although lack of roads nar well inlibi t change bull
In addition suitable credit facilities for the finance of co~~odity
holding through time are necessary
74 Hany complaints were voiced to the Hission reearding lack of
short-term banking credit for crop movement and storage and for medium
and long-term agricultural investment and no doubt there is signifi
cant lack of such credits But this is not the result of some simle
institutional defect of the b~~inc and credit structure even though
institutional improvement may be necessary It is fundamentally a
- 27-
reflection of the fact that Ecuador is extremely poor in disposable
capital available for even short-term investment ie vrorcing capi-
tal Improvement of short-term credit facilities for what in advanced
communities are regarded as purely commercial purposes would in effect
represent an increase of capital intensity in the Ecuadorian ecororny
To the extent that banks met more fully the gtJeak seasonal credit re-
quirements for croo movement and storage individual nrivate reoources
are relieved of the 1eak burden and available for other investments
75 Thus iorovement of the techanisr by 11hich the banking system
provides working capital for corrtercial or inciustrial (in the sense of
crop processing) purposes is itself an act of investment rather than
merely an institutional rationalization ilnd as such carry the
usual consequences of investment in an undevelogted economr with very
law voluntary savings To the extent that additional credits are not
matched by savings sewhere (either voluntary or forced through
taxation) they will be inflationary in effect just as an
additional act of long-term investment would be Increase of banki1g
nrovision of workinrr capital should keep step with totl capital for-_ - - 1 mation of which it is one aspect7
It is implicitly assumed in the foregoine that at nresent in Ecuador the amount of small voluntary savinrrs is neclicible It vrill presumably not alrmys remain so and ~Jart of the modifications of the bankin~ system shou1d be attract Clli1U1 atively such sav-ings in the fom of savinc do)Josi ts This 1muld increase the extent to which Danks can safely flovide capital It will be a much later before small private savincs are directly in-vested in commerce or industry throuh joint stock r1ethods There is no stock-exchance in Ecuador
-28-
76 It is of course just as important that the availabi lity of
working capital should not lag behind as it is that it should not run
ahead The Bank should ensure that any long-term investment projects it
may assist to finance do not effectively starve the rest of the econo~
of working capital in the process of avoiding inflation
77 There is also the question of the price of short-term lending
that is of the level of interest rates The Ecuadorian is a highshy
interest rate eoonomy The legal maximum for commercial short-term loans
is 10 per cent having recently been increased from 7 per cent legal
maximum rates however are not systematically enforced by commercial
banks themselves At a time when the legal maximum was 7 per cent
going rate for 90 day loans secured upon properly warehoused commodishy
ties and with third party endorsement was 12 pe+ cent
78 This very high structure of interest rates seems open to
obvious criticism but is in fact probably not Tiholly unjustifiable in
the present conditions of Ecuador It is the cumulative result of many
factors so that more official prescription of lower rates would be
quite ineffective These factors seem to be
(a) Interest proper~
(b) layment for risk bearing arising in part out of a
low rating upon individual credit and in part from
the institutional conditions (such as embryonic
commercial and financial ruarkets) which seriously
reduce the liquidity of any asset other than money
itself
-29
(c) An clcmmt 0f discount 111nn cyectcd luturc irf] utinn
reducing the real value of the pa~nent for lending
(d) An element of monopoly which upon purely subjective
judgment may be the least ilJI9ortant of these several 1
factors7
(e) The real shortace of capital whether short or long--
term~ reflecting in interest rates as a genuine
scarcity price
79bull Of those factors the di~ount upon expected future in-
flation increases prices at a rate of 12 ner cent per annum a money
interest rate of 12 per cent per annum is a real rate of zero If
therefore inflation could be controlled a substantial reduction of
money interest rates could be hoked for At the same tine while
inflation continues high interest rates probably have small influencemiddot
in encouraging money savings
80 Even without inflation ans until the su~1ly of available
real capital improves relatively high interest rates may well be
acceDtablemiddot as a price mechanisn nethod of selectin~ most urofitable y ~
uses of limited fundsbull middothere exoected urivate nrofit did not seem l - -
to parallel social desirability loans at lower rates (ie subsidized
terms) could be made perhaps through reconstituted Development Banks
Prima facie however such loans 1bullrould not be short-term
~I -Onthis interprepoundaion the situation in Ecuador differs signifishycantly from that in Peru
tt is suggested that a powerful point of intervention would be to limit commercial banking dividends distributed to not more than say 7 per cent The high profits nmv earned by commercial banks would then progressively accumulate until liberalization of lending becomes virtually forced by accumulation of funds representing genuine corporation saVings
- 30-
81 The discussion of private finance has so far upon
short-term credits there is an even larger nroblem in the
intermediate and long-term arricul tural credit It is not necessarr
to expand greatly upon this since it too is a consequence capi-
tal shortage
82 Imnrovement would seem to be alonrr the route - 1 of nroper UElte
of existing Development Banks (or their successors-) effectively
in the earlier stages as lending agencies of Government
VII OFFICIAL DEVLOPHl~NT FHmiddotIfJCE
83 In the circurnstances of a country like Ecuador the greater
part of domestic capital forr1ation requires official directly
or indirectly if it is to occur on any scale are too
small and too narrowly held to permit much -rowth this roL1te
andthose few who are able to save at any sinificant rate are larely
uninterested in the efficiency of ~reduction
84 Official finance may be either direct or indirect direct
throueh works executed by Government or 0JUblic bodies indirect
throueh lending institutions such as Dev~lopment Banlcs capitalized
from public funds In either case funds are diverted to investment
purposes by Govern~ent intervention
85 Thus Development Bank lending for productive purposes (for
example long-term acricul tural credit) is an item 1n ca9i tal formation
V There are thirteen reaional Development with an unirnJresstve record of manaeement Their possible reconstitution is under discussion
-31-
rather than a mere institutional rationalization of the credit mech-
anism Indeed as has been stressed in the last section even im-
proved su1nly of short-term credit gtrill in art rewesent
formation A developing economy which neclected these items in 11Cnn21~~
or forecastinc total caital investnent would be very vulnerable indeed
to inflation induced by over-investment
86 17here voluntary savings are Jow the only wmiddotamiddot to sirnificant
rate of capital formatton can emerge without inflation is an equi-
valent amount of savine forced throurh taxation One ould look for a
relatively hirsh level of taxation to national income and for a rela-
tively high proportion of exnenditures caDi tal purposes to total
Government expenditures On both these counts Ecuadorian elq)erience
seems irare s si ve
87 In 1946 total budretary and spedal revenue rms disclosed
as 5368 million sucres in the sa1le rear an estLnate middotJaced national
income at 20096 million sucres This a proym~tion of 27 middoter
come a proportion so hich that in fact it lacks credence In assess-
inc total tax burden part of the revenues of Government monorolies
and all of municial revenues should be included if this be done y
the proportion becomes 37 per cent In addition new exchance taxes
yielded 973 million sucres in 1947
Mono_)oly participations (ii direct disbursements for public _Jurposes) were 353 million sucres in 1946 munici~al income was 1803 million sucres in 1947 (1946 not available)
32-
88 It is very difficult to accept the conclusion that Ecuadorian
revenues form so high a proportion of national income it would seem
that the estimate of national income is too low Nevertheless tax
revenues are clearly a sizable percentace of national income
89 At the request of the Mission an official estimate of total
official expenditures on capital account was prepared Total income of
Government municipalities provincial councils and other public
entities was ~iven as 7S4 million sucres and total capital expenditure
from that income as 2237 million sucres or slichtlr over 30 per cent
of revenuesY It is difficult to feel confident that effective capi-
tal formation on this scale actually occurred certainly there is
little evidence visible to the eye of the t1middotaveler
90 Notwithstanding such doubts the fiscal evidence is of a
fairly hich proportion of tax revenues to national inco~e and of a
hich proportion of revenue allocated to capital investment It would
seem that the fiscal mechanism exists for domestic capital fo~~tion
what may be required is more effective expenditure of allocated funds-
Before a development plan envisa~ing the expenditure of still more funds
was adopted it would be desirable to examine closely administrative
and technical efficiency in the use of existing funds
91 On the side of revenue Treasurr officials informed the Mis-
sion that tax evasion was estirnated at some 30 per cent of ta revenues
1 This makes such capital expenditures 112) per cent of 1946 national income which a~ain seems very high indeed
The two largest items are Government public works (8)4 million sucres) and municipal works (900 million sucres)
- 33-
particularly in income and land tax It might well be advantareous
on the sides both of revenue and of expenditure for Ecuador to obtain
technical assistance of the tPe that the United Nations Department of
Economic Affairs rendered to Venezuela in 1947~Y involvinpound revision
of the structure of the budget of budcetary audit practices and the
like
f Report~d in UN Document ECN 1SubJfti 4 - 21 June 1948 lostricted)
- 34 -
VIII 001EHNl(iEi~T FINANCE AND INRATlON
92 What may be called 11multiple budget practices exist in Ecuador
as in other Latin American countries There is an annual Ordinary Budget
one or more Extraordinary Budgets( tro in 1947) end a number of Special
Accounts (twenty-five in 1946) not included in the general budgetary
accounts The State operates nxmopolies in tobacco liquor salt and
matches part of whose profits are taken into the ordinary budget as
revenue and part used directly for public purposes It is thus diffi-
cult to assesrmiddotgggregate Government revenues and expencii tures and vir-
tually impossible to detail the purposes of expenditure to ascertain
accurately public capital formation by way of public morks and the like
9 Taking the disclosed figures on the ordinary and extraordinary
budgets and tne special accounts there has been a net surplus over the
past ten years 1operations of 234 million sucres~ This however is
not an accurate reflection of the true aggregate position because the
Government operations are not ~holly included in these disclosed ac-
counts But since the Government has no source of internal funds other
than the Central Bank the net recourse of Government to Central BanJJI mirrors the over-all result of Government finance such recourse increased
In 1946 for example the monopolies contributed 5357 million sucres to the general revenue and disbursed 3526 million to municipalities (145 million on general participation and 1652 million sucres for 11 special participation of gthich an example is a new electricity plant at Ambato the state railways (92 million) etc
gj iiith only three years of disclosed deficit since 1938 See Table 12 in Statistical Appendix
2 Central Bank loans middotto Government less Govertllllent deposits in banks
- 35-
480 million sucres over the nine-year period 1939 to 1947 inelusivel
an average of 53 million sucres annually amplch averaging however con-
ceals very important differences between the three periods within the
nine years to tal
94 The table on the next page sumnari zes the factors causing in-
crease of domestic money supply It is computed by rearrangemm t of the
balance sheets of the Central Bank all commercial banks and all developshy
ment banks and is thus a table shoring changes in items in a rearranged
aggregate balance sheet of the Ecuadorian banking system
95bull The first t70 periods 1939-1943 end l943-l946f were both
periods of heavy inflation_ During the first five years notes in cir
culation and monetary deposits increased 3437 million sucres (or 255 per
cent) and in the next three )eera 2904 million sucres (or 61 per cent)
But the causal structure was quite different in the two periods
96 In the first inflation was almost wholly induced by external
factors (favorable balance of paYments causing increase of foreign exshy
change holdings) the major domestic factor being expansion of commercial
bank loans and investments in this period deficit Government finance
was not a causal factor
97 In the next three-year period 1943-1946 however the major
inflationary factors change deficit Government finance and expansi on of
f As calculated by IBRD Mission loans to Government including ali loans to official agencies A recent calculation by the IMF Research Departshyment covering Government operations only places the aggregate 9 years deficit at 345 million sucres~ See Table 12 in Statistical Appendix
- 36-
BANKING CHANGES ~0015 SucresJ
Jan 1939 Jan 1944 Jan 1947 Jan 1948 to to to tomiddot
Dec 1943 Dec 1946 nee 1947 June 19h8 t~ ~arsJ ~~ iears) trmiddot ~~r1 t~ mo~~h~2
Central rcrk loans tomiddotc~vt~ f 16174 f 160260 - 701p88 23695 Central B~r~ Loans to Public -1 6978 2_283 1- 67548 1- 39763 Commercial Bank Loans and
Investments J 187554 f 14624 88h4 1- 2~ ~49 Development Baru Loans and
J 14227 136818 ~ 644 1- 26090 Investments
1 224933 f 313985 11)40 1- 68107 Net Bank Foreign Exchange 260774 f 94662 - 53203 - u6 112
7 485707 7 408647 I
7 bull - 64543 21395
Notes in Circulation f 16o907 1-131729 - 23205 - 17290 Public Monetary Deposits -A 162868 1- 128914 - 68734 1- 19620 Government Deposits f 19968middot 29768 9050 2366
7 343743 7 290411 82889 - 36 Public Time Deposits 116834 ~ 42053 1~004 f 317j
y 7 46o517 7 3J2464 83893 ~ -- 3137
Absorbed by Banking System 1- 25130 middot~ 76183 1- 19350 18258 7 485707
11 f 4o8647 64543 I - 7 21395
Net Government Borrowing J 131492 from Banks 3794 - 79738 - 32745
Deposits in Central Bank in foreign money (not included above ex pressed in Sucres
Government ~ 4486 - 633 871 - 11059 Public 25242 J 78964 - 78814 J 4h97
T29J 728 7 I
7 IIIII middot~~ ~ I
78331 79685 31+38
y Made urt as Io11mlfs
Cas~ bullbullbullbullbullbullbullbullbullbullbullbullbullbull ~ bullbullbullbullbullbullbullbull - bullbullbullbull J 266 1- 367 - 22~7 99 Other assets less other liabilities~ ~ 4 330 ~ 293 ~ 18~8 Capital and Reserves~- bull bullbullbullbull 4 bullbull 52 bull 1 1- 79-9 26 o 278
7 I
7 7 I
7 bull Ill ri bullbullbull
251 762 194 18)
Subtract increase
37-
Davelopment Bank lending dominE)te the position Expansion of commercial
bank lending is relatively negligible while a comparatively small role is
played by balance of payment influences
98 From the end of 1946 the general financial situation deterior-ated
rapidly in five months from January 1947 to ~~ay 1947 net foreign exshy
change reserves of the Centrel Bank fell 935 million sucres or 7 7 mil-
lion dollars to a level of 2927 million sucres or 21 7 million dolJars
In litaY 1947 an IMF Mission arrived in Ecuador (at the request of the
Government) and in June 1947 a multiple exchange rate system with import
classification was introduced upon the advice and with the concurrence of
the Fund Operation of this system Jielded considerable profit n in
sucres it is in effect a new imposition of import taxes and such
11profits 11 are in reality additional fiscal revenueY It was of the
essence of the Emd s attitude in Ecnador that the exchange difficulties
bad arisen through domestic inflation and that these addi tiona reve-
nues should therefore be applied only in reduction of Government debt to
the Central Bank
99 The effect of such policy is clearly seen in the third column
of the table Inflation is checked notes in cirmlation and monetary
deposits falling 929 million sucres (or 11-per cent) i~ one year Alshy
thoUtgb however Central Bank loans to Government (and also colllWrci al
jJ At this point only the domestic aspects of this measure are emphashysized In a later section the external or balance of ~ent aspects will be taken up
Y Such revenue from exchange taxes yielded 975 million sucres in 1947 bull md in July 1948 was running at g to 10 jllillion sucres a month this revenue is not of course taken into the budgets bull
- 38 -
bank loans and investments) fell the actual deflation _was largely
caused through loss of foJeign exchange rather than over~all reduction
of domestic bank lending For in response to vigorous ~oilplaints of
credit shortage the Central Bank greatly increased its loans to the
public almost fully offsetting reduction of its loans to Government
In the first six months of 1948 there was no significant contraction
of money supply banking loans to the public eJggtanding to offset the
deflationary effects af an adverse balance of payments and of Government
debt reduction
100 The exchange surcharge multiple rate system was in operation
through August 1948 proceeds being devoted to reduction of Government
debt to the Central Bank~ But there has bean concern lest the resulting
deflation of domestic money supply would be too severe and the Central
Bank has in fact adopted a compensatory policy to prevent further reducshy
tion through continuing to expand lending to the public arid through
quasi-open-market pur~e of mortgage bonds to the amount of 17 million
sucres by July 10 19l8 when further purchases were discontinued
101 To avoid the netcessity for such compensatory policy the Cen-
tral Bank proposed to the Government that the destination of reveme from
exchange taxes should be changed Instead of being applied in reduction
of debt the proposal was that they should be useci instead to create a
development fund tt to be administered by the Cent~al Bank unless a
planned Development Institute or other competent authority is estabshy
lished In mid-September the Fund appro ved such cllanged dest ination of
these revenues 90 per cent of which will in future be applied in finance
of development and 10 per cent in stabilization of Government bond prices
-39-
This removes a check upon inflation which has operated for some fifteen
months unless Central and commercial bank lending policies recognize
this changed situation further inflation may follow even if the Budgetary
accounts run no deficit
102 At the same time this change does provide a source of local
currency finance for development projects
-40-
IX INTERNATIONAL TRAIE AND THE BALANCE OF PADlENTS
103 Ecuador exports agricultural products (rice cacao coffee
tropical fruits balsa wood) mineral products (crude petrolelUil gold
silver copper and lead) and handicraft products (panama hats)Y
lo4 Approximately one trird of Ecuadorian exports (including
minerals) go to the United States The proportion rose during the war
due to VmiddotIar-time demand for strategic raw materials but is now tending
to revert to pre-war levels Loss of European markets has been partly
compensated by gain of n$w export markets at least for a time and
especially for rice Countries in the Far East whose rice production
fell during war such as the Philippines and in Latin America whose
Eastern sources of supply were cut off such as Cuba and Venezuela
have provided demand for Ecuadorian rice This outlet however may not
last much longer
105 On an average of years 1938 to 1943 about 15 per cent of
Ecuadorian imports are foodstuffs wheat and lard being the largest
items and 85 per cent are manufactured goods and equipment Import
of foodstuffs is however gro1ing t-vith population and in the key pro-
ducts of wheat and fats would be expected to grow still faster if
econowic development raises n~ss living standards witl10ut increasing
domestic output of these prodvcts For increased consumption of wheat
products and fats is in part the definition of rising living standards
for a very poor population
fJ See Table No13 in Statistical Appendix for composition of exports
-41-
106bull Before the war (average of the years 1937 to 1933 ) the Americas
supplied 49 per cent of Ecuadorian imports by value the United States
alone supplying 41 per cent Germany provided 22 per cent of total
imports and the United Kingdom only 8 per cent Europe as a whole supshy
plying 45 per cent
107 In 1946 and 1947 the Americas provided 86 per cent of total
imports the United States supplying 66 per cent EUrope as a source of
imports fell to 12 per cent although the United Kingdom maintained its
relative position (7 per cent) Whether the United Kingdom can expand
its provision of imports for Ecuador JDaY be domiddotubtful on the one hand
the loss of Germany as a supplier pzo vides an opportunity on the
other the competitive industrial position of the United States may make
it difficult for the United Kingdom to fill this gap
No balmce of payments estimates eJd st for Ecuador1
Growth
of foreign exchange holdings over the war period however indicates a
strongly favorable balmce ~let reserves which were equivalent to 409
million sucres in December 1939 rose to 3962 million sucres (294 milshy
lion dollars) in December 1946
109 Official purchases and sales of exchange are shown in the fol-
lowing table together with corresponding movements of exchange reserves
The difference betRSen the balance on official transactions and the moveshy
ment in reserves arises from transactions on the free market
110 During the war import and exchange controls were nominal
there being no shortage of dollars nor any decrease of exchange reserves
jJ Except for the ~eriod January to May 1948
-42-
Loss of exchange reserves in 1945 led to a tightening of control on an
allocation of quotas smong users of exchange Import permi ts were
granted on the basis of former imports by merchants At the end of
1946 controls were relaxed on an extensive list of imports items and
the consequent loss of exchange has led to difficultieQ
Ul Official Official Balance Changes in Purchases Sales on Net
Official International Trans- Reserves actions
(Millions of u S Dollars)
1942 257 185 t 72
1943 35-5 279 t 1middot5 t Ul
1944 423 34~4 t 79 f 88
1945 353 394 - 41 - 7-2
1946 471 415 f 56 t 1 9
1947 488 579 - 91 38
112 From December 1946 to IVtay 1947 net foreign exchalge reserves
fell US$ 77 million from US$ 294 million to US$ 217 million In May
1947 the advice of the International More tary Fund was sought with reshy
sults summarized as follows in a recent Fund documentY
The lfund 1 s Mission arrived in Ecuador in Yay 1947 It was not advisable at that time to contemplate devaluation which would have made the inflationary situation worse An emergency program was therefore proposed Essential and semi-essential imports were to be distic5~ished and a surcharge of 5 sucres p3r dollar imposed on the semi-essential group as a check against their excessive import New decrees including many of the recomshymendations were issued in June
The main features of the new system were as follows
Y Economic SuVey of Ecuador RD 672 - P 43-44
- 43-
(a) The elimination of all quantitative import export or exchan~ restrictions licenses and quotas with the exception of a few absolute prohibitions of some luxury imports
(b) The checldng of excessive import demand through a fiveshysucre (33 per cent) surcharge on non-essential imports
(c) The suspension of nearly all exchange sales for nonshytrade transactions and the creation of a free market bull narrowly limited in volume and comprising mostly all transactions that are uncontrollable in practice plus a snall amount of domestically produced gold
(d) Exchange for a small amount of the least essential goods was made available in the free market
(e) One of the basic aspects of this plan was the steriliz~ tion of all proceeds from the import surcharge which was placed in a fund for the extraordinary amortization of the government debt to the Central Bank Tnis is still in operation
The beneficial effects of these reforms were felt immediately In June the trade deficit ~as reduced to only $07 million and in July to $06 million By August for the first time in 3 monthsl there was a small surplus In September the deficit was smci l -j)O 5 million In October there was a surplus of $15 million and in November and December there were small deficits of only $01 million and $07 million respectively
In short the deficit for the year was about $99 million in its gross gold and foreign exchange reserves During the same period international liabilities of the Central Bank showed a reduction of about $6 million Therefore~ the net deficit was around $39 million 95 per cent being in the first half-yeer and before advice had been received from the Fundrs Mission
113 It should be emphasized that this multiple-rate system of
exchange control is entirely freed cpentitative controls Excessive
import demand is checked by the higher rates upon imports deemed non-
essential the list of which is knollD and published Anyone presenting
sucres is provided with exchange at the appropriate rate upon list A and
B goods and the free rate is influenced by occasional releases of offi-
cial exchange into the free market The system that is utilizes the
inter-play of the price mechanism rather than the bWlilmlcracy of quanti-
tive controls or quotas
- u4-
114 Loss of exchange continues however despite considerable reduc-
tion of imports Gross international reserves declined US$ 18 million
and net reserves US$ 35 million in the first six months of 1948 Offishy
cial transactions January to June 1948 are surmrarized in the following
table~
Receipts From Exports From other Transactions (1)
Total
Payments For Imports For other Transactions
Total
Balance Change in Gross Reserves
1947 Jan to June
1948 Jan to June
(Millions of Dollnrs)
163 5 6
167 44
219 211
289 219 23 10
312 22 9
- 93 - 18
(l) Includes purchases of domestically produced gold deposits received in foreign currencies and borrowing from corres~ pondents abroad
115 Prospects for the remainder of the year moreover are not goo~
It is estimated that loss of international reserves over the whole year
may be aboat US$ 6 million Whether the deficit is in this region de-
pends largely upon actual export realizations for the remainder of the
year lhe most critical here is rice 11hose ygtrice is falling and the
crops accumulating in the rice millsplusmn Latest information is that
f Countries receiving allocations of Ecuadorian rice under International Emergency Food Council allocations have been requesting a change in source of supply owing to shortage of doJJers Thus France has asked for 6000 tons of rice from Indo-China instead of ~cuador and Greece for 2000 tons from kVPt in place of Ecuador as supplier A recent favorable sale of rice-to Haiti has somewhat improvea the cuITent position
-45-
plantings for the October crop are substantially reduced Wet weather bas
led to some loss of the cacao crop Receipts from exports in the follow-shy
ing official exchange budget may therefore have to be modified down- [l
ward on any pxuient calculation-
116 ~or Recei1ts and Sales of Foreign hchange
(Thousands of U S Iollars)
1948 1947 Estimated Actual
BECEIPTS
Worts Rice 13~ la4~ Cacao 11 l 2 Other products 10700 12371
Total Exports 354oo 42120
Foreign companies 5300 4842 Others 800 1883
41500 48845
SALES
Imports 44800 53499
Services 3200 4470
4B ooo 57969
117 In this situation of continuing presSlre one step has been
tken and others are under consideration The one taken relates to offishy
cial imports representing an average pf 20 per cent of total imports
Importation of cigarettes liquor matches and other things by the State
tionopolies is especiallyen significant These were formerly provided with
exchange tax-freebull ie at the ~owest rate of 1350 From July 26 they
afe required to pay the ordinary import rate of 15o4 on sll supplies for
J See note on page 47 -A
- 46-
their ovm use (such as office supplies) and the same rates as private
importers (ie 15o4 or 20o4) on all imports to be sold to the public
(such as wheat flour fats cigarettes etc) accord~ng to the classifi-
cation of the goods
118 Remaining possibilities seem to be a partial reclassification
of imports removing items from List A as essentials to List B as se~ishy
lwruriesY and or a chenge of nominal exchange parity vri th or mithout
a narrowing of the spread between the rates Here pressure from
exporters particularly from rice exporters may be hee~vily in favor of
an increase of the dollar buying rate with consequential changes of
selling rates
119 The present loss of foreign exchange is occurring ~rithout any
service being met upon defaulted foreign debt although service of Ex-Im
Bank loans is being made If it be assumed for purposes of calculation
that Ecuador reaches an agreed settlement identical to the Chilean sershy
vice would require exchange equivalent to US$ 378000 in 1949 (of which
US$ 368000 would be required in dollars) and would rise to US$ 4o20CO
in 1954 Adding service upon Ex-Im Bank loans outstanding on June 30
1948 and other known but small indebtedness total debt service would
increase to US$ 1410000 in 1949 rise to a second maxilliUID of US$ 1394000
in 1951 and then progressively decline Upon the assumption thet amp-Im
Bank loans undisbursed on June 30 1948 are all fully drawn before their
maturity total debt service charges would be US$ 1533000 in 1949 rise
On August 21 a number of import items were changed from List A to List B the aggregate import value (when granted exchange at List A rate) affected being US$ 7 million
-47-
to US$ 213431000 in 1952 and again would progressively decline These
last service charges rould be for 1949 3 1 per cent of 1947 actual
official foreign exchange receipts and 3 bull 7 per cent of estimated 1948
receipts and for 1952 48 per cent and 56 per cent of 1947 actual
and 1948 estimated exchange receipts respectively
120 Estimating prospects from this point in time Ecuador does not
seem to be a country able to afford assumption of any great additional
burden of debt service payable in dollars The amount that could wi thbull
out hardship or distortion be squeezed out of the balance of payments
by no means corresponds to the development needs of the country Any
start must therefore be modest and cumulative rather than spectacular
and precarious and this conclusion fits with other controlling factors
in the over-all situation notably the supply of administrative techshy
nical and managerial abi li ty
- 47-A -
Note on Official Exchange Transactions
Official exchange transactions for the firstsix months of
1948 are given on page 44 of this report Results for the full year
are now available and reveal that earlier expectations regarding the
probable 1948 balance of payments deficit were unduly nessimistic
Cacao export values have been lar~er than expected and in the last
period of the year there IBre some unexpectecily favorable rice eA-port
sales total export receipts were US$ 8 million larger than forecast
on page 45 Imports were held close to forecast
Receipts
Exports Foreign Co~anies Other
Payments
Imports Foreign Comoanies Other
Balance
Change in Grass Reserves
Official Exchange Transactions (full year - n~illions of dollars)
1947 -421
L18 19
488
535 06 149
580
y does not agree because of rounding
January 26 1949
1948 -436 h2 7
i85
Lt52 2
28
-oJ
-48-
X EXTERiJAL DEBT BEoomJ
121 The position of public long-term external bonded (excluding
inter-governmental) indebtedness of Ecuador is as follows
Amount in Default AmoUpt Outstandi~ ~ e Interest D~te
~In currmc1 (u s (us of p~t Dollars) Dollars)
Dollar obligations Gueyaquil amp Qui to Ry) $ 1226)000 12263000
286000 12263000
286000 123147
63047 Sterling obligations Franc obligations ( Oie
b 71000
Francaise de Chemin de Fer 1 lquateur ) Fcs 8386000 70000 70000
12619000 l26l9000
middotmiddot Note The Government of Ecuador oyenms about 75 per cent of the
stock of the Guayaquil and 1uito Railway and guarm tees the bonds and certificates which are largely held in England The franc obligations of the Cie Francaise de Chemin de Fer 11lquateur are not included in the offi cial statement of the public debt nevertheless the Government does recognize some liability for them and during the last few years has engaged in Degotiations for their retirement
Inter-governmental Debtsmiddot
122 Debts to the United States Government are of three types
63047
first the loans by the Export-Import ~which were outstanding on
June 30 1948 in the amount of $7 705606~ second the aJIDunts duemiddot
because of purchases of surplus property totaled $484 567 on March 31
1948 and third the obligations arising out of the lend-lease settleshy
ment the amount of 1fhich is not available (Total lend-lease assistance
j This section of the Report was prepared by Mr Paul Dickens
to Ecuador amounted to $7 bull 795000 )
123 In addition Ecuador is indebted to the Government of Venezuela
in connection with the establishment of a joint shipping company Late
data are not available but as of February 1947 $500000 ($1000000
authorized) was outstanding the total to be repaid by 1966
Debt History
l2ij Upon partition of the old Republic of Colombia~ middotEcuador was
apportioned 215 per cent of the original Colombian debt by the convershy
sion of l834a Between 1834 and 1854 no interest was paid The period
1855 to 1908 was marked by numerous adjustments and defaults
125 In 1898 the Guayaquil and Q]lito Railway Companyt s first mort-
gage 5 per cent loan of 1899 was issued It was expressed in dollars but
was in reality an English loan In 1908 a new (reemenJl was reachedbull
which was to be a final settlemet of all past disputes and controversies
between the Government and the Guayaquil end ~ito Railway Company and
the bondholders In 19~-10 the Government defaulted on the new agree-
ment In Novemberl9ll payments were resumed on the railway debt on)y
but a revolution caused a further suspension from December 1911 until
lfarch 1912 Subsequently service was partially resumed on the external
debt until July 1914
126 From August 1914 to July l9l8 no paYments were made on eny
foreign obligations except that service on the prior lien railway bonds
had been maintained up to and including the January 1915 coupon By
rf Negotiated settie~nt
-50-
1920 interest and sinking fund on the prior lien railway bonds had been
brought up to date but service on all other obligations ~ed in
arrears In 1926 interest on the salt loan of 1908 was brought up to
date but default took place on the coupon dueJam1ary 2 1927
127 The outstanding bonds of the prior lien issue were redeemed~~
January 1929 at VIhich time the January 1914 coupon was paid on the
5 per cent first mortgage bonds of 1897 In the case of the salt loan
of 1908 sinking fund was resumed in July 1928 and interest was paid
to Jazruary 1929 inclusive None thereafter Sums due from July 2 19C3
to January 2 1931 inclusive deposited with Central Bank in sucres
were used for governmental purposes after December 1931 No payments
were made after January 1929 on the external debt of Ecuador
128 Up to the end of 1948 no acceptable arrangement had been pro-
posed by the Ecuadorian Government for the resumption of interest and
sinking fund payments on external loans
-51-middot
XI bull POLITICAL
129bull Recent political history in Ecuador has been turbulent
although contest fo~ power at the top has not greatly affected the
bulk of the population Suffrage extends to all literate citizens 1
over twenty-one years of aee-but the requirement of literacy effect-
ively excludes the Indian bull T)tal votes cast in the recent Presidential
elections were 289164 from a total Population of some 35 million
130middot On May 28 1944 a few days prior to a scheduled ceneral
election an uprising occurred and Dr Jose Haria Velasco Ibarra
assumed office as President Dr Velasco had been President before
but following a coup dletat in August 1935 after he had been in
Presidential office less than a year he fled to Colombia and re-
mained in exile for several years On July 23 191-4 general elections
for a Constitutional Assembly to draft a new Constitution were held
Installed on August 10 the first Act of the new Assembl3r which was
predominantly Conservative was to confirm the legality of Dr
Velascos assumntion of the Presidency
131 On June 30 1946 new elections to the ronstitutional
Assembly middotwere held The only party particiJatine in these elections
was the Conservative The Liberals R~dicals Socialists and Commu-
nists abstained on the crounds that President Velasco did not offer
them sufficient guarantees On Aucust 3 1946 there vrere a number
of arrests following an abortive uprising and on Aueust 11 the Con-
stitutional Assembly re-elected Dr Velasco to the Presidency (by 43
to 10) for a term of office to last to September 1 1948
12bull Being compUisory for men voluntary for woraen -
132bull A new Constitution was promulgated in January 1947
133middot On August 23 194 7 a bloodless coup detat led by Colonel
Carlos Iancheno Minister of Defense in Dr Velascos Cabinet deposed
rresident Velasco who fled the country to Colombia for the second timebull
Next day Colonel Mancheno proclaimed himself Acting President and
formed a five-man Socialist-Liberal Cabinet despite the absolute
Conservative majority in the Assembly A week later however on
August 31 a counter-revolutionary military movemont broke out in the
north and the counter-revolutionaries captured Quito on September 2
134middot Colonel llancheno resigned the ActinG Presidency and dis
appeared the sa1ne day Dr Suarez Veintimilla who had been Vice
President under Dr Velasco and the former conservative Uinister
resumed control of the GoverPment Next day September 3 a Council
of State in Quito declared that Dr Velasco had by abandoning his
post terminated his functions as Chief of the State Dr Velasco
howeverJ vrho middotwas by this time in the Argentine declared that his
remo~al to Colombia had been forced and announced his intention of
returning to Ecuador to resume office
1~ On Seytember 15 1947 a Secial session of the Zcuadorian
Concress accepted the resignation of Dr Veintimilla and elected
Senor Carlos Julios Arosernena head of the Banco Ce Descuento at
Gua~raquil and a non-party man as Vice President with novers as
Acting President until September 1 1~48 Senor Arosemena formed a
mainly Liberal Cabinet with one representative each of the Consershy
vatives and the Socialists Coneress also ~onfinned the Council of
State 1 s view that Dr Velasco had forfeited the Presidency by abandoning
his postbull
136 On June 6 1948 Presidential elections were held The
three parties represented vere the Conservatives (Dr Manuel Elicio
Flor Torreo) the Liberals (Galo Plaza Lasso) and the Radical (Genera1
Alberto Enriques Gallo) Final results were announced as
Plaza 115835
Flor 112052
Enriques 53601
Invalid 27 676 289164
137 bull Doubt persisted until this month (August) as to who would
receive the election The Electoral College had been invalidating
votes on technical Grounds and as interim returns and invalidities
were announced it was noticed that the majority of the latter were
being deducted from the Plazavote After conferences the Electoral
College revalidated all votes and conducted a re-scrutiny on less
strict basis Senor Plaza has been declared to be the rfjSident-Elect
by the Ecuadorian Coneress and assumed power September 1 1948 The
middotpresidential term of office is four years
The Vice Presidential results were
Conservative 1anuel Sotomayor y Luna llu008
Liberal Dr Abel Gilbert 113213
Radical Dr Cueva Tamarz 5h07h 28129gt
139 Senor Plaza was born in Nmv York USA forty-two years
ago his fatter the late General Leonidas Plaz~ was President of
Ecuador in 1901-05 and 1912-16 middotSenor Plaz who had been taken to
Ecuador as an infant accomnanied his father in exile to the United
States and attended the University of California the University of
Maryland and the Georgetown School of Foreign Service in ~7ashington
l4o Senor Plaza returned to Ecuador in 1930 and for the next
fourteen years operated the family estates there reclaiming them from
virtual bankru~tcymiddot to prosperous and efficient state He has for
example been active in encouraging the breeding of new cattle strains
is President of the Ecuadorian Holstein-Friesian Association and oper-
ates a butter factory on his estates with a Danish ~anarer He was
ar Minister from 1938-40 and Ambassador to Cashington from 19h4-46
l In executing any policies he will of course be handishyt4
capped by the lack of a fully efficient Civil Service The position
in Ecuador is the same as that in othelmiddot Latin American countries
that the Civil Service is naid on low salary sca1e and lacks compe-
tent administrators Such lack is an aspect of the general shortage
of technical ability in the country
TABLE
1
2 bull
3 bull
4
middot 6
7 bull
8
9
10
11
lZ
13
14 bull
15
16
17
18
19
20
ECUADOR
STATISTICAL APPENDIX
Oil Production and Exports
Cement Production and Imports
Yfueat Production and Imports
Rice Production and Exports
Rice Exports by Destination
Cacao Production and Exports
Coffee Production and Exports
Cotton Tobacco amp Sugar Production amp Sugar Imports
State Railwaysmiddot Lines amp Rolling Stock
State Railways Merchandise Hauled
Population and Roads by Provinces
Budgetary Receipts and Expenditures
Exports of Principal Commodities Volume amp Value
Imports Classified by Groups Value
Exports by Destination Value
Imports by Source Value
Balance of Trade by Major Regions
Exehanee Reserves and Banking Position
Price middotIndices
Status of Ex-Im Ballilt Loans
ECUAIOR Table 1
Oil Production and Expomiddotrts
(thousands of American gallons)
Crude ou Gasoline Produced EJtported bullRefined middotproduced
1938 94586 78696 15500 41654
1939 97125 68819 17679 bull 141
194o 98654 70~99 23001 6162
1941 65382 38362 25914 6462
1942 95671 68516 29489 72l7
1943 97211 65003 34635 8076
1944 121469 82520 38083 8927
1945 109855 73897 38752 10059
1946 979+7 52412 45213 12271
1947 99140 39359 53949 16587
Source J3o1etin Banco Central del Ecuador
ECUADOR Table No 2
1929
1937
1938
1939
1940
1941
1942
1943
1944
1945
1946
1947
1948
l First six months
CEMEHT PRODUOTIOllT AliD IMlORlS (metric tons)
Production Imports
17782
15699 10082
14254 13373
14249 12013
16512 10935
17213 2_846
19802 so98
2756o 933
34691 1590
37504 953
38496 3114
33231 14941
20484JJ
Sources Production Eoletin Banco Central del Ecuador Trade Ministerio deEconomia
Total
25781
27627
26262
27447
20059
24900
28793
36281
38458
41610
ECUAJX)R Table J
Wheat and Wheat Flour Production and Irraquorts
(thousands of kilos)
Wheat
Production Imports Exports Consumption
194o 28120 bull 73 28o47 1941 24578 36 24542
1942 24265 bull 76 24189
1943 22034 22034
1944 23251 912 24175 1945 23115 2733 180 25667
1946 25852 4532 23 30361
1947 2lo66 494f)J 11
Vfueat Flour
1938 10743 9981 na
1939 7864 16638 na
1940 7996 8-592 275 16312
1941 7225 11823 286 18762
1942 7 161 23497 161 30498
1943 7461 9862 17322
1944 5216 24023 29239
1945 5174 25137 30311
1946 7~38 11313 g 18813
1947 5943 1886) 4Y
Less than 500 kilos Y First 6 months
Sources Ecuador en Cifres a~d Ministerio de Economia
~emiddot 1926-30
1931
1932
1933
1934
1935
1936
1937
1938
1939
1940 -middotmiddotmiddot
1941 ~ )~ (1
1942
1943
1944
1945
1946
1947
1948
~iiampn-sect00-lfmiddotks
-~Jrst~middot-nsmcnths
gJ Provisional
(B EQUOR
RI03 PRODUCTION ApoundP ~OR~S
Vo1wnfJ Production middot E~orts
(metric tons)
26)04
23584
29863
39270
39008
31699
39036
52136
44027
40144 ltit middotmiddot~ 0 56596
5873
100949
ao6o7
53168
102048
112711
047
8255
3842
6449
5282
22907
8734
12)3
2ooso
962
18343 t - ~ J
20546
32028
46992
64604
29318
66918
6~209fl middot tloo 1
$ bull
tt ( r t
z
Value 3xoorts
(thousand sucres)
1881
936
6667
10864
6555
14632 pound 170
23265
51460
93837
127105
60395
203243
2rfjuft
Sources Production Boletin Banco Central del 39uador~ Trade Ministerio de Econom1a~ ~r- ~fl ]r bull ~-middotmiddotmiddotmiddot f ~~middot~---i
Average Destination 1937-41
Cuba 2
Peru 13
Venezuela 6
Colombia 4
Panama 2
Jamaica 0
Philippines 0
India 0
Dominican Republic 0
Other Countries 4
TOTALS 31
Preliminary~
RIQ] EXlORTS (in million po~ds)
1943 1944 1945
81 88 5S
20 29 0
0 17 4
~ 0
Rf 2 hi 0 0 0
0 0 0
0 0 0
0 0 0
bullbull ~ 6 6
105 142 6S
R Less than )OOOOOpounds
Table No 5
1946 ~ Jan to~
1~ June-194
46 12 24
0 0 s 17 49 )j
2 13 2
5 4 1
16 1 0
20 0 0middot
0 38 0
0
1 f4~ 2
r middot I
130 13 34
sf Ineludes 6 million pounds to Mexico and 5 million tmiddoto Greece bull middot
1[0
supound~sect8_ Foreigl Crops and Markets Offiee of Foreign Agrtcultural Relations u bull Sll~artment of Agriculture May 3l 1948 bull p bull 402 First six months of 1948 from ibid August 16 1948 p bull 120
Average 191i-15
191620
l921-25
1926-30
1931-35
193640
1940
i941
1942
1943
1944
1945
1946
1947
tf I
ECUADOR
Cacao Production and ~orts
Volume
Estimated Production ~rts
(metric tons)
n (
12108
15middot330
14652
19030
15058
17759
17689
19459
4o625
43547
36825
21319
15980
174o4
11208
14433
13762
18161
13735
16827
16526
Exports ( 000 sucres)
186o9
26073
26746
27531
16647
37424
29354
34365
40327
51794
41985
53547
74935
188208
middot)(et) middot( middot
Sourcesmiddot Estimated production Ministerio de Economia E~orts to 193~ Estadisticas de las Exportaciones del
Ecuador 1940-1942 subsequently El Trimestie Estadistico del Ecuador Number 1
1 ~ Mini sterio de Economia -bull gt(
111 t bull r r (o J bull bullbullbull 1) ( bull
ECUADOR
Coffee Production and Exports
Volume Estimated Production EXports
(Metric TohS)
1921-25 average 5147
1926-30 II 7571
193D-35 10047
1936-40 II 13811
1940 16158 14571
1941 14260 11847
1942 9016 6140
1943 14144 12340
1944 16598 14458
1945 12999 10737
1946 9948 7636
1947 12522 8970
Table 7
Value
Exports 000 Sucres)
59~9
11530
10945
18546
16J83
23827
17278
33176
35626
33863
34839
43524
Source Estimated production - Ministerio de Economia
Exports t~ 1936-40 - Estadisticas de las Exportaciones del
Ecuador 1940-1942 - subsequently El
Tremestre Estadistico del Ecuador Number 1
and Ministerio de Economia
YEAR
1937
1938
1939
1940
1941
1942
1943
1944
1945
1946
1947
ECUADOR
Production of Cotton Tobacco amp Sugar amp Sugar Imports (000 Kilos)
Raw Cotton
9237
7213
7172
8165
PRODUCTION
Tobacco
1519
1106
1875
1028
1359
Sugar
17528
22950
26950
27835
30421
27858
26799
23151
32474
33544
33480
Table B
IMPORTS
Sugar
5310
11068
12387
38
6
33
184
784
21455
3060
Sources Production of Cotton and Tobacco Ecuador en Cifres 1942
Sugar Production and Imports Ministerio de Economia
ECUAOOR Table 9
State Railways
Length Locomotives Rolling Stock (Number)
(Kilometers) (number) 1relght Passenger
Gueyaquil-Qpito 452 39 319 41
Guayenaquil-SalinaJ 150 6 22 24
-~i to-CarcbiY 222 6 23 22
Bahia-Chone 78 3 12 g
Sibambo-Azogues 117 3 6 ll
Puerto Bolivar-Piedras 155l 7 21 10
Puerto Bolivar-Pasaje 55
1199 64 4oy llG
Narrow-gauge line
gj On uncompleted line ~ito-Esmeraldas
21 Of which 4 are rail-cars
jj Of Vihich 61 are rail-cars
Source lviinisteria de Economia
1938
1939
194ltgt
1941
1942
1943
1944
1945
1946
+947
ECUAOOR
Railway Transport
(thousands of metric tons)
Products
Agricultural Animal Mineral Forest Manufactures
1639 19 3 160 122 1034
1318 143 172 138 961middot
1714 144 233 219 1472
1613 184 277 209 1543
1809 224 280 272 1631
1841 280 35a4 376 193-3
2011 250 263 299 C5J7 3
1888 29-5 350 238 2234
1941 29-9 46 bull 4 258 2170
1787 299 51 0 180 2085
Source l3oletin Banco Ce~~nu del Ecuador
Table 10
Others Total
58 3205
58 279l
298 4oso
289 4115
328 4543
384 5168
352 5248
292 5296
37middot7 5508
419 5279
Table 11
Population and Boads
Poeation Roads (Kilometers) Province Jan 1 1948 Main Secondary In Construction
Care hi 86663 1744 1191 1050
Imbabura 158896 1818 2100 1810
Finchincha 350149 4)13 3703 670
Cotopaxi 215232 642 4o6o 970
Tungurahua 222963 2290 1810 300
Chimborazo 29864o 1664 3316 2740
Bolivar 121653 1877 1294 2045
Canar 133971 580 580 1300
AZUaY 284982 1053 2190 630
Loja 238705 1140 4s6o 1430
El Oro 93752 1005 2378 650
Quay as 482843 3900 3367 3700
Los Rios 148428 933 4632 1050
Manabi 381538 3627 1lo61 1970
Esmeraldas 664o5 50 19 0 2840
Frov Orientales 181071
465891 26636 46732 2t3l5bull5
Source Direccion General de Estadistica y Censos
1938
1939
1940
1941
1942
1943
1944
1945
1946
1947
Source
r
Table No 12 ECUADOR
DISOLOS3D BUDGETARY R303IFTS AlfD EXP3NpiTURES
(Total of ordinary and extra-ordinary budgets and special accounts)
thousand of sucres)
Total Receipts
1323204
131699 6
1262710
1547624
1667455
2112614
3145318
4051038
5367822
6696647 11 ~I JJ( middot
Total Expenditures
1429134
1267687
123135middot0
1586615
1489251
2101429
3031038
4174550
5352394
6593858 bull I
aoletin Banco Central del Ecuador
-middot middotmiddot
Diff~reuce
106830
j 49309
f 1360
- 38991
f 178204
j ltll8-5
f 114280
12351middot2
+ 15428
j 10278bull9 r 7
l I 1
L
ECUAOOR EXPORTS OF PRINCIPAL COMMODITIES 1937-47 Table 13
VOLUME (thousand metric tons)
1937 i98 1939 194o 1941 1942 1943 1944 1945 1946 194711
12 200 96 183 20 bull 5 320 47~0 646 293 669 66) 218 191 153 112 144 138 182 137 168 16 bull 5 203 14~ iJI 137 129 146 118 61 123 14 bull 5 107 76 90 48 55~5 53middot3 472 34 bull 2 226 158 1)9 178 35middot511 72 bull 5 345 19~2 251 183 14bull4 13 2 112 103 12~0 132 121 1-4 16 16 15 18 30 22 28 2~0 13 01 14 1middotmiddot9 2~2 21 47 90 136 93 74 28 na
~gt i824) (1387) (944) (1036) (1981) (2516) ( 2756) (4373) (4462) (4947) _01 2849 2454 2274 2201 1201 2167 2062 2513 2446 1640 1358
Ltrates 7~3 140 76 so 3~3 )9 26 10
VALUE (thousand sucres)
610 10864 6555 14632 23265 51460 93837 127105 60395 203242 201111 49985 39bull276 37bull033 29354 34364 40)26 51794 4lt985 53547 74935 188208 24613 16703 15227 16)84 23827 17278 33176 35~26 33863 4839 43 bull 524 5bull691 7558 7t006 6448 4658 _J 107 2159 1898 2872 738~- 24355
18242 7~146 9605 86o6 6120 201 6274 6209 9264 1)02 14994 4048 4300 4298 3~866 6979 35481 23316 38043 26553 15111 979 lt363 2~134 2724 3168 8450 25613 43419 31877 18 bull 509 7125 na 8048 6 234 4981 6509 16231 22121 25191 69033 69J87 81962 4662
21989 26374 25020 24862 13425 24820 23796 28788 28107 18253 15902 trates 10165 16090 13134 38609 27208 29013 18075 809 ates 18682 35297 41204 39907 29426 25374 27476 26457 15482 24858 25334
10774 13210 13495 3 950 16869 32775 2L068 32402 30902 38326 n bull a_
164_045 169096 167148 167851 199704 298690 393115 466631 377894 537131 619859 tmiddotbull bull
Note Dash (---) signifies zero or less than 50 metric tons nly or ~00 sucres ata expressed in quantities other than weight Sourcis 193 data from unpubli~hed Zcuadorian trado stati~tics
at US Department of Commerce 1938 nnd 1939 from partment of Commerce official data Direccion Nacional de Estadistica Eruad6r en Cifras ~7 from Banco Central Boletin 1940 and subsequont ~ears from Banco Centrll jto~n sterio de Economia and from M1nister1o c Economia data furn she
Mission July 1948
~ tobacco tone JgS
articles
11res ilk
al
value of Imports by Groups 1937-Lt-5 Volume and middot~alue of Selected Individual Imports 1937-46
(Value in thousand Sucre~)
1~37 1~38 1~39 1940 1941 ~942
19~731 20~ 375 24~874 16~)65 19043 37~540 5127 7194 1958 6~4e8 5t298 8 118
12888 13Jl5 14522 17702 19556 25~152 21627 25~272 21455 28532 21619 18923 20649 21~593 25559 29437 22636 19~$13 13~505 11961 12~654 15~976 15667 18899 5~829 7 bull 524 6066 9385 833 14353
22912 )0868 24~75 27 t 750 25993 42~916 9376 1028 10038 12118 11345 13932
-bull
131643 148320 1486o 173753 149499 199715 (Volume in thousand metric tons) (Value in thous~tnd sucres)
5middot3 111 124 194 5 bull 534 6385 26 4 24
os 246 -
122 ioo i66 86 118 235 8255 6)88 7449 5076 013 14609
19 07 11 11 14 29 2187 1824 2695 294-3 29J9 8182
101 i4 i2o i09 28 51 804 llJ)6 1667 1546 577 866
~ hides amp skins amp manufactures amp miScellaneous
~~43 1944 1945
33270 70915 82984 6717 8)69 904)
31~700 43196 32~830 17073 53~400 JBoo6 15447 32~624 38797 14~88 18~388 22895 14116 11a99 9812
68928 n~l79 69-113 15856 19186 20042
217983 33ltl56 323524
78 middot 0 2 215 130 12622
09 27 775 2290
99 240 bull 25~1 337 24070 26388
23 46 67 8853 146)1 21699
09 16 10 321 349 246
~s zero or less than 50 metric tons -middotNote Columns may not ahmys add to totals because of rounding Denartment of Commerce official sources - 19)8-42 Direccion Nacional de Estadistica Ecuador en Cifras [inisterio de Economia El Trimestre Estadistico del Ecuador
1946
)1 8135
4 bull 5 )842
114 13123
46 22709
)1 639
ECUAOOR Exports by Countries 197-47 (Value in thousand sucres) Table - 15
1937 1938 1939 1940 1941 1942 1943 1944 1945 1946 1947 --middot-------middot
80458 lt2865 116t-J78 150055 196953 293081 386483 46lt-909 372~549 463~378 sa4~68J 54422 63418 8)254 1t0496 145 bull 558 168585 2)9238 267105 218018 227291 262887
26 20 65 17 2228 78 124 7)41 17173 630 610 949 1281 1055 1)98 5~526 25686 78523 85382 61478 75890 23481
2899 4955 2109 3568 162 1163 4J54 2526 4197 44~ 1450 5027 6335 4972 5i92 5285 7425 4546 7379 10286 9798 15537
1 5 5 17 57 13 291 54 444 574 6996 8 662 9188 8714 13bull764 7238 15316 13900 11223 6~07l 14503 11717 2908 12544 5 730 7896 3767 21215 22608 29233 4243 6703 7965
51 15 24 8 532 3620 1603 539 2336 11579 3749 80 207 862 4070 9991 17096 1275 17~428 6~973 27431 80541
1943 2135 5229 6039 1965 5435 3021 4827 15~702 25~137 51~854 middot 667 740 991 zo83 3358 11412 4286 4282 3~-970 13064 5~864
1799 419 2218 875 2865 12299 9644 14900 13714 9653 11655 J 89 82 2527 1247 964 326 )24 250 41141 2~985
1024 1514 1068 2205 7173 2650 2 744 8871 7694 J2 5811 17 39~ 77029 61869 43688 11945 1503 5550 6335 4108 4075 36783 61998
32) 6)3 1187 490 58 186 2164 4021 J217 35974 29595 11277 69 - 29 4411 7909 6156 3477 1183 5492 4876 26)8 359 1860 7~467
489 255 J2 100 280 1155 1239 1265 3827 3~961 20539 13t521 10802 2254 5 706 4177 6313 2bull610 3615 4251 -middot 2842 13546 lBi 1415 3 758 822 6 188 12962 3592 2531 412~ 162 7~ 10052
8643 1693 3bull521 3~400 2751 320 40 118 231 222 5404 J 4894
6337 4201 6548 5478 1175 5 45 40 1611 50950 6261 4132 5386 5452 117) -
~l - - 15 45988 5 middotmiddot 7S 8 5 25 567 92S 11
33 ~- 76 18 966 151 150 3419
38 29 858 2 45 78 467
(continuation on next naee) middot
~GUJLOR ~xnorts by Countries 1937-47 (falue in thousPnd sucres) T~ble-15 continued
middot-~--- -~-middotmiddot -middot _ middot-- ~~---~~- ---- -middot--~middot--------middot- -middotmiddotmiddot--middotmiddot--193 1938 1939 1940 1941 1942 1943 1944 1945 1946 1947 _I --middot -middot- ---~- ------ middot- bull middotmiddot-middot -
4 7 5 5 5 219 1087
218 153 529 368 73 49 297 569 1230 35140 789 28137
207 144 379 J68 73 49 297 559 1104 605 11 9 10 126 43
150 6355 plusmn
353 54045 169096 167148 167851 199704 298690 39J115 466631 377894 537131 619859
~S Columns may not always add to totals because of rounding
Dash (-) signifies zero or less than 500 sucres
Primarily Guadeloupe and Jamacia
Primarily British West Indies and Netherlands West Indies
Primarily Denmark Spain and Norway
Primarily Java
~ces 1937 and 1947 from unpublished Ecuadorian Trade Statistics at U s Department of Commerce
1938-46 from Ecuador Ministerio de Economia data furnished IBIID rassion July 1948
Imports by Countr~es 1937-1947 Table-H)
ECUAOOR
l937 1938 1939 1940 1941 1942 1943 1944 1945 1946 1947 I (()
Value in thousand sucres) ~ + -gt L520 63151 83984 115382 128423 186958 200061 311989 302~329 363403 517582 j
u t 2086 51311 71950 103214 110422 138729 103583 173776 178821 240233 429906 0
Q) f
811 674 551 2436 1815 3J258 2150 5265 6538 12178 20912 d S Ugt ro c 1 n 4 4144 3042 8 99 14 23 295 178 8~011 210 h middot-1
(- 0
186 324 237 957 2~991 8492 18~376 15~239 17232 10~574 3121 4 middot-2375 2310 1959 2476 3016 4735 7930 7~696 11~201 15~564 14755 sectwfi
middot-1 1 fli 4 6 343 1~823 3J064 4110 3~612 60J5 h 0H
2739 2109 3789 174 2352 7949 9~934 17845 23~ 616 1559t 18~727 ~rld ()
328 164 457 2498 612 733 10892 10902 20003 16684 11981 oc ampl+lll
mmiddota J63 1297 1161 -- - 2 23 115 1~128 1192 d+gt-
2464 507 500 1438 5565 20668 39979 46654 33684 33034 6~486 15~~ (()
na 1 311 2297 5515 130 bull-I m rl bull +gt
15 31 68 245 995 1516 2804 25326 6124 5956 3472 Oltll~
149 280 269 332 550 208 270 389 707 839 655 a~ sect (1) Cl 4-209 72986 ~ 38 09 1433J 9813 16276 15885 1721~9 45194 80928 ~-g 1701 35767 2 7 7 33 1202 67 47 61 19 2 El 0 0 eo g 3250 11462 8094 12980 10124 8108 13634 12513 11984 28392 40983 cent1-t+l~
1803 718 1687 otmiddot r-
4-114 6465 7339 630 475 34 22 2 66 889 7279 t -P () ~led
36o 4685 1573 7144 308 12 682 4824 rlltll ltDno
1~896 2550 1466 1624 64 1 58 5090 bull-1
fJ ~ ~ 1052 1489 794 945 293 224 5 21 1373 9062 9 703 P + na 868 881 423 10 1 8 223 135 r- 0) u
1 r=l middotr-l
1162 4823 1264 1675 877 1017 1~52 2380 3129 4~326 6851 () l=l rl
7274 3074 2609 3595 980 349 1041 905 599 1~543 3~134 cn~oo bull t
724 11939 8983 19951 6239 2281 1439 304 3882 5478 5736 op a cent1-t ~sect rl
173 302 262 238 -w 14 276 -rr 472 ---s9l ctillmgt
259 10949 7810 18190 4414 170 16 4 5 +gtUd ~-- ~
935 712 728 1278 1281 1715 1314 2685 3185 4465 3151 +gtP t-1
530 105 143 221 306 240 95 89 582 541 2089 ~ (f)
1l 21 12 80 1f 196 122 169 125 1J n ~-T~
0
109 218 lllL 250 m 46 sect2 12_ 28 119 112 I ~ --sB_l_ 0 ---- -
643 148315 147860 17353 149499 199715 21 ~ 983 331156 323524 414266 604479 ms may not a1ways add up to t ta1s because of rounding Dash (-) signifies zero or less than 500 sucres ~ country breakdown not given in source g) of which 591 from Syria 2Z3 from China 264 from Straits Settlements 1 Sumatra and 264 from Iran
YEAR
1937l
1938t
1939~ -
1940amp
194H
1942
Exports Imports Balance
Exports Imports Balance
Exports Imports Balance
Exports Imports Balance
Exp(rts Imports Balance
Exports Imports Balance
ECUAroR Balance of Trade by Area 1937-47 (thousand sucres)
fRlSTERN HEMISPHERE including Philinuines
United States Other Total Eurone
54~lt-22 26~036 80~-~-sa 77~029 52086 9~434 61520 64~209 2336 16602 18938 12820
63418 39447 102~865 61869 51311 11840 63151 72~986 12107 27~607 39714 -11117
83254 33124 116~378 43688 71950 12034 83984 54505 11304 21090 32394 -10817
100496 49559 15Cl055 11945 103214 12~ 168 115382 38~090 -2718 37391 34 673 -26145
145 bull 558 51395 196953 1503 110422 18001 128 423 14333 35136 33394 68530 -12830
168585 124~496 293081 5t550 138~729 48229 186958 9 813 29856 76267 106123 -4263
Table 17
Other Countries World Total
6~559 164045 5-912 131643
647 32405
4361 169~096 12~ 178 148315
- 7817 20781
7082 167148 9372 147860
-2290 19288
5851 167851 20281 173753
-14430 - 5902
1248 199704 6743 149499
-5495 50205
59 298690 2944 199715
-2885 98975
NOTE Areas may not always add to world t~tals because of rounding
Source 1937 and 1947 frlttm unuublished Ecuadorian Trade Statistics at US Department of Commerce 1938-46 frem Ecuador Ministerio de Economia data furnished Mission July 1948
(Table 17 continued on next page)
YEAR
12J Exports Imports Balance
1944 Exports Imports Balance
125 Exports Imports Balance
1946l) Expltgtrts Imports Balance
12Z= Exports Imports Balance
ECUADOR~ Balance of Trade by Area 1937-47 (thousand sucres)
WESTERN HEMISPHEL~ (including Phili~ines United States Other Total EuroQe
239238 147~245 386~483 6335 103583 96~478 200~061 16276 135655 50769 186422 -9~941
267105 194804 461909 4~108 173776 138213 311989 15~885 93329 56591 149920 -11779
218018 154~531 372549 4075 178821 123508 302)29 17159 39197 31023 70220 -13084
227291 264224 49J515 36783 240~233 123170 36J403 45~194 -12942 141054 128112 -8411
262887 241796 504683 61998 429906 8676 517582 80928
-167019 154120 -12899 -18930
1 Only year in which substantial Philippine trade
NOTE Areas may not always add to world total becasue of rounding
Table 17 (oonttnued)
Other Countries World Total
29 393115 1646 217983
-1)49 15132
614 466~631 3~282 331~156
-2668 135475
1270 377894 4035 323524
-2765 54)70
8~833 537131 5670 414266 3163 122865
53179 619859 5969 60449
47210 15380
Sources 1937 and 1947 from unpublished Ecuadorian Trade Statistics at us Department of Commerce 1938-46 from Ecuador Ministerio de Economia data furnished IBRD Mission July 1948
~ EXCHANGJ-tAL BANK
ECUADOR Exchange Reserves amp Banking Position (million sucres)
r 4 bull TIC CQEDITS OF CENTRAL BAl~K Domestic Govt Official Bus Other Credits
MOliEY SUPELY Current AC
JJj To()2f (4) Entities Indvls Total Banks of O~mtl Currencl Denosits l (6) (7) (8) (10) (5) Banks amp 11
Indvls (9)
16 10 26 51 1 116 62 64 48 26 7 40 73 4 129 74 66 3middot7 )9 7 29 66 4 144 73 71 37 29 8 24 62 4 159 78 73 56 26 8 22 55 5 183 8l 103 81 37 28 2 8 201) 120 119
152 37 21 22 79 9 255 169 17~ 26) 34 27 22 83 13 378 ZJa 26e )4 60 37 20 117 9 385 295 308 Z5 105 73 11 189 26 493 321 312 282 153 81 10 244 24 536 35middot~ 354 242 104 44 93 241 2 565 329 284
221 110 51 99 260 2 56 313 278 215 102 47 101 250 2 573 )06 294 225 97 45 95 237 2 585 299 299 219 100 44 98 242 1 591 307 297 214 98 35 111 244 4 6)4 315 295
)20 295
on of $12500CC beginning in December 1946 bull
ars
Ttttal (12)
127 14) 144 151 183 239 345 492 602 634 704 613
591 599 597 604 610 614
ge liabilitieS but including Stabilization Fund in 1945 and GolC CertificCt in 194) bull ial banks and fomento banks ial bc1nkst and fomento banks sits of commercial banks and time deposits of fomento banks
Table 18
Govl t Den sits ~L
(lJ)
6 23 12 27 7 28 8 31 6 32
middotmiddot 11 )6 16 57 27 71 41 74 63 98 59 90 66 77
71 8 75 76 6 75 81 75 81 72
72
1 1 Boletin - Superintendencia de Bancos Boletin - Unpublished data furnish~d MF bY Banco Central of Ecuador
Table 19 ECUADOR
Price Indices
WHOLESALE Rents Export Fooa in
YEAR Goods and Quito - Coal ~1) (2) (3)
1937 100
1938 83 100
1939 95 100 153
19h0 95 106 16h
1941 96 113 150
1942 114 146 172
1943 114 183 187
19h4 118 218 219
1945 133 266 254
1946 203 320 315
1947 297 364 516
19h8 (March) 294 379
(liay) 416
(July) 389
llame l~umbar
Republic of Ecuador
Status of u s Export-Import Bank Loans to ~cuador
Purpose
gs of Junemiddot10omiddotl9ltsect
Gross Authorized
Cancel- Net lations Authorized Repeid
Amount Amount Outstandin~ Undisbursed
6J048 6J048
( 262 )16
Haterials equip amp services $ 6480000 $20810 $6459170 $1279775 ~)5-l19middot395 _____ _
ibulliunicipali ty of iui to (Republic of Ecuador)
ibullIunicipali ty of Guayaquil (Republic of Ecuador)
Republic of Ec~ador
Republic of Ecuador
Ecuador DeveloPIlent Corp
Pan-American Highray (Cuenca-Loja)
Agricultural Research amp Experiments
Raihray Equipment
5000000
12JOOOO
50000 200000
)28 Haterials equip ~~ 4000000 services - ater 1middot1orks
)28 iltiaterials equip amp services - ~~rater orks 4000000
J4J Pan-American High1middotray (Guamote-Tambo)
432 uevedo-Hanta Hightmiddotray (additional credit)
1980000
220000
$19180000
Of tlhich $2500000 tts used on the Quevedo-Ibullianta HighTaY
4000000 28880
4000000 167
-1 t-9amphOOO- -7500
220000
6o6120 -h365000-middot
41592 575-t 2-41
-l-y5Q2- 500 44Gooo
220000
IBRD Statistics Sectio spte~ber 24 1948
offset during the past sixtem months by application of special exchange
tax revenues in reduction of Government debt to the Central Bank Ver-J
recently however 90-rer cent of these revenues has been diverted to finarce
of development with consequent renewed danger of monetary inflation v1hen
total Government finances no longer run a surplus
11 These special exchange revenues derive from a multiple excharge
rate system installed in iilay 1947 (with IivF advice and concurrence) to
meet rapid loss of foreign exchange reserves The system has bern successshy
ful in slowing the rate of loss bull but not in colq)Jetely preventing it midshy
year expectat ions were for a loss of foreign exchange of some US$ 5 million
in 1948 Recent action reclassifyinamp i~crts may reduce this e~~ected loss
12 The balance of p~ents position at present difficult and no
great easement can be expected It is improbable that Ecuador could safoly
assume any large additional debt burdens At the same time her ability
effectively to absorb and use loans directed tmmiddot1ard increase of production
is limited bya present lack of technical and administrative abilities
Here iLiprovement though clillilllati ve is necessarily slow at first
- iv-
I GIDGRaPHIC
13 Ecuador has common boundaries with Colombia on the North and
Peru on the East and South The greater part of the country lies immeshy
diately south of the equator which passes 13 miles north of Quito The
area of the country has never been measured but is estimated as 150 COO
square miles ri thin the frontiers resulting fror1 the war with Peru in 1942
the area west of the Andean crest is about 60000 square miles
14 Ecuador is divided by nature into tru-ee separate reeions of
which only two are in effective occupation
(a) The sea-coast plain (about 28000 square miles and about 425
miles long by 62 miles in width) is composed partly of swampy
lowlands and partly of low hills most of the region being
less than 1000 feet in altitude I the north it shares tbe
double rainy season of Colombia and is covered with dense
forest Not far south of the borders of Colombia the double
rainy season ~ves way to a single rainy season from Decemshy
ber to June as one goes further south the rains begin later
and end sooner until at the extreme south desert conditions
begin stretching onward into Peru ald Chile As the rainfall
becomes less the vegetation changes from wet forest to dry
scrub forest and savanna until in the south settlement is
limited to irrigated areas
Temperatures in the region are modified by the cold-vater
-2-
Humboldt current and are more pleasant than latitude alone
would suggest
The coastal region produces almost all the export commodities
of Ecuador its people are largely mestizo strongly conscious
of nationality and commercially active Its major port
Guayaquil (population 1942 154000) is larger than ~ito
(population 1942 139000) and is the commercial capital
of the country
(b) The Andean Highlands or Sierra (about 25000 square miles)
comprises the second natural region and forms the physical
backbone of the country There are two high corderillas
surmounted by towering volcanoes and separated by a series
of ten large intermont basins lying in a north-south line
seven are linked to Guayequil by railway Each basin is
occupied by a dense JOpulation 1hich is almost pure Indim
Only in ~ito and Cuenca are there any important number
of people with Spanish ancestors and these are either
office-holders in the Government or landowners with large
private estates
(c) The Oriente (Amazonian region to the East of the Andes) is
not yet part of the effectively occupied area of Ecuador
Its jungle inhabitants from time to time spear the
agents of the Shell Oil Company who are prospecting
for oil
3
In 1942 official Government figures for these rerions were
Area Population middot Density Square of
Kilometers middotmiddotNumber middot Ponulation
Sierra 70344 23 11686748 61 268
Costa 68633 23 1JooOl8 33 14 6
Oriente 153143 51 189005 6 12
CalapagS Islands 7880 j 2192 a 0~2 -Miera tory 4115 a middot-
300000 100 3089078 100 102
15 Very little however of the total area is under cultivation
It was estimated in 1916 that about 90 ~)er cent of the coast and 60 per
cent of the Sierra was suitable for cultivation that is about 25000
and 1)000 square miles respectively Of the total of Loooo square
miles of cultivable land~ only about 1$000 was under cultivation in
1946~
16 No census of the population has ever been in Ecuador
In 1892 estimated nopulation was 127 million in 1942 309 million
and in January 1948 3L7 million with crude birth rate of 379 oor v ~ thousand and crude death rate of 201 per thousand in 1942- Estimated
composition of the 1942 population was
a less than 05
Yhi te Mestizo Indian Negro Iulatto Other
100 per cent l-t10 ner cent 390 per cent 50 ner cent 5 o Per cenmiddot~
1000 ner cent
Just over half these deaths oc~urred in the are rroun of 0-4 years in 1942
4-
17 At the same date the literacy rate was estimated at 20 pe~ qent
s~i~literacy at 20 per cent and illiteracy at 60 per cent
-5-
II OCCUPAmtOUS AND INCOivES
18 There having been no census there is no at~curate information
under this beading
19 The Economic Department of the Ecuadorian Central Bank has esti-
mated that of a total population of 334 million in 1946 1285000 or
J9o per cent were gainfully employed in the following occupations
Agriculture Forestry etc
Mining
Building and Repairing
Manufacturing and Processing
Services (communication comshymerce government etc)
820000
10000
6oooo 10000
325000
5 5
26
100
20 No valid estimate of national inco~e exists At the request of
tne International Monetary fund the Technical Adviser to the Central Bank
of Ecuador Mr L A Carbo estimated national inccue in 1946 as 20096
million sucres or US$ 149 million Although this estimate is probably too
low ] it is clear that national income is very small Ecuador is very
low on the list of income per head among Latin American countries its
income per head is in feet among the lowest of countries of the world
21 Income is very unevenly distributed A survey made in 1943
yielded the following picture
g lror reasons Sdvanceit below Paragraphs 87 and 88
~ pt WI
-6-
To tal Monthly Average Monthly Population Income Income per Fw~ly
Number of Amount t tount People (SUcres) (Sa~res)
Upper Cla~s 4oooo 133 28000000 144o 2300
Middle Class 96oooo 3200 96000000 4950 4 L ~ 00- middotJ~
Lower Class 2000000 6667 70000000 3610 140 -- -~
3000000 10000 194000000 10000 10000 yenSliP C_~ ~
Note At the ofDcial rat~ of 1350 suc~es to the US$ average monthly incomes per family are equivalent to approximately $2J7 $30 and $10 respectively
~ Uneven distribution of incoue is of course largely a conse-
quence of uneven distribution of property Some ideas of the distribution
of rural property is afforded by analysis of re~urns made in payment of
rural property tax Such tax was paid by only ll2l4o proprietors in 1944
whose holdings may be summarized as follows
Per cent of Value of Rural ProEerties Number of Proprietors
916 4o
29-33 llOO
3041 10400
2030 37200
1080 634oO
10000 112J4o
23 Such statistics do not of course carry one very far beyond
the general observation that income and wealth is very unevenly distributed
and that much is obvious from a little travel in the country But it should
-7-
be said that comparing observations in Ecuador vrith those made in Peru
and Bolivia Ecuador by subjective judgment compares very favorably with the
tvo latter The Ecuadorian Indian seems to be on a perceptibly higher stan-
dard of life both in the highlands and on the coast than the Indians seen
in Peru and Bolivia Vhile his land holding is small it yields somethi1e
he very freqjl ently possesses livestock such as pigs and chickens has cot-
ton clothing drying on a line a~d often cultivates flowers and keeps
pigeons By American standards he is undoubtedly on the poverty level by
Latin American standards he may be a little off it
24 At the other end of the scale the wealthy upper class are pro-
bably not as wealthy as the Peruvian upper clas~h and the Bolivian elite
in operating in poundcuadc~the upper class lacks the rich property of mines
Thus while income is of course unevenly distributed in Ecuador as else-
wnere the range between the wealthy and the InJian may well be less tban
elsewhere The line of income distribution is of aboat the same slope
but probably significantly srJOrterY
This conclusion cannot be demonstrated statistically It results from a 11feel 11 deri ved from personal observetions in the respective counshytries
-8-
III AGRICULTURAL lROIDCTION
25 Ecuadorian development is largely a matter of increasing the out-
put of and improving internal and external trade in agricultural products
There appears to be no enduring geographic or physical reason ~middotby this can
not be accomplished She possesses soils and climate ranging from the
tropical to the temperate soils which in some areas are very fertile and in
others are in danger of exhaustion To anticipate subsecpent conclusions
her problem of development through agricultural progress breaks doTltD into
separate aspects all involving improved technique
(a) increasing arable yields from areas already cultivated
(b) improving pastures and stock in grazing areas
(c) enlarging both arable and pastural areas (including irrigation)
(d) improving roads in rural areas
26 Achieving these objectives involves providing more adequate
domestic credit for short- medi~ and long-term agricultural requirements
27 In application however interpretation of these problems is very
different in the two occupied regions of the country the Sierra and the
Coastal Lovrlands no generalization can cover both
(a) TLe Sierra
28 The occupied inter-Andean valleys are a region of temperate
agriculture producing almost exclusively for local consumptionmiddot Their
pat tern of tilled fields grazing land trees and flowerJl is almost
Y Flowers bloom all year round The main tree is the eucalyptusmiddot introshyduced some 70 years ago end used for all purposes (~indbreaks fuel 1
and lumber) affording a striking example of the effect of introduction of one plant upon regional habitability-
-9-
Western liiuropean in appearance but not unfortunately in productivity
Agricultural Production of the Sierra
1939 194o 1941 1942 - -(Hundreds of pounds)
Theat 49QOOO 611300 534300 527499
Potatoes 1201000 1476400 1386120 1146000
Rye 72500 79900 159495 115000
Lentels 46000 424oO 37955 csooo Corn 816700 1349300 1308062 1315200
Barley 85)000 795700 903600 911000
Cotton 45000 42020
Kidney Beans 80000
29 In addition about 1000000 hectares (247 m~llion acres) are
devoted to pasture supporting epproximate1y 683000 cattle 145 million
sheEf 107000 STrrine and 320000 goats
30 Yields are low in all Sierrean agricultural activities the
standing VJheat and barley crops are so thin that the ground can be seen
through them Yet the greater part (some 6o per cent) of the people of
Ecuador live in the Sierra and population is increasing at about 2 per
cent per annum The effect upon land use under existing tecnniques is
clearly visible cultivated areas are being pushed higher and higner up
the hillsides (slopes of 30 to 40 degrees being used) and onto the
fJparamon the high plateau betvreen adjacent valleys at altitudes of
11000 feet and higher The result is a picturesque scene but one which
reveals a near Malthusian situation in the man-land ratio rbullrith static
-10-
technical practices It is a situation which cannot remain unchanged if
economic development is to occur in the region
31 There sean to be three possible lines of advance increase of
output from highland areas in present use the bringing into use of new
ground in the highlandsbull or a change to increasing reliance upon the outshy
put of non-highland areas
32 The third possibility is not one for the immediate future It
involves either large-scale migration from highland areas to lowland
regions or a large transport program linking highlands and lowlands
together with growth of non-~ricultural activities on the highlands to
provide a cash income with which to purchase 11 imported 11 foodstuffs This
second possibility may indeed be the trend of ultimate development but
offers no irmnediate easement Large-scale internal population movement
from highland to lowland is probably impossible since the Andean
Indian (of different stock to the coastal Indian) is fullf acclimatized
both mentally and physically to life at high and temperate altitudes and
little suited to life on tropical lowlands
33 The two remaining lines of advance would both seec to increase
highland agricultural output But there is an important difference beshy
tween increasing output from valley land in rr esent use and bringing new
and higher land into arable use The first is a complex problem suscepshy
tible only of relatively slow solution the second is seemingly simple
and capable of quick result yet basically less sound offering only
temporary improvement
34 The thurst onto higher ground is already evident and the area
-11-
taken in could probably be greatly enlarged by efficient use of tractors
and modern plows Such use of mechanical equipment would thus give quick
increase of agricultural output but it is very doubtful whether improveshy
ment induced by these means alone could be long maintained The greatest
~r particularly on sloping land is that deep plowing may lead to
soil erosion so serious that land becomes finally llilgtroductive To use
mecbanical equipment i thout at the same time adopting eqJally modern
methods of soil conservation way well be disastrous and that perhaps
within no long period
35 Even apart from this physical daneer there is the virtual cer-
tainty that new land however plowed would gradually sink in fertility
end hence output unless farmed by better agricultural practices than
those now followed in highland Ecuador The present attraction of the
higher land is principally good natural fertility beine virgin ground
On all other counts this higher land is less advMtageous than the valley
floors the va)ley sides are steeply sloping a1d the fl~t paramo is some
2000 feet higher bare windswept and devoid of habitation It would
seem obvious that it is pastoral rather than arable ground were it not
for the pressure upon arable output of the region
36 The pressure today however rises from the relation betwem
popUation and output rather than that betvreen population and arable
area Productivity in the Andean valley is low and can certainly be
improved If improved the pressgtlre which is causing the thrust to
higher ground is relieved until population increase again overtakes outshy
put Against that time however the higher ground vrould remain
-12-
availfibleY and other lower regions may be coming under effective use
37 To increase output of the populated valleys is not a simple mat-
ter responsive to single policies such as simple mechanization by tracshy
tors It will embrace the wlo le range of agricultural practices from
better seed types to crop rotation and fertilizers including in some
valleys irrigation It is a matter rrther of agricultural education
than of~dtlgagricultural appliances and probably experiment under
the peculiar regional conditions will need to precede education Improveshy
ment will necessarily be slov1 but along these lines it can be sound and
permanent
38 Wher~ lfL mere importation of mechanical methods Vi thout
understanding of their dangers in speeding soil destruction by wind and
water erosion may permanently damage the region The somewhat gradual
mechanization of agriculture is of course to be expected and not disshy
couraged but it is not the wlole answer to development in highland
Ecuador
39 It seems that there is at present no over-all agricultural
lfibor sl1ortage in the Sierra and mechanization is nOt therefore called
for to relieve an adverse manpower position It seems however that
some of the larger estates are experiencing difficulty in obtaining their
labor requirements because Indian tenants are viitblolding quasi-feudal
labor dues and devoting whole time to cultivation of their own plotsbull
As a result hacienda holders are attracted to mechanization as an
escape from growing difficulties in obtaining and supervising labor upon
Y As it would not if destructi ve1y formed at this stage
-13-
their ovm land To the extent they are successful the tendency for agrishy
cultural money vrages to rise is weakened
4o There vrould seem to be good possibilities of increasing pas-
toral agriculture in the highlands 1Jrith improvement in both numbers and
strains of cattle and sheep If adequate arable development occurred in
the valleys the main grazing grounds could be the higher land not then
required for arable purposes ~lith dairy cattle on the valley margins or
on valley ground not well suited to arable use Such pastoral development
would be desirable not only to imp1middotove nutrition in Ecuador itself 1 but
as a possible new export of meats fats and hides to meat deficient
Republics notably Peru Early export would probably be on the hoof
along the Andea1 ridge it self
41 The Ecuadorian Government has not included any explicit propo-
sals for highland agriculture (other than irrigation) in its present apshy
proach to the Bank It has however suggested the Bank finance $1 mil-
lion of agricultural tractors and equipment to be handled by agriculshy
tural stations located at strategic places both in the coastal
provinces and the highlands 11 without further elaboration of the
intended highland use of such ecp ipment The description given above
suggests that the usefulness of agriculture machire ry depends to a conshy
siderable extent on the place plan and purpose for rhich it is to be
used
42 In some of the highland valleys (for example in Cotopaxi end
~ound Biobamba) rainfall is deficient and irrigation would increase
valley output by bringing more valley ground into effective use This
- 14 ~-
is clearly sound for flat valley ground already populated is more useshy
ful than higher sloping and more exposed ground The Ecuadorian Govern
ment has included purchase of eq1 ipment for irrigtion works to the value
of $500000 in its present approach to the Barik Assessed against the
requirements for economic development the request is sound provided of
course such equipment is effectively used
(b) The Ooast
43 The condition and nationel significance of agriculture on the
tropical coastal plains is quite different from that ltNl the Sierra The
area as a whole is less densely populated and in some parts such as the
Province of Esmeraldas is very sparsely populated Its principal pro-
ducts are exported The population has more mixed blood than the highland
people and is oore corumercially active and minded There is little feel-
ing of community of interest with the highlmds the rrincipal coastal
city GuayaqJil is larger than Quito and less remote fror-1 outside
influence
44 In terms of reported area devoted to its cultivation cacao
is the principal crop of the coast The table on the following page
shows output of main crops
45 Cacao is not however the most important export crop by value
being surpassed by both rice and panama rats (a handicraft product of the
region) Nor does the table show those products which result from
gatherage of mild growth tagua kapok oil-bearing vegetable nuts
balsa rood rubber etc
Y For use by the Caja de Klaquogo as required both in tile highlands and on the lowlands
-15-
46 Agricultural Production of the Coast
1939 ~ 1941 1942
(limdreds of pounds)
Rice 957164 872890 12304oO 1610489
Cacao 392000 263300 333250 315782
Coffee 343800 369000 310000 190633
Bananas (1000 bunches) 4090 3913 4568 4265
Oranges (COOs) 103000 lQ96oO 80550 75000
Cotton 200800 156800 155910 111500
Tobacco 24o43 4o 765 22349 29539
47 It has been estimated that about 500000 hectares (1 235 500
acres) are devoted to pastures on the coast supporting approximately
425000 cattle and 36000 swine
48 There is no doubt that the coast is an extremely rich agricul-
tural area although toward the south it is increasingly hampered by
shortage of water in the dry season And rt is overwhelmingly the
principal foreign exchange producing region of the country Yet it is
largely undeveloped by any modern standards lacking roads and almost
all basic civic amenities (water supply sewage paved streets etc) in
the provincial towns The development of a tropical agricultural region
without large labor supply _rill raise many interesting and some new
J Irrigation ~rks are in execution and others planned in various places and the irrigation equipment which it has bee11 suggested the Bank might finance would presumably be used on the lovlands as well as the highlands
-16-
problems the solution of hlch in detail may lack precedentY The
suitability of cacao to Ecuadorian conditions arises in part from the very
small labor requirements of the crop At bottom advance will lie along
the route of crop improvement and mechanization the difficulty will be
the proper application of mechanization crop by crop Some tropical pro-
ducts may never be suitable for mechanical cultivation being those whicl
would require intensive hand cul ti vat ion and may therefore not be appro-
priate for Ecuadorian condttions Others r1JJi3 be suitable only if grown on
relatively large plantations
49 Clearly for the foreseeable future many lowland products will re-
main at the stage of gathering of nld natural growth rather than plantashy
tion enterprise The flow to market of such productswould be increased
by improved access notably road core truction anQ at the same time road
building ~~uld seem to be a condition precedent for spread of plantation
methods particularly plantations using mechanical equipment lilliE diate
measures for the over-all agricultural development of the region may not
be directly agricultural at ell they are rather the provision of roads
and transport facilities the provision of long and medium term agric-llshy
tural credits and in some areas) the institution of health services
With the opening up of the region in this manner iiould come more clearly
perceived opportunity for better agricultural use of the land particu-
larly if effective demand for the products is transmit ted back to the
cultivator through establishment of product processing plants where approshy
priate for example in vegetable oils and tagua (vegetable ivory)
] This is the situation which in Brazil for example in an earlier technical epoch was 11 solvedll by importation of Negro slave lebor
-17-
50 As in the Sierra there are good possibilities for pastoral
development on the lowlands Some progress is already being made in this
direction with experiment in breeding more suitable cattle types through
crossing 11Ji th imported Indian brahmin strains Grazing for beef is not
highly labor intensive and this development is very promising since
export to other Republics by sea llould be reltti vely easy In the first
stages export would presumably be upon the hoof ith later development
of meat packing
51 There seems to be no single bottleneck or restraint upon devel~
ment presently existing all other conditions being favorable If developshy
ment occurs it will be along many simultaneous fronts but the front iJhiclf
is lagging and Inayen continue to lag is the provision of basic social ccp ishy
tal (roads water supplies health services etc) that is of those
things which no single private individual or corporation can provide for
itself Given these and the institution of suitable domestic credit
fecilities the rest may be accomplished by private domestic ini tiat1ve
52 The development plans of the Ecuadorian Government as outlined
in a Memorandum dated April 8 give much weight to lowland agriculture
The establishment of agricultural stations to provide farmers wi~h
disease-resisting cacao plants~ tecl1nical advice and credit facilities
is CD ntemplated no foreign exchange would be recpired all funds being
local currency The rehabilitation of cacao formerly a leading export
crop is desirable although development of cacao sources elsewhere may
prev~nt recapture of the position formerly held by Ecuador
53 A proposed agricultural mechanization programwoUld total
- 18
$25 million in foreign exchange cost )J The bulk of this ($1 5 million)
is allocated to wechanization of rice cultivation alone the benefit being
principally in resulting improved export position The remainder $1 milshy
lion is for mechanization of other agricultural produc~s apparently
mainly lowland (those products specifically mentioned being 11cotton sugar
oil-bearing seeds and other specified products11) the exclwnge benefit
forecast being principally through reduction of import a
54 Different criteria ~~ould be used in assessment of these two
projects The judgment on that for rice will depend upon forecast of
world rice markets and in particular upon expectations regarding rorld
demand for rice from the dollar area The validity of mechanization in
cotton sugar oil-bearing seeds and other lowland products will depend
first upon the technical possibilities for such mechanization a matter
not yet fully explored If sudl technical possibilities are favorable
effective mechanization vOuld constitute sound development upon the low-
lands which are relatively sparsely populated
Y Some part of which would be for the benefit of highland agriculture if machinery stations be established there
--19 -
IV MI-~RAL PHODUCTION
55 Ecuadorian mineral nroduction covers only a few products and
important the wells of the lowlands being exploited by the nglo-
Ecuadorian Oil Comany Production of crude petrolewn shows a slicl1t
rising tendency while exnorts have declined steadily a~ more refined 1
products are consumed domestically
56 Oil exploration to the Iast opound the Andesin the Amazonian
region is proceedinc under concession to tl-1e Shell Oil Go1~1any
Three wells have been drilled without success and tvro arc beinc
deepened Cost of this exploration to ciate j_s around US)23 million
If oil is found its only outlet middotwill be a pipe line over Ue Ances
(estimated to cost USiD93 million) and this the comany is not -rE1inz
to undertake unless assured of an outnut of at least 100000 barrels a
day
57 The only other irnrJortant minine activities are those of gold
silver conper and lead conducted by the South ~~erican Develoument ~
Company and the Cotapaxi Sxplora tion ConJ1any War-time lr oduction peaks
were 1942 for gold and CO)per 1944 for silver and lead Since these
resective peaks production has ~-~clined narticularly in copper and
lead although not to 1933 lsvels7
crude petroleum II II
1938 (millio~1s of 225 107
Production Exports Production refined petroleum 37
1947 barrels)
236 bull94
128 (See Table No_Jl_ Statistical Appendix
Production Gold (000 troy ounces) Silver (000 troy ounces) Co~per (000 pounds) Lead (000 pounds)
1938 445 82~0 27 21
War Peak l03tJ hhl3
96788 161-+88
19h7 5o5
1569 3316 h98h
-20-
58 Ecuadorian trade statistics list exports of crude pet~middotoleum
and minerals separately from that of other commodities even in aggre-
gate figures underlining the fact the exploitation is in foreign hands
and hence colonial in nature This aspect hmmiddotever is of di-1inishmiddot-
ing importance as now the foreign exchange realized from such mineral
exports accrues to the Central Bank and as in any event nineral ex-1)
ports form a diminishing proportion of the vhole 7
V ~JNUFACTURING PEODUCTION
59 There are virtually no stCltistics on manufacturing in Ecuador
and none which present any comprehensive view It is ho~middot-rever clear
that there is very Uttle industrial factory prJchJction and obser-
vation in the country leaves one with an impression of the nresent
igtilportance of handicraft production
60 The most inportant consuxner-good factory industrj_es are tex-
t~~~breweri~-~~ otheuro7r beveraces shoes ard leather _roduc~s buttons ~d~lttfr
and nails Textile production using domestically produced cotton pro-
duces cotton piece-goods and wool rayon and hemgt textiles supplying
almost all domestic demand for low-quality products The only irJDcrtant
producer-good factory industry is cement the plants being located near
Guayaquil Lack of domestic technical lmow-how and of capLtal and
the low level of domestic effective demand account for the sli~ht develop-
ment of faetory industries whose rrowth on any scale beloncs to a 1ter
stage of economic development
y Value of nineral exportsmiddot as nercentare of value of all exports 1929 260 nercent 1933 430 n 1939 397 1946 11~5 1947 69
Production and irrport statistics for cement tre civen in Table IJo bull 2__ Statistical Appendix
- 21-
61 Uuch of finished commodity ygtroduction is at the handicraft
stage both for nroducer and consumer goods In Quito and Guayaquil
one sees many small 11 shops11 producing metal leather and wood manushy
factures largely by manual methods It is an illuminating co~~entary
on the shallow growth of industrial specialization that the ll1ission
did not see any shops selling ready-made womens clothing All
womens clothing shops displayed only materials in the bolt as in
pioneer days elsewhere
62 One handicraft industry of great importance in exports is
the production of panama hats It has been estimated that 30000
families are occupied vrhole or art-time upon this nroduction and
at times (for example 1945) they have provided the largest single
export item by value The grmvth and treatment of the fiber and the
weaving of the hat is entirely an Indian handicraft industry the
Yteaving of a high-quality hat taking three months The fiber is erown
and the best hats woven in the lowlands Its future ir-mort nee is unshy
certain as the competition of Italy and the Fhilinpines is again felt
in low-_)rice woven hats the boom emjoyed during the war nay recede
63 Ecuador in its ~resent and foreseeable development is an
agricultural country with no immediate movement toward industrialization
EcuAdorians met by the Mission themselves stated this The growth of
factory industry will be slow that of small shop and handicraft manushy
facture somewhat less slow It vmuld seem as stressed later in this
report that there is room for grm~h of processing of agricultural
products Statistically such processing would be classed as industrial
production but is oroperly the finishing stage of agricultural productior
- 22-
to secure improved durability and portability of perishable products
This would increase effective demand imnacting upon the farm and ass1st
in stimulating agricultural development Some progress being made in
this direction notably in vegetable oil expressing plants Ihe only
non-agricultural project suggested by the -r~cuadorian Government has -eer
a cement plant located in the highlands at a foreign exchanr~e cost of
$2 rrillion the justification being both the saving of foreign exchange
expended upon cement imports and reduction of load upon the only railshy
way connecting lovrlands and hichlands Growth of cement use accompanies
economic development assessment of this project (engineering questions
apart) would involve tainly questions of timing location and finance
matters which are really all aspects of the single question whether
such a project may not be one for private direct investment Initial
expectation would be that were all factors favorable to the success of
the project it gtlould be readily undertaken by orivate enterprise
particularly when it is remembered that railway freiehts 1bullrould protect
highland production from lowland competition
6h No sueeestions regarding increase of electric power output
have come fror1 the Government indeed the official statistical services
have no data upon installed capacities and demand Cnly in Quito and
Guayaquil are present industrial uses of electric poler of any ir1portance
Elsewhere suIJply is from snall municipal plants (mainly therraal) for house-
hold consumption It appears that demand mar be ahead sunply in cost
towns very frequently voltages are maintained around 80 instead of the
rated 110
- 23 -
65 Shortage of electric nower is not however hamoering
economic development at this stage although it may soon do so in
sevral urban centers such as Qui to and Hiobamba Sone ttne i-1 the
iuture the possibility of large hydro-electric vrorks on the eastern 1
side of the Andes will merit attention
y Where the rivers are fast and clear on the western side they carry much silt
- 24-
VI DmIESTC THANSPORT AND COilERCE
66 The space devoted to agriculture in this report reflects its
importance in the Ecuadorian economy As has been said further developshy
ment will for sometime be mainly agricu1tural
67 Present restraints upon that development are not located
solely or perhaps even nrincipally on the farm there are many
features of the general economic environment which operate to hamper
even purely agricultural development There is great room for improveshy
ment of transport to knit the economy tocether and to encot1raee grovrth
of output
(a) Transport
68 Without roads there can be little regional or inter-regional
intergration Fithout that intergration (which for some regions and
some crops would open upon the world at the gatewa~r of a oort) there
can be but small inducement andlittle opportunity of increasing proshy
duction In much of Ecuador the principal transport vehicle is the mule
whose patience and endurance under heaJr load is matched by that of the
Indian
69 As regards roads the requirement is both more roads and
better roads capable of bearinr modern vehicular traffic The roads
traveled by the 1Jission are uniformly bad both slowing traffic and imshy
Ilosing extraordiPamiddoty vehicular de_reciation Ultimately no coubt
there vdll be an adequate system of all-rreather roads in Ecuador For
the immediate future the more modest tarset is to attain a reasonable
system of roads civine access to the creater art of roducine areas
- 25-
in the dry season At present the unsurfaced access roads are cut to
pieces by --vater erosion in the wet season and consolidated somew1at
traffic in the dry season A single eradinr operation smoothin thE
dirt surface at the end of the vret season would ci ve accelJtable usashy
bility in the dry )eriod v1hich in the populated coastal rovince of
icanabi for example is eight ~aonths of the year At -_resent the so1e
transport link for corunodities between loYrlands and the hihlands
is the Guayaquil to Quito (and beyond) railway This link is nrobaoly
nearing saturation point vdth present equipment and its strencthening
both by railway imJrovement and all-middotweather hichway construction is
obviously desirable it middotill probably become essential yri thin five
years
(b) Commerce
70 Physical transport alone hogtever is not the only ope c-ation
ofcarriaee required to intecrate a reeion internally and to bind toshy
cether the various regions There are also tL physical and the finanshy
cial aspects of comr1odity holdinr involving the storae and vrhere
necessaFJ the partial processing of products to reduce perishability
and the avail~bility of mechanisms of short-term finance extendine over
crop periods In Ecuador these tro aspects are closely related
71 Apart from some export crops there is virtually no crop or
food processinG undertaken And in the export crops processing
is the minimum necessary to secure portability Eice is nilled but not
polished cacao is sun dried coffee is dried and within only recent
years washed fruit is exported whole Some new e~Jor-ts may require
further processing and installation of plant starting or is in
- 26-
advanced discussion for example vegetable oil processing (although
for sometime no eXport surplus of vegetable oils is 11~11 and fish
canning
72 Nor is there any important ~recessing of domestic food pro-
duction for home consumption bull There is no freezing or canning of meat
which is taken to market on the hoof There are only two or three
very small butter factories and no whole milk orocessing Cereals
of course are not highly perishable but there are no silos or granarshy
ies and experience of similar situations elsewhere suzfests that losses
by deterioration and infestation may be significant no direct evishy
dence anthe incidence of this factor in Ecuador ~as obtained by the
Mission Thee is little storage of grass on the coast in silos or
as hay and in the dry season slaughter of cattle because of lack of
feed is at times necessary In short the situation is not so very
dissimilar to that ofmiddotmedieval Europe
73 Roads alone would not create an environment favorable to
change in this position although lack of roads nar well inlibi t change bull
In addition suitable credit facilities for the finance of co~~odity
holding through time are necessary
74 Hany complaints were voiced to the Hission reearding lack of
short-term banking credit for crop movement and storage and for medium
and long-term agricultural investment and no doubt there is signifi
cant lack of such credits But this is not the result of some simle
institutional defect of the b~~inc and credit structure even though
institutional improvement may be necessary It is fundamentally a
- 27-
reflection of the fact that Ecuador is extremely poor in disposable
capital available for even short-term investment ie vrorcing capi-
tal Improvement of short-term credit facilities for what in advanced
communities are regarded as purely commercial purposes would in effect
represent an increase of capital intensity in the Ecuadorian ecororny
To the extent that banks met more fully the gtJeak seasonal credit re-
quirements for croo movement and storage individual nrivate reoources
are relieved of the 1eak burden and available for other investments
75 Thus iorovement of the techanisr by 11hich the banking system
provides working capital for corrtercial or inciustrial (in the sense of
crop processing) purposes is itself an act of investment rather than
merely an institutional rationalization ilnd as such carry the
usual consequences of investment in an undevelogted economr with very
law voluntary savings To the extent that additional credits are not
matched by savings sewhere (either voluntary or forced through
taxation) they will be inflationary in effect just as an
additional act of long-term investment would be Increase of banki1g
nrovision of workinrr capital should keep step with totl capital for-_ - - 1 mation of which it is one aspect7
It is implicitly assumed in the foregoine that at nresent in Ecuador the amount of small voluntary savinrrs is neclicible It vrill presumably not alrmys remain so and ~Jart of the modifications of the bankin~ system shou1d be attract Clli1U1 atively such sav-ings in the fom of savinc do)Josi ts This 1muld increase the extent to which Danks can safely flovide capital It will be a much later before small private savincs are directly in-vested in commerce or industry throuh joint stock r1ethods There is no stock-exchance in Ecuador
-28-
76 It is of course just as important that the availabi lity of
working capital should not lag behind as it is that it should not run
ahead The Bank should ensure that any long-term investment projects it
may assist to finance do not effectively starve the rest of the econo~
of working capital in the process of avoiding inflation
77 There is also the question of the price of short-term lending
that is of the level of interest rates The Ecuadorian is a highshy
interest rate eoonomy The legal maximum for commercial short-term loans
is 10 per cent having recently been increased from 7 per cent legal
maximum rates however are not systematically enforced by commercial
banks themselves At a time when the legal maximum was 7 per cent
going rate for 90 day loans secured upon properly warehoused commodishy
ties and with third party endorsement was 12 pe+ cent
78 This very high structure of interest rates seems open to
obvious criticism but is in fact probably not Tiholly unjustifiable in
the present conditions of Ecuador It is the cumulative result of many
factors so that more official prescription of lower rates would be
quite ineffective These factors seem to be
(a) Interest proper~
(b) layment for risk bearing arising in part out of a
low rating upon individual credit and in part from
the institutional conditions (such as embryonic
commercial and financial ruarkets) which seriously
reduce the liquidity of any asset other than money
itself
-29
(c) An clcmmt 0f discount 111nn cyectcd luturc irf] utinn
reducing the real value of the pa~nent for lending
(d) An element of monopoly which upon purely subjective
judgment may be the least ilJI9ortant of these several 1
factors7
(e) The real shortace of capital whether short or long--
term~ reflecting in interest rates as a genuine
scarcity price
79bull Of those factors the di~ount upon expected future in-
flation increases prices at a rate of 12 ner cent per annum a money
interest rate of 12 per cent per annum is a real rate of zero If
therefore inflation could be controlled a substantial reduction of
money interest rates could be hoked for At the same tine while
inflation continues high interest rates probably have small influencemiddot
in encouraging money savings
80 Even without inflation ans until the su~1ly of available
real capital improves relatively high interest rates may well be
acceDtablemiddot as a price mechanisn nethod of selectin~ most urofitable y ~
uses of limited fundsbull middothere exoected urivate nrofit did not seem l - -
to parallel social desirability loans at lower rates (ie subsidized
terms) could be made perhaps through reconstituted Development Banks
Prima facie however such loans 1bullrould not be short-term
~I -Onthis interprepoundaion the situation in Ecuador differs signifishycantly from that in Peru
tt is suggested that a powerful point of intervention would be to limit commercial banking dividends distributed to not more than say 7 per cent The high profits nmv earned by commercial banks would then progressively accumulate until liberalization of lending becomes virtually forced by accumulation of funds representing genuine corporation saVings
- 30-
81 The discussion of private finance has so far upon
short-term credits there is an even larger nroblem in the
intermediate and long-term arricul tural credit It is not necessarr
to expand greatly upon this since it too is a consequence capi-
tal shortage
82 Imnrovement would seem to be alonrr the route - 1 of nroper UElte
of existing Development Banks (or their successors-) effectively
in the earlier stages as lending agencies of Government
VII OFFICIAL DEVLOPHl~NT FHmiddotIfJCE
83 In the circurnstances of a country like Ecuador the greater
part of domestic capital forr1ation requires official directly
or indirectly if it is to occur on any scale are too
small and too narrowly held to permit much -rowth this roL1te
andthose few who are able to save at any sinificant rate are larely
uninterested in the efficiency of ~reduction
84 Official finance may be either direct or indirect direct
throueh works executed by Government or 0JUblic bodies indirect
throueh lending institutions such as Dev~lopment Banlcs capitalized
from public funds In either case funds are diverted to investment
purposes by Govern~ent intervention
85 Thus Development Bank lending for productive purposes (for
example long-term acricul tural credit) is an item 1n ca9i tal formation
V There are thirteen reaional Development with an unirnJresstve record of manaeement Their possible reconstitution is under discussion
-31-
rather than a mere institutional rationalization of the credit mech-
anism Indeed as has been stressed in the last section even im-
proved su1nly of short-term credit gtrill in art rewesent
formation A developing economy which neclected these items in 11Cnn21~~
or forecastinc total caital investnent would be very vulnerable indeed
to inflation induced by over-investment
86 17here voluntary savings are Jow the only wmiddotamiddot to sirnificant
rate of capital formatton can emerge without inflation is an equi-
valent amount of savine forced throurh taxation One ould look for a
relatively hirsh level of taxation to national income and for a rela-
tively high proportion of exnenditures caDi tal purposes to total
Government expenditures On both these counts Ecuadorian elq)erience
seems irare s si ve
87 In 1946 total budretary and spedal revenue rms disclosed
as 5368 million sucres in the sa1le rear an estLnate middotJaced national
income at 20096 million sucres This a proym~tion of 27 middoter
come a proportion so hich that in fact it lacks credence In assess-
inc total tax burden part of the revenues of Government monorolies
and all of municial revenues should be included if this be done y
the proportion becomes 37 per cent In addition new exchance taxes
yielded 973 million sucres in 1947
Mono_)oly participations (ii direct disbursements for public _Jurposes) were 353 million sucres in 1946 munici~al income was 1803 million sucres in 1947 (1946 not available)
32-
88 It is very difficult to accept the conclusion that Ecuadorian
revenues form so high a proportion of national income it would seem
that the estimate of national income is too low Nevertheless tax
revenues are clearly a sizable percentace of national income
89 At the request of the Mission an official estimate of total
official expenditures on capital account was prepared Total income of
Government municipalities provincial councils and other public
entities was ~iven as 7S4 million sucres and total capital expenditure
from that income as 2237 million sucres or slichtlr over 30 per cent
of revenuesY It is difficult to feel confident that effective capi-
tal formation on this scale actually occurred certainly there is
little evidence visible to the eye of the t1middotaveler
90 Notwithstanding such doubts the fiscal evidence is of a
fairly hich proportion of tax revenues to national inco~e and of a
hich proportion of revenue allocated to capital investment It would
seem that the fiscal mechanism exists for domestic capital fo~~tion
what may be required is more effective expenditure of allocated funds-
Before a development plan envisa~ing the expenditure of still more funds
was adopted it would be desirable to examine closely administrative
and technical efficiency in the use of existing funds
91 On the side of revenue Treasurr officials informed the Mis-
sion that tax evasion was estirnated at some 30 per cent of ta revenues
1 This makes such capital expenditures 112) per cent of 1946 national income which a~ain seems very high indeed
The two largest items are Government public works (8)4 million sucres) and municipal works (900 million sucres)
- 33-
particularly in income and land tax It might well be advantareous
on the sides both of revenue and of expenditure for Ecuador to obtain
technical assistance of the tPe that the United Nations Department of
Economic Affairs rendered to Venezuela in 1947~Y involvinpound revision
of the structure of the budget of budcetary audit practices and the
like
f Report~d in UN Document ECN 1SubJfti 4 - 21 June 1948 lostricted)
- 34 -
VIII 001EHNl(iEi~T FINANCE AND INRATlON
92 What may be called 11multiple budget practices exist in Ecuador
as in other Latin American countries There is an annual Ordinary Budget
one or more Extraordinary Budgets( tro in 1947) end a number of Special
Accounts (twenty-five in 1946) not included in the general budgetary
accounts The State operates nxmopolies in tobacco liquor salt and
matches part of whose profits are taken into the ordinary budget as
revenue and part used directly for public purposes It is thus diffi-
cult to assesrmiddotgggregate Government revenues and expencii tures and vir-
tually impossible to detail the purposes of expenditure to ascertain
accurately public capital formation by way of public morks and the like
9 Taking the disclosed figures on the ordinary and extraordinary
budgets and tne special accounts there has been a net surplus over the
past ten years 1operations of 234 million sucres~ This however is
not an accurate reflection of the true aggregate position because the
Government operations are not ~holly included in these disclosed ac-
counts But since the Government has no source of internal funds other
than the Central Bank the net recourse of Government to Central BanJJI mirrors the over-all result of Government finance such recourse increased
In 1946 for example the monopolies contributed 5357 million sucres to the general revenue and disbursed 3526 million to municipalities (145 million on general participation and 1652 million sucres for 11 special participation of gthich an example is a new electricity plant at Ambato the state railways (92 million) etc
gj iiith only three years of disclosed deficit since 1938 See Table 12 in Statistical Appendix
2 Central Bank loans middotto Government less Govertllllent deposits in banks
- 35-
480 million sucres over the nine-year period 1939 to 1947 inelusivel
an average of 53 million sucres annually amplch averaging however con-
ceals very important differences between the three periods within the
nine years to tal
94 The table on the next page sumnari zes the factors causing in-
crease of domestic money supply It is computed by rearrangemm t of the
balance sheets of the Central Bank all commercial banks and all developshy
ment banks and is thus a table shoring changes in items in a rearranged
aggregate balance sheet of the Ecuadorian banking system
95bull The first t70 periods 1939-1943 end l943-l946f were both
periods of heavy inflation_ During the first five years notes in cir
culation and monetary deposits increased 3437 million sucres (or 255 per
cent) and in the next three )eera 2904 million sucres (or 61 per cent)
But the causal structure was quite different in the two periods
96 In the first inflation was almost wholly induced by external
factors (favorable balance of paYments causing increase of foreign exshy
change holdings) the major domestic factor being expansion of commercial
bank loans and investments in this period deficit Government finance
was not a causal factor
97 In the next three-year period 1943-1946 however the major
inflationary factors change deficit Government finance and expansi on of
f As calculated by IBRD Mission loans to Government including ali loans to official agencies A recent calculation by the IMF Research Departshyment covering Government operations only places the aggregate 9 years deficit at 345 million sucres~ See Table 12 in Statistical Appendix
- 36-
BANKING CHANGES ~0015 SucresJ
Jan 1939 Jan 1944 Jan 1947 Jan 1948 to to to tomiddot
Dec 1943 Dec 1946 nee 1947 June 19h8 t~ ~arsJ ~~ iears) trmiddot ~~r1 t~ mo~~h~2
Central rcrk loans tomiddotc~vt~ f 16174 f 160260 - 701p88 23695 Central B~r~ Loans to Public -1 6978 2_283 1- 67548 1- 39763 Commercial Bank Loans and
Investments J 187554 f 14624 88h4 1- 2~ ~49 Development Baru Loans and
J 14227 136818 ~ 644 1- 26090 Investments
1 224933 f 313985 11)40 1- 68107 Net Bank Foreign Exchange 260774 f 94662 - 53203 - u6 112
7 485707 7 408647 I
7 bull - 64543 21395
Notes in Circulation f 16o907 1-131729 - 23205 - 17290 Public Monetary Deposits -A 162868 1- 128914 - 68734 1- 19620 Government Deposits f 19968middot 29768 9050 2366
7 343743 7 290411 82889 - 36 Public Time Deposits 116834 ~ 42053 1~004 f 317j
y 7 46o517 7 3J2464 83893 ~ -- 3137
Absorbed by Banking System 1- 25130 middot~ 76183 1- 19350 18258 7 485707
11 f 4o8647 64543 I - 7 21395
Net Government Borrowing J 131492 from Banks 3794 - 79738 - 32745
Deposits in Central Bank in foreign money (not included above ex pressed in Sucres
Government ~ 4486 - 633 871 - 11059 Public 25242 J 78964 - 78814 J 4h97
T29J 728 7 I
7 IIIII middot~~ ~ I
78331 79685 31+38
y Made urt as Io11mlfs
Cas~ bullbullbullbullbullbullbullbullbullbullbullbullbullbull ~ bullbullbullbullbullbullbullbull - bullbullbullbull J 266 1- 367 - 22~7 99 Other assets less other liabilities~ ~ 4 330 ~ 293 ~ 18~8 Capital and Reserves~- bull bullbullbullbull 4 bullbull 52 bull 1 1- 79-9 26 o 278
7 I
7 7 I
7 bull Ill ri bullbullbull
251 762 194 18)
Subtract increase
37-
Davelopment Bank lending dominE)te the position Expansion of commercial
bank lending is relatively negligible while a comparatively small role is
played by balance of payment influences
98 From the end of 1946 the general financial situation deterior-ated
rapidly in five months from January 1947 to ~~ay 1947 net foreign exshy
change reserves of the Centrel Bank fell 935 million sucres or 7 7 mil-
lion dollars to a level of 2927 million sucres or 21 7 million dolJars
In litaY 1947 an IMF Mission arrived in Ecuador (at the request of the
Government) and in June 1947 a multiple exchange rate system with import
classification was introduced upon the advice and with the concurrence of
the Fund Operation of this system Jielded considerable profit n in
sucres it is in effect a new imposition of import taxes and such
11profits 11 are in reality additional fiscal revenueY It was of the
essence of the Emd s attitude in Ecnador that the exchange difficulties
bad arisen through domestic inflation and that these addi tiona reve-
nues should therefore be applied only in reduction of Government debt to
the Central Bank
99 The effect of such policy is clearly seen in the third column
of the table Inflation is checked notes in cirmlation and monetary
deposits falling 929 million sucres (or 11-per cent) i~ one year Alshy
thoUtgb however Central Bank loans to Government (and also colllWrci al
jJ At this point only the domestic aspects of this measure are emphashysized In a later section the external or balance of ~ent aspects will be taken up
Y Such revenue from exchange taxes yielded 975 million sucres in 1947 bull md in July 1948 was running at g to 10 jllillion sucres a month this revenue is not of course taken into the budgets bull
- 38 -
bank loans and investments) fell the actual deflation _was largely
caused through loss of foJeign exchange rather than over~all reduction
of domestic bank lending For in response to vigorous ~oilplaints of
credit shortage the Central Bank greatly increased its loans to the
public almost fully offsetting reduction of its loans to Government
In the first six months of 1948 there was no significant contraction
of money supply banking loans to the public eJggtanding to offset the
deflationary effects af an adverse balance of payments and of Government
debt reduction
100 The exchange surcharge multiple rate system was in operation
through August 1948 proceeds being devoted to reduction of Government
debt to the Central Bank~ But there has bean concern lest the resulting
deflation of domestic money supply would be too severe and the Central
Bank has in fact adopted a compensatory policy to prevent further reducshy
tion through continuing to expand lending to the public arid through
quasi-open-market pur~e of mortgage bonds to the amount of 17 million
sucres by July 10 19l8 when further purchases were discontinued
101 To avoid the netcessity for such compensatory policy the Cen-
tral Bank proposed to the Government that the destination of reveme from
exchange taxes should be changed Instead of being applied in reduction
of debt the proposal was that they should be useci instead to create a
development fund tt to be administered by the Cent~al Bank unless a
planned Development Institute or other competent authority is estabshy
lished In mid-September the Fund appro ved such cllanged dest ination of
these revenues 90 per cent of which will in future be applied in finance
of development and 10 per cent in stabilization of Government bond prices
-39-
This removes a check upon inflation which has operated for some fifteen
months unless Central and commercial bank lending policies recognize
this changed situation further inflation may follow even if the Budgetary
accounts run no deficit
102 At the same time this change does provide a source of local
currency finance for development projects
-40-
IX INTERNATIONAL TRAIE AND THE BALANCE OF PADlENTS
103 Ecuador exports agricultural products (rice cacao coffee
tropical fruits balsa wood) mineral products (crude petrolelUil gold
silver copper and lead) and handicraft products (panama hats)Y
lo4 Approximately one trird of Ecuadorian exports (including
minerals) go to the United States The proportion rose during the war
due to VmiddotIar-time demand for strategic raw materials but is now tending
to revert to pre-war levels Loss of European markets has been partly
compensated by gain of n$w export markets at least for a time and
especially for rice Countries in the Far East whose rice production
fell during war such as the Philippines and in Latin America whose
Eastern sources of supply were cut off such as Cuba and Venezuela
have provided demand for Ecuadorian rice This outlet however may not
last much longer
105 On an average of years 1938 to 1943 about 15 per cent of
Ecuadorian imports are foodstuffs wheat and lard being the largest
items and 85 per cent are manufactured goods and equipment Import
of foodstuffs is however gro1ing t-vith population and in the key pro-
ducts of wheat and fats would be expected to grow still faster if
econowic development raises n~ss living standards witl10ut increasing
domestic output of these prodvcts For increased consumption of wheat
products and fats is in part the definition of rising living standards
for a very poor population
fJ See Table No13 in Statistical Appendix for composition of exports
-41-
106bull Before the war (average of the years 1937 to 1933 ) the Americas
supplied 49 per cent of Ecuadorian imports by value the United States
alone supplying 41 per cent Germany provided 22 per cent of total
imports and the United Kingdom only 8 per cent Europe as a whole supshy
plying 45 per cent
107 In 1946 and 1947 the Americas provided 86 per cent of total
imports the United States supplying 66 per cent EUrope as a source of
imports fell to 12 per cent although the United Kingdom maintained its
relative position (7 per cent) Whether the United Kingdom can expand
its provision of imports for Ecuador JDaY be domiddotubtful on the one hand
the loss of Germany as a supplier pzo vides an opportunity on the
other the competitive industrial position of the United States may make
it difficult for the United Kingdom to fill this gap
No balmce of payments estimates eJd st for Ecuador1
Growth
of foreign exchange holdings over the war period however indicates a
strongly favorable balmce ~let reserves which were equivalent to 409
million sucres in December 1939 rose to 3962 million sucres (294 milshy
lion dollars) in December 1946
109 Official purchases and sales of exchange are shown in the fol-
lowing table together with corresponding movements of exchange reserves
The difference betRSen the balance on official transactions and the moveshy
ment in reserves arises from transactions on the free market
110 During the war import and exchange controls were nominal
there being no shortage of dollars nor any decrease of exchange reserves
jJ Except for the ~eriod January to May 1948
-42-
Loss of exchange reserves in 1945 led to a tightening of control on an
allocation of quotas smong users of exchange Import permi ts were
granted on the basis of former imports by merchants At the end of
1946 controls were relaxed on an extensive list of imports items and
the consequent loss of exchange has led to difficultieQ
Ul Official Official Balance Changes in Purchases Sales on Net
Official International Trans- Reserves actions
(Millions of u S Dollars)
1942 257 185 t 72
1943 35-5 279 t 1middot5 t Ul
1944 423 34~4 t 79 f 88
1945 353 394 - 41 - 7-2
1946 471 415 f 56 t 1 9
1947 488 579 - 91 38
112 From December 1946 to IVtay 1947 net foreign exchalge reserves
fell US$ 77 million from US$ 294 million to US$ 217 million In May
1947 the advice of the International More tary Fund was sought with reshy
sults summarized as follows in a recent Fund documentY
The lfund 1 s Mission arrived in Ecuador in Yay 1947 It was not advisable at that time to contemplate devaluation which would have made the inflationary situation worse An emergency program was therefore proposed Essential and semi-essential imports were to be distic5~ished and a surcharge of 5 sucres p3r dollar imposed on the semi-essential group as a check against their excessive import New decrees including many of the recomshymendations were issued in June
The main features of the new system were as follows
Y Economic SuVey of Ecuador RD 672 - P 43-44
- 43-
(a) The elimination of all quantitative import export or exchan~ restrictions licenses and quotas with the exception of a few absolute prohibitions of some luxury imports
(b) The checldng of excessive import demand through a fiveshysucre (33 per cent) surcharge on non-essential imports
(c) The suspension of nearly all exchange sales for nonshytrade transactions and the creation of a free market bull narrowly limited in volume and comprising mostly all transactions that are uncontrollable in practice plus a snall amount of domestically produced gold
(d) Exchange for a small amount of the least essential goods was made available in the free market
(e) One of the basic aspects of this plan was the steriliz~ tion of all proceeds from the import surcharge which was placed in a fund for the extraordinary amortization of the government debt to the Central Bank Tnis is still in operation
The beneficial effects of these reforms were felt immediately In June the trade deficit ~as reduced to only $07 million and in July to $06 million By August for the first time in 3 monthsl there was a small surplus In September the deficit was smci l -j)O 5 million In October there was a surplus of $15 million and in November and December there were small deficits of only $01 million and $07 million respectively
In short the deficit for the year was about $99 million in its gross gold and foreign exchange reserves During the same period international liabilities of the Central Bank showed a reduction of about $6 million Therefore~ the net deficit was around $39 million 95 per cent being in the first half-yeer and before advice had been received from the Fundrs Mission
113 It should be emphasized that this multiple-rate system of
exchange control is entirely freed cpentitative controls Excessive
import demand is checked by the higher rates upon imports deemed non-
essential the list of which is knollD and published Anyone presenting
sucres is provided with exchange at the appropriate rate upon list A and
B goods and the free rate is influenced by occasional releases of offi-
cial exchange into the free market The system that is utilizes the
inter-play of the price mechanism rather than the bWlilmlcracy of quanti-
tive controls or quotas
- u4-
114 Loss of exchange continues however despite considerable reduc-
tion of imports Gross international reserves declined US$ 18 million
and net reserves US$ 35 million in the first six months of 1948 Offishy
cial transactions January to June 1948 are surmrarized in the following
table~
Receipts From Exports From other Transactions (1)
Total
Payments For Imports For other Transactions
Total
Balance Change in Gross Reserves
1947 Jan to June
1948 Jan to June
(Millions of Dollnrs)
163 5 6
167 44
219 211
289 219 23 10
312 22 9
- 93 - 18
(l) Includes purchases of domestically produced gold deposits received in foreign currencies and borrowing from corres~ pondents abroad
115 Prospects for the remainder of the year moreover are not goo~
It is estimated that loss of international reserves over the whole year
may be aboat US$ 6 million Whether the deficit is in this region de-
pends largely upon actual export realizations for the remainder of the
year lhe most critical here is rice 11hose ygtrice is falling and the
crops accumulating in the rice millsplusmn Latest information is that
f Countries receiving allocations of Ecuadorian rice under International Emergency Food Council allocations have been requesting a change in source of supply owing to shortage of doJJers Thus France has asked for 6000 tons of rice from Indo-China instead of ~cuador and Greece for 2000 tons from kVPt in place of Ecuador as supplier A recent favorable sale of rice-to Haiti has somewhat improvea the cuITent position
-45-
plantings for the October crop are substantially reduced Wet weather bas
led to some loss of the cacao crop Receipts from exports in the follow-shy
ing official exchange budget may therefore have to be modified down- [l
ward on any pxuient calculation-
116 ~or Recei1ts and Sales of Foreign hchange
(Thousands of U S Iollars)
1948 1947 Estimated Actual
BECEIPTS
Worts Rice 13~ la4~ Cacao 11 l 2 Other products 10700 12371
Total Exports 354oo 42120
Foreign companies 5300 4842 Others 800 1883
41500 48845
SALES
Imports 44800 53499
Services 3200 4470
4B ooo 57969
117 In this situation of continuing presSlre one step has been
tken and others are under consideration The one taken relates to offishy
cial imports representing an average pf 20 per cent of total imports
Importation of cigarettes liquor matches and other things by the State
tionopolies is especiallyen significant These were formerly provided with
exchange tax-freebull ie at the ~owest rate of 1350 From July 26 they
afe required to pay the ordinary import rate of 15o4 on sll supplies for
J See note on page 47 -A
- 46-
their ovm use (such as office supplies) and the same rates as private
importers (ie 15o4 or 20o4) on all imports to be sold to the public
(such as wheat flour fats cigarettes etc) accord~ng to the classifi-
cation of the goods
118 Remaining possibilities seem to be a partial reclassification
of imports removing items from List A as essentials to List B as se~ishy
lwruriesY and or a chenge of nominal exchange parity vri th or mithout
a narrowing of the spread between the rates Here pressure from
exporters particularly from rice exporters may be hee~vily in favor of
an increase of the dollar buying rate with consequential changes of
selling rates
119 The present loss of foreign exchange is occurring ~rithout any
service being met upon defaulted foreign debt although service of Ex-Im
Bank loans is being made If it be assumed for purposes of calculation
that Ecuador reaches an agreed settlement identical to the Chilean sershy
vice would require exchange equivalent to US$ 378000 in 1949 (of which
US$ 368000 would be required in dollars) and would rise to US$ 4o20CO
in 1954 Adding service upon Ex-Im Bank loans outstanding on June 30
1948 and other known but small indebtedness total debt service would
increase to US$ 1410000 in 1949 rise to a second maxilliUID of US$ 1394000
in 1951 and then progressively decline Upon the assumption thet amp-Im
Bank loans undisbursed on June 30 1948 are all fully drawn before their
maturity total debt service charges would be US$ 1533000 in 1949 rise
On August 21 a number of import items were changed from List A to List B the aggregate import value (when granted exchange at List A rate) affected being US$ 7 million
-47-
to US$ 213431000 in 1952 and again would progressively decline These
last service charges rould be for 1949 3 1 per cent of 1947 actual
official foreign exchange receipts and 3 bull 7 per cent of estimated 1948
receipts and for 1952 48 per cent and 56 per cent of 1947 actual
and 1948 estimated exchange receipts respectively
120 Estimating prospects from this point in time Ecuador does not
seem to be a country able to afford assumption of any great additional
burden of debt service payable in dollars The amount that could wi thbull
out hardship or distortion be squeezed out of the balance of payments
by no means corresponds to the development needs of the country Any
start must therefore be modest and cumulative rather than spectacular
and precarious and this conclusion fits with other controlling factors
in the over-all situation notably the supply of administrative techshy
nical and managerial abi li ty
- 47-A -
Note on Official Exchange Transactions
Official exchange transactions for the firstsix months of
1948 are given on page 44 of this report Results for the full year
are now available and reveal that earlier expectations regarding the
probable 1948 balance of payments deficit were unduly nessimistic
Cacao export values have been lar~er than expected and in the last
period of the year there IBre some unexpectecily favorable rice eA-port
sales total export receipts were US$ 8 million larger than forecast
on page 45 Imports were held close to forecast
Receipts
Exports Foreign Co~anies Other
Payments
Imports Foreign Comoanies Other
Balance
Change in Grass Reserves
Official Exchange Transactions (full year - n~illions of dollars)
1947 -421
L18 19
488
535 06 149
580
y does not agree because of rounding
January 26 1949
1948 -436 h2 7
i85
Lt52 2
28
-oJ
-48-
X EXTERiJAL DEBT BEoomJ
121 The position of public long-term external bonded (excluding
inter-governmental) indebtedness of Ecuador is as follows
Amount in Default AmoUpt Outstandi~ ~ e Interest D~te
~In currmc1 (u s (us of p~t Dollars) Dollars)
Dollar obligations Gueyaquil amp Qui to Ry) $ 1226)000 12263000
286000 12263000
286000 123147
63047 Sterling obligations Franc obligations ( Oie
b 71000
Francaise de Chemin de Fer 1 lquateur ) Fcs 8386000 70000 70000
12619000 l26l9000
middotmiddot Note The Government of Ecuador oyenms about 75 per cent of the
stock of the Guayaquil and 1uito Railway and guarm tees the bonds and certificates which are largely held in England The franc obligations of the Cie Francaise de Chemin de Fer 11lquateur are not included in the offi cial statement of the public debt nevertheless the Government does recognize some liability for them and during the last few years has engaged in Degotiations for their retirement
Inter-governmental Debtsmiddot
122 Debts to the United States Government are of three types
63047
first the loans by the Export-Import ~which were outstanding on
June 30 1948 in the amount of $7 705606~ second the aJIDunts duemiddot
because of purchases of surplus property totaled $484 567 on March 31
1948 and third the obligations arising out of the lend-lease settleshy
ment the amount of 1fhich is not available (Total lend-lease assistance
j This section of the Report was prepared by Mr Paul Dickens
to Ecuador amounted to $7 bull 795000 )
123 In addition Ecuador is indebted to the Government of Venezuela
in connection with the establishment of a joint shipping company Late
data are not available but as of February 1947 $500000 ($1000000
authorized) was outstanding the total to be repaid by 1966
Debt History
l2ij Upon partition of the old Republic of Colombia~ middotEcuador was
apportioned 215 per cent of the original Colombian debt by the convershy
sion of l834a Between 1834 and 1854 no interest was paid The period
1855 to 1908 was marked by numerous adjustments and defaults
125 In 1898 the Guayaquil and Q]lito Railway Companyt s first mort-
gage 5 per cent loan of 1899 was issued It was expressed in dollars but
was in reality an English loan In 1908 a new (reemenJl was reachedbull
which was to be a final settlemet of all past disputes and controversies
between the Government and the Guayaquil end ~ito Railway Company and
the bondholders In 19~-10 the Government defaulted on the new agree-
ment In Novemberl9ll payments were resumed on the railway debt on)y
but a revolution caused a further suspension from December 1911 until
lfarch 1912 Subsequently service was partially resumed on the external
debt until July 1914
126 From August 1914 to July l9l8 no paYments were made on eny
foreign obligations except that service on the prior lien railway bonds
had been maintained up to and including the January 1915 coupon By
rf Negotiated settie~nt
-50-
1920 interest and sinking fund on the prior lien railway bonds had been
brought up to date but service on all other obligations ~ed in
arrears In 1926 interest on the salt loan of 1908 was brought up to
date but default took place on the coupon dueJam1ary 2 1927
127 The outstanding bonds of the prior lien issue were redeemed~~
January 1929 at VIhich time the January 1914 coupon was paid on the
5 per cent first mortgage bonds of 1897 In the case of the salt loan
of 1908 sinking fund was resumed in July 1928 and interest was paid
to Jazruary 1929 inclusive None thereafter Sums due from July 2 19C3
to January 2 1931 inclusive deposited with Central Bank in sucres
were used for governmental purposes after December 1931 No payments
were made after January 1929 on the external debt of Ecuador
128 Up to the end of 1948 no acceptable arrangement had been pro-
posed by the Ecuadorian Government for the resumption of interest and
sinking fund payments on external loans
-51-middot
XI bull POLITICAL
129bull Recent political history in Ecuador has been turbulent
although contest fo~ power at the top has not greatly affected the
bulk of the population Suffrage extends to all literate citizens 1
over twenty-one years of aee-but the requirement of literacy effect-
ively excludes the Indian bull T)tal votes cast in the recent Presidential
elections were 289164 from a total Population of some 35 million
130middot On May 28 1944 a few days prior to a scheduled ceneral
election an uprising occurred and Dr Jose Haria Velasco Ibarra
assumed office as President Dr Velasco had been President before
but following a coup dletat in August 1935 after he had been in
Presidential office less than a year he fled to Colombia and re-
mained in exile for several years On July 23 191-4 general elections
for a Constitutional Assembly to draft a new Constitution were held
Installed on August 10 the first Act of the new Assembl3r which was
predominantly Conservative was to confirm the legality of Dr
Velascos assumntion of the Presidency
131 On June 30 1946 new elections to the ronstitutional
Assembly middotwere held The only party particiJatine in these elections
was the Conservative The Liberals R~dicals Socialists and Commu-
nists abstained on the crounds that President Velasco did not offer
them sufficient guarantees On Aucust 3 1946 there vrere a number
of arrests following an abortive uprising and on Aueust 11 the Con-
stitutional Assembly re-elected Dr Velasco to the Presidency (by 43
to 10) for a term of office to last to September 1 1948
12bull Being compUisory for men voluntary for woraen -
132bull A new Constitution was promulgated in January 1947
133middot On August 23 194 7 a bloodless coup detat led by Colonel
Carlos Iancheno Minister of Defense in Dr Velascos Cabinet deposed
rresident Velasco who fled the country to Colombia for the second timebull
Next day Colonel Mancheno proclaimed himself Acting President and
formed a five-man Socialist-Liberal Cabinet despite the absolute
Conservative majority in the Assembly A week later however on
August 31 a counter-revolutionary military movemont broke out in the
north and the counter-revolutionaries captured Quito on September 2
134middot Colonel llancheno resigned the ActinG Presidency and dis
appeared the sa1ne day Dr Suarez Veintimilla who had been Vice
President under Dr Velasco and the former conservative Uinister
resumed control of the GoverPment Next day September 3 a Council
of State in Quito declared that Dr Velasco had by abandoning his
post terminated his functions as Chief of the State Dr Velasco
howeverJ vrho middotwas by this time in the Argentine declared that his
remo~al to Colombia had been forced and announced his intention of
returning to Ecuador to resume office
1~ On Seytember 15 1947 a Secial session of the Zcuadorian
Concress accepted the resignation of Dr Veintimilla and elected
Senor Carlos Julios Arosernena head of the Banco Ce Descuento at
Gua~raquil and a non-party man as Vice President with novers as
Acting President until September 1 1~48 Senor Arosemena formed a
mainly Liberal Cabinet with one representative each of the Consershy
vatives and the Socialists Coneress also ~onfinned the Council of
State 1 s view that Dr Velasco had forfeited the Presidency by abandoning
his postbull
136 On June 6 1948 Presidential elections were held The
three parties represented vere the Conservatives (Dr Manuel Elicio
Flor Torreo) the Liberals (Galo Plaza Lasso) and the Radical (Genera1
Alberto Enriques Gallo) Final results were announced as
Plaza 115835
Flor 112052
Enriques 53601
Invalid 27 676 289164
137 bull Doubt persisted until this month (August) as to who would
receive the election The Electoral College had been invalidating
votes on technical Grounds and as interim returns and invalidities
were announced it was noticed that the majority of the latter were
being deducted from the Plazavote After conferences the Electoral
College revalidated all votes and conducted a re-scrutiny on less
strict basis Senor Plaza has been declared to be the rfjSident-Elect
by the Ecuadorian Coneress and assumed power September 1 1948 The
middotpresidential term of office is four years
The Vice Presidential results were
Conservative 1anuel Sotomayor y Luna llu008
Liberal Dr Abel Gilbert 113213
Radical Dr Cueva Tamarz 5h07h 28129gt
139 Senor Plaza was born in Nmv York USA forty-two years
ago his fatter the late General Leonidas Plaz~ was President of
Ecuador in 1901-05 and 1912-16 middotSenor Plaz who had been taken to
Ecuador as an infant accomnanied his father in exile to the United
States and attended the University of California the University of
Maryland and the Georgetown School of Foreign Service in ~7ashington
l4o Senor Plaza returned to Ecuador in 1930 and for the next
fourteen years operated the family estates there reclaiming them from
virtual bankru~tcymiddot to prosperous and efficient state He has for
example been active in encouraging the breeding of new cattle strains
is President of the Ecuadorian Holstein-Friesian Association and oper-
ates a butter factory on his estates with a Danish ~anarer He was
ar Minister from 1938-40 and Ambassador to Cashington from 19h4-46
l In executing any policies he will of course be handishyt4
capped by the lack of a fully efficient Civil Service The position
in Ecuador is the same as that in othelmiddot Latin American countries
that the Civil Service is naid on low salary sca1e and lacks compe-
tent administrators Such lack is an aspect of the general shortage
of technical ability in the country
TABLE
1
2 bull
3 bull
4
middot 6
7 bull
8
9
10
11
lZ
13
14 bull
15
16
17
18
19
20
ECUADOR
STATISTICAL APPENDIX
Oil Production and Exports
Cement Production and Imports
Yfueat Production and Imports
Rice Production and Exports
Rice Exports by Destination
Cacao Production and Exports
Coffee Production and Exports
Cotton Tobacco amp Sugar Production amp Sugar Imports
State Railwaysmiddot Lines amp Rolling Stock
State Railways Merchandise Hauled
Population and Roads by Provinces
Budgetary Receipts and Expenditures
Exports of Principal Commodities Volume amp Value
Imports Classified by Groups Value
Exports by Destination Value
Imports by Source Value
Balance of Trade by Major Regions
Exehanee Reserves and Banking Position
Price middotIndices
Status of Ex-Im Ballilt Loans
ECUAIOR Table 1
Oil Production and Expomiddotrts
(thousands of American gallons)
Crude ou Gasoline Produced EJtported bullRefined middotproduced
1938 94586 78696 15500 41654
1939 97125 68819 17679 bull 141
194o 98654 70~99 23001 6162
1941 65382 38362 25914 6462
1942 95671 68516 29489 72l7
1943 97211 65003 34635 8076
1944 121469 82520 38083 8927
1945 109855 73897 38752 10059
1946 979+7 52412 45213 12271
1947 99140 39359 53949 16587
Source J3o1etin Banco Central del Ecuador
ECUADOR Table No 2
1929
1937
1938
1939
1940
1941
1942
1943
1944
1945
1946
1947
1948
l First six months
CEMEHT PRODUOTIOllT AliD IMlORlS (metric tons)
Production Imports
17782
15699 10082
14254 13373
14249 12013
16512 10935
17213 2_846
19802 so98
2756o 933
34691 1590
37504 953
38496 3114
33231 14941
20484JJ
Sources Production Eoletin Banco Central del Ecuador Trade Ministerio deEconomia
Total
25781
27627
26262
27447
20059
24900
28793
36281
38458
41610
ECUAJX)R Table J
Wheat and Wheat Flour Production and Irraquorts
(thousands of kilos)
Wheat
Production Imports Exports Consumption
194o 28120 bull 73 28o47 1941 24578 36 24542
1942 24265 bull 76 24189
1943 22034 22034
1944 23251 912 24175 1945 23115 2733 180 25667
1946 25852 4532 23 30361
1947 2lo66 494f)J 11
Vfueat Flour
1938 10743 9981 na
1939 7864 16638 na
1940 7996 8-592 275 16312
1941 7225 11823 286 18762
1942 7 161 23497 161 30498
1943 7461 9862 17322
1944 5216 24023 29239
1945 5174 25137 30311
1946 7~38 11313 g 18813
1947 5943 1886) 4Y
Less than 500 kilos Y First 6 months
Sources Ecuador en Cifres a~d Ministerio de Economia
~emiddot 1926-30
1931
1932
1933
1934
1935
1936
1937
1938
1939
1940 -middotmiddotmiddot
1941 ~ )~ (1
1942
1943
1944
1945
1946
1947
1948
~iiampn-sect00-lfmiddotks
-~Jrst~middot-nsmcnths
gJ Provisional
(B EQUOR
RI03 PRODUCTION ApoundP ~OR~S
Vo1wnfJ Production middot E~orts
(metric tons)
26)04
23584
29863
39270
39008
31699
39036
52136
44027
40144 ltit middotmiddot~ 0 56596
5873
100949
ao6o7
53168
102048
112711
047
8255
3842
6449
5282
22907
8734
12)3
2ooso
962
18343 t - ~ J
20546
32028
46992
64604
29318
66918
6~209fl middot tloo 1
$ bull
tt ( r t
z
Value 3xoorts
(thousand sucres)
1881
936
6667
10864
6555
14632 pound 170
23265
51460
93837
127105
60395
203243
2rfjuft
Sources Production Boletin Banco Central del 39uador~ Trade Ministerio de Econom1a~ ~r- ~fl ]r bull ~-middotmiddotmiddotmiddot f ~~middot~---i
Average Destination 1937-41
Cuba 2
Peru 13
Venezuela 6
Colombia 4
Panama 2
Jamaica 0
Philippines 0
India 0
Dominican Republic 0
Other Countries 4
TOTALS 31
Preliminary~
RIQ] EXlORTS (in million po~ds)
1943 1944 1945
81 88 5S
20 29 0
0 17 4
~ 0
Rf 2 hi 0 0 0
0 0 0
0 0 0
0 0 0
bullbull ~ 6 6
105 142 6S
R Less than )OOOOOpounds
Table No 5
1946 ~ Jan to~
1~ June-194
46 12 24
0 0 s 17 49 )j
2 13 2
5 4 1
16 1 0
20 0 0middot
0 38 0
0
1 f4~ 2
r middot I
130 13 34
sf Ineludes 6 million pounds to Mexico and 5 million tmiddoto Greece bull middot
1[0
supound~sect8_ Foreigl Crops and Markets Offiee of Foreign Agrtcultural Relations u bull Sll~artment of Agriculture May 3l 1948 bull p bull 402 First six months of 1948 from ibid August 16 1948 p bull 120
Average 191i-15
191620
l921-25
1926-30
1931-35
193640
1940
i941
1942
1943
1944
1945
1946
1947
tf I
ECUADOR
Cacao Production and ~orts
Volume
Estimated Production ~rts
(metric tons)
n (
12108
15middot330
14652
19030
15058
17759
17689
19459
4o625
43547
36825
21319
15980
174o4
11208
14433
13762
18161
13735
16827
16526
Exports ( 000 sucres)
186o9
26073
26746
27531
16647
37424
29354
34365
40327
51794
41985
53547
74935
188208
middot)(et) middot( middot
Sourcesmiddot Estimated production Ministerio de Economia E~orts to 193~ Estadisticas de las Exportaciones del
Ecuador 1940-1942 subsequently El Trimestie Estadistico del Ecuador Number 1
1 ~ Mini sterio de Economia -bull gt(
111 t bull r r (o J bull bullbullbull 1) ( bull
ECUADOR
Coffee Production and Exports
Volume Estimated Production EXports
(Metric TohS)
1921-25 average 5147
1926-30 II 7571
193D-35 10047
1936-40 II 13811
1940 16158 14571
1941 14260 11847
1942 9016 6140
1943 14144 12340
1944 16598 14458
1945 12999 10737
1946 9948 7636
1947 12522 8970
Table 7
Value
Exports 000 Sucres)
59~9
11530
10945
18546
16J83
23827
17278
33176
35626
33863
34839
43524
Source Estimated production - Ministerio de Economia
Exports t~ 1936-40 - Estadisticas de las Exportaciones del
Ecuador 1940-1942 - subsequently El
Tremestre Estadistico del Ecuador Number 1
and Ministerio de Economia
YEAR
1937
1938
1939
1940
1941
1942
1943
1944
1945
1946
1947
ECUADOR
Production of Cotton Tobacco amp Sugar amp Sugar Imports (000 Kilos)
Raw Cotton
9237
7213
7172
8165
PRODUCTION
Tobacco
1519
1106
1875
1028
1359
Sugar
17528
22950
26950
27835
30421
27858
26799
23151
32474
33544
33480
Table B
IMPORTS
Sugar
5310
11068
12387
38
6
33
184
784
21455
3060
Sources Production of Cotton and Tobacco Ecuador en Cifres 1942
Sugar Production and Imports Ministerio de Economia
ECUAOOR Table 9
State Railways
Length Locomotives Rolling Stock (Number)
(Kilometers) (number) 1relght Passenger
Gueyaquil-Qpito 452 39 319 41
Guayenaquil-SalinaJ 150 6 22 24
-~i to-CarcbiY 222 6 23 22
Bahia-Chone 78 3 12 g
Sibambo-Azogues 117 3 6 ll
Puerto Bolivar-Piedras 155l 7 21 10
Puerto Bolivar-Pasaje 55
1199 64 4oy llG
Narrow-gauge line
gj On uncompleted line ~ito-Esmeraldas
21 Of which 4 are rail-cars
jj Of Vihich 61 are rail-cars
Source lviinisteria de Economia
1938
1939
194ltgt
1941
1942
1943
1944
1945
1946
+947
ECUAOOR
Railway Transport
(thousands of metric tons)
Products
Agricultural Animal Mineral Forest Manufactures
1639 19 3 160 122 1034
1318 143 172 138 961middot
1714 144 233 219 1472
1613 184 277 209 1543
1809 224 280 272 1631
1841 280 35a4 376 193-3
2011 250 263 299 C5J7 3
1888 29-5 350 238 2234
1941 29-9 46 bull 4 258 2170
1787 299 51 0 180 2085
Source l3oletin Banco Ce~~nu del Ecuador
Table 10
Others Total
58 3205
58 279l
298 4oso
289 4115
328 4543
384 5168
352 5248
292 5296
37middot7 5508
419 5279
Table 11
Population and Boads
Poeation Roads (Kilometers) Province Jan 1 1948 Main Secondary In Construction
Care hi 86663 1744 1191 1050
Imbabura 158896 1818 2100 1810
Finchincha 350149 4)13 3703 670
Cotopaxi 215232 642 4o6o 970
Tungurahua 222963 2290 1810 300
Chimborazo 29864o 1664 3316 2740
Bolivar 121653 1877 1294 2045
Canar 133971 580 580 1300
AZUaY 284982 1053 2190 630
Loja 238705 1140 4s6o 1430
El Oro 93752 1005 2378 650
Quay as 482843 3900 3367 3700
Los Rios 148428 933 4632 1050
Manabi 381538 3627 1lo61 1970
Esmeraldas 664o5 50 19 0 2840
Frov Orientales 181071
465891 26636 46732 2t3l5bull5
Source Direccion General de Estadistica y Censos
1938
1939
1940
1941
1942
1943
1944
1945
1946
1947
Source
r
Table No 12 ECUADOR
DISOLOS3D BUDGETARY R303IFTS AlfD EXP3NpiTURES
(Total of ordinary and extra-ordinary budgets and special accounts)
thousand of sucres)
Total Receipts
1323204
131699 6
1262710
1547624
1667455
2112614
3145318
4051038
5367822
6696647 11 ~I JJ( middot
Total Expenditures
1429134
1267687
123135middot0
1586615
1489251
2101429
3031038
4174550
5352394
6593858 bull I
aoletin Banco Central del Ecuador
-middot middotmiddot
Diff~reuce
106830
j 49309
f 1360
- 38991
f 178204
j ltll8-5
f 114280
12351middot2
+ 15428
j 10278bull9 r 7
l I 1
L
ECUAOOR EXPORTS OF PRINCIPAL COMMODITIES 1937-47 Table 13
VOLUME (thousand metric tons)
1937 i98 1939 194o 1941 1942 1943 1944 1945 1946 194711
12 200 96 183 20 bull 5 320 47~0 646 293 669 66) 218 191 153 112 144 138 182 137 168 16 bull 5 203 14~ iJI 137 129 146 118 61 123 14 bull 5 107 76 90 48 55~5 53middot3 472 34 bull 2 226 158 1)9 178 35middot511 72 bull 5 345 19~2 251 183 14bull4 13 2 112 103 12~0 132 121 1-4 16 16 15 18 30 22 28 2~0 13 01 14 1middotmiddot9 2~2 21 47 90 136 93 74 28 na
~gt i824) (1387) (944) (1036) (1981) (2516) ( 2756) (4373) (4462) (4947) _01 2849 2454 2274 2201 1201 2167 2062 2513 2446 1640 1358
Ltrates 7~3 140 76 so 3~3 )9 26 10
VALUE (thousand sucres)
610 10864 6555 14632 23265 51460 93837 127105 60395 203242 201111 49985 39bull276 37bull033 29354 34364 40)26 51794 4lt985 53547 74935 188208 24613 16703 15227 16)84 23827 17278 33176 35~26 33863 4839 43 bull 524 5bull691 7558 7t006 6448 4658 _J 107 2159 1898 2872 738~- 24355
18242 7~146 9605 86o6 6120 201 6274 6209 9264 1)02 14994 4048 4300 4298 3~866 6979 35481 23316 38043 26553 15111 979 lt363 2~134 2724 3168 8450 25613 43419 31877 18 bull 509 7125 na 8048 6 234 4981 6509 16231 22121 25191 69033 69J87 81962 4662
21989 26374 25020 24862 13425 24820 23796 28788 28107 18253 15902 trates 10165 16090 13134 38609 27208 29013 18075 809 ates 18682 35297 41204 39907 29426 25374 27476 26457 15482 24858 25334
10774 13210 13495 3 950 16869 32775 2L068 32402 30902 38326 n bull a_
164_045 169096 167148 167851 199704 298690 393115 466631 377894 537131 619859 tmiddotbull bull
Note Dash (---) signifies zero or less than 50 metric tons nly or ~00 sucres ata expressed in quantities other than weight Sourcis 193 data from unpubli~hed Zcuadorian trado stati~tics
at US Department of Commerce 1938 nnd 1939 from partment of Commerce official data Direccion Nacional de Estadistica Eruad6r en Cifras ~7 from Banco Central Boletin 1940 and subsequont ~ears from Banco Centrll jto~n sterio de Economia and from M1nister1o c Economia data furn she
Mission July 1948
~ tobacco tone JgS
articles
11res ilk
al
value of Imports by Groups 1937-Lt-5 Volume and middot~alue of Selected Individual Imports 1937-46
(Value in thousand Sucre~)
1~37 1~38 1~39 1940 1941 ~942
19~731 20~ 375 24~874 16~)65 19043 37~540 5127 7194 1958 6~4e8 5t298 8 118
12888 13Jl5 14522 17702 19556 25~152 21627 25~272 21455 28532 21619 18923 20649 21~593 25559 29437 22636 19~$13 13~505 11961 12~654 15~976 15667 18899 5~829 7 bull 524 6066 9385 833 14353
22912 )0868 24~75 27 t 750 25993 42~916 9376 1028 10038 12118 11345 13932
-bull
131643 148320 1486o 173753 149499 199715 (Volume in thousand metric tons) (Value in thous~tnd sucres)
5middot3 111 124 194 5 bull 534 6385 26 4 24
os 246 -
122 ioo i66 86 118 235 8255 6)88 7449 5076 013 14609
19 07 11 11 14 29 2187 1824 2695 294-3 29J9 8182
101 i4 i2o i09 28 51 804 llJ)6 1667 1546 577 866
~ hides amp skins amp manufactures amp miScellaneous
~~43 1944 1945
33270 70915 82984 6717 8)69 904)
31~700 43196 32~830 17073 53~400 JBoo6 15447 32~624 38797 14~88 18~388 22895 14116 11a99 9812
68928 n~l79 69-113 15856 19186 20042
217983 33ltl56 323524
78 middot 0 2 215 130 12622
09 27 775 2290
99 240 bull 25~1 337 24070 26388
23 46 67 8853 146)1 21699
09 16 10 321 349 246
~s zero or less than 50 metric tons -middotNote Columns may not ahmys add to totals because of rounding Denartment of Commerce official sources - 19)8-42 Direccion Nacional de Estadistica Ecuador en Cifras [inisterio de Economia El Trimestre Estadistico del Ecuador
1946
)1 8135
4 bull 5 )842
114 13123
46 22709
)1 639
ECUAOOR Exports by Countries 197-47 (Value in thousand sucres) Table - 15
1937 1938 1939 1940 1941 1942 1943 1944 1945 1946 1947 --middot-------middot
80458 lt2865 116t-J78 150055 196953 293081 386483 46lt-909 372~549 463~378 sa4~68J 54422 63418 8)254 1t0496 145 bull 558 168585 2)9238 267105 218018 227291 262887
26 20 65 17 2228 78 124 7)41 17173 630 610 949 1281 1055 1)98 5~526 25686 78523 85382 61478 75890 23481
2899 4955 2109 3568 162 1163 4J54 2526 4197 44~ 1450 5027 6335 4972 5i92 5285 7425 4546 7379 10286 9798 15537
1 5 5 17 57 13 291 54 444 574 6996 8 662 9188 8714 13bull764 7238 15316 13900 11223 6~07l 14503 11717 2908 12544 5 730 7896 3767 21215 22608 29233 4243 6703 7965
51 15 24 8 532 3620 1603 539 2336 11579 3749 80 207 862 4070 9991 17096 1275 17~428 6~973 27431 80541
1943 2135 5229 6039 1965 5435 3021 4827 15~702 25~137 51~854 middot 667 740 991 zo83 3358 11412 4286 4282 3~-970 13064 5~864
1799 419 2218 875 2865 12299 9644 14900 13714 9653 11655 J 89 82 2527 1247 964 326 )24 250 41141 2~985
1024 1514 1068 2205 7173 2650 2 744 8871 7694 J2 5811 17 39~ 77029 61869 43688 11945 1503 5550 6335 4108 4075 36783 61998
32) 6)3 1187 490 58 186 2164 4021 J217 35974 29595 11277 69 - 29 4411 7909 6156 3477 1183 5492 4876 26)8 359 1860 7~467
489 255 J2 100 280 1155 1239 1265 3827 3~961 20539 13t521 10802 2254 5 706 4177 6313 2bull610 3615 4251 -middot 2842 13546 lBi 1415 3 758 822 6 188 12962 3592 2531 412~ 162 7~ 10052
8643 1693 3bull521 3~400 2751 320 40 118 231 222 5404 J 4894
6337 4201 6548 5478 1175 5 45 40 1611 50950 6261 4132 5386 5452 117) -
~l - - 15 45988 5 middotmiddot 7S 8 5 25 567 92S 11
33 ~- 76 18 966 151 150 3419
38 29 858 2 45 78 467
(continuation on next naee) middot
~GUJLOR ~xnorts by Countries 1937-47 (falue in thousPnd sucres) T~ble-15 continued
middot-~--- -~-middotmiddot -middot _ middot-- ~~---~~- ---- -middot--~middot--------middot- -middotmiddotmiddot--middotmiddot--193 1938 1939 1940 1941 1942 1943 1944 1945 1946 1947 _I --middot -middot- ---~- ------ middot- bull middotmiddot-middot -
4 7 5 5 5 219 1087
218 153 529 368 73 49 297 569 1230 35140 789 28137
207 144 379 J68 73 49 297 559 1104 605 11 9 10 126 43
150 6355 plusmn
353 54045 169096 167148 167851 199704 298690 39J115 466631 377894 537131 619859
~S Columns may not always add to totals because of rounding
Dash (-) signifies zero or less than 500 sucres
Primarily Guadeloupe and Jamacia
Primarily British West Indies and Netherlands West Indies
Primarily Denmark Spain and Norway
Primarily Java
~ces 1937 and 1947 from unpublished Ecuadorian Trade Statistics at U s Department of Commerce
1938-46 from Ecuador Ministerio de Economia data furnished IBIID rassion July 1948
Imports by Countr~es 1937-1947 Table-H)
ECUAOOR
l937 1938 1939 1940 1941 1942 1943 1944 1945 1946 1947 I (()
Value in thousand sucres) ~ + -gt L520 63151 83984 115382 128423 186958 200061 311989 302~329 363403 517582 j
u t 2086 51311 71950 103214 110422 138729 103583 173776 178821 240233 429906 0
Q) f
811 674 551 2436 1815 3J258 2150 5265 6538 12178 20912 d S Ugt ro c 1 n 4 4144 3042 8 99 14 23 295 178 8~011 210 h middot-1
(- 0
186 324 237 957 2~991 8492 18~376 15~239 17232 10~574 3121 4 middot-2375 2310 1959 2476 3016 4735 7930 7~696 11~201 15~564 14755 sectwfi
middot-1 1 fli 4 6 343 1~823 3J064 4110 3~612 60J5 h 0H
2739 2109 3789 174 2352 7949 9~934 17845 23~ 616 1559t 18~727 ~rld ()
328 164 457 2498 612 733 10892 10902 20003 16684 11981 oc ampl+lll
mmiddota J63 1297 1161 -- - 2 23 115 1~128 1192 d+gt-
2464 507 500 1438 5565 20668 39979 46654 33684 33034 6~486 15~~ (()
na 1 311 2297 5515 130 bull-I m rl bull +gt
15 31 68 245 995 1516 2804 25326 6124 5956 3472 Oltll~
149 280 269 332 550 208 270 389 707 839 655 a~ sect (1) Cl 4-209 72986 ~ 38 09 1433J 9813 16276 15885 1721~9 45194 80928 ~-g 1701 35767 2 7 7 33 1202 67 47 61 19 2 El 0 0 eo g 3250 11462 8094 12980 10124 8108 13634 12513 11984 28392 40983 cent1-t+l~
1803 718 1687 otmiddot r-
4-114 6465 7339 630 475 34 22 2 66 889 7279 t -P () ~led
36o 4685 1573 7144 308 12 682 4824 rlltll ltDno
1~896 2550 1466 1624 64 1 58 5090 bull-1
fJ ~ ~ 1052 1489 794 945 293 224 5 21 1373 9062 9 703 P + na 868 881 423 10 1 8 223 135 r- 0) u
1 r=l middotr-l
1162 4823 1264 1675 877 1017 1~52 2380 3129 4~326 6851 () l=l rl
7274 3074 2609 3595 980 349 1041 905 599 1~543 3~134 cn~oo bull t
724 11939 8983 19951 6239 2281 1439 304 3882 5478 5736 op a cent1-t ~sect rl
173 302 262 238 -w 14 276 -rr 472 ---s9l ctillmgt
259 10949 7810 18190 4414 170 16 4 5 +gtUd ~-- ~
935 712 728 1278 1281 1715 1314 2685 3185 4465 3151 +gtP t-1
530 105 143 221 306 240 95 89 582 541 2089 ~ (f)
1l 21 12 80 1f 196 122 169 125 1J n ~-T~
0
109 218 lllL 250 m 46 sect2 12_ 28 119 112 I ~ --sB_l_ 0 ---- -
643 148315 147860 17353 149499 199715 21 ~ 983 331156 323524 414266 604479 ms may not a1ways add up to t ta1s because of rounding Dash (-) signifies zero or less than 500 sucres ~ country breakdown not given in source g) of which 591 from Syria 2Z3 from China 264 from Straits Settlements 1 Sumatra and 264 from Iran
YEAR
1937l
1938t
1939~ -
1940amp
194H
1942
Exports Imports Balance
Exports Imports Balance
Exports Imports Balance
Exports Imports Balance
Exp(rts Imports Balance
Exports Imports Balance
ECUAroR Balance of Trade by Area 1937-47 (thousand sucres)
fRlSTERN HEMISPHERE including Philinuines
United States Other Total Eurone
54~lt-22 26~036 80~-~-sa 77~029 52086 9~434 61520 64~209 2336 16602 18938 12820
63418 39447 102~865 61869 51311 11840 63151 72~986 12107 27~607 39714 -11117
83254 33124 116~378 43688 71950 12034 83984 54505 11304 21090 32394 -10817
100496 49559 15Cl055 11945 103214 12~ 168 115382 38~090 -2718 37391 34 673 -26145
145 bull 558 51395 196953 1503 110422 18001 128 423 14333 35136 33394 68530 -12830
168585 124~496 293081 5t550 138~729 48229 186958 9 813 29856 76267 106123 -4263
Table 17
Other Countries World Total
6~559 164045 5-912 131643
647 32405
4361 169~096 12~ 178 148315
- 7817 20781
7082 167148 9372 147860
-2290 19288
5851 167851 20281 173753
-14430 - 5902
1248 199704 6743 149499
-5495 50205
59 298690 2944 199715
-2885 98975
NOTE Areas may not always add to world t~tals because of rounding
Source 1937 and 1947 frlttm unuublished Ecuadorian Trade Statistics at US Department of Commerce 1938-46 frem Ecuador Ministerio de Economia data furnished Mission July 1948
(Table 17 continued on next page)
YEAR
12J Exports Imports Balance
1944 Exports Imports Balance
125 Exports Imports Balance
1946l) Expltgtrts Imports Balance
12Z= Exports Imports Balance
ECUADOR~ Balance of Trade by Area 1937-47 (thousand sucres)
WESTERN HEMISPHEL~ (including Phili~ines United States Other Total EuroQe
239238 147~245 386~483 6335 103583 96~478 200~061 16276 135655 50769 186422 -9~941
267105 194804 461909 4~108 173776 138213 311989 15~885 93329 56591 149920 -11779
218018 154~531 372549 4075 178821 123508 302)29 17159 39197 31023 70220 -13084
227291 264224 49J515 36783 240~233 123170 36J403 45~194 -12942 141054 128112 -8411
262887 241796 504683 61998 429906 8676 517582 80928
-167019 154120 -12899 -18930
1 Only year in which substantial Philippine trade
NOTE Areas may not always add to world total becasue of rounding
Table 17 (oonttnued)
Other Countries World Total
29 393115 1646 217983
-1)49 15132
614 466~631 3~282 331~156
-2668 135475
1270 377894 4035 323524
-2765 54)70
8~833 537131 5670 414266 3163 122865
53179 619859 5969 60449
47210 15380
Sources 1937 and 1947 from unpublished Ecuadorian Trade Statistics at us Department of Commerce 1938-46 from Ecuador Ministerio de Economia data furnished IBRD Mission July 1948
~ EXCHANGJ-tAL BANK
ECUADOR Exchange Reserves amp Banking Position (million sucres)
r 4 bull TIC CQEDITS OF CENTRAL BAl~K Domestic Govt Official Bus Other Credits
MOliEY SUPELY Current AC
JJj To()2f (4) Entities Indvls Total Banks of O~mtl Currencl Denosits l (6) (7) (8) (10) (5) Banks amp 11
Indvls (9)
16 10 26 51 1 116 62 64 48 26 7 40 73 4 129 74 66 3middot7 )9 7 29 66 4 144 73 71 37 29 8 24 62 4 159 78 73 56 26 8 22 55 5 183 8l 103 81 37 28 2 8 201) 120 119
152 37 21 22 79 9 255 169 17~ 26) 34 27 22 83 13 378 ZJa 26e )4 60 37 20 117 9 385 295 308 Z5 105 73 11 189 26 493 321 312 282 153 81 10 244 24 536 35middot~ 354 242 104 44 93 241 2 565 329 284
221 110 51 99 260 2 56 313 278 215 102 47 101 250 2 573 )06 294 225 97 45 95 237 2 585 299 299 219 100 44 98 242 1 591 307 297 214 98 35 111 244 4 6)4 315 295
)20 295
on of $12500CC beginning in December 1946 bull
ars
Ttttal (12)
127 14) 144 151 183 239 345 492 602 634 704 613
591 599 597 604 610 614
ge liabilitieS but including Stabilization Fund in 1945 and GolC CertificCt in 194) bull ial banks and fomento banks ial bc1nkst and fomento banks sits of commercial banks and time deposits of fomento banks
Table 18
Govl t Den sits ~L
(lJ)
6 23 12 27 7 28 8 31 6 32
middotmiddot 11 )6 16 57 27 71 41 74 63 98 59 90 66 77
71 8 75 76 6 75 81 75 81 72
72
1 1 Boletin - Superintendencia de Bancos Boletin - Unpublished data furnish~d MF bY Banco Central of Ecuador
Table 19 ECUADOR
Price Indices
WHOLESALE Rents Export Fooa in
YEAR Goods and Quito - Coal ~1) (2) (3)
1937 100
1938 83 100
1939 95 100 153
19h0 95 106 16h
1941 96 113 150
1942 114 146 172
1943 114 183 187
19h4 118 218 219
1945 133 266 254
1946 203 320 315
1947 297 364 516
19h8 (March) 294 379
(liay) 416
(July) 389
llame l~umbar
Republic of Ecuador
Status of u s Export-Import Bank Loans to ~cuador
Purpose
gs of Junemiddot10omiddotl9ltsect
Gross Authorized
Cancel- Net lations Authorized Repeid
Amount Amount Outstandin~ Undisbursed
6J048 6J048
( 262 )16
Haterials equip amp services $ 6480000 $20810 $6459170 $1279775 ~)5-l19middot395 _____ _
ibulliunicipali ty of iui to (Republic of Ecuador)
ibullIunicipali ty of Guayaquil (Republic of Ecuador)
Republic of Ec~ador
Republic of Ecuador
Ecuador DeveloPIlent Corp
Pan-American Highray (Cuenca-Loja)
Agricultural Research amp Experiments
Raihray Equipment
5000000
12JOOOO
50000 200000
)28 Haterials equip ~~ 4000000 services - ater 1middot1orks
)28 iltiaterials equip amp services - ~~rater orks 4000000
J4J Pan-American High1middotray (Guamote-Tambo)
432 uevedo-Hanta Hightmiddotray (additional credit)
1980000
220000
$19180000
Of tlhich $2500000 tts used on the Quevedo-Ibullianta HighTaY
4000000 28880
4000000 167
-1 t-9amphOOO- -7500
220000
6o6120 -h365000-middot
41592 575-t 2-41
-l-y5Q2- 500 44Gooo
220000
IBRD Statistics Sectio spte~ber 24 1948
I GIDGRaPHIC
13 Ecuador has common boundaries with Colombia on the North and
Peru on the East and South The greater part of the country lies immeshy
diately south of the equator which passes 13 miles north of Quito The
area of the country has never been measured but is estimated as 150 COO
square miles ri thin the frontiers resulting fror1 the war with Peru in 1942
the area west of the Andean crest is about 60000 square miles
14 Ecuador is divided by nature into tru-ee separate reeions of
which only two are in effective occupation
(a) The sea-coast plain (about 28000 square miles and about 425
miles long by 62 miles in width) is composed partly of swampy
lowlands and partly of low hills most of the region being
less than 1000 feet in altitude I the north it shares tbe
double rainy season of Colombia and is covered with dense
forest Not far south of the borders of Colombia the double
rainy season ~ves way to a single rainy season from Decemshy
ber to June as one goes further south the rains begin later
and end sooner until at the extreme south desert conditions
begin stretching onward into Peru ald Chile As the rainfall
becomes less the vegetation changes from wet forest to dry
scrub forest and savanna until in the south settlement is
limited to irrigated areas
Temperatures in the region are modified by the cold-vater
-2-
Humboldt current and are more pleasant than latitude alone
would suggest
The coastal region produces almost all the export commodities
of Ecuador its people are largely mestizo strongly conscious
of nationality and commercially active Its major port
Guayaquil (population 1942 154000) is larger than ~ito
(population 1942 139000) and is the commercial capital
of the country
(b) The Andean Highlands or Sierra (about 25000 square miles)
comprises the second natural region and forms the physical
backbone of the country There are two high corderillas
surmounted by towering volcanoes and separated by a series
of ten large intermont basins lying in a north-south line
seven are linked to Guayequil by railway Each basin is
occupied by a dense JOpulation 1hich is almost pure Indim
Only in ~ito and Cuenca are there any important number
of people with Spanish ancestors and these are either
office-holders in the Government or landowners with large
private estates
(c) The Oriente (Amazonian region to the East of the Andes) is
not yet part of the effectively occupied area of Ecuador
Its jungle inhabitants from time to time spear the
agents of the Shell Oil Company who are prospecting
for oil
3
In 1942 official Government figures for these rerions were
Area Population middot Density Square of
Kilometers middotmiddotNumber middot Ponulation
Sierra 70344 23 11686748 61 268
Costa 68633 23 1JooOl8 33 14 6
Oriente 153143 51 189005 6 12
CalapagS Islands 7880 j 2192 a 0~2 -Miera tory 4115 a middot-
300000 100 3089078 100 102
15 Very little however of the total area is under cultivation
It was estimated in 1916 that about 90 ~)er cent of the coast and 60 per
cent of the Sierra was suitable for cultivation that is about 25000
and 1)000 square miles respectively Of the total of Loooo square
miles of cultivable land~ only about 1$000 was under cultivation in
1946~
16 No census of the population has ever been in Ecuador
In 1892 estimated nopulation was 127 million in 1942 309 million
and in January 1948 3L7 million with crude birth rate of 379 oor v ~ thousand and crude death rate of 201 per thousand in 1942- Estimated
composition of the 1942 population was
a less than 05
Yhi te Mestizo Indian Negro Iulatto Other
100 per cent l-t10 ner cent 390 per cent 50 ner cent 5 o Per cenmiddot~
1000 ner cent
Just over half these deaths oc~urred in the are rroun of 0-4 years in 1942
4-
17 At the same date the literacy rate was estimated at 20 pe~ qent
s~i~literacy at 20 per cent and illiteracy at 60 per cent
-5-
II OCCUPAmtOUS AND INCOivES
18 There having been no census there is no at~curate information
under this beading
19 The Economic Department of the Ecuadorian Central Bank has esti-
mated that of a total population of 334 million in 1946 1285000 or
J9o per cent were gainfully employed in the following occupations
Agriculture Forestry etc
Mining
Building and Repairing
Manufacturing and Processing
Services (communication comshymerce government etc)
820000
10000
6oooo 10000
325000
5 5
26
100
20 No valid estimate of national inco~e exists At the request of
tne International Monetary fund the Technical Adviser to the Central Bank
of Ecuador Mr L A Carbo estimated national inccue in 1946 as 20096
million sucres or US$ 149 million Although this estimate is probably too
low ] it is clear that national income is very small Ecuador is very
low on the list of income per head among Latin American countries its
income per head is in feet among the lowest of countries of the world
21 Income is very unevenly distributed A survey made in 1943
yielded the following picture
g lror reasons Sdvanceit below Paragraphs 87 and 88
~ pt WI
-6-
To tal Monthly Average Monthly Population Income Income per Fw~ly
Number of Amount t tount People (SUcres) (Sa~res)
Upper Cla~s 4oooo 133 28000000 144o 2300
Middle Class 96oooo 3200 96000000 4950 4 L ~ 00- middotJ~
Lower Class 2000000 6667 70000000 3610 140 -- -~
3000000 10000 194000000 10000 10000 yenSliP C_~ ~
Note At the ofDcial rat~ of 1350 suc~es to the US$ average monthly incomes per family are equivalent to approximately $2J7 $30 and $10 respectively
~ Uneven distribution of incoue is of course largely a conse-
quence of uneven distribution of property Some ideas of the distribution
of rural property is afforded by analysis of re~urns made in payment of
rural property tax Such tax was paid by only ll2l4o proprietors in 1944
whose holdings may be summarized as follows
Per cent of Value of Rural ProEerties Number of Proprietors
916 4o
29-33 llOO
3041 10400
2030 37200
1080 634oO
10000 112J4o
23 Such statistics do not of course carry one very far beyond
the general observation that income and wealth is very unevenly distributed
and that much is obvious from a little travel in the country But it should
-7-
be said that comparing observations in Ecuador vrith those made in Peru
and Bolivia Ecuador by subjective judgment compares very favorably with the
tvo latter The Ecuadorian Indian seems to be on a perceptibly higher stan-
dard of life both in the highlands and on the coast than the Indians seen
in Peru and Bolivia Vhile his land holding is small it yields somethi1e
he very freqjl ently possesses livestock such as pigs and chickens has cot-
ton clothing drying on a line a~d often cultivates flowers and keeps
pigeons By American standards he is undoubtedly on the poverty level by
Latin American standards he may be a little off it
24 At the other end of the scale the wealthy upper class are pro-
bably not as wealthy as the Peruvian upper clas~h and the Bolivian elite
in operating in poundcuadc~the upper class lacks the rich property of mines
Thus while income is of course unevenly distributed in Ecuador as else-
wnere the range between the wealthy and the InJian may well be less tban
elsewhere The line of income distribution is of aboat the same slope
but probably significantly srJOrterY
This conclusion cannot be demonstrated statistically It results from a 11feel 11 deri ved from personal observetions in the respective counshytries
-8-
III AGRICULTURAL lROIDCTION
25 Ecuadorian development is largely a matter of increasing the out-
put of and improving internal and external trade in agricultural products
There appears to be no enduring geographic or physical reason ~middotby this can
not be accomplished She possesses soils and climate ranging from the
tropical to the temperate soils which in some areas are very fertile and in
others are in danger of exhaustion To anticipate subsecpent conclusions
her problem of development through agricultural progress breaks doTltD into
separate aspects all involving improved technique
(a) increasing arable yields from areas already cultivated
(b) improving pastures and stock in grazing areas
(c) enlarging both arable and pastural areas (including irrigation)
(d) improving roads in rural areas
26 Achieving these objectives involves providing more adequate
domestic credit for short- medi~ and long-term agricultural requirements
27 In application however interpretation of these problems is very
different in the two occupied regions of the country the Sierra and the
Coastal Lovrlands no generalization can cover both
(a) TLe Sierra
28 The occupied inter-Andean valleys are a region of temperate
agriculture producing almost exclusively for local consumptionmiddot Their
pat tern of tilled fields grazing land trees and flowerJl is almost
Y Flowers bloom all year round The main tree is the eucalyptusmiddot introshyduced some 70 years ago end used for all purposes (~indbreaks fuel 1
and lumber) affording a striking example of the effect of introduction of one plant upon regional habitability-
-9-
Western liiuropean in appearance but not unfortunately in productivity
Agricultural Production of the Sierra
1939 194o 1941 1942 - -(Hundreds of pounds)
Theat 49QOOO 611300 534300 527499
Potatoes 1201000 1476400 1386120 1146000
Rye 72500 79900 159495 115000
Lentels 46000 424oO 37955 csooo Corn 816700 1349300 1308062 1315200
Barley 85)000 795700 903600 911000
Cotton 45000 42020
Kidney Beans 80000
29 In addition about 1000000 hectares (247 m~llion acres) are
devoted to pasture supporting epproximate1y 683000 cattle 145 million
sheEf 107000 STrrine and 320000 goats
30 Yields are low in all Sierrean agricultural activities the
standing VJheat and barley crops are so thin that the ground can be seen
through them Yet the greater part (some 6o per cent) of the people of
Ecuador live in the Sierra and population is increasing at about 2 per
cent per annum The effect upon land use under existing tecnniques is
clearly visible cultivated areas are being pushed higher and higner up
the hillsides (slopes of 30 to 40 degrees being used) and onto the
fJparamon the high plateau betvreen adjacent valleys at altitudes of
11000 feet and higher The result is a picturesque scene but one which
reveals a near Malthusian situation in the man-land ratio rbullrith static
-10-
technical practices It is a situation which cannot remain unchanged if
economic development is to occur in the region
31 There sean to be three possible lines of advance increase of
output from highland areas in present use the bringing into use of new
ground in the highlandsbull or a change to increasing reliance upon the outshy
put of non-highland areas
32 The third possibility is not one for the immediate future It
involves either large-scale migration from highland areas to lowland
regions or a large transport program linking highlands and lowlands
together with growth of non-~ricultural activities on the highlands to
provide a cash income with which to purchase 11 imported 11 foodstuffs This
second possibility may indeed be the trend of ultimate development but
offers no irmnediate easement Large-scale internal population movement
from highland to lowland is probably impossible since the Andean
Indian (of different stock to the coastal Indian) is fullf acclimatized
both mentally and physically to life at high and temperate altitudes and
little suited to life on tropical lowlands
33 The two remaining lines of advance would both seec to increase
highland agricultural output But there is an important difference beshy
tween increasing output from valley land in rr esent use and bringing new
and higher land into arable use The first is a complex problem suscepshy
tible only of relatively slow solution the second is seemingly simple
and capable of quick result yet basically less sound offering only
temporary improvement
34 The thurst onto higher ground is already evident and the area
-11-
taken in could probably be greatly enlarged by efficient use of tractors
and modern plows Such use of mechanical equipment would thus give quick
increase of agricultural output but it is very doubtful whether improveshy
ment induced by these means alone could be long maintained The greatest
~r particularly on sloping land is that deep plowing may lead to
soil erosion so serious that land becomes finally llilgtroductive To use
mecbanical equipment i thout at the same time adopting eqJally modern
methods of soil conservation way well be disastrous and that perhaps
within no long period
35 Even apart from this physical daneer there is the virtual cer-
tainty that new land however plowed would gradually sink in fertility
end hence output unless farmed by better agricultural practices than
those now followed in highland Ecuador The present attraction of the
higher land is principally good natural fertility beine virgin ground
On all other counts this higher land is less advMtageous than the valley
floors the va)ley sides are steeply sloping a1d the fl~t paramo is some
2000 feet higher bare windswept and devoid of habitation It would
seem obvious that it is pastoral rather than arable ground were it not
for the pressure upon arable output of the region
36 The pressure today however rises from the relation betwem
popUation and output rather than that betvreen population and arable
area Productivity in the Andean valley is low and can certainly be
improved If improved the pressgtlre which is causing the thrust to
higher ground is relieved until population increase again overtakes outshy
put Against that time however the higher ground vrould remain
-12-
availfibleY and other lower regions may be coming under effective use
37 To increase output of the populated valleys is not a simple mat-
ter responsive to single policies such as simple mechanization by tracshy
tors It will embrace the wlo le range of agricultural practices from
better seed types to crop rotation and fertilizers including in some
valleys irrigation It is a matter rrther of agricultural education
than of~dtlgagricultural appliances and probably experiment under
the peculiar regional conditions will need to precede education Improveshy
ment will necessarily be slov1 but along these lines it can be sound and
permanent
38 Wher~ lfL mere importation of mechanical methods Vi thout
understanding of their dangers in speeding soil destruction by wind and
water erosion may permanently damage the region The somewhat gradual
mechanization of agriculture is of course to be expected and not disshy
couraged but it is not the wlole answer to development in highland
Ecuador
39 It seems that there is at present no over-all agricultural
lfibor sl1ortage in the Sierra and mechanization is nOt therefore called
for to relieve an adverse manpower position It seems however that
some of the larger estates are experiencing difficulty in obtaining their
labor requirements because Indian tenants are viitblolding quasi-feudal
labor dues and devoting whole time to cultivation of their own plotsbull
As a result hacienda holders are attracted to mechanization as an
escape from growing difficulties in obtaining and supervising labor upon
Y As it would not if destructi ve1y formed at this stage
-13-
their ovm land To the extent they are successful the tendency for agrishy
cultural money vrages to rise is weakened
4o There vrould seem to be good possibilities of increasing pas-
toral agriculture in the highlands 1Jrith improvement in both numbers and
strains of cattle and sheep If adequate arable development occurred in
the valleys the main grazing grounds could be the higher land not then
required for arable purposes ~lith dairy cattle on the valley margins or
on valley ground not well suited to arable use Such pastoral development
would be desirable not only to imp1middotove nutrition in Ecuador itself 1 but
as a possible new export of meats fats and hides to meat deficient
Republics notably Peru Early export would probably be on the hoof
along the Andea1 ridge it self
41 The Ecuadorian Government has not included any explicit propo-
sals for highland agriculture (other than irrigation) in its present apshy
proach to the Bank It has however suggested the Bank finance $1 mil-
lion of agricultural tractors and equipment to be handled by agriculshy
tural stations located at strategic places both in the coastal
provinces and the highlands 11 without further elaboration of the
intended highland use of such ecp ipment The description given above
suggests that the usefulness of agriculture machire ry depends to a conshy
siderable extent on the place plan and purpose for rhich it is to be
used
42 In some of the highland valleys (for example in Cotopaxi end
~ound Biobamba) rainfall is deficient and irrigation would increase
valley output by bringing more valley ground into effective use This
- 14 ~-
is clearly sound for flat valley ground already populated is more useshy
ful than higher sloping and more exposed ground The Ecuadorian Govern
ment has included purchase of eq1 ipment for irrigtion works to the value
of $500000 in its present approach to the Barik Assessed against the
requirements for economic development the request is sound provided of
course such equipment is effectively used
(b) The Ooast
43 The condition and nationel significance of agriculture on the
tropical coastal plains is quite different from that ltNl the Sierra The
area as a whole is less densely populated and in some parts such as the
Province of Esmeraldas is very sparsely populated Its principal pro-
ducts are exported The population has more mixed blood than the highland
people and is oore corumercially active and minded There is little feel-
ing of community of interest with the highlmds the rrincipal coastal
city GuayaqJil is larger than Quito and less remote fror-1 outside
influence
44 In terms of reported area devoted to its cultivation cacao
is the principal crop of the coast The table on the following page
shows output of main crops
45 Cacao is not however the most important export crop by value
being surpassed by both rice and panama rats (a handicraft product of the
region) Nor does the table show those products which result from
gatherage of mild growth tagua kapok oil-bearing vegetable nuts
balsa rood rubber etc
Y For use by the Caja de Klaquogo as required both in tile highlands and on the lowlands
-15-
46 Agricultural Production of the Coast
1939 ~ 1941 1942
(limdreds of pounds)
Rice 957164 872890 12304oO 1610489
Cacao 392000 263300 333250 315782
Coffee 343800 369000 310000 190633
Bananas (1000 bunches) 4090 3913 4568 4265
Oranges (COOs) 103000 lQ96oO 80550 75000
Cotton 200800 156800 155910 111500
Tobacco 24o43 4o 765 22349 29539
47 It has been estimated that about 500000 hectares (1 235 500
acres) are devoted to pastures on the coast supporting approximately
425000 cattle and 36000 swine
48 There is no doubt that the coast is an extremely rich agricul-
tural area although toward the south it is increasingly hampered by
shortage of water in the dry season And rt is overwhelmingly the
principal foreign exchange producing region of the country Yet it is
largely undeveloped by any modern standards lacking roads and almost
all basic civic amenities (water supply sewage paved streets etc) in
the provincial towns The development of a tropical agricultural region
without large labor supply _rill raise many interesting and some new
J Irrigation ~rks are in execution and others planned in various places and the irrigation equipment which it has bee11 suggested the Bank might finance would presumably be used on the lovlands as well as the highlands
-16-
problems the solution of hlch in detail may lack precedentY The
suitability of cacao to Ecuadorian conditions arises in part from the very
small labor requirements of the crop At bottom advance will lie along
the route of crop improvement and mechanization the difficulty will be
the proper application of mechanization crop by crop Some tropical pro-
ducts may never be suitable for mechanical cultivation being those whicl
would require intensive hand cul ti vat ion and may therefore not be appro-
priate for Ecuadorian condttions Others r1JJi3 be suitable only if grown on
relatively large plantations
49 Clearly for the foreseeable future many lowland products will re-
main at the stage of gathering of nld natural growth rather than plantashy
tion enterprise The flow to market of such productswould be increased
by improved access notably road core truction anQ at the same time road
building ~~uld seem to be a condition precedent for spread of plantation
methods particularly plantations using mechanical equipment lilliE diate
measures for the over-all agricultural development of the region may not
be directly agricultural at ell they are rather the provision of roads
and transport facilities the provision of long and medium term agric-llshy
tural credits and in some areas) the institution of health services
With the opening up of the region in this manner iiould come more clearly
perceived opportunity for better agricultural use of the land particu-
larly if effective demand for the products is transmit ted back to the
cultivator through establishment of product processing plants where approshy
priate for example in vegetable oils and tagua (vegetable ivory)
] This is the situation which in Brazil for example in an earlier technical epoch was 11 solvedll by importation of Negro slave lebor
-17-
50 As in the Sierra there are good possibilities for pastoral
development on the lowlands Some progress is already being made in this
direction with experiment in breeding more suitable cattle types through
crossing 11Ji th imported Indian brahmin strains Grazing for beef is not
highly labor intensive and this development is very promising since
export to other Republics by sea llould be reltti vely easy In the first
stages export would presumably be upon the hoof ith later development
of meat packing
51 There seems to be no single bottleneck or restraint upon devel~
ment presently existing all other conditions being favorable If developshy
ment occurs it will be along many simultaneous fronts but the front iJhiclf
is lagging and Inayen continue to lag is the provision of basic social ccp ishy
tal (roads water supplies health services etc) that is of those
things which no single private individual or corporation can provide for
itself Given these and the institution of suitable domestic credit
fecilities the rest may be accomplished by private domestic ini tiat1ve
52 The development plans of the Ecuadorian Government as outlined
in a Memorandum dated April 8 give much weight to lowland agriculture
The establishment of agricultural stations to provide farmers wi~h
disease-resisting cacao plants~ tecl1nical advice and credit facilities
is CD ntemplated no foreign exchange would be recpired all funds being
local currency The rehabilitation of cacao formerly a leading export
crop is desirable although development of cacao sources elsewhere may
prev~nt recapture of the position formerly held by Ecuador
53 A proposed agricultural mechanization programwoUld total
- 18
$25 million in foreign exchange cost )J The bulk of this ($1 5 million)
is allocated to wechanization of rice cultivation alone the benefit being
principally in resulting improved export position The remainder $1 milshy
lion is for mechanization of other agricultural produc~s apparently
mainly lowland (those products specifically mentioned being 11cotton sugar
oil-bearing seeds and other specified products11) the exclwnge benefit
forecast being principally through reduction of import a
54 Different criteria ~~ould be used in assessment of these two
projects The judgment on that for rice will depend upon forecast of
world rice markets and in particular upon expectations regarding rorld
demand for rice from the dollar area The validity of mechanization in
cotton sugar oil-bearing seeds and other lowland products will depend
first upon the technical possibilities for such mechanization a matter
not yet fully explored If sudl technical possibilities are favorable
effective mechanization vOuld constitute sound development upon the low-
lands which are relatively sparsely populated
Y Some part of which would be for the benefit of highland agriculture if machinery stations be established there
--19 -
IV MI-~RAL PHODUCTION
55 Ecuadorian mineral nroduction covers only a few products and
important the wells of the lowlands being exploited by the nglo-
Ecuadorian Oil Comany Production of crude petrolewn shows a slicl1t
rising tendency while exnorts have declined steadily a~ more refined 1
products are consumed domestically
56 Oil exploration to the Iast opound the Andesin the Amazonian
region is proceedinc under concession to tl-1e Shell Oil Go1~1any
Three wells have been drilled without success and tvro arc beinc
deepened Cost of this exploration to ciate j_s around US)23 million
If oil is found its only outlet middotwill be a pipe line over Ue Ances
(estimated to cost USiD93 million) and this the comany is not -rE1inz
to undertake unless assured of an outnut of at least 100000 barrels a
day
57 The only other irnrJortant minine activities are those of gold
silver conper and lead conducted by the South ~~erican Develoument ~
Company and the Cotapaxi Sxplora tion ConJ1any War-time lr oduction peaks
were 1942 for gold and CO)per 1944 for silver and lead Since these
resective peaks production has ~-~clined narticularly in copper and
lead although not to 1933 lsvels7
crude petroleum II II
1938 (millio~1s of 225 107
Production Exports Production refined petroleum 37
1947 barrels)
236 bull94
128 (See Table No_Jl_ Statistical Appendix
Production Gold (000 troy ounces) Silver (000 troy ounces) Co~per (000 pounds) Lead (000 pounds)
1938 445 82~0 27 21
War Peak l03tJ hhl3
96788 161-+88
19h7 5o5
1569 3316 h98h
-20-
58 Ecuadorian trade statistics list exports of crude pet~middotoleum
and minerals separately from that of other commodities even in aggre-
gate figures underlining the fact the exploitation is in foreign hands
and hence colonial in nature This aspect hmmiddotever is of di-1inishmiddot-
ing importance as now the foreign exchange realized from such mineral
exports accrues to the Central Bank and as in any event nineral ex-1)
ports form a diminishing proportion of the vhole 7
V ~JNUFACTURING PEODUCTION
59 There are virtually no stCltistics on manufacturing in Ecuador
and none which present any comprehensive view It is ho~middot-rever clear
that there is very Uttle industrial factory prJchJction and obser-
vation in the country leaves one with an impression of the nresent
igtilportance of handicraft production
60 The most inportant consuxner-good factory industrj_es are tex-
t~~~breweri~-~~ otheuro7r beveraces shoes ard leather _roduc~s buttons ~d~lttfr
and nails Textile production using domestically produced cotton pro-
duces cotton piece-goods and wool rayon and hemgt textiles supplying
almost all domestic demand for low-quality products The only irJDcrtant
producer-good factory industry is cement the plants being located near
Guayaquil Lack of domestic technical lmow-how and of capLtal and
the low level of domestic effective demand account for the sli~ht develop-
ment of faetory industries whose rrowth on any scale beloncs to a 1ter
stage of economic development
y Value of nineral exportsmiddot as nercentare of value of all exports 1929 260 nercent 1933 430 n 1939 397 1946 11~5 1947 69
Production and irrport statistics for cement tre civen in Table IJo bull 2__ Statistical Appendix
- 21-
61 Uuch of finished commodity ygtroduction is at the handicraft
stage both for nroducer and consumer goods In Quito and Guayaquil
one sees many small 11 shops11 producing metal leather and wood manushy
factures largely by manual methods It is an illuminating co~~entary
on the shallow growth of industrial specialization that the ll1ission
did not see any shops selling ready-made womens clothing All
womens clothing shops displayed only materials in the bolt as in
pioneer days elsewhere
62 One handicraft industry of great importance in exports is
the production of panama hats It has been estimated that 30000
families are occupied vrhole or art-time upon this nroduction and
at times (for example 1945) they have provided the largest single
export item by value The grmvth and treatment of the fiber and the
weaving of the hat is entirely an Indian handicraft industry the
Yteaving of a high-quality hat taking three months The fiber is erown
and the best hats woven in the lowlands Its future ir-mort nee is unshy
certain as the competition of Italy and the Fhilinpines is again felt
in low-_)rice woven hats the boom emjoyed during the war nay recede
63 Ecuador in its ~resent and foreseeable development is an
agricultural country with no immediate movement toward industrialization
EcuAdorians met by the Mission themselves stated this The growth of
factory industry will be slow that of small shop and handicraft manushy
facture somewhat less slow It vmuld seem as stressed later in this
report that there is room for grm~h of processing of agricultural
products Statistically such processing would be classed as industrial
production but is oroperly the finishing stage of agricultural productior
- 22-
to secure improved durability and portability of perishable products
This would increase effective demand imnacting upon the farm and ass1st
in stimulating agricultural development Some progress being made in
this direction notably in vegetable oil expressing plants Ihe only
non-agricultural project suggested by the -r~cuadorian Government has -eer
a cement plant located in the highlands at a foreign exchanr~e cost of
$2 rrillion the justification being both the saving of foreign exchange
expended upon cement imports and reduction of load upon the only railshy
way connecting lovrlands and hichlands Growth of cement use accompanies
economic development assessment of this project (engineering questions
apart) would involve tainly questions of timing location and finance
matters which are really all aspects of the single question whether
such a project may not be one for private direct investment Initial
expectation would be that were all factors favorable to the success of
the project it gtlould be readily undertaken by orivate enterprise
particularly when it is remembered that railway freiehts 1bullrould protect
highland production from lowland competition
6h No sueeestions regarding increase of electric power output
have come fror1 the Government indeed the official statistical services
have no data upon installed capacities and demand Cnly in Quito and
Guayaquil are present industrial uses of electric poler of any ir1portance
Elsewhere suIJply is from snall municipal plants (mainly therraal) for house-
hold consumption It appears that demand mar be ahead sunply in cost
towns very frequently voltages are maintained around 80 instead of the
rated 110
- 23 -
65 Shortage of electric nower is not however hamoering
economic development at this stage although it may soon do so in
sevral urban centers such as Qui to and Hiobamba Sone ttne i-1 the
iuture the possibility of large hydro-electric vrorks on the eastern 1
side of the Andes will merit attention
y Where the rivers are fast and clear on the western side they carry much silt
- 24-
VI DmIESTC THANSPORT AND COilERCE
66 The space devoted to agriculture in this report reflects its
importance in the Ecuadorian economy As has been said further developshy
ment will for sometime be mainly agricu1tural
67 Present restraints upon that development are not located
solely or perhaps even nrincipally on the farm there are many
features of the general economic environment which operate to hamper
even purely agricultural development There is great room for improveshy
ment of transport to knit the economy tocether and to encot1raee grovrth
of output
(a) Transport
68 Without roads there can be little regional or inter-regional
intergration Fithout that intergration (which for some regions and
some crops would open upon the world at the gatewa~r of a oort) there
can be but small inducement andlittle opportunity of increasing proshy
duction In much of Ecuador the principal transport vehicle is the mule
whose patience and endurance under heaJr load is matched by that of the
Indian
69 As regards roads the requirement is both more roads and
better roads capable of bearinr modern vehicular traffic The roads
traveled by the 1Jission are uniformly bad both slowing traffic and imshy
Ilosing extraordiPamiddoty vehicular de_reciation Ultimately no coubt
there vdll be an adequate system of all-rreather roads in Ecuador For
the immediate future the more modest tarset is to attain a reasonable
system of roads civine access to the creater art of roducine areas
- 25-
in the dry season At present the unsurfaced access roads are cut to
pieces by --vater erosion in the wet season and consolidated somew1at
traffic in the dry season A single eradinr operation smoothin thE
dirt surface at the end of the vret season would ci ve accelJtable usashy
bility in the dry )eriod v1hich in the populated coastal rovince of
icanabi for example is eight ~aonths of the year At -_resent the so1e
transport link for corunodities between loYrlands and the hihlands
is the Guayaquil to Quito (and beyond) railway This link is nrobaoly
nearing saturation point vdth present equipment and its strencthening
both by railway imJrovement and all-middotweather hichway construction is
obviously desirable it middotill probably become essential yri thin five
years
(b) Commerce
70 Physical transport alone hogtever is not the only ope c-ation
ofcarriaee required to intecrate a reeion internally and to bind toshy
cether the various regions There are also tL physical and the finanshy
cial aspects of comr1odity holdinr involving the storae and vrhere
necessaFJ the partial processing of products to reduce perishability
and the avail~bility of mechanisms of short-term finance extendine over
crop periods In Ecuador these tro aspects are closely related
71 Apart from some export crops there is virtually no crop or
food processinG undertaken And in the export crops processing
is the minimum necessary to secure portability Eice is nilled but not
polished cacao is sun dried coffee is dried and within only recent
years washed fruit is exported whole Some new e~Jor-ts may require
further processing and installation of plant starting or is in
- 26-
advanced discussion for example vegetable oil processing (although
for sometime no eXport surplus of vegetable oils is 11~11 and fish
canning
72 Nor is there any important ~recessing of domestic food pro-
duction for home consumption bull There is no freezing or canning of meat
which is taken to market on the hoof There are only two or three
very small butter factories and no whole milk orocessing Cereals
of course are not highly perishable but there are no silos or granarshy
ies and experience of similar situations elsewhere suzfests that losses
by deterioration and infestation may be significant no direct evishy
dence anthe incidence of this factor in Ecuador ~as obtained by the
Mission Thee is little storage of grass on the coast in silos or
as hay and in the dry season slaughter of cattle because of lack of
feed is at times necessary In short the situation is not so very
dissimilar to that ofmiddotmedieval Europe
73 Roads alone would not create an environment favorable to
change in this position although lack of roads nar well inlibi t change bull
In addition suitable credit facilities for the finance of co~~odity
holding through time are necessary
74 Hany complaints were voiced to the Hission reearding lack of
short-term banking credit for crop movement and storage and for medium
and long-term agricultural investment and no doubt there is signifi
cant lack of such credits But this is not the result of some simle
institutional defect of the b~~inc and credit structure even though
institutional improvement may be necessary It is fundamentally a
- 27-
reflection of the fact that Ecuador is extremely poor in disposable
capital available for even short-term investment ie vrorcing capi-
tal Improvement of short-term credit facilities for what in advanced
communities are regarded as purely commercial purposes would in effect
represent an increase of capital intensity in the Ecuadorian ecororny
To the extent that banks met more fully the gtJeak seasonal credit re-
quirements for croo movement and storage individual nrivate reoources
are relieved of the 1eak burden and available for other investments
75 Thus iorovement of the techanisr by 11hich the banking system
provides working capital for corrtercial or inciustrial (in the sense of
crop processing) purposes is itself an act of investment rather than
merely an institutional rationalization ilnd as such carry the
usual consequences of investment in an undevelogted economr with very
law voluntary savings To the extent that additional credits are not
matched by savings sewhere (either voluntary or forced through
taxation) they will be inflationary in effect just as an
additional act of long-term investment would be Increase of banki1g
nrovision of workinrr capital should keep step with totl capital for-_ - - 1 mation of which it is one aspect7
It is implicitly assumed in the foregoine that at nresent in Ecuador the amount of small voluntary savinrrs is neclicible It vrill presumably not alrmys remain so and ~Jart of the modifications of the bankin~ system shou1d be attract Clli1U1 atively such sav-ings in the fom of savinc do)Josi ts This 1muld increase the extent to which Danks can safely flovide capital It will be a much later before small private savincs are directly in-vested in commerce or industry throuh joint stock r1ethods There is no stock-exchance in Ecuador
-28-
76 It is of course just as important that the availabi lity of
working capital should not lag behind as it is that it should not run
ahead The Bank should ensure that any long-term investment projects it
may assist to finance do not effectively starve the rest of the econo~
of working capital in the process of avoiding inflation
77 There is also the question of the price of short-term lending
that is of the level of interest rates The Ecuadorian is a highshy
interest rate eoonomy The legal maximum for commercial short-term loans
is 10 per cent having recently been increased from 7 per cent legal
maximum rates however are not systematically enforced by commercial
banks themselves At a time when the legal maximum was 7 per cent
going rate for 90 day loans secured upon properly warehoused commodishy
ties and with third party endorsement was 12 pe+ cent
78 This very high structure of interest rates seems open to
obvious criticism but is in fact probably not Tiholly unjustifiable in
the present conditions of Ecuador It is the cumulative result of many
factors so that more official prescription of lower rates would be
quite ineffective These factors seem to be
(a) Interest proper~
(b) layment for risk bearing arising in part out of a
low rating upon individual credit and in part from
the institutional conditions (such as embryonic
commercial and financial ruarkets) which seriously
reduce the liquidity of any asset other than money
itself
-29
(c) An clcmmt 0f discount 111nn cyectcd luturc irf] utinn
reducing the real value of the pa~nent for lending
(d) An element of monopoly which upon purely subjective
judgment may be the least ilJI9ortant of these several 1
factors7
(e) The real shortace of capital whether short or long--
term~ reflecting in interest rates as a genuine
scarcity price
79bull Of those factors the di~ount upon expected future in-
flation increases prices at a rate of 12 ner cent per annum a money
interest rate of 12 per cent per annum is a real rate of zero If
therefore inflation could be controlled a substantial reduction of
money interest rates could be hoked for At the same tine while
inflation continues high interest rates probably have small influencemiddot
in encouraging money savings
80 Even without inflation ans until the su~1ly of available
real capital improves relatively high interest rates may well be
acceDtablemiddot as a price mechanisn nethod of selectin~ most urofitable y ~
uses of limited fundsbull middothere exoected urivate nrofit did not seem l - -
to parallel social desirability loans at lower rates (ie subsidized
terms) could be made perhaps through reconstituted Development Banks
Prima facie however such loans 1bullrould not be short-term
~I -Onthis interprepoundaion the situation in Ecuador differs signifishycantly from that in Peru
tt is suggested that a powerful point of intervention would be to limit commercial banking dividends distributed to not more than say 7 per cent The high profits nmv earned by commercial banks would then progressively accumulate until liberalization of lending becomes virtually forced by accumulation of funds representing genuine corporation saVings
- 30-
81 The discussion of private finance has so far upon
short-term credits there is an even larger nroblem in the
intermediate and long-term arricul tural credit It is not necessarr
to expand greatly upon this since it too is a consequence capi-
tal shortage
82 Imnrovement would seem to be alonrr the route - 1 of nroper UElte
of existing Development Banks (or their successors-) effectively
in the earlier stages as lending agencies of Government
VII OFFICIAL DEVLOPHl~NT FHmiddotIfJCE
83 In the circurnstances of a country like Ecuador the greater
part of domestic capital forr1ation requires official directly
or indirectly if it is to occur on any scale are too
small and too narrowly held to permit much -rowth this roL1te
andthose few who are able to save at any sinificant rate are larely
uninterested in the efficiency of ~reduction
84 Official finance may be either direct or indirect direct
throueh works executed by Government or 0JUblic bodies indirect
throueh lending institutions such as Dev~lopment Banlcs capitalized
from public funds In either case funds are diverted to investment
purposes by Govern~ent intervention
85 Thus Development Bank lending for productive purposes (for
example long-term acricul tural credit) is an item 1n ca9i tal formation
V There are thirteen reaional Development with an unirnJresstve record of manaeement Their possible reconstitution is under discussion
-31-
rather than a mere institutional rationalization of the credit mech-
anism Indeed as has been stressed in the last section even im-
proved su1nly of short-term credit gtrill in art rewesent
formation A developing economy which neclected these items in 11Cnn21~~
or forecastinc total caital investnent would be very vulnerable indeed
to inflation induced by over-investment
86 17here voluntary savings are Jow the only wmiddotamiddot to sirnificant
rate of capital formatton can emerge without inflation is an equi-
valent amount of savine forced throurh taxation One ould look for a
relatively hirsh level of taxation to national income and for a rela-
tively high proportion of exnenditures caDi tal purposes to total
Government expenditures On both these counts Ecuadorian elq)erience
seems irare s si ve
87 In 1946 total budretary and spedal revenue rms disclosed
as 5368 million sucres in the sa1le rear an estLnate middotJaced national
income at 20096 million sucres This a proym~tion of 27 middoter
come a proportion so hich that in fact it lacks credence In assess-
inc total tax burden part of the revenues of Government monorolies
and all of municial revenues should be included if this be done y
the proportion becomes 37 per cent In addition new exchance taxes
yielded 973 million sucres in 1947
Mono_)oly participations (ii direct disbursements for public _Jurposes) were 353 million sucres in 1946 munici~al income was 1803 million sucres in 1947 (1946 not available)
32-
88 It is very difficult to accept the conclusion that Ecuadorian
revenues form so high a proportion of national income it would seem
that the estimate of national income is too low Nevertheless tax
revenues are clearly a sizable percentace of national income
89 At the request of the Mission an official estimate of total
official expenditures on capital account was prepared Total income of
Government municipalities provincial councils and other public
entities was ~iven as 7S4 million sucres and total capital expenditure
from that income as 2237 million sucres or slichtlr over 30 per cent
of revenuesY It is difficult to feel confident that effective capi-
tal formation on this scale actually occurred certainly there is
little evidence visible to the eye of the t1middotaveler
90 Notwithstanding such doubts the fiscal evidence is of a
fairly hich proportion of tax revenues to national inco~e and of a
hich proportion of revenue allocated to capital investment It would
seem that the fiscal mechanism exists for domestic capital fo~~tion
what may be required is more effective expenditure of allocated funds-
Before a development plan envisa~ing the expenditure of still more funds
was adopted it would be desirable to examine closely administrative
and technical efficiency in the use of existing funds
91 On the side of revenue Treasurr officials informed the Mis-
sion that tax evasion was estirnated at some 30 per cent of ta revenues
1 This makes such capital expenditures 112) per cent of 1946 national income which a~ain seems very high indeed
The two largest items are Government public works (8)4 million sucres) and municipal works (900 million sucres)
- 33-
particularly in income and land tax It might well be advantareous
on the sides both of revenue and of expenditure for Ecuador to obtain
technical assistance of the tPe that the United Nations Department of
Economic Affairs rendered to Venezuela in 1947~Y involvinpound revision
of the structure of the budget of budcetary audit practices and the
like
f Report~d in UN Document ECN 1SubJfti 4 - 21 June 1948 lostricted)
- 34 -
VIII 001EHNl(iEi~T FINANCE AND INRATlON
92 What may be called 11multiple budget practices exist in Ecuador
as in other Latin American countries There is an annual Ordinary Budget
one or more Extraordinary Budgets( tro in 1947) end a number of Special
Accounts (twenty-five in 1946) not included in the general budgetary
accounts The State operates nxmopolies in tobacco liquor salt and
matches part of whose profits are taken into the ordinary budget as
revenue and part used directly for public purposes It is thus diffi-
cult to assesrmiddotgggregate Government revenues and expencii tures and vir-
tually impossible to detail the purposes of expenditure to ascertain
accurately public capital formation by way of public morks and the like
9 Taking the disclosed figures on the ordinary and extraordinary
budgets and tne special accounts there has been a net surplus over the
past ten years 1operations of 234 million sucres~ This however is
not an accurate reflection of the true aggregate position because the
Government operations are not ~holly included in these disclosed ac-
counts But since the Government has no source of internal funds other
than the Central Bank the net recourse of Government to Central BanJJI mirrors the over-all result of Government finance such recourse increased
In 1946 for example the monopolies contributed 5357 million sucres to the general revenue and disbursed 3526 million to municipalities (145 million on general participation and 1652 million sucres for 11 special participation of gthich an example is a new electricity plant at Ambato the state railways (92 million) etc
gj iiith only three years of disclosed deficit since 1938 See Table 12 in Statistical Appendix
2 Central Bank loans middotto Government less Govertllllent deposits in banks
- 35-
480 million sucres over the nine-year period 1939 to 1947 inelusivel
an average of 53 million sucres annually amplch averaging however con-
ceals very important differences between the three periods within the
nine years to tal
94 The table on the next page sumnari zes the factors causing in-
crease of domestic money supply It is computed by rearrangemm t of the
balance sheets of the Central Bank all commercial banks and all developshy
ment banks and is thus a table shoring changes in items in a rearranged
aggregate balance sheet of the Ecuadorian banking system
95bull The first t70 periods 1939-1943 end l943-l946f were both
periods of heavy inflation_ During the first five years notes in cir
culation and monetary deposits increased 3437 million sucres (or 255 per
cent) and in the next three )eera 2904 million sucres (or 61 per cent)
But the causal structure was quite different in the two periods
96 In the first inflation was almost wholly induced by external
factors (favorable balance of paYments causing increase of foreign exshy
change holdings) the major domestic factor being expansion of commercial
bank loans and investments in this period deficit Government finance
was not a causal factor
97 In the next three-year period 1943-1946 however the major
inflationary factors change deficit Government finance and expansi on of
f As calculated by IBRD Mission loans to Government including ali loans to official agencies A recent calculation by the IMF Research Departshyment covering Government operations only places the aggregate 9 years deficit at 345 million sucres~ See Table 12 in Statistical Appendix
- 36-
BANKING CHANGES ~0015 SucresJ
Jan 1939 Jan 1944 Jan 1947 Jan 1948 to to to tomiddot
Dec 1943 Dec 1946 nee 1947 June 19h8 t~ ~arsJ ~~ iears) trmiddot ~~r1 t~ mo~~h~2
Central rcrk loans tomiddotc~vt~ f 16174 f 160260 - 701p88 23695 Central B~r~ Loans to Public -1 6978 2_283 1- 67548 1- 39763 Commercial Bank Loans and
Investments J 187554 f 14624 88h4 1- 2~ ~49 Development Baru Loans and
J 14227 136818 ~ 644 1- 26090 Investments
1 224933 f 313985 11)40 1- 68107 Net Bank Foreign Exchange 260774 f 94662 - 53203 - u6 112
7 485707 7 408647 I
7 bull - 64543 21395
Notes in Circulation f 16o907 1-131729 - 23205 - 17290 Public Monetary Deposits -A 162868 1- 128914 - 68734 1- 19620 Government Deposits f 19968middot 29768 9050 2366
7 343743 7 290411 82889 - 36 Public Time Deposits 116834 ~ 42053 1~004 f 317j
y 7 46o517 7 3J2464 83893 ~ -- 3137
Absorbed by Banking System 1- 25130 middot~ 76183 1- 19350 18258 7 485707
11 f 4o8647 64543 I - 7 21395
Net Government Borrowing J 131492 from Banks 3794 - 79738 - 32745
Deposits in Central Bank in foreign money (not included above ex pressed in Sucres
Government ~ 4486 - 633 871 - 11059 Public 25242 J 78964 - 78814 J 4h97
T29J 728 7 I
7 IIIII middot~~ ~ I
78331 79685 31+38
y Made urt as Io11mlfs
Cas~ bullbullbullbullbullbullbullbullbullbullbullbullbullbull ~ bullbullbullbullbullbullbullbull - bullbullbullbull J 266 1- 367 - 22~7 99 Other assets less other liabilities~ ~ 4 330 ~ 293 ~ 18~8 Capital and Reserves~- bull bullbullbullbull 4 bullbull 52 bull 1 1- 79-9 26 o 278
7 I
7 7 I
7 bull Ill ri bullbullbull
251 762 194 18)
Subtract increase
37-
Davelopment Bank lending dominE)te the position Expansion of commercial
bank lending is relatively negligible while a comparatively small role is
played by balance of payment influences
98 From the end of 1946 the general financial situation deterior-ated
rapidly in five months from January 1947 to ~~ay 1947 net foreign exshy
change reserves of the Centrel Bank fell 935 million sucres or 7 7 mil-
lion dollars to a level of 2927 million sucres or 21 7 million dolJars
In litaY 1947 an IMF Mission arrived in Ecuador (at the request of the
Government) and in June 1947 a multiple exchange rate system with import
classification was introduced upon the advice and with the concurrence of
the Fund Operation of this system Jielded considerable profit n in
sucres it is in effect a new imposition of import taxes and such
11profits 11 are in reality additional fiscal revenueY It was of the
essence of the Emd s attitude in Ecnador that the exchange difficulties
bad arisen through domestic inflation and that these addi tiona reve-
nues should therefore be applied only in reduction of Government debt to
the Central Bank
99 The effect of such policy is clearly seen in the third column
of the table Inflation is checked notes in cirmlation and monetary
deposits falling 929 million sucres (or 11-per cent) i~ one year Alshy
thoUtgb however Central Bank loans to Government (and also colllWrci al
jJ At this point only the domestic aspects of this measure are emphashysized In a later section the external or balance of ~ent aspects will be taken up
Y Such revenue from exchange taxes yielded 975 million sucres in 1947 bull md in July 1948 was running at g to 10 jllillion sucres a month this revenue is not of course taken into the budgets bull
- 38 -
bank loans and investments) fell the actual deflation _was largely
caused through loss of foJeign exchange rather than over~all reduction
of domestic bank lending For in response to vigorous ~oilplaints of
credit shortage the Central Bank greatly increased its loans to the
public almost fully offsetting reduction of its loans to Government
In the first six months of 1948 there was no significant contraction
of money supply banking loans to the public eJggtanding to offset the
deflationary effects af an adverse balance of payments and of Government
debt reduction
100 The exchange surcharge multiple rate system was in operation
through August 1948 proceeds being devoted to reduction of Government
debt to the Central Bank~ But there has bean concern lest the resulting
deflation of domestic money supply would be too severe and the Central
Bank has in fact adopted a compensatory policy to prevent further reducshy
tion through continuing to expand lending to the public arid through
quasi-open-market pur~e of mortgage bonds to the amount of 17 million
sucres by July 10 19l8 when further purchases were discontinued
101 To avoid the netcessity for such compensatory policy the Cen-
tral Bank proposed to the Government that the destination of reveme from
exchange taxes should be changed Instead of being applied in reduction
of debt the proposal was that they should be useci instead to create a
development fund tt to be administered by the Cent~al Bank unless a
planned Development Institute or other competent authority is estabshy
lished In mid-September the Fund appro ved such cllanged dest ination of
these revenues 90 per cent of which will in future be applied in finance
of development and 10 per cent in stabilization of Government bond prices
-39-
This removes a check upon inflation which has operated for some fifteen
months unless Central and commercial bank lending policies recognize
this changed situation further inflation may follow even if the Budgetary
accounts run no deficit
102 At the same time this change does provide a source of local
currency finance for development projects
-40-
IX INTERNATIONAL TRAIE AND THE BALANCE OF PADlENTS
103 Ecuador exports agricultural products (rice cacao coffee
tropical fruits balsa wood) mineral products (crude petrolelUil gold
silver copper and lead) and handicraft products (panama hats)Y
lo4 Approximately one trird of Ecuadorian exports (including
minerals) go to the United States The proportion rose during the war
due to VmiddotIar-time demand for strategic raw materials but is now tending
to revert to pre-war levels Loss of European markets has been partly
compensated by gain of n$w export markets at least for a time and
especially for rice Countries in the Far East whose rice production
fell during war such as the Philippines and in Latin America whose
Eastern sources of supply were cut off such as Cuba and Venezuela
have provided demand for Ecuadorian rice This outlet however may not
last much longer
105 On an average of years 1938 to 1943 about 15 per cent of
Ecuadorian imports are foodstuffs wheat and lard being the largest
items and 85 per cent are manufactured goods and equipment Import
of foodstuffs is however gro1ing t-vith population and in the key pro-
ducts of wheat and fats would be expected to grow still faster if
econowic development raises n~ss living standards witl10ut increasing
domestic output of these prodvcts For increased consumption of wheat
products and fats is in part the definition of rising living standards
for a very poor population
fJ See Table No13 in Statistical Appendix for composition of exports
-41-
106bull Before the war (average of the years 1937 to 1933 ) the Americas
supplied 49 per cent of Ecuadorian imports by value the United States
alone supplying 41 per cent Germany provided 22 per cent of total
imports and the United Kingdom only 8 per cent Europe as a whole supshy
plying 45 per cent
107 In 1946 and 1947 the Americas provided 86 per cent of total
imports the United States supplying 66 per cent EUrope as a source of
imports fell to 12 per cent although the United Kingdom maintained its
relative position (7 per cent) Whether the United Kingdom can expand
its provision of imports for Ecuador JDaY be domiddotubtful on the one hand
the loss of Germany as a supplier pzo vides an opportunity on the
other the competitive industrial position of the United States may make
it difficult for the United Kingdom to fill this gap
No balmce of payments estimates eJd st for Ecuador1
Growth
of foreign exchange holdings over the war period however indicates a
strongly favorable balmce ~let reserves which were equivalent to 409
million sucres in December 1939 rose to 3962 million sucres (294 milshy
lion dollars) in December 1946
109 Official purchases and sales of exchange are shown in the fol-
lowing table together with corresponding movements of exchange reserves
The difference betRSen the balance on official transactions and the moveshy
ment in reserves arises from transactions on the free market
110 During the war import and exchange controls were nominal
there being no shortage of dollars nor any decrease of exchange reserves
jJ Except for the ~eriod January to May 1948
-42-
Loss of exchange reserves in 1945 led to a tightening of control on an
allocation of quotas smong users of exchange Import permi ts were
granted on the basis of former imports by merchants At the end of
1946 controls were relaxed on an extensive list of imports items and
the consequent loss of exchange has led to difficultieQ
Ul Official Official Balance Changes in Purchases Sales on Net
Official International Trans- Reserves actions
(Millions of u S Dollars)
1942 257 185 t 72
1943 35-5 279 t 1middot5 t Ul
1944 423 34~4 t 79 f 88
1945 353 394 - 41 - 7-2
1946 471 415 f 56 t 1 9
1947 488 579 - 91 38
112 From December 1946 to IVtay 1947 net foreign exchalge reserves
fell US$ 77 million from US$ 294 million to US$ 217 million In May
1947 the advice of the International More tary Fund was sought with reshy
sults summarized as follows in a recent Fund documentY
The lfund 1 s Mission arrived in Ecuador in Yay 1947 It was not advisable at that time to contemplate devaluation which would have made the inflationary situation worse An emergency program was therefore proposed Essential and semi-essential imports were to be distic5~ished and a surcharge of 5 sucres p3r dollar imposed on the semi-essential group as a check against their excessive import New decrees including many of the recomshymendations were issued in June
The main features of the new system were as follows
Y Economic SuVey of Ecuador RD 672 - P 43-44
- 43-
(a) The elimination of all quantitative import export or exchan~ restrictions licenses and quotas with the exception of a few absolute prohibitions of some luxury imports
(b) The checldng of excessive import demand through a fiveshysucre (33 per cent) surcharge on non-essential imports
(c) The suspension of nearly all exchange sales for nonshytrade transactions and the creation of a free market bull narrowly limited in volume and comprising mostly all transactions that are uncontrollable in practice plus a snall amount of domestically produced gold
(d) Exchange for a small amount of the least essential goods was made available in the free market
(e) One of the basic aspects of this plan was the steriliz~ tion of all proceeds from the import surcharge which was placed in a fund for the extraordinary amortization of the government debt to the Central Bank Tnis is still in operation
The beneficial effects of these reforms were felt immediately In June the trade deficit ~as reduced to only $07 million and in July to $06 million By August for the first time in 3 monthsl there was a small surplus In September the deficit was smci l -j)O 5 million In October there was a surplus of $15 million and in November and December there were small deficits of only $01 million and $07 million respectively
In short the deficit for the year was about $99 million in its gross gold and foreign exchange reserves During the same period international liabilities of the Central Bank showed a reduction of about $6 million Therefore~ the net deficit was around $39 million 95 per cent being in the first half-yeer and before advice had been received from the Fundrs Mission
113 It should be emphasized that this multiple-rate system of
exchange control is entirely freed cpentitative controls Excessive
import demand is checked by the higher rates upon imports deemed non-
essential the list of which is knollD and published Anyone presenting
sucres is provided with exchange at the appropriate rate upon list A and
B goods and the free rate is influenced by occasional releases of offi-
cial exchange into the free market The system that is utilizes the
inter-play of the price mechanism rather than the bWlilmlcracy of quanti-
tive controls or quotas
- u4-
114 Loss of exchange continues however despite considerable reduc-
tion of imports Gross international reserves declined US$ 18 million
and net reserves US$ 35 million in the first six months of 1948 Offishy
cial transactions January to June 1948 are surmrarized in the following
table~
Receipts From Exports From other Transactions (1)
Total
Payments For Imports For other Transactions
Total
Balance Change in Gross Reserves
1947 Jan to June
1948 Jan to June
(Millions of Dollnrs)
163 5 6
167 44
219 211
289 219 23 10
312 22 9
- 93 - 18
(l) Includes purchases of domestically produced gold deposits received in foreign currencies and borrowing from corres~ pondents abroad
115 Prospects for the remainder of the year moreover are not goo~
It is estimated that loss of international reserves over the whole year
may be aboat US$ 6 million Whether the deficit is in this region de-
pends largely upon actual export realizations for the remainder of the
year lhe most critical here is rice 11hose ygtrice is falling and the
crops accumulating in the rice millsplusmn Latest information is that
f Countries receiving allocations of Ecuadorian rice under International Emergency Food Council allocations have been requesting a change in source of supply owing to shortage of doJJers Thus France has asked for 6000 tons of rice from Indo-China instead of ~cuador and Greece for 2000 tons from kVPt in place of Ecuador as supplier A recent favorable sale of rice-to Haiti has somewhat improvea the cuITent position
-45-
plantings for the October crop are substantially reduced Wet weather bas
led to some loss of the cacao crop Receipts from exports in the follow-shy
ing official exchange budget may therefore have to be modified down- [l
ward on any pxuient calculation-
116 ~or Recei1ts and Sales of Foreign hchange
(Thousands of U S Iollars)
1948 1947 Estimated Actual
BECEIPTS
Worts Rice 13~ la4~ Cacao 11 l 2 Other products 10700 12371
Total Exports 354oo 42120
Foreign companies 5300 4842 Others 800 1883
41500 48845
SALES
Imports 44800 53499
Services 3200 4470
4B ooo 57969
117 In this situation of continuing presSlre one step has been
tken and others are under consideration The one taken relates to offishy
cial imports representing an average pf 20 per cent of total imports
Importation of cigarettes liquor matches and other things by the State
tionopolies is especiallyen significant These were formerly provided with
exchange tax-freebull ie at the ~owest rate of 1350 From July 26 they
afe required to pay the ordinary import rate of 15o4 on sll supplies for
J See note on page 47 -A
- 46-
their ovm use (such as office supplies) and the same rates as private
importers (ie 15o4 or 20o4) on all imports to be sold to the public
(such as wheat flour fats cigarettes etc) accord~ng to the classifi-
cation of the goods
118 Remaining possibilities seem to be a partial reclassification
of imports removing items from List A as essentials to List B as se~ishy
lwruriesY and or a chenge of nominal exchange parity vri th or mithout
a narrowing of the spread between the rates Here pressure from
exporters particularly from rice exporters may be hee~vily in favor of
an increase of the dollar buying rate with consequential changes of
selling rates
119 The present loss of foreign exchange is occurring ~rithout any
service being met upon defaulted foreign debt although service of Ex-Im
Bank loans is being made If it be assumed for purposes of calculation
that Ecuador reaches an agreed settlement identical to the Chilean sershy
vice would require exchange equivalent to US$ 378000 in 1949 (of which
US$ 368000 would be required in dollars) and would rise to US$ 4o20CO
in 1954 Adding service upon Ex-Im Bank loans outstanding on June 30
1948 and other known but small indebtedness total debt service would
increase to US$ 1410000 in 1949 rise to a second maxilliUID of US$ 1394000
in 1951 and then progressively decline Upon the assumption thet amp-Im
Bank loans undisbursed on June 30 1948 are all fully drawn before their
maturity total debt service charges would be US$ 1533000 in 1949 rise
On August 21 a number of import items were changed from List A to List B the aggregate import value (when granted exchange at List A rate) affected being US$ 7 million
-47-
to US$ 213431000 in 1952 and again would progressively decline These
last service charges rould be for 1949 3 1 per cent of 1947 actual
official foreign exchange receipts and 3 bull 7 per cent of estimated 1948
receipts and for 1952 48 per cent and 56 per cent of 1947 actual
and 1948 estimated exchange receipts respectively
120 Estimating prospects from this point in time Ecuador does not
seem to be a country able to afford assumption of any great additional
burden of debt service payable in dollars The amount that could wi thbull
out hardship or distortion be squeezed out of the balance of payments
by no means corresponds to the development needs of the country Any
start must therefore be modest and cumulative rather than spectacular
and precarious and this conclusion fits with other controlling factors
in the over-all situation notably the supply of administrative techshy
nical and managerial abi li ty
- 47-A -
Note on Official Exchange Transactions
Official exchange transactions for the firstsix months of
1948 are given on page 44 of this report Results for the full year
are now available and reveal that earlier expectations regarding the
probable 1948 balance of payments deficit were unduly nessimistic
Cacao export values have been lar~er than expected and in the last
period of the year there IBre some unexpectecily favorable rice eA-port
sales total export receipts were US$ 8 million larger than forecast
on page 45 Imports were held close to forecast
Receipts
Exports Foreign Co~anies Other
Payments
Imports Foreign Comoanies Other
Balance
Change in Grass Reserves
Official Exchange Transactions (full year - n~illions of dollars)
1947 -421
L18 19
488
535 06 149
580
y does not agree because of rounding
January 26 1949
1948 -436 h2 7
i85
Lt52 2
28
-oJ
-48-
X EXTERiJAL DEBT BEoomJ
121 The position of public long-term external bonded (excluding
inter-governmental) indebtedness of Ecuador is as follows
Amount in Default AmoUpt Outstandi~ ~ e Interest D~te
~In currmc1 (u s (us of p~t Dollars) Dollars)
Dollar obligations Gueyaquil amp Qui to Ry) $ 1226)000 12263000
286000 12263000
286000 123147
63047 Sterling obligations Franc obligations ( Oie
b 71000
Francaise de Chemin de Fer 1 lquateur ) Fcs 8386000 70000 70000
12619000 l26l9000
middotmiddot Note The Government of Ecuador oyenms about 75 per cent of the
stock of the Guayaquil and 1uito Railway and guarm tees the bonds and certificates which are largely held in England The franc obligations of the Cie Francaise de Chemin de Fer 11lquateur are not included in the offi cial statement of the public debt nevertheless the Government does recognize some liability for them and during the last few years has engaged in Degotiations for their retirement
Inter-governmental Debtsmiddot
122 Debts to the United States Government are of three types
63047
first the loans by the Export-Import ~which were outstanding on
June 30 1948 in the amount of $7 705606~ second the aJIDunts duemiddot
because of purchases of surplus property totaled $484 567 on March 31
1948 and third the obligations arising out of the lend-lease settleshy
ment the amount of 1fhich is not available (Total lend-lease assistance
j This section of the Report was prepared by Mr Paul Dickens
to Ecuador amounted to $7 bull 795000 )
123 In addition Ecuador is indebted to the Government of Venezuela
in connection with the establishment of a joint shipping company Late
data are not available but as of February 1947 $500000 ($1000000
authorized) was outstanding the total to be repaid by 1966
Debt History
l2ij Upon partition of the old Republic of Colombia~ middotEcuador was
apportioned 215 per cent of the original Colombian debt by the convershy
sion of l834a Between 1834 and 1854 no interest was paid The period
1855 to 1908 was marked by numerous adjustments and defaults
125 In 1898 the Guayaquil and Q]lito Railway Companyt s first mort-
gage 5 per cent loan of 1899 was issued It was expressed in dollars but
was in reality an English loan In 1908 a new (reemenJl was reachedbull
which was to be a final settlemet of all past disputes and controversies
between the Government and the Guayaquil end ~ito Railway Company and
the bondholders In 19~-10 the Government defaulted on the new agree-
ment In Novemberl9ll payments were resumed on the railway debt on)y
but a revolution caused a further suspension from December 1911 until
lfarch 1912 Subsequently service was partially resumed on the external
debt until July 1914
126 From August 1914 to July l9l8 no paYments were made on eny
foreign obligations except that service on the prior lien railway bonds
had been maintained up to and including the January 1915 coupon By
rf Negotiated settie~nt
-50-
1920 interest and sinking fund on the prior lien railway bonds had been
brought up to date but service on all other obligations ~ed in
arrears In 1926 interest on the salt loan of 1908 was brought up to
date but default took place on the coupon dueJam1ary 2 1927
127 The outstanding bonds of the prior lien issue were redeemed~~
January 1929 at VIhich time the January 1914 coupon was paid on the
5 per cent first mortgage bonds of 1897 In the case of the salt loan
of 1908 sinking fund was resumed in July 1928 and interest was paid
to Jazruary 1929 inclusive None thereafter Sums due from July 2 19C3
to January 2 1931 inclusive deposited with Central Bank in sucres
were used for governmental purposes after December 1931 No payments
were made after January 1929 on the external debt of Ecuador
128 Up to the end of 1948 no acceptable arrangement had been pro-
posed by the Ecuadorian Government for the resumption of interest and
sinking fund payments on external loans
-51-middot
XI bull POLITICAL
129bull Recent political history in Ecuador has been turbulent
although contest fo~ power at the top has not greatly affected the
bulk of the population Suffrage extends to all literate citizens 1
over twenty-one years of aee-but the requirement of literacy effect-
ively excludes the Indian bull T)tal votes cast in the recent Presidential
elections were 289164 from a total Population of some 35 million
130middot On May 28 1944 a few days prior to a scheduled ceneral
election an uprising occurred and Dr Jose Haria Velasco Ibarra
assumed office as President Dr Velasco had been President before
but following a coup dletat in August 1935 after he had been in
Presidential office less than a year he fled to Colombia and re-
mained in exile for several years On July 23 191-4 general elections
for a Constitutional Assembly to draft a new Constitution were held
Installed on August 10 the first Act of the new Assembl3r which was
predominantly Conservative was to confirm the legality of Dr
Velascos assumntion of the Presidency
131 On June 30 1946 new elections to the ronstitutional
Assembly middotwere held The only party particiJatine in these elections
was the Conservative The Liberals R~dicals Socialists and Commu-
nists abstained on the crounds that President Velasco did not offer
them sufficient guarantees On Aucust 3 1946 there vrere a number
of arrests following an abortive uprising and on Aueust 11 the Con-
stitutional Assembly re-elected Dr Velasco to the Presidency (by 43
to 10) for a term of office to last to September 1 1948
12bull Being compUisory for men voluntary for woraen -
132bull A new Constitution was promulgated in January 1947
133middot On August 23 194 7 a bloodless coup detat led by Colonel
Carlos Iancheno Minister of Defense in Dr Velascos Cabinet deposed
rresident Velasco who fled the country to Colombia for the second timebull
Next day Colonel Mancheno proclaimed himself Acting President and
formed a five-man Socialist-Liberal Cabinet despite the absolute
Conservative majority in the Assembly A week later however on
August 31 a counter-revolutionary military movemont broke out in the
north and the counter-revolutionaries captured Quito on September 2
134middot Colonel llancheno resigned the ActinG Presidency and dis
appeared the sa1ne day Dr Suarez Veintimilla who had been Vice
President under Dr Velasco and the former conservative Uinister
resumed control of the GoverPment Next day September 3 a Council
of State in Quito declared that Dr Velasco had by abandoning his
post terminated his functions as Chief of the State Dr Velasco
howeverJ vrho middotwas by this time in the Argentine declared that his
remo~al to Colombia had been forced and announced his intention of
returning to Ecuador to resume office
1~ On Seytember 15 1947 a Secial session of the Zcuadorian
Concress accepted the resignation of Dr Veintimilla and elected
Senor Carlos Julios Arosernena head of the Banco Ce Descuento at
Gua~raquil and a non-party man as Vice President with novers as
Acting President until September 1 1~48 Senor Arosemena formed a
mainly Liberal Cabinet with one representative each of the Consershy
vatives and the Socialists Coneress also ~onfinned the Council of
State 1 s view that Dr Velasco had forfeited the Presidency by abandoning
his postbull
136 On June 6 1948 Presidential elections were held The
three parties represented vere the Conservatives (Dr Manuel Elicio
Flor Torreo) the Liberals (Galo Plaza Lasso) and the Radical (Genera1
Alberto Enriques Gallo) Final results were announced as
Plaza 115835
Flor 112052
Enriques 53601
Invalid 27 676 289164
137 bull Doubt persisted until this month (August) as to who would
receive the election The Electoral College had been invalidating
votes on technical Grounds and as interim returns and invalidities
were announced it was noticed that the majority of the latter were
being deducted from the Plazavote After conferences the Electoral
College revalidated all votes and conducted a re-scrutiny on less
strict basis Senor Plaza has been declared to be the rfjSident-Elect
by the Ecuadorian Coneress and assumed power September 1 1948 The
middotpresidential term of office is four years
The Vice Presidential results were
Conservative 1anuel Sotomayor y Luna llu008
Liberal Dr Abel Gilbert 113213
Radical Dr Cueva Tamarz 5h07h 28129gt
139 Senor Plaza was born in Nmv York USA forty-two years
ago his fatter the late General Leonidas Plaz~ was President of
Ecuador in 1901-05 and 1912-16 middotSenor Plaz who had been taken to
Ecuador as an infant accomnanied his father in exile to the United
States and attended the University of California the University of
Maryland and the Georgetown School of Foreign Service in ~7ashington
l4o Senor Plaza returned to Ecuador in 1930 and for the next
fourteen years operated the family estates there reclaiming them from
virtual bankru~tcymiddot to prosperous and efficient state He has for
example been active in encouraging the breeding of new cattle strains
is President of the Ecuadorian Holstein-Friesian Association and oper-
ates a butter factory on his estates with a Danish ~anarer He was
ar Minister from 1938-40 and Ambassador to Cashington from 19h4-46
l In executing any policies he will of course be handishyt4
capped by the lack of a fully efficient Civil Service The position
in Ecuador is the same as that in othelmiddot Latin American countries
that the Civil Service is naid on low salary sca1e and lacks compe-
tent administrators Such lack is an aspect of the general shortage
of technical ability in the country
TABLE
1
2 bull
3 bull
4
middot 6
7 bull
8
9
10
11
lZ
13
14 bull
15
16
17
18
19
20
ECUADOR
STATISTICAL APPENDIX
Oil Production and Exports
Cement Production and Imports
Yfueat Production and Imports
Rice Production and Exports
Rice Exports by Destination
Cacao Production and Exports
Coffee Production and Exports
Cotton Tobacco amp Sugar Production amp Sugar Imports
State Railwaysmiddot Lines amp Rolling Stock
State Railways Merchandise Hauled
Population and Roads by Provinces
Budgetary Receipts and Expenditures
Exports of Principal Commodities Volume amp Value
Imports Classified by Groups Value
Exports by Destination Value
Imports by Source Value
Balance of Trade by Major Regions
Exehanee Reserves and Banking Position
Price middotIndices
Status of Ex-Im Ballilt Loans
ECUAIOR Table 1
Oil Production and Expomiddotrts
(thousands of American gallons)
Crude ou Gasoline Produced EJtported bullRefined middotproduced
1938 94586 78696 15500 41654
1939 97125 68819 17679 bull 141
194o 98654 70~99 23001 6162
1941 65382 38362 25914 6462
1942 95671 68516 29489 72l7
1943 97211 65003 34635 8076
1944 121469 82520 38083 8927
1945 109855 73897 38752 10059
1946 979+7 52412 45213 12271
1947 99140 39359 53949 16587
Source J3o1etin Banco Central del Ecuador
ECUADOR Table No 2
1929
1937
1938
1939
1940
1941
1942
1943
1944
1945
1946
1947
1948
l First six months
CEMEHT PRODUOTIOllT AliD IMlORlS (metric tons)
Production Imports
17782
15699 10082
14254 13373
14249 12013
16512 10935
17213 2_846
19802 so98
2756o 933
34691 1590
37504 953
38496 3114
33231 14941
20484JJ
Sources Production Eoletin Banco Central del Ecuador Trade Ministerio deEconomia
Total
25781
27627
26262
27447
20059
24900
28793
36281
38458
41610
ECUAJX)R Table J
Wheat and Wheat Flour Production and Irraquorts
(thousands of kilos)
Wheat
Production Imports Exports Consumption
194o 28120 bull 73 28o47 1941 24578 36 24542
1942 24265 bull 76 24189
1943 22034 22034
1944 23251 912 24175 1945 23115 2733 180 25667
1946 25852 4532 23 30361
1947 2lo66 494f)J 11
Vfueat Flour
1938 10743 9981 na
1939 7864 16638 na
1940 7996 8-592 275 16312
1941 7225 11823 286 18762
1942 7 161 23497 161 30498
1943 7461 9862 17322
1944 5216 24023 29239
1945 5174 25137 30311
1946 7~38 11313 g 18813
1947 5943 1886) 4Y
Less than 500 kilos Y First 6 months
Sources Ecuador en Cifres a~d Ministerio de Economia
~emiddot 1926-30
1931
1932
1933
1934
1935
1936
1937
1938
1939
1940 -middotmiddotmiddot
1941 ~ )~ (1
1942
1943
1944
1945
1946
1947
1948
~iiampn-sect00-lfmiddotks
-~Jrst~middot-nsmcnths
gJ Provisional
(B EQUOR
RI03 PRODUCTION ApoundP ~OR~S
Vo1wnfJ Production middot E~orts
(metric tons)
26)04
23584
29863
39270
39008
31699
39036
52136
44027
40144 ltit middotmiddot~ 0 56596
5873
100949
ao6o7
53168
102048
112711
047
8255
3842
6449
5282
22907
8734
12)3
2ooso
962
18343 t - ~ J
20546
32028
46992
64604
29318
66918
6~209fl middot tloo 1
$ bull
tt ( r t
z
Value 3xoorts
(thousand sucres)
1881
936
6667
10864
6555
14632 pound 170
23265
51460
93837
127105
60395
203243
2rfjuft
Sources Production Boletin Banco Central del 39uador~ Trade Ministerio de Econom1a~ ~r- ~fl ]r bull ~-middotmiddotmiddotmiddot f ~~middot~---i
Average Destination 1937-41
Cuba 2
Peru 13
Venezuela 6
Colombia 4
Panama 2
Jamaica 0
Philippines 0
India 0
Dominican Republic 0
Other Countries 4
TOTALS 31
Preliminary~
RIQ] EXlORTS (in million po~ds)
1943 1944 1945
81 88 5S
20 29 0
0 17 4
~ 0
Rf 2 hi 0 0 0
0 0 0
0 0 0
0 0 0
bullbull ~ 6 6
105 142 6S
R Less than )OOOOOpounds
Table No 5
1946 ~ Jan to~
1~ June-194
46 12 24
0 0 s 17 49 )j
2 13 2
5 4 1
16 1 0
20 0 0middot
0 38 0
0
1 f4~ 2
r middot I
130 13 34
sf Ineludes 6 million pounds to Mexico and 5 million tmiddoto Greece bull middot
1[0
supound~sect8_ Foreigl Crops and Markets Offiee of Foreign Agrtcultural Relations u bull Sll~artment of Agriculture May 3l 1948 bull p bull 402 First six months of 1948 from ibid August 16 1948 p bull 120
Average 191i-15
191620
l921-25
1926-30
1931-35
193640
1940
i941
1942
1943
1944
1945
1946
1947
tf I
ECUADOR
Cacao Production and ~orts
Volume
Estimated Production ~rts
(metric tons)
n (
12108
15middot330
14652
19030
15058
17759
17689
19459
4o625
43547
36825
21319
15980
174o4
11208
14433
13762
18161
13735
16827
16526
Exports ( 000 sucres)
186o9
26073
26746
27531
16647
37424
29354
34365
40327
51794
41985
53547
74935
188208
middot)(et) middot( middot
Sourcesmiddot Estimated production Ministerio de Economia E~orts to 193~ Estadisticas de las Exportaciones del
Ecuador 1940-1942 subsequently El Trimestie Estadistico del Ecuador Number 1
1 ~ Mini sterio de Economia -bull gt(
111 t bull r r (o J bull bullbullbull 1) ( bull
ECUADOR
Coffee Production and Exports
Volume Estimated Production EXports
(Metric TohS)
1921-25 average 5147
1926-30 II 7571
193D-35 10047
1936-40 II 13811
1940 16158 14571
1941 14260 11847
1942 9016 6140
1943 14144 12340
1944 16598 14458
1945 12999 10737
1946 9948 7636
1947 12522 8970
Table 7
Value
Exports 000 Sucres)
59~9
11530
10945
18546
16J83
23827
17278
33176
35626
33863
34839
43524
Source Estimated production - Ministerio de Economia
Exports t~ 1936-40 - Estadisticas de las Exportaciones del
Ecuador 1940-1942 - subsequently El
Tremestre Estadistico del Ecuador Number 1
and Ministerio de Economia
YEAR
1937
1938
1939
1940
1941
1942
1943
1944
1945
1946
1947
ECUADOR
Production of Cotton Tobacco amp Sugar amp Sugar Imports (000 Kilos)
Raw Cotton
9237
7213
7172
8165
PRODUCTION
Tobacco
1519
1106
1875
1028
1359
Sugar
17528
22950
26950
27835
30421
27858
26799
23151
32474
33544
33480
Table B
IMPORTS
Sugar
5310
11068
12387
38
6
33
184
784
21455
3060
Sources Production of Cotton and Tobacco Ecuador en Cifres 1942
Sugar Production and Imports Ministerio de Economia
ECUAOOR Table 9
State Railways
Length Locomotives Rolling Stock (Number)
(Kilometers) (number) 1relght Passenger
Gueyaquil-Qpito 452 39 319 41
Guayenaquil-SalinaJ 150 6 22 24
-~i to-CarcbiY 222 6 23 22
Bahia-Chone 78 3 12 g
Sibambo-Azogues 117 3 6 ll
Puerto Bolivar-Piedras 155l 7 21 10
Puerto Bolivar-Pasaje 55
1199 64 4oy llG
Narrow-gauge line
gj On uncompleted line ~ito-Esmeraldas
21 Of which 4 are rail-cars
jj Of Vihich 61 are rail-cars
Source lviinisteria de Economia
1938
1939
194ltgt
1941
1942
1943
1944
1945
1946
+947
ECUAOOR
Railway Transport
(thousands of metric tons)
Products
Agricultural Animal Mineral Forest Manufactures
1639 19 3 160 122 1034
1318 143 172 138 961middot
1714 144 233 219 1472
1613 184 277 209 1543
1809 224 280 272 1631
1841 280 35a4 376 193-3
2011 250 263 299 C5J7 3
1888 29-5 350 238 2234
1941 29-9 46 bull 4 258 2170
1787 299 51 0 180 2085
Source l3oletin Banco Ce~~nu del Ecuador
Table 10
Others Total
58 3205
58 279l
298 4oso
289 4115
328 4543
384 5168
352 5248
292 5296
37middot7 5508
419 5279
Table 11
Population and Boads
Poeation Roads (Kilometers) Province Jan 1 1948 Main Secondary In Construction
Care hi 86663 1744 1191 1050
Imbabura 158896 1818 2100 1810
Finchincha 350149 4)13 3703 670
Cotopaxi 215232 642 4o6o 970
Tungurahua 222963 2290 1810 300
Chimborazo 29864o 1664 3316 2740
Bolivar 121653 1877 1294 2045
Canar 133971 580 580 1300
AZUaY 284982 1053 2190 630
Loja 238705 1140 4s6o 1430
El Oro 93752 1005 2378 650
Quay as 482843 3900 3367 3700
Los Rios 148428 933 4632 1050
Manabi 381538 3627 1lo61 1970
Esmeraldas 664o5 50 19 0 2840
Frov Orientales 181071
465891 26636 46732 2t3l5bull5
Source Direccion General de Estadistica y Censos
1938
1939
1940
1941
1942
1943
1944
1945
1946
1947
Source
r
Table No 12 ECUADOR
DISOLOS3D BUDGETARY R303IFTS AlfD EXP3NpiTURES
(Total of ordinary and extra-ordinary budgets and special accounts)
thousand of sucres)
Total Receipts
1323204
131699 6
1262710
1547624
1667455
2112614
3145318
4051038
5367822
6696647 11 ~I JJ( middot
Total Expenditures
1429134
1267687
123135middot0
1586615
1489251
2101429
3031038
4174550
5352394
6593858 bull I
aoletin Banco Central del Ecuador
-middot middotmiddot
Diff~reuce
106830
j 49309
f 1360
- 38991
f 178204
j ltll8-5
f 114280
12351middot2
+ 15428
j 10278bull9 r 7
l I 1
L
ECUAOOR EXPORTS OF PRINCIPAL COMMODITIES 1937-47 Table 13
VOLUME (thousand metric tons)
1937 i98 1939 194o 1941 1942 1943 1944 1945 1946 194711
12 200 96 183 20 bull 5 320 47~0 646 293 669 66) 218 191 153 112 144 138 182 137 168 16 bull 5 203 14~ iJI 137 129 146 118 61 123 14 bull 5 107 76 90 48 55~5 53middot3 472 34 bull 2 226 158 1)9 178 35middot511 72 bull 5 345 19~2 251 183 14bull4 13 2 112 103 12~0 132 121 1-4 16 16 15 18 30 22 28 2~0 13 01 14 1middotmiddot9 2~2 21 47 90 136 93 74 28 na
~gt i824) (1387) (944) (1036) (1981) (2516) ( 2756) (4373) (4462) (4947) _01 2849 2454 2274 2201 1201 2167 2062 2513 2446 1640 1358
Ltrates 7~3 140 76 so 3~3 )9 26 10
VALUE (thousand sucres)
610 10864 6555 14632 23265 51460 93837 127105 60395 203242 201111 49985 39bull276 37bull033 29354 34364 40)26 51794 4lt985 53547 74935 188208 24613 16703 15227 16)84 23827 17278 33176 35~26 33863 4839 43 bull 524 5bull691 7558 7t006 6448 4658 _J 107 2159 1898 2872 738~- 24355
18242 7~146 9605 86o6 6120 201 6274 6209 9264 1)02 14994 4048 4300 4298 3~866 6979 35481 23316 38043 26553 15111 979 lt363 2~134 2724 3168 8450 25613 43419 31877 18 bull 509 7125 na 8048 6 234 4981 6509 16231 22121 25191 69033 69J87 81962 4662
21989 26374 25020 24862 13425 24820 23796 28788 28107 18253 15902 trates 10165 16090 13134 38609 27208 29013 18075 809 ates 18682 35297 41204 39907 29426 25374 27476 26457 15482 24858 25334
10774 13210 13495 3 950 16869 32775 2L068 32402 30902 38326 n bull a_
164_045 169096 167148 167851 199704 298690 393115 466631 377894 537131 619859 tmiddotbull bull
Note Dash (---) signifies zero or less than 50 metric tons nly or ~00 sucres ata expressed in quantities other than weight Sourcis 193 data from unpubli~hed Zcuadorian trado stati~tics
at US Department of Commerce 1938 nnd 1939 from partment of Commerce official data Direccion Nacional de Estadistica Eruad6r en Cifras ~7 from Banco Central Boletin 1940 and subsequont ~ears from Banco Centrll jto~n sterio de Economia and from M1nister1o c Economia data furn she
Mission July 1948
~ tobacco tone JgS
articles
11res ilk
al
value of Imports by Groups 1937-Lt-5 Volume and middot~alue of Selected Individual Imports 1937-46
(Value in thousand Sucre~)
1~37 1~38 1~39 1940 1941 ~942
19~731 20~ 375 24~874 16~)65 19043 37~540 5127 7194 1958 6~4e8 5t298 8 118
12888 13Jl5 14522 17702 19556 25~152 21627 25~272 21455 28532 21619 18923 20649 21~593 25559 29437 22636 19~$13 13~505 11961 12~654 15~976 15667 18899 5~829 7 bull 524 6066 9385 833 14353
22912 )0868 24~75 27 t 750 25993 42~916 9376 1028 10038 12118 11345 13932
-bull
131643 148320 1486o 173753 149499 199715 (Volume in thousand metric tons) (Value in thous~tnd sucres)
5middot3 111 124 194 5 bull 534 6385 26 4 24
os 246 -
122 ioo i66 86 118 235 8255 6)88 7449 5076 013 14609
19 07 11 11 14 29 2187 1824 2695 294-3 29J9 8182
101 i4 i2o i09 28 51 804 llJ)6 1667 1546 577 866
~ hides amp skins amp manufactures amp miScellaneous
~~43 1944 1945
33270 70915 82984 6717 8)69 904)
31~700 43196 32~830 17073 53~400 JBoo6 15447 32~624 38797 14~88 18~388 22895 14116 11a99 9812
68928 n~l79 69-113 15856 19186 20042
217983 33ltl56 323524
78 middot 0 2 215 130 12622
09 27 775 2290
99 240 bull 25~1 337 24070 26388
23 46 67 8853 146)1 21699
09 16 10 321 349 246
~s zero or less than 50 metric tons -middotNote Columns may not ahmys add to totals because of rounding Denartment of Commerce official sources - 19)8-42 Direccion Nacional de Estadistica Ecuador en Cifras [inisterio de Economia El Trimestre Estadistico del Ecuador
1946
)1 8135
4 bull 5 )842
114 13123
46 22709
)1 639
ECUAOOR Exports by Countries 197-47 (Value in thousand sucres) Table - 15
1937 1938 1939 1940 1941 1942 1943 1944 1945 1946 1947 --middot-------middot
80458 lt2865 116t-J78 150055 196953 293081 386483 46lt-909 372~549 463~378 sa4~68J 54422 63418 8)254 1t0496 145 bull 558 168585 2)9238 267105 218018 227291 262887
26 20 65 17 2228 78 124 7)41 17173 630 610 949 1281 1055 1)98 5~526 25686 78523 85382 61478 75890 23481
2899 4955 2109 3568 162 1163 4J54 2526 4197 44~ 1450 5027 6335 4972 5i92 5285 7425 4546 7379 10286 9798 15537
1 5 5 17 57 13 291 54 444 574 6996 8 662 9188 8714 13bull764 7238 15316 13900 11223 6~07l 14503 11717 2908 12544 5 730 7896 3767 21215 22608 29233 4243 6703 7965
51 15 24 8 532 3620 1603 539 2336 11579 3749 80 207 862 4070 9991 17096 1275 17~428 6~973 27431 80541
1943 2135 5229 6039 1965 5435 3021 4827 15~702 25~137 51~854 middot 667 740 991 zo83 3358 11412 4286 4282 3~-970 13064 5~864
1799 419 2218 875 2865 12299 9644 14900 13714 9653 11655 J 89 82 2527 1247 964 326 )24 250 41141 2~985
1024 1514 1068 2205 7173 2650 2 744 8871 7694 J2 5811 17 39~ 77029 61869 43688 11945 1503 5550 6335 4108 4075 36783 61998
32) 6)3 1187 490 58 186 2164 4021 J217 35974 29595 11277 69 - 29 4411 7909 6156 3477 1183 5492 4876 26)8 359 1860 7~467
489 255 J2 100 280 1155 1239 1265 3827 3~961 20539 13t521 10802 2254 5 706 4177 6313 2bull610 3615 4251 -middot 2842 13546 lBi 1415 3 758 822 6 188 12962 3592 2531 412~ 162 7~ 10052
8643 1693 3bull521 3~400 2751 320 40 118 231 222 5404 J 4894
6337 4201 6548 5478 1175 5 45 40 1611 50950 6261 4132 5386 5452 117) -
~l - - 15 45988 5 middotmiddot 7S 8 5 25 567 92S 11
33 ~- 76 18 966 151 150 3419
38 29 858 2 45 78 467
(continuation on next naee) middot
~GUJLOR ~xnorts by Countries 1937-47 (falue in thousPnd sucres) T~ble-15 continued
middot-~--- -~-middotmiddot -middot _ middot-- ~~---~~- ---- -middot--~middot--------middot- -middotmiddotmiddot--middotmiddot--193 1938 1939 1940 1941 1942 1943 1944 1945 1946 1947 _I --middot -middot- ---~- ------ middot- bull middotmiddot-middot -
4 7 5 5 5 219 1087
218 153 529 368 73 49 297 569 1230 35140 789 28137
207 144 379 J68 73 49 297 559 1104 605 11 9 10 126 43
150 6355 plusmn
353 54045 169096 167148 167851 199704 298690 39J115 466631 377894 537131 619859
~S Columns may not always add to totals because of rounding
Dash (-) signifies zero or less than 500 sucres
Primarily Guadeloupe and Jamacia
Primarily British West Indies and Netherlands West Indies
Primarily Denmark Spain and Norway
Primarily Java
~ces 1937 and 1947 from unpublished Ecuadorian Trade Statistics at U s Department of Commerce
1938-46 from Ecuador Ministerio de Economia data furnished IBIID rassion July 1948
Imports by Countr~es 1937-1947 Table-H)
ECUAOOR
l937 1938 1939 1940 1941 1942 1943 1944 1945 1946 1947 I (()
Value in thousand sucres) ~ + -gt L520 63151 83984 115382 128423 186958 200061 311989 302~329 363403 517582 j
u t 2086 51311 71950 103214 110422 138729 103583 173776 178821 240233 429906 0
Q) f
811 674 551 2436 1815 3J258 2150 5265 6538 12178 20912 d S Ugt ro c 1 n 4 4144 3042 8 99 14 23 295 178 8~011 210 h middot-1
(- 0
186 324 237 957 2~991 8492 18~376 15~239 17232 10~574 3121 4 middot-2375 2310 1959 2476 3016 4735 7930 7~696 11~201 15~564 14755 sectwfi
middot-1 1 fli 4 6 343 1~823 3J064 4110 3~612 60J5 h 0H
2739 2109 3789 174 2352 7949 9~934 17845 23~ 616 1559t 18~727 ~rld ()
328 164 457 2498 612 733 10892 10902 20003 16684 11981 oc ampl+lll
mmiddota J63 1297 1161 -- - 2 23 115 1~128 1192 d+gt-
2464 507 500 1438 5565 20668 39979 46654 33684 33034 6~486 15~~ (()
na 1 311 2297 5515 130 bull-I m rl bull +gt
15 31 68 245 995 1516 2804 25326 6124 5956 3472 Oltll~
149 280 269 332 550 208 270 389 707 839 655 a~ sect (1) Cl 4-209 72986 ~ 38 09 1433J 9813 16276 15885 1721~9 45194 80928 ~-g 1701 35767 2 7 7 33 1202 67 47 61 19 2 El 0 0 eo g 3250 11462 8094 12980 10124 8108 13634 12513 11984 28392 40983 cent1-t+l~
1803 718 1687 otmiddot r-
4-114 6465 7339 630 475 34 22 2 66 889 7279 t -P () ~led
36o 4685 1573 7144 308 12 682 4824 rlltll ltDno
1~896 2550 1466 1624 64 1 58 5090 bull-1
fJ ~ ~ 1052 1489 794 945 293 224 5 21 1373 9062 9 703 P + na 868 881 423 10 1 8 223 135 r- 0) u
1 r=l middotr-l
1162 4823 1264 1675 877 1017 1~52 2380 3129 4~326 6851 () l=l rl
7274 3074 2609 3595 980 349 1041 905 599 1~543 3~134 cn~oo bull t
724 11939 8983 19951 6239 2281 1439 304 3882 5478 5736 op a cent1-t ~sect rl
173 302 262 238 -w 14 276 -rr 472 ---s9l ctillmgt
259 10949 7810 18190 4414 170 16 4 5 +gtUd ~-- ~
935 712 728 1278 1281 1715 1314 2685 3185 4465 3151 +gtP t-1
530 105 143 221 306 240 95 89 582 541 2089 ~ (f)
1l 21 12 80 1f 196 122 169 125 1J n ~-T~
0
109 218 lllL 250 m 46 sect2 12_ 28 119 112 I ~ --sB_l_ 0 ---- -
643 148315 147860 17353 149499 199715 21 ~ 983 331156 323524 414266 604479 ms may not a1ways add up to t ta1s because of rounding Dash (-) signifies zero or less than 500 sucres ~ country breakdown not given in source g) of which 591 from Syria 2Z3 from China 264 from Straits Settlements 1 Sumatra and 264 from Iran
YEAR
1937l
1938t
1939~ -
1940amp
194H
1942
Exports Imports Balance
Exports Imports Balance
Exports Imports Balance
Exports Imports Balance
Exp(rts Imports Balance
Exports Imports Balance
ECUAroR Balance of Trade by Area 1937-47 (thousand sucres)
fRlSTERN HEMISPHERE including Philinuines
United States Other Total Eurone
54~lt-22 26~036 80~-~-sa 77~029 52086 9~434 61520 64~209 2336 16602 18938 12820
63418 39447 102~865 61869 51311 11840 63151 72~986 12107 27~607 39714 -11117
83254 33124 116~378 43688 71950 12034 83984 54505 11304 21090 32394 -10817
100496 49559 15Cl055 11945 103214 12~ 168 115382 38~090 -2718 37391 34 673 -26145
145 bull 558 51395 196953 1503 110422 18001 128 423 14333 35136 33394 68530 -12830
168585 124~496 293081 5t550 138~729 48229 186958 9 813 29856 76267 106123 -4263
Table 17
Other Countries World Total
6~559 164045 5-912 131643
647 32405
4361 169~096 12~ 178 148315
- 7817 20781
7082 167148 9372 147860
-2290 19288
5851 167851 20281 173753
-14430 - 5902
1248 199704 6743 149499
-5495 50205
59 298690 2944 199715
-2885 98975
NOTE Areas may not always add to world t~tals because of rounding
Source 1937 and 1947 frlttm unuublished Ecuadorian Trade Statistics at US Department of Commerce 1938-46 frem Ecuador Ministerio de Economia data furnished Mission July 1948
(Table 17 continued on next page)
YEAR
12J Exports Imports Balance
1944 Exports Imports Balance
125 Exports Imports Balance
1946l) Expltgtrts Imports Balance
12Z= Exports Imports Balance
ECUADOR~ Balance of Trade by Area 1937-47 (thousand sucres)
WESTERN HEMISPHEL~ (including Phili~ines United States Other Total EuroQe
239238 147~245 386~483 6335 103583 96~478 200~061 16276 135655 50769 186422 -9~941
267105 194804 461909 4~108 173776 138213 311989 15~885 93329 56591 149920 -11779
218018 154~531 372549 4075 178821 123508 302)29 17159 39197 31023 70220 -13084
227291 264224 49J515 36783 240~233 123170 36J403 45~194 -12942 141054 128112 -8411
262887 241796 504683 61998 429906 8676 517582 80928
-167019 154120 -12899 -18930
1 Only year in which substantial Philippine trade
NOTE Areas may not always add to world total becasue of rounding
Table 17 (oonttnued)
Other Countries World Total
29 393115 1646 217983
-1)49 15132
614 466~631 3~282 331~156
-2668 135475
1270 377894 4035 323524
-2765 54)70
8~833 537131 5670 414266 3163 122865
53179 619859 5969 60449
47210 15380
Sources 1937 and 1947 from unpublished Ecuadorian Trade Statistics at us Department of Commerce 1938-46 from Ecuador Ministerio de Economia data furnished IBRD Mission July 1948
~ EXCHANGJ-tAL BANK
ECUADOR Exchange Reserves amp Banking Position (million sucres)
r 4 bull TIC CQEDITS OF CENTRAL BAl~K Domestic Govt Official Bus Other Credits
MOliEY SUPELY Current AC
JJj To()2f (4) Entities Indvls Total Banks of O~mtl Currencl Denosits l (6) (7) (8) (10) (5) Banks amp 11
Indvls (9)
16 10 26 51 1 116 62 64 48 26 7 40 73 4 129 74 66 3middot7 )9 7 29 66 4 144 73 71 37 29 8 24 62 4 159 78 73 56 26 8 22 55 5 183 8l 103 81 37 28 2 8 201) 120 119
152 37 21 22 79 9 255 169 17~ 26) 34 27 22 83 13 378 ZJa 26e )4 60 37 20 117 9 385 295 308 Z5 105 73 11 189 26 493 321 312 282 153 81 10 244 24 536 35middot~ 354 242 104 44 93 241 2 565 329 284
221 110 51 99 260 2 56 313 278 215 102 47 101 250 2 573 )06 294 225 97 45 95 237 2 585 299 299 219 100 44 98 242 1 591 307 297 214 98 35 111 244 4 6)4 315 295
)20 295
on of $12500CC beginning in December 1946 bull
ars
Ttttal (12)
127 14) 144 151 183 239 345 492 602 634 704 613
591 599 597 604 610 614
ge liabilitieS but including Stabilization Fund in 1945 and GolC CertificCt in 194) bull ial banks and fomento banks ial bc1nkst and fomento banks sits of commercial banks and time deposits of fomento banks
Table 18
Govl t Den sits ~L
(lJ)
6 23 12 27 7 28 8 31 6 32
middotmiddot 11 )6 16 57 27 71 41 74 63 98 59 90 66 77
71 8 75 76 6 75 81 75 81 72
72
1 1 Boletin - Superintendencia de Bancos Boletin - Unpublished data furnish~d MF bY Banco Central of Ecuador
Table 19 ECUADOR
Price Indices
WHOLESALE Rents Export Fooa in
YEAR Goods and Quito - Coal ~1) (2) (3)
1937 100
1938 83 100
1939 95 100 153
19h0 95 106 16h
1941 96 113 150
1942 114 146 172
1943 114 183 187
19h4 118 218 219
1945 133 266 254
1946 203 320 315
1947 297 364 516
19h8 (March) 294 379
(liay) 416
(July) 389
llame l~umbar
Republic of Ecuador
Status of u s Export-Import Bank Loans to ~cuador
Purpose
gs of Junemiddot10omiddotl9ltsect
Gross Authorized
Cancel- Net lations Authorized Repeid
Amount Amount Outstandin~ Undisbursed
6J048 6J048
( 262 )16
Haterials equip amp services $ 6480000 $20810 $6459170 $1279775 ~)5-l19middot395 _____ _
ibulliunicipali ty of iui to (Republic of Ecuador)
ibullIunicipali ty of Guayaquil (Republic of Ecuador)
Republic of Ec~ador
Republic of Ecuador
Ecuador DeveloPIlent Corp
Pan-American Highray (Cuenca-Loja)
Agricultural Research amp Experiments
Raihray Equipment
5000000
12JOOOO
50000 200000
)28 Haterials equip ~~ 4000000 services - ater 1middot1orks
)28 iltiaterials equip amp services - ~~rater orks 4000000
J4J Pan-American High1middotray (Guamote-Tambo)
432 uevedo-Hanta Hightmiddotray (additional credit)
1980000
220000
$19180000
Of tlhich $2500000 tts used on the Quevedo-Ibullianta HighTaY
4000000 28880
4000000 167
-1 t-9amphOOO- -7500
220000
6o6120 -h365000-middot
41592 575-t 2-41
-l-y5Q2- 500 44Gooo
220000
IBRD Statistics Sectio spte~ber 24 1948
-2-
Humboldt current and are more pleasant than latitude alone
would suggest
The coastal region produces almost all the export commodities
of Ecuador its people are largely mestizo strongly conscious
of nationality and commercially active Its major port
Guayaquil (population 1942 154000) is larger than ~ito
(population 1942 139000) and is the commercial capital
of the country
(b) The Andean Highlands or Sierra (about 25000 square miles)
comprises the second natural region and forms the physical
backbone of the country There are two high corderillas
surmounted by towering volcanoes and separated by a series
of ten large intermont basins lying in a north-south line
seven are linked to Guayequil by railway Each basin is
occupied by a dense JOpulation 1hich is almost pure Indim
Only in ~ito and Cuenca are there any important number
of people with Spanish ancestors and these are either
office-holders in the Government or landowners with large
private estates
(c) The Oriente (Amazonian region to the East of the Andes) is
not yet part of the effectively occupied area of Ecuador
Its jungle inhabitants from time to time spear the
agents of the Shell Oil Company who are prospecting
for oil
3
In 1942 official Government figures for these rerions were
Area Population middot Density Square of
Kilometers middotmiddotNumber middot Ponulation
Sierra 70344 23 11686748 61 268
Costa 68633 23 1JooOl8 33 14 6
Oriente 153143 51 189005 6 12
CalapagS Islands 7880 j 2192 a 0~2 -Miera tory 4115 a middot-
300000 100 3089078 100 102
15 Very little however of the total area is under cultivation
It was estimated in 1916 that about 90 ~)er cent of the coast and 60 per
cent of the Sierra was suitable for cultivation that is about 25000
and 1)000 square miles respectively Of the total of Loooo square
miles of cultivable land~ only about 1$000 was under cultivation in
1946~
16 No census of the population has ever been in Ecuador
In 1892 estimated nopulation was 127 million in 1942 309 million
and in January 1948 3L7 million with crude birth rate of 379 oor v ~ thousand and crude death rate of 201 per thousand in 1942- Estimated
composition of the 1942 population was
a less than 05
Yhi te Mestizo Indian Negro Iulatto Other
100 per cent l-t10 ner cent 390 per cent 50 ner cent 5 o Per cenmiddot~
1000 ner cent
Just over half these deaths oc~urred in the are rroun of 0-4 years in 1942
4-
17 At the same date the literacy rate was estimated at 20 pe~ qent
s~i~literacy at 20 per cent and illiteracy at 60 per cent
-5-
II OCCUPAmtOUS AND INCOivES
18 There having been no census there is no at~curate information
under this beading
19 The Economic Department of the Ecuadorian Central Bank has esti-
mated that of a total population of 334 million in 1946 1285000 or
J9o per cent were gainfully employed in the following occupations
Agriculture Forestry etc
Mining
Building and Repairing
Manufacturing and Processing
Services (communication comshymerce government etc)
820000
10000
6oooo 10000
325000
5 5
26
100
20 No valid estimate of national inco~e exists At the request of
tne International Monetary fund the Technical Adviser to the Central Bank
of Ecuador Mr L A Carbo estimated national inccue in 1946 as 20096
million sucres or US$ 149 million Although this estimate is probably too
low ] it is clear that national income is very small Ecuador is very
low on the list of income per head among Latin American countries its
income per head is in feet among the lowest of countries of the world
21 Income is very unevenly distributed A survey made in 1943
yielded the following picture
g lror reasons Sdvanceit below Paragraphs 87 and 88
~ pt WI
-6-
To tal Monthly Average Monthly Population Income Income per Fw~ly
Number of Amount t tount People (SUcres) (Sa~res)
Upper Cla~s 4oooo 133 28000000 144o 2300
Middle Class 96oooo 3200 96000000 4950 4 L ~ 00- middotJ~
Lower Class 2000000 6667 70000000 3610 140 -- -~
3000000 10000 194000000 10000 10000 yenSliP C_~ ~
Note At the ofDcial rat~ of 1350 suc~es to the US$ average monthly incomes per family are equivalent to approximately $2J7 $30 and $10 respectively
~ Uneven distribution of incoue is of course largely a conse-
quence of uneven distribution of property Some ideas of the distribution
of rural property is afforded by analysis of re~urns made in payment of
rural property tax Such tax was paid by only ll2l4o proprietors in 1944
whose holdings may be summarized as follows
Per cent of Value of Rural ProEerties Number of Proprietors
916 4o
29-33 llOO
3041 10400
2030 37200
1080 634oO
10000 112J4o
23 Such statistics do not of course carry one very far beyond
the general observation that income and wealth is very unevenly distributed
and that much is obvious from a little travel in the country But it should
-7-
be said that comparing observations in Ecuador vrith those made in Peru
and Bolivia Ecuador by subjective judgment compares very favorably with the
tvo latter The Ecuadorian Indian seems to be on a perceptibly higher stan-
dard of life both in the highlands and on the coast than the Indians seen
in Peru and Bolivia Vhile his land holding is small it yields somethi1e
he very freqjl ently possesses livestock such as pigs and chickens has cot-
ton clothing drying on a line a~d often cultivates flowers and keeps
pigeons By American standards he is undoubtedly on the poverty level by
Latin American standards he may be a little off it
24 At the other end of the scale the wealthy upper class are pro-
bably not as wealthy as the Peruvian upper clas~h and the Bolivian elite
in operating in poundcuadc~the upper class lacks the rich property of mines
Thus while income is of course unevenly distributed in Ecuador as else-
wnere the range between the wealthy and the InJian may well be less tban
elsewhere The line of income distribution is of aboat the same slope
but probably significantly srJOrterY
This conclusion cannot be demonstrated statistically It results from a 11feel 11 deri ved from personal observetions in the respective counshytries
-8-
III AGRICULTURAL lROIDCTION
25 Ecuadorian development is largely a matter of increasing the out-
put of and improving internal and external trade in agricultural products
There appears to be no enduring geographic or physical reason ~middotby this can
not be accomplished She possesses soils and climate ranging from the
tropical to the temperate soils which in some areas are very fertile and in
others are in danger of exhaustion To anticipate subsecpent conclusions
her problem of development through agricultural progress breaks doTltD into
separate aspects all involving improved technique
(a) increasing arable yields from areas already cultivated
(b) improving pastures and stock in grazing areas
(c) enlarging both arable and pastural areas (including irrigation)
(d) improving roads in rural areas
26 Achieving these objectives involves providing more adequate
domestic credit for short- medi~ and long-term agricultural requirements
27 In application however interpretation of these problems is very
different in the two occupied regions of the country the Sierra and the
Coastal Lovrlands no generalization can cover both
(a) TLe Sierra
28 The occupied inter-Andean valleys are a region of temperate
agriculture producing almost exclusively for local consumptionmiddot Their
pat tern of tilled fields grazing land trees and flowerJl is almost
Y Flowers bloom all year round The main tree is the eucalyptusmiddot introshyduced some 70 years ago end used for all purposes (~indbreaks fuel 1
and lumber) affording a striking example of the effect of introduction of one plant upon regional habitability-
-9-
Western liiuropean in appearance but not unfortunately in productivity
Agricultural Production of the Sierra
1939 194o 1941 1942 - -(Hundreds of pounds)
Theat 49QOOO 611300 534300 527499
Potatoes 1201000 1476400 1386120 1146000
Rye 72500 79900 159495 115000
Lentels 46000 424oO 37955 csooo Corn 816700 1349300 1308062 1315200
Barley 85)000 795700 903600 911000
Cotton 45000 42020
Kidney Beans 80000
29 In addition about 1000000 hectares (247 m~llion acres) are
devoted to pasture supporting epproximate1y 683000 cattle 145 million
sheEf 107000 STrrine and 320000 goats
30 Yields are low in all Sierrean agricultural activities the
standing VJheat and barley crops are so thin that the ground can be seen
through them Yet the greater part (some 6o per cent) of the people of
Ecuador live in the Sierra and population is increasing at about 2 per
cent per annum The effect upon land use under existing tecnniques is
clearly visible cultivated areas are being pushed higher and higner up
the hillsides (slopes of 30 to 40 degrees being used) and onto the
fJparamon the high plateau betvreen adjacent valleys at altitudes of
11000 feet and higher The result is a picturesque scene but one which
reveals a near Malthusian situation in the man-land ratio rbullrith static
-10-
technical practices It is a situation which cannot remain unchanged if
economic development is to occur in the region
31 There sean to be three possible lines of advance increase of
output from highland areas in present use the bringing into use of new
ground in the highlandsbull or a change to increasing reliance upon the outshy
put of non-highland areas
32 The third possibility is not one for the immediate future It
involves either large-scale migration from highland areas to lowland
regions or a large transport program linking highlands and lowlands
together with growth of non-~ricultural activities on the highlands to
provide a cash income with which to purchase 11 imported 11 foodstuffs This
second possibility may indeed be the trend of ultimate development but
offers no irmnediate easement Large-scale internal population movement
from highland to lowland is probably impossible since the Andean
Indian (of different stock to the coastal Indian) is fullf acclimatized
both mentally and physically to life at high and temperate altitudes and
little suited to life on tropical lowlands
33 The two remaining lines of advance would both seec to increase
highland agricultural output But there is an important difference beshy
tween increasing output from valley land in rr esent use and bringing new
and higher land into arable use The first is a complex problem suscepshy
tible only of relatively slow solution the second is seemingly simple
and capable of quick result yet basically less sound offering only
temporary improvement
34 The thurst onto higher ground is already evident and the area
-11-
taken in could probably be greatly enlarged by efficient use of tractors
and modern plows Such use of mechanical equipment would thus give quick
increase of agricultural output but it is very doubtful whether improveshy
ment induced by these means alone could be long maintained The greatest
~r particularly on sloping land is that deep plowing may lead to
soil erosion so serious that land becomes finally llilgtroductive To use
mecbanical equipment i thout at the same time adopting eqJally modern
methods of soil conservation way well be disastrous and that perhaps
within no long period
35 Even apart from this physical daneer there is the virtual cer-
tainty that new land however plowed would gradually sink in fertility
end hence output unless farmed by better agricultural practices than
those now followed in highland Ecuador The present attraction of the
higher land is principally good natural fertility beine virgin ground
On all other counts this higher land is less advMtageous than the valley
floors the va)ley sides are steeply sloping a1d the fl~t paramo is some
2000 feet higher bare windswept and devoid of habitation It would
seem obvious that it is pastoral rather than arable ground were it not
for the pressure upon arable output of the region
36 The pressure today however rises from the relation betwem
popUation and output rather than that betvreen population and arable
area Productivity in the Andean valley is low and can certainly be
improved If improved the pressgtlre which is causing the thrust to
higher ground is relieved until population increase again overtakes outshy
put Against that time however the higher ground vrould remain
-12-
availfibleY and other lower regions may be coming under effective use
37 To increase output of the populated valleys is not a simple mat-
ter responsive to single policies such as simple mechanization by tracshy
tors It will embrace the wlo le range of agricultural practices from
better seed types to crop rotation and fertilizers including in some
valleys irrigation It is a matter rrther of agricultural education
than of~dtlgagricultural appliances and probably experiment under
the peculiar regional conditions will need to precede education Improveshy
ment will necessarily be slov1 but along these lines it can be sound and
permanent
38 Wher~ lfL mere importation of mechanical methods Vi thout
understanding of their dangers in speeding soil destruction by wind and
water erosion may permanently damage the region The somewhat gradual
mechanization of agriculture is of course to be expected and not disshy
couraged but it is not the wlole answer to development in highland
Ecuador
39 It seems that there is at present no over-all agricultural
lfibor sl1ortage in the Sierra and mechanization is nOt therefore called
for to relieve an adverse manpower position It seems however that
some of the larger estates are experiencing difficulty in obtaining their
labor requirements because Indian tenants are viitblolding quasi-feudal
labor dues and devoting whole time to cultivation of their own plotsbull
As a result hacienda holders are attracted to mechanization as an
escape from growing difficulties in obtaining and supervising labor upon
Y As it would not if destructi ve1y formed at this stage
-13-
their ovm land To the extent they are successful the tendency for agrishy
cultural money vrages to rise is weakened
4o There vrould seem to be good possibilities of increasing pas-
toral agriculture in the highlands 1Jrith improvement in both numbers and
strains of cattle and sheep If adequate arable development occurred in
the valleys the main grazing grounds could be the higher land not then
required for arable purposes ~lith dairy cattle on the valley margins or
on valley ground not well suited to arable use Such pastoral development
would be desirable not only to imp1middotove nutrition in Ecuador itself 1 but
as a possible new export of meats fats and hides to meat deficient
Republics notably Peru Early export would probably be on the hoof
along the Andea1 ridge it self
41 The Ecuadorian Government has not included any explicit propo-
sals for highland agriculture (other than irrigation) in its present apshy
proach to the Bank It has however suggested the Bank finance $1 mil-
lion of agricultural tractors and equipment to be handled by agriculshy
tural stations located at strategic places both in the coastal
provinces and the highlands 11 without further elaboration of the
intended highland use of such ecp ipment The description given above
suggests that the usefulness of agriculture machire ry depends to a conshy
siderable extent on the place plan and purpose for rhich it is to be
used
42 In some of the highland valleys (for example in Cotopaxi end
~ound Biobamba) rainfall is deficient and irrigation would increase
valley output by bringing more valley ground into effective use This
- 14 ~-
is clearly sound for flat valley ground already populated is more useshy
ful than higher sloping and more exposed ground The Ecuadorian Govern
ment has included purchase of eq1 ipment for irrigtion works to the value
of $500000 in its present approach to the Barik Assessed against the
requirements for economic development the request is sound provided of
course such equipment is effectively used
(b) The Ooast
43 The condition and nationel significance of agriculture on the
tropical coastal plains is quite different from that ltNl the Sierra The
area as a whole is less densely populated and in some parts such as the
Province of Esmeraldas is very sparsely populated Its principal pro-
ducts are exported The population has more mixed blood than the highland
people and is oore corumercially active and minded There is little feel-
ing of community of interest with the highlmds the rrincipal coastal
city GuayaqJil is larger than Quito and less remote fror-1 outside
influence
44 In terms of reported area devoted to its cultivation cacao
is the principal crop of the coast The table on the following page
shows output of main crops
45 Cacao is not however the most important export crop by value
being surpassed by both rice and panama rats (a handicraft product of the
region) Nor does the table show those products which result from
gatherage of mild growth tagua kapok oil-bearing vegetable nuts
balsa rood rubber etc
Y For use by the Caja de Klaquogo as required both in tile highlands and on the lowlands
-15-
46 Agricultural Production of the Coast
1939 ~ 1941 1942
(limdreds of pounds)
Rice 957164 872890 12304oO 1610489
Cacao 392000 263300 333250 315782
Coffee 343800 369000 310000 190633
Bananas (1000 bunches) 4090 3913 4568 4265
Oranges (COOs) 103000 lQ96oO 80550 75000
Cotton 200800 156800 155910 111500
Tobacco 24o43 4o 765 22349 29539
47 It has been estimated that about 500000 hectares (1 235 500
acres) are devoted to pastures on the coast supporting approximately
425000 cattle and 36000 swine
48 There is no doubt that the coast is an extremely rich agricul-
tural area although toward the south it is increasingly hampered by
shortage of water in the dry season And rt is overwhelmingly the
principal foreign exchange producing region of the country Yet it is
largely undeveloped by any modern standards lacking roads and almost
all basic civic amenities (water supply sewage paved streets etc) in
the provincial towns The development of a tropical agricultural region
without large labor supply _rill raise many interesting and some new
J Irrigation ~rks are in execution and others planned in various places and the irrigation equipment which it has bee11 suggested the Bank might finance would presumably be used on the lovlands as well as the highlands
-16-
problems the solution of hlch in detail may lack precedentY The
suitability of cacao to Ecuadorian conditions arises in part from the very
small labor requirements of the crop At bottom advance will lie along
the route of crop improvement and mechanization the difficulty will be
the proper application of mechanization crop by crop Some tropical pro-
ducts may never be suitable for mechanical cultivation being those whicl
would require intensive hand cul ti vat ion and may therefore not be appro-
priate for Ecuadorian condttions Others r1JJi3 be suitable only if grown on
relatively large plantations
49 Clearly for the foreseeable future many lowland products will re-
main at the stage of gathering of nld natural growth rather than plantashy
tion enterprise The flow to market of such productswould be increased
by improved access notably road core truction anQ at the same time road
building ~~uld seem to be a condition precedent for spread of plantation
methods particularly plantations using mechanical equipment lilliE diate
measures for the over-all agricultural development of the region may not
be directly agricultural at ell they are rather the provision of roads
and transport facilities the provision of long and medium term agric-llshy
tural credits and in some areas) the institution of health services
With the opening up of the region in this manner iiould come more clearly
perceived opportunity for better agricultural use of the land particu-
larly if effective demand for the products is transmit ted back to the
cultivator through establishment of product processing plants where approshy
priate for example in vegetable oils and tagua (vegetable ivory)
] This is the situation which in Brazil for example in an earlier technical epoch was 11 solvedll by importation of Negro slave lebor
-17-
50 As in the Sierra there are good possibilities for pastoral
development on the lowlands Some progress is already being made in this
direction with experiment in breeding more suitable cattle types through
crossing 11Ji th imported Indian brahmin strains Grazing for beef is not
highly labor intensive and this development is very promising since
export to other Republics by sea llould be reltti vely easy In the first
stages export would presumably be upon the hoof ith later development
of meat packing
51 There seems to be no single bottleneck or restraint upon devel~
ment presently existing all other conditions being favorable If developshy
ment occurs it will be along many simultaneous fronts but the front iJhiclf
is lagging and Inayen continue to lag is the provision of basic social ccp ishy
tal (roads water supplies health services etc) that is of those
things which no single private individual or corporation can provide for
itself Given these and the institution of suitable domestic credit
fecilities the rest may be accomplished by private domestic ini tiat1ve
52 The development plans of the Ecuadorian Government as outlined
in a Memorandum dated April 8 give much weight to lowland agriculture
The establishment of agricultural stations to provide farmers wi~h
disease-resisting cacao plants~ tecl1nical advice and credit facilities
is CD ntemplated no foreign exchange would be recpired all funds being
local currency The rehabilitation of cacao formerly a leading export
crop is desirable although development of cacao sources elsewhere may
prev~nt recapture of the position formerly held by Ecuador
53 A proposed agricultural mechanization programwoUld total
- 18
$25 million in foreign exchange cost )J The bulk of this ($1 5 million)
is allocated to wechanization of rice cultivation alone the benefit being
principally in resulting improved export position The remainder $1 milshy
lion is for mechanization of other agricultural produc~s apparently
mainly lowland (those products specifically mentioned being 11cotton sugar
oil-bearing seeds and other specified products11) the exclwnge benefit
forecast being principally through reduction of import a
54 Different criteria ~~ould be used in assessment of these two
projects The judgment on that for rice will depend upon forecast of
world rice markets and in particular upon expectations regarding rorld
demand for rice from the dollar area The validity of mechanization in
cotton sugar oil-bearing seeds and other lowland products will depend
first upon the technical possibilities for such mechanization a matter
not yet fully explored If sudl technical possibilities are favorable
effective mechanization vOuld constitute sound development upon the low-
lands which are relatively sparsely populated
Y Some part of which would be for the benefit of highland agriculture if machinery stations be established there
--19 -
IV MI-~RAL PHODUCTION
55 Ecuadorian mineral nroduction covers only a few products and
important the wells of the lowlands being exploited by the nglo-
Ecuadorian Oil Comany Production of crude petrolewn shows a slicl1t
rising tendency while exnorts have declined steadily a~ more refined 1
products are consumed domestically
56 Oil exploration to the Iast opound the Andesin the Amazonian
region is proceedinc under concession to tl-1e Shell Oil Go1~1any
Three wells have been drilled without success and tvro arc beinc
deepened Cost of this exploration to ciate j_s around US)23 million
If oil is found its only outlet middotwill be a pipe line over Ue Ances
(estimated to cost USiD93 million) and this the comany is not -rE1inz
to undertake unless assured of an outnut of at least 100000 barrels a
day
57 The only other irnrJortant minine activities are those of gold
silver conper and lead conducted by the South ~~erican Develoument ~
Company and the Cotapaxi Sxplora tion ConJ1any War-time lr oduction peaks
were 1942 for gold and CO)per 1944 for silver and lead Since these
resective peaks production has ~-~clined narticularly in copper and
lead although not to 1933 lsvels7
crude petroleum II II
1938 (millio~1s of 225 107
Production Exports Production refined petroleum 37
1947 barrels)
236 bull94
128 (See Table No_Jl_ Statistical Appendix
Production Gold (000 troy ounces) Silver (000 troy ounces) Co~per (000 pounds) Lead (000 pounds)
1938 445 82~0 27 21
War Peak l03tJ hhl3
96788 161-+88
19h7 5o5
1569 3316 h98h
-20-
58 Ecuadorian trade statistics list exports of crude pet~middotoleum
and minerals separately from that of other commodities even in aggre-
gate figures underlining the fact the exploitation is in foreign hands
and hence colonial in nature This aspect hmmiddotever is of di-1inishmiddot-
ing importance as now the foreign exchange realized from such mineral
exports accrues to the Central Bank and as in any event nineral ex-1)
ports form a diminishing proportion of the vhole 7
V ~JNUFACTURING PEODUCTION
59 There are virtually no stCltistics on manufacturing in Ecuador
and none which present any comprehensive view It is ho~middot-rever clear
that there is very Uttle industrial factory prJchJction and obser-
vation in the country leaves one with an impression of the nresent
igtilportance of handicraft production
60 The most inportant consuxner-good factory industrj_es are tex-
t~~~breweri~-~~ otheuro7r beveraces shoes ard leather _roduc~s buttons ~d~lttfr
and nails Textile production using domestically produced cotton pro-
duces cotton piece-goods and wool rayon and hemgt textiles supplying
almost all domestic demand for low-quality products The only irJDcrtant
producer-good factory industry is cement the plants being located near
Guayaquil Lack of domestic technical lmow-how and of capLtal and
the low level of domestic effective demand account for the sli~ht develop-
ment of faetory industries whose rrowth on any scale beloncs to a 1ter
stage of economic development
y Value of nineral exportsmiddot as nercentare of value of all exports 1929 260 nercent 1933 430 n 1939 397 1946 11~5 1947 69
Production and irrport statistics for cement tre civen in Table IJo bull 2__ Statistical Appendix
- 21-
61 Uuch of finished commodity ygtroduction is at the handicraft
stage both for nroducer and consumer goods In Quito and Guayaquil
one sees many small 11 shops11 producing metal leather and wood manushy
factures largely by manual methods It is an illuminating co~~entary
on the shallow growth of industrial specialization that the ll1ission
did not see any shops selling ready-made womens clothing All
womens clothing shops displayed only materials in the bolt as in
pioneer days elsewhere
62 One handicraft industry of great importance in exports is
the production of panama hats It has been estimated that 30000
families are occupied vrhole or art-time upon this nroduction and
at times (for example 1945) they have provided the largest single
export item by value The grmvth and treatment of the fiber and the
weaving of the hat is entirely an Indian handicraft industry the
Yteaving of a high-quality hat taking three months The fiber is erown
and the best hats woven in the lowlands Its future ir-mort nee is unshy
certain as the competition of Italy and the Fhilinpines is again felt
in low-_)rice woven hats the boom emjoyed during the war nay recede
63 Ecuador in its ~resent and foreseeable development is an
agricultural country with no immediate movement toward industrialization
EcuAdorians met by the Mission themselves stated this The growth of
factory industry will be slow that of small shop and handicraft manushy
facture somewhat less slow It vmuld seem as stressed later in this
report that there is room for grm~h of processing of agricultural
products Statistically such processing would be classed as industrial
production but is oroperly the finishing stage of agricultural productior
- 22-
to secure improved durability and portability of perishable products
This would increase effective demand imnacting upon the farm and ass1st
in stimulating agricultural development Some progress being made in
this direction notably in vegetable oil expressing plants Ihe only
non-agricultural project suggested by the -r~cuadorian Government has -eer
a cement plant located in the highlands at a foreign exchanr~e cost of
$2 rrillion the justification being both the saving of foreign exchange
expended upon cement imports and reduction of load upon the only railshy
way connecting lovrlands and hichlands Growth of cement use accompanies
economic development assessment of this project (engineering questions
apart) would involve tainly questions of timing location and finance
matters which are really all aspects of the single question whether
such a project may not be one for private direct investment Initial
expectation would be that were all factors favorable to the success of
the project it gtlould be readily undertaken by orivate enterprise
particularly when it is remembered that railway freiehts 1bullrould protect
highland production from lowland competition
6h No sueeestions regarding increase of electric power output
have come fror1 the Government indeed the official statistical services
have no data upon installed capacities and demand Cnly in Quito and
Guayaquil are present industrial uses of electric poler of any ir1portance
Elsewhere suIJply is from snall municipal plants (mainly therraal) for house-
hold consumption It appears that demand mar be ahead sunply in cost
towns very frequently voltages are maintained around 80 instead of the
rated 110
- 23 -
65 Shortage of electric nower is not however hamoering
economic development at this stage although it may soon do so in
sevral urban centers such as Qui to and Hiobamba Sone ttne i-1 the
iuture the possibility of large hydro-electric vrorks on the eastern 1
side of the Andes will merit attention
y Where the rivers are fast and clear on the western side they carry much silt
- 24-
VI DmIESTC THANSPORT AND COilERCE
66 The space devoted to agriculture in this report reflects its
importance in the Ecuadorian economy As has been said further developshy
ment will for sometime be mainly agricu1tural
67 Present restraints upon that development are not located
solely or perhaps even nrincipally on the farm there are many
features of the general economic environment which operate to hamper
even purely agricultural development There is great room for improveshy
ment of transport to knit the economy tocether and to encot1raee grovrth
of output
(a) Transport
68 Without roads there can be little regional or inter-regional
intergration Fithout that intergration (which for some regions and
some crops would open upon the world at the gatewa~r of a oort) there
can be but small inducement andlittle opportunity of increasing proshy
duction In much of Ecuador the principal transport vehicle is the mule
whose patience and endurance under heaJr load is matched by that of the
Indian
69 As regards roads the requirement is both more roads and
better roads capable of bearinr modern vehicular traffic The roads
traveled by the 1Jission are uniformly bad both slowing traffic and imshy
Ilosing extraordiPamiddoty vehicular de_reciation Ultimately no coubt
there vdll be an adequate system of all-rreather roads in Ecuador For
the immediate future the more modest tarset is to attain a reasonable
system of roads civine access to the creater art of roducine areas
- 25-
in the dry season At present the unsurfaced access roads are cut to
pieces by --vater erosion in the wet season and consolidated somew1at
traffic in the dry season A single eradinr operation smoothin thE
dirt surface at the end of the vret season would ci ve accelJtable usashy
bility in the dry )eriod v1hich in the populated coastal rovince of
icanabi for example is eight ~aonths of the year At -_resent the so1e
transport link for corunodities between loYrlands and the hihlands
is the Guayaquil to Quito (and beyond) railway This link is nrobaoly
nearing saturation point vdth present equipment and its strencthening
both by railway imJrovement and all-middotweather hichway construction is
obviously desirable it middotill probably become essential yri thin five
years
(b) Commerce
70 Physical transport alone hogtever is not the only ope c-ation
ofcarriaee required to intecrate a reeion internally and to bind toshy
cether the various regions There are also tL physical and the finanshy
cial aspects of comr1odity holdinr involving the storae and vrhere
necessaFJ the partial processing of products to reduce perishability
and the avail~bility of mechanisms of short-term finance extendine over
crop periods In Ecuador these tro aspects are closely related
71 Apart from some export crops there is virtually no crop or
food processinG undertaken And in the export crops processing
is the minimum necessary to secure portability Eice is nilled but not
polished cacao is sun dried coffee is dried and within only recent
years washed fruit is exported whole Some new e~Jor-ts may require
further processing and installation of plant starting or is in
- 26-
advanced discussion for example vegetable oil processing (although
for sometime no eXport surplus of vegetable oils is 11~11 and fish
canning
72 Nor is there any important ~recessing of domestic food pro-
duction for home consumption bull There is no freezing or canning of meat
which is taken to market on the hoof There are only two or three
very small butter factories and no whole milk orocessing Cereals
of course are not highly perishable but there are no silos or granarshy
ies and experience of similar situations elsewhere suzfests that losses
by deterioration and infestation may be significant no direct evishy
dence anthe incidence of this factor in Ecuador ~as obtained by the
Mission Thee is little storage of grass on the coast in silos or
as hay and in the dry season slaughter of cattle because of lack of
feed is at times necessary In short the situation is not so very
dissimilar to that ofmiddotmedieval Europe
73 Roads alone would not create an environment favorable to
change in this position although lack of roads nar well inlibi t change bull
In addition suitable credit facilities for the finance of co~~odity
holding through time are necessary
74 Hany complaints were voiced to the Hission reearding lack of
short-term banking credit for crop movement and storage and for medium
and long-term agricultural investment and no doubt there is signifi
cant lack of such credits But this is not the result of some simle
institutional defect of the b~~inc and credit structure even though
institutional improvement may be necessary It is fundamentally a
- 27-
reflection of the fact that Ecuador is extremely poor in disposable
capital available for even short-term investment ie vrorcing capi-
tal Improvement of short-term credit facilities for what in advanced
communities are regarded as purely commercial purposes would in effect
represent an increase of capital intensity in the Ecuadorian ecororny
To the extent that banks met more fully the gtJeak seasonal credit re-
quirements for croo movement and storage individual nrivate reoources
are relieved of the 1eak burden and available for other investments
75 Thus iorovement of the techanisr by 11hich the banking system
provides working capital for corrtercial or inciustrial (in the sense of
crop processing) purposes is itself an act of investment rather than
merely an institutional rationalization ilnd as such carry the
usual consequences of investment in an undevelogted economr with very
law voluntary savings To the extent that additional credits are not
matched by savings sewhere (either voluntary or forced through
taxation) they will be inflationary in effect just as an
additional act of long-term investment would be Increase of banki1g
nrovision of workinrr capital should keep step with totl capital for-_ - - 1 mation of which it is one aspect7
It is implicitly assumed in the foregoine that at nresent in Ecuador the amount of small voluntary savinrrs is neclicible It vrill presumably not alrmys remain so and ~Jart of the modifications of the bankin~ system shou1d be attract Clli1U1 atively such sav-ings in the fom of savinc do)Josi ts This 1muld increase the extent to which Danks can safely flovide capital It will be a much later before small private savincs are directly in-vested in commerce or industry throuh joint stock r1ethods There is no stock-exchance in Ecuador
-28-
76 It is of course just as important that the availabi lity of
working capital should not lag behind as it is that it should not run
ahead The Bank should ensure that any long-term investment projects it
may assist to finance do not effectively starve the rest of the econo~
of working capital in the process of avoiding inflation
77 There is also the question of the price of short-term lending
that is of the level of interest rates The Ecuadorian is a highshy
interest rate eoonomy The legal maximum for commercial short-term loans
is 10 per cent having recently been increased from 7 per cent legal
maximum rates however are not systematically enforced by commercial
banks themselves At a time when the legal maximum was 7 per cent
going rate for 90 day loans secured upon properly warehoused commodishy
ties and with third party endorsement was 12 pe+ cent
78 This very high structure of interest rates seems open to
obvious criticism but is in fact probably not Tiholly unjustifiable in
the present conditions of Ecuador It is the cumulative result of many
factors so that more official prescription of lower rates would be
quite ineffective These factors seem to be
(a) Interest proper~
(b) layment for risk bearing arising in part out of a
low rating upon individual credit and in part from
the institutional conditions (such as embryonic
commercial and financial ruarkets) which seriously
reduce the liquidity of any asset other than money
itself
-29
(c) An clcmmt 0f discount 111nn cyectcd luturc irf] utinn
reducing the real value of the pa~nent for lending
(d) An element of monopoly which upon purely subjective
judgment may be the least ilJI9ortant of these several 1
factors7
(e) The real shortace of capital whether short or long--
term~ reflecting in interest rates as a genuine
scarcity price
79bull Of those factors the di~ount upon expected future in-
flation increases prices at a rate of 12 ner cent per annum a money
interest rate of 12 per cent per annum is a real rate of zero If
therefore inflation could be controlled a substantial reduction of
money interest rates could be hoked for At the same tine while
inflation continues high interest rates probably have small influencemiddot
in encouraging money savings
80 Even without inflation ans until the su~1ly of available
real capital improves relatively high interest rates may well be
acceDtablemiddot as a price mechanisn nethod of selectin~ most urofitable y ~
uses of limited fundsbull middothere exoected urivate nrofit did not seem l - -
to parallel social desirability loans at lower rates (ie subsidized
terms) could be made perhaps through reconstituted Development Banks
Prima facie however such loans 1bullrould not be short-term
~I -Onthis interprepoundaion the situation in Ecuador differs signifishycantly from that in Peru
tt is suggested that a powerful point of intervention would be to limit commercial banking dividends distributed to not more than say 7 per cent The high profits nmv earned by commercial banks would then progressively accumulate until liberalization of lending becomes virtually forced by accumulation of funds representing genuine corporation saVings
- 30-
81 The discussion of private finance has so far upon
short-term credits there is an even larger nroblem in the
intermediate and long-term arricul tural credit It is not necessarr
to expand greatly upon this since it too is a consequence capi-
tal shortage
82 Imnrovement would seem to be alonrr the route - 1 of nroper UElte
of existing Development Banks (or their successors-) effectively
in the earlier stages as lending agencies of Government
VII OFFICIAL DEVLOPHl~NT FHmiddotIfJCE
83 In the circurnstances of a country like Ecuador the greater
part of domestic capital forr1ation requires official directly
or indirectly if it is to occur on any scale are too
small and too narrowly held to permit much -rowth this roL1te
andthose few who are able to save at any sinificant rate are larely
uninterested in the efficiency of ~reduction
84 Official finance may be either direct or indirect direct
throueh works executed by Government or 0JUblic bodies indirect
throueh lending institutions such as Dev~lopment Banlcs capitalized
from public funds In either case funds are diverted to investment
purposes by Govern~ent intervention
85 Thus Development Bank lending for productive purposes (for
example long-term acricul tural credit) is an item 1n ca9i tal formation
V There are thirteen reaional Development with an unirnJresstve record of manaeement Their possible reconstitution is under discussion
-31-
rather than a mere institutional rationalization of the credit mech-
anism Indeed as has been stressed in the last section even im-
proved su1nly of short-term credit gtrill in art rewesent
formation A developing economy which neclected these items in 11Cnn21~~
or forecastinc total caital investnent would be very vulnerable indeed
to inflation induced by over-investment
86 17here voluntary savings are Jow the only wmiddotamiddot to sirnificant
rate of capital formatton can emerge without inflation is an equi-
valent amount of savine forced throurh taxation One ould look for a
relatively hirsh level of taxation to national income and for a rela-
tively high proportion of exnenditures caDi tal purposes to total
Government expenditures On both these counts Ecuadorian elq)erience
seems irare s si ve
87 In 1946 total budretary and spedal revenue rms disclosed
as 5368 million sucres in the sa1le rear an estLnate middotJaced national
income at 20096 million sucres This a proym~tion of 27 middoter
come a proportion so hich that in fact it lacks credence In assess-
inc total tax burden part of the revenues of Government monorolies
and all of municial revenues should be included if this be done y
the proportion becomes 37 per cent In addition new exchance taxes
yielded 973 million sucres in 1947
Mono_)oly participations (ii direct disbursements for public _Jurposes) were 353 million sucres in 1946 munici~al income was 1803 million sucres in 1947 (1946 not available)
32-
88 It is very difficult to accept the conclusion that Ecuadorian
revenues form so high a proportion of national income it would seem
that the estimate of national income is too low Nevertheless tax
revenues are clearly a sizable percentace of national income
89 At the request of the Mission an official estimate of total
official expenditures on capital account was prepared Total income of
Government municipalities provincial councils and other public
entities was ~iven as 7S4 million sucres and total capital expenditure
from that income as 2237 million sucres or slichtlr over 30 per cent
of revenuesY It is difficult to feel confident that effective capi-
tal formation on this scale actually occurred certainly there is
little evidence visible to the eye of the t1middotaveler
90 Notwithstanding such doubts the fiscal evidence is of a
fairly hich proportion of tax revenues to national inco~e and of a
hich proportion of revenue allocated to capital investment It would
seem that the fiscal mechanism exists for domestic capital fo~~tion
what may be required is more effective expenditure of allocated funds-
Before a development plan envisa~ing the expenditure of still more funds
was adopted it would be desirable to examine closely administrative
and technical efficiency in the use of existing funds
91 On the side of revenue Treasurr officials informed the Mis-
sion that tax evasion was estirnated at some 30 per cent of ta revenues
1 This makes such capital expenditures 112) per cent of 1946 national income which a~ain seems very high indeed
The two largest items are Government public works (8)4 million sucres) and municipal works (900 million sucres)
- 33-
particularly in income and land tax It might well be advantareous
on the sides both of revenue and of expenditure for Ecuador to obtain
technical assistance of the tPe that the United Nations Department of
Economic Affairs rendered to Venezuela in 1947~Y involvinpound revision
of the structure of the budget of budcetary audit practices and the
like
f Report~d in UN Document ECN 1SubJfti 4 - 21 June 1948 lostricted)
- 34 -
VIII 001EHNl(iEi~T FINANCE AND INRATlON
92 What may be called 11multiple budget practices exist in Ecuador
as in other Latin American countries There is an annual Ordinary Budget
one or more Extraordinary Budgets( tro in 1947) end a number of Special
Accounts (twenty-five in 1946) not included in the general budgetary
accounts The State operates nxmopolies in tobacco liquor salt and
matches part of whose profits are taken into the ordinary budget as
revenue and part used directly for public purposes It is thus diffi-
cult to assesrmiddotgggregate Government revenues and expencii tures and vir-
tually impossible to detail the purposes of expenditure to ascertain
accurately public capital formation by way of public morks and the like
9 Taking the disclosed figures on the ordinary and extraordinary
budgets and tne special accounts there has been a net surplus over the
past ten years 1operations of 234 million sucres~ This however is
not an accurate reflection of the true aggregate position because the
Government operations are not ~holly included in these disclosed ac-
counts But since the Government has no source of internal funds other
than the Central Bank the net recourse of Government to Central BanJJI mirrors the over-all result of Government finance such recourse increased
In 1946 for example the monopolies contributed 5357 million sucres to the general revenue and disbursed 3526 million to municipalities (145 million on general participation and 1652 million sucres for 11 special participation of gthich an example is a new electricity plant at Ambato the state railways (92 million) etc
gj iiith only three years of disclosed deficit since 1938 See Table 12 in Statistical Appendix
2 Central Bank loans middotto Government less Govertllllent deposits in banks
- 35-
480 million sucres over the nine-year period 1939 to 1947 inelusivel
an average of 53 million sucres annually amplch averaging however con-
ceals very important differences between the three periods within the
nine years to tal
94 The table on the next page sumnari zes the factors causing in-
crease of domestic money supply It is computed by rearrangemm t of the
balance sheets of the Central Bank all commercial banks and all developshy
ment banks and is thus a table shoring changes in items in a rearranged
aggregate balance sheet of the Ecuadorian banking system
95bull The first t70 periods 1939-1943 end l943-l946f were both
periods of heavy inflation_ During the first five years notes in cir
culation and monetary deposits increased 3437 million sucres (or 255 per
cent) and in the next three )eera 2904 million sucres (or 61 per cent)
But the causal structure was quite different in the two periods
96 In the first inflation was almost wholly induced by external
factors (favorable balance of paYments causing increase of foreign exshy
change holdings) the major domestic factor being expansion of commercial
bank loans and investments in this period deficit Government finance
was not a causal factor
97 In the next three-year period 1943-1946 however the major
inflationary factors change deficit Government finance and expansi on of
f As calculated by IBRD Mission loans to Government including ali loans to official agencies A recent calculation by the IMF Research Departshyment covering Government operations only places the aggregate 9 years deficit at 345 million sucres~ See Table 12 in Statistical Appendix
- 36-
BANKING CHANGES ~0015 SucresJ
Jan 1939 Jan 1944 Jan 1947 Jan 1948 to to to tomiddot
Dec 1943 Dec 1946 nee 1947 June 19h8 t~ ~arsJ ~~ iears) trmiddot ~~r1 t~ mo~~h~2
Central rcrk loans tomiddotc~vt~ f 16174 f 160260 - 701p88 23695 Central B~r~ Loans to Public -1 6978 2_283 1- 67548 1- 39763 Commercial Bank Loans and
Investments J 187554 f 14624 88h4 1- 2~ ~49 Development Baru Loans and
J 14227 136818 ~ 644 1- 26090 Investments
1 224933 f 313985 11)40 1- 68107 Net Bank Foreign Exchange 260774 f 94662 - 53203 - u6 112
7 485707 7 408647 I
7 bull - 64543 21395
Notes in Circulation f 16o907 1-131729 - 23205 - 17290 Public Monetary Deposits -A 162868 1- 128914 - 68734 1- 19620 Government Deposits f 19968middot 29768 9050 2366
7 343743 7 290411 82889 - 36 Public Time Deposits 116834 ~ 42053 1~004 f 317j
y 7 46o517 7 3J2464 83893 ~ -- 3137
Absorbed by Banking System 1- 25130 middot~ 76183 1- 19350 18258 7 485707
11 f 4o8647 64543 I - 7 21395
Net Government Borrowing J 131492 from Banks 3794 - 79738 - 32745
Deposits in Central Bank in foreign money (not included above ex pressed in Sucres
Government ~ 4486 - 633 871 - 11059 Public 25242 J 78964 - 78814 J 4h97
T29J 728 7 I
7 IIIII middot~~ ~ I
78331 79685 31+38
y Made urt as Io11mlfs
Cas~ bullbullbullbullbullbullbullbullbullbullbullbullbullbull ~ bullbullbullbullbullbullbullbull - bullbullbullbull J 266 1- 367 - 22~7 99 Other assets less other liabilities~ ~ 4 330 ~ 293 ~ 18~8 Capital and Reserves~- bull bullbullbullbull 4 bullbull 52 bull 1 1- 79-9 26 o 278
7 I
7 7 I
7 bull Ill ri bullbullbull
251 762 194 18)
Subtract increase
37-
Davelopment Bank lending dominE)te the position Expansion of commercial
bank lending is relatively negligible while a comparatively small role is
played by balance of payment influences
98 From the end of 1946 the general financial situation deterior-ated
rapidly in five months from January 1947 to ~~ay 1947 net foreign exshy
change reserves of the Centrel Bank fell 935 million sucres or 7 7 mil-
lion dollars to a level of 2927 million sucres or 21 7 million dolJars
In litaY 1947 an IMF Mission arrived in Ecuador (at the request of the
Government) and in June 1947 a multiple exchange rate system with import
classification was introduced upon the advice and with the concurrence of
the Fund Operation of this system Jielded considerable profit n in
sucres it is in effect a new imposition of import taxes and such
11profits 11 are in reality additional fiscal revenueY It was of the
essence of the Emd s attitude in Ecnador that the exchange difficulties
bad arisen through domestic inflation and that these addi tiona reve-
nues should therefore be applied only in reduction of Government debt to
the Central Bank
99 The effect of such policy is clearly seen in the third column
of the table Inflation is checked notes in cirmlation and monetary
deposits falling 929 million sucres (or 11-per cent) i~ one year Alshy
thoUtgb however Central Bank loans to Government (and also colllWrci al
jJ At this point only the domestic aspects of this measure are emphashysized In a later section the external or balance of ~ent aspects will be taken up
Y Such revenue from exchange taxes yielded 975 million sucres in 1947 bull md in July 1948 was running at g to 10 jllillion sucres a month this revenue is not of course taken into the budgets bull
- 38 -
bank loans and investments) fell the actual deflation _was largely
caused through loss of foJeign exchange rather than over~all reduction
of domestic bank lending For in response to vigorous ~oilplaints of
credit shortage the Central Bank greatly increased its loans to the
public almost fully offsetting reduction of its loans to Government
In the first six months of 1948 there was no significant contraction
of money supply banking loans to the public eJggtanding to offset the
deflationary effects af an adverse balance of payments and of Government
debt reduction
100 The exchange surcharge multiple rate system was in operation
through August 1948 proceeds being devoted to reduction of Government
debt to the Central Bank~ But there has bean concern lest the resulting
deflation of domestic money supply would be too severe and the Central
Bank has in fact adopted a compensatory policy to prevent further reducshy
tion through continuing to expand lending to the public arid through
quasi-open-market pur~e of mortgage bonds to the amount of 17 million
sucres by July 10 19l8 when further purchases were discontinued
101 To avoid the netcessity for such compensatory policy the Cen-
tral Bank proposed to the Government that the destination of reveme from
exchange taxes should be changed Instead of being applied in reduction
of debt the proposal was that they should be useci instead to create a
development fund tt to be administered by the Cent~al Bank unless a
planned Development Institute or other competent authority is estabshy
lished In mid-September the Fund appro ved such cllanged dest ination of
these revenues 90 per cent of which will in future be applied in finance
of development and 10 per cent in stabilization of Government bond prices
-39-
This removes a check upon inflation which has operated for some fifteen
months unless Central and commercial bank lending policies recognize
this changed situation further inflation may follow even if the Budgetary
accounts run no deficit
102 At the same time this change does provide a source of local
currency finance for development projects
-40-
IX INTERNATIONAL TRAIE AND THE BALANCE OF PADlENTS
103 Ecuador exports agricultural products (rice cacao coffee
tropical fruits balsa wood) mineral products (crude petrolelUil gold
silver copper and lead) and handicraft products (panama hats)Y
lo4 Approximately one trird of Ecuadorian exports (including
minerals) go to the United States The proportion rose during the war
due to VmiddotIar-time demand for strategic raw materials but is now tending
to revert to pre-war levels Loss of European markets has been partly
compensated by gain of n$w export markets at least for a time and
especially for rice Countries in the Far East whose rice production
fell during war such as the Philippines and in Latin America whose
Eastern sources of supply were cut off such as Cuba and Venezuela
have provided demand for Ecuadorian rice This outlet however may not
last much longer
105 On an average of years 1938 to 1943 about 15 per cent of
Ecuadorian imports are foodstuffs wheat and lard being the largest
items and 85 per cent are manufactured goods and equipment Import
of foodstuffs is however gro1ing t-vith population and in the key pro-
ducts of wheat and fats would be expected to grow still faster if
econowic development raises n~ss living standards witl10ut increasing
domestic output of these prodvcts For increased consumption of wheat
products and fats is in part the definition of rising living standards
for a very poor population
fJ See Table No13 in Statistical Appendix for composition of exports
-41-
106bull Before the war (average of the years 1937 to 1933 ) the Americas
supplied 49 per cent of Ecuadorian imports by value the United States
alone supplying 41 per cent Germany provided 22 per cent of total
imports and the United Kingdom only 8 per cent Europe as a whole supshy
plying 45 per cent
107 In 1946 and 1947 the Americas provided 86 per cent of total
imports the United States supplying 66 per cent EUrope as a source of
imports fell to 12 per cent although the United Kingdom maintained its
relative position (7 per cent) Whether the United Kingdom can expand
its provision of imports for Ecuador JDaY be domiddotubtful on the one hand
the loss of Germany as a supplier pzo vides an opportunity on the
other the competitive industrial position of the United States may make
it difficult for the United Kingdom to fill this gap
No balmce of payments estimates eJd st for Ecuador1
Growth
of foreign exchange holdings over the war period however indicates a
strongly favorable balmce ~let reserves which were equivalent to 409
million sucres in December 1939 rose to 3962 million sucres (294 milshy
lion dollars) in December 1946
109 Official purchases and sales of exchange are shown in the fol-
lowing table together with corresponding movements of exchange reserves
The difference betRSen the balance on official transactions and the moveshy
ment in reserves arises from transactions on the free market
110 During the war import and exchange controls were nominal
there being no shortage of dollars nor any decrease of exchange reserves
jJ Except for the ~eriod January to May 1948
-42-
Loss of exchange reserves in 1945 led to a tightening of control on an
allocation of quotas smong users of exchange Import permi ts were
granted on the basis of former imports by merchants At the end of
1946 controls were relaxed on an extensive list of imports items and
the consequent loss of exchange has led to difficultieQ
Ul Official Official Balance Changes in Purchases Sales on Net
Official International Trans- Reserves actions
(Millions of u S Dollars)
1942 257 185 t 72
1943 35-5 279 t 1middot5 t Ul
1944 423 34~4 t 79 f 88
1945 353 394 - 41 - 7-2
1946 471 415 f 56 t 1 9
1947 488 579 - 91 38
112 From December 1946 to IVtay 1947 net foreign exchalge reserves
fell US$ 77 million from US$ 294 million to US$ 217 million In May
1947 the advice of the International More tary Fund was sought with reshy
sults summarized as follows in a recent Fund documentY
The lfund 1 s Mission arrived in Ecuador in Yay 1947 It was not advisable at that time to contemplate devaluation which would have made the inflationary situation worse An emergency program was therefore proposed Essential and semi-essential imports were to be distic5~ished and a surcharge of 5 sucres p3r dollar imposed on the semi-essential group as a check against their excessive import New decrees including many of the recomshymendations were issued in June
The main features of the new system were as follows
Y Economic SuVey of Ecuador RD 672 - P 43-44
- 43-
(a) The elimination of all quantitative import export or exchan~ restrictions licenses and quotas with the exception of a few absolute prohibitions of some luxury imports
(b) The checldng of excessive import demand through a fiveshysucre (33 per cent) surcharge on non-essential imports
(c) The suspension of nearly all exchange sales for nonshytrade transactions and the creation of a free market bull narrowly limited in volume and comprising mostly all transactions that are uncontrollable in practice plus a snall amount of domestically produced gold
(d) Exchange for a small amount of the least essential goods was made available in the free market
(e) One of the basic aspects of this plan was the steriliz~ tion of all proceeds from the import surcharge which was placed in a fund for the extraordinary amortization of the government debt to the Central Bank Tnis is still in operation
The beneficial effects of these reforms were felt immediately In June the trade deficit ~as reduced to only $07 million and in July to $06 million By August for the first time in 3 monthsl there was a small surplus In September the deficit was smci l -j)O 5 million In October there was a surplus of $15 million and in November and December there were small deficits of only $01 million and $07 million respectively
In short the deficit for the year was about $99 million in its gross gold and foreign exchange reserves During the same period international liabilities of the Central Bank showed a reduction of about $6 million Therefore~ the net deficit was around $39 million 95 per cent being in the first half-yeer and before advice had been received from the Fundrs Mission
113 It should be emphasized that this multiple-rate system of
exchange control is entirely freed cpentitative controls Excessive
import demand is checked by the higher rates upon imports deemed non-
essential the list of which is knollD and published Anyone presenting
sucres is provided with exchange at the appropriate rate upon list A and
B goods and the free rate is influenced by occasional releases of offi-
cial exchange into the free market The system that is utilizes the
inter-play of the price mechanism rather than the bWlilmlcracy of quanti-
tive controls or quotas
- u4-
114 Loss of exchange continues however despite considerable reduc-
tion of imports Gross international reserves declined US$ 18 million
and net reserves US$ 35 million in the first six months of 1948 Offishy
cial transactions January to June 1948 are surmrarized in the following
table~
Receipts From Exports From other Transactions (1)
Total
Payments For Imports For other Transactions
Total
Balance Change in Gross Reserves
1947 Jan to June
1948 Jan to June
(Millions of Dollnrs)
163 5 6
167 44
219 211
289 219 23 10
312 22 9
- 93 - 18
(l) Includes purchases of domestically produced gold deposits received in foreign currencies and borrowing from corres~ pondents abroad
115 Prospects for the remainder of the year moreover are not goo~
It is estimated that loss of international reserves over the whole year
may be aboat US$ 6 million Whether the deficit is in this region de-
pends largely upon actual export realizations for the remainder of the
year lhe most critical here is rice 11hose ygtrice is falling and the
crops accumulating in the rice millsplusmn Latest information is that
f Countries receiving allocations of Ecuadorian rice under International Emergency Food Council allocations have been requesting a change in source of supply owing to shortage of doJJers Thus France has asked for 6000 tons of rice from Indo-China instead of ~cuador and Greece for 2000 tons from kVPt in place of Ecuador as supplier A recent favorable sale of rice-to Haiti has somewhat improvea the cuITent position
-45-
plantings for the October crop are substantially reduced Wet weather bas
led to some loss of the cacao crop Receipts from exports in the follow-shy
ing official exchange budget may therefore have to be modified down- [l
ward on any pxuient calculation-
116 ~or Recei1ts and Sales of Foreign hchange
(Thousands of U S Iollars)
1948 1947 Estimated Actual
BECEIPTS
Worts Rice 13~ la4~ Cacao 11 l 2 Other products 10700 12371
Total Exports 354oo 42120
Foreign companies 5300 4842 Others 800 1883
41500 48845
SALES
Imports 44800 53499
Services 3200 4470
4B ooo 57969
117 In this situation of continuing presSlre one step has been
tken and others are under consideration The one taken relates to offishy
cial imports representing an average pf 20 per cent of total imports
Importation of cigarettes liquor matches and other things by the State
tionopolies is especiallyen significant These were formerly provided with
exchange tax-freebull ie at the ~owest rate of 1350 From July 26 they
afe required to pay the ordinary import rate of 15o4 on sll supplies for
J See note on page 47 -A
- 46-
their ovm use (such as office supplies) and the same rates as private
importers (ie 15o4 or 20o4) on all imports to be sold to the public
(such as wheat flour fats cigarettes etc) accord~ng to the classifi-
cation of the goods
118 Remaining possibilities seem to be a partial reclassification
of imports removing items from List A as essentials to List B as se~ishy
lwruriesY and or a chenge of nominal exchange parity vri th or mithout
a narrowing of the spread between the rates Here pressure from
exporters particularly from rice exporters may be hee~vily in favor of
an increase of the dollar buying rate with consequential changes of
selling rates
119 The present loss of foreign exchange is occurring ~rithout any
service being met upon defaulted foreign debt although service of Ex-Im
Bank loans is being made If it be assumed for purposes of calculation
that Ecuador reaches an agreed settlement identical to the Chilean sershy
vice would require exchange equivalent to US$ 378000 in 1949 (of which
US$ 368000 would be required in dollars) and would rise to US$ 4o20CO
in 1954 Adding service upon Ex-Im Bank loans outstanding on June 30
1948 and other known but small indebtedness total debt service would
increase to US$ 1410000 in 1949 rise to a second maxilliUID of US$ 1394000
in 1951 and then progressively decline Upon the assumption thet amp-Im
Bank loans undisbursed on June 30 1948 are all fully drawn before their
maturity total debt service charges would be US$ 1533000 in 1949 rise
On August 21 a number of import items were changed from List A to List B the aggregate import value (when granted exchange at List A rate) affected being US$ 7 million
-47-
to US$ 213431000 in 1952 and again would progressively decline These
last service charges rould be for 1949 3 1 per cent of 1947 actual
official foreign exchange receipts and 3 bull 7 per cent of estimated 1948
receipts and for 1952 48 per cent and 56 per cent of 1947 actual
and 1948 estimated exchange receipts respectively
120 Estimating prospects from this point in time Ecuador does not
seem to be a country able to afford assumption of any great additional
burden of debt service payable in dollars The amount that could wi thbull
out hardship or distortion be squeezed out of the balance of payments
by no means corresponds to the development needs of the country Any
start must therefore be modest and cumulative rather than spectacular
and precarious and this conclusion fits with other controlling factors
in the over-all situation notably the supply of administrative techshy
nical and managerial abi li ty
- 47-A -
Note on Official Exchange Transactions
Official exchange transactions for the firstsix months of
1948 are given on page 44 of this report Results for the full year
are now available and reveal that earlier expectations regarding the
probable 1948 balance of payments deficit were unduly nessimistic
Cacao export values have been lar~er than expected and in the last
period of the year there IBre some unexpectecily favorable rice eA-port
sales total export receipts were US$ 8 million larger than forecast
on page 45 Imports were held close to forecast
Receipts
Exports Foreign Co~anies Other
Payments
Imports Foreign Comoanies Other
Balance
Change in Grass Reserves
Official Exchange Transactions (full year - n~illions of dollars)
1947 -421
L18 19
488
535 06 149
580
y does not agree because of rounding
January 26 1949
1948 -436 h2 7
i85
Lt52 2
28
-oJ
-48-
X EXTERiJAL DEBT BEoomJ
121 The position of public long-term external bonded (excluding
inter-governmental) indebtedness of Ecuador is as follows
Amount in Default AmoUpt Outstandi~ ~ e Interest D~te
~In currmc1 (u s (us of p~t Dollars) Dollars)
Dollar obligations Gueyaquil amp Qui to Ry) $ 1226)000 12263000
286000 12263000
286000 123147
63047 Sterling obligations Franc obligations ( Oie
b 71000
Francaise de Chemin de Fer 1 lquateur ) Fcs 8386000 70000 70000
12619000 l26l9000
middotmiddot Note The Government of Ecuador oyenms about 75 per cent of the
stock of the Guayaquil and 1uito Railway and guarm tees the bonds and certificates which are largely held in England The franc obligations of the Cie Francaise de Chemin de Fer 11lquateur are not included in the offi cial statement of the public debt nevertheless the Government does recognize some liability for them and during the last few years has engaged in Degotiations for their retirement
Inter-governmental Debtsmiddot
122 Debts to the United States Government are of three types
63047
first the loans by the Export-Import ~which were outstanding on
June 30 1948 in the amount of $7 705606~ second the aJIDunts duemiddot
because of purchases of surplus property totaled $484 567 on March 31
1948 and third the obligations arising out of the lend-lease settleshy
ment the amount of 1fhich is not available (Total lend-lease assistance
j This section of the Report was prepared by Mr Paul Dickens
to Ecuador amounted to $7 bull 795000 )
123 In addition Ecuador is indebted to the Government of Venezuela
in connection with the establishment of a joint shipping company Late
data are not available but as of February 1947 $500000 ($1000000
authorized) was outstanding the total to be repaid by 1966
Debt History
l2ij Upon partition of the old Republic of Colombia~ middotEcuador was
apportioned 215 per cent of the original Colombian debt by the convershy
sion of l834a Between 1834 and 1854 no interest was paid The period
1855 to 1908 was marked by numerous adjustments and defaults
125 In 1898 the Guayaquil and Q]lito Railway Companyt s first mort-
gage 5 per cent loan of 1899 was issued It was expressed in dollars but
was in reality an English loan In 1908 a new (reemenJl was reachedbull
which was to be a final settlemet of all past disputes and controversies
between the Government and the Guayaquil end ~ito Railway Company and
the bondholders In 19~-10 the Government defaulted on the new agree-
ment In Novemberl9ll payments were resumed on the railway debt on)y
but a revolution caused a further suspension from December 1911 until
lfarch 1912 Subsequently service was partially resumed on the external
debt until July 1914
126 From August 1914 to July l9l8 no paYments were made on eny
foreign obligations except that service on the prior lien railway bonds
had been maintained up to and including the January 1915 coupon By
rf Negotiated settie~nt
-50-
1920 interest and sinking fund on the prior lien railway bonds had been
brought up to date but service on all other obligations ~ed in
arrears In 1926 interest on the salt loan of 1908 was brought up to
date but default took place on the coupon dueJam1ary 2 1927
127 The outstanding bonds of the prior lien issue were redeemed~~
January 1929 at VIhich time the January 1914 coupon was paid on the
5 per cent first mortgage bonds of 1897 In the case of the salt loan
of 1908 sinking fund was resumed in July 1928 and interest was paid
to Jazruary 1929 inclusive None thereafter Sums due from July 2 19C3
to January 2 1931 inclusive deposited with Central Bank in sucres
were used for governmental purposes after December 1931 No payments
were made after January 1929 on the external debt of Ecuador
128 Up to the end of 1948 no acceptable arrangement had been pro-
posed by the Ecuadorian Government for the resumption of interest and
sinking fund payments on external loans
-51-middot
XI bull POLITICAL
129bull Recent political history in Ecuador has been turbulent
although contest fo~ power at the top has not greatly affected the
bulk of the population Suffrage extends to all literate citizens 1
over twenty-one years of aee-but the requirement of literacy effect-
ively excludes the Indian bull T)tal votes cast in the recent Presidential
elections were 289164 from a total Population of some 35 million
130middot On May 28 1944 a few days prior to a scheduled ceneral
election an uprising occurred and Dr Jose Haria Velasco Ibarra
assumed office as President Dr Velasco had been President before
but following a coup dletat in August 1935 after he had been in
Presidential office less than a year he fled to Colombia and re-
mained in exile for several years On July 23 191-4 general elections
for a Constitutional Assembly to draft a new Constitution were held
Installed on August 10 the first Act of the new Assembl3r which was
predominantly Conservative was to confirm the legality of Dr
Velascos assumntion of the Presidency
131 On June 30 1946 new elections to the ronstitutional
Assembly middotwere held The only party particiJatine in these elections
was the Conservative The Liberals R~dicals Socialists and Commu-
nists abstained on the crounds that President Velasco did not offer
them sufficient guarantees On Aucust 3 1946 there vrere a number
of arrests following an abortive uprising and on Aueust 11 the Con-
stitutional Assembly re-elected Dr Velasco to the Presidency (by 43
to 10) for a term of office to last to September 1 1948
12bull Being compUisory for men voluntary for woraen -
132bull A new Constitution was promulgated in January 1947
133middot On August 23 194 7 a bloodless coup detat led by Colonel
Carlos Iancheno Minister of Defense in Dr Velascos Cabinet deposed
rresident Velasco who fled the country to Colombia for the second timebull
Next day Colonel Mancheno proclaimed himself Acting President and
formed a five-man Socialist-Liberal Cabinet despite the absolute
Conservative majority in the Assembly A week later however on
August 31 a counter-revolutionary military movemont broke out in the
north and the counter-revolutionaries captured Quito on September 2
134middot Colonel llancheno resigned the ActinG Presidency and dis
appeared the sa1ne day Dr Suarez Veintimilla who had been Vice
President under Dr Velasco and the former conservative Uinister
resumed control of the GoverPment Next day September 3 a Council
of State in Quito declared that Dr Velasco had by abandoning his
post terminated his functions as Chief of the State Dr Velasco
howeverJ vrho middotwas by this time in the Argentine declared that his
remo~al to Colombia had been forced and announced his intention of
returning to Ecuador to resume office
1~ On Seytember 15 1947 a Secial session of the Zcuadorian
Concress accepted the resignation of Dr Veintimilla and elected
Senor Carlos Julios Arosernena head of the Banco Ce Descuento at
Gua~raquil and a non-party man as Vice President with novers as
Acting President until September 1 1~48 Senor Arosemena formed a
mainly Liberal Cabinet with one representative each of the Consershy
vatives and the Socialists Coneress also ~onfinned the Council of
State 1 s view that Dr Velasco had forfeited the Presidency by abandoning
his postbull
136 On June 6 1948 Presidential elections were held The
three parties represented vere the Conservatives (Dr Manuel Elicio
Flor Torreo) the Liberals (Galo Plaza Lasso) and the Radical (Genera1
Alberto Enriques Gallo) Final results were announced as
Plaza 115835
Flor 112052
Enriques 53601
Invalid 27 676 289164
137 bull Doubt persisted until this month (August) as to who would
receive the election The Electoral College had been invalidating
votes on technical Grounds and as interim returns and invalidities
were announced it was noticed that the majority of the latter were
being deducted from the Plazavote After conferences the Electoral
College revalidated all votes and conducted a re-scrutiny on less
strict basis Senor Plaza has been declared to be the rfjSident-Elect
by the Ecuadorian Coneress and assumed power September 1 1948 The
middotpresidential term of office is four years
The Vice Presidential results were
Conservative 1anuel Sotomayor y Luna llu008
Liberal Dr Abel Gilbert 113213
Radical Dr Cueva Tamarz 5h07h 28129gt
139 Senor Plaza was born in Nmv York USA forty-two years
ago his fatter the late General Leonidas Plaz~ was President of
Ecuador in 1901-05 and 1912-16 middotSenor Plaz who had been taken to
Ecuador as an infant accomnanied his father in exile to the United
States and attended the University of California the University of
Maryland and the Georgetown School of Foreign Service in ~7ashington
l4o Senor Plaza returned to Ecuador in 1930 and for the next
fourteen years operated the family estates there reclaiming them from
virtual bankru~tcymiddot to prosperous and efficient state He has for
example been active in encouraging the breeding of new cattle strains
is President of the Ecuadorian Holstein-Friesian Association and oper-
ates a butter factory on his estates with a Danish ~anarer He was
ar Minister from 1938-40 and Ambassador to Cashington from 19h4-46
l In executing any policies he will of course be handishyt4
capped by the lack of a fully efficient Civil Service The position
in Ecuador is the same as that in othelmiddot Latin American countries
that the Civil Service is naid on low salary sca1e and lacks compe-
tent administrators Such lack is an aspect of the general shortage
of technical ability in the country
TABLE
1
2 bull
3 bull
4
middot 6
7 bull
8
9
10
11
lZ
13
14 bull
15
16
17
18
19
20
ECUADOR
STATISTICAL APPENDIX
Oil Production and Exports
Cement Production and Imports
Yfueat Production and Imports
Rice Production and Exports
Rice Exports by Destination
Cacao Production and Exports
Coffee Production and Exports
Cotton Tobacco amp Sugar Production amp Sugar Imports
State Railwaysmiddot Lines amp Rolling Stock
State Railways Merchandise Hauled
Population and Roads by Provinces
Budgetary Receipts and Expenditures
Exports of Principal Commodities Volume amp Value
Imports Classified by Groups Value
Exports by Destination Value
Imports by Source Value
Balance of Trade by Major Regions
Exehanee Reserves and Banking Position
Price middotIndices
Status of Ex-Im Ballilt Loans
ECUAIOR Table 1
Oil Production and Expomiddotrts
(thousands of American gallons)
Crude ou Gasoline Produced EJtported bullRefined middotproduced
1938 94586 78696 15500 41654
1939 97125 68819 17679 bull 141
194o 98654 70~99 23001 6162
1941 65382 38362 25914 6462
1942 95671 68516 29489 72l7
1943 97211 65003 34635 8076
1944 121469 82520 38083 8927
1945 109855 73897 38752 10059
1946 979+7 52412 45213 12271
1947 99140 39359 53949 16587
Source J3o1etin Banco Central del Ecuador
ECUADOR Table No 2
1929
1937
1938
1939
1940
1941
1942
1943
1944
1945
1946
1947
1948
l First six months
CEMEHT PRODUOTIOllT AliD IMlORlS (metric tons)
Production Imports
17782
15699 10082
14254 13373
14249 12013
16512 10935
17213 2_846
19802 so98
2756o 933
34691 1590
37504 953
38496 3114
33231 14941
20484JJ
Sources Production Eoletin Banco Central del Ecuador Trade Ministerio deEconomia
Total
25781
27627
26262
27447
20059
24900
28793
36281
38458
41610
ECUAJX)R Table J
Wheat and Wheat Flour Production and Irraquorts
(thousands of kilos)
Wheat
Production Imports Exports Consumption
194o 28120 bull 73 28o47 1941 24578 36 24542
1942 24265 bull 76 24189
1943 22034 22034
1944 23251 912 24175 1945 23115 2733 180 25667
1946 25852 4532 23 30361
1947 2lo66 494f)J 11
Vfueat Flour
1938 10743 9981 na
1939 7864 16638 na
1940 7996 8-592 275 16312
1941 7225 11823 286 18762
1942 7 161 23497 161 30498
1943 7461 9862 17322
1944 5216 24023 29239
1945 5174 25137 30311
1946 7~38 11313 g 18813
1947 5943 1886) 4Y
Less than 500 kilos Y First 6 months
Sources Ecuador en Cifres a~d Ministerio de Economia
~emiddot 1926-30
1931
1932
1933
1934
1935
1936
1937
1938
1939
1940 -middotmiddotmiddot
1941 ~ )~ (1
1942
1943
1944
1945
1946
1947
1948
~iiampn-sect00-lfmiddotks
-~Jrst~middot-nsmcnths
gJ Provisional
(B EQUOR
RI03 PRODUCTION ApoundP ~OR~S
Vo1wnfJ Production middot E~orts
(metric tons)
26)04
23584
29863
39270
39008
31699
39036
52136
44027
40144 ltit middotmiddot~ 0 56596
5873
100949
ao6o7
53168
102048
112711
047
8255
3842
6449
5282
22907
8734
12)3
2ooso
962
18343 t - ~ J
20546
32028
46992
64604
29318
66918
6~209fl middot tloo 1
$ bull
tt ( r t
z
Value 3xoorts
(thousand sucres)
1881
936
6667
10864
6555
14632 pound 170
23265
51460
93837
127105
60395
203243
2rfjuft
Sources Production Boletin Banco Central del 39uador~ Trade Ministerio de Econom1a~ ~r- ~fl ]r bull ~-middotmiddotmiddotmiddot f ~~middot~---i
Average Destination 1937-41
Cuba 2
Peru 13
Venezuela 6
Colombia 4
Panama 2
Jamaica 0
Philippines 0
India 0
Dominican Republic 0
Other Countries 4
TOTALS 31
Preliminary~
RIQ] EXlORTS (in million po~ds)
1943 1944 1945
81 88 5S
20 29 0
0 17 4
~ 0
Rf 2 hi 0 0 0
0 0 0
0 0 0
0 0 0
bullbull ~ 6 6
105 142 6S
R Less than )OOOOOpounds
Table No 5
1946 ~ Jan to~
1~ June-194
46 12 24
0 0 s 17 49 )j
2 13 2
5 4 1
16 1 0
20 0 0middot
0 38 0
0
1 f4~ 2
r middot I
130 13 34
sf Ineludes 6 million pounds to Mexico and 5 million tmiddoto Greece bull middot
1[0
supound~sect8_ Foreigl Crops and Markets Offiee of Foreign Agrtcultural Relations u bull Sll~artment of Agriculture May 3l 1948 bull p bull 402 First six months of 1948 from ibid August 16 1948 p bull 120
Average 191i-15
191620
l921-25
1926-30
1931-35
193640
1940
i941
1942
1943
1944
1945
1946
1947
tf I
ECUADOR
Cacao Production and ~orts
Volume
Estimated Production ~rts
(metric tons)
n (
12108
15middot330
14652
19030
15058
17759
17689
19459
4o625
43547
36825
21319
15980
174o4
11208
14433
13762
18161
13735
16827
16526
Exports ( 000 sucres)
186o9
26073
26746
27531
16647
37424
29354
34365
40327
51794
41985
53547
74935
188208
middot)(et) middot( middot
Sourcesmiddot Estimated production Ministerio de Economia E~orts to 193~ Estadisticas de las Exportaciones del
Ecuador 1940-1942 subsequently El Trimestie Estadistico del Ecuador Number 1
1 ~ Mini sterio de Economia -bull gt(
111 t bull r r (o J bull bullbullbull 1) ( bull
ECUADOR
Coffee Production and Exports
Volume Estimated Production EXports
(Metric TohS)
1921-25 average 5147
1926-30 II 7571
193D-35 10047
1936-40 II 13811
1940 16158 14571
1941 14260 11847
1942 9016 6140
1943 14144 12340
1944 16598 14458
1945 12999 10737
1946 9948 7636
1947 12522 8970
Table 7
Value
Exports 000 Sucres)
59~9
11530
10945
18546
16J83
23827
17278
33176
35626
33863
34839
43524
Source Estimated production - Ministerio de Economia
Exports t~ 1936-40 - Estadisticas de las Exportaciones del
Ecuador 1940-1942 - subsequently El
Tremestre Estadistico del Ecuador Number 1
and Ministerio de Economia
YEAR
1937
1938
1939
1940
1941
1942
1943
1944
1945
1946
1947
ECUADOR
Production of Cotton Tobacco amp Sugar amp Sugar Imports (000 Kilos)
Raw Cotton
9237
7213
7172
8165
PRODUCTION
Tobacco
1519
1106
1875
1028
1359
Sugar
17528
22950
26950
27835
30421
27858
26799
23151
32474
33544
33480
Table B
IMPORTS
Sugar
5310
11068
12387
38
6
33
184
784
21455
3060
Sources Production of Cotton and Tobacco Ecuador en Cifres 1942
Sugar Production and Imports Ministerio de Economia
ECUAOOR Table 9
State Railways
Length Locomotives Rolling Stock (Number)
(Kilometers) (number) 1relght Passenger
Gueyaquil-Qpito 452 39 319 41
Guayenaquil-SalinaJ 150 6 22 24
-~i to-CarcbiY 222 6 23 22
Bahia-Chone 78 3 12 g
Sibambo-Azogues 117 3 6 ll
Puerto Bolivar-Piedras 155l 7 21 10
Puerto Bolivar-Pasaje 55
1199 64 4oy llG
Narrow-gauge line
gj On uncompleted line ~ito-Esmeraldas
21 Of which 4 are rail-cars
jj Of Vihich 61 are rail-cars
Source lviinisteria de Economia
1938
1939
194ltgt
1941
1942
1943
1944
1945
1946
+947
ECUAOOR
Railway Transport
(thousands of metric tons)
Products
Agricultural Animal Mineral Forest Manufactures
1639 19 3 160 122 1034
1318 143 172 138 961middot
1714 144 233 219 1472
1613 184 277 209 1543
1809 224 280 272 1631
1841 280 35a4 376 193-3
2011 250 263 299 C5J7 3
1888 29-5 350 238 2234
1941 29-9 46 bull 4 258 2170
1787 299 51 0 180 2085
Source l3oletin Banco Ce~~nu del Ecuador
Table 10
Others Total
58 3205
58 279l
298 4oso
289 4115
328 4543
384 5168
352 5248
292 5296
37middot7 5508
419 5279
Table 11
Population and Boads
Poeation Roads (Kilometers) Province Jan 1 1948 Main Secondary In Construction
Care hi 86663 1744 1191 1050
Imbabura 158896 1818 2100 1810
Finchincha 350149 4)13 3703 670
Cotopaxi 215232 642 4o6o 970
Tungurahua 222963 2290 1810 300
Chimborazo 29864o 1664 3316 2740
Bolivar 121653 1877 1294 2045
Canar 133971 580 580 1300
AZUaY 284982 1053 2190 630
Loja 238705 1140 4s6o 1430
El Oro 93752 1005 2378 650
Quay as 482843 3900 3367 3700
Los Rios 148428 933 4632 1050
Manabi 381538 3627 1lo61 1970
Esmeraldas 664o5 50 19 0 2840
Frov Orientales 181071
465891 26636 46732 2t3l5bull5
Source Direccion General de Estadistica y Censos
1938
1939
1940
1941
1942
1943
1944
1945
1946
1947
Source
r
Table No 12 ECUADOR
DISOLOS3D BUDGETARY R303IFTS AlfD EXP3NpiTURES
(Total of ordinary and extra-ordinary budgets and special accounts)
thousand of sucres)
Total Receipts
1323204
131699 6
1262710
1547624
1667455
2112614
3145318
4051038
5367822
6696647 11 ~I JJ( middot
Total Expenditures
1429134
1267687
123135middot0
1586615
1489251
2101429
3031038
4174550
5352394
6593858 bull I
aoletin Banco Central del Ecuador
-middot middotmiddot
Diff~reuce
106830
j 49309
f 1360
- 38991
f 178204
j ltll8-5
f 114280
12351middot2
+ 15428
j 10278bull9 r 7
l I 1
L
ECUAOOR EXPORTS OF PRINCIPAL COMMODITIES 1937-47 Table 13
VOLUME (thousand metric tons)
1937 i98 1939 194o 1941 1942 1943 1944 1945 1946 194711
12 200 96 183 20 bull 5 320 47~0 646 293 669 66) 218 191 153 112 144 138 182 137 168 16 bull 5 203 14~ iJI 137 129 146 118 61 123 14 bull 5 107 76 90 48 55~5 53middot3 472 34 bull 2 226 158 1)9 178 35middot511 72 bull 5 345 19~2 251 183 14bull4 13 2 112 103 12~0 132 121 1-4 16 16 15 18 30 22 28 2~0 13 01 14 1middotmiddot9 2~2 21 47 90 136 93 74 28 na
~gt i824) (1387) (944) (1036) (1981) (2516) ( 2756) (4373) (4462) (4947) _01 2849 2454 2274 2201 1201 2167 2062 2513 2446 1640 1358
Ltrates 7~3 140 76 so 3~3 )9 26 10
VALUE (thousand sucres)
610 10864 6555 14632 23265 51460 93837 127105 60395 203242 201111 49985 39bull276 37bull033 29354 34364 40)26 51794 4lt985 53547 74935 188208 24613 16703 15227 16)84 23827 17278 33176 35~26 33863 4839 43 bull 524 5bull691 7558 7t006 6448 4658 _J 107 2159 1898 2872 738~- 24355
18242 7~146 9605 86o6 6120 201 6274 6209 9264 1)02 14994 4048 4300 4298 3~866 6979 35481 23316 38043 26553 15111 979 lt363 2~134 2724 3168 8450 25613 43419 31877 18 bull 509 7125 na 8048 6 234 4981 6509 16231 22121 25191 69033 69J87 81962 4662
21989 26374 25020 24862 13425 24820 23796 28788 28107 18253 15902 trates 10165 16090 13134 38609 27208 29013 18075 809 ates 18682 35297 41204 39907 29426 25374 27476 26457 15482 24858 25334
10774 13210 13495 3 950 16869 32775 2L068 32402 30902 38326 n bull a_
164_045 169096 167148 167851 199704 298690 393115 466631 377894 537131 619859 tmiddotbull bull
Note Dash (---) signifies zero or less than 50 metric tons nly or ~00 sucres ata expressed in quantities other than weight Sourcis 193 data from unpubli~hed Zcuadorian trado stati~tics
at US Department of Commerce 1938 nnd 1939 from partment of Commerce official data Direccion Nacional de Estadistica Eruad6r en Cifras ~7 from Banco Central Boletin 1940 and subsequont ~ears from Banco Centrll jto~n sterio de Economia and from M1nister1o c Economia data furn she
Mission July 1948
~ tobacco tone JgS
articles
11res ilk
al
value of Imports by Groups 1937-Lt-5 Volume and middot~alue of Selected Individual Imports 1937-46
(Value in thousand Sucre~)
1~37 1~38 1~39 1940 1941 ~942
19~731 20~ 375 24~874 16~)65 19043 37~540 5127 7194 1958 6~4e8 5t298 8 118
12888 13Jl5 14522 17702 19556 25~152 21627 25~272 21455 28532 21619 18923 20649 21~593 25559 29437 22636 19~$13 13~505 11961 12~654 15~976 15667 18899 5~829 7 bull 524 6066 9385 833 14353
22912 )0868 24~75 27 t 750 25993 42~916 9376 1028 10038 12118 11345 13932
-bull
131643 148320 1486o 173753 149499 199715 (Volume in thousand metric tons) (Value in thous~tnd sucres)
5middot3 111 124 194 5 bull 534 6385 26 4 24
os 246 -
122 ioo i66 86 118 235 8255 6)88 7449 5076 013 14609
19 07 11 11 14 29 2187 1824 2695 294-3 29J9 8182
101 i4 i2o i09 28 51 804 llJ)6 1667 1546 577 866
~ hides amp skins amp manufactures amp miScellaneous
~~43 1944 1945
33270 70915 82984 6717 8)69 904)
31~700 43196 32~830 17073 53~400 JBoo6 15447 32~624 38797 14~88 18~388 22895 14116 11a99 9812
68928 n~l79 69-113 15856 19186 20042
217983 33ltl56 323524
78 middot 0 2 215 130 12622
09 27 775 2290
99 240 bull 25~1 337 24070 26388
23 46 67 8853 146)1 21699
09 16 10 321 349 246
~s zero or less than 50 metric tons -middotNote Columns may not ahmys add to totals because of rounding Denartment of Commerce official sources - 19)8-42 Direccion Nacional de Estadistica Ecuador en Cifras [inisterio de Economia El Trimestre Estadistico del Ecuador
1946
)1 8135
4 bull 5 )842
114 13123
46 22709
)1 639
ECUAOOR Exports by Countries 197-47 (Value in thousand sucres) Table - 15
1937 1938 1939 1940 1941 1942 1943 1944 1945 1946 1947 --middot-------middot
80458 lt2865 116t-J78 150055 196953 293081 386483 46lt-909 372~549 463~378 sa4~68J 54422 63418 8)254 1t0496 145 bull 558 168585 2)9238 267105 218018 227291 262887
26 20 65 17 2228 78 124 7)41 17173 630 610 949 1281 1055 1)98 5~526 25686 78523 85382 61478 75890 23481
2899 4955 2109 3568 162 1163 4J54 2526 4197 44~ 1450 5027 6335 4972 5i92 5285 7425 4546 7379 10286 9798 15537
1 5 5 17 57 13 291 54 444 574 6996 8 662 9188 8714 13bull764 7238 15316 13900 11223 6~07l 14503 11717 2908 12544 5 730 7896 3767 21215 22608 29233 4243 6703 7965
51 15 24 8 532 3620 1603 539 2336 11579 3749 80 207 862 4070 9991 17096 1275 17~428 6~973 27431 80541
1943 2135 5229 6039 1965 5435 3021 4827 15~702 25~137 51~854 middot 667 740 991 zo83 3358 11412 4286 4282 3~-970 13064 5~864
1799 419 2218 875 2865 12299 9644 14900 13714 9653 11655 J 89 82 2527 1247 964 326 )24 250 41141 2~985
1024 1514 1068 2205 7173 2650 2 744 8871 7694 J2 5811 17 39~ 77029 61869 43688 11945 1503 5550 6335 4108 4075 36783 61998
32) 6)3 1187 490 58 186 2164 4021 J217 35974 29595 11277 69 - 29 4411 7909 6156 3477 1183 5492 4876 26)8 359 1860 7~467
489 255 J2 100 280 1155 1239 1265 3827 3~961 20539 13t521 10802 2254 5 706 4177 6313 2bull610 3615 4251 -middot 2842 13546 lBi 1415 3 758 822 6 188 12962 3592 2531 412~ 162 7~ 10052
8643 1693 3bull521 3~400 2751 320 40 118 231 222 5404 J 4894
6337 4201 6548 5478 1175 5 45 40 1611 50950 6261 4132 5386 5452 117) -
~l - - 15 45988 5 middotmiddot 7S 8 5 25 567 92S 11
33 ~- 76 18 966 151 150 3419
38 29 858 2 45 78 467
(continuation on next naee) middot
~GUJLOR ~xnorts by Countries 1937-47 (falue in thousPnd sucres) T~ble-15 continued
middot-~--- -~-middotmiddot -middot _ middot-- ~~---~~- ---- -middot--~middot--------middot- -middotmiddotmiddot--middotmiddot--193 1938 1939 1940 1941 1942 1943 1944 1945 1946 1947 _I --middot -middot- ---~- ------ middot- bull middotmiddot-middot -
4 7 5 5 5 219 1087
218 153 529 368 73 49 297 569 1230 35140 789 28137
207 144 379 J68 73 49 297 559 1104 605 11 9 10 126 43
150 6355 plusmn
353 54045 169096 167148 167851 199704 298690 39J115 466631 377894 537131 619859
~S Columns may not always add to totals because of rounding
Dash (-) signifies zero or less than 500 sucres
Primarily Guadeloupe and Jamacia
Primarily British West Indies and Netherlands West Indies
Primarily Denmark Spain and Norway
Primarily Java
~ces 1937 and 1947 from unpublished Ecuadorian Trade Statistics at U s Department of Commerce
1938-46 from Ecuador Ministerio de Economia data furnished IBIID rassion July 1948
Imports by Countr~es 1937-1947 Table-H)
ECUAOOR
l937 1938 1939 1940 1941 1942 1943 1944 1945 1946 1947 I (()
Value in thousand sucres) ~ + -gt L520 63151 83984 115382 128423 186958 200061 311989 302~329 363403 517582 j
u t 2086 51311 71950 103214 110422 138729 103583 173776 178821 240233 429906 0
Q) f
811 674 551 2436 1815 3J258 2150 5265 6538 12178 20912 d S Ugt ro c 1 n 4 4144 3042 8 99 14 23 295 178 8~011 210 h middot-1
(- 0
186 324 237 957 2~991 8492 18~376 15~239 17232 10~574 3121 4 middot-2375 2310 1959 2476 3016 4735 7930 7~696 11~201 15~564 14755 sectwfi
middot-1 1 fli 4 6 343 1~823 3J064 4110 3~612 60J5 h 0H
2739 2109 3789 174 2352 7949 9~934 17845 23~ 616 1559t 18~727 ~rld ()
328 164 457 2498 612 733 10892 10902 20003 16684 11981 oc ampl+lll
mmiddota J63 1297 1161 -- - 2 23 115 1~128 1192 d+gt-
2464 507 500 1438 5565 20668 39979 46654 33684 33034 6~486 15~~ (()
na 1 311 2297 5515 130 bull-I m rl bull +gt
15 31 68 245 995 1516 2804 25326 6124 5956 3472 Oltll~
149 280 269 332 550 208 270 389 707 839 655 a~ sect (1) Cl 4-209 72986 ~ 38 09 1433J 9813 16276 15885 1721~9 45194 80928 ~-g 1701 35767 2 7 7 33 1202 67 47 61 19 2 El 0 0 eo g 3250 11462 8094 12980 10124 8108 13634 12513 11984 28392 40983 cent1-t+l~
1803 718 1687 otmiddot r-
4-114 6465 7339 630 475 34 22 2 66 889 7279 t -P () ~led
36o 4685 1573 7144 308 12 682 4824 rlltll ltDno
1~896 2550 1466 1624 64 1 58 5090 bull-1
fJ ~ ~ 1052 1489 794 945 293 224 5 21 1373 9062 9 703 P + na 868 881 423 10 1 8 223 135 r- 0) u
1 r=l middotr-l
1162 4823 1264 1675 877 1017 1~52 2380 3129 4~326 6851 () l=l rl
7274 3074 2609 3595 980 349 1041 905 599 1~543 3~134 cn~oo bull t
724 11939 8983 19951 6239 2281 1439 304 3882 5478 5736 op a cent1-t ~sect rl
173 302 262 238 -w 14 276 -rr 472 ---s9l ctillmgt
259 10949 7810 18190 4414 170 16 4 5 +gtUd ~-- ~
935 712 728 1278 1281 1715 1314 2685 3185 4465 3151 +gtP t-1
530 105 143 221 306 240 95 89 582 541 2089 ~ (f)
1l 21 12 80 1f 196 122 169 125 1J n ~-T~
0
109 218 lllL 250 m 46 sect2 12_ 28 119 112 I ~ --sB_l_ 0 ---- -
643 148315 147860 17353 149499 199715 21 ~ 983 331156 323524 414266 604479 ms may not a1ways add up to t ta1s because of rounding Dash (-) signifies zero or less than 500 sucres ~ country breakdown not given in source g) of which 591 from Syria 2Z3 from China 264 from Straits Settlements 1 Sumatra and 264 from Iran
YEAR
1937l
1938t
1939~ -
1940amp
194H
1942
Exports Imports Balance
Exports Imports Balance
Exports Imports Balance
Exports Imports Balance
Exp(rts Imports Balance
Exports Imports Balance
ECUAroR Balance of Trade by Area 1937-47 (thousand sucres)
fRlSTERN HEMISPHERE including Philinuines
United States Other Total Eurone
54~lt-22 26~036 80~-~-sa 77~029 52086 9~434 61520 64~209 2336 16602 18938 12820
63418 39447 102~865 61869 51311 11840 63151 72~986 12107 27~607 39714 -11117
83254 33124 116~378 43688 71950 12034 83984 54505 11304 21090 32394 -10817
100496 49559 15Cl055 11945 103214 12~ 168 115382 38~090 -2718 37391 34 673 -26145
145 bull 558 51395 196953 1503 110422 18001 128 423 14333 35136 33394 68530 -12830
168585 124~496 293081 5t550 138~729 48229 186958 9 813 29856 76267 106123 -4263
Table 17
Other Countries World Total
6~559 164045 5-912 131643
647 32405
4361 169~096 12~ 178 148315
- 7817 20781
7082 167148 9372 147860
-2290 19288
5851 167851 20281 173753
-14430 - 5902
1248 199704 6743 149499
-5495 50205
59 298690 2944 199715
-2885 98975
NOTE Areas may not always add to world t~tals because of rounding
Source 1937 and 1947 frlttm unuublished Ecuadorian Trade Statistics at US Department of Commerce 1938-46 frem Ecuador Ministerio de Economia data furnished Mission July 1948
(Table 17 continued on next page)
YEAR
12J Exports Imports Balance
1944 Exports Imports Balance
125 Exports Imports Balance
1946l) Expltgtrts Imports Balance
12Z= Exports Imports Balance
ECUADOR~ Balance of Trade by Area 1937-47 (thousand sucres)
WESTERN HEMISPHEL~ (including Phili~ines United States Other Total EuroQe
239238 147~245 386~483 6335 103583 96~478 200~061 16276 135655 50769 186422 -9~941
267105 194804 461909 4~108 173776 138213 311989 15~885 93329 56591 149920 -11779
218018 154~531 372549 4075 178821 123508 302)29 17159 39197 31023 70220 -13084
227291 264224 49J515 36783 240~233 123170 36J403 45~194 -12942 141054 128112 -8411
262887 241796 504683 61998 429906 8676 517582 80928
-167019 154120 -12899 -18930
1 Only year in which substantial Philippine trade
NOTE Areas may not always add to world total becasue of rounding
Table 17 (oonttnued)
Other Countries World Total
29 393115 1646 217983
-1)49 15132
614 466~631 3~282 331~156
-2668 135475
1270 377894 4035 323524
-2765 54)70
8~833 537131 5670 414266 3163 122865
53179 619859 5969 60449
47210 15380
Sources 1937 and 1947 from unpublished Ecuadorian Trade Statistics at us Department of Commerce 1938-46 from Ecuador Ministerio de Economia data furnished IBRD Mission July 1948
~ EXCHANGJ-tAL BANK
ECUADOR Exchange Reserves amp Banking Position (million sucres)
r 4 bull TIC CQEDITS OF CENTRAL BAl~K Domestic Govt Official Bus Other Credits
MOliEY SUPELY Current AC
JJj To()2f (4) Entities Indvls Total Banks of O~mtl Currencl Denosits l (6) (7) (8) (10) (5) Banks amp 11
Indvls (9)
16 10 26 51 1 116 62 64 48 26 7 40 73 4 129 74 66 3middot7 )9 7 29 66 4 144 73 71 37 29 8 24 62 4 159 78 73 56 26 8 22 55 5 183 8l 103 81 37 28 2 8 201) 120 119
152 37 21 22 79 9 255 169 17~ 26) 34 27 22 83 13 378 ZJa 26e )4 60 37 20 117 9 385 295 308 Z5 105 73 11 189 26 493 321 312 282 153 81 10 244 24 536 35middot~ 354 242 104 44 93 241 2 565 329 284
221 110 51 99 260 2 56 313 278 215 102 47 101 250 2 573 )06 294 225 97 45 95 237 2 585 299 299 219 100 44 98 242 1 591 307 297 214 98 35 111 244 4 6)4 315 295
)20 295
on of $12500CC beginning in December 1946 bull
ars
Ttttal (12)
127 14) 144 151 183 239 345 492 602 634 704 613
591 599 597 604 610 614
ge liabilitieS but including Stabilization Fund in 1945 and GolC CertificCt in 194) bull ial banks and fomento banks ial bc1nkst and fomento banks sits of commercial banks and time deposits of fomento banks
Table 18
Govl t Den sits ~L
(lJ)
6 23 12 27 7 28 8 31 6 32
middotmiddot 11 )6 16 57 27 71 41 74 63 98 59 90 66 77
71 8 75 76 6 75 81 75 81 72
72
1 1 Boletin - Superintendencia de Bancos Boletin - Unpublished data furnish~d MF bY Banco Central of Ecuador
Table 19 ECUADOR
Price Indices
WHOLESALE Rents Export Fooa in
YEAR Goods and Quito - Coal ~1) (2) (3)
1937 100
1938 83 100
1939 95 100 153
19h0 95 106 16h
1941 96 113 150
1942 114 146 172
1943 114 183 187
19h4 118 218 219
1945 133 266 254
1946 203 320 315
1947 297 364 516
19h8 (March) 294 379
(liay) 416
(July) 389
llame l~umbar
Republic of Ecuador
Status of u s Export-Import Bank Loans to ~cuador
Purpose
gs of Junemiddot10omiddotl9ltsect
Gross Authorized
Cancel- Net lations Authorized Repeid
Amount Amount Outstandin~ Undisbursed
6J048 6J048
( 262 )16
Haterials equip amp services $ 6480000 $20810 $6459170 $1279775 ~)5-l19middot395 _____ _
ibulliunicipali ty of iui to (Republic of Ecuador)
ibullIunicipali ty of Guayaquil (Republic of Ecuador)
Republic of Ec~ador
Republic of Ecuador
Ecuador DeveloPIlent Corp
Pan-American Highray (Cuenca-Loja)
Agricultural Research amp Experiments
Raihray Equipment
5000000
12JOOOO
50000 200000
)28 Haterials equip ~~ 4000000 services - ater 1middot1orks
)28 iltiaterials equip amp services - ~~rater orks 4000000
J4J Pan-American High1middotray (Guamote-Tambo)
432 uevedo-Hanta Hightmiddotray (additional credit)
1980000
220000
$19180000
Of tlhich $2500000 tts used on the Quevedo-Ibullianta HighTaY
4000000 28880
4000000 167
-1 t-9amphOOO- -7500
220000
6o6120 -h365000-middot
41592 575-t 2-41
-l-y5Q2- 500 44Gooo
220000
IBRD Statistics Sectio spte~ber 24 1948
3
In 1942 official Government figures for these rerions were
Area Population middot Density Square of
Kilometers middotmiddotNumber middot Ponulation
Sierra 70344 23 11686748 61 268
Costa 68633 23 1JooOl8 33 14 6
Oriente 153143 51 189005 6 12
CalapagS Islands 7880 j 2192 a 0~2 -Miera tory 4115 a middot-
300000 100 3089078 100 102
15 Very little however of the total area is under cultivation
It was estimated in 1916 that about 90 ~)er cent of the coast and 60 per
cent of the Sierra was suitable for cultivation that is about 25000
and 1)000 square miles respectively Of the total of Loooo square
miles of cultivable land~ only about 1$000 was under cultivation in
1946~
16 No census of the population has ever been in Ecuador
In 1892 estimated nopulation was 127 million in 1942 309 million
and in January 1948 3L7 million with crude birth rate of 379 oor v ~ thousand and crude death rate of 201 per thousand in 1942- Estimated
composition of the 1942 population was
a less than 05
Yhi te Mestizo Indian Negro Iulatto Other
100 per cent l-t10 ner cent 390 per cent 50 ner cent 5 o Per cenmiddot~
1000 ner cent
Just over half these deaths oc~urred in the are rroun of 0-4 years in 1942
4-
17 At the same date the literacy rate was estimated at 20 pe~ qent
s~i~literacy at 20 per cent and illiteracy at 60 per cent
-5-
II OCCUPAmtOUS AND INCOivES
18 There having been no census there is no at~curate information
under this beading
19 The Economic Department of the Ecuadorian Central Bank has esti-
mated that of a total population of 334 million in 1946 1285000 or
J9o per cent were gainfully employed in the following occupations
Agriculture Forestry etc
Mining
Building and Repairing
Manufacturing and Processing
Services (communication comshymerce government etc)
820000
10000
6oooo 10000
325000
5 5
26
100
20 No valid estimate of national inco~e exists At the request of
tne International Monetary fund the Technical Adviser to the Central Bank
of Ecuador Mr L A Carbo estimated national inccue in 1946 as 20096
million sucres or US$ 149 million Although this estimate is probably too
low ] it is clear that national income is very small Ecuador is very
low on the list of income per head among Latin American countries its
income per head is in feet among the lowest of countries of the world
21 Income is very unevenly distributed A survey made in 1943
yielded the following picture
g lror reasons Sdvanceit below Paragraphs 87 and 88
~ pt WI
-6-
To tal Monthly Average Monthly Population Income Income per Fw~ly
Number of Amount t tount People (SUcres) (Sa~res)
Upper Cla~s 4oooo 133 28000000 144o 2300
Middle Class 96oooo 3200 96000000 4950 4 L ~ 00- middotJ~
Lower Class 2000000 6667 70000000 3610 140 -- -~
3000000 10000 194000000 10000 10000 yenSliP C_~ ~
Note At the ofDcial rat~ of 1350 suc~es to the US$ average monthly incomes per family are equivalent to approximately $2J7 $30 and $10 respectively
~ Uneven distribution of incoue is of course largely a conse-
quence of uneven distribution of property Some ideas of the distribution
of rural property is afforded by analysis of re~urns made in payment of
rural property tax Such tax was paid by only ll2l4o proprietors in 1944
whose holdings may be summarized as follows
Per cent of Value of Rural ProEerties Number of Proprietors
916 4o
29-33 llOO
3041 10400
2030 37200
1080 634oO
10000 112J4o
23 Such statistics do not of course carry one very far beyond
the general observation that income and wealth is very unevenly distributed
and that much is obvious from a little travel in the country But it should
-7-
be said that comparing observations in Ecuador vrith those made in Peru
and Bolivia Ecuador by subjective judgment compares very favorably with the
tvo latter The Ecuadorian Indian seems to be on a perceptibly higher stan-
dard of life both in the highlands and on the coast than the Indians seen
in Peru and Bolivia Vhile his land holding is small it yields somethi1e
he very freqjl ently possesses livestock such as pigs and chickens has cot-
ton clothing drying on a line a~d often cultivates flowers and keeps
pigeons By American standards he is undoubtedly on the poverty level by
Latin American standards he may be a little off it
24 At the other end of the scale the wealthy upper class are pro-
bably not as wealthy as the Peruvian upper clas~h and the Bolivian elite
in operating in poundcuadc~the upper class lacks the rich property of mines
Thus while income is of course unevenly distributed in Ecuador as else-
wnere the range between the wealthy and the InJian may well be less tban
elsewhere The line of income distribution is of aboat the same slope
but probably significantly srJOrterY
This conclusion cannot be demonstrated statistically It results from a 11feel 11 deri ved from personal observetions in the respective counshytries
-8-
III AGRICULTURAL lROIDCTION
25 Ecuadorian development is largely a matter of increasing the out-
put of and improving internal and external trade in agricultural products
There appears to be no enduring geographic or physical reason ~middotby this can
not be accomplished She possesses soils and climate ranging from the
tropical to the temperate soils which in some areas are very fertile and in
others are in danger of exhaustion To anticipate subsecpent conclusions
her problem of development through agricultural progress breaks doTltD into
separate aspects all involving improved technique
(a) increasing arable yields from areas already cultivated
(b) improving pastures and stock in grazing areas
(c) enlarging both arable and pastural areas (including irrigation)
(d) improving roads in rural areas
26 Achieving these objectives involves providing more adequate
domestic credit for short- medi~ and long-term agricultural requirements
27 In application however interpretation of these problems is very
different in the two occupied regions of the country the Sierra and the
Coastal Lovrlands no generalization can cover both
(a) TLe Sierra
28 The occupied inter-Andean valleys are a region of temperate
agriculture producing almost exclusively for local consumptionmiddot Their
pat tern of tilled fields grazing land trees and flowerJl is almost
Y Flowers bloom all year round The main tree is the eucalyptusmiddot introshyduced some 70 years ago end used for all purposes (~indbreaks fuel 1
and lumber) affording a striking example of the effect of introduction of one plant upon regional habitability-
-9-
Western liiuropean in appearance but not unfortunately in productivity
Agricultural Production of the Sierra
1939 194o 1941 1942 - -(Hundreds of pounds)
Theat 49QOOO 611300 534300 527499
Potatoes 1201000 1476400 1386120 1146000
Rye 72500 79900 159495 115000
Lentels 46000 424oO 37955 csooo Corn 816700 1349300 1308062 1315200
Barley 85)000 795700 903600 911000
Cotton 45000 42020
Kidney Beans 80000
29 In addition about 1000000 hectares (247 m~llion acres) are
devoted to pasture supporting epproximate1y 683000 cattle 145 million
sheEf 107000 STrrine and 320000 goats
30 Yields are low in all Sierrean agricultural activities the
standing VJheat and barley crops are so thin that the ground can be seen
through them Yet the greater part (some 6o per cent) of the people of
Ecuador live in the Sierra and population is increasing at about 2 per
cent per annum The effect upon land use under existing tecnniques is
clearly visible cultivated areas are being pushed higher and higner up
the hillsides (slopes of 30 to 40 degrees being used) and onto the
fJparamon the high plateau betvreen adjacent valleys at altitudes of
11000 feet and higher The result is a picturesque scene but one which
reveals a near Malthusian situation in the man-land ratio rbullrith static
-10-
technical practices It is a situation which cannot remain unchanged if
economic development is to occur in the region
31 There sean to be three possible lines of advance increase of
output from highland areas in present use the bringing into use of new
ground in the highlandsbull or a change to increasing reliance upon the outshy
put of non-highland areas
32 The third possibility is not one for the immediate future It
involves either large-scale migration from highland areas to lowland
regions or a large transport program linking highlands and lowlands
together with growth of non-~ricultural activities on the highlands to
provide a cash income with which to purchase 11 imported 11 foodstuffs This
second possibility may indeed be the trend of ultimate development but
offers no irmnediate easement Large-scale internal population movement
from highland to lowland is probably impossible since the Andean
Indian (of different stock to the coastal Indian) is fullf acclimatized
both mentally and physically to life at high and temperate altitudes and
little suited to life on tropical lowlands
33 The two remaining lines of advance would both seec to increase
highland agricultural output But there is an important difference beshy
tween increasing output from valley land in rr esent use and bringing new
and higher land into arable use The first is a complex problem suscepshy
tible only of relatively slow solution the second is seemingly simple
and capable of quick result yet basically less sound offering only
temporary improvement
34 The thurst onto higher ground is already evident and the area
-11-
taken in could probably be greatly enlarged by efficient use of tractors
and modern plows Such use of mechanical equipment would thus give quick
increase of agricultural output but it is very doubtful whether improveshy
ment induced by these means alone could be long maintained The greatest
~r particularly on sloping land is that deep plowing may lead to
soil erosion so serious that land becomes finally llilgtroductive To use
mecbanical equipment i thout at the same time adopting eqJally modern
methods of soil conservation way well be disastrous and that perhaps
within no long period
35 Even apart from this physical daneer there is the virtual cer-
tainty that new land however plowed would gradually sink in fertility
end hence output unless farmed by better agricultural practices than
those now followed in highland Ecuador The present attraction of the
higher land is principally good natural fertility beine virgin ground
On all other counts this higher land is less advMtageous than the valley
floors the va)ley sides are steeply sloping a1d the fl~t paramo is some
2000 feet higher bare windswept and devoid of habitation It would
seem obvious that it is pastoral rather than arable ground were it not
for the pressure upon arable output of the region
36 The pressure today however rises from the relation betwem
popUation and output rather than that betvreen population and arable
area Productivity in the Andean valley is low and can certainly be
improved If improved the pressgtlre which is causing the thrust to
higher ground is relieved until population increase again overtakes outshy
put Against that time however the higher ground vrould remain
-12-
availfibleY and other lower regions may be coming under effective use
37 To increase output of the populated valleys is not a simple mat-
ter responsive to single policies such as simple mechanization by tracshy
tors It will embrace the wlo le range of agricultural practices from
better seed types to crop rotation and fertilizers including in some
valleys irrigation It is a matter rrther of agricultural education
than of~dtlgagricultural appliances and probably experiment under
the peculiar regional conditions will need to precede education Improveshy
ment will necessarily be slov1 but along these lines it can be sound and
permanent
38 Wher~ lfL mere importation of mechanical methods Vi thout
understanding of their dangers in speeding soil destruction by wind and
water erosion may permanently damage the region The somewhat gradual
mechanization of agriculture is of course to be expected and not disshy
couraged but it is not the wlole answer to development in highland
Ecuador
39 It seems that there is at present no over-all agricultural
lfibor sl1ortage in the Sierra and mechanization is nOt therefore called
for to relieve an adverse manpower position It seems however that
some of the larger estates are experiencing difficulty in obtaining their
labor requirements because Indian tenants are viitblolding quasi-feudal
labor dues and devoting whole time to cultivation of their own plotsbull
As a result hacienda holders are attracted to mechanization as an
escape from growing difficulties in obtaining and supervising labor upon
Y As it would not if destructi ve1y formed at this stage
-13-
their ovm land To the extent they are successful the tendency for agrishy
cultural money vrages to rise is weakened
4o There vrould seem to be good possibilities of increasing pas-
toral agriculture in the highlands 1Jrith improvement in both numbers and
strains of cattle and sheep If adequate arable development occurred in
the valleys the main grazing grounds could be the higher land not then
required for arable purposes ~lith dairy cattle on the valley margins or
on valley ground not well suited to arable use Such pastoral development
would be desirable not only to imp1middotove nutrition in Ecuador itself 1 but
as a possible new export of meats fats and hides to meat deficient
Republics notably Peru Early export would probably be on the hoof
along the Andea1 ridge it self
41 The Ecuadorian Government has not included any explicit propo-
sals for highland agriculture (other than irrigation) in its present apshy
proach to the Bank It has however suggested the Bank finance $1 mil-
lion of agricultural tractors and equipment to be handled by agriculshy
tural stations located at strategic places both in the coastal
provinces and the highlands 11 without further elaboration of the
intended highland use of such ecp ipment The description given above
suggests that the usefulness of agriculture machire ry depends to a conshy
siderable extent on the place plan and purpose for rhich it is to be
used
42 In some of the highland valleys (for example in Cotopaxi end
~ound Biobamba) rainfall is deficient and irrigation would increase
valley output by bringing more valley ground into effective use This
- 14 ~-
is clearly sound for flat valley ground already populated is more useshy
ful than higher sloping and more exposed ground The Ecuadorian Govern
ment has included purchase of eq1 ipment for irrigtion works to the value
of $500000 in its present approach to the Barik Assessed against the
requirements for economic development the request is sound provided of
course such equipment is effectively used
(b) The Ooast
43 The condition and nationel significance of agriculture on the
tropical coastal plains is quite different from that ltNl the Sierra The
area as a whole is less densely populated and in some parts such as the
Province of Esmeraldas is very sparsely populated Its principal pro-
ducts are exported The population has more mixed blood than the highland
people and is oore corumercially active and minded There is little feel-
ing of community of interest with the highlmds the rrincipal coastal
city GuayaqJil is larger than Quito and less remote fror-1 outside
influence
44 In terms of reported area devoted to its cultivation cacao
is the principal crop of the coast The table on the following page
shows output of main crops
45 Cacao is not however the most important export crop by value
being surpassed by both rice and panama rats (a handicraft product of the
region) Nor does the table show those products which result from
gatherage of mild growth tagua kapok oil-bearing vegetable nuts
balsa rood rubber etc
Y For use by the Caja de Klaquogo as required both in tile highlands and on the lowlands
-15-
46 Agricultural Production of the Coast
1939 ~ 1941 1942
(limdreds of pounds)
Rice 957164 872890 12304oO 1610489
Cacao 392000 263300 333250 315782
Coffee 343800 369000 310000 190633
Bananas (1000 bunches) 4090 3913 4568 4265
Oranges (COOs) 103000 lQ96oO 80550 75000
Cotton 200800 156800 155910 111500
Tobacco 24o43 4o 765 22349 29539
47 It has been estimated that about 500000 hectares (1 235 500
acres) are devoted to pastures on the coast supporting approximately
425000 cattle and 36000 swine
48 There is no doubt that the coast is an extremely rich agricul-
tural area although toward the south it is increasingly hampered by
shortage of water in the dry season And rt is overwhelmingly the
principal foreign exchange producing region of the country Yet it is
largely undeveloped by any modern standards lacking roads and almost
all basic civic amenities (water supply sewage paved streets etc) in
the provincial towns The development of a tropical agricultural region
without large labor supply _rill raise many interesting and some new
J Irrigation ~rks are in execution and others planned in various places and the irrigation equipment which it has bee11 suggested the Bank might finance would presumably be used on the lovlands as well as the highlands
-16-
problems the solution of hlch in detail may lack precedentY The
suitability of cacao to Ecuadorian conditions arises in part from the very
small labor requirements of the crop At bottom advance will lie along
the route of crop improvement and mechanization the difficulty will be
the proper application of mechanization crop by crop Some tropical pro-
ducts may never be suitable for mechanical cultivation being those whicl
would require intensive hand cul ti vat ion and may therefore not be appro-
priate for Ecuadorian condttions Others r1JJi3 be suitable only if grown on
relatively large plantations
49 Clearly for the foreseeable future many lowland products will re-
main at the stage of gathering of nld natural growth rather than plantashy
tion enterprise The flow to market of such productswould be increased
by improved access notably road core truction anQ at the same time road
building ~~uld seem to be a condition precedent for spread of plantation
methods particularly plantations using mechanical equipment lilliE diate
measures for the over-all agricultural development of the region may not
be directly agricultural at ell they are rather the provision of roads
and transport facilities the provision of long and medium term agric-llshy
tural credits and in some areas) the institution of health services
With the opening up of the region in this manner iiould come more clearly
perceived opportunity for better agricultural use of the land particu-
larly if effective demand for the products is transmit ted back to the
cultivator through establishment of product processing plants where approshy
priate for example in vegetable oils and tagua (vegetable ivory)
] This is the situation which in Brazil for example in an earlier technical epoch was 11 solvedll by importation of Negro slave lebor
-17-
50 As in the Sierra there are good possibilities for pastoral
development on the lowlands Some progress is already being made in this
direction with experiment in breeding more suitable cattle types through
crossing 11Ji th imported Indian brahmin strains Grazing for beef is not
highly labor intensive and this development is very promising since
export to other Republics by sea llould be reltti vely easy In the first
stages export would presumably be upon the hoof ith later development
of meat packing
51 There seems to be no single bottleneck or restraint upon devel~
ment presently existing all other conditions being favorable If developshy
ment occurs it will be along many simultaneous fronts but the front iJhiclf
is lagging and Inayen continue to lag is the provision of basic social ccp ishy
tal (roads water supplies health services etc) that is of those
things which no single private individual or corporation can provide for
itself Given these and the institution of suitable domestic credit
fecilities the rest may be accomplished by private domestic ini tiat1ve
52 The development plans of the Ecuadorian Government as outlined
in a Memorandum dated April 8 give much weight to lowland agriculture
The establishment of agricultural stations to provide farmers wi~h
disease-resisting cacao plants~ tecl1nical advice and credit facilities
is CD ntemplated no foreign exchange would be recpired all funds being
local currency The rehabilitation of cacao formerly a leading export
crop is desirable although development of cacao sources elsewhere may
prev~nt recapture of the position formerly held by Ecuador
53 A proposed agricultural mechanization programwoUld total
- 18
$25 million in foreign exchange cost )J The bulk of this ($1 5 million)
is allocated to wechanization of rice cultivation alone the benefit being
principally in resulting improved export position The remainder $1 milshy
lion is for mechanization of other agricultural produc~s apparently
mainly lowland (those products specifically mentioned being 11cotton sugar
oil-bearing seeds and other specified products11) the exclwnge benefit
forecast being principally through reduction of import a
54 Different criteria ~~ould be used in assessment of these two
projects The judgment on that for rice will depend upon forecast of
world rice markets and in particular upon expectations regarding rorld
demand for rice from the dollar area The validity of mechanization in
cotton sugar oil-bearing seeds and other lowland products will depend
first upon the technical possibilities for such mechanization a matter
not yet fully explored If sudl technical possibilities are favorable
effective mechanization vOuld constitute sound development upon the low-
lands which are relatively sparsely populated
Y Some part of which would be for the benefit of highland agriculture if machinery stations be established there
--19 -
IV MI-~RAL PHODUCTION
55 Ecuadorian mineral nroduction covers only a few products and
important the wells of the lowlands being exploited by the nglo-
Ecuadorian Oil Comany Production of crude petrolewn shows a slicl1t
rising tendency while exnorts have declined steadily a~ more refined 1
products are consumed domestically
56 Oil exploration to the Iast opound the Andesin the Amazonian
region is proceedinc under concession to tl-1e Shell Oil Go1~1any
Three wells have been drilled without success and tvro arc beinc
deepened Cost of this exploration to ciate j_s around US)23 million
If oil is found its only outlet middotwill be a pipe line over Ue Ances
(estimated to cost USiD93 million) and this the comany is not -rE1inz
to undertake unless assured of an outnut of at least 100000 barrels a
day
57 The only other irnrJortant minine activities are those of gold
silver conper and lead conducted by the South ~~erican Develoument ~
Company and the Cotapaxi Sxplora tion ConJ1any War-time lr oduction peaks
were 1942 for gold and CO)per 1944 for silver and lead Since these
resective peaks production has ~-~clined narticularly in copper and
lead although not to 1933 lsvels7
crude petroleum II II
1938 (millio~1s of 225 107
Production Exports Production refined petroleum 37
1947 barrels)
236 bull94
128 (See Table No_Jl_ Statistical Appendix
Production Gold (000 troy ounces) Silver (000 troy ounces) Co~per (000 pounds) Lead (000 pounds)
1938 445 82~0 27 21
War Peak l03tJ hhl3
96788 161-+88
19h7 5o5
1569 3316 h98h
-20-
58 Ecuadorian trade statistics list exports of crude pet~middotoleum
and minerals separately from that of other commodities even in aggre-
gate figures underlining the fact the exploitation is in foreign hands
and hence colonial in nature This aspect hmmiddotever is of di-1inishmiddot-
ing importance as now the foreign exchange realized from such mineral
exports accrues to the Central Bank and as in any event nineral ex-1)
ports form a diminishing proportion of the vhole 7
V ~JNUFACTURING PEODUCTION
59 There are virtually no stCltistics on manufacturing in Ecuador
and none which present any comprehensive view It is ho~middot-rever clear
that there is very Uttle industrial factory prJchJction and obser-
vation in the country leaves one with an impression of the nresent
igtilportance of handicraft production
60 The most inportant consuxner-good factory industrj_es are tex-
t~~~breweri~-~~ otheuro7r beveraces shoes ard leather _roduc~s buttons ~d~lttfr
and nails Textile production using domestically produced cotton pro-
duces cotton piece-goods and wool rayon and hemgt textiles supplying
almost all domestic demand for low-quality products The only irJDcrtant
producer-good factory industry is cement the plants being located near
Guayaquil Lack of domestic technical lmow-how and of capLtal and
the low level of domestic effective demand account for the sli~ht develop-
ment of faetory industries whose rrowth on any scale beloncs to a 1ter
stage of economic development
y Value of nineral exportsmiddot as nercentare of value of all exports 1929 260 nercent 1933 430 n 1939 397 1946 11~5 1947 69
Production and irrport statistics for cement tre civen in Table IJo bull 2__ Statistical Appendix
- 21-
61 Uuch of finished commodity ygtroduction is at the handicraft
stage both for nroducer and consumer goods In Quito and Guayaquil
one sees many small 11 shops11 producing metal leather and wood manushy
factures largely by manual methods It is an illuminating co~~entary
on the shallow growth of industrial specialization that the ll1ission
did not see any shops selling ready-made womens clothing All
womens clothing shops displayed only materials in the bolt as in
pioneer days elsewhere
62 One handicraft industry of great importance in exports is
the production of panama hats It has been estimated that 30000
families are occupied vrhole or art-time upon this nroduction and
at times (for example 1945) they have provided the largest single
export item by value The grmvth and treatment of the fiber and the
weaving of the hat is entirely an Indian handicraft industry the
Yteaving of a high-quality hat taking three months The fiber is erown
and the best hats woven in the lowlands Its future ir-mort nee is unshy
certain as the competition of Italy and the Fhilinpines is again felt
in low-_)rice woven hats the boom emjoyed during the war nay recede
63 Ecuador in its ~resent and foreseeable development is an
agricultural country with no immediate movement toward industrialization
EcuAdorians met by the Mission themselves stated this The growth of
factory industry will be slow that of small shop and handicraft manushy
facture somewhat less slow It vmuld seem as stressed later in this
report that there is room for grm~h of processing of agricultural
products Statistically such processing would be classed as industrial
production but is oroperly the finishing stage of agricultural productior
- 22-
to secure improved durability and portability of perishable products
This would increase effective demand imnacting upon the farm and ass1st
in stimulating agricultural development Some progress being made in
this direction notably in vegetable oil expressing plants Ihe only
non-agricultural project suggested by the -r~cuadorian Government has -eer
a cement plant located in the highlands at a foreign exchanr~e cost of
$2 rrillion the justification being both the saving of foreign exchange
expended upon cement imports and reduction of load upon the only railshy
way connecting lovrlands and hichlands Growth of cement use accompanies
economic development assessment of this project (engineering questions
apart) would involve tainly questions of timing location and finance
matters which are really all aspects of the single question whether
such a project may not be one for private direct investment Initial
expectation would be that were all factors favorable to the success of
the project it gtlould be readily undertaken by orivate enterprise
particularly when it is remembered that railway freiehts 1bullrould protect
highland production from lowland competition
6h No sueeestions regarding increase of electric power output
have come fror1 the Government indeed the official statistical services
have no data upon installed capacities and demand Cnly in Quito and
Guayaquil are present industrial uses of electric poler of any ir1portance
Elsewhere suIJply is from snall municipal plants (mainly therraal) for house-
hold consumption It appears that demand mar be ahead sunply in cost
towns very frequently voltages are maintained around 80 instead of the
rated 110
- 23 -
65 Shortage of electric nower is not however hamoering
economic development at this stage although it may soon do so in
sevral urban centers such as Qui to and Hiobamba Sone ttne i-1 the
iuture the possibility of large hydro-electric vrorks on the eastern 1
side of the Andes will merit attention
y Where the rivers are fast and clear on the western side they carry much silt
- 24-
VI DmIESTC THANSPORT AND COilERCE
66 The space devoted to agriculture in this report reflects its
importance in the Ecuadorian economy As has been said further developshy
ment will for sometime be mainly agricu1tural
67 Present restraints upon that development are not located
solely or perhaps even nrincipally on the farm there are many
features of the general economic environment which operate to hamper
even purely agricultural development There is great room for improveshy
ment of transport to knit the economy tocether and to encot1raee grovrth
of output
(a) Transport
68 Without roads there can be little regional or inter-regional
intergration Fithout that intergration (which for some regions and
some crops would open upon the world at the gatewa~r of a oort) there
can be but small inducement andlittle opportunity of increasing proshy
duction In much of Ecuador the principal transport vehicle is the mule
whose patience and endurance under heaJr load is matched by that of the
Indian
69 As regards roads the requirement is both more roads and
better roads capable of bearinr modern vehicular traffic The roads
traveled by the 1Jission are uniformly bad both slowing traffic and imshy
Ilosing extraordiPamiddoty vehicular de_reciation Ultimately no coubt
there vdll be an adequate system of all-rreather roads in Ecuador For
the immediate future the more modest tarset is to attain a reasonable
system of roads civine access to the creater art of roducine areas
- 25-
in the dry season At present the unsurfaced access roads are cut to
pieces by --vater erosion in the wet season and consolidated somew1at
traffic in the dry season A single eradinr operation smoothin thE
dirt surface at the end of the vret season would ci ve accelJtable usashy
bility in the dry )eriod v1hich in the populated coastal rovince of
icanabi for example is eight ~aonths of the year At -_resent the so1e
transport link for corunodities between loYrlands and the hihlands
is the Guayaquil to Quito (and beyond) railway This link is nrobaoly
nearing saturation point vdth present equipment and its strencthening
both by railway imJrovement and all-middotweather hichway construction is
obviously desirable it middotill probably become essential yri thin five
years
(b) Commerce
70 Physical transport alone hogtever is not the only ope c-ation
ofcarriaee required to intecrate a reeion internally and to bind toshy
cether the various regions There are also tL physical and the finanshy
cial aspects of comr1odity holdinr involving the storae and vrhere
necessaFJ the partial processing of products to reduce perishability
and the avail~bility of mechanisms of short-term finance extendine over
crop periods In Ecuador these tro aspects are closely related
71 Apart from some export crops there is virtually no crop or
food processinG undertaken And in the export crops processing
is the minimum necessary to secure portability Eice is nilled but not
polished cacao is sun dried coffee is dried and within only recent
years washed fruit is exported whole Some new e~Jor-ts may require
further processing and installation of plant starting or is in
- 26-
advanced discussion for example vegetable oil processing (although
for sometime no eXport surplus of vegetable oils is 11~11 and fish
canning
72 Nor is there any important ~recessing of domestic food pro-
duction for home consumption bull There is no freezing or canning of meat
which is taken to market on the hoof There are only two or three
very small butter factories and no whole milk orocessing Cereals
of course are not highly perishable but there are no silos or granarshy
ies and experience of similar situations elsewhere suzfests that losses
by deterioration and infestation may be significant no direct evishy
dence anthe incidence of this factor in Ecuador ~as obtained by the
Mission Thee is little storage of grass on the coast in silos or
as hay and in the dry season slaughter of cattle because of lack of
feed is at times necessary In short the situation is not so very
dissimilar to that ofmiddotmedieval Europe
73 Roads alone would not create an environment favorable to
change in this position although lack of roads nar well inlibi t change bull
In addition suitable credit facilities for the finance of co~~odity
holding through time are necessary
74 Hany complaints were voiced to the Hission reearding lack of
short-term banking credit for crop movement and storage and for medium
and long-term agricultural investment and no doubt there is signifi
cant lack of such credits But this is not the result of some simle
institutional defect of the b~~inc and credit structure even though
institutional improvement may be necessary It is fundamentally a
- 27-
reflection of the fact that Ecuador is extremely poor in disposable
capital available for even short-term investment ie vrorcing capi-
tal Improvement of short-term credit facilities for what in advanced
communities are regarded as purely commercial purposes would in effect
represent an increase of capital intensity in the Ecuadorian ecororny
To the extent that banks met more fully the gtJeak seasonal credit re-
quirements for croo movement and storage individual nrivate reoources
are relieved of the 1eak burden and available for other investments
75 Thus iorovement of the techanisr by 11hich the banking system
provides working capital for corrtercial or inciustrial (in the sense of
crop processing) purposes is itself an act of investment rather than
merely an institutional rationalization ilnd as such carry the
usual consequences of investment in an undevelogted economr with very
law voluntary savings To the extent that additional credits are not
matched by savings sewhere (either voluntary or forced through
taxation) they will be inflationary in effect just as an
additional act of long-term investment would be Increase of banki1g
nrovision of workinrr capital should keep step with totl capital for-_ - - 1 mation of which it is one aspect7
It is implicitly assumed in the foregoine that at nresent in Ecuador the amount of small voluntary savinrrs is neclicible It vrill presumably not alrmys remain so and ~Jart of the modifications of the bankin~ system shou1d be attract Clli1U1 atively such sav-ings in the fom of savinc do)Josi ts This 1muld increase the extent to which Danks can safely flovide capital It will be a much later before small private savincs are directly in-vested in commerce or industry throuh joint stock r1ethods There is no stock-exchance in Ecuador
-28-
76 It is of course just as important that the availabi lity of
working capital should not lag behind as it is that it should not run
ahead The Bank should ensure that any long-term investment projects it
may assist to finance do not effectively starve the rest of the econo~
of working capital in the process of avoiding inflation
77 There is also the question of the price of short-term lending
that is of the level of interest rates The Ecuadorian is a highshy
interest rate eoonomy The legal maximum for commercial short-term loans
is 10 per cent having recently been increased from 7 per cent legal
maximum rates however are not systematically enforced by commercial
banks themselves At a time when the legal maximum was 7 per cent
going rate for 90 day loans secured upon properly warehoused commodishy
ties and with third party endorsement was 12 pe+ cent
78 This very high structure of interest rates seems open to
obvious criticism but is in fact probably not Tiholly unjustifiable in
the present conditions of Ecuador It is the cumulative result of many
factors so that more official prescription of lower rates would be
quite ineffective These factors seem to be
(a) Interest proper~
(b) layment for risk bearing arising in part out of a
low rating upon individual credit and in part from
the institutional conditions (such as embryonic
commercial and financial ruarkets) which seriously
reduce the liquidity of any asset other than money
itself
-29
(c) An clcmmt 0f discount 111nn cyectcd luturc irf] utinn
reducing the real value of the pa~nent for lending
(d) An element of monopoly which upon purely subjective
judgment may be the least ilJI9ortant of these several 1
factors7
(e) The real shortace of capital whether short or long--
term~ reflecting in interest rates as a genuine
scarcity price
79bull Of those factors the di~ount upon expected future in-
flation increases prices at a rate of 12 ner cent per annum a money
interest rate of 12 per cent per annum is a real rate of zero If
therefore inflation could be controlled a substantial reduction of
money interest rates could be hoked for At the same tine while
inflation continues high interest rates probably have small influencemiddot
in encouraging money savings
80 Even without inflation ans until the su~1ly of available
real capital improves relatively high interest rates may well be
acceDtablemiddot as a price mechanisn nethod of selectin~ most urofitable y ~
uses of limited fundsbull middothere exoected urivate nrofit did not seem l - -
to parallel social desirability loans at lower rates (ie subsidized
terms) could be made perhaps through reconstituted Development Banks
Prima facie however such loans 1bullrould not be short-term
~I -Onthis interprepoundaion the situation in Ecuador differs signifishycantly from that in Peru
tt is suggested that a powerful point of intervention would be to limit commercial banking dividends distributed to not more than say 7 per cent The high profits nmv earned by commercial banks would then progressively accumulate until liberalization of lending becomes virtually forced by accumulation of funds representing genuine corporation saVings
- 30-
81 The discussion of private finance has so far upon
short-term credits there is an even larger nroblem in the
intermediate and long-term arricul tural credit It is not necessarr
to expand greatly upon this since it too is a consequence capi-
tal shortage
82 Imnrovement would seem to be alonrr the route - 1 of nroper UElte
of existing Development Banks (or their successors-) effectively
in the earlier stages as lending agencies of Government
VII OFFICIAL DEVLOPHl~NT FHmiddotIfJCE
83 In the circurnstances of a country like Ecuador the greater
part of domestic capital forr1ation requires official directly
or indirectly if it is to occur on any scale are too
small and too narrowly held to permit much -rowth this roL1te
andthose few who are able to save at any sinificant rate are larely
uninterested in the efficiency of ~reduction
84 Official finance may be either direct or indirect direct
throueh works executed by Government or 0JUblic bodies indirect
throueh lending institutions such as Dev~lopment Banlcs capitalized
from public funds In either case funds are diverted to investment
purposes by Govern~ent intervention
85 Thus Development Bank lending for productive purposes (for
example long-term acricul tural credit) is an item 1n ca9i tal formation
V There are thirteen reaional Development with an unirnJresstve record of manaeement Their possible reconstitution is under discussion
-31-
rather than a mere institutional rationalization of the credit mech-
anism Indeed as has been stressed in the last section even im-
proved su1nly of short-term credit gtrill in art rewesent
formation A developing economy which neclected these items in 11Cnn21~~
or forecastinc total caital investnent would be very vulnerable indeed
to inflation induced by over-investment
86 17here voluntary savings are Jow the only wmiddotamiddot to sirnificant
rate of capital formatton can emerge without inflation is an equi-
valent amount of savine forced throurh taxation One ould look for a
relatively hirsh level of taxation to national income and for a rela-
tively high proportion of exnenditures caDi tal purposes to total
Government expenditures On both these counts Ecuadorian elq)erience
seems irare s si ve
87 In 1946 total budretary and spedal revenue rms disclosed
as 5368 million sucres in the sa1le rear an estLnate middotJaced national
income at 20096 million sucres This a proym~tion of 27 middoter
come a proportion so hich that in fact it lacks credence In assess-
inc total tax burden part of the revenues of Government monorolies
and all of municial revenues should be included if this be done y
the proportion becomes 37 per cent In addition new exchance taxes
yielded 973 million sucres in 1947
Mono_)oly participations (ii direct disbursements for public _Jurposes) were 353 million sucres in 1946 munici~al income was 1803 million sucres in 1947 (1946 not available)
32-
88 It is very difficult to accept the conclusion that Ecuadorian
revenues form so high a proportion of national income it would seem
that the estimate of national income is too low Nevertheless tax
revenues are clearly a sizable percentace of national income
89 At the request of the Mission an official estimate of total
official expenditures on capital account was prepared Total income of
Government municipalities provincial councils and other public
entities was ~iven as 7S4 million sucres and total capital expenditure
from that income as 2237 million sucres or slichtlr over 30 per cent
of revenuesY It is difficult to feel confident that effective capi-
tal formation on this scale actually occurred certainly there is
little evidence visible to the eye of the t1middotaveler
90 Notwithstanding such doubts the fiscal evidence is of a
fairly hich proportion of tax revenues to national inco~e and of a
hich proportion of revenue allocated to capital investment It would
seem that the fiscal mechanism exists for domestic capital fo~~tion
what may be required is more effective expenditure of allocated funds-
Before a development plan envisa~ing the expenditure of still more funds
was adopted it would be desirable to examine closely administrative
and technical efficiency in the use of existing funds
91 On the side of revenue Treasurr officials informed the Mis-
sion that tax evasion was estirnated at some 30 per cent of ta revenues
1 This makes such capital expenditures 112) per cent of 1946 national income which a~ain seems very high indeed
The two largest items are Government public works (8)4 million sucres) and municipal works (900 million sucres)
- 33-
particularly in income and land tax It might well be advantareous
on the sides both of revenue and of expenditure for Ecuador to obtain
technical assistance of the tPe that the United Nations Department of
Economic Affairs rendered to Venezuela in 1947~Y involvinpound revision
of the structure of the budget of budcetary audit practices and the
like
f Report~d in UN Document ECN 1SubJfti 4 - 21 June 1948 lostricted)
- 34 -
VIII 001EHNl(iEi~T FINANCE AND INRATlON
92 What may be called 11multiple budget practices exist in Ecuador
as in other Latin American countries There is an annual Ordinary Budget
one or more Extraordinary Budgets( tro in 1947) end a number of Special
Accounts (twenty-five in 1946) not included in the general budgetary
accounts The State operates nxmopolies in tobacco liquor salt and
matches part of whose profits are taken into the ordinary budget as
revenue and part used directly for public purposes It is thus diffi-
cult to assesrmiddotgggregate Government revenues and expencii tures and vir-
tually impossible to detail the purposes of expenditure to ascertain
accurately public capital formation by way of public morks and the like
9 Taking the disclosed figures on the ordinary and extraordinary
budgets and tne special accounts there has been a net surplus over the
past ten years 1operations of 234 million sucres~ This however is
not an accurate reflection of the true aggregate position because the
Government operations are not ~holly included in these disclosed ac-
counts But since the Government has no source of internal funds other
than the Central Bank the net recourse of Government to Central BanJJI mirrors the over-all result of Government finance such recourse increased
In 1946 for example the monopolies contributed 5357 million sucres to the general revenue and disbursed 3526 million to municipalities (145 million on general participation and 1652 million sucres for 11 special participation of gthich an example is a new electricity plant at Ambato the state railways (92 million) etc
gj iiith only three years of disclosed deficit since 1938 See Table 12 in Statistical Appendix
2 Central Bank loans middotto Government less Govertllllent deposits in banks
- 35-
480 million sucres over the nine-year period 1939 to 1947 inelusivel
an average of 53 million sucres annually amplch averaging however con-
ceals very important differences between the three periods within the
nine years to tal
94 The table on the next page sumnari zes the factors causing in-
crease of domestic money supply It is computed by rearrangemm t of the
balance sheets of the Central Bank all commercial banks and all developshy
ment banks and is thus a table shoring changes in items in a rearranged
aggregate balance sheet of the Ecuadorian banking system
95bull The first t70 periods 1939-1943 end l943-l946f were both
periods of heavy inflation_ During the first five years notes in cir
culation and monetary deposits increased 3437 million sucres (or 255 per
cent) and in the next three )eera 2904 million sucres (or 61 per cent)
But the causal structure was quite different in the two periods
96 In the first inflation was almost wholly induced by external
factors (favorable balance of paYments causing increase of foreign exshy
change holdings) the major domestic factor being expansion of commercial
bank loans and investments in this period deficit Government finance
was not a causal factor
97 In the next three-year period 1943-1946 however the major
inflationary factors change deficit Government finance and expansi on of
f As calculated by IBRD Mission loans to Government including ali loans to official agencies A recent calculation by the IMF Research Departshyment covering Government operations only places the aggregate 9 years deficit at 345 million sucres~ See Table 12 in Statistical Appendix
- 36-
BANKING CHANGES ~0015 SucresJ
Jan 1939 Jan 1944 Jan 1947 Jan 1948 to to to tomiddot
Dec 1943 Dec 1946 nee 1947 June 19h8 t~ ~arsJ ~~ iears) trmiddot ~~r1 t~ mo~~h~2
Central rcrk loans tomiddotc~vt~ f 16174 f 160260 - 701p88 23695 Central B~r~ Loans to Public -1 6978 2_283 1- 67548 1- 39763 Commercial Bank Loans and
Investments J 187554 f 14624 88h4 1- 2~ ~49 Development Baru Loans and
J 14227 136818 ~ 644 1- 26090 Investments
1 224933 f 313985 11)40 1- 68107 Net Bank Foreign Exchange 260774 f 94662 - 53203 - u6 112
7 485707 7 408647 I
7 bull - 64543 21395
Notes in Circulation f 16o907 1-131729 - 23205 - 17290 Public Monetary Deposits -A 162868 1- 128914 - 68734 1- 19620 Government Deposits f 19968middot 29768 9050 2366
7 343743 7 290411 82889 - 36 Public Time Deposits 116834 ~ 42053 1~004 f 317j
y 7 46o517 7 3J2464 83893 ~ -- 3137
Absorbed by Banking System 1- 25130 middot~ 76183 1- 19350 18258 7 485707
11 f 4o8647 64543 I - 7 21395
Net Government Borrowing J 131492 from Banks 3794 - 79738 - 32745
Deposits in Central Bank in foreign money (not included above ex pressed in Sucres
Government ~ 4486 - 633 871 - 11059 Public 25242 J 78964 - 78814 J 4h97
T29J 728 7 I
7 IIIII middot~~ ~ I
78331 79685 31+38
y Made urt as Io11mlfs
Cas~ bullbullbullbullbullbullbullbullbullbullbullbullbullbull ~ bullbullbullbullbullbullbullbull - bullbullbullbull J 266 1- 367 - 22~7 99 Other assets less other liabilities~ ~ 4 330 ~ 293 ~ 18~8 Capital and Reserves~- bull bullbullbullbull 4 bullbull 52 bull 1 1- 79-9 26 o 278
7 I
7 7 I
7 bull Ill ri bullbullbull
251 762 194 18)
Subtract increase
37-
Davelopment Bank lending dominE)te the position Expansion of commercial
bank lending is relatively negligible while a comparatively small role is
played by balance of payment influences
98 From the end of 1946 the general financial situation deterior-ated
rapidly in five months from January 1947 to ~~ay 1947 net foreign exshy
change reserves of the Centrel Bank fell 935 million sucres or 7 7 mil-
lion dollars to a level of 2927 million sucres or 21 7 million dolJars
In litaY 1947 an IMF Mission arrived in Ecuador (at the request of the
Government) and in June 1947 a multiple exchange rate system with import
classification was introduced upon the advice and with the concurrence of
the Fund Operation of this system Jielded considerable profit n in
sucres it is in effect a new imposition of import taxes and such
11profits 11 are in reality additional fiscal revenueY It was of the
essence of the Emd s attitude in Ecnador that the exchange difficulties
bad arisen through domestic inflation and that these addi tiona reve-
nues should therefore be applied only in reduction of Government debt to
the Central Bank
99 The effect of such policy is clearly seen in the third column
of the table Inflation is checked notes in cirmlation and monetary
deposits falling 929 million sucres (or 11-per cent) i~ one year Alshy
thoUtgb however Central Bank loans to Government (and also colllWrci al
jJ At this point only the domestic aspects of this measure are emphashysized In a later section the external or balance of ~ent aspects will be taken up
Y Such revenue from exchange taxes yielded 975 million sucres in 1947 bull md in July 1948 was running at g to 10 jllillion sucres a month this revenue is not of course taken into the budgets bull
- 38 -
bank loans and investments) fell the actual deflation _was largely
caused through loss of foJeign exchange rather than over~all reduction
of domestic bank lending For in response to vigorous ~oilplaints of
credit shortage the Central Bank greatly increased its loans to the
public almost fully offsetting reduction of its loans to Government
In the first six months of 1948 there was no significant contraction
of money supply banking loans to the public eJggtanding to offset the
deflationary effects af an adverse balance of payments and of Government
debt reduction
100 The exchange surcharge multiple rate system was in operation
through August 1948 proceeds being devoted to reduction of Government
debt to the Central Bank~ But there has bean concern lest the resulting
deflation of domestic money supply would be too severe and the Central
Bank has in fact adopted a compensatory policy to prevent further reducshy
tion through continuing to expand lending to the public arid through
quasi-open-market pur~e of mortgage bonds to the amount of 17 million
sucres by July 10 19l8 when further purchases were discontinued
101 To avoid the netcessity for such compensatory policy the Cen-
tral Bank proposed to the Government that the destination of reveme from
exchange taxes should be changed Instead of being applied in reduction
of debt the proposal was that they should be useci instead to create a
development fund tt to be administered by the Cent~al Bank unless a
planned Development Institute or other competent authority is estabshy
lished In mid-September the Fund appro ved such cllanged dest ination of
these revenues 90 per cent of which will in future be applied in finance
of development and 10 per cent in stabilization of Government bond prices
-39-
This removes a check upon inflation which has operated for some fifteen
months unless Central and commercial bank lending policies recognize
this changed situation further inflation may follow even if the Budgetary
accounts run no deficit
102 At the same time this change does provide a source of local
currency finance for development projects
-40-
IX INTERNATIONAL TRAIE AND THE BALANCE OF PADlENTS
103 Ecuador exports agricultural products (rice cacao coffee
tropical fruits balsa wood) mineral products (crude petrolelUil gold
silver copper and lead) and handicraft products (panama hats)Y
lo4 Approximately one trird of Ecuadorian exports (including
minerals) go to the United States The proportion rose during the war
due to VmiddotIar-time demand for strategic raw materials but is now tending
to revert to pre-war levels Loss of European markets has been partly
compensated by gain of n$w export markets at least for a time and
especially for rice Countries in the Far East whose rice production
fell during war such as the Philippines and in Latin America whose
Eastern sources of supply were cut off such as Cuba and Venezuela
have provided demand for Ecuadorian rice This outlet however may not
last much longer
105 On an average of years 1938 to 1943 about 15 per cent of
Ecuadorian imports are foodstuffs wheat and lard being the largest
items and 85 per cent are manufactured goods and equipment Import
of foodstuffs is however gro1ing t-vith population and in the key pro-
ducts of wheat and fats would be expected to grow still faster if
econowic development raises n~ss living standards witl10ut increasing
domestic output of these prodvcts For increased consumption of wheat
products and fats is in part the definition of rising living standards
for a very poor population
fJ See Table No13 in Statistical Appendix for composition of exports
-41-
106bull Before the war (average of the years 1937 to 1933 ) the Americas
supplied 49 per cent of Ecuadorian imports by value the United States
alone supplying 41 per cent Germany provided 22 per cent of total
imports and the United Kingdom only 8 per cent Europe as a whole supshy
plying 45 per cent
107 In 1946 and 1947 the Americas provided 86 per cent of total
imports the United States supplying 66 per cent EUrope as a source of
imports fell to 12 per cent although the United Kingdom maintained its
relative position (7 per cent) Whether the United Kingdom can expand
its provision of imports for Ecuador JDaY be domiddotubtful on the one hand
the loss of Germany as a supplier pzo vides an opportunity on the
other the competitive industrial position of the United States may make
it difficult for the United Kingdom to fill this gap
No balmce of payments estimates eJd st for Ecuador1
Growth
of foreign exchange holdings over the war period however indicates a
strongly favorable balmce ~let reserves which were equivalent to 409
million sucres in December 1939 rose to 3962 million sucres (294 milshy
lion dollars) in December 1946
109 Official purchases and sales of exchange are shown in the fol-
lowing table together with corresponding movements of exchange reserves
The difference betRSen the balance on official transactions and the moveshy
ment in reserves arises from transactions on the free market
110 During the war import and exchange controls were nominal
there being no shortage of dollars nor any decrease of exchange reserves
jJ Except for the ~eriod January to May 1948
-42-
Loss of exchange reserves in 1945 led to a tightening of control on an
allocation of quotas smong users of exchange Import permi ts were
granted on the basis of former imports by merchants At the end of
1946 controls were relaxed on an extensive list of imports items and
the consequent loss of exchange has led to difficultieQ
Ul Official Official Balance Changes in Purchases Sales on Net
Official International Trans- Reserves actions
(Millions of u S Dollars)
1942 257 185 t 72
1943 35-5 279 t 1middot5 t Ul
1944 423 34~4 t 79 f 88
1945 353 394 - 41 - 7-2
1946 471 415 f 56 t 1 9
1947 488 579 - 91 38
112 From December 1946 to IVtay 1947 net foreign exchalge reserves
fell US$ 77 million from US$ 294 million to US$ 217 million In May
1947 the advice of the International More tary Fund was sought with reshy
sults summarized as follows in a recent Fund documentY
The lfund 1 s Mission arrived in Ecuador in Yay 1947 It was not advisable at that time to contemplate devaluation which would have made the inflationary situation worse An emergency program was therefore proposed Essential and semi-essential imports were to be distic5~ished and a surcharge of 5 sucres p3r dollar imposed on the semi-essential group as a check against their excessive import New decrees including many of the recomshymendations were issued in June
The main features of the new system were as follows
Y Economic SuVey of Ecuador RD 672 - P 43-44
- 43-
(a) The elimination of all quantitative import export or exchan~ restrictions licenses and quotas with the exception of a few absolute prohibitions of some luxury imports
(b) The checldng of excessive import demand through a fiveshysucre (33 per cent) surcharge on non-essential imports
(c) The suspension of nearly all exchange sales for nonshytrade transactions and the creation of a free market bull narrowly limited in volume and comprising mostly all transactions that are uncontrollable in practice plus a snall amount of domestically produced gold
(d) Exchange for a small amount of the least essential goods was made available in the free market
(e) One of the basic aspects of this plan was the steriliz~ tion of all proceeds from the import surcharge which was placed in a fund for the extraordinary amortization of the government debt to the Central Bank Tnis is still in operation
The beneficial effects of these reforms were felt immediately In June the trade deficit ~as reduced to only $07 million and in July to $06 million By August for the first time in 3 monthsl there was a small surplus In September the deficit was smci l -j)O 5 million In October there was a surplus of $15 million and in November and December there were small deficits of only $01 million and $07 million respectively
In short the deficit for the year was about $99 million in its gross gold and foreign exchange reserves During the same period international liabilities of the Central Bank showed a reduction of about $6 million Therefore~ the net deficit was around $39 million 95 per cent being in the first half-yeer and before advice had been received from the Fundrs Mission
113 It should be emphasized that this multiple-rate system of
exchange control is entirely freed cpentitative controls Excessive
import demand is checked by the higher rates upon imports deemed non-
essential the list of which is knollD and published Anyone presenting
sucres is provided with exchange at the appropriate rate upon list A and
B goods and the free rate is influenced by occasional releases of offi-
cial exchange into the free market The system that is utilizes the
inter-play of the price mechanism rather than the bWlilmlcracy of quanti-
tive controls or quotas
- u4-
114 Loss of exchange continues however despite considerable reduc-
tion of imports Gross international reserves declined US$ 18 million
and net reserves US$ 35 million in the first six months of 1948 Offishy
cial transactions January to June 1948 are surmrarized in the following
table~
Receipts From Exports From other Transactions (1)
Total
Payments For Imports For other Transactions
Total
Balance Change in Gross Reserves
1947 Jan to June
1948 Jan to June
(Millions of Dollnrs)
163 5 6
167 44
219 211
289 219 23 10
312 22 9
- 93 - 18
(l) Includes purchases of domestically produced gold deposits received in foreign currencies and borrowing from corres~ pondents abroad
115 Prospects for the remainder of the year moreover are not goo~
It is estimated that loss of international reserves over the whole year
may be aboat US$ 6 million Whether the deficit is in this region de-
pends largely upon actual export realizations for the remainder of the
year lhe most critical here is rice 11hose ygtrice is falling and the
crops accumulating in the rice millsplusmn Latest information is that
f Countries receiving allocations of Ecuadorian rice under International Emergency Food Council allocations have been requesting a change in source of supply owing to shortage of doJJers Thus France has asked for 6000 tons of rice from Indo-China instead of ~cuador and Greece for 2000 tons from kVPt in place of Ecuador as supplier A recent favorable sale of rice-to Haiti has somewhat improvea the cuITent position
-45-
plantings for the October crop are substantially reduced Wet weather bas
led to some loss of the cacao crop Receipts from exports in the follow-shy
ing official exchange budget may therefore have to be modified down- [l
ward on any pxuient calculation-
116 ~or Recei1ts and Sales of Foreign hchange
(Thousands of U S Iollars)
1948 1947 Estimated Actual
BECEIPTS
Worts Rice 13~ la4~ Cacao 11 l 2 Other products 10700 12371
Total Exports 354oo 42120
Foreign companies 5300 4842 Others 800 1883
41500 48845
SALES
Imports 44800 53499
Services 3200 4470
4B ooo 57969
117 In this situation of continuing presSlre one step has been
tken and others are under consideration The one taken relates to offishy
cial imports representing an average pf 20 per cent of total imports
Importation of cigarettes liquor matches and other things by the State
tionopolies is especiallyen significant These were formerly provided with
exchange tax-freebull ie at the ~owest rate of 1350 From July 26 they
afe required to pay the ordinary import rate of 15o4 on sll supplies for
J See note on page 47 -A
- 46-
their ovm use (such as office supplies) and the same rates as private
importers (ie 15o4 or 20o4) on all imports to be sold to the public
(such as wheat flour fats cigarettes etc) accord~ng to the classifi-
cation of the goods
118 Remaining possibilities seem to be a partial reclassification
of imports removing items from List A as essentials to List B as se~ishy
lwruriesY and or a chenge of nominal exchange parity vri th or mithout
a narrowing of the spread between the rates Here pressure from
exporters particularly from rice exporters may be hee~vily in favor of
an increase of the dollar buying rate with consequential changes of
selling rates
119 The present loss of foreign exchange is occurring ~rithout any
service being met upon defaulted foreign debt although service of Ex-Im
Bank loans is being made If it be assumed for purposes of calculation
that Ecuador reaches an agreed settlement identical to the Chilean sershy
vice would require exchange equivalent to US$ 378000 in 1949 (of which
US$ 368000 would be required in dollars) and would rise to US$ 4o20CO
in 1954 Adding service upon Ex-Im Bank loans outstanding on June 30
1948 and other known but small indebtedness total debt service would
increase to US$ 1410000 in 1949 rise to a second maxilliUID of US$ 1394000
in 1951 and then progressively decline Upon the assumption thet amp-Im
Bank loans undisbursed on June 30 1948 are all fully drawn before their
maturity total debt service charges would be US$ 1533000 in 1949 rise
On August 21 a number of import items were changed from List A to List B the aggregate import value (when granted exchange at List A rate) affected being US$ 7 million
-47-
to US$ 213431000 in 1952 and again would progressively decline These
last service charges rould be for 1949 3 1 per cent of 1947 actual
official foreign exchange receipts and 3 bull 7 per cent of estimated 1948
receipts and for 1952 48 per cent and 56 per cent of 1947 actual
and 1948 estimated exchange receipts respectively
120 Estimating prospects from this point in time Ecuador does not
seem to be a country able to afford assumption of any great additional
burden of debt service payable in dollars The amount that could wi thbull
out hardship or distortion be squeezed out of the balance of payments
by no means corresponds to the development needs of the country Any
start must therefore be modest and cumulative rather than spectacular
and precarious and this conclusion fits with other controlling factors
in the over-all situation notably the supply of administrative techshy
nical and managerial abi li ty
- 47-A -
Note on Official Exchange Transactions
Official exchange transactions for the firstsix months of
1948 are given on page 44 of this report Results for the full year
are now available and reveal that earlier expectations regarding the
probable 1948 balance of payments deficit were unduly nessimistic
Cacao export values have been lar~er than expected and in the last
period of the year there IBre some unexpectecily favorable rice eA-port
sales total export receipts were US$ 8 million larger than forecast
on page 45 Imports were held close to forecast
Receipts
Exports Foreign Co~anies Other
Payments
Imports Foreign Comoanies Other
Balance
Change in Grass Reserves
Official Exchange Transactions (full year - n~illions of dollars)
1947 -421
L18 19
488
535 06 149
580
y does not agree because of rounding
January 26 1949
1948 -436 h2 7
i85
Lt52 2
28
-oJ
-48-
X EXTERiJAL DEBT BEoomJ
121 The position of public long-term external bonded (excluding
inter-governmental) indebtedness of Ecuador is as follows
Amount in Default AmoUpt Outstandi~ ~ e Interest D~te
~In currmc1 (u s (us of p~t Dollars) Dollars)
Dollar obligations Gueyaquil amp Qui to Ry) $ 1226)000 12263000
286000 12263000
286000 123147
63047 Sterling obligations Franc obligations ( Oie
b 71000
Francaise de Chemin de Fer 1 lquateur ) Fcs 8386000 70000 70000
12619000 l26l9000
middotmiddot Note The Government of Ecuador oyenms about 75 per cent of the
stock of the Guayaquil and 1uito Railway and guarm tees the bonds and certificates which are largely held in England The franc obligations of the Cie Francaise de Chemin de Fer 11lquateur are not included in the offi cial statement of the public debt nevertheless the Government does recognize some liability for them and during the last few years has engaged in Degotiations for their retirement
Inter-governmental Debtsmiddot
122 Debts to the United States Government are of three types
63047
first the loans by the Export-Import ~which were outstanding on
June 30 1948 in the amount of $7 705606~ second the aJIDunts duemiddot
because of purchases of surplus property totaled $484 567 on March 31
1948 and third the obligations arising out of the lend-lease settleshy
ment the amount of 1fhich is not available (Total lend-lease assistance
j This section of the Report was prepared by Mr Paul Dickens
to Ecuador amounted to $7 bull 795000 )
123 In addition Ecuador is indebted to the Government of Venezuela
in connection with the establishment of a joint shipping company Late
data are not available but as of February 1947 $500000 ($1000000
authorized) was outstanding the total to be repaid by 1966
Debt History
l2ij Upon partition of the old Republic of Colombia~ middotEcuador was
apportioned 215 per cent of the original Colombian debt by the convershy
sion of l834a Between 1834 and 1854 no interest was paid The period
1855 to 1908 was marked by numerous adjustments and defaults
125 In 1898 the Guayaquil and Q]lito Railway Companyt s first mort-
gage 5 per cent loan of 1899 was issued It was expressed in dollars but
was in reality an English loan In 1908 a new (reemenJl was reachedbull
which was to be a final settlemet of all past disputes and controversies
between the Government and the Guayaquil end ~ito Railway Company and
the bondholders In 19~-10 the Government defaulted on the new agree-
ment In Novemberl9ll payments were resumed on the railway debt on)y
but a revolution caused a further suspension from December 1911 until
lfarch 1912 Subsequently service was partially resumed on the external
debt until July 1914
126 From August 1914 to July l9l8 no paYments were made on eny
foreign obligations except that service on the prior lien railway bonds
had been maintained up to and including the January 1915 coupon By
rf Negotiated settie~nt
-50-
1920 interest and sinking fund on the prior lien railway bonds had been
brought up to date but service on all other obligations ~ed in
arrears In 1926 interest on the salt loan of 1908 was brought up to
date but default took place on the coupon dueJam1ary 2 1927
127 The outstanding bonds of the prior lien issue were redeemed~~
January 1929 at VIhich time the January 1914 coupon was paid on the
5 per cent first mortgage bonds of 1897 In the case of the salt loan
of 1908 sinking fund was resumed in July 1928 and interest was paid
to Jazruary 1929 inclusive None thereafter Sums due from July 2 19C3
to January 2 1931 inclusive deposited with Central Bank in sucres
were used for governmental purposes after December 1931 No payments
were made after January 1929 on the external debt of Ecuador
128 Up to the end of 1948 no acceptable arrangement had been pro-
posed by the Ecuadorian Government for the resumption of interest and
sinking fund payments on external loans
-51-middot
XI bull POLITICAL
129bull Recent political history in Ecuador has been turbulent
although contest fo~ power at the top has not greatly affected the
bulk of the population Suffrage extends to all literate citizens 1
over twenty-one years of aee-but the requirement of literacy effect-
ively excludes the Indian bull T)tal votes cast in the recent Presidential
elections were 289164 from a total Population of some 35 million
130middot On May 28 1944 a few days prior to a scheduled ceneral
election an uprising occurred and Dr Jose Haria Velasco Ibarra
assumed office as President Dr Velasco had been President before
but following a coup dletat in August 1935 after he had been in
Presidential office less than a year he fled to Colombia and re-
mained in exile for several years On July 23 191-4 general elections
for a Constitutional Assembly to draft a new Constitution were held
Installed on August 10 the first Act of the new Assembl3r which was
predominantly Conservative was to confirm the legality of Dr
Velascos assumntion of the Presidency
131 On June 30 1946 new elections to the ronstitutional
Assembly middotwere held The only party particiJatine in these elections
was the Conservative The Liberals R~dicals Socialists and Commu-
nists abstained on the crounds that President Velasco did not offer
them sufficient guarantees On Aucust 3 1946 there vrere a number
of arrests following an abortive uprising and on Aueust 11 the Con-
stitutional Assembly re-elected Dr Velasco to the Presidency (by 43
to 10) for a term of office to last to September 1 1948
12bull Being compUisory for men voluntary for woraen -
132bull A new Constitution was promulgated in January 1947
133middot On August 23 194 7 a bloodless coup detat led by Colonel
Carlos Iancheno Minister of Defense in Dr Velascos Cabinet deposed
rresident Velasco who fled the country to Colombia for the second timebull
Next day Colonel Mancheno proclaimed himself Acting President and
formed a five-man Socialist-Liberal Cabinet despite the absolute
Conservative majority in the Assembly A week later however on
August 31 a counter-revolutionary military movemont broke out in the
north and the counter-revolutionaries captured Quito on September 2
134middot Colonel llancheno resigned the ActinG Presidency and dis
appeared the sa1ne day Dr Suarez Veintimilla who had been Vice
President under Dr Velasco and the former conservative Uinister
resumed control of the GoverPment Next day September 3 a Council
of State in Quito declared that Dr Velasco had by abandoning his
post terminated his functions as Chief of the State Dr Velasco
howeverJ vrho middotwas by this time in the Argentine declared that his
remo~al to Colombia had been forced and announced his intention of
returning to Ecuador to resume office
1~ On Seytember 15 1947 a Secial session of the Zcuadorian
Concress accepted the resignation of Dr Veintimilla and elected
Senor Carlos Julios Arosernena head of the Banco Ce Descuento at
Gua~raquil and a non-party man as Vice President with novers as
Acting President until September 1 1~48 Senor Arosemena formed a
mainly Liberal Cabinet with one representative each of the Consershy
vatives and the Socialists Coneress also ~onfinned the Council of
State 1 s view that Dr Velasco had forfeited the Presidency by abandoning
his postbull
136 On June 6 1948 Presidential elections were held The
three parties represented vere the Conservatives (Dr Manuel Elicio
Flor Torreo) the Liberals (Galo Plaza Lasso) and the Radical (Genera1
Alberto Enriques Gallo) Final results were announced as
Plaza 115835
Flor 112052
Enriques 53601
Invalid 27 676 289164
137 bull Doubt persisted until this month (August) as to who would
receive the election The Electoral College had been invalidating
votes on technical Grounds and as interim returns and invalidities
were announced it was noticed that the majority of the latter were
being deducted from the Plazavote After conferences the Electoral
College revalidated all votes and conducted a re-scrutiny on less
strict basis Senor Plaza has been declared to be the rfjSident-Elect
by the Ecuadorian Coneress and assumed power September 1 1948 The
middotpresidential term of office is four years
The Vice Presidential results were
Conservative 1anuel Sotomayor y Luna llu008
Liberal Dr Abel Gilbert 113213
Radical Dr Cueva Tamarz 5h07h 28129gt
139 Senor Plaza was born in Nmv York USA forty-two years
ago his fatter the late General Leonidas Plaz~ was President of
Ecuador in 1901-05 and 1912-16 middotSenor Plaz who had been taken to
Ecuador as an infant accomnanied his father in exile to the United
States and attended the University of California the University of
Maryland and the Georgetown School of Foreign Service in ~7ashington
l4o Senor Plaza returned to Ecuador in 1930 and for the next
fourteen years operated the family estates there reclaiming them from
virtual bankru~tcymiddot to prosperous and efficient state He has for
example been active in encouraging the breeding of new cattle strains
is President of the Ecuadorian Holstein-Friesian Association and oper-
ates a butter factory on his estates with a Danish ~anarer He was
ar Minister from 1938-40 and Ambassador to Cashington from 19h4-46
l In executing any policies he will of course be handishyt4
capped by the lack of a fully efficient Civil Service The position
in Ecuador is the same as that in othelmiddot Latin American countries
that the Civil Service is naid on low salary sca1e and lacks compe-
tent administrators Such lack is an aspect of the general shortage
of technical ability in the country
TABLE
1
2 bull
3 bull
4
middot 6
7 bull
8
9
10
11
lZ
13
14 bull
15
16
17
18
19
20
ECUADOR
STATISTICAL APPENDIX
Oil Production and Exports
Cement Production and Imports
Yfueat Production and Imports
Rice Production and Exports
Rice Exports by Destination
Cacao Production and Exports
Coffee Production and Exports
Cotton Tobacco amp Sugar Production amp Sugar Imports
State Railwaysmiddot Lines amp Rolling Stock
State Railways Merchandise Hauled
Population and Roads by Provinces
Budgetary Receipts and Expenditures
Exports of Principal Commodities Volume amp Value
Imports Classified by Groups Value
Exports by Destination Value
Imports by Source Value
Balance of Trade by Major Regions
Exehanee Reserves and Banking Position
Price middotIndices
Status of Ex-Im Ballilt Loans
ECUAIOR Table 1
Oil Production and Expomiddotrts
(thousands of American gallons)
Crude ou Gasoline Produced EJtported bullRefined middotproduced
1938 94586 78696 15500 41654
1939 97125 68819 17679 bull 141
194o 98654 70~99 23001 6162
1941 65382 38362 25914 6462
1942 95671 68516 29489 72l7
1943 97211 65003 34635 8076
1944 121469 82520 38083 8927
1945 109855 73897 38752 10059
1946 979+7 52412 45213 12271
1947 99140 39359 53949 16587
Source J3o1etin Banco Central del Ecuador
ECUADOR Table No 2
1929
1937
1938
1939
1940
1941
1942
1943
1944
1945
1946
1947
1948
l First six months
CEMEHT PRODUOTIOllT AliD IMlORlS (metric tons)
Production Imports
17782
15699 10082
14254 13373
14249 12013
16512 10935
17213 2_846
19802 so98
2756o 933
34691 1590
37504 953
38496 3114
33231 14941
20484JJ
Sources Production Eoletin Banco Central del Ecuador Trade Ministerio deEconomia
Total
25781
27627
26262
27447
20059
24900
28793
36281
38458
41610
ECUAJX)R Table J
Wheat and Wheat Flour Production and Irraquorts
(thousands of kilos)
Wheat
Production Imports Exports Consumption
194o 28120 bull 73 28o47 1941 24578 36 24542
1942 24265 bull 76 24189
1943 22034 22034
1944 23251 912 24175 1945 23115 2733 180 25667
1946 25852 4532 23 30361
1947 2lo66 494f)J 11
Vfueat Flour
1938 10743 9981 na
1939 7864 16638 na
1940 7996 8-592 275 16312
1941 7225 11823 286 18762
1942 7 161 23497 161 30498
1943 7461 9862 17322
1944 5216 24023 29239
1945 5174 25137 30311
1946 7~38 11313 g 18813
1947 5943 1886) 4Y
Less than 500 kilos Y First 6 months
Sources Ecuador en Cifres a~d Ministerio de Economia
~emiddot 1926-30
1931
1932
1933
1934
1935
1936
1937
1938
1939
1940 -middotmiddotmiddot
1941 ~ )~ (1
1942
1943
1944
1945
1946
1947
1948
~iiampn-sect00-lfmiddotks
-~Jrst~middot-nsmcnths
gJ Provisional
(B EQUOR
RI03 PRODUCTION ApoundP ~OR~S
Vo1wnfJ Production middot E~orts
(metric tons)
26)04
23584
29863
39270
39008
31699
39036
52136
44027
40144 ltit middotmiddot~ 0 56596
5873
100949
ao6o7
53168
102048
112711
047
8255
3842
6449
5282
22907
8734
12)3
2ooso
962
18343 t - ~ J
20546
32028
46992
64604
29318
66918
6~209fl middot tloo 1
$ bull
tt ( r t
z
Value 3xoorts
(thousand sucres)
1881
936
6667
10864
6555
14632 pound 170
23265
51460
93837
127105
60395
203243
2rfjuft
Sources Production Boletin Banco Central del 39uador~ Trade Ministerio de Econom1a~ ~r- ~fl ]r bull ~-middotmiddotmiddotmiddot f ~~middot~---i
Average Destination 1937-41
Cuba 2
Peru 13
Venezuela 6
Colombia 4
Panama 2
Jamaica 0
Philippines 0
India 0
Dominican Republic 0
Other Countries 4
TOTALS 31
Preliminary~
RIQ] EXlORTS (in million po~ds)
1943 1944 1945
81 88 5S
20 29 0
0 17 4
~ 0
Rf 2 hi 0 0 0
0 0 0
0 0 0
0 0 0
bullbull ~ 6 6
105 142 6S
R Less than )OOOOOpounds
Table No 5
1946 ~ Jan to~
1~ June-194
46 12 24
0 0 s 17 49 )j
2 13 2
5 4 1
16 1 0
20 0 0middot
0 38 0
0
1 f4~ 2
r middot I
130 13 34
sf Ineludes 6 million pounds to Mexico and 5 million tmiddoto Greece bull middot
1[0
supound~sect8_ Foreigl Crops and Markets Offiee of Foreign Agrtcultural Relations u bull Sll~artment of Agriculture May 3l 1948 bull p bull 402 First six months of 1948 from ibid August 16 1948 p bull 120
Average 191i-15
191620
l921-25
1926-30
1931-35
193640
1940
i941
1942
1943
1944
1945
1946
1947
tf I
ECUADOR
Cacao Production and ~orts
Volume
Estimated Production ~rts
(metric tons)
n (
12108
15middot330
14652
19030
15058
17759
17689
19459
4o625
43547
36825
21319
15980
174o4
11208
14433
13762
18161
13735
16827
16526
Exports ( 000 sucres)
186o9
26073
26746
27531
16647
37424
29354
34365
40327
51794
41985
53547
74935
188208
middot)(et) middot( middot
Sourcesmiddot Estimated production Ministerio de Economia E~orts to 193~ Estadisticas de las Exportaciones del
Ecuador 1940-1942 subsequently El Trimestie Estadistico del Ecuador Number 1
1 ~ Mini sterio de Economia -bull gt(
111 t bull r r (o J bull bullbullbull 1) ( bull
ECUADOR
Coffee Production and Exports
Volume Estimated Production EXports
(Metric TohS)
1921-25 average 5147
1926-30 II 7571
193D-35 10047
1936-40 II 13811
1940 16158 14571
1941 14260 11847
1942 9016 6140
1943 14144 12340
1944 16598 14458
1945 12999 10737
1946 9948 7636
1947 12522 8970
Table 7
Value
Exports 000 Sucres)
59~9
11530
10945
18546
16J83
23827
17278
33176
35626
33863
34839
43524
Source Estimated production - Ministerio de Economia
Exports t~ 1936-40 - Estadisticas de las Exportaciones del
Ecuador 1940-1942 - subsequently El
Tremestre Estadistico del Ecuador Number 1
and Ministerio de Economia
YEAR
1937
1938
1939
1940
1941
1942
1943
1944
1945
1946
1947
ECUADOR
Production of Cotton Tobacco amp Sugar amp Sugar Imports (000 Kilos)
Raw Cotton
9237
7213
7172
8165
PRODUCTION
Tobacco
1519
1106
1875
1028
1359
Sugar
17528
22950
26950
27835
30421
27858
26799
23151
32474
33544
33480
Table B
IMPORTS
Sugar
5310
11068
12387
38
6
33
184
784
21455
3060
Sources Production of Cotton and Tobacco Ecuador en Cifres 1942
Sugar Production and Imports Ministerio de Economia
ECUAOOR Table 9
State Railways
Length Locomotives Rolling Stock (Number)
(Kilometers) (number) 1relght Passenger
Gueyaquil-Qpito 452 39 319 41
Guayenaquil-SalinaJ 150 6 22 24
-~i to-CarcbiY 222 6 23 22
Bahia-Chone 78 3 12 g
Sibambo-Azogues 117 3 6 ll
Puerto Bolivar-Piedras 155l 7 21 10
Puerto Bolivar-Pasaje 55
1199 64 4oy llG
Narrow-gauge line
gj On uncompleted line ~ito-Esmeraldas
21 Of which 4 are rail-cars
jj Of Vihich 61 are rail-cars
Source lviinisteria de Economia
1938
1939
194ltgt
1941
1942
1943
1944
1945
1946
+947
ECUAOOR
Railway Transport
(thousands of metric tons)
Products
Agricultural Animal Mineral Forest Manufactures
1639 19 3 160 122 1034
1318 143 172 138 961middot
1714 144 233 219 1472
1613 184 277 209 1543
1809 224 280 272 1631
1841 280 35a4 376 193-3
2011 250 263 299 C5J7 3
1888 29-5 350 238 2234
1941 29-9 46 bull 4 258 2170
1787 299 51 0 180 2085
Source l3oletin Banco Ce~~nu del Ecuador
Table 10
Others Total
58 3205
58 279l
298 4oso
289 4115
328 4543
384 5168
352 5248
292 5296
37middot7 5508
419 5279
Table 11
Population and Boads
Poeation Roads (Kilometers) Province Jan 1 1948 Main Secondary In Construction
Care hi 86663 1744 1191 1050
Imbabura 158896 1818 2100 1810
Finchincha 350149 4)13 3703 670
Cotopaxi 215232 642 4o6o 970
Tungurahua 222963 2290 1810 300
Chimborazo 29864o 1664 3316 2740
Bolivar 121653 1877 1294 2045
Canar 133971 580 580 1300
AZUaY 284982 1053 2190 630
Loja 238705 1140 4s6o 1430
El Oro 93752 1005 2378 650
Quay as 482843 3900 3367 3700
Los Rios 148428 933 4632 1050
Manabi 381538 3627 1lo61 1970
Esmeraldas 664o5 50 19 0 2840
Frov Orientales 181071
465891 26636 46732 2t3l5bull5
Source Direccion General de Estadistica y Censos
1938
1939
1940
1941
1942
1943
1944
1945
1946
1947
Source
r
Table No 12 ECUADOR
DISOLOS3D BUDGETARY R303IFTS AlfD EXP3NpiTURES
(Total of ordinary and extra-ordinary budgets and special accounts)
thousand of sucres)
Total Receipts
1323204
131699 6
1262710
1547624
1667455
2112614
3145318
4051038
5367822
6696647 11 ~I JJ( middot
Total Expenditures
1429134
1267687
123135middot0
1586615
1489251
2101429
3031038
4174550
5352394
6593858 bull I
aoletin Banco Central del Ecuador
-middot middotmiddot
Diff~reuce
106830
j 49309
f 1360
- 38991
f 178204
j ltll8-5
f 114280
12351middot2
+ 15428
j 10278bull9 r 7
l I 1
L
ECUAOOR EXPORTS OF PRINCIPAL COMMODITIES 1937-47 Table 13
VOLUME (thousand metric tons)
1937 i98 1939 194o 1941 1942 1943 1944 1945 1946 194711
12 200 96 183 20 bull 5 320 47~0 646 293 669 66) 218 191 153 112 144 138 182 137 168 16 bull 5 203 14~ iJI 137 129 146 118 61 123 14 bull 5 107 76 90 48 55~5 53middot3 472 34 bull 2 226 158 1)9 178 35middot511 72 bull 5 345 19~2 251 183 14bull4 13 2 112 103 12~0 132 121 1-4 16 16 15 18 30 22 28 2~0 13 01 14 1middotmiddot9 2~2 21 47 90 136 93 74 28 na
~gt i824) (1387) (944) (1036) (1981) (2516) ( 2756) (4373) (4462) (4947) _01 2849 2454 2274 2201 1201 2167 2062 2513 2446 1640 1358
Ltrates 7~3 140 76 so 3~3 )9 26 10
VALUE (thousand sucres)
610 10864 6555 14632 23265 51460 93837 127105 60395 203242 201111 49985 39bull276 37bull033 29354 34364 40)26 51794 4lt985 53547 74935 188208 24613 16703 15227 16)84 23827 17278 33176 35~26 33863 4839 43 bull 524 5bull691 7558 7t006 6448 4658 _J 107 2159 1898 2872 738~- 24355
18242 7~146 9605 86o6 6120 201 6274 6209 9264 1)02 14994 4048 4300 4298 3~866 6979 35481 23316 38043 26553 15111 979 lt363 2~134 2724 3168 8450 25613 43419 31877 18 bull 509 7125 na 8048 6 234 4981 6509 16231 22121 25191 69033 69J87 81962 4662
21989 26374 25020 24862 13425 24820 23796 28788 28107 18253 15902 trates 10165 16090 13134 38609 27208 29013 18075 809 ates 18682 35297 41204 39907 29426 25374 27476 26457 15482 24858 25334
10774 13210 13495 3 950 16869 32775 2L068 32402 30902 38326 n bull a_
164_045 169096 167148 167851 199704 298690 393115 466631 377894 537131 619859 tmiddotbull bull
Note Dash (---) signifies zero or less than 50 metric tons nly or ~00 sucres ata expressed in quantities other than weight Sourcis 193 data from unpubli~hed Zcuadorian trado stati~tics
at US Department of Commerce 1938 nnd 1939 from partment of Commerce official data Direccion Nacional de Estadistica Eruad6r en Cifras ~7 from Banco Central Boletin 1940 and subsequont ~ears from Banco Centrll jto~n sterio de Economia and from M1nister1o c Economia data furn she
Mission July 1948
~ tobacco tone JgS
articles
11res ilk
al
value of Imports by Groups 1937-Lt-5 Volume and middot~alue of Selected Individual Imports 1937-46
(Value in thousand Sucre~)
1~37 1~38 1~39 1940 1941 ~942
19~731 20~ 375 24~874 16~)65 19043 37~540 5127 7194 1958 6~4e8 5t298 8 118
12888 13Jl5 14522 17702 19556 25~152 21627 25~272 21455 28532 21619 18923 20649 21~593 25559 29437 22636 19~$13 13~505 11961 12~654 15~976 15667 18899 5~829 7 bull 524 6066 9385 833 14353
22912 )0868 24~75 27 t 750 25993 42~916 9376 1028 10038 12118 11345 13932
-bull
131643 148320 1486o 173753 149499 199715 (Volume in thousand metric tons) (Value in thous~tnd sucres)
5middot3 111 124 194 5 bull 534 6385 26 4 24
os 246 -
122 ioo i66 86 118 235 8255 6)88 7449 5076 013 14609
19 07 11 11 14 29 2187 1824 2695 294-3 29J9 8182
101 i4 i2o i09 28 51 804 llJ)6 1667 1546 577 866
~ hides amp skins amp manufactures amp miScellaneous
~~43 1944 1945
33270 70915 82984 6717 8)69 904)
31~700 43196 32~830 17073 53~400 JBoo6 15447 32~624 38797 14~88 18~388 22895 14116 11a99 9812
68928 n~l79 69-113 15856 19186 20042
217983 33ltl56 323524
78 middot 0 2 215 130 12622
09 27 775 2290
99 240 bull 25~1 337 24070 26388
23 46 67 8853 146)1 21699
09 16 10 321 349 246
~s zero or less than 50 metric tons -middotNote Columns may not ahmys add to totals because of rounding Denartment of Commerce official sources - 19)8-42 Direccion Nacional de Estadistica Ecuador en Cifras [inisterio de Economia El Trimestre Estadistico del Ecuador
1946
)1 8135
4 bull 5 )842
114 13123
46 22709
)1 639
ECUAOOR Exports by Countries 197-47 (Value in thousand sucres) Table - 15
1937 1938 1939 1940 1941 1942 1943 1944 1945 1946 1947 --middot-------middot
80458 lt2865 116t-J78 150055 196953 293081 386483 46lt-909 372~549 463~378 sa4~68J 54422 63418 8)254 1t0496 145 bull 558 168585 2)9238 267105 218018 227291 262887
26 20 65 17 2228 78 124 7)41 17173 630 610 949 1281 1055 1)98 5~526 25686 78523 85382 61478 75890 23481
2899 4955 2109 3568 162 1163 4J54 2526 4197 44~ 1450 5027 6335 4972 5i92 5285 7425 4546 7379 10286 9798 15537
1 5 5 17 57 13 291 54 444 574 6996 8 662 9188 8714 13bull764 7238 15316 13900 11223 6~07l 14503 11717 2908 12544 5 730 7896 3767 21215 22608 29233 4243 6703 7965
51 15 24 8 532 3620 1603 539 2336 11579 3749 80 207 862 4070 9991 17096 1275 17~428 6~973 27431 80541
1943 2135 5229 6039 1965 5435 3021 4827 15~702 25~137 51~854 middot 667 740 991 zo83 3358 11412 4286 4282 3~-970 13064 5~864
1799 419 2218 875 2865 12299 9644 14900 13714 9653 11655 J 89 82 2527 1247 964 326 )24 250 41141 2~985
1024 1514 1068 2205 7173 2650 2 744 8871 7694 J2 5811 17 39~ 77029 61869 43688 11945 1503 5550 6335 4108 4075 36783 61998
32) 6)3 1187 490 58 186 2164 4021 J217 35974 29595 11277 69 - 29 4411 7909 6156 3477 1183 5492 4876 26)8 359 1860 7~467
489 255 J2 100 280 1155 1239 1265 3827 3~961 20539 13t521 10802 2254 5 706 4177 6313 2bull610 3615 4251 -middot 2842 13546 lBi 1415 3 758 822 6 188 12962 3592 2531 412~ 162 7~ 10052
8643 1693 3bull521 3~400 2751 320 40 118 231 222 5404 J 4894
6337 4201 6548 5478 1175 5 45 40 1611 50950 6261 4132 5386 5452 117) -
~l - - 15 45988 5 middotmiddot 7S 8 5 25 567 92S 11
33 ~- 76 18 966 151 150 3419
38 29 858 2 45 78 467
(continuation on next naee) middot
~GUJLOR ~xnorts by Countries 1937-47 (falue in thousPnd sucres) T~ble-15 continued
middot-~--- -~-middotmiddot -middot _ middot-- ~~---~~- ---- -middot--~middot--------middot- -middotmiddotmiddot--middotmiddot--193 1938 1939 1940 1941 1942 1943 1944 1945 1946 1947 _I --middot -middot- ---~- ------ middot- bull middotmiddot-middot -
4 7 5 5 5 219 1087
218 153 529 368 73 49 297 569 1230 35140 789 28137
207 144 379 J68 73 49 297 559 1104 605 11 9 10 126 43
150 6355 plusmn
353 54045 169096 167148 167851 199704 298690 39J115 466631 377894 537131 619859
~S Columns may not always add to totals because of rounding
Dash (-) signifies zero or less than 500 sucres
Primarily Guadeloupe and Jamacia
Primarily British West Indies and Netherlands West Indies
Primarily Denmark Spain and Norway
Primarily Java
~ces 1937 and 1947 from unpublished Ecuadorian Trade Statistics at U s Department of Commerce
1938-46 from Ecuador Ministerio de Economia data furnished IBIID rassion July 1948
Imports by Countr~es 1937-1947 Table-H)
ECUAOOR
l937 1938 1939 1940 1941 1942 1943 1944 1945 1946 1947 I (()
Value in thousand sucres) ~ + -gt L520 63151 83984 115382 128423 186958 200061 311989 302~329 363403 517582 j
u t 2086 51311 71950 103214 110422 138729 103583 173776 178821 240233 429906 0
Q) f
811 674 551 2436 1815 3J258 2150 5265 6538 12178 20912 d S Ugt ro c 1 n 4 4144 3042 8 99 14 23 295 178 8~011 210 h middot-1
(- 0
186 324 237 957 2~991 8492 18~376 15~239 17232 10~574 3121 4 middot-2375 2310 1959 2476 3016 4735 7930 7~696 11~201 15~564 14755 sectwfi
middot-1 1 fli 4 6 343 1~823 3J064 4110 3~612 60J5 h 0H
2739 2109 3789 174 2352 7949 9~934 17845 23~ 616 1559t 18~727 ~rld ()
328 164 457 2498 612 733 10892 10902 20003 16684 11981 oc ampl+lll
mmiddota J63 1297 1161 -- - 2 23 115 1~128 1192 d+gt-
2464 507 500 1438 5565 20668 39979 46654 33684 33034 6~486 15~~ (()
na 1 311 2297 5515 130 bull-I m rl bull +gt
15 31 68 245 995 1516 2804 25326 6124 5956 3472 Oltll~
149 280 269 332 550 208 270 389 707 839 655 a~ sect (1) Cl 4-209 72986 ~ 38 09 1433J 9813 16276 15885 1721~9 45194 80928 ~-g 1701 35767 2 7 7 33 1202 67 47 61 19 2 El 0 0 eo g 3250 11462 8094 12980 10124 8108 13634 12513 11984 28392 40983 cent1-t+l~
1803 718 1687 otmiddot r-
4-114 6465 7339 630 475 34 22 2 66 889 7279 t -P () ~led
36o 4685 1573 7144 308 12 682 4824 rlltll ltDno
1~896 2550 1466 1624 64 1 58 5090 bull-1
fJ ~ ~ 1052 1489 794 945 293 224 5 21 1373 9062 9 703 P + na 868 881 423 10 1 8 223 135 r- 0) u
1 r=l middotr-l
1162 4823 1264 1675 877 1017 1~52 2380 3129 4~326 6851 () l=l rl
7274 3074 2609 3595 980 349 1041 905 599 1~543 3~134 cn~oo bull t
724 11939 8983 19951 6239 2281 1439 304 3882 5478 5736 op a cent1-t ~sect rl
173 302 262 238 -w 14 276 -rr 472 ---s9l ctillmgt
259 10949 7810 18190 4414 170 16 4 5 +gtUd ~-- ~
935 712 728 1278 1281 1715 1314 2685 3185 4465 3151 +gtP t-1
530 105 143 221 306 240 95 89 582 541 2089 ~ (f)
1l 21 12 80 1f 196 122 169 125 1J n ~-T~
0
109 218 lllL 250 m 46 sect2 12_ 28 119 112 I ~ --sB_l_ 0 ---- -
643 148315 147860 17353 149499 199715 21 ~ 983 331156 323524 414266 604479 ms may not a1ways add up to t ta1s because of rounding Dash (-) signifies zero or less than 500 sucres ~ country breakdown not given in source g) of which 591 from Syria 2Z3 from China 264 from Straits Settlements 1 Sumatra and 264 from Iran
YEAR
1937l
1938t
1939~ -
1940amp
194H
1942
Exports Imports Balance
Exports Imports Balance
Exports Imports Balance
Exports Imports Balance
Exp(rts Imports Balance
Exports Imports Balance
ECUAroR Balance of Trade by Area 1937-47 (thousand sucres)
fRlSTERN HEMISPHERE including Philinuines
United States Other Total Eurone
54~lt-22 26~036 80~-~-sa 77~029 52086 9~434 61520 64~209 2336 16602 18938 12820
63418 39447 102~865 61869 51311 11840 63151 72~986 12107 27~607 39714 -11117
83254 33124 116~378 43688 71950 12034 83984 54505 11304 21090 32394 -10817
100496 49559 15Cl055 11945 103214 12~ 168 115382 38~090 -2718 37391 34 673 -26145
145 bull 558 51395 196953 1503 110422 18001 128 423 14333 35136 33394 68530 -12830
168585 124~496 293081 5t550 138~729 48229 186958 9 813 29856 76267 106123 -4263
Table 17
Other Countries World Total
6~559 164045 5-912 131643
647 32405
4361 169~096 12~ 178 148315
- 7817 20781
7082 167148 9372 147860
-2290 19288
5851 167851 20281 173753
-14430 - 5902
1248 199704 6743 149499
-5495 50205
59 298690 2944 199715
-2885 98975
NOTE Areas may not always add to world t~tals because of rounding
Source 1937 and 1947 frlttm unuublished Ecuadorian Trade Statistics at US Department of Commerce 1938-46 frem Ecuador Ministerio de Economia data furnished Mission July 1948
(Table 17 continued on next page)
YEAR
12J Exports Imports Balance
1944 Exports Imports Balance
125 Exports Imports Balance
1946l) Expltgtrts Imports Balance
12Z= Exports Imports Balance
ECUADOR~ Balance of Trade by Area 1937-47 (thousand sucres)
WESTERN HEMISPHEL~ (including Phili~ines United States Other Total EuroQe
239238 147~245 386~483 6335 103583 96~478 200~061 16276 135655 50769 186422 -9~941
267105 194804 461909 4~108 173776 138213 311989 15~885 93329 56591 149920 -11779
218018 154~531 372549 4075 178821 123508 302)29 17159 39197 31023 70220 -13084
227291 264224 49J515 36783 240~233 123170 36J403 45~194 -12942 141054 128112 -8411
262887 241796 504683 61998 429906 8676 517582 80928
-167019 154120 -12899 -18930
1 Only year in which substantial Philippine trade
NOTE Areas may not always add to world total becasue of rounding
Table 17 (oonttnued)
Other Countries World Total
29 393115 1646 217983
-1)49 15132
614 466~631 3~282 331~156
-2668 135475
1270 377894 4035 323524
-2765 54)70
8~833 537131 5670 414266 3163 122865
53179 619859 5969 60449
47210 15380
Sources 1937 and 1947 from unpublished Ecuadorian Trade Statistics at us Department of Commerce 1938-46 from Ecuador Ministerio de Economia data furnished IBRD Mission July 1948
~ EXCHANGJ-tAL BANK
ECUADOR Exchange Reserves amp Banking Position (million sucres)
r 4 bull TIC CQEDITS OF CENTRAL BAl~K Domestic Govt Official Bus Other Credits
MOliEY SUPELY Current AC
JJj To()2f (4) Entities Indvls Total Banks of O~mtl Currencl Denosits l (6) (7) (8) (10) (5) Banks amp 11
Indvls (9)
16 10 26 51 1 116 62 64 48 26 7 40 73 4 129 74 66 3middot7 )9 7 29 66 4 144 73 71 37 29 8 24 62 4 159 78 73 56 26 8 22 55 5 183 8l 103 81 37 28 2 8 201) 120 119
152 37 21 22 79 9 255 169 17~ 26) 34 27 22 83 13 378 ZJa 26e )4 60 37 20 117 9 385 295 308 Z5 105 73 11 189 26 493 321 312 282 153 81 10 244 24 536 35middot~ 354 242 104 44 93 241 2 565 329 284
221 110 51 99 260 2 56 313 278 215 102 47 101 250 2 573 )06 294 225 97 45 95 237 2 585 299 299 219 100 44 98 242 1 591 307 297 214 98 35 111 244 4 6)4 315 295
)20 295
on of $12500CC beginning in December 1946 bull
ars
Ttttal (12)
127 14) 144 151 183 239 345 492 602 634 704 613
591 599 597 604 610 614
ge liabilitieS but including Stabilization Fund in 1945 and GolC CertificCt in 194) bull ial banks and fomento banks ial bc1nkst and fomento banks sits of commercial banks and time deposits of fomento banks
Table 18
Govl t Den sits ~L
(lJ)
6 23 12 27 7 28 8 31 6 32
middotmiddot 11 )6 16 57 27 71 41 74 63 98 59 90 66 77
71 8 75 76 6 75 81 75 81 72
72
1 1 Boletin - Superintendencia de Bancos Boletin - Unpublished data furnish~d MF bY Banco Central of Ecuador
Table 19 ECUADOR
Price Indices
WHOLESALE Rents Export Fooa in
YEAR Goods and Quito - Coal ~1) (2) (3)
1937 100
1938 83 100
1939 95 100 153
19h0 95 106 16h
1941 96 113 150
1942 114 146 172
1943 114 183 187
19h4 118 218 219
1945 133 266 254
1946 203 320 315
1947 297 364 516
19h8 (March) 294 379
(liay) 416
(July) 389
llame l~umbar
Republic of Ecuador
Status of u s Export-Import Bank Loans to ~cuador
Purpose
gs of Junemiddot10omiddotl9ltsect
Gross Authorized
Cancel- Net lations Authorized Repeid
Amount Amount Outstandin~ Undisbursed
6J048 6J048
( 262 )16
Haterials equip amp services $ 6480000 $20810 $6459170 $1279775 ~)5-l19middot395 _____ _
ibulliunicipali ty of iui to (Republic of Ecuador)
ibullIunicipali ty of Guayaquil (Republic of Ecuador)
Republic of Ec~ador
Republic of Ecuador
Ecuador DeveloPIlent Corp
Pan-American Highray (Cuenca-Loja)
Agricultural Research amp Experiments
Raihray Equipment
5000000
12JOOOO
50000 200000
)28 Haterials equip ~~ 4000000 services - ater 1middot1orks
)28 iltiaterials equip amp services - ~~rater orks 4000000
J4J Pan-American High1middotray (Guamote-Tambo)
432 uevedo-Hanta Hightmiddotray (additional credit)
1980000
220000
$19180000
Of tlhich $2500000 tts used on the Quevedo-Ibullianta HighTaY
4000000 28880
4000000 167
-1 t-9amphOOO- -7500
220000
6o6120 -h365000-middot
41592 575-t 2-41
-l-y5Q2- 500 44Gooo
220000
IBRD Statistics Sectio spte~ber 24 1948
4-
17 At the same date the literacy rate was estimated at 20 pe~ qent
s~i~literacy at 20 per cent and illiteracy at 60 per cent
-5-
II OCCUPAmtOUS AND INCOivES
18 There having been no census there is no at~curate information
under this beading
19 The Economic Department of the Ecuadorian Central Bank has esti-
mated that of a total population of 334 million in 1946 1285000 or
J9o per cent were gainfully employed in the following occupations
Agriculture Forestry etc
Mining
Building and Repairing
Manufacturing and Processing
Services (communication comshymerce government etc)
820000
10000
6oooo 10000
325000
5 5
26
100
20 No valid estimate of national inco~e exists At the request of
tne International Monetary fund the Technical Adviser to the Central Bank
of Ecuador Mr L A Carbo estimated national inccue in 1946 as 20096
million sucres or US$ 149 million Although this estimate is probably too
low ] it is clear that national income is very small Ecuador is very
low on the list of income per head among Latin American countries its
income per head is in feet among the lowest of countries of the world
21 Income is very unevenly distributed A survey made in 1943
yielded the following picture
g lror reasons Sdvanceit below Paragraphs 87 and 88
~ pt WI
-6-
To tal Monthly Average Monthly Population Income Income per Fw~ly
Number of Amount t tount People (SUcres) (Sa~res)
Upper Cla~s 4oooo 133 28000000 144o 2300
Middle Class 96oooo 3200 96000000 4950 4 L ~ 00- middotJ~
Lower Class 2000000 6667 70000000 3610 140 -- -~
3000000 10000 194000000 10000 10000 yenSliP C_~ ~
Note At the ofDcial rat~ of 1350 suc~es to the US$ average monthly incomes per family are equivalent to approximately $2J7 $30 and $10 respectively
~ Uneven distribution of incoue is of course largely a conse-
quence of uneven distribution of property Some ideas of the distribution
of rural property is afforded by analysis of re~urns made in payment of
rural property tax Such tax was paid by only ll2l4o proprietors in 1944
whose holdings may be summarized as follows
Per cent of Value of Rural ProEerties Number of Proprietors
916 4o
29-33 llOO
3041 10400
2030 37200
1080 634oO
10000 112J4o
23 Such statistics do not of course carry one very far beyond
the general observation that income and wealth is very unevenly distributed
and that much is obvious from a little travel in the country But it should
-7-
be said that comparing observations in Ecuador vrith those made in Peru
and Bolivia Ecuador by subjective judgment compares very favorably with the
tvo latter The Ecuadorian Indian seems to be on a perceptibly higher stan-
dard of life both in the highlands and on the coast than the Indians seen
in Peru and Bolivia Vhile his land holding is small it yields somethi1e
he very freqjl ently possesses livestock such as pigs and chickens has cot-
ton clothing drying on a line a~d often cultivates flowers and keeps
pigeons By American standards he is undoubtedly on the poverty level by
Latin American standards he may be a little off it
24 At the other end of the scale the wealthy upper class are pro-
bably not as wealthy as the Peruvian upper clas~h and the Bolivian elite
in operating in poundcuadc~the upper class lacks the rich property of mines
Thus while income is of course unevenly distributed in Ecuador as else-
wnere the range between the wealthy and the InJian may well be less tban
elsewhere The line of income distribution is of aboat the same slope
but probably significantly srJOrterY
This conclusion cannot be demonstrated statistically It results from a 11feel 11 deri ved from personal observetions in the respective counshytries
-8-
III AGRICULTURAL lROIDCTION
25 Ecuadorian development is largely a matter of increasing the out-
put of and improving internal and external trade in agricultural products
There appears to be no enduring geographic or physical reason ~middotby this can
not be accomplished She possesses soils and climate ranging from the
tropical to the temperate soils which in some areas are very fertile and in
others are in danger of exhaustion To anticipate subsecpent conclusions
her problem of development through agricultural progress breaks doTltD into
separate aspects all involving improved technique
(a) increasing arable yields from areas already cultivated
(b) improving pastures and stock in grazing areas
(c) enlarging both arable and pastural areas (including irrigation)
(d) improving roads in rural areas
26 Achieving these objectives involves providing more adequate
domestic credit for short- medi~ and long-term agricultural requirements
27 In application however interpretation of these problems is very
different in the two occupied regions of the country the Sierra and the
Coastal Lovrlands no generalization can cover both
(a) TLe Sierra
28 The occupied inter-Andean valleys are a region of temperate
agriculture producing almost exclusively for local consumptionmiddot Their
pat tern of tilled fields grazing land trees and flowerJl is almost
Y Flowers bloom all year round The main tree is the eucalyptusmiddot introshyduced some 70 years ago end used for all purposes (~indbreaks fuel 1
and lumber) affording a striking example of the effect of introduction of one plant upon regional habitability-
-9-
Western liiuropean in appearance but not unfortunately in productivity
Agricultural Production of the Sierra
1939 194o 1941 1942 - -(Hundreds of pounds)
Theat 49QOOO 611300 534300 527499
Potatoes 1201000 1476400 1386120 1146000
Rye 72500 79900 159495 115000
Lentels 46000 424oO 37955 csooo Corn 816700 1349300 1308062 1315200
Barley 85)000 795700 903600 911000
Cotton 45000 42020
Kidney Beans 80000
29 In addition about 1000000 hectares (247 m~llion acres) are
devoted to pasture supporting epproximate1y 683000 cattle 145 million
sheEf 107000 STrrine and 320000 goats
30 Yields are low in all Sierrean agricultural activities the
standing VJheat and barley crops are so thin that the ground can be seen
through them Yet the greater part (some 6o per cent) of the people of
Ecuador live in the Sierra and population is increasing at about 2 per
cent per annum The effect upon land use under existing tecnniques is
clearly visible cultivated areas are being pushed higher and higner up
the hillsides (slopes of 30 to 40 degrees being used) and onto the
fJparamon the high plateau betvreen adjacent valleys at altitudes of
11000 feet and higher The result is a picturesque scene but one which
reveals a near Malthusian situation in the man-land ratio rbullrith static
-10-
technical practices It is a situation which cannot remain unchanged if
economic development is to occur in the region
31 There sean to be three possible lines of advance increase of
output from highland areas in present use the bringing into use of new
ground in the highlandsbull or a change to increasing reliance upon the outshy
put of non-highland areas
32 The third possibility is not one for the immediate future It
involves either large-scale migration from highland areas to lowland
regions or a large transport program linking highlands and lowlands
together with growth of non-~ricultural activities on the highlands to
provide a cash income with which to purchase 11 imported 11 foodstuffs This
second possibility may indeed be the trend of ultimate development but
offers no irmnediate easement Large-scale internal population movement
from highland to lowland is probably impossible since the Andean
Indian (of different stock to the coastal Indian) is fullf acclimatized
both mentally and physically to life at high and temperate altitudes and
little suited to life on tropical lowlands
33 The two remaining lines of advance would both seec to increase
highland agricultural output But there is an important difference beshy
tween increasing output from valley land in rr esent use and bringing new
and higher land into arable use The first is a complex problem suscepshy
tible only of relatively slow solution the second is seemingly simple
and capable of quick result yet basically less sound offering only
temporary improvement
34 The thurst onto higher ground is already evident and the area
-11-
taken in could probably be greatly enlarged by efficient use of tractors
and modern plows Such use of mechanical equipment would thus give quick
increase of agricultural output but it is very doubtful whether improveshy
ment induced by these means alone could be long maintained The greatest
~r particularly on sloping land is that deep plowing may lead to
soil erosion so serious that land becomes finally llilgtroductive To use
mecbanical equipment i thout at the same time adopting eqJally modern
methods of soil conservation way well be disastrous and that perhaps
within no long period
35 Even apart from this physical daneer there is the virtual cer-
tainty that new land however plowed would gradually sink in fertility
end hence output unless farmed by better agricultural practices than
those now followed in highland Ecuador The present attraction of the
higher land is principally good natural fertility beine virgin ground
On all other counts this higher land is less advMtageous than the valley
floors the va)ley sides are steeply sloping a1d the fl~t paramo is some
2000 feet higher bare windswept and devoid of habitation It would
seem obvious that it is pastoral rather than arable ground were it not
for the pressure upon arable output of the region
36 The pressure today however rises from the relation betwem
popUation and output rather than that betvreen population and arable
area Productivity in the Andean valley is low and can certainly be
improved If improved the pressgtlre which is causing the thrust to
higher ground is relieved until population increase again overtakes outshy
put Against that time however the higher ground vrould remain
-12-
availfibleY and other lower regions may be coming under effective use
37 To increase output of the populated valleys is not a simple mat-
ter responsive to single policies such as simple mechanization by tracshy
tors It will embrace the wlo le range of agricultural practices from
better seed types to crop rotation and fertilizers including in some
valleys irrigation It is a matter rrther of agricultural education
than of~dtlgagricultural appliances and probably experiment under
the peculiar regional conditions will need to precede education Improveshy
ment will necessarily be slov1 but along these lines it can be sound and
permanent
38 Wher~ lfL mere importation of mechanical methods Vi thout
understanding of their dangers in speeding soil destruction by wind and
water erosion may permanently damage the region The somewhat gradual
mechanization of agriculture is of course to be expected and not disshy
couraged but it is not the wlole answer to development in highland
Ecuador
39 It seems that there is at present no over-all agricultural
lfibor sl1ortage in the Sierra and mechanization is nOt therefore called
for to relieve an adverse manpower position It seems however that
some of the larger estates are experiencing difficulty in obtaining their
labor requirements because Indian tenants are viitblolding quasi-feudal
labor dues and devoting whole time to cultivation of their own plotsbull
As a result hacienda holders are attracted to mechanization as an
escape from growing difficulties in obtaining and supervising labor upon
Y As it would not if destructi ve1y formed at this stage
-13-
their ovm land To the extent they are successful the tendency for agrishy
cultural money vrages to rise is weakened
4o There vrould seem to be good possibilities of increasing pas-
toral agriculture in the highlands 1Jrith improvement in both numbers and
strains of cattle and sheep If adequate arable development occurred in
the valleys the main grazing grounds could be the higher land not then
required for arable purposes ~lith dairy cattle on the valley margins or
on valley ground not well suited to arable use Such pastoral development
would be desirable not only to imp1middotove nutrition in Ecuador itself 1 but
as a possible new export of meats fats and hides to meat deficient
Republics notably Peru Early export would probably be on the hoof
along the Andea1 ridge it self
41 The Ecuadorian Government has not included any explicit propo-
sals for highland agriculture (other than irrigation) in its present apshy
proach to the Bank It has however suggested the Bank finance $1 mil-
lion of agricultural tractors and equipment to be handled by agriculshy
tural stations located at strategic places both in the coastal
provinces and the highlands 11 without further elaboration of the
intended highland use of such ecp ipment The description given above
suggests that the usefulness of agriculture machire ry depends to a conshy
siderable extent on the place plan and purpose for rhich it is to be
used
42 In some of the highland valleys (for example in Cotopaxi end
~ound Biobamba) rainfall is deficient and irrigation would increase
valley output by bringing more valley ground into effective use This
- 14 ~-
is clearly sound for flat valley ground already populated is more useshy
ful than higher sloping and more exposed ground The Ecuadorian Govern
ment has included purchase of eq1 ipment for irrigtion works to the value
of $500000 in its present approach to the Barik Assessed against the
requirements for economic development the request is sound provided of
course such equipment is effectively used
(b) The Ooast
43 The condition and nationel significance of agriculture on the
tropical coastal plains is quite different from that ltNl the Sierra The
area as a whole is less densely populated and in some parts such as the
Province of Esmeraldas is very sparsely populated Its principal pro-
ducts are exported The population has more mixed blood than the highland
people and is oore corumercially active and minded There is little feel-
ing of community of interest with the highlmds the rrincipal coastal
city GuayaqJil is larger than Quito and less remote fror-1 outside
influence
44 In terms of reported area devoted to its cultivation cacao
is the principal crop of the coast The table on the following page
shows output of main crops
45 Cacao is not however the most important export crop by value
being surpassed by both rice and panama rats (a handicraft product of the
region) Nor does the table show those products which result from
gatherage of mild growth tagua kapok oil-bearing vegetable nuts
balsa rood rubber etc
Y For use by the Caja de Klaquogo as required both in tile highlands and on the lowlands
-15-
46 Agricultural Production of the Coast
1939 ~ 1941 1942
(limdreds of pounds)
Rice 957164 872890 12304oO 1610489
Cacao 392000 263300 333250 315782
Coffee 343800 369000 310000 190633
Bananas (1000 bunches) 4090 3913 4568 4265
Oranges (COOs) 103000 lQ96oO 80550 75000
Cotton 200800 156800 155910 111500
Tobacco 24o43 4o 765 22349 29539
47 It has been estimated that about 500000 hectares (1 235 500
acres) are devoted to pastures on the coast supporting approximately
425000 cattle and 36000 swine
48 There is no doubt that the coast is an extremely rich agricul-
tural area although toward the south it is increasingly hampered by
shortage of water in the dry season And rt is overwhelmingly the
principal foreign exchange producing region of the country Yet it is
largely undeveloped by any modern standards lacking roads and almost
all basic civic amenities (water supply sewage paved streets etc) in
the provincial towns The development of a tropical agricultural region
without large labor supply _rill raise many interesting and some new
J Irrigation ~rks are in execution and others planned in various places and the irrigation equipment which it has bee11 suggested the Bank might finance would presumably be used on the lovlands as well as the highlands
-16-
problems the solution of hlch in detail may lack precedentY The
suitability of cacao to Ecuadorian conditions arises in part from the very
small labor requirements of the crop At bottom advance will lie along
the route of crop improvement and mechanization the difficulty will be
the proper application of mechanization crop by crop Some tropical pro-
ducts may never be suitable for mechanical cultivation being those whicl
would require intensive hand cul ti vat ion and may therefore not be appro-
priate for Ecuadorian condttions Others r1JJi3 be suitable only if grown on
relatively large plantations
49 Clearly for the foreseeable future many lowland products will re-
main at the stage of gathering of nld natural growth rather than plantashy
tion enterprise The flow to market of such productswould be increased
by improved access notably road core truction anQ at the same time road
building ~~uld seem to be a condition precedent for spread of plantation
methods particularly plantations using mechanical equipment lilliE diate
measures for the over-all agricultural development of the region may not
be directly agricultural at ell they are rather the provision of roads
and transport facilities the provision of long and medium term agric-llshy
tural credits and in some areas) the institution of health services
With the opening up of the region in this manner iiould come more clearly
perceived opportunity for better agricultural use of the land particu-
larly if effective demand for the products is transmit ted back to the
cultivator through establishment of product processing plants where approshy
priate for example in vegetable oils and tagua (vegetable ivory)
] This is the situation which in Brazil for example in an earlier technical epoch was 11 solvedll by importation of Negro slave lebor
-17-
50 As in the Sierra there are good possibilities for pastoral
development on the lowlands Some progress is already being made in this
direction with experiment in breeding more suitable cattle types through
crossing 11Ji th imported Indian brahmin strains Grazing for beef is not
highly labor intensive and this development is very promising since
export to other Republics by sea llould be reltti vely easy In the first
stages export would presumably be upon the hoof ith later development
of meat packing
51 There seems to be no single bottleneck or restraint upon devel~
ment presently existing all other conditions being favorable If developshy
ment occurs it will be along many simultaneous fronts but the front iJhiclf
is lagging and Inayen continue to lag is the provision of basic social ccp ishy
tal (roads water supplies health services etc) that is of those
things which no single private individual or corporation can provide for
itself Given these and the institution of suitable domestic credit
fecilities the rest may be accomplished by private domestic ini tiat1ve
52 The development plans of the Ecuadorian Government as outlined
in a Memorandum dated April 8 give much weight to lowland agriculture
The establishment of agricultural stations to provide farmers wi~h
disease-resisting cacao plants~ tecl1nical advice and credit facilities
is CD ntemplated no foreign exchange would be recpired all funds being
local currency The rehabilitation of cacao formerly a leading export
crop is desirable although development of cacao sources elsewhere may
prev~nt recapture of the position formerly held by Ecuador
53 A proposed agricultural mechanization programwoUld total
- 18
$25 million in foreign exchange cost )J The bulk of this ($1 5 million)
is allocated to wechanization of rice cultivation alone the benefit being
principally in resulting improved export position The remainder $1 milshy
lion is for mechanization of other agricultural produc~s apparently
mainly lowland (those products specifically mentioned being 11cotton sugar
oil-bearing seeds and other specified products11) the exclwnge benefit
forecast being principally through reduction of import a
54 Different criteria ~~ould be used in assessment of these two
projects The judgment on that for rice will depend upon forecast of
world rice markets and in particular upon expectations regarding rorld
demand for rice from the dollar area The validity of mechanization in
cotton sugar oil-bearing seeds and other lowland products will depend
first upon the technical possibilities for such mechanization a matter
not yet fully explored If sudl technical possibilities are favorable
effective mechanization vOuld constitute sound development upon the low-
lands which are relatively sparsely populated
Y Some part of which would be for the benefit of highland agriculture if machinery stations be established there
--19 -
IV MI-~RAL PHODUCTION
55 Ecuadorian mineral nroduction covers only a few products and
important the wells of the lowlands being exploited by the nglo-
Ecuadorian Oil Comany Production of crude petrolewn shows a slicl1t
rising tendency while exnorts have declined steadily a~ more refined 1
products are consumed domestically
56 Oil exploration to the Iast opound the Andesin the Amazonian
region is proceedinc under concession to tl-1e Shell Oil Go1~1any
Three wells have been drilled without success and tvro arc beinc
deepened Cost of this exploration to ciate j_s around US)23 million
If oil is found its only outlet middotwill be a pipe line over Ue Ances
(estimated to cost USiD93 million) and this the comany is not -rE1inz
to undertake unless assured of an outnut of at least 100000 barrels a
day
57 The only other irnrJortant minine activities are those of gold
silver conper and lead conducted by the South ~~erican Develoument ~
Company and the Cotapaxi Sxplora tion ConJ1any War-time lr oduction peaks
were 1942 for gold and CO)per 1944 for silver and lead Since these
resective peaks production has ~-~clined narticularly in copper and
lead although not to 1933 lsvels7
crude petroleum II II
1938 (millio~1s of 225 107
Production Exports Production refined petroleum 37
1947 barrels)
236 bull94
128 (See Table No_Jl_ Statistical Appendix
Production Gold (000 troy ounces) Silver (000 troy ounces) Co~per (000 pounds) Lead (000 pounds)
1938 445 82~0 27 21
War Peak l03tJ hhl3
96788 161-+88
19h7 5o5
1569 3316 h98h
-20-
58 Ecuadorian trade statistics list exports of crude pet~middotoleum
and minerals separately from that of other commodities even in aggre-
gate figures underlining the fact the exploitation is in foreign hands
and hence colonial in nature This aspect hmmiddotever is of di-1inishmiddot-
ing importance as now the foreign exchange realized from such mineral
exports accrues to the Central Bank and as in any event nineral ex-1)
ports form a diminishing proportion of the vhole 7
V ~JNUFACTURING PEODUCTION
59 There are virtually no stCltistics on manufacturing in Ecuador
and none which present any comprehensive view It is ho~middot-rever clear
that there is very Uttle industrial factory prJchJction and obser-
vation in the country leaves one with an impression of the nresent
igtilportance of handicraft production
60 The most inportant consuxner-good factory industrj_es are tex-
t~~~breweri~-~~ otheuro7r beveraces shoes ard leather _roduc~s buttons ~d~lttfr
and nails Textile production using domestically produced cotton pro-
duces cotton piece-goods and wool rayon and hemgt textiles supplying
almost all domestic demand for low-quality products The only irJDcrtant
producer-good factory industry is cement the plants being located near
Guayaquil Lack of domestic technical lmow-how and of capLtal and
the low level of domestic effective demand account for the sli~ht develop-
ment of faetory industries whose rrowth on any scale beloncs to a 1ter
stage of economic development
y Value of nineral exportsmiddot as nercentare of value of all exports 1929 260 nercent 1933 430 n 1939 397 1946 11~5 1947 69
Production and irrport statistics for cement tre civen in Table IJo bull 2__ Statistical Appendix
- 21-
61 Uuch of finished commodity ygtroduction is at the handicraft
stage both for nroducer and consumer goods In Quito and Guayaquil
one sees many small 11 shops11 producing metal leather and wood manushy
factures largely by manual methods It is an illuminating co~~entary
on the shallow growth of industrial specialization that the ll1ission
did not see any shops selling ready-made womens clothing All
womens clothing shops displayed only materials in the bolt as in
pioneer days elsewhere
62 One handicraft industry of great importance in exports is
the production of panama hats It has been estimated that 30000
families are occupied vrhole or art-time upon this nroduction and
at times (for example 1945) they have provided the largest single
export item by value The grmvth and treatment of the fiber and the
weaving of the hat is entirely an Indian handicraft industry the
Yteaving of a high-quality hat taking three months The fiber is erown
and the best hats woven in the lowlands Its future ir-mort nee is unshy
certain as the competition of Italy and the Fhilinpines is again felt
in low-_)rice woven hats the boom emjoyed during the war nay recede
63 Ecuador in its ~resent and foreseeable development is an
agricultural country with no immediate movement toward industrialization
EcuAdorians met by the Mission themselves stated this The growth of
factory industry will be slow that of small shop and handicraft manushy
facture somewhat less slow It vmuld seem as stressed later in this
report that there is room for grm~h of processing of agricultural
products Statistically such processing would be classed as industrial
production but is oroperly the finishing stage of agricultural productior
- 22-
to secure improved durability and portability of perishable products
This would increase effective demand imnacting upon the farm and ass1st
in stimulating agricultural development Some progress being made in
this direction notably in vegetable oil expressing plants Ihe only
non-agricultural project suggested by the -r~cuadorian Government has -eer
a cement plant located in the highlands at a foreign exchanr~e cost of
$2 rrillion the justification being both the saving of foreign exchange
expended upon cement imports and reduction of load upon the only railshy
way connecting lovrlands and hichlands Growth of cement use accompanies
economic development assessment of this project (engineering questions
apart) would involve tainly questions of timing location and finance
matters which are really all aspects of the single question whether
such a project may not be one for private direct investment Initial
expectation would be that were all factors favorable to the success of
the project it gtlould be readily undertaken by orivate enterprise
particularly when it is remembered that railway freiehts 1bullrould protect
highland production from lowland competition
6h No sueeestions regarding increase of electric power output
have come fror1 the Government indeed the official statistical services
have no data upon installed capacities and demand Cnly in Quito and
Guayaquil are present industrial uses of electric poler of any ir1portance
Elsewhere suIJply is from snall municipal plants (mainly therraal) for house-
hold consumption It appears that demand mar be ahead sunply in cost
towns very frequently voltages are maintained around 80 instead of the
rated 110
- 23 -
65 Shortage of electric nower is not however hamoering
economic development at this stage although it may soon do so in
sevral urban centers such as Qui to and Hiobamba Sone ttne i-1 the
iuture the possibility of large hydro-electric vrorks on the eastern 1
side of the Andes will merit attention
y Where the rivers are fast and clear on the western side they carry much silt
- 24-
VI DmIESTC THANSPORT AND COilERCE
66 The space devoted to agriculture in this report reflects its
importance in the Ecuadorian economy As has been said further developshy
ment will for sometime be mainly agricu1tural
67 Present restraints upon that development are not located
solely or perhaps even nrincipally on the farm there are many
features of the general economic environment which operate to hamper
even purely agricultural development There is great room for improveshy
ment of transport to knit the economy tocether and to encot1raee grovrth
of output
(a) Transport
68 Without roads there can be little regional or inter-regional
intergration Fithout that intergration (which for some regions and
some crops would open upon the world at the gatewa~r of a oort) there
can be but small inducement andlittle opportunity of increasing proshy
duction In much of Ecuador the principal transport vehicle is the mule
whose patience and endurance under heaJr load is matched by that of the
Indian
69 As regards roads the requirement is both more roads and
better roads capable of bearinr modern vehicular traffic The roads
traveled by the 1Jission are uniformly bad both slowing traffic and imshy
Ilosing extraordiPamiddoty vehicular de_reciation Ultimately no coubt
there vdll be an adequate system of all-rreather roads in Ecuador For
the immediate future the more modest tarset is to attain a reasonable
system of roads civine access to the creater art of roducine areas
- 25-
in the dry season At present the unsurfaced access roads are cut to
pieces by --vater erosion in the wet season and consolidated somew1at
traffic in the dry season A single eradinr operation smoothin thE
dirt surface at the end of the vret season would ci ve accelJtable usashy
bility in the dry )eriod v1hich in the populated coastal rovince of
icanabi for example is eight ~aonths of the year At -_resent the so1e
transport link for corunodities between loYrlands and the hihlands
is the Guayaquil to Quito (and beyond) railway This link is nrobaoly
nearing saturation point vdth present equipment and its strencthening
both by railway imJrovement and all-middotweather hichway construction is
obviously desirable it middotill probably become essential yri thin five
years
(b) Commerce
70 Physical transport alone hogtever is not the only ope c-ation
ofcarriaee required to intecrate a reeion internally and to bind toshy
cether the various regions There are also tL physical and the finanshy
cial aspects of comr1odity holdinr involving the storae and vrhere
necessaFJ the partial processing of products to reduce perishability
and the avail~bility of mechanisms of short-term finance extendine over
crop periods In Ecuador these tro aspects are closely related
71 Apart from some export crops there is virtually no crop or
food processinG undertaken And in the export crops processing
is the minimum necessary to secure portability Eice is nilled but not
polished cacao is sun dried coffee is dried and within only recent
years washed fruit is exported whole Some new e~Jor-ts may require
further processing and installation of plant starting or is in
- 26-
advanced discussion for example vegetable oil processing (although
for sometime no eXport surplus of vegetable oils is 11~11 and fish
canning
72 Nor is there any important ~recessing of domestic food pro-
duction for home consumption bull There is no freezing or canning of meat
which is taken to market on the hoof There are only two or three
very small butter factories and no whole milk orocessing Cereals
of course are not highly perishable but there are no silos or granarshy
ies and experience of similar situations elsewhere suzfests that losses
by deterioration and infestation may be significant no direct evishy
dence anthe incidence of this factor in Ecuador ~as obtained by the
Mission Thee is little storage of grass on the coast in silos or
as hay and in the dry season slaughter of cattle because of lack of
feed is at times necessary In short the situation is not so very
dissimilar to that ofmiddotmedieval Europe
73 Roads alone would not create an environment favorable to
change in this position although lack of roads nar well inlibi t change bull
In addition suitable credit facilities for the finance of co~~odity
holding through time are necessary
74 Hany complaints were voiced to the Hission reearding lack of
short-term banking credit for crop movement and storage and for medium
and long-term agricultural investment and no doubt there is signifi
cant lack of such credits But this is not the result of some simle
institutional defect of the b~~inc and credit structure even though
institutional improvement may be necessary It is fundamentally a
- 27-
reflection of the fact that Ecuador is extremely poor in disposable
capital available for even short-term investment ie vrorcing capi-
tal Improvement of short-term credit facilities for what in advanced
communities are regarded as purely commercial purposes would in effect
represent an increase of capital intensity in the Ecuadorian ecororny
To the extent that banks met more fully the gtJeak seasonal credit re-
quirements for croo movement and storage individual nrivate reoources
are relieved of the 1eak burden and available for other investments
75 Thus iorovement of the techanisr by 11hich the banking system
provides working capital for corrtercial or inciustrial (in the sense of
crop processing) purposes is itself an act of investment rather than
merely an institutional rationalization ilnd as such carry the
usual consequences of investment in an undevelogted economr with very
law voluntary savings To the extent that additional credits are not
matched by savings sewhere (either voluntary or forced through
taxation) they will be inflationary in effect just as an
additional act of long-term investment would be Increase of banki1g
nrovision of workinrr capital should keep step with totl capital for-_ - - 1 mation of which it is one aspect7
It is implicitly assumed in the foregoine that at nresent in Ecuador the amount of small voluntary savinrrs is neclicible It vrill presumably not alrmys remain so and ~Jart of the modifications of the bankin~ system shou1d be attract Clli1U1 atively such sav-ings in the fom of savinc do)Josi ts This 1muld increase the extent to which Danks can safely flovide capital It will be a much later before small private savincs are directly in-vested in commerce or industry throuh joint stock r1ethods There is no stock-exchance in Ecuador
-28-
76 It is of course just as important that the availabi lity of
working capital should not lag behind as it is that it should not run
ahead The Bank should ensure that any long-term investment projects it
may assist to finance do not effectively starve the rest of the econo~
of working capital in the process of avoiding inflation
77 There is also the question of the price of short-term lending
that is of the level of interest rates The Ecuadorian is a highshy
interest rate eoonomy The legal maximum for commercial short-term loans
is 10 per cent having recently been increased from 7 per cent legal
maximum rates however are not systematically enforced by commercial
banks themselves At a time when the legal maximum was 7 per cent
going rate for 90 day loans secured upon properly warehoused commodishy
ties and with third party endorsement was 12 pe+ cent
78 This very high structure of interest rates seems open to
obvious criticism but is in fact probably not Tiholly unjustifiable in
the present conditions of Ecuador It is the cumulative result of many
factors so that more official prescription of lower rates would be
quite ineffective These factors seem to be
(a) Interest proper~
(b) layment for risk bearing arising in part out of a
low rating upon individual credit and in part from
the institutional conditions (such as embryonic
commercial and financial ruarkets) which seriously
reduce the liquidity of any asset other than money
itself
-29
(c) An clcmmt 0f discount 111nn cyectcd luturc irf] utinn
reducing the real value of the pa~nent for lending
(d) An element of monopoly which upon purely subjective
judgment may be the least ilJI9ortant of these several 1
factors7
(e) The real shortace of capital whether short or long--
term~ reflecting in interest rates as a genuine
scarcity price
79bull Of those factors the di~ount upon expected future in-
flation increases prices at a rate of 12 ner cent per annum a money
interest rate of 12 per cent per annum is a real rate of zero If
therefore inflation could be controlled a substantial reduction of
money interest rates could be hoked for At the same tine while
inflation continues high interest rates probably have small influencemiddot
in encouraging money savings
80 Even without inflation ans until the su~1ly of available
real capital improves relatively high interest rates may well be
acceDtablemiddot as a price mechanisn nethod of selectin~ most urofitable y ~
uses of limited fundsbull middothere exoected urivate nrofit did not seem l - -
to parallel social desirability loans at lower rates (ie subsidized
terms) could be made perhaps through reconstituted Development Banks
Prima facie however such loans 1bullrould not be short-term
~I -Onthis interprepoundaion the situation in Ecuador differs signifishycantly from that in Peru
tt is suggested that a powerful point of intervention would be to limit commercial banking dividends distributed to not more than say 7 per cent The high profits nmv earned by commercial banks would then progressively accumulate until liberalization of lending becomes virtually forced by accumulation of funds representing genuine corporation saVings
- 30-
81 The discussion of private finance has so far upon
short-term credits there is an even larger nroblem in the
intermediate and long-term arricul tural credit It is not necessarr
to expand greatly upon this since it too is a consequence capi-
tal shortage
82 Imnrovement would seem to be alonrr the route - 1 of nroper UElte
of existing Development Banks (or their successors-) effectively
in the earlier stages as lending agencies of Government
VII OFFICIAL DEVLOPHl~NT FHmiddotIfJCE
83 In the circurnstances of a country like Ecuador the greater
part of domestic capital forr1ation requires official directly
or indirectly if it is to occur on any scale are too
small and too narrowly held to permit much -rowth this roL1te
andthose few who are able to save at any sinificant rate are larely
uninterested in the efficiency of ~reduction
84 Official finance may be either direct or indirect direct
throueh works executed by Government or 0JUblic bodies indirect
throueh lending institutions such as Dev~lopment Banlcs capitalized
from public funds In either case funds are diverted to investment
purposes by Govern~ent intervention
85 Thus Development Bank lending for productive purposes (for
example long-term acricul tural credit) is an item 1n ca9i tal formation
V There are thirteen reaional Development with an unirnJresstve record of manaeement Their possible reconstitution is under discussion
-31-
rather than a mere institutional rationalization of the credit mech-
anism Indeed as has been stressed in the last section even im-
proved su1nly of short-term credit gtrill in art rewesent
formation A developing economy which neclected these items in 11Cnn21~~
or forecastinc total caital investnent would be very vulnerable indeed
to inflation induced by over-investment
86 17here voluntary savings are Jow the only wmiddotamiddot to sirnificant
rate of capital formatton can emerge without inflation is an equi-
valent amount of savine forced throurh taxation One ould look for a
relatively hirsh level of taxation to national income and for a rela-
tively high proportion of exnenditures caDi tal purposes to total
Government expenditures On both these counts Ecuadorian elq)erience
seems irare s si ve
87 In 1946 total budretary and spedal revenue rms disclosed
as 5368 million sucres in the sa1le rear an estLnate middotJaced national
income at 20096 million sucres This a proym~tion of 27 middoter
come a proportion so hich that in fact it lacks credence In assess-
inc total tax burden part of the revenues of Government monorolies
and all of municial revenues should be included if this be done y
the proportion becomes 37 per cent In addition new exchance taxes
yielded 973 million sucres in 1947
Mono_)oly participations (ii direct disbursements for public _Jurposes) were 353 million sucres in 1946 munici~al income was 1803 million sucres in 1947 (1946 not available)
32-
88 It is very difficult to accept the conclusion that Ecuadorian
revenues form so high a proportion of national income it would seem
that the estimate of national income is too low Nevertheless tax
revenues are clearly a sizable percentace of national income
89 At the request of the Mission an official estimate of total
official expenditures on capital account was prepared Total income of
Government municipalities provincial councils and other public
entities was ~iven as 7S4 million sucres and total capital expenditure
from that income as 2237 million sucres or slichtlr over 30 per cent
of revenuesY It is difficult to feel confident that effective capi-
tal formation on this scale actually occurred certainly there is
little evidence visible to the eye of the t1middotaveler
90 Notwithstanding such doubts the fiscal evidence is of a
fairly hich proportion of tax revenues to national inco~e and of a
hich proportion of revenue allocated to capital investment It would
seem that the fiscal mechanism exists for domestic capital fo~~tion
what may be required is more effective expenditure of allocated funds-
Before a development plan envisa~ing the expenditure of still more funds
was adopted it would be desirable to examine closely administrative
and technical efficiency in the use of existing funds
91 On the side of revenue Treasurr officials informed the Mis-
sion that tax evasion was estirnated at some 30 per cent of ta revenues
1 This makes such capital expenditures 112) per cent of 1946 national income which a~ain seems very high indeed
The two largest items are Government public works (8)4 million sucres) and municipal works (900 million sucres)
- 33-
particularly in income and land tax It might well be advantareous
on the sides both of revenue and of expenditure for Ecuador to obtain
technical assistance of the tPe that the United Nations Department of
Economic Affairs rendered to Venezuela in 1947~Y involvinpound revision
of the structure of the budget of budcetary audit practices and the
like
f Report~d in UN Document ECN 1SubJfti 4 - 21 June 1948 lostricted)
- 34 -
VIII 001EHNl(iEi~T FINANCE AND INRATlON
92 What may be called 11multiple budget practices exist in Ecuador
as in other Latin American countries There is an annual Ordinary Budget
one or more Extraordinary Budgets( tro in 1947) end a number of Special
Accounts (twenty-five in 1946) not included in the general budgetary
accounts The State operates nxmopolies in tobacco liquor salt and
matches part of whose profits are taken into the ordinary budget as
revenue and part used directly for public purposes It is thus diffi-
cult to assesrmiddotgggregate Government revenues and expencii tures and vir-
tually impossible to detail the purposes of expenditure to ascertain
accurately public capital formation by way of public morks and the like
9 Taking the disclosed figures on the ordinary and extraordinary
budgets and tne special accounts there has been a net surplus over the
past ten years 1operations of 234 million sucres~ This however is
not an accurate reflection of the true aggregate position because the
Government operations are not ~holly included in these disclosed ac-
counts But since the Government has no source of internal funds other
than the Central Bank the net recourse of Government to Central BanJJI mirrors the over-all result of Government finance such recourse increased
In 1946 for example the monopolies contributed 5357 million sucres to the general revenue and disbursed 3526 million to municipalities (145 million on general participation and 1652 million sucres for 11 special participation of gthich an example is a new electricity plant at Ambato the state railways (92 million) etc
gj iiith only three years of disclosed deficit since 1938 See Table 12 in Statistical Appendix
2 Central Bank loans middotto Government less Govertllllent deposits in banks
- 35-
480 million sucres over the nine-year period 1939 to 1947 inelusivel
an average of 53 million sucres annually amplch averaging however con-
ceals very important differences between the three periods within the
nine years to tal
94 The table on the next page sumnari zes the factors causing in-
crease of domestic money supply It is computed by rearrangemm t of the
balance sheets of the Central Bank all commercial banks and all developshy
ment banks and is thus a table shoring changes in items in a rearranged
aggregate balance sheet of the Ecuadorian banking system
95bull The first t70 periods 1939-1943 end l943-l946f were both
periods of heavy inflation_ During the first five years notes in cir
culation and monetary deposits increased 3437 million sucres (or 255 per
cent) and in the next three )eera 2904 million sucres (or 61 per cent)
But the causal structure was quite different in the two periods
96 In the first inflation was almost wholly induced by external
factors (favorable balance of paYments causing increase of foreign exshy
change holdings) the major domestic factor being expansion of commercial
bank loans and investments in this period deficit Government finance
was not a causal factor
97 In the next three-year period 1943-1946 however the major
inflationary factors change deficit Government finance and expansi on of
f As calculated by IBRD Mission loans to Government including ali loans to official agencies A recent calculation by the IMF Research Departshyment covering Government operations only places the aggregate 9 years deficit at 345 million sucres~ See Table 12 in Statistical Appendix
- 36-
BANKING CHANGES ~0015 SucresJ
Jan 1939 Jan 1944 Jan 1947 Jan 1948 to to to tomiddot
Dec 1943 Dec 1946 nee 1947 June 19h8 t~ ~arsJ ~~ iears) trmiddot ~~r1 t~ mo~~h~2
Central rcrk loans tomiddotc~vt~ f 16174 f 160260 - 701p88 23695 Central B~r~ Loans to Public -1 6978 2_283 1- 67548 1- 39763 Commercial Bank Loans and
Investments J 187554 f 14624 88h4 1- 2~ ~49 Development Baru Loans and
J 14227 136818 ~ 644 1- 26090 Investments
1 224933 f 313985 11)40 1- 68107 Net Bank Foreign Exchange 260774 f 94662 - 53203 - u6 112
7 485707 7 408647 I
7 bull - 64543 21395
Notes in Circulation f 16o907 1-131729 - 23205 - 17290 Public Monetary Deposits -A 162868 1- 128914 - 68734 1- 19620 Government Deposits f 19968middot 29768 9050 2366
7 343743 7 290411 82889 - 36 Public Time Deposits 116834 ~ 42053 1~004 f 317j
y 7 46o517 7 3J2464 83893 ~ -- 3137
Absorbed by Banking System 1- 25130 middot~ 76183 1- 19350 18258 7 485707
11 f 4o8647 64543 I - 7 21395
Net Government Borrowing J 131492 from Banks 3794 - 79738 - 32745
Deposits in Central Bank in foreign money (not included above ex pressed in Sucres
Government ~ 4486 - 633 871 - 11059 Public 25242 J 78964 - 78814 J 4h97
T29J 728 7 I
7 IIIII middot~~ ~ I
78331 79685 31+38
y Made urt as Io11mlfs
Cas~ bullbullbullbullbullbullbullbullbullbullbullbullbullbull ~ bullbullbullbullbullbullbullbull - bullbullbullbull J 266 1- 367 - 22~7 99 Other assets less other liabilities~ ~ 4 330 ~ 293 ~ 18~8 Capital and Reserves~- bull bullbullbullbull 4 bullbull 52 bull 1 1- 79-9 26 o 278
7 I
7 7 I
7 bull Ill ri bullbullbull
251 762 194 18)
Subtract increase
37-
Davelopment Bank lending dominE)te the position Expansion of commercial
bank lending is relatively negligible while a comparatively small role is
played by balance of payment influences
98 From the end of 1946 the general financial situation deterior-ated
rapidly in five months from January 1947 to ~~ay 1947 net foreign exshy
change reserves of the Centrel Bank fell 935 million sucres or 7 7 mil-
lion dollars to a level of 2927 million sucres or 21 7 million dolJars
In litaY 1947 an IMF Mission arrived in Ecuador (at the request of the
Government) and in June 1947 a multiple exchange rate system with import
classification was introduced upon the advice and with the concurrence of
the Fund Operation of this system Jielded considerable profit n in
sucres it is in effect a new imposition of import taxes and such
11profits 11 are in reality additional fiscal revenueY It was of the
essence of the Emd s attitude in Ecnador that the exchange difficulties
bad arisen through domestic inflation and that these addi tiona reve-
nues should therefore be applied only in reduction of Government debt to
the Central Bank
99 The effect of such policy is clearly seen in the third column
of the table Inflation is checked notes in cirmlation and monetary
deposits falling 929 million sucres (or 11-per cent) i~ one year Alshy
thoUtgb however Central Bank loans to Government (and also colllWrci al
jJ At this point only the domestic aspects of this measure are emphashysized In a later section the external or balance of ~ent aspects will be taken up
Y Such revenue from exchange taxes yielded 975 million sucres in 1947 bull md in July 1948 was running at g to 10 jllillion sucres a month this revenue is not of course taken into the budgets bull
- 38 -
bank loans and investments) fell the actual deflation _was largely
caused through loss of foJeign exchange rather than over~all reduction
of domestic bank lending For in response to vigorous ~oilplaints of
credit shortage the Central Bank greatly increased its loans to the
public almost fully offsetting reduction of its loans to Government
In the first six months of 1948 there was no significant contraction
of money supply banking loans to the public eJggtanding to offset the
deflationary effects af an adverse balance of payments and of Government
debt reduction
100 The exchange surcharge multiple rate system was in operation
through August 1948 proceeds being devoted to reduction of Government
debt to the Central Bank~ But there has bean concern lest the resulting
deflation of domestic money supply would be too severe and the Central
Bank has in fact adopted a compensatory policy to prevent further reducshy
tion through continuing to expand lending to the public arid through
quasi-open-market pur~e of mortgage bonds to the amount of 17 million
sucres by July 10 19l8 when further purchases were discontinued
101 To avoid the netcessity for such compensatory policy the Cen-
tral Bank proposed to the Government that the destination of reveme from
exchange taxes should be changed Instead of being applied in reduction
of debt the proposal was that they should be useci instead to create a
development fund tt to be administered by the Cent~al Bank unless a
planned Development Institute or other competent authority is estabshy
lished In mid-September the Fund appro ved such cllanged dest ination of
these revenues 90 per cent of which will in future be applied in finance
of development and 10 per cent in stabilization of Government bond prices
-39-
This removes a check upon inflation which has operated for some fifteen
months unless Central and commercial bank lending policies recognize
this changed situation further inflation may follow even if the Budgetary
accounts run no deficit
102 At the same time this change does provide a source of local
currency finance for development projects
-40-
IX INTERNATIONAL TRAIE AND THE BALANCE OF PADlENTS
103 Ecuador exports agricultural products (rice cacao coffee
tropical fruits balsa wood) mineral products (crude petrolelUil gold
silver copper and lead) and handicraft products (panama hats)Y
lo4 Approximately one trird of Ecuadorian exports (including
minerals) go to the United States The proportion rose during the war
due to VmiddotIar-time demand for strategic raw materials but is now tending
to revert to pre-war levels Loss of European markets has been partly
compensated by gain of n$w export markets at least for a time and
especially for rice Countries in the Far East whose rice production
fell during war such as the Philippines and in Latin America whose
Eastern sources of supply were cut off such as Cuba and Venezuela
have provided demand for Ecuadorian rice This outlet however may not
last much longer
105 On an average of years 1938 to 1943 about 15 per cent of
Ecuadorian imports are foodstuffs wheat and lard being the largest
items and 85 per cent are manufactured goods and equipment Import
of foodstuffs is however gro1ing t-vith population and in the key pro-
ducts of wheat and fats would be expected to grow still faster if
econowic development raises n~ss living standards witl10ut increasing
domestic output of these prodvcts For increased consumption of wheat
products and fats is in part the definition of rising living standards
for a very poor population
fJ See Table No13 in Statistical Appendix for composition of exports
-41-
106bull Before the war (average of the years 1937 to 1933 ) the Americas
supplied 49 per cent of Ecuadorian imports by value the United States
alone supplying 41 per cent Germany provided 22 per cent of total
imports and the United Kingdom only 8 per cent Europe as a whole supshy
plying 45 per cent
107 In 1946 and 1947 the Americas provided 86 per cent of total
imports the United States supplying 66 per cent EUrope as a source of
imports fell to 12 per cent although the United Kingdom maintained its
relative position (7 per cent) Whether the United Kingdom can expand
its provision of imports for Ecuador JDaY be domiddotubtful on the one hand
the loss of Germany as a supplier pzo vides an opportunity on the
other the competitive industrial position of the United States may make
it difficult for the United Kingdom to fill this gap
No balmce of payments estimates eJd st for Ecuador1
Growth
of foreign exchange holdings over the war period however indicates a
strongly favorable balmce ~let reserves which were equivalent to 409
million sucres in December 1939 rose to 3962 million sucres (294 milshy
lion dollars) in December 1946
109 Official purchases and sales of exchange are shown in the fol-
lowing table together with corresponding movements of exchange reserves
The difference betRSen the balance on official transactions and the moveshy
ment in reserves arises from transactions on the free market
110 During the war import and exchange controls were nominal
there being no shortage of dollars nor any decrease of exchange reserves
jJ Except for the ~eriod January to May 1948
-42-
Loss of exchange reserves in 1945 led to a tightening of control on an
allocation of quotas smong users of exchange Import permi ts were
granted on the basis of former imports by merchants At the end of
1946 controls were relaxed on an extensive list of imports items and
the consequent loss of exchange has led to difficultieQ
Ul Official Official Balance Changes in Purchases Sales on Net
Official International Trans- Reserves actions
(Millions of u S Dollars)
1942 257 185 t 72
1943 35-5 279 t 1middot5 t Ul
1944 423 34~4 t 79 f 88
1945 353 394 - 41 - 7-2
1946 471 415 f 56 t 1 9
1947 488 579 - 91 38
112 From December 1946 to IVtay 1947 net foreign exchalge reserves
fell US$ 77 million from US$ 294 million to US$ 217 million In May
1947 the advice of the International More tary Fund was sought with reshy
sults summarized as follows in a recent Fund documentY
The lfund 1 s Mission arrived in Ecuador in Yay 1947 It was not advisable at that time to contemplate devaluation which would have made the inflationary situation worse An emergency program was therefore proposed Essential and semi-essential imports were to be distic5~ished and a surcharge of 5 sucres p3r dollar imposed on the semi-essential group as a check against their excessive import New decrees including many of the recomshymendations were issued in June
The main features of the new system were as follows
Y Economic SuVey of Ecuador RD 672 - P 43-44
- 43-
(a) The elimination of all quantitative import export or exchan~ restrictions licenses and quotas with the exception of a few absolute prohibitions of some luxury imports
(b) The checldng of excessive import demand through a fiveshysucre (33 per cent) surcharge on non-essential imports
(c) The suspension of nearly all exchange sales for nonshytrade transactions and the creation of a free market bull narrowly limited in volume and comprising mostly all transactions that are uncontrollable in practice plus a snall amount of domestically produced gold
(d) Exchange for a small amount of the least essential goods was made available in the free market
(e) One of the basic aspects of this plan was the steriliz~ tion of all proceeds from the import surcharge which was placed in a fund for the extraordinary amortization of the government debt to the Central Bank Tnis is still in operation
The beneficial effects of these reforms were felt immediately In June the trade deficit ~as reduced to only $07 million and in July to $06 million By August for the first time in 3 monthsl there was a small surplus In September the deficit was smci l -j)O 5 million In October there was a surplus of $15 million and in November and December there were small deficits of only $01 million and $07 million respectively
In short the deficit for the year was about $99 million in its gross gold and foreign exchange reserves During the same period international liabilities of the Central Bank showed a reduction of about $6 million Therefore~ the net deficit was around $39 million 95 per cent being in the first half-yeer and before advice had been received from the Fundrs Mission
113 It should be emphasized that this multiple-rate system of
exchange control is entirely freed cpentitative controls Excessive
import demand is checked by the higher rates upon imports deemed non-
essential the list of which is knollD and published Anyone presenting
sucres is provided with exchange at the appropriate rate upon list A and
B goods and the free rate is influenced by occasional releases of offi-
cial exchange into the free market The system that is utilizes the
inter-play of the price mechanism rather than the bWlilmlcracy of quanti-
tive controls or quotas
- u4-
114 Loss of exchange continues however despite considerable reduc-
tion of imports Gross international reserves declined US$ 18 million
and net reserves US$ 35 million in the first six months of 1948 Offishy
cial transactions January to June 1948 are surmrarized in the following
table~
Receipts From Exports From other Transactions (1)
Total
Payments For Imports For other Transactions
Total
Balance Change in Gross Reserves
1947 Jan to June
1948 Jan to June
(Millions of Dollnrs)
163 5 6
167 44
219 211
289 219 23 10
312 22 9
- 93 - 18
(l) Includes purchases of domestically produced gold deposits received in foreign currencies and borrowing from corres~ pondents abroad
115 Prospects for the remainder of the year moreover are not goo~
It is estimated that loss of international reserves over the whole year
may be aboat US$ 6 million Whether the deficit is in this region de-
pends largely upon actual export realizations for the remainder of the
year lhe most critical here is rice 11hose ygtrice is falling and the
crops accumulating in the rice millsplusmn Latest information is that
f Countries receiving allocations of Ecuadorian rice under International Emergency Food Council allocations have been requesting a change in source of supply owing to shortage of doJJers Thus France has asked for 6000 tons of rice from Indo-China instead of ~cuador and Greece for 2000 tons from kVPt in place of Ecuador as supplier A recent favorable sale of rice-to Haiti has somewhat improvea the cuITent position
-45-
plantings for the October crop are substantially reduced Wet weather bas
led to some loss of the cacao crop Receipts from exports in the follow-shy
ing official exchange budget may therefore have to be modified down- [l
ward on any pxuient calculation-
116 ~or Recei1ts and Sales of Foreign hchange
(Thousands of U S Iollars)
1948 1947 Estimated Actual
BECEIPTS
Worts Rice 13~ la4~ Cacao 11 l 2 Other products 10700 12371
Total Exports 354oo 42120
Foreign companies 5300 4842 Others 800 1883
41500 48845
SALES
Imports 44800 53499
Services 3200 4470
4B ooo 57969
117 In this situation of continuing presSlre one step has been
tken and others are under consideration The one taken relates to offishy
cial imports representing an average pf 20 per cent of total imports
Importation of cigarettes liquor matches and other things by the State
tionopolies is especiallyen significant These were formerly provided with
exchange tax-freebull ie at the ~owest rate of 1350 From July 26 they
afe required to pay the ordinary import rate of 15o4 on sll supplies for
J See note on page 47 -A
- 46-
their ovm use (such as office supplies) and the same rates as private
importers (ie 15o4 or 20o4) on all imports to be sold to the public
(such as wheat flour fats cigarettes etc) accord~ng to the classifi-
cation of the goods
118 Remaining possibilities seem to be a partial reclassification
of imports removing items from List A as essentials to List B as se~ishy
lwruriesY and or a chenge of nominal exchange parity vri th or mithout
a narrowing of the spread between the rates Here pressure from
exporters particularly from rice exporters may be hee~vily in favor of
an increase of the dollar buying rate with consequential changes of
selling rates
119 The present loss of foreign exchange is occurring ~rithout any
service being met upon defaulted foreign debt although service of Ex-Im
Bank loans is being made If it be assumed for purposes of calculation
that Ecuador reaches an agreed settlement identical to the Chilean sershy
vice would require exchange equivalent to US$ 378000 in 1949 (of which
US$ 368000 would be required in dollars) and would rise to US$ 4o20CO
in 1954 Adding service upon Ex-Im Bank loans outstanding on June 30
1948 and other known but small indebtedness total debt service would
increase to US$ 1410000 in 1949 rise to a second maxilliUID of US$ 1394000
in 1951 and then progressively decline Upon the assumption thet amp-Im
Bank loans undisbursed on June 30 1948 are all fully drawn before their
maturity total debt service charges would be US$ 1533000 in 1949 rise
On August 21 a number of import items were changed from List A to List B the aggregate import value (when granted exchange at List A rate) affected being US$ 7 million
-47-
to US$ 213431000 in 1952 and again would progressively decline These
last service charges rould be for 1949 3 1 per cent of 1947 actual
official foreign exchange receipts and 3 bull 7 per cent of estimated 1948
receipts and for 1952 48 per cent and 56 per cent of 1947 actual
and 1948 estimated exchange receipts respectively
120 Estimating prospects from this point in time Ecuador does not
seem to be a country able to afford assumption of any great additional
burden of debt service payable in dollars The amount that could wi thbull
out hardship or distortion be squeezed out of the balance of payments
by no means corresponds to the development needs of the country Any
start must therefore be modest and cumulative rather than spectacular
and precarious and this conclusion fits with other controlling factors
in the over-all situation notably the supply of administrative techshy
nical and managerial abi li ty
- 47-A -
Note on Official Exchange Transactions
Official exchange transactions for the firstsix months of
1948 are given on page 44 of this report Results for the full year
are now available and reveal that earlier expectations regarding the
probable 1948 balance of payments deficit were unduly nessimistic
Cacao export values have been lar~er than expected and in the last
period of the year there IBre some unexpectecily favorable rice eA-port
sales total export receipts were US$ 8 million larger than forecast
on page 45 Imports were held close to forecast
Receipts
Exports Foreign Co~anies Other
Payments
Imports Foreign Comoanies Other
Balance
Change in Grass Reserves
Official Exchange Transactions (full year - n~illions of dollars)
1947 -421
L18 19
488
535 06 149
580
y does not agree because of rounding
January 26 1949
1948 -436 h2 7
i85
Lt52 2
28
-oJ
-48-
X EXTERiJAL DEBT BEoomJ
121 The position of public long-term external bonded (excluding
inter-governmental) indebtedness of Ecuador is as follows
Amount in Default AmoUpt Outstandi~ ~ e Interest D~te
~In currmc1 (u s (us of p~t Dollars) Dollars)
Dollar obligations Gueyaquil amp Qui to Ry) $ 1226)000 12263000
286000 12263000
286000 123147
63047 Sterling obligations Franc obligations ( Oie
b 71000
Francaise de Chemin de Fer 1 lquateur ) Fcs 8386000 70000 70000
12619000 l26l9000
middotmiddot Note The Government of Ecuador oyenms about 75 per cent of the
stock of the Guayaquil and 1uito Railway and guarm tees the bonds and certificates which are largely held in England The franc obligations of the Cie Francaise de Chemin de Fer 11lquateur are not included in the offi cial statement of the public debt nevertheless the Government does recognize some liability for them and during the last few years has engaged in Degotiations for their retirement
Inter-governmental Debtsmiddot
122 Debts to the United States Government are of three types
63047
first the loans by the Export-Import ~which were outstanding on
June 30 1948 in the amount of $7 705606~ second the aJIDunts duemiddot
because of purchases of surplus property totaled $484 567 on March 31
1948 and third the obligations arising out of the lend-lease settleshy
ment the amount of 1fhich is not available (Total lend-lease assistance
j This section of the Report was prepared by Mr Paul Dickens
to Ecuador amounted to $7 bull 795000 )
123 In addition Ecuador is indebted to the Government of Venezuela
in connection with the establishment of a joint shipping company Late
data are not available but as of February 1947 $500000 ($1000000
authorized) was outstanding the total to be repaid by 1966
Debt History
l2ij Upon partition of the old Republic of Colombia~ middotEcuador was
apportioned 215 per cent of the original Colombian debt by the convershy
sion of l834a Between 1834 and 1854 no interest was paid The period
1855 to 1908 was marked by numerous adjustments and defaults
125 In 1898 the Guayaquil and Q]lito Railway Companyt s first mort-
gage 5 per cent loan of 1899 was issued It was expressed in dollars but
was in reality an English loan In 1908 a new (reemenJl was reachedbull
which was to be a final settlemet of all past disputes and controversies
between the Government and the Guayaquil end ~ito Railway Company and
the bondholders In 19~-10 the Government defaulted on the new agree-
ment In Novemberl9ll payments were resumed on the railway debt on)y
but a revolution caused a further suspension from December 1911 until
lfarch 1912 Subsequently service was partially resumed on the external
debt until July 1914
126 From August 1914 to July l9l8 no paYments were made on eny
foreign obligations except that service on the prior lien railway bonds
had been maintained up to and including the January 1915 coupon By
rf Negotiated settie~nt
-50-
1920 interest and sinking fund on the prior lien railway bonds had been
brought up to date but service on all other obligations ~ed in
arrears In 1926 interest on the salt loan of 1908 was brought up to
date but default took place on the coupon dueJam1ary 2 1927
127 The outstanding bonds of the prior lien issue were redeemed~~
January 1929 at VIhich time the January 1914 coupon was paid on the
5 per cent first mortgage bonds of 1897 In the case of the salt loan
of 1908 sinking fund was resumed in July 1928 and interest was paid
to Jazruary 1929 inclusive None thereafter Sums due from July 2 19C3
to January 2 1931 inclusive deposited with Central Bank in sucres
were used for governmental purposes after December 1931 No payments
were made after January 1929 on the external debt of Ecuador
128 Up to the end of 1948 no acceptable arrangement had been pro-
posed by the Ecuadorian Government for the resumption of interest and
sinking fund payments on external loans
-51-middot
XI bull POLITICAL
129bull Recent political history in Ecuador has been turbulent
although contest fo~ power at the top has not greatly affected the
bulk of the population Suffrage extends to all literate citizens 1
over twenty-one years of aee-but the requirement of literacy effect-
ively excludes the Indian bull T)tal votes cast in the recent Presidential
elections were 289164 from a total Population of some 35 million
130middot On May 28 1944 a few days prior to a scheduled ceneral
election an uprising occurred and Dr Jose Haria Velasco Ibarra
assumed office as President Dr Velasco had been President before
but following a coup dletat in August 1935 after he had been in
Presidential office less than a year he fled to Colombia and re-
mained in exile for several years On July 23 191-4 general elections
for a Constitutional Assembly to draft a new Constitution were held
Installed on August 10 the first Act of the new Assembl3r which was
predominantly Conservative was to confirm the legality of Dr
Velascos assumntion of the Presidency
131 On June 30 1946 new elections to the ronstitutional
Assembly middotwere held The only party particiJatine in these elections
was the Conservative The Liberals R~dicals Socialists and Commu-
nists abstained on the crounds that President Velasco did not offer
them sufficient guarantees On Aucust 3 1946 there vrere a number
of arrests following an abortive uprising and on Aueust 11 the Con-
stitutional Assembly re-elected Dr Velasco to the Presidency (by 43
to 10) for a term of office to last to September 1 1948
12bull Being compUisory for men voluntary for woraen -
132bull A new Constitution was promulgated in January 1947
133middot On August 23 194 7 a bloodless coup detat led by Colonel
Carlos Iancheno Minister of Defense in Dr Velascos Cabinet deposed
rresident Velasco who fled the country to Colombia for the second timebull
Next day Colonel Mancheno proclaimed himself Acting President and
formed a five-man Socialist-Liberal Cabinet despite the absolute
Conservative majority in the Assembly A week later however on
August 31 a counter-revolutionary military movemont broke out in the
north and the counter-revolutionaries captured Quito on September 2
134middot Colonel llancheno resigned the ActinG Presidency and dis
appeared the sa1ne day Dr Suarez Veintimilla who had been Vice
President under Dr Velasco and the former conservative Uinister
resumed control of the GoverPment Next day September 3 a Council
of State in Quito declared that Dr Velasco had by abandoning his
post terminated his functions as Chief of the State Dr Velasco
howeverJ vrho middotwas by this time in the Argentine declared that his
remo~al to Colombia had been forced and announced his intention of
returning to Ecuador to resume office
1~ On Seytember 15 1947 a Secial session of the Zcuadorian
Concress accepted the resignation of Dr Veintimilla and elected
Senor Carlos Julios Arosernena head of the Banco Ce Descuento at
Gua~raquil and a non-party man as Vice President with novers as
Acting President until September 1 1~48 Senor Arosemena formed a
mainly Liberal Cabinet with one representative each of the Consershy
vatives and the Socialists Coneress also ~onfinned the Council of
State 1 s view that Dr Velasco had forfeited the Presidency by abandoning
his postbull
136 On June 6 1948 Presidential elections were held The
three parties represented vere the Conservatives (Dr Manuel Elicio
Flor Torreo) the Liberals (Galo Plaza Lasso) and the Radical (Genera1
Alberto Enriques Gallo) Final results were announced as
Plaza 115835
Flor 112052
Enriques 53601
Invalid 27 676 289164
137 bull Doubt persisted until this month (August) as to who would
receive the election The Electoral College had been invalidating
votes on technical Grounds and as interim returns and invalidities
were announced it was noticed that the majority of the latter were
being deducted from the Plazavote After conferences the Electoral
College revalidated all votes and conducted a re-scrutiny on less
strict basis Senor Plaza has been declared to be the rfjSident-Elect
by the Ecuadorian Coneress and assumed power September 1 1948 The
middotpresidential term of office is four years
The Vice Presidential results were
Conservative 1anuel Sotomayor y Luna llu008
Liberal Dr Abel Gilbert 113213
Radical Dr Cueva Tamarz 5h07h 28129gt
139 Senor Plaza was born in Nmv York USA forty-two years
ago his fatter the late General Leonidas Plaz~ was President of
Ecuador in 1901-05 and 1912-16 middotSenor Plaz who had been taken to
Ecuador as an infant accomnanied his father in exile to the United
States and attended the University of California the University of
Maryland and the Georgetown School of Foreign Service in ~7ashington
l4o Senor Plaza returned to Ecuador in 1930 and for the next
fourteen years operated the family estates there reclaiming them from
virtual bankru~tcymiddot to prosperous and efficient state He has for
example been active in encouraging the breeding of new cattle strains
is President of the Ecuadorian Holstein-Friesian Association and oper-
ates a butter factory on his estates with a Danish ~anarer He was
ar Minister from 1938-40 and Ambassador to Cashington from 19h4-46
l In executing any policies he will of course be handishyt4
capped by the lack of a fully efficient Civil Service The position
in Ecuador is the same as that in othelmiddot Latin American countries
that the Civil Service is naid on low salary sca1e and lacks compe-
tent administrators Such lack is an aspect of the general shortage
of technical ability in the country
TABLE
1
2 bull
3 bull
4
middot 6
7 bull
8
9
10
11
lZ
13
14 bull
15
16
17
18
19
20
ECUADOR
STATISTICAL APPENDIX
Oil Production and Exports
Cement Production and Imports
Yfueat Production and Imports
Rice Production and Exports
Rice Exports by Destination
Cacao Production and Exports
Coffee Production and Exports
Cotton Tobacco amp Sugar Production amp Sugar Imports
State Railwaysmiddot Lines amp Rolling Stock
State Railways Merchandise Hauled
Population and Roads by Provinces
Budgetary Receipts and Expenditures
Exports of Principal Commodities Volume amp Value
Imports Classified by Groups Value
Exports by Destination Value
Imports by Source Value
Balance of Trade by Major Regions
Exehanee Reserves and Banking Position
Price middotIndices
Status of Ex-Im Ballilt Loans
ECUAIOR Table 1
Oil Production and Expomiddotrts
(thousands of American gallons)
Crude ou Gasoline Produced EJtported bullRefined middotproduced
1938 94586 78696 15500 41654
1939 97125 68819 17679 bull 141
194o 98654 70~99 23001 6162
1941 65382 38362 25914 6462
1942 95671 68516 29489 72l7
1943 97211 65003 34635 8076
1944 121469 82520 38083 8927
1945 109855 73897 38752 10059
1946 979+7 52412 45213 12271
1947 99140 39359 53949 16587
Source J3o1etin Banco Central del Ecuador
ECUADOR Table No 2
1929
1937
1938
1939
1940
1941
1942
1943
1944
1945
1946
1947
1948
l First six months
CEMEHT PRODUOTIOllT AliD IMlORlS (metric tons)
Production Imports
17782
15699 10082
14254 13373
14249 12013
16512 10935
17213 2_846
19802 so98
2756o 933
34691 1590
37504 953
38496 3114
33231 14941
20484JJ
Sources Production Eoletin Banco Central del Ecuador Trade Ministerio deEconomia
Total
25781
27627
26262
27447
20059
24900
28793
36281
38458
41610
ECUAJX)R Table J
Wheat and Wheat Flour Production and Irraquorts
(thousands of kilos)
Wheat
Production Imports Exports Consumption
194o 28120 bull 73 28o47 1941 24578 36 24542
1942 24265 bull 76 24189
1943 22034 22034
1944 23251 912 24175 1945 23115 2733 180 25667
1946 25852 4532 23 30361
1947 2lo66 494f)J 11
Vfueat Flour
1938 10743 9981 na
1939 7864 16638 na
1940 7996 8-592 275 16312
1941 7225 11823 286 18762
1942 7 161 23497 161 30498
1943 7461 9862 17322
1944 5216 24023 29239
1945 5174 25137 30311
1946 7~38 11313 g 18813
1947 5943 1886) 4Y
Less than 500 kilos Y First 6 months
Sources Ecuador en Cifres a~d Ministerio de Economia
~emiddot 1926-30
1931
1932
1933
1934
1935
1936
1937
1938
1939
1940 -middotmiddotmiddot
1941 ~ )~ (1
1942
1943
1944
1945
1946
1947
1948
~iiampn-sect00-lfmiddotks
-~Jrst~middot-nsmcnths
gJ Provisional
(B EQUOR
RI03 PRODUCTION ApoundP ~OR~S
Vo1wnfJ Production middot E~orts
(metric tons)
26)04
23584
29863
39270
39008
31699
39036
52136
44027
40144 ltit middotmiddot~ 0 56596
5873
100949
ao6o7
53168
102048
112711
047
8255
3842
6449
5282
22907
8734
12)3
2ooso
962
18343 t - ~ J
20546
32028
46992
64604
29318
66918
6~209fl middot tloo 1
$ bull
tt ( r t
z
Value 3xoorts
(thousand sucres)
1881
936
6667
10864
6555
14632 pound 170
23265
51460
93837
127105
60395
203243
2rfjuft
Sources Production Boletin Banco Central del 39uador~ Trade Ministerio de Econom1a~ ~r- ~fl ]r bull ~-middotmiddotmiddotmiddot f ~~middot~---i
Average Destination 1937-41
Cuba 2
Peru 13
Venezuela 6
Colombia 4
Panama 2
Jamaica 0
Philippines 0
India 0
Dominican Republic 0
Other Countries 4
TOTALS 31
Preliminary~
RIQ] EXlORTS (in million po~ds)
1943 1944 1945
81 88 5S
20 29 0
0 17 4
~ 0
Rf 2 hi 0 0 0
0 0 0
0 0 0
0 0 0
bullbull ~ 6 6
105 142 6S
R Less than )OOOOOpounds
Table No 5
1946 ~ Jan to~
1~ June-194
46 12 24
0 0 s 17 49 )j
2 13 2
5 4 1
16 1 0
20 0 0middot
0 38 0
0
1 f4~ 2
r middot I
130 13 34
sf Ineludes 6 million pounds to Mexico and 5 million tmiddoto Greece bull middot
1[0
supound~sect8_ Foreigl Crops and Markets Offiee of Foreign Agrtcultural Relations u bull Sll~artment of Agriculture May 3l 1948 bull p bull 402 First six months of 1948 from ibid August 16 1948 p bull 120
Average 191i-15
191620
l921-25
1926-30
1931-35
193640
1940
i941
1942
1943
1944
1945
1946
1947
tf I
ECUADOR
Cacao Production and ~orts
Volume
Estimated Production ~rts
(metric tons)
n (
12108
15middot330
14652
19030
15058
17759
17689
19459
4o625
43547
36825
21319
15980
174o4
11208
14433
13762
18161
13735
16827
16526
Exports ( 000 sucres)
186o9
26073
26746
27531
16647
37424
29354
34365
40327
51794
41985
53547
74935
188208
middot)(et) middot( middot
Sourcesmiddot Estimated production Ministerio de Economia E~orts to 193~ Estadisticas de las Exportaciones del
Ecuador 1940-1942 subsequently El Trimestie Estadistico del Ecuador Number 1
1 ~ Mini sterio de Economia -bull gt(
111 t bull r r (o J bull bullbullbull 1) ( bull
ECUADOR
Coffee Production and Exports
Volume Estimated Production EXports
(Metric TohS)
1921-25 average 5147
1926-30 II 7571
193D-35 10047
1936-40 II 13811
1940 16158 14571
1941 14260 11847
1942 9016 6140
1943 14144 12340
1944 16598 14458
1945 12999 10737
1946 9948 7636
1947 12522 8970
Table 7
Value
Exports 000 Sucres)
59~9
11530
10945
18546
16J83
23827
17278
33176
35626
33863
34839
43524
Source Estimated production - Ministerio de Economia
Exports t~ 1936-40 - Estadisticas de las Exportaciones del
Ecuador 1940-1942 - subsequently El
Tremestre Estadistico del Ecuador Number 1
and Ministerio de Economia
YEAR
1937
1938
1939
1940
1941
1942
1943
1944
1945
1946
1947
ECUADOR
Production of Cotton Tobacco amp Sugar amp Sugar Imports (000 Kilos)
Raw Cotton
9237
7213
7172
8165
PRODUCTION
Tobacco
1519
1106
1875
1028
1359
Sugar
17528
22950
26950
27835
30421
27858
26799
23151
32474
33544
33480
Table B
IMPORTS
Sugar
5310
11068
12387
38
6
33
184
784
21455
3060
Sources Production of Cotton and Tobacco Ecuador en Cifres 1942
Sugar Production and Imports Ministerio de Economia
ECUAOOR Table 9
State Railways
Length Locomotives Rolling Stock (Number)
(Kilometers) (number) 1relght Passenger
Gueyaquil-Qpito 452 39 319 41
Guayenaquil-SalinaJ 150 6 22 24
-~i to-CarcbiY 222 6 23 22
Bahia-Chone 78 3 12 g
Sibambo-Azogues 117 3 6 ll
Puerto Bolivar-Piedras 155l 7 21 10
Puerto Bolivar-Pasaje 55
1199 64 4oy llG
Narrow-gauge line
gj On uncompleted line ~ito-Esmeraldas
21 Of which 4 are rail-cars
jj Of Vihich 61 are rail-cars
Source lviinisteria de Economia
1938
1939
194ltgt
1941
1942
1943
1944
1945
1946
+947
ECUAOOR
Railway Transport
(thousands of metric tons)
Products
Agricultural Animal Mineral Forest Manufactures
1639 19 3 160 122 1034
1318 143 172 138 961middot
1714 144 233 219 1472
1613 184 277 209 1543
1809 224 280 272 1631
1841 280 35a4 376 193-3
2011 250 263 299 C5J7 3
1888 29-5 350 238 2234
1941 29-9 46 bull 4 258 2170
1787 299 51 0 180 2085
Source l3oletin Banco Ce~~nu del Ecuador
Table 10
Others Total
58 3205
58 279l
298 4oso
289 4115
328 4543
384 5168
352 5248
292 5296
37middot7 5508
419 5279
Table 11
Population and Boads
Poeation Roads (Kilometers) Province Jan 1 1948 Main Secondary In Construction
Care hi 86663 1744 1191 1050
Imbabura 158896 1818 2100 1810
Finchincha 350149 4)13 3703 670
Cotopaxi 215232 642 4o6o 970
Tungurahua 222963 2290 1810 300
Chimborazo 29864o 1664 3316 2740
Bolivar 121653 1877 1294 2045
Canar 133971 580 580 1300
AZUaY 284982 1053 2190 630
Loja 238705 1140 4s6o 1430
El Oro 93752 1005 2378 650
Quay as 482843 3900 3367 3700
Los Rios 148428 933 4632 1050
Manabi 381538 3627 1lo61 1970
Esmeraldas 664o5 50 19 0 2840
Frov Orientales 181071
465891 26636 46732 2t3l5bull5
Source Direccion General de Estadistica y Censos
1938
1939
1940
1941
1942
1943
1944
1945
1946
1947
Source
r
Table No 12 ECUADOR
DISOLOS3D BUDGETARY R303IFTS AlfD EXP3NpiTURES
(Total of ordinary and extra-ordinary budgets and special accounts)
thousand of sucres)
Total Receipts
1323204
131699 6
1262710
1547624
1667455
2112614
3145318
4051038
5367822
6696647 11 ~I JJ( middot
Total Expenditures
1429134
1267687
123135middot0
1586615
1489251
2101429
3031038
4174550
5352394
6593858 bull I
aoletin Banco Central del Ecuador
-middot middotmiddot
Diff~reuce
106830
j 49309
f 1360
- 38991
f 178204
j ltll8-5
f 114280
12351middot2
+ 15428
j 10278bull9 r 7
l I 1
L
ECUAOOR EXPORTS OF PRINCIPAL COMMODITIES 1937-47 Table 13
VOLUME (thousand metric tons)
1937 i98 1939 194o 1941 1942 1943 1944 1945 1946 194711
12 200 96 183 20 bull 5 320 47~0 646 293 669 66) 218 191 153 112 144 138 182 137 168 16 bull 5 203 14~ iJI 137 129 146 118 61 123 14 bull 5 107 76 90 48 55~5 53middot3 472 34 bull 2 226 158 1)9 178 35middot511 72 bull 5 345 19~2 251 183 14bull4 13 2 112 103 12~0 132 121 1-4 16 16 15 18 30 22 28 2~0 13 01 14 1middotmiddot9 2~2 21 47 90 136 93 74 28 na
~gt i824) (1387) (944) (1036) (1981) (2516) ( 2756) (4373) (4462) (4947) _01 2849 2454 2274 2201 1201 2167 2062 2513 2446 1640 1358
Ltrates 7~3 140 76 so 3~3 )9 26 10
VALUE (thousand sucres)
610 10864 6555 14632 23265 51460 93837 127105 60395 203242 201111 49985 39bull276 37bull033 29354 34364 40)26 51794 4lt985 53547 74935 188208 24613 16703 15227 16)84 23827 17278 33176 35~26 33863 4839 43 bull 524 5bull691 7558 7t006 6448 4658 _J 107 2159 1898 2872 738~- 24355
18242 7~146 9605 86o6 6120 201 6274 6209 9264 1)02 14994 4048 4300 4298 3~866 6979 35481 23316 38043 26553 15111 979 lt363 2~134 2724 3168 8450 25613 43419 31877 18 bull 509 7125 na 8048 6 234 4981 6509 16231 22121 25191 69033 69J87 81962 4662
21989 26374 25020 24862 13425 24820 23796 28788 28107 18253 15902 trates 10165 16090 13134 38609 27208 29013 18075 809 ates 18682 35297 41204 39907 29426 25374 27476 26457 15482 24858 25334
10774 13210 13495 3 950 16869 32775 2L068 32402 30902 38326 n bull a_
164_045 169096 167148 167851 199704 298690 393115 466631 377894 537131 619859 tmiddotbull bull
Note Dash (---) signifies zero or less than 50 metric tons nly or ~00 sucres ata expressed in quantities other than weight Sourcis 193 data from unpubli~hed Zcuadorian trado stati~tics
at US Department of Commerce 1938 nnd 1939 from partment of Commerce official data Direccion Nacional de Estadistica Eruad6r en Cifras ~7 from Banco Central Boletin 1940 and subsequont ~ears from Banco Centrll jto~n sterio de Economia and from M1nister1o c Economia data furn she
Mission July 1948
~ tobacco tone JgS
articles
11res ilk
al
value of Imports by Groups 1937-Lt-5 Volume and middot~alue of Selected Individual Imports 1937-46
(Value in thousand Sucre~)
1~37 1~38 1~39 1940 1941 ~942
19~731 20~ 375 24~874 16~)65 19043 37~540 5127 7194 1958 6~4e8 5t298 8 118
12888 13Jl5 14522 17702 19556 25~152 21627 25~272 21455 28532 21619 18923 20649 21~593 25559 29437 22636 19~$13 13~505 11961 12~654 15~976 15667 18899 5~829 7 bull 524 6066 9385 833 14353
22912 )0868 24~75 27 t 750 25993 42~916 9376 1028 10038 12118 11345 13932
-bull
131643 148320 1486o 173753 149499 199715 (Volume in thousand metric tons) (Value in thous~tnd sucres)
5middot3 111 124 194 5 bull 534 6385 26 4 24
os 246 -
122 ioo i66 86 118 235 8255 6)88 7449 5076 013 14609
19 07 11 11 14 29 2187 1824 2695 294-3 29J9 8182
101 i4 i2o i09 28 51 804 llJ)6 1667 1546 577 866
~ hides amp skins amp manufactures amp miScellaneous
~~43 1944 1945
33270 70915 82984 6717 8)69 904)
31~700 43196 32~830 17073 53~400 JBoo6 15447 32~624 38797 14~88 18~388 22895 14116 11a99 9812
68928 n~l79 69-113 15856 19186 20042
217983 33ltl56 323524
78 middot 0 2 215 130 12622
09 27 775 2290
99 240 bull 25~1 337 24070 26388
23 46 67 8853 146)1 21699
09 16 10 321 349 246
~s zero or less than 50 metric tons -middotNote Columns may not ahmys add to totals because of rounding Denartment of Commerce official sources - 19)8-42 Direccion Nacional de Estadistica Ecuador en Cifras [inisterio de Economia El Trimestre Estadistico del Ecuador
1946
)1 8135
4 bull 5 )842
114 13123
46 22709
)1 639
ECUAOOR Exports by Countries 197-47 (Value in thousand sucres) Table - 15
1937 1938 1939 1940 1941 1942 1943 1944 1945 1946 1947 --middot-------middot
80458 lt2865 116t-J78 150055 196953 293081 386483 46lt-909 372~549 463~378 sa4~68J 54422 63418 8)254 1t0496 145 bull 558 168585 2)9238 267105 218018 227291 262887
26 20 65 17 2228 78 124 7)41 17173 630 610 949 1281 1055 1)98 5~526 25686 78523 85382 61478 75890 23481
2899 4955 2109 3568 162 1163 4J54 2526 4197 44~ 1450 5027 6335 4972 5i92 5285 7425 4546 7379 10286 9798 15537
1 5 5 17 57 13 291 54 444 574 6996 8 662 9188 8714 13bull764 7238 15316 13900 11223 6~07l 14503 11717 2908 12544 5 730 7896 3767 21215 22608 29233 4243 6703 7965
51 15 24 8 532 3620 1603 539 2336 11579 3749 80 207 862 4070 9991 17096 1275 17~428 6~973 27431 80541
1943 2135 5229 6039 1965 5435 3021 4827 15~702 25~137 51~854 middot 667 740 991 zo83 3358 11412 4286 4282 3~-970 13064 5~864
1799 419 2218 875 2865 12299 9644 14900 13714 9653 11655 J 89 82 2527 1247 964 326 )24 250 41141 2~985
1024 1514 1068 2205 7173 2650 2 744 8871 7694 J2 5811 17 39~ 77029 61869 43688 11945 1503 5550 6335 4108 4075 36783 61998
32) 6)3 1187 490 58 186 2164 4021 J217 35974 29595 11277 69 - 29 4411 7909 6156 3477 1183 5492 4876 26)8 359 1860 7~467
489 255 J2 100 280 1155 1239 1265 3827 3~961 20539 13t521 10802 2254 5 706 4177 6313 2bull610 3615 4251 -middot 2842 13546 lBi 1415 3 758 822 6 188 12962 3592 2531 412~ 162 7~ 10052
8643 1693 3bull521 3~400 2751 320 40 118 231 222 5404 J 4894
6337 4201 6548 5478 1175 5 45 40 1611 50950 6261 4132 5386 5452 117) -
~l - - 15 45988 5 middotmiddot 7S 8 5 25 567 92S 11
33 ~- 76 18 966 151 150 3419
38 29 858 2 45 78 467
(continuation on next naee) middot
~GUJLOR ~xnorts by Countries 1937-47 (falue in thousPnd sucres) T~ble-15 continued
middot-~--- -~-middotmiddot -middot _ middot-- ~~---~~- ---- -middot--~middot--------middot- -middotmiddotmiddot--middotmiddot--193 1938 1939 1940 1941 1942 1943 1944 1945 1946 1947 _I --middot -middot- ---~- ------ middot- bull middotmiddot-middot -
4 7 5 5 5 219 1087
218 153 529 368 73 49 297 569 1230 35140 789 28137
207 144 379 J68 73 49 297 559 1104 605 11 9 10 126 43
150 6355 plusmn
353 54045 169096 167148 167851 199704 298690 39J115 466631 377894 537131 619859
~S Columns may not always add to totals because of rounding
Dash (-) signifies zero or less than 500 sucres
Primarily Guadeloupe and Jamacia
Primarily British West Indies and Netherlands West Indies
Primarily Denmark Spain and Norway
Primarily Java
~ces 1937 and 1947 from unpublished Ecuadorian Trade Statistics at U s Department of Commerce
1938-46 from Ecuador Ministerio de Economia data furnished IBIID rassion July 1948
Imports by Countr~es 1937-1947 Table-H)
ECUAOOR
l937 1938 1939 1940 1941 1942 1943 1944 1945 1946 1947 I (()
Value in thousand sucres) ~ + -gt L520 63151 83984 115382 128423 186958 200061 311989 302~329 363403 517582 j
u t 2086 51311 71950 103214 110422 138729 103583 173776 178821 240233 429906 0
Q) f
811 674 551 2436 1815 3J258 2150 5265 6538 12178 20912 d S Ugt ro c 1 n 4 4144 3042 8 99 14 23 295 178 8~011 210 h middot-1
(- 0
186 324 237 957 2~991 8492 18~376 15~239 17232 10~574 3121 4 middot-2375 2310 1959 2476 3016 4735 7930 7~696 11~201 15~564 14755 sectwfi
middot-1 1 fli 4 6 343 1~823 3J064 4110 3~612 60J5 h 0H
2739 2109 3789 174 2352 7949 9~934 17845 23~ 616 1559t 18~727 ~rld ()
328 164 457 2498 612 733 10892 10902 20003 16684 11981 oc ampl+lll
mmiddota J63 1297 1161 -- - 2 23 115 1~128 1192 d+gt-
2464 507 500 1438 5565 20668 39979 46654 33684 33034 6~486 15~~ (()
na 1 311 2297 5515 130 bull-I m rl bull +gt
15 31 68 245 995 1516 2804 25326 6124 5956 3472 Oltll~
149 280 269 332 550 208 270 389 707 839 655 a~ sect (1) Cl 4-209 72986 ~ 38 09 1433J 9813 16276 15885 1721~9 45194 80928 ~-g 1701 35767 2 7 7 33 1202 67 47 61 19 2 El 0 0 eo g 3250 11462 8094 12980 10124 8108 13634 12513 11984 28392 40983 cent1-t+l~
1803 718 1687 otmiddot r-
4-114 6465 7339 630 475 34 22 2 66 889 7279 t -P () ~led
36o 4685 1573 7144 308 12 682 4824 rlltll ltDno
1~896 2550 1466 1624 64 1 58 5090 bull-1
fJ ~ ~ 1052 1489 794 945 293 224 5 21 1373 9062 9 703 P + na 868 881 423 10 1 8 223 135 r- 0) u
1 r=l middotr-l
1162 4823 1264 1675 877 1017 1~52 2380 3129 4~326 6851 () l=l rl
7274 3074 2609 3595 980 349 1041 905 599 1~543 3~134 cn~oo bull t
724 11939 8983 19951 6239 2281 1439 304 3882 5478 5736 op a cent1-t ~sect rl
173 302 262 238 -w 14 276 -rr 472 ---s9l ctillmgt
259 10949 7810 18190 4414 170 16 4 5 +gtUd ~-- ~
935 712 728 1278 1281 1715 1314 2685 3185 4465 3151 +gtP t-1
530 105 143 221 306 240 95 89 582 541 2089 ~ (f)
1l 21 12 80 1f 196 122 169 125 1J n ~-T~
0
109 218 lllL 250 m 46 sect2 12_ 28 119 112 I ~ --sB_l_ 0 ---- -
643 148315 147860 17353 149499 199715 21 ~ 983 331156 323524 414266 604479 ms may not a1ways add up to t ta1s because of rounding Dash (-) signifies zero or less than 500 sucres ~ country breakdown not given in source g) of which 591 from Syria 2Z3 from China 264 from Straits Settlements 1 Sumatra and 264 from Iran
YEAR
1937l
1938t
1939~ -
1940amp
194H
1942
Exports Imports Balance
Exports Imports Balance
Exports Imports Balance
Exports Imports Balance
Exp(rts Imports Balance
Exports Imports Balance
ECUAroR Balance of Trade by Area 1937-47 (thousand sucres)
fRlSTERN HEMISPHERE including Philinuines
United States Other Total Eurone
54~lt-22 26~036 80~-~-sa 77~029 52086 9~434 61520 64~209 2336 16602 18938 12820
63418 39447 102~865 61869 51311 11840 63151 72~986 12107 27~607 39714 -11117
83254 33124 116~378 43688 71950 12034 83984 54505 11304 21090 32394 -10817
100496 49559 15Cl055 11945 103214 12~ 168 115382 38~090 -2718 37391 34 673 -26145
145 bull 558 51395 196953 1503 110422 18001 128 423 14333 35136 33394 68530 -12830
168585 124~496 293081 5t550 138~729 48229 186958 9 813 29856 76267 106123 -4263
Table 17
Other Countries World Total
6~559 164045 5-912 131643
647 32405
4361 169~096 12~ 178 148315
- 7817 20781
7082 167148 9372 147860
-2290 19288
5851 167851 20281 173753
-14430 - 5902
1248 199704 6743 149499
-5495 50205
59 298690 2944 199715
-2885 98975
NOTE Areas may not always add to world t~tals because of rounding
Source 1937 and 1947 frlttm unuublished Ecuadorian Trade Statistics at US Department of Commerce 1938-46 frem Ecuador Ministerio de Economia data furnished Mission July 1948
(Table 17 continued on next page)
YEAR
12J Exports Imports Balance
1944 Exports Imports Balance
125 Exports Imports Balance
1946l) Expltgtrts Imports Balance
12Z= Exports Imports Balance
ECUADOR~ Balance of Trade by Area 1937-47 (thousand sucres)
WESTERN HEMISPHEL~ (including Phili~ines United States Other Total EuroQe
239238 147~245 386~483 6335 103583 96~478 200~061 16276 135655 50769 186422 -9~941
267105 194804 461909 4~108 173776 138213 311989 15~885 93329 56591 149920 -11779
218018 154~531 372549 4075 178821 123508 302)29 17159 39197 31023 70220 -13084
227291 264224 49J515 36783 240~233 123170 36J403 45~194 -12942 141054 128112 -8411
262887 241796 504683 61998 429906 8676 517582 80928
-167019 154120 -12899 -18930
1 Only year in which substantial Philippine trade
NOTE Areas may not always add to world total becasue of rounding
Table 17 (oonttnued)
Other Countries World Total
29 393115 1646 217983
-1)49 15132
614 466~631 3~282 331~156
-2668 135475
1270 377894 4035 323524
-2765 54)70
8~833 537131 5670 414266 3163 122865
53179 619859 5969 60449
47210 15380
Sources 1937 and 1947 from unpublished Ecuadorian Trade Statistics at us Department of Commerce 1938-46 from Ecuador Ministerio de Economia data furnished IBRD Mission July 1948
~ EXCHANGJ-tAL BANK
ECUADOR Exchange Reserves amp Banking Position (million sucres)
r 4 bull TIC CQEDITS OF CENTRAL BAl~K Domestic Govt Official Bus Other Credits
MOliEY SUPELY Current AC
JJj To()2f (4) Entities Indvls Total Banks of O~mtl Currencl Denosits l (6) (7) (8) (10) (5) Banks amp 11
Indvls (9)
16 10 26 51 1 116 62 64 48 26 7 40 73 4 129 74 66 3middot7 )9 7 29 66 4 144 73 71 37 29 8 24 62 4 159 78 73 56 26 8 22 55 5 183 8l 103 81 37 28 2 8 201) 120 119
152 37 21 22 79 9 255 169 17~ 26) 34 27 22 83 13 378 ZJa 26e )4 60 37 20 117 9 385 295 308 Z5 105 73 11 189 26 493 321 312 282 153 81 10 244 24 536 35middot~ 354 242 104 44 93 241 2 565 329 284
221 110 51 99 260 2 56 313 278 215 102 47 101 250 2 573 )06 294 225 97 45 95 237 2 585 299 299 219 100 44 98 242 1 591 307 297 214 98 35 111 244 4 6)4 315 295
)20 295
on of $12500CC beginning in December 1946 bull
ars
Ttttal (12)
127 14) 144 151 183 239 345 492 602 634 704 613
591 599 597 604 610 614
ge liabilitieS but including Stabilization Fund in 1945 and GolC CertificCt in 194) bull ial banks and fomento banks ial bc1nkst and fomento banks sits of commercial banks and time deposits of fomento banks
Table 18
Govl t Den sits ~L
(lJ)
6 23 12 27 7 28 8 31 6 32
middotmiddot 11 )6 16 57 27 71 41 74 63 98 59 90 66 77
71 8 75 76 6 75 81 75 81 72
72
1 1 Boletin - Superintendencia de Bancos Boletin - Unpublished data furnish~d MF bY Banco Central of Ecuador
Table 19 ECUADOR
Price Indices
WHOLESALE Rents Export Fooa in
YEAR Goods and Quito - Coal ~1) (2) (3)
1937 100
1938 83 100
1939 95 100 153
19h0 95 106 16h
1941 96 113 150
1942 114 146 172
1943 114 183 187
19h4 118 218 219
1945 133 266 254
1946 203 320 315
1947 297 364 516
19h8 (March) 294 379
(liay) 416
(July) 389
llame l~umbar
Republic of Ecuador
Status of u s Export-Import Bank Loans to ~cuador
Purpose
gs of Junemiddot10omiddotl9ltsect
Gross Authorized
Cancel- Net lations Authorized Repeid
Amount Amount Outstandin~ Undisbursed
6J048 6J048
( 262 )16
Haterials equip amp services $ 6480000 $20810 $6459170 $1279775 ~)5-l19middot395 _____ _
ibulliunicipali ty of iui to (Republic of Ecuador)
ibullIunicipali ty of Guayaquil (Republic of Ecuador)
Republic of Ec~ador
Republic of Ecuador
Ecuador DeveloPIlent Corp
Pan-American Highray (Cuenca-Loja)
Agricultural Research amp Experiments
Raihray Equipment
5000000
12JOOOO
50000 200000
)28 Haterials equip ~~ 4000000 services - ater 1middot1orks
)28 iltiaterials equip amp services - ~~rater orks 4000000
J4J Pan-American High1middotray (Guamote-Tambo)
432 uevedo-Hanta Hightmiddotray (additional credit)
1980000
220000
$19180000
Of tlhich $2500000 tts used on the Quevedo-Ibullianta HighTaY
4000000 28880
4000000 167
-1 t-9amphOOO- -7500
220000
6o6120 -h365000-middot
41592 575-t 2-41
-l-y5Q2- 500 44Gooo
220000
IBRD Statistics Sectio spte~ber 24 1948
-5-
II OCCUPAmtOUS AND INCOivES
18 There having been no census there is no at~curate information
under this beading
19 The Economic Department of the Ecuadorian Central Bank has esti-
mated that of a total population of 334 million in 1946 1285000 or
J9o per cent were gainfully employed in the following occupations
Agriculture Forestry etc
Mining
Building and Repairing
Manufacturing and Processing
Services (communication comshymerce government etc)
820000
10000
6oooo 10000
325000
5 5
26
100
20 No valid estimate of national inco~e exists At the request of
tne International Monetary fund the Technical Adviser to the Central Bank
of Ecuador Mr L A Carbo estimated national inccue in 1946 as 20096
million sucres or US$ 149 million Although this estimate is probably too
low ] it is clear that national income is very small Ecuador is very
low on the list of income per head among Latin American countries its
income per head is in feet among the lowest of countries of the world
21 Income is very unevenly distributed A survey made in 1943
yielded the following picture
g lror reasons Sdvanceit below Paragraphs 87 and 88
~ pt WI
-6-
To tal Monthly Average Monthly Population Income Income per Fw~ly
Number of Amount t tount People (SUcres) (Sa~res)
Upper Cla~s 4oooo 133 28000000 144o 2300
Middle Class 96oooo 3200 96000000 4950 4 L ~ 00- middotJ~
Lower Class 2000000 6667 70000000 3610 140 -- -~
3000000 10000 194000000 10000 10000 yenSliP C_~ ~
Note At the ofDcial rat~ of 1350 suc~es to the US$ average monthly incomes per family are equivalent to approximately $2J7 $30 and $10 respectively
~ Uneven distribution of incoue is of course largely a conse-
quence of uneven distribution of property Some ideas of the distribution
of rural property is afforded by analysis of re~urns made in payment of
rural property tax Such tax was paid by only ll2l4o proprietors in 1944
whose holdings may be summarized as follows
Per cent of Value of Rural ProEerties Number of Proprietors
916 4o
29-33 llOO
3041 10400
2030 37200
1080 634oO
10000 112J4o
23 Such statistics do not of course carry one very far beyond
the general observation that income and wealth is very unevenly distributed
and that much is obvious from a little travel in the country But it should
-7-
be said that comparing observations in Ecuador vrith those made in Peru
and Bolivia Ecuador by subjective judgment compares very favorably with the
tvo latter The Ecuadorian Indian seems to be on a perceptibly higher stan-
dard of life both in the highlands and on the coast than the Indians seen
in Peru and Bolivia Vhile his land holding is small it yields somethi1e
he very freqjl ently possesses livestock such as pigs and chickens has cot-
ton clothing drying on a line a~d often cultivates flowers and keeps
pigeons By American standards he is undoubtedly on the poverty level by
Latin American standards he may be a little off it
24 At the other end of the scale the wealthy upper class are pro-
bably not as wealthy as the Peruvian upper clas~h and the Bolivian elite
in operating in poundcuadc~the upper class lacks the rich property of mines
Thus while income is of course unevenly distributed in Ecuador as else-
wnere the range between the wealthy and the InJian may well be less tban
elsewhere The line of income distribution is of aboat the same slope
but probably significantly srJOrterY
This conclusion cannot be demonstrated statistically It results from a 11feel 11 deri ved from personal observetions in the respective counshytries
-8-
III AGRICULTURAL lROIDCTION
25 Ecuadorian development is largely a matter of increasing the out-
put of and improving internal and external trade in agricultural products
There appears to be no enduring geographic or physical reason ~middotby this can
not be accomplished She possesses soils and climate ranging from the
tropical to the temperate soils which in some areas are very fertile and in
others are in danger of exhaustion To anticipate subsecpent conclusions
her problem of development through agricultural progress breaks doTltD into
separate aspects all involving improved technique
(a) increasing arable yields from areas already cultivated
(b) improving pastures and stock in grazing areas
(c) enlarging both arable and pastural areas (including irrigation)
(d) improving roads in rural areas
26 Achieving these objectives involves providing more adequate
domestic credit for short- medi~ and long-term agricultural requirements
27 In application however interpretation of these problems is very
different in the two occupied regions of the country the Sierra and the
Coastal Lovrlands no generalization can cover both
(a) TLe Sierra
28 The occupied inter-Andean valleys are a region of temperate
agriculture producing almost exclusively for local consumptionmiddot Their
pat tern of tilled fields grazing land trees and flowerJl is almost
Y Flowers bloom all year round The main tree is the eucalyptusmiddot introshyduced some 70 years ago end used for all purposes (~indbreaks fuel 1
and lumber) affording a striking example of the effect of introduction of one plant upon regional habitability-
-9-
Western liiuropean in appearance but not unfortunately in productivity
Agricultural Production of the Sierra
1939 194o 1941 1942 - -(Hundreds of pounds)
Theat 49QOOO 611300 534300 527499
Potatoes 1201000 1476400 1386120 1146000
Rye 72500 79900 159495 115000
Lentels 46000 424oO 37955 csooo Corn 816700 1349300 1308062 1315200
Barley 85)000 795700 903600 911000
Cotton 45000 42020
Kidney Beans 80000
29 In addition about 1000000 hectares (247 m~llion acres) are
devoted to pasture supporting epproximate1y 683000 cattle 145 million
sheEf 107000 STrrine and 320000 goats
30 Yields are low in all Sierrean agricultural activities the
standing VJheat and barley crops are so thin that the ground can be seen
through them Yet the greater part (some 6o per cent) of the people of
Ecuador live in the Sierra and population is increasing at about 2 per
cent per annum The effect upon land use under existing tecnniques is
clearly visible cultivated areas are being pushed higher and higner up
the hillsides (slopes of 30 to 40 degrees being used) and onto the
fJparamon the high plateau betvreen adjacent valleys at altitudes of
11000 feet and higher The result is a picturesque scene but one which
reveals a near Malthusian situation in the man-land ratio rbullrith static
-10-
technical practices It is a situation which cannot remain unchanged if
economic development is to occur in the region
31 There sean to be three possible lines of advance increase of
output from highland areas in present use the bringing into use of new
ground in the highlandsbull or a change to increasing reliance upon the outshy
put of non-highland areas
32 The third possibility is not one for the immediate future It
involves either large-scale migration from highland areas to lowland
regions or a large transport program linking highlands and lowlands
together with growth of non-~ricultural activities on the highlands to
provide a cash income with which to purchase 11 imported 11 foodstuffs This
second possibility may indeed be the trend of ultimate development but
offers no irmnediate easement Large-scale internal population movement
from highland to lowland is probably impossible since the Andean
Indian (of different stock to the coastal Indian) is fullf acclimatized
both mentally and physically to life at high and temperate altitudes and
little suited to life on tropical lowlands
33 The two remaining lines of advance would both seec to increase
highland agricultural output But there is an important difference beshy
tween increasing output from valley land in rr esent use and bringing new
and higher land into arable use The first is a complex problem suscepshy
tible only of relatively slow solution the second is seemingly simple
and capable of quick result yet basically less sound offering only
temporary improvement
34 The thurst onto higher ground is already evident and the area
-11-
taken in could probably be greatly enlarged by efficient use of tractors
and modern plows Such use of mechanical equipment would thus give quick
increase of agricultural output but it is very doubtful whether improveshy
ment induced by these means alone could be long maintained The greatest
~r particularly on sloping land is that deep plowing may lead to
soil erosion so serious that land becomes finally llilgtroductive To use
mecbanical equipment i thout at the same time adopting eqJally modern
methods of soil conservation way well be disastrous and that perhaps
within no long period
35 Even apart from this physical daneer there is the virtual cer-
tainty that new land however plowed would gradually sink in fertility
end hence output unless farmed by better agricultural practices than
those now followed in highland Ecuador The present attraction of the
higher land is principally good natural fertility beine virgin ground
On all other counts this higher land is less advMtageous than the valley
floors the va)ley sides are steeply sloping a1d the fl~t paramo is some
2000 feet higher bare windswept and devoid of habitation It would
seem obvious that it is pastoral rather than arable ground were it not
for the pressure upon arable output of the region
36 The pressure today however rises from the relation betwem
popUation and output rather than that betvreen population and arable
area Productivity in the Andean valley is low and can certainly be
improved If improved the pressgtlre which is causing the thrust to
higher ground is relieved until population increase again overtakes outshy
put Against that time however the higher ground vrould remain
-12-
availfibleY and other lower regions may be coming under effective use
37 To increase output of the populated valleys is not a simple mat-
ter responsive to single policies such as simple mechanization by tracshy
tors It will embrace the wlo le range of agricultural practices from
better seed types to crop rotation and fertilizers including in some
valleys irrigation It is a matter rrther of agricultural education
than of~dtlgagricultural appliances and probably experiment under
the peculiar regional conditions will need to precede education Improveshy
ment will necessarily be slov1 but along these lines it can be sound and
permanent
38 Wher~ lfL mere importation of mechanical methods Vi thout
understanding of their dangers in speeding soil destruction by wind and
water erosion may permanently damage the region The somewhat gradual
mechanization of agriculture is of course to be expected and not disshy
couraged but it is not the wlole answer to development in highland
Ecuador
39 It seems that there is at present no over-all agricultural
lfibor sl1ortage in the Sierra and mechanization is nOt therefore called
for to relieve an adverse manpower position It seems however that
some of the larger estates are experiencing difficulty in obtaining their
labor requirements because Indian tenants are viitblolding quasi-feudal
labor dues and devoting whole time to cultivation of their own plotsbull
As a result hacienda holders are attracted to mechanization as an
escape from growing difficulties in obtaining and supervising labor upon
Y As it would not if destructi ve1y formed at this stage
-13-
their ovm land To the extent they are successful the tendency for agrishy
cultural money vrages to rise is weakened
4o There vrould seem to be good possibilities of increasing pas-
toral agriculture in the highlands 1Jrith improvement in both numbers and
strains of cattle and sheep If adequate arable development occurred in
the valleys the main grazing grounds could be the higher land not then
required for arable purposes ~lith dairy cattle on the valley margins or
on valley ground not well suited to arable use Such pastoral development
would be desirable not only to imp1middotove nutrition in Ecuador itself 1 but
as a possible new export of meats fats and hides to meat deficient
Republics notably Peru Early export would probably be on the hoof
along the Andea1 ridge it self
41 The Ecuadorian Government has not included any explicit propo-
sals for highland agriculture (other than irrigation) in its present apshy
proach to the Bank It has however suggested the Bank finance $1 mil-
lion of agricultural tractors and equipment to be handled by agriculshy
tural stations located at strategic places both in the coastal
provinces and the highlands 11 without further elaboration of the
intended highland use of such ecp ipment The description given above
suggests that the usefulness of agriculture machire ry depends to a conshy
siderable extent on the place plan and purpose for rhich it is to be
used
42 In some of the highland valleys (for example in Cotopaxi end
~ound Biobamba) rainfall is deficient and irrigation would increase
valley output by bringing more valley ground into effective use This
- 14 ~-
is clearly sound for flat valley ground already populated is more useshy
ful than higher sloping and more exposed ground The Ecuadorian Govern
ment has included purchase of eq1 ipment for irrigtion works to the value
of $500000 in its present approach to the Barik Assessed against the
requirements for economic development the request is sound provided of
course such equipment is effectively used
(b) The Ooast
43 The condition and nationel significance of agriculture on the
tropical coastal plains is quite different from that ltNl the Sierra The
area as a whole is less densely populated and in some parts such as the
Province of Esmeraldas is very sparsely populated Its principal pro-
ducts are exported The population has more mixed blood than the highland
people and is oore corumercially active and minded There is little feel-
ing of community of interest with the highlmds the rrincipal coastal
city GuayaqJil is larger than Quito and less remote fror-1 outside
influence
44 In terms of reported area devoted to its cultivation cacao
is the principal crop of the coast The table on the following page
shows output of main crops
45 Cacao is not however the most important export crop by value
being surpassed by both rice and panama rats (a handicraft product of the
region) Nor does the table show those products which result from
gatherage of mild growth tagua kapok oil-bearing vegetable nuts
balsa rood rubber etc
Y For use by the Caja de Klaquogo as required both in tile highlands and on the lowlands
-15-
46 Agricultural Production of the Coast
1939 ~ 1941 1942
(limdreds of pounds)
Rice 957164 872890 12304oO 1610489
Cacao 392000 263300 333250 315782
Coffee 343800 369000 310000 190633
Bananas (1000 bunches) 4090 3913 4568 4265
Oranges (COOs) 103000 lQ96oO 80550 75000
Cotton 200800 156800 155910 111500
Tobacco 24o43 4o 765 22349 29539
47 It has been estimated that about 500000 hectares (1 235 500
acres) are devoted to pastures on the coast supporting approximately
425000 cattle and 36000 swine
48 There is no doubt that the coast is an extremely rich agricul-
tural area although toward the south it is increasingly hampered by
shortage of water in the dry season And rt is overwhelmingly the
principal foreign exchange producing region of the country Yet it is
largely undeveloped by any modern standards lacking roads and almost
all basic civic amenities (water supply sewage paved streets etc) in
the provincial towns The development of a tropical agricultural region
without large labor supply _rill raise many interesting and some new
J Irrigation ~rks are in execution and others planned in various places and the irrigation equipment which it has bee11 suggested the Bank might finance would presumably be used on the lovlands as well as the highlands
-16-
problems the solution of hlch in detail may lack precedentY The
suitability of cacao to Ecuadorian conditions arises in part from the very
small labor requirements of the crop At bottom advance will lie along
the route of crop improvement and mechanization the difficulty will be
the proper application of mechanization crop by crop Some tropical pro-
ducts may never be suitable for mechanical cultivation being those whicl
would require intensive hand cul ti vat ion and may therefore not be appro-
priate for Ecuadorian condttions Others r1JJi3 be suitable only if grown on
relatively large plantations
49 Clearly for the foreseeable future many lowland products will re-
main at the stage of gathering of nld natural growth rather than plantashy
tion enterprise The flow to market of such productswould be increased
by improved access notably road core truction anQ at the same time road
building ~~uld seem to be a condition precedent for spread of plantation
methods particularly plantations using mechanical equipment lilliE diate
measures for the over-all agricultural development of the region may not
be directly agricultural at ell they are rather the provision of roads
and transport facilities the provision of long and medium term agric-llshy
tural credits and in some areas) the institution of health services
With the opening up of the region in this manner iiould come more clearly
perceived opportunity for better agricultural use of the land particu-
larly if effective demand for the products is transmit ted back to the
cultivator through establishment of product processing plants where approshy
priate for example in vegetable oils and tagua (vegetable ivory)
] This is the situation which in Brazil for example in an earlier technical epoch was 11 solvedll by importation of Negro slave lebor
-17-
50 As in the Sierra there are good possibilities for pastoral
development on the lowlands Some progress is already being made in this
direction with experiment in breeding more suitable cattle types through
crossing 11Ji th imported Indian brahmin strains Grazing for beef is not
highly labor intensive and this development is very promising since
export to other Republics by sea llould be reltti vely easy In the first
stages export would presumably be upon the hoof ith later development
of meat packing
51 There seems to be no single bottleneck or restraint upon devel~
ment presently existing all other conditions being favorable If developshy
ment occurs it will be along many simultaneous fronts but the front iJhiclf
is lagging and Inayen continue to lag is the provision of basic social ccp ishy
tal (roads water supplies health services etc) that is of those
things which no single private individual or corporation can provide for
itself Given these and the institution of suitable domestic credit
fecilities the rest may be accomplished by private domestic ini tiat1ve
52 The development plans of the Ecuadorian Government as outlined
in a Memorandum dated April 8 give much weight to lowland agriculture
The establishment of agricultural stations to provide farmers wi~h
disease-resisting cacao plants~ tecl1nical advice and credit facilities
is CD ntemplated no foreign exchange would be recpired all funds being
local currency The rehabilitation of cacao formerly a leading export
crop is desirable although development of cacao sources elsewhere may
prev~nt recapture of the position formerly held by Ecuador
53 A proposed agricultural mechanization programwoUld total
- 18
$25 million in foreign exchange cost )J The bulk of this ($1 5 million)
is allocated to wechanization of rice cultivation alone the benefit being
principally in resulting improved export position The remainder $1 milshy
lion is for mechanization of other agricultural produc~s apparently
mainly lowland (those products specifically mentioned being 11cotton sugar
oil-bearing seeds and other specified products11) the exclwnge benefit
forecast being principally through reduction of import a
54 Different criteria ~~ould be used in assessment of these two
projects The judgment on that for rice will depend upon forecast of
world rice markets and in particular upon expectations regarding rorld
demand for rice from the dollar area The validity of mechanization in
cotton sugar oil-bearing seeds and other lowland products will depend
first upon the technical possibilities for such mechanization a matter
not yet fully explored If sudl technical possibilities are favorable
effective mechanization vOuld constitute sound development upon the low-
lands which are relatively sparsely populated
Y Some part of which would be for the benefit of highland agriculture if machinery stations be established there
--19 -
IV MI-~RAL PHODUCTION
55 Ecuadorian mineral nroduction covers only a few products and
important the wells of the lowlands being exploited by the nglo-
Ecuadorian Oil Comany Production of crude petrolewn shows a slicl1t
rising tendency while exnorts have declined steadily a~ more refined 1
products are consumed domestically
56 Oil exploration to the Iast opound the Andesin the Amazonian
region is proceedinc under concession to tl-1e Shell Oil Go1~1any
Three wells have been drilled without success and tvro arc beinc
deepened Cost of this exploration to ciate j_s around US)23 million
If oil is found its only outlet middotwill be a pipe line over Ue Ances
(estimated to cost USiD93 million) and this the comany is not -rE1inz
to undertake unless assured of an outnut of at least 100000 barrels a
day
57 The only other irnrJortant minine activities are those of gold
silver conper and lead conducted by the South ~~erican Develoument ~
Company and the Cotapaxi Sxplora tion ConJ1any War-time lr oduction peaks
were 1942 for gold and CO)per 1944 for silver and lead Since these
resective peaks production has ~-~clined narticularly in copper and
lead although not to 1933 lsvels7
crude petroleum II II
1938 (millio~1s of 225 107
Production Exports Production refined petroleum 37
1947 barrels)
236 bull94
128 (See Table No_Jl_ Statistical Appendix
Production Gold (000 troy ounces) Silver (000 troy ounces) Co~per (000 pounds) Lead (000 pounds)
1938 445 82~0 27 21
War Peak l03tJ hhl3
96788 161-+88
19h7 5o5
1569 3316 h98h
-20-
58 Ecuadorian trade statistics list exports of crude pet~middotoleum
and minerals separately from that of other commodities even in aggre-
gate figures underlining the fact the exploitation is in foreign hands
and hence colonial in nature This aspect hmmiddotever is of di-1inishmiddot-
ing importance as now the foreign exchange realized from such mineral
exports accrues to the Central Bank and as in any event nineral ex-1)
ports form a diminishing proportion of the vhole 7
V ~JNUFACTURING PEODUCTION
59 There are virtually no stCltistics on manufacturing in Ecuador
and none which present any comprehensive view It is ho~middot-rever clear
that there is very Uttle industrial factory prJchJction and obser-
vation in the country leaves one with an impression of the nresent
igtilportance of handicraft production
60 The most inportant consuxner-good factory industrj_es are tex-
t~~~breweri~-~~ otheuro7r beveraces shoes ard leather _roduc~s buttons ~d~lttfr
and nails Textile production using domestically produced cotton pro-
duces cotton piece-goods and wool rayon and hemgt textiles supplying
almost all domestic demand for low-quality products The only irJDcrtant
producer-good factory industry is cement the plants being located near
Guayaquil Lack of domestic technical lmow-how and of capLtal and
the low level of domestic effective demand account for the sli~ht develop-
ment of faetory industries whose rrowth on any scale beloncs to a 1ter
stage of economic development
y Value of nineral exportsmiddot as nercentare of value of all exports 1929 260 nercent 1933 430 n 1939 397 1946 11~5 1947 69
Production and irrport statistics for cement tre civen in Table IJo bull 2__ Statistical Appendix
- 21-
61 Uuch of finished commodity ygtroduction is at the handicraft
stage both for nroducer and consumer goods In Quito and Guayaquil
one sees many small 11 shops11 producing metal leather and wood manushy
factures largely by manual methods It is an illuminating co~~entary
on the shallow growth of industrial specialization that the ll1ission
did not see any shops selling ready-made womens clothing All
womens clothing shops displayed only materials in the bolt as in
pioneer days elsewhere
62 One handicraft industry of great importance in exports is
the production of panama hats It has been estimated that 30000
families are occupied vrhole or art-time upon this nroduction and
at times (for example 1945) they have provided the largest single
export item by value The grmvth and treatment of the fiber and the
weaving of the hat is entirely an Indian handicraft industry the
Yteaving of a high-quality hat taking three months The fiber is erown
and the best hats woven in the lowlands Its future ir-mort nee is unshy
certain as the competition of Italy and the Fhilinpines is again felt
in low-_)rice woven hats the boom emjoyed during the war nay recede
63 Ecuador in its ~resent and foreseeable development is an
agricultural country with no immediate movement toward industrialization
EcuAdorians met by the Mission themselves stated this The growth of
factory industry will be slow that of small shop and handicraft manushy
facture somewhat less slow It vmuld seem as stressed later in this
report that there is room for grm~h of processing of agricultural
products Statistically such processing would be classed as industrial
production but is oroperly the finishing stage of agricultural productior
- 22-
to secure improved durability and portability of perishable products
This would increase effective demand imnacting upon the farm and ass1st
in stimulating agricultural development Some progress being made in
this direction notably in vegetable oil expressing plants Ihe only
non-agricultural project suggested by the -r~cuadorian Government has -eer
a cement plant located in the highlands at a foreign exchanr~e cost of
$2 rrillion the justification being both the saving of foreign exchange
expended upon cement imports and reduction of load upon the only railshy
way connecting lovrlands and hichlands Growth of cement use accompanies
economic development assessment of this project (engineering questions
apart) would involve tainly questions of timing location and finance
matters which are really all aspects of the single question whether
such a project may not be one for private direct investment Initial
expectation would be that were all factors favorable to the success of
the project it gtlould be readily undertaken by orivate enterprise
particularly when it is remembered that railway freiehts 1bullrould protect
highland production from lowland competition
6h No sueeestions regarding increase of electric power output
have come fror1 the Government indeed the official statistical services
have no data upon installed capacities and demand Cnly in Quito and
Guayaquil are present industrial uses of electric poler of any ir1portance
Elsewhere suIJply is from snall municipal plants (mainly therraal) for house-
hold consumption It appears that demand mar be ahead sunply in cost
towns very frequently voltages are maintained around 80 instead of the
rated 110
- 23 -
65 Shortage of electric nower is not however hamoering
economic development at this stage although it may soon do so in
sevral urban centers such as Qui to and Hiobamba Sone ttne i-1 the
iuture the possibility of large hydro-electric vrorks on the eastern 1
side of the Andes will merit attention
y Where the rivers are fast and clear on the western side they carry much silt
- 24-
VI DmIESTC THANSPORT AND COilERCE
66 The space devoted to agriculture in this report reflects its
importance in the Ecuadorian economy As has been said further developshy
ment will for sometime be mainly agricu1tural
67 Present restraints upon that development are not located
solely or perhaps even nrincipally on the farm there are many
features of the general economic environment which operate to hamper
even purely agricultural development There is great room for improveshy
ment of transport to knit the economy tocether and to encot1raee grovrth
of output
(a) Transport
68 Without roads there can be little regional or inter-regional
intergration Fithout that intergration (which for some regions and
some crops would open upon the world at the gatewa~r of a oort) there
can be but small inducement andlittle opportunity of increasing proshy
duction In much of Ecuador the principal transport vehicle is the mule
whose patience and endurance under heaJr load is matched by that of the
Indian
69 As regards roads the requirement is both more roads and
better roads capable of bearinr modern vehicular traffic The roads
traveled by the 1Jission are uniformly bad both slowing traffic and imshy
Ilosing extraordiPamiddoty vehicular de_reciation Ultimately no coubt
there vdll be an adequate system of all-rreather roads in Ecuador For
the immediate future the more modest tarset is to attain a reasonable
system of roads civine access to the creater art of roducine areas
- 25-
in the dry season At present the unsurfaced access roads are cut to
pieces by --vater erosion in the wet season and consolidated somew1at
traffic in the dry season A single eradinr operation smoothin thE
dirt surface at the end of the vret season would ci ve accelJtable usashy
bility in the dry )eriod v1hich in the populated coastal rovince of
icanabi for example is eight ~aonths of the year At -_resent the so1e
transport link for corunodities between loYrlands and the hihlands
is the Guayaquil to Quito (and beyond) railway This link is nrobaoly
nearing saturation point vdth present equipment and its strencthening
both by railway imJrovement and all-middotweather hichway construction is
obviously desirable it middotill probably become essential yri thin five
years
(b) Commerce
70 Physical transport alone hogtever is not the only ope c-ation
ofcarriaee required to intecrate a reeion internally and to bind toshy
cether the various regions There are also tL physical and the finanshy
cial aspects of comr1odity holdinr involving the storae and vrhere
necessaFJ the partial processing of products to reduce perishability
and the avail~bility of mechanisms of short-term finance extendine over
crop periods In Ecuador these tro aspects are closely related
71 Apart from some export crops there is virtually no crop or
food processinG undertaken And in the export crops processing
is the minimum necessary to secure portability Eice is nilled but not
polished cacao is sun dried coffee is dried and within only recent
years washed fruit is exported whole Some new e~Jor-ts may require
further processing and installation of plant starting or is in
- 26-
advanced discussion for example vegetable oil processing (although
for sometime no eXport surplus of vegetable oils is 11~11 and fish
canning
72 Nor is there any important ~recessing of domestic food pro-
duction for home consumption bull There is no freezing or canning of meat
which is taken to market on the hoof There are only two or three
very small butter factories and no whole milk orocessing Cereals
of course are not highly perishable but there are no silos or granarshy
ies and experience of similar situations elsewhere suzfests that losses
by deterioration and infestation may be significant no direct evishy
dence anthe incidence of this factor in Ecuador ~as obtained by the
Mission Thee is little storage of grass on the coast in silos or
as hay and in the dry season slaughter of cattle because of lack of
feed is at times necessary In short the situation is not so very
dissimilar to that ofmiddotmedieval Europe
73 Roads alone would not create an environment favorable to
change in this position although lack of roads nar well inlibi t change bull
In addition suitable credit facilities for the finance of co~~odity
holding through time are necessary
74 Hany complaints were voiced to the Hission reearding lack of
short-term banking credit for crop movement and storage and for medium
and long-term agricultural investment and no doubt there is signifi
cant lack of such credits But this is not the result of some simle
institutional defect of the b~~inc and credit structure even though
institutional improvement may be necessary It is fundamentally a
- 27-
reflection of the fact that Ecuador is extremely poor in disposable
capital available for even short-term investment ie vrorcing capi-
tal Improvement of short-term credit facilities for what in advanced
communities are regarded as purely commercial purposes would in effect
represent an increase of capital intensity in the Ecuadorian ecororny
To the extent that banks met more fully the gtJeak seasonal credit re-
quirements for croo movement and storage individual nrivate reoources
are relieved of the 1eak burden and available for other investments
75 Thus iorovement of the techanisr by 11hich the banking system
provides working capital for corrtercial or inciustrial (in the sense of
crop processing) purposes is itself an act of investment rather than
merely an institutional rationalization ilnd as such carry the
usual consequences of investment in an undevelogted economr with very
law voluntary savings To the extent that additional credits are not
matched by savings sewhere (either voluntary or forced through
taxation) they will be inflationary in effect just as an
additional act of long-term investment would be Increase of banki1g
nrovision of workinrr capital should keep step with totl capital for-_ - - 1 mation of which it is one aspect7
It is implicitly assumed in the foregoine that at nresent in Ecuador the amount of small voluntary savinrrs is neclicible It vrill presumably not alrmys remain so and ~Jart of the modifications of the bankin~ system shou1d be attract Clli1U1 atively such sav-ings in the fom of savinc do)Josi ts This 1muld increase the extent to which Danks can safely flovide capital It will be a much later before small private savincs are directly in-vested in commerce or industry throuh joint stock r1ethods There is no stock-exchance in Ecuador
-28-
76 It is of course just as important that the availabi lity of
working capital should not lag behind as it is that it should not run
ahead The Bank should ensure that any long-term investment projects it
may assist to finance do not effectively starve the rest of the econo~
of working capital in the process of avoiding inflation
77 There is also the question of the price of short-term lending
that is of the level of interest rates The Ecuadorian is a highshy
interest rate eoonomy The legal maximum for commercial short-term loans
is 10 per cent having recently been increased from 7 per cent legal
maximum rates however are not systematically enforced by commercial
banks themselves At a time when the legal maximum was 7 per cent
going rate for 90 day loans secured upon properly warehoused commodishy
ties and with third party endorsement was 12 pe+ cent
78 This very high structure of interest rates seems open to
obvious criticism but is in fact probably not Tiholly unjustifiable in
the present conditions of Ecuador It is the cumulative result of many
factors so that more official prescription of lower rates would be
quite ineffective These factors seem to be
(a) Interest proper~
(b) layment for risk bearing arising in part out of a
low rating upon individual credit and in part from
the institutional conditions (such as embryonic
commercial and financial ruarkets) which seriously
reduce the liquidity of any asset other than money
itself
-29
(c) An clcmmt 0f discount 111nn cyectcd luturc irf] utinn
reducing the real value of the pa~nent for lending
(d) An element of monopoly which upon purely subjective
judgment may be the least ilJI9ortant of these several 1
factors7
(e) The real shortace of capital whether short or long--
term~ reflecting in interest rates as a genuine
scarcity price
79bull Of those factors the di~ount upon expected future in-
flation increases prices at a rate of 12 ner cent per annum a money
interest rate of 12 per cent per annum is a real rate of zero If
therefore inflation could be controlled a substantial reduction of
money interest rates could be hoked for At the same tine while
inflation continues high interest rates probably have small influencemiddot
in encouraging money savings
80 Even without inflation ans until the su~1ly of available
real capital improves relatively high interest rates may well be
acceDtablemiddot as a price mechanisn nethod of selectin~ most urofitable y ~
uses of limited fundsbull middothere exoected urivate nrofit did not seem l - -
to parallel social desirability loans at lower rates (ie subsidized
terms) could be made perhaps through reconstituted Development Banks
Prima facie however such loans 1bullrould not be short-term
~I -Onthis interprepoundaion the situation in Ecuador differs signifishycantly from that in Peru
tt is suggested that a powerful point of intervention would be to limit commercial banking dividends distributed to not more than say 7 per cent The high profits nmv earned by commercial banks would then progressively accumulate until liberalization of lending becomes virtually forced by accumulation of funds representing genuine corporation saVings
- 30-
81 The discussion of private finance has so far upon
short-term credits there is an even larger nroblem in the
intermediate and long-term arricul tural credit It is not necessarr
to expand greatly upon this since it too is a consequence capi-
tal shortage
82 Imnrovement would seem to be alonrr the route - 1 of nroper UElte
of existing Development Banks (or their successors-) effectively
in the earlier stages as lending agencies of Government
VII OFFICIAL DEVLOPHl~NT FHmiddotIfJCE
83 In the circurnstances of a country like Ecuador the greater
part of domestic capital forr1ation requires official directly
or indirectly if it is to occur on any scale are too
small and too narrowly held to permit much -rowth this roL1te
andthose few who are able to save at any sinificant rate are larely
uninterested in the efficiency of ~reduction
84 Official finance may be either direct or indirect direct
throueh works executed by Government or 0JUblic bodies indirect
throueh lending institutions such as Dev~lopment Banlcs capitalized
from public funds In either case funds are diverted to investment
purposes by Govern~ent intervention
85 Thus Development Bank lending for productive purposes (for
example long-term acricul tural credit) is an item 1n ca9i tal formation
V There are thirteen reaional Development with an unirnJresstve record of manaeement Their possible reconstitution is under discussion
-31-
rather than a mere institutional rationalization of the credit mech-
anism Indeed as has been stressed in the last section even im-
proved su1nly of short-term credit gtrill in art rewesent
formation A developing economy which neclected these items in 11Cnn21~~
or forecastinc total caital investnent would be very vulnerable indeed
to inflation induced by over-investment
86 17here voluntary savings are Jow the only wmiddotamiddot to sirnificant
rate of capital formatton can emerge without inflation is an equi-
valent amount of savine forced throurh taxation One ould look for a
relatively hirsh level of taxation to national income and for a rela-
tively high proportion of exnenditures caDi tal purposes to total
Government expenditures On both these counts Ecuadorian elq)erience
seems irare s si ve
87 In 1946 total budretary and spedal revenue rms disclosed
as 5368 million sucres in the sa1le rear an estLnate middotJaced national
income at 20096 million sucres This a proym~tion of 27 middoter
come a proportion so hich that in fact it lacks credence In assess-
inc total tax burden part of the revenues of Government monorolies
and all of municial revenues should be included if this be done y
the proportion becomes 37 per cent In addition new exchance taxes
yielded 973 million sucres in 1947
Mono_)oly participations (ii direct disbursements for public _Jurposes) were 353 million sucres in 1946 munici~al income was 1803 million sucres in 1947 (1946 not available)
32-
88 It is very difficult to accept the conclusion that Ecuadorian
revenues form so high a proportion of national income it would seem
that the estimate of national income is too low Nevertheless tax
revenues are clearly a sizable percentace of national income
89 At the request of the Mission an official estimate of total
official expenditures on capital account was prepared Total income of
Government municipalities provincial councils and other public
entities was ~iven as 7S4 million sucres and total capital expenditure
from that income as 2237 million sucres or slichtlr over 30 per cent
of revenuesY It is difficult to feel confident that effective capi-
tal formation on this scale actually occurred certainly there is
little evidence visible to the eye of the t1middotaveler
90 Notwithstanding such doubts the fiscal evidence is of a
fairly hich proportion of tax revenues to national inco~e and of a
hich proportion of revenue allocated to capital investment It would
seem that the fiscal mechanism exists for domestic capital fo~~tion
what may be required is more effective expenditure of allocated funds-
Before a development plan envisa~ing the expenditure of still more funds
was adopted it would be desirable to examine closely administrative
and technical efficiency in the use of existing funds
91 On the side of revenue Treasurr officials informed the Mis-
sion that tax evasion was estirnated at some 30 per cent of ta revenues
1 This makes such capital expenditures 112) per cent of 1946 national income which a~ain seems very high indeed
The two largest items are Government public works (8)4 million sucres) and municipal works (900 million sucres)
- 33-
particularly in income and land tax It might well be advantareous
on the sides both of revenue and of expenditure for Ecuador to obtain
technical assistance of the tPe that the United Nations Department of
Economic Affairs rendered to Venezuela in 1947~Y involvinpound revision
of the structure of the budget of budcetary audit practices and the
like
f Report~d in UN Document ECN 1SubJfti 4 - 21 June 1948 lostricted)
- 34 -
VIII 001EHNl(iEi~T FINANCE AND INRATlON
92 What may be called 11multiple budget practices exist in Ecuador
as in other Latin American countries There is an annual Ordinary Budget
one or more Extraordinary Budgets( tro in 1947) end a number of Special
Accounts (twenty-five in 1946) not included in the general budgetary
accounts The State operates nxmopolies in tobacco liquor salt and
matches part of whose profits are taken into the ordinary budget as
revenue and part used directly for public purposes It is thus diffi-
cult to assesrmiddotgggregate Government revenues and expencii tures and vir-
tually impossible to detail the purposes of expenditure to ascertain
accurately public capital formation by way of public morks and the like
9 Taking the disclosed figures on the ordinary and extraordinary
budgets and tne special accounts there has been a net surplus over the
past ten years 1operations of 234 million sucres~ This however is
not an accurate reflection of the true aggregate position because the
Government operations are not ~holly included in these disclosed ac-
counts But since the Government has no source of internal funds other
than the Central Bank the net recourse of Government to Central BanJJI mirrors the over-all result of Government finance such recourse increased
In 1946 for example the monopolies contributed 5357 million sucres to the general revenue and disbursed 3526 million to municipalities (145 million on general participation and 1652 million sucres for 11 special participation of gthich an example is a new electricity plant at Ambato the state railways (92 million) etc
gj iiith only three years of disclosed deficit since 1938 See Table 12 in Statistical Appendix
2 Central Bank loans middotto Government less Govertllllent deposits in banks
- 35-
480 million sucres over the nine-year period 1939 to 1947 inelusivel
an average of 53 million sucres annually amplch averaging however con-
ceals very important differences between the three periods within the
nine years to tal
94 The table on the next page sumnari zes the factors causing in-
crease of domestic money supply It is computed by rearrangemm t of the
balance sheets of the Central Bank all commercial banks and all developshy
ment banks and is thus a table shoring changes in items in a rearranged
aggregate balance sheet of the Ecuadorian banking system
95bull The first t70 periods 1939-1943 end l943-l946f were both
periods of heavy inflation_ During the first five years notes in cir
culation and monetary deposits increased 3437 million sucres (or 255 per
cent) and in the next three )eera 2904 million sucres (or 61 per cent)
But the causal structure was quite different in the two periods
96 In the first inflation was almost wholly induced by external
factors (favorable balance of paYments causing increase of foreign exshy
change holdings) the major domestic factor being expansion of commercial
bank loans and investments in this period deficit Government finance
was not a causal factor
97 In the next three-year period 1943-1946 however the major
inflationary factors change deficit Government finance and expansi on of
f As calculated by IBRD Mission loans to Government including ali loans to official agencies A recent calculation by the IMF Research Departshyment covering Government operations only places the aggregate 9 years deficit at 345 million sucres~ See Table 12 in Statistical Appendix
- 36-
BANKING CHANGES ~0015 SucresJ
Jan 1939 Jan 1944 Jan 1947 Jan 1948 to to to tomiddot
Dec 1943 Dec 1946 nee 1947 June 19h8 t~ ~arsJ ~~ iears) trmiddot ~~r1 t~ mo~~h~2
Central rcrk loans tomiddotc~vt~ f 16174 f 160260 - 701p88 23695 Central B~r~ Loans to Public -1 6978 2_283 1- 67548 1- 39763 Commercial Bank Loans and
Investments J 187554 f 14624 88h4 1- 2~ ~49 Development Baru Loans and
J 14227 136818 ~ 644 1- 26090 Investments
1 224933 f 313985 11)40 1- 68107 Net Bank Foreign Exchange 260774 f 94662 - 53203 - u6 112
7 485707 7 408647 I
7 bull - 64543 21395
Notes in Circulation f 16o907 1-131729 - 23205 - 17290 Public Monetary Deposits -A 162868 1- 128914 - 68734 1- 19620 Government Deposits f 19968middot 29768 9050 2366
7 343743 7 290411 82889 - 36 Public Time Deposits 116834 ~ 42053 1~004 f 317j
y 7 46o517 7 3J2464 83893 ~ -- 3137
Absorbed by Banking System 1- 25130 middot~ 76183 1- 19350 18258 7 485707
11 f 4o8647 64543 I - 7 21395
Net Government Borrowing J 131492 from Banks 3794 - 79738 - 32745
Deposits in Central Bank in foreign money (not included above ex pressed in Sucres
Government ~ 4486 - 633 871 - 11059 Public 25242 J 78964 - 78814 J 4h97
T29J 728 7 I
7 IIIII middot~~ ~ I
78331 79685 31+38
y Made urt as Io11mlfs
Cas~ bullbullbullbullbullbullbullbullbullbullbullbullbullbull ~ bullbullbullbullbullbullbullbull - bullbullbullbull J 266 1- 367 - 22~7 99 Other assets less other liabilities~ ~ 4 330 ~ 293 ~ 18~8 Capital and Reserves~- bull bullbullbullbull 4 bullbull 52 bull 1 1- 79-9 26 o 278
7 I
7 7 I
7 bull Ill ri bullbullbull
251 762 194 18)
Subtract increase
37-
Davelopment Bank lending dominE)te the position Expansion of commercial
bank lending is relatively negligible while a comparatively small role is
played by balance of payment influences
98 From the end of 1946 the general financial situation deterior-ated
rapidly in five months from January 1947 to ~~ay 1947 net foreign exshy
change reserves of the Centrel Bank fell 935 million sucres or 7 7 mil-
lion dollars to a level of 2927 million sucres or 21 7 million dolJars
In litaY 1947 an IMF Mission arrived in Ecuador (at the request of the
Government) and in June 1947 a multiple exchange rate system with import
classification was introduced upon the advice and with the concurrence of
the Fund Operation of this system Jielded considerable profit n in
sucres it is in effect a new imposition of import taxes and such
11profits 11 are in reality additional fiscal revenueY It was of the
essence of the Emd s attitude in Ecnador that the exchange difficulties
bad arisen through domestic inflation and that these addi tiona reve-
nues should therefore be applied only in reduction of Government debt to
the Central Bank
99 The effect of such policy is clearly seen in the third column
of the table Inflation is checked notes in cirmlation and monetary
deposits falling 929 million sucres (or 11-per cent) i~ one year Alshy
thoUtgb however Central Bank loans to Government (and also colllWrci al
jJ At this point only the domestic aspects of this measure are emphashysized In a later section the external or balance of ~ent aspects will be taken up
Y Such revenue from exchange taxes yielded 975 million sucres in 1947 bull md in July 1948 was running at g to 10 jllillion sucres a month this revenue is not of course taken into the budgets bull
- 38 -
bank loans and investments) fell the actual deflation _was largely
caused through loss of foJeign exchange rather than over~all reduction
of domestic bank lending For in response to vigorous ~oilplaints of
credit shortage the Central Bank greatly increased its loans to the
public almost fully offsetting reduction of its loans to Government
In the first six months of 1948 there was no significant contraction
of money supply banking loans to the public eJggtanding to offset the
deflationary effects af an adverse balance of payments and of Government
debt reduction
100 The exchange surcharge multiple rate system was in operation
through August 1948 proceeds being devoted to reduction of Government
debt to the Central Bank~ But there has bean concern lest the resulting
deflation of domestic money supply would be too severe and the Central
Bank has in fact adopted a compensatory policy to prevent further reducshy
tion through continuing to expand lending to the public arid through
quasi-open-market pur~e of mortgage bonds to the amount of 17 million
sucres by July 10 19l8 when further purchases were discontinued
101 To avoid the netcessity for such compensatory policy the Cen-
tral Bank proposed to the Government that the destination of reveme from
exchange taxes should be changed Instead of being applied in reduction
of debt the proposal was that they should be useci instead to create a
development fund tt to be administered by the Cent~al Bank unless a
planned Development Institute or other competent authority is estabshy
lished In mid-September the Fund appro ved such cllanged dest ination of
these revenues 90 per cent of which will in future be applied in finance
of development and 10 per cent in stabilization of Government bond prices
-39-
This removes a check upon inflation which has operated for some fifteen
months unless Central and commercial bank lending policies recognize
this changed situation further inflation may follow even if the Budgetary
accounts run no deficit
102 At the same time this change does provide a source of local
currency finance for development projects
-40-
IX INTERNATIONAL TRAIE AND THE BALANCE OF PADlENTS
103 Ecuador exports agricultural products (rice cacao coffee
tropical fruits balsa wood) mineral products (crude petrolelUil gold
silver copper and lead) and handicraft products (panama hats)Y
lo4 Approximately one trird of Ecuadorian exports (including
minerals) go to the United States The proportion rose during the war
due to VmiddotIar-time demand for strategic raw materials but is now tending
to revert to pre-war levels Loss of European markets has been partly
compensated by gain of n$w export markets at least for a time and
especially for rice Countries in the Far East whose rice production
fell during war such as the Philippines and in Latin America whose
Eastern sources of supply were cut off such as Cuba and Venezuela
have provided demand for Ecuadorian rice This outlet however may not
last much longer
105 On an average of years 1938 to 1943 about 15 per cent of
Ecuadorian imports are foodstuffs wheat and lard being the largest
items and 85 per cent are manufactured goods and equipment Import
of foodstuffs is however gro1ing t-vith population and in the key pro-
ducts of wheat and fats would be expected to grow still faster if
econowic development raises n~ss living standards witl10ut increasing
domestic output of these prodvcts For increased consumption of wheat
products and fats is in part the definition of rising living standards
for a very poor population
fJ See Table No13 in Statistical Appendix for composition of exports
-41-
106bull Before the war (average of the years 1937 to 1933 ) the Americas
supplied 49 per cent of Ecuadorian imports by value the United States
alone supplying 41 per cent Germany provided 22 per cent of total
imports and the United Kingdom only 8 per cent Europe as a whole supshy
plying 45 per cent
107 In 1946 and 1947 the Americas provided 86 per cent of total
imports the United States supplying 66 per cent EUrope as a source of
imports fell to 12 per cent although the United Kingdom maintained its
relative position (7 per cent) Whether the United Kingdom can expand
its provision of imports for Ecuador JDaY be domiddotubtful on the one hand
the loss of Germany as a supplier pzo vides an opportunity on the
other the competitive industrial position of the United States may make
it difficult for the United Kingdom to fill this gap
No balmce of payments estimates eJd st for Ecuador1
Growth
of foreign exchange holdings over the war period however indicates a
strongly favorable balmce ~let reserves which were equivalent to 409
million sucres in December 1939 rose to 3962 million sucres (294 milshy
lion dollars) in December 1946
109 Official purchases and sales of exchange are shown in the fol-
lowing table together with corresponding movements of exchange reserves
The difference betRSen the balance on official transactions and the moveshy
ment in reserves arises from transactions on the free market
110 During the war import and exchange controls were nominal
there being no shortage of dollars nor any decrease of exchange reserves
jJ Except for the ~eriod January to May 1948
-42-
Loss of exchange reserves in 1945 led to a tightening of control on an
allocation of quotas smong users of exchange Import permi ts were
granted on the basis of former imports by merchants At the end of
1946 controls were relaxed on an extensive list of imports items and
the consequent loss of exchange has led to difficultieQ
Ul Official Official Balance Changes in Purchases Sales on Net
Official International Trans- Reserves actions
(Millions of u S Dollars)
1942 257 185 t 72
1943 35-5 279 t 1middot5 t Ul
1944 423 34~4 t 79 f 88
1945 353 394 - 41 - 7-2
1946 471 415 f 56 t 1 9
1947 488 579 - 91 38
112 From December 1946 to IVtay 1947 net foreign exchalge reserves
fell US$ 77 million from US$ 294 million to US$ 217 million In May
1947 the advice of the International More tary Fund was sought with reshy
sults summarized as follows in a recent Fund documentY
The lfund 1 s Mission arrived in Ecuador in Yay 1947 It was not advisable at that time to contemplate devaluation which would have made the inflationary situation worse An emergency program was therefore proposed Essential and semi-essential imports were to be distic5~ished and a surcharge of 5 sucres p3r dollar imposed on the semi-essential group as a check against their excessive import New decrees including many of the recomshymendations were issued in June
The main features of the new system were as follows
Y Economic SuVey of Ecuador RD 672 - P 43-44
- 43-
(a) The elimination of all quantitative import export or exchan~ restrictions licenses and quotas with the exception of a few absolute prohibitions of some luxury imports
(b) The checldng of excessive import demand through a fiveshysucre (33 per cent) surcharge on non-essential imports
(c) The suspension of nearly all exchange sales for nonshytrade transactions and the creation of a free market bull narrowly limited in volume and comprising mostly all transactions that are uncontrollable in practice plus a snall amount of domestically produced gold
(d) Exchange for a small amount of the least essential goods was made available in the free market
(e) One of the basic aspects of this plan was the steriliz~ tion of all proceeds from the import surcharge which was placed in a fund for the extraordinary amortization of the government debt to the Central Bank Tnis is still in operation
The beneficial effects of these reforms were felt immediately In June the trade deficit ~as reduced to only $07 million and in July to $06 million By August for the first time in 3 monthsl there was a small surplus In September the deficit was smci l -j)O 5 million In October there was a surplus of $15 million and in November and December there were small deficits of only $01 million and $07 million respectively
In short the deficit for the year was about $99 million in its gross gold and foreign exchange reserves During the same period international liabilities of the Central Bank showed a reduction of about $6 million Therefore~ the net deficit was around $39 million 95 per cent being in the first half-yeer and before advice had been received from the Fundrs Mission
113 It should be emphasized that this multiple-rate system of
exchange control is entirely freed cpentitative controls Excessive
import demand is checked by the higher rates upon imports deemed non-
essential the list of which is knollD and published Anyone presenting
sucres is provided with exchange at the appropriate rate upon list A and
B goods and the free rate is influenced by occasional releases of offi-
cial exchange into the free market The system that is utilizes the
inter-play of the price mechanism rather than the bWlilmlcracy of quanti-
tive controls or quotas
- u4-
114 Loss of exchange continues however despite considerable reduc-
tion of imports Gross international reserves declined US$ 18 million
and net reserves US$ 35 million in the first six months of 1948 Offishy
cial transactions January to June 1948 are surmrarized in the following
table~
Receipts From Exports From other Transactions (1)
Total
Payments For Imports For other Transactions
Total
Balance Change in Gross Reserves
1947 Jan to June
1948 Jan to June
(Millions of Dollnrs)
163 5 6
167 44
219 211
289 219 23 10
312 22 9
- 93 - 18
(l) Includes purchases of domestically produced gold deposits received in foreign currencies and borrowing from corres~ pondents abroad
115 Prospects for the remainder of the year moreover are not goo~
It is estimated that loss of international reserves over the whole year
may be aboat US$ 6 million Whether the deficit is in this region de-
pends largely upon actual export realizations for the remainder of the
year lhe most critical here is rice 11hose ygtrice is falling and the
crops accumulating in the rice millsplusmn Latest information is that
f Countries receiving allocations of Ecuadorian rice under International Emergency Food Council allocations have been requesting a change in source of supply owing to shortage of doJJers Thus France has asked for 6000 tons of rice from Indo-China instead of ~cuador and Greece for 2000 tons from kVPt in place of Ecuador as supplier A recent favorable sale of rice-to Haiti has somewhat improvea the cuITent position
-45-
plantings for the October crop are substantially reduced Wet weather bas
led to some loss of the cacao crop Receipts from exports in the follow-shy
ing official exchange budget may therefore have to be modified down- [l
ward on any pxuient calculation-
116 ~or Recei1ts and Sales of Foreign hchange
(Thousands of U S Iollars)
1948 1947 Estimated Actual
BECEIPTS
Worts Rice 13~ la4~ Cacao 11 l 2 Other products 10700 12371
Total Exports 354oo 42120
Foreign companies 5300 4842 Others 800 1883
41500 48845
SALES
Imports 44800 53499
Services 3200 4470
4B ooo 57969
117 In this situation of continuing presSlre one step has been
tken and others are under consideration The one taken relates to offishy
cial imports representing an average pf 20 per cent of total imports
Importation of cigarettes liquor matches and other things by the State
tionopolies is especiallyen significant These were formerly provided with
exchange tax-freebull ie at the ~owest rate of 1350 From July 26 they
afe required to pay the ordinary import rate of 15o4 on sll supplies for
J See note on page 47 -A
- 46-
their ovm use (such as office supplies) and the same rates as private
importers (ie 15o4 or 20o4) on all imports to be sold to the public
(such as wheat flour fats cigarettes etc) accord~ng to the classifi-
cation of the goods
118 Remaining possibilities seem to be a partial reclassification
of imports removing items from List A as essentials to List B as se~ishy
lwruriesY and or a chenge of nominal exchange parity vri th or mithout
a narrowing of the spread between the rates Here pressure from
exporters particularly from rice exporters may be hee~vily in favor of
an increase of the dollar buying rate with consequential changes of
selling rates
119 The present loss of foreign exchange is occurring ~rithout any
service being met upon defaulted foreign debt although service of Ex-Im
Bank loans is being made If it be assumed for purposes of calculation
that Ecuador reaches an agreed settlement identical to the Chilean sershy
vice would require exchange equivalent to US$ 378000 in 1949 (of which
US$ 368000 would be required in dollars) and would rise to US$ 4o20CO
in 1954 Adding service upon Ex-Im Bank loans outstanding on June 30
1948 and other known but small indebtedness total debt service would
increase to US$ 1410000 in 1949 rise to a second maxilliUID of US$ 1394000
in 1951 and then progressively decline Upon the assumption thet amp-Im
Bank loans undisbursed on June 30 1948 are all fully drawn before their
maturity total debt service charges would be US$ 1533000 in 1949 rise
On August 21 a number of import items were changed from List A to List B the aggregate import value (when granted exchange at List A rate) affected being US$ 7 million
-47-
to US$ 213431000 in 1952 and again would progressively decline These
last service charges rould be for 1949 3 1 per cent of 1947 actual
official foreign exchange receipts and 3 bull 7 per cent of estimated 1948
receipts and for 1952 48 per cent and 56 per cent of 1947 actual
and 1948 estimated exchange receipts respectively
120 Estimating prospects from this point in time Ecuador does not
seem to be a country able to afford assumption of any great additional
burden of debt service payable in dollars The amount that could wi thbull
out hardship or distortion be squeezed out of the balance of payments
by no means corresponds to the development needs of the country Any
start must therefore be modest and cumulative rather than spectacular
and precarious and this conclusion fits with other controlling factors
in the over-all situation notably the supply of administrative techshy
nical and managerial abi li ty
- 47-A -
Note on Official Exchange Transactions
Official exchange transactions for the firstsix months of
1948 are given on page 44 of this report Results for the full year
are now available and reveal that earlier expectations regarding the
probable 1948 balance of payments deficit were unduly nessimistic
Cacao export values have been lar~er than expected and in the last
period of the year there IBre some unexpectecily favorable rice eA-port
sales total export receipts were US$ 8 million larger than forecast
on page 45 Imports were held close to forecast
Receipts
Exports Foreign Co~anies Other
Payments
Imports Foreign Comoanies Other
Balance
Change in Grass Reserves
Official Exchange Transactions (full year - n~illions of dollars)
1947 -421
L18 19
488
535 06 149
580
y does not agree because of rounding
January 26 1949
1948 -436 h2 7
i85
Lt52 2
28
-oJ
-48-
X EXTERiJAL DEBT BEoomJ
121 The position of public long-term external bonded (excluding
inter-governmental) indebtedness of Ecuador is as follows
Amount in Default AmoUpt Outstandi~ ~ e Interest D~te
~In currmc1 (u s (us of p~t Dollars) Dollars)
Dollar obligations Gueyaquil amp Qui to Ry) $ 1226)000 12263000
286000 12263000
286000 123147
63047 Sterling obligations Franc obligations ( Oie
b 71000
Francaise de Chemin de Fer 1 lquateur ) Fcs 8386000 70000 70000
12619000 l26l9000
middotmiddot Note The Government of Ecuador oyenms about 75 per cent of the
stock of the Guayaquil and 1uito Railway and guarm tees the bonds and certificates which are largely held in England The franc obligations of the Cie Francaise de Chemin de Fer 11lquateur are not included in the offi cial statement of the public debt nevertheless the Government does recognize some liability for them and during the last few years has engaged in Degotiations for their retirement
Inter-governmental Debtsmiddot
122 Debts to the United States Government are of three types
63047
first the loans by the Export-Import ~which were outstanding on
June 30 1948 in the amount of $7 705606~ second the aJIDunts duemiddot
because of purchases of surplus property totaled $484 567 on March 31
1948 and third the obligations arising out of the lend-lease settleshy
ment the amount of 1fhich is not available (Total lend-lease assistance
j This section of the Report was prepared by Mr Paul Dickens
to Ecuador amounted to $7 bull 795000 )
123 In addition Ecuador is indebted to the Government of Venezuela
in connection with the establishment of a joint shipping company Late
data are not available but as of February 1947 $500000 ($1000000
authorized) was outstanding the total to be repaid by 1966
Debt History
l2ij Upon partition of the old Republic of Colombia~ middotEcuador was
apportioned 215 per cent of the original Colombian debt by the convershy
sion of l834a Between 1834 and 1854 no interest was paid The period
1855 to 1908 was marked by numerous adjustments and defaults
125 In 1898 the Guayaquil and Q]lito Railway Companyt s first mort-
gage 5 per cent loan of 1899 was issued It was expressed in dollars but
was in reality an English loan In 1908 a new (reemenJl was reachedbull
which was to be a final settlemet of all past disputes and controversies
between the Government and the Guayaquil end ~ito Railway Company and
the bondholders In 19~-10 the Government defaulted on the new agree-
ment In Novemberl9ll payments were resumed on the railway debt on)y
but a revolution caused a further suspension from December 1911 until
lfarch 1912 Subsequently service was partially resumed on the external
debt until July 1914
126 From August 1914 to July l9l8 no paYments were made on eny
foreign obligations except that service on the prior lien railway bonds
had been maintained up to and including the January 1915 coupon By
rf Negotiated settie~nt
-50-
1920 interest and sinking fund on the prior lien railway bonds had been
brought up to date but service on all other obligations ~ed in
arrears In 1926 interest on the salt loan of 1908 was brought up to
date but default took place on the coupon dueJam1ary 2 1927
127 The outstanding bonds of the prior lien issue were redeemed~~
January 1929 at VIhich time the January 1914 coupon was paid on the
5 per cent first mortgage bonds of 1897 In the case of the salt loan
of 1908 sinking fund was resumed in July 1928 and interest was paid
to Jazruary 1929 inclusive None thereafter Sums due from July 2 19C3
to January 2 1931 inclusive deposited with Central Bank in sucres
were used for governmental purposes after December 1931 No payments
were made after January 1929 on the external debt of Ecuador
128 Up to the end of 1948 no acceptable arrangement had been pro-
posed by the Ecuadorian Government for the resumption of interest and
sinking fund payments on external loans
-51-middot
XI bull POLITICAL
129bull Recent political history in Ecuador has been turbulent
although contest fo~ power at the top has not greatly affected the
bulk of the population Suffrage extends to all literate citizens 1
over twenty-one years of aee-but the requirement of literacy effect-
ively excludes the Indian bull T)tal votes cast in the recent Presidential
elections were 289164 from a total Population of some 35 million
130middot On May 28 1944 a few days prior to a scheduled ceneral
election an uprising occurred and Dr Jose Haria Velasco Ibarra
assumed office as President Dr Velasco had been President before
but following a coup dletat in August 1935 after he had been in
Presidential office less than a year he fled to Colombia and re-
mained in exile for several years On July 23 191-4 general elections
for a Constitutional Assembly to draft a new Constitution were held
Installed on August 10 the first Act of the new Assembl3r which was
predominantly Conservative was to confirm the legality of Dr
Velascos assumntion of the Presidency
131 On June 30 1946 new elections to the ronstitutional
Assembly middotwere held The only party particiJatine in these elections
was the Conservative The Liberals R~dicals Socialists and Commu-
nists abstained on the crounds that President Velasco did not offer
them sufficient guarantees On Aucust 3 1946 there vrere a number
of arrests following an abortive uprising and on Aueust 11 the Con-
stitutional Assembly re-elected Dr Velasco to the Presidency (by 43
to 10) for a term of office to last to September 1 1948
12bull Being compUisory for men voluntary for woraen -
132bull A new Constitution was promulgated in January 1947
133middot On August 23 194 7 a bloodless coup detat led by Colonel
Carlos Iancheno Minister of Defense in Dr Velascos Cabinet deposed
rresident Velasco who fled the country to Colombia for the second timebull
Next day Colonel Mancheno proclaimed himself Acting President and
formed a five-man Socialist-Liberal Cabinet despite the absolute
Conservative majority in the Assembly A week later however on
August 31 a counter-revolutionary military movemont broke out in the
north and the counter-revolutionaries captured Quito on September 2
134middot Colonel llancheno resigned the ActinG Presidency and dis
appeared the sa1ne day Dr Suarez Veintimilla who had been Vice
President under Dr Velasco and the former conservative Uinister
resumed control of the GoverPment Next day September 3 a Council
of State in Quito declared that Dr Velasco had by abandoning his
post terminated his functions as Chief of the State Dr Velasco
howeverJ vrho middotwas by this time in the Argentine declared that his
remo~al to Colombia had been forced and announced his intention of
returning to Ecuador to resume office
1~ On Seytember 15 1947 a Secial session of the Zcuadorian
Concress accepted the resignation of Dr Veintimilla and elected
Senor Carlos Julios Arosernena head of the Banco Ce Descuento at
Gua~raquil and a non-party man as Vice President with novers as
Acting President until September 1 1~48 Senor Arosemena formed a
mainly Liberal Cabinet with one representative each of the Consershy
vatives and the Socialists Coneress also ~onfinned the Council of
State 1 s view that Dr Velasco had forfeited the Presidency by abandoning
his postbull
136 On June 6 1948 Presidential elections were held The
three parties represented vere the Conservatives (Dr Manuel Elicio
Flor Torreo) the Liberals (Galo Plaza Lasso) and the Radical (Genera1
Alberto Enriques Gallo) Final results were announced as
Plaza 115835
Flor 112052
Enriques 53601
Invalid 27 676 289164
137 bull Doubt persisted until this month (August) as to who would
receive the election The Electoral College had been invalidating
votes on technical Grounds and as interim returns and invalidities
were announced it was noticed that the majority of the latter were
being deducted from the Plazavote After conferences the Electoral
College revalidated all votes and conducted a re-scrutiny on less
strict basis Senor Plaza has been declared to be the rfjSident-Elect
by the Ecuadorian Coneress and assumed power September 1 1948 The
middotpresidential term of office is four years
The Vice Presidential results were
Conservative 1anuel Sotomayor y Luna llu008
Liberal Dr Abel Gilbert 113213
Radical Dr Cueva Tamarz 5h07h 28129gt
139 Senor Plaza was born in Nmv York USA forty-two years
ago his fatter the late General Leonidas Plaz~ was President of
Ecuador in 1901-05 and 1912-16 middotSenor Plaz who had been taken to
Ecuador as an infant accomnanied his father in exile to the United
States and attended the University of California the University of
Maryland and the Georgetown School of Foreign Service in ~7ashington
l4o Senor Plaza returned to Ecuador in 1930 and for the next
fourteen years operated the family estates there reclaiming them from
virtual bankru~tcymiddot to prosperous and efficient state He has for
example been active in encouraging the breeding of new cattle strains
is President of the Ecuadorian Holstein-Friesian Association and oper-
ates a butter factory on his estates with a Danish ~anarer He was
ar Minister from 1938-40 and Ambassador to Cashington from 19h4-46
l In executing any policies he will of course be handishyt4
capped by the lack of a fully efficient Civil Service The position
in Ecuador is the same as that in othelmiddot Latin American countries
that the Civil Service is naid on low salary sca1e and lacks compe-
tent administrators Such lack is an aspect of the general shortage
of technical ability in the country
TABLE
1
2 bull
3 bull
4
middot 6
7 bull
8
9
10
11
lZ
13
14 bull
15
16
17
18
19
20
ECUADOR
STATISTICAL APPENDIX
Oil Production and Exports
Cement Production and Imports
Yfueat Production and Imports
Rice Production and Exports
Rice Exports by Destination
Cacao Production and Exports
Coffee Production and Exports
Cotton Tobacco amp Sugar Production amp Sugar Imports
State Railwaysmiddot Lines amp Rolling Stock
State Railways Merchandise Hauled
Population and Roads by Provinces
Budgetary Receipts and Expenditures
Exports of Principal Commodities Volume amp Value
Imports Classified by Groups Value
Exports by Destination Value
Imports by Source Value
Balance of Trade by Major Regions
Exehanee Reserves and Banking Position
Price middotIndices
Status of Ex-Im Ballilt Loans
ECUAIOR Table 1
Oil Production and Expomiddotrts
(thousands of American gallons)
Crude ou Gasoline Produced EJtported bullRefined middotproduced
1938 94586 78696 15500 41654
1939 97125 68819 17679 bull 141
194o 98654 70~99 23001 6162
1941 65382 38362 25914 6462
1942 95671 68516 29489 72l7
1943 97211 65003 34635 8076
1944 121469 82520 38083 8927
1945 109855 73897 38752 10059
1946 979+7 52412 45213 12271
1947 99140 39359 53949 16587
Source J3o1etin Banco Central del Ecuador
ECUADOR Table No 2
1929
1937
1938
1939
1940
1941
1942
1943
1944
1945
1946
1947
1948
l First six months
CEMEHT PRODUOTIOllT AliD IMlORlS (metric tons)
Production Imports
17782
15699 10082
14254 13373
14249 12013
16512 10935
17213 2_846
19802 so98
2756o 933
34691 1590
37504 953
38496 3114
33231 14941
20484JJ
Sources Production Eoletin Banco Central del Ecuador Trade Ministerio deEconomia
Total
25781
27627
26262
27447
20059
24900
28793
36281
38458
41610
ECUAJX)R Table J
Wheat and Wheat Flour Production and Irraquorts
(thousands of kilos)
Wheat
Production Imports Exports Consumption
194o 28120 bull 73 28o47 1941 24578 36 24542
1942 24265 bull 76 24189
1943 22034 22034
1944 23251 912 24175 1945 23115 2733 180 25667
1946 25852 4532 23 30361
1947 2lo66 494f)J 11
Vfueat Flour
1938 10743 9981 na
1939 7864 16638 na
1940 7996 8-592 275 16312
1941 7225 11823 286 18762
1942 7 161 23497 161 30498
1943 7461 9862 17322
1944 5216 24023 29239
1945 5174 25137 30311
1946 7~38 11313 g 18813
1947 5943 1886) 4Y
Less than 500 kilos Y First 6 months
Sources Ecuador en Cifres a~d Ministerio de Economia
~emiddot 1926-30
1931
1932
1933
1934
1935
1936
1937
1938
1939
1940 -middotmiddotmiddot
1941 ~ )~ (1
1942
1943
1944
1945
1946
1947
1948
~iiampn-sect00-lfmiddotks
-~Jrst~middot-nsmcnths
gJ Provisional
(B EQUOR
RI03 PRODUCTION ApoundP ~OR~S
Vo1wnfJ Production middot E~orts
(metric tons)
26)04
23584
29863
39270
39008
31699
39036
52136
44027
40144 ltit middotmiddot~ 0 56596
5873
100949
ao6o7
53168
102048
112711
047
8255
3842
6449
5282
22907
8734
12)3
2ooso
962
18343 t - ~ J
20546
32028
46992
64604
29318
66918
6~209fl middot tloo 1
$ bull
tt ( r t
z
Value 3xoorts
(thousand sucres)
1881
936
6667
10864
6555
14632 pound 170
23265
51460
93837
127105
60395
203243
2rfjuft
Sources Production Boletin Banco Central del 39uador~ Trade Ministerio de Econom1a~ ~r- ~fl ]r bull ~-middotmiddotmiddotmiddot f ~~middot~---i
Average Destination 1937-41
Cuba 2
Peru 13
Venezuela 6
Colombia 4
Panama 2
Jamaica 0
Philippines 0
India 0
Dominican Republic 0
Other Countries 4
TOTALS 31
Preliminary~
RIQ] EXlORTS (in million po~ds)
1943 1944 1945
81 88 5S
20 29 0
0 17 4
~ 0
Rf 2 hi 0 0 0
0 0 0
0 0 0
0 0 0
bullbull ~ 6 6
105 142 6S
R Less than )OOOOOpounds
Table No 5
1946 ~ Jan to~
1~ June-194
46 12 24
0 0 s 17 49 )j
2 13 2
5 4 1
16 1 0
20 0 0middot
0 38 0
0
1 f4~ 2
r middot I
130 13 34
sf Ineludes 6 million pounds to Mexico and 5 million tmiddoto Greece bull middot
1[0
supound~sect8_ Foreigl Crops and Markets Offiee of Foreign Agrtcultural Relations u bull Sll~artment of Agriculture May 3l 1948 bull p bull 402 First six months of 1948 from ibid August 16 1948 p bull 120
Average 191i-15
191620
l921-25
1926-30
1931-35
193640
1940
i941
1942
1943
1944
1945
1946
1947
tf I
ECUADOR
Cacao Production and ~orts
Volume
Estimated Production ~rts
(metric tons)
n (
12108
15middot330
14652
19030
15058
17759
17689
19459
4o625
43547
36825
21319
15980
174o4
11208
14433
13762
18161
13735
16827
16526
Exports ( 000 sucres)
186o9
26073
26746
27531
16647
37424
29354
34365
40327
51794
41985
53547
74935
188208
middot)(et) middot( middot
Sourcesmiddot Estimated production Ministerio de Economia E~orts to 193~ Estadisticas de las Exportaciones del
Ecuador 1940-1942 subsequently El Trimestie Estadistico del Ecuador Number 1
1 ~ Mini sterio de Economia -bull gt(
111 t bull r r (o J bull bullbullbull 1) ( bull
ECUADOR
Coffee Production and Exports
Volume Estimated Production EXports
(Metric TohS)
1921-25 average 5147
1926-30 II 7571
193D-35 10047
1936-40 II 13811
1940 16158 14571
1941 14260 11847
1942 9016 6140
1943 14144 12340
1944 16598 14458
1945 12999 10737
1946 9948 7636
1947 12522 8970
Table 7
Value
Exports 000 Sucres)
59~9
11530
10945
18546
16J83
23827
17278
33176
35626
33863
34839
43524
Source Estimated production - Ministerio de Economia
Exports t~ 1936-40 - Estadisticas de las Exportaciones del
Ecuador 1940-1942 - subsequently El
Tremestre Estadistico del Ecuador Number 1
and Ministerio de Economia
YEAR
1937
1938
1939
1940
1941
1942
1943
1944
1945
1946
1947
ECUADOR
Production of Cotton Tobacco amp Sugar amp Sugar Imports (000 Kilos)
Raw Cotton
9237
7213
7172
8165
PRODUCTION
Tobacco
1519
1106
1875
1028
1359
Sugar
17528
22950
26950
27835
30421
27858
26799
23151
32474
33544
33480
Table B
IMPORTS
Sugar
5310
11068
12387
38
6
33
184
784
21455
3060
Sources Production of Cotton and Tobacco Ecuador en Cifres 1942
Sugar Production and Imports Ministerio de Economia
ECUAOOR Table 9
State Railways
Length Locomotives Rolling Stock (Number)
(Kilometers) (number) 1relght Passenger
Gueyaquil-Qpito 452 39 319 41
Guayenaquil-SalinaJ 150 6 22 24
-~i to-CarcbiY 222 6 23 22
Bahia-Chone 78 3 12 g
Sibambo-Azogues 117 3 6 ll
Puerto Bolivar-Piedras 155l 7 21 10
Puerto Bolivar-Pasaje 55
1199 64 4oy llG
Narrow-gauge line
gj On uncompleted line ~ito-Esmeraldas
21 Of which 4 are rail-cars
jj Of Vihich 61 are rail-cars
Source lviinisteria de Economia
1938
1939
194ltgt
1941
1942
1943
1944
1945
1946
+947
ECUAOOR
Railway Transport
(thousands of metric tons)
Products
Agricultural Animal Mineral Forest Manufactures
1639 19 3 160 122 1034
1318 143 172 138 961middot
1714 144 233 219 1472
1613 184 277 209 1543
1809 224 280 272 1631
1841 280 35a4 376 193-3
2011 250 263 299 C5J7 3
1888 29-5 350 238 2234
1941 29-9 46 bull 4 258 2170
1787 299 51 0 180 2085
Source l3oletin Banco Ce~~nu del Ecuador
Table 10
Others Total
58 3205
58 279l
298 4oso
289 4115
328 4543
384 5168
352 5248
292 5296
37middot7 5508
419 5279
Table 11
Population and Boads
Poeation Roads (Kilometers) Province Jan 1 1948 Main Secondary In Construction
Care hi 86663 1744 1191 1050
Imbabura 158896 1818 2100 1810
Finchincha 350149 4)13 3703 670
Cotopaxi 215232 642 4o6o 970
Tungurahua 222963 2290 1810 300
Chimborazo 29864o 1664 3316 2740
Bolivar 121653 1877 1294 2045
Canar 133971 580 580 1300
AZUaY 284982 1053 2190 630
Loja 238705 1140 4s6o 1430
El Oro 93752 1005 2378 650
Quay as 482843 3900 3367 3700
Los Rios 148428 933 4632 1050
Manabi 381538 3627 1lo61 1970
Esmeraldas 664o5 50 19 0 2840
Frov Orientales 181071
465891 26636 46732 2t3l5bull5
Source Direccion General de Estadistica y Censos
1938
1939
1940
1941
1942
1943
1944
1945
1946
1947
Source
r
Table No 12 ECUADOR
DISOLOS3D BUDGETARY R303IFTS AlfD EXP3NpiTURES
(Total of ordinary and extra-ordinary budgets and special accounts)
thousand of sucres)
Total Receipts
1323204
131699 6
1262710
1547624
1667455
2112614
3145318
4051038
5367822
6696647 11 ~I JJ( middot
Total Expenditures
1429134
1267687
123135middot0
1586615
1489251
2101429
3031038
4174550
5352394
6593858 bull I
aoletin Banco Central del Ecuador
-middot middotmiddot
Diff~reuce
106830
j 49309
f 1360
- 38991
f 178204
j ltll8-5
f 114280
12351middot2
+ 15428
j 10278bull9 r 7
l I 1
L
ECUAOOR EXPORTS OF PRINCIPAL COMMODITIES 1937-47 Table 13
VOLUME (thousand metric tons)
1937 i98 1939 194o 1941 1942 1943 1944 1945 1946 194711
12 200 96 183 20 bull 5 320 47~0 646 293 669 66) 218 191 153 112 144 138 182 137 168 16 bull 5 203 14~ iJI 137 129 146 118 61 123 14 bull 5 107 76 90 48 55~5 53middot3 472 34 bull 2 226 158 1)9 178 35middot511 72 bull 5 345 19~2 251 183 14bull4 13 2 112 103 12~0 132 121 1-4 16 16 15 18 30 22 28 2~0 13 01 14 1middotmiddot9 2~2 21 47 90 136 93 74 28 na
~gt i824) (1387) (944) (1036) (1981) (2516) ( 2756) (4373) (4462) (4947) _01 2849 2454 2274 2201 1201 2167 2062 2513 2446 1640 1358
Ltrates 7~3 140 76 so 3~3 )9 26 10
VALUE (thousand sucres)
610 10864 6555 14632 23265 51460 93837 127105 60395 203242 201111 49985 39bull276 37bull033 29354 34364 40)26 51794 4lt985 53547 74935 188208 24613 16703 15227 16)84 23827 17278 33176 35~26 33863 4839 43 bull 524 5bull691 7558 7t006 6448 4658 _J 107 2159 1898 2872 738~- 24355
18242 7~146 9605 86o6 6120 201 6274 6209 9264 1)02 14994 4048 4300 4298 3~866 6979 35481 23316 38043 26553 15111 979 lt363 2~134 2724 3168 8450 25613 43419 31877 18 bull 509 7125 na 8048 6 234 4981 6509 16231 22121 25191 69033 69J87 81962 4662
21989 26374 25020 24862 13425 24820 23796 28788 28107 18253 15902 trates 10165 16090 13134 38609 27208 29013 18075 809 ates 18682 35297 41204 39907 29426 25374 27476 26457 15482 24858 25334
10774 13210 13495 3 950 16869 32775 2L068 32402 30902 38326 n bull a_
164_045 169096 167148 167851 199704 298690 393115 466631 377894 537131 619859 tmiddotbull bull
Note Dash (---) signifies zero or less than 50 metric tons nly or ~00 sucres ata expressed in quantities other than weight Sourcis 193 data from unpubli~hed Zcuadorian trado stati~tics
at US Department of Commerce 1938 nnd 1939 from partment of Commerce official data Direccion Nacional de Estadistica Eruad6r en Cifras ~7 from Banco Central Boletin 1940 and subsequont ~ears from Banco Centrll jto~n sterio de Economia and from M1nister1o c Economia data furn she
Mission July 1948
~ tobacco tone JgS
articles
11res ilk
al
value of Imports by Groups 1937-Lt-5 Volume and middot~alue of Selected Individual Imports 1937-46
(Value in thousand Sucre~)
1~37 1~38 1~39 1940 1941 ~942
19~731 20~ 375 24~874 16~)65 19043 37~540 5127 7194 1958 6~4e8 5t298 8 118
12888 13Jl5 14522 17702 19556 25~152 21627 25~272 21455 28532 21619 18923 20649 21~593 25559 29437 22636 19~$13 13~505 11961 12~654 15~976 15667 18899 5~829 7 bull 524 6066 9385 833 14353
22912 )0868 24~75 27 t 750 25993 42~916 9376 1028 10038 12118 11345 13932
-bull
131643 148320 1486o 173753 149499 199715 (Volume in thousand metric tons) (Value in thous~tnd sucres)
5middot3 111 124 194 5 bull 534 6385 26 4 24
os 246 -
122 ioo i66 86 118 235 8255 6)88 7449 5076 013 14609
19 07 11 11 14 29 2187 1824 2695 294-3 29J9 8182
101 i4 i2o i09 28 51 804 llJ)6 1667 1546 577 866
~ hides amp skins amp manufactures amp miScellaneous
~~43 1944 1945
33270 70915 82984 6717 8)69 904)
31~700 43196 32~830 17073 53~400 JBoo6 15447 32~624 38797 14~88 18~388 22895 14116 11a99 9812
68928 n~l79 69-113 15856 19186 20042
217983 33ltl56 323524
78 middot 0 2 215 130 12622
09 27 775 2290
99 240 bull 25~1 337 24070 26388
23 46 67 8853 146)1 21699
09 16 10 321 349 246
~s zero or less than 50 metric tons -middotNote Columns may not ahmys add to totals because of rounding Denartment of Commerce official sources - 19)8-42 Direccion Nacional de Estadistica Ecuador en Cifras [inisterio de Economia El Trimestre Estadistico del Ecuador
1946
)1 8135
4 bull 5 )842
114 13123
46 22709
)1 639
ECUAOOR Exports by Countries 197-47 (Value in thousand sucres) Table - 15
1937 1938 1939 1940 1941 1942 1943 1944 1945 1946 1947 --middot-------middot
80458 lt2865 116t-J78 150055 196953 293081 386483 46lt-909 372~549 463~378 sa4~68J 54422 63418 8)254 1t0496 145 bull 558 168585 2)9238 267105 218018 227291 262887
26 20 65 17 2228 78 124 7)41 17173 630 610 949 1281 1055 1)98 5~526 25686 78523 85382 61478 75890 23481
2899 4955 2109 3568 162 1163 4J54 2526 4197 44~ 1450 5027 6335 4972 5i92 5285 7425 4546 7379 10286 9798 15537
1 5 5 17 57 13 291 54 444 574 6996 8 662 9188 8714 13bull764 7238 15316 13900 11223 6~07l 14503 11717 2908 12544 5 730 7896 3767 21215 22608 29233 4243 6703 7965
51 15 24 8 532 3620 1603 539 2336 11579 3749 80 207 862 4070 9991 17096 1275 17~428 6~973 27431 80541
1943 2135 5229 6039 1965 5435 3021 4827 15~702 25~137 51~854 middot 667 740 991 zo83 3358 11412 4286 4282 3~-970 13064 5~864
1799 419 2218 875 2865 12299 9644 14900 13714 9653 11655 J 89 82 2527 1247 964 326 )24 250 41141 2~985
1024 1514 1068 2205 7173 2650 2 744 8871 7694 J2 5811 17 39~ 77029 61869 43688 11945 1503 5550 6335 4108 4075 36783 61998
32) 6)3 1187 490 58 186 2164 4021 J217 35974 29595 11277 69 - 29 4411 7909 6156 3477 1183 5492 4876 26)8 359 1860 7~467
489 255 J2 100 280 1155 1239 1265 3827 3~961 20539 13t521 10802 2254 5 706 4177 6313 2bull610 3615 4251 -middot 2842 13546 lBi 1415 3 758 822 6 188 12962 3592 2531 412~ 162 7~ 10052
8643 1693 3bull521 3~400 2751 320 40 118 231 222 5404 J 4894
6337 4201 6548 5478 1175 5 45 40 1611 50950 6261 4132 5386 5452 117) -
~l - - 15 45988 5 middotmiddot 7S 8 5 25 567 92S 11
33 ~- 76 18 966 151 150 3419
38 29 858 2 45 78 467
(continuation on next naee) middot
~GUJLOR ~xnorts by Countries 1937-47 (falue in thousPnd sucres) T~ble-15 continued
middot-~--- -~-middotmiddot -middot _ middot-- ~~---~~- ---- -middot--~middot--------middot- -middotmiddotmiddot--middotmiddot--193 1938 1939 1940 1941 1942 1943 1944 1945 1946 1947 _I --middot -middot- ---~- ------ middot- bull middotmiddot-middot -
4 7 5 5 5 219 1087
218 153 529 368 73 49 297 569 1230 35140 789 28137
207 144 379 J68 73 49 297 559 1104 605 11 9 10 126 43
150 6355 plusmn
353 54045 169096 167148 167851 199704 298690 39J115 466631 377894 537131 619859
~S Columns may not always add to totals because of rounding
Dash (-) signifies zero or less than 500 sucres
Primarily Guadeloupe and Jamacia
Primarily British West Indies and Netherlands West Indies
Primarily Denmark Spain and Norway
Primarily Java
~ces 1937 and 1947 from unpublished Ecuadorian Trade Statistics at U s Department of Commerce
1938-46 from Ecuador Ministerio de Economia data furnished IBIID rassion July 1948
Imports by Countr~es 1937-1947 Table-H)
ECUAOOR
l937 1938 1939 1940 1941 1942 1943 1944 1945 1946 1947 I (()
Value in thousand sucres) ~ + -gt L520 63151 83984 115382 128423 186958 200061 311989 302~329 363403 517582 j
u t 2086 51311 71950 103214 110422 138729 103583 173776 178821 240233 429906 0
Q) f
811 674 551 2436 1815 3J258 2150 5265 6538 12178 20912 d S Ugt ro c 1 n 4 4144 3042 8 99 14 23 295 178 8~011 210 h middot-1
(- 0
186 324 237 957 2~991 8492 18~376 15~239 17232 10~574 3121 4 middot-2375 2310 1959 2476 3016 4735 7930 7~696 11~201 15~564 14755 sectwfi
middot-1 1 fli 4 6 343 1~823 3J064 4110 3~612 60J5 h 0H
2739 2109 3789 174 2352 7949 9~934 17845 23~ 616 1559t 18~727 ~rld ()
328 164 457 2498 612 733 10892 10902 20003 16684 11981 oc ampl+lll
mmiddota J63 1297 1161 -- - 2 23 115 1~128 1192 d+gt-
2464 507 500 1438 5565 20668 39979 46654 33684 33034 6~486 15~~ (()
na 1 311 2297 5515 130 bull-I m rl bull +gt
15 31 68 245 995 1516 2804 25326 6124 5956 3472 Oltll~
149 280 269 332 550 208 270 389 707 839 655 a~ sect (1) Cl 4-209 72986 ~ 38 09 1433J 9813 16276 15885 1721~9 45194 80928 ~-g 1701 35767 2 7 7 33 1202 67 47 61 19 2 El 0 0 eo g 3250 11462 8094 12980 10124 8108 13634 12513 11984 28392 40983 cent1-t+l~
1803 718 1687 otmiddot r-
4-114 6465 7339 630 475 34 22 2 66 889 7279 t -P () ~led
36o 4685 1573 7144 308 12 682 4824 rlltll ltDno
1~896 2550 1466 1624 64 1 58 5090 bull-1
fJ ~ ~ 1052 1489 794 945 293 224 5 21 1373 9062 9 703 P + na 868 881 423 10 1 8 223 135 r- 0) u
1 r=l middotr-l
1162 4823 1264 1675 877 1017 1~52 2380 3129 4~326 6851 () l=l rl
7274 3074 2609 3595 980 349 1041 905 599 1~543 3~134 cn~oo bull t
724 11939 8983 19951 6239 2281 1439 304 3882 5478 5736 op a cent1-t ~sect rl
173 302 262 238 -w 14 276 -rr 472 ---s9l ctillmgt
259 10949 7810 18190 4414 170 16 4 5 +gtUd ~-- ~
935 712 728 1278 1281 1715 1314 2685 3185 4465 3151 +gtP t-1
530 105 143 221 306 240 95 89 582 541 2089 ~ (f)
1l 21 12 80 1f 196 122 169 125 1J n ~-T~
0
109 218 lllL 250 m 46 sect2 12_ 28 119 112 I ~ --sB_l_ 0 ---- -
643 148315 147860 17353 149499 199715 21 ~ 983 331156 323524 414266 604479 ms may not a1ways add up to t ta1s because of rounding Dash (-) signifies zero or less than 500 sucres ~ country breakdown not given in source g) of which 591 from Syria 2Z3 from China 264 from Straits Settlements 1 Sumatra and 264 from Iran
YEAR
1937l
1938t
1939~ -
1940amp
194H
1942
Exports Imports Balance
Exports Imports Balance
Exports Imports Balance
Exports Imports Balance
Exp(rts Imports Balance
Exports Imports Balance
ECUAroR Balance of Trade by Area 1937-47 (thousand sucres)
fRlSTERN HEMISPHERE including Philinuines
United States Other Total Eurone
54~lt-22 26~036 80~-~-sa 77~029 52086 9~434 61520 64~209 2336 16602 18938 12820
63418 39447 102~865 61869 51311 11840 63151 72~986 12107 27~607 39714 -11117
83254 33124 116~378 43688 71950 12034 83984 54505 11304 21090 32394 -10817
100496 49559 15Cl055 11945 103214 12~ 168 115382 38~090 -2718 37391 34 673 -26145
145 bull 558 51395 196953 1503 110422 18001 128 423 14333 35136 33394 68530 -12830
168585 124~496 293081 5t550 138~729 48229 186958 9 813 29856 76267 106123 -4263
Table 17
Other Countries World Total
6~559 164045 5-912 131643
647 32405
4361 169~096 12~ 178 148315
- 7817 20781
7082 167148 9372 147860
-2290 19288
5851 167851 20281 173753
-14430 - 5902
1248 199704 6743 149499
-5495 50205
59 298690 2944 199715
-2885 98975
NOTE Areas may not always add to world t~tals because of rounding
Source 1937 and 1947 frlttm unuublished Ecuadorian Trade Statistics at US Department of Commerce 1938-46 frem Ecuador Ministerio de Economia data furnished Mission July 1948
(Table 17 continued on next page)
YEAR
12J Exports Imports Balance
1944 Exports Imports Balance
125 Exports Imports Balance
1946l) Expltgtrts Imports Balance
12Z= Exports Imports Balance
ECUADOR~ Balance of Trade by Area 1937-47 (thousand sucres)
WESTERN HEMISPHEL~ (including Phili~ines United States Other Total EuroQe
239238 147~245 386~483 6335 103583 96~478 200~061 16276 135655 50769 186422 -9~941
267105 194804 461909 4~108 173776 138213 311989 15~885 93329 56591 149920 -11779
218018 154~531 372549 4075 178821 123508 302)29 17159 39197 31023 70220 -13084
227291 264224 49J515 36783 240~233 123170 36J403 45~194 -12942 141054 128112 -8411
262887 241796 504683 61998 429906 8676 517582 80928
-167019 154120 -12899 -18930
1 Only year in which substantial Philippine trade
NOTE Areas may not always add to world total becasue of rounding
Table 17 (oonttnued)
Other Countries World Total
29 393115 1646 217983
-1)49 15132
614 466~631 3~282 331~156
-2668 135475
1270 377894 4035 323524
-2765 54)70
8~833 537131 5670 414266 3163 122865
53179 619859 5969 60449
47210 15380
Sources 1937 and 1947 from unpublished Ecuadorian Trade Statistics at us Department of Commerce 1938-46 from Ecuador Ministerio de Economia data furnished IBRD Mission July 1948
~ EXCHANGJ-tAL BANK
ECUADOR Exchange Reserves amp Banking Position (million sucres)
r 4 bull TIC CQEDITS OF CENTRAL BAl~K Domestic Govt Official Bus Other Credits
MOliEY SUPELY Current AC
JJj To()2f (4) Entities Indvls Total Banks of O~mtl Currencl Denosits l (6) (7) (8) (10) (5) Banks amp 11
Indvls (9)
16 10 26 51 1 116 62 64 48 26 7 40 73 4 129 74 66 3middot7 )9 7 29 66 4 144 73 71 37 29 8 24 62 4 159 78 73 56 26 8 22 55 5 183 8l 103 81 37 28 2 8 201) 120 119
152 37 21 22 79 9 255 169 17~ 26) 34 27 22 83 13 378 ZJa 26e )4 60 37 20 117 9 385 295 308 Z5 105 73 11 189 26 493 321 312 282 153 81 10 244 24 536 35middot~ 354 242 104 44 93 241 2 565 329 284
221 110 51 99 260 2 56 313 278 215 102 47 101 250 2 573 )06 294 225 97 45 95 237 2 585 299 299 219 100 44 98 242 1 591 307 297 214 98 35 111 244 4 6)4 315 295
)20 295
on of $12500CC beginning in December 1946 bull
ars
Ttttal (12)
127 14) 144 151 183 239 345 492 602 634 704 613
591 599 597 604 610 614
ge liabilitieS but including Stabilization Fund in 1945 and GolC CertificCt in 194) bull ial banks and fomento banks ial bc1nkst and fomento banks sits of commercial banks and time deposits of fomento banks
Table 18
Govl t Den sits ~L
(lJ)
6 23 12 27 7 28 8 31 6 32
middotmiddot 11 )6 16 57 27 71 41 74 63 98 59 90 66 77
71 8 75 76 6 75 81 75 81 72
72
1 1 Boletin - Superintendencia de Bancos Boletin - Unpublished data furnish~d MF bY Banco Central of Ecuador
Table 19 ECUADOR
Price Indices
WHOLESALE Rents Export Fooa in
YEAR Goods and Quito - Coal ~1) (2) (3)
1937 100
1938 83 100
1939 95 100 153
19h0 95 106 16h
1941 96 113 150
1942 114 146 172
1943 114 183 187
19h4 118 218 219
1945 133 266 254
1946 203 320 315
1947 297 364 516
19h8 (March) 294 379
(liay) 416
(July) 389
llame l~umbar
Republic of Ecuador
Status of u s Export-Import Bank Loans to ~cuador
Purpose
gs of Junemiddot10omiddotl9ltsect
Gross Authorized
Cancel- Net lations Authorized Repeid
Amount Amount Outstandin~ Undisbursed
6J048 6J048
( 262 )16
Haterials equip amp services $ 6480000 $20810 $6459170 $1279775 ~)5-l19middot395 _____ _
ibulliunicipali ty of iui to (Republic of Ecuador)
ibullIunicipali ty of Guayaquil (Republic of Ecuador)
Republic of Ec~ador
Republic of Ecuador
Ecuador DeveloPIlent Corp
Pan-American Highray (Cuenca-Loja)
Agricultural Research amp Experiments
Raihray Equipment
5000000
12JOOOO
50000 200000
)28 Haterials equip ~~ 4000000 services - ater 1middot1orks
)28 iltiaterials equip amp services - ~~rater orks 4000000
J4J Pan-American High1middotray (Guamote-Tambo)
432 uevedo-Hanta Hightmiddotray (additional credit)
1980000
220000
$19180000
Of tlhich $2500000 tts used on the Quevedo-Ibullianta HighTaY
4000000 28880
4000000 167
-1 t-9amphOOO- -7500
220000
6o6120 -h365000-middot
41592 575-t 2-41
-l-y5Q2- 500 44Gooo
220000
IBRD Statistics Sectio spte~ber 24 1948
~ pt WI
-6-
To tal Monthly Average Monthly Population Income Income per Fw~ly
Number of Amount t tount People (SUcres) (Sa~res)
Upper Cla~s 4oooo 133 28000000 144o 2300
Middle Class 96oooo 3200 96000000 4950 4 L ~ 00- middotJ~
Lower Class 2000000 6667 70000000 3610 140 -- -~
3000000 10000 194000000 10000 10000 yenSliP C_~ ~
Note At the ofDcial rat~ of 1350 suc~es to the US$ average monthly incomes per family are equivalent to approximately $2J7 $30 and $10 respectively
~ Uneven distribution of incoue is of course largely a conse-
quence of uneven distribution of property Some ideas of the distribution
of rural property is afforded by analysis of re~urns made in payment of
rural property tax Such tax was paid by only ll2l4o proprietors in 1944
whose holdings may be summarized as follows
Per cent of Value of Rural ProEerties Number of Proprietors
916 4o
29-33 llOO
3041 10400
2030 37200
1080 634oO
10000 112J4o
23 Such statistics do not of course carry one very far beyond
the general observation that income and wealth is very unevenly distributed
and that much is obvious from a little travel in the country But it should
-7-
be said that comparing observations in Ecuador vrith those made in Peru
and Bolivia Ecuador by subjective judgment compares very favorably with the
tvo latter The Ecuadorian Indian seems to be on a perceptibly higher stan-
dard of life both in the highlands and on the coast than the Indians seen
in Peru and Bolivia Vhile his land holding is small it yields somethi1e
he very freqjl ently possesses livestock such as pigs and chickens has cot-
ton clothing drying on a line a~d often cultivates flowers and keeps
pigeons By American standards he is undoubtedly on the poverty level by
Latin American standards he may be a little off it
24 At the other end of the scale the wealthy upper class are pro-
bably not as wealthy as the Peruvian upper clas~h and the Bolivian elite
in operating in poundcuadc~the upper class lacks the rich property of mines
Thus while income is of course unevenly distributed in Ecuador as else-
wnere the range between the wealthy and the InJian may well be less tban
elsewhere The line of income distribution is of aboat the same slope
but probably significantly srJOrterY
This conclusion cannot be demonstrated statistically It results from a 11feel 11 deri ved from personal observetions in the respective counshytries
-8-
III AGRICULTURAL lROIDCTION
25 Ecuadorian development is largely a matter of increasing the out-
put of and improving internal and external trade in agricultural products
There appears to be no enduring geographic or physical reason ~middotby this can
not be accomplished She possesses soils and climate ranging from the
tropical to the temperate soils which in some areas are very fertile and in
others are in danger of exhaustion To anticipate subsecpent conclusions
her problem of development through agricultural progress breaks doTltD into
separate aspects all involving improved technique
(a) increasing arable yields from areas already cultivated
(b) improving pastures and stock in grazing areas
(c) enlarging both arable and pastural areas (including irrigation)
(d) improving roads in rural areas
26 Achieving these objectives involves providing more adequate
domestic credit for short- medi~ and long-term agricultural requirements
27 In application however interpretation of these problems is very
different in the two occupied regions of the country the Sierra and the
Coastal Lovrlands no generalization can cover both
(a) TLe Sierra
28 The occupied inter-Andean valleys are a region of temperate
agriculture producing almost exclusively for local consumptionmiddot Their
pat tern of tilled fields grazing land trees and flowerJl is almost
Y Flowers bloom all year round The main tree is the eucalyptusmiddot introshyduced some 70 years ago end used for all purposes (~indbreaks fuel 1
and lumber) affording a striking example of the effect of introduction of one plant upon regional habitability-
-9-
Western liiuropean in appearance but not unfortunately in productivity
Agricultural Production of the Sierra
1939 194o 1941 1942 - -(Hundreds of pounds)
Theat 49QOOO 611300 534300 527499
Potatoes 1201000 1476400 1386120 1146000
Rye 72500 79900 159495 115000
Lentels 46000 424oO 37955 csooo Corn 816700 1349300 1308062 1315200
Barley 85)000 795700 903600 911000
Cotton 45000 42020
Kidney Beans 80000
29 In addition about 1000000 hectares (247 m~llion acres) are
devoted to pasture supporting epproximate1y 683000 cattle 145 million
sheEf 107000 STrrine and 320000 goats
30 Yields are low in all Sierrean agricultural activities the
standing VJheat and barley crops are so thin that the ground can be seen
through them Yet the greater part (some 6o per cent) of the people of
Ecuador live in the Sierra and population is increasing at about 2 per
cent per annum The effect upon land use under existing tecnniques is
clearly visible cultivated areas are being pushed higher and higner up
the hillsides (slopes of 30 to 40 degrees being used) and onto the
fJparamon the high plateau betvreen adjacent valleys at altitudes of
11000 feet and higher The result is a picturesque scene but one which
reveals a near Malthusian situation in the man-land ratio rbullrith static
-10-
technical practices It is a situation which cannot remain unchanged if
economic development is to occur in the region
31 There sean to be three possible lines of advance increase of
output from highland areas in present use the bringing into use of new
ground in the highlandsbull or a change to increasing reliance upon the outshy
put of non-highland areas
32 The third possibility is not one for the immediate future It
involves either large-scale migration from highland areas to lowland
regions or a large transport program linking highlands and lowlands
together with growth of non-~ricultural activities on the highlands to
provide a cash income with which to purchase 11 imported 11 foodstuffs This
second possibility may indeed be the trend of ultimate development but
offers no irmnediate easement Large-scale internal population movement
from highland to lowland is probably impossible since the Andean
Indian (of different stock to the coastal Indian) is fullf acclimatized
both mentally and physically to life at high and temperate altitudes and
little suited to life on tropical lowlands
33 The two remaining lines of advance would both seec to increase
highland agricultural output But there is an important difference beshy
tween increasing output from valley land in rr esent use and bringing new
and higher land into arable use The first is a complex problem suscepshy
tible only of relatively slow solution the second is seemingly simple
and capable of quick result yet basically less sound offering only
temporary improvement
34 The thurst onto higher ground is already evident and the area
-11-
taken in could probably be greatly enlarged by efficient use of tractors
and modern plows Such use of mechanical equipment would thus give quick
increase of agricultural output but it is very doubtful whether improveshy
ment induced by these means alone could be long maintained The greatest
~r particularly on sloping land is that deep plowing may lead to
soil erosion so serious that land becomes finally llilgtroductive To use
mecbanical equipment i thout at the same time adopting eqJally modern
methods of soil conservation way well be disastrous and that perhaps
within no long period
35 Even apart from this physical daneer there is the virtual cer-
tainty that new land however plowed would gradually sink in fertility
end hence output unless farmed by better agricultural practices than
those now followed in highland Ecuador The present attraction of the
higher land is principally good natural fertility beine virgin ground
On all other counts this higher land is less advMtageous than the valley
floors the va)ley sides are steeply sloping a1d the fl~t paramo is some
2000 feet higher bare windswept and devoid of habitation It would
seem obvious that it is pastoral rather than arable ground were it not
for the pressure upon arable output of the region
36 The pressure today however rises from the relation betwem
popUation and output rather than that betvreen population and arable
area Productivity in the Andean valley is low and can certainly be
improved If improved the pressgtlre which is causing the thrust to
higher ground is relieved until population increase again overtakes outshy
put Against that time however the higher ground vrould remain
-12-
availfibleY and other lower regions may be coming under effective use
37 To increase output of the populated valleys is not a simple mat-
ter responsive to single policies such as simple mechanization by tracshy
tors It will embrace the wlo le range of agricultural practices from
better seed types to crop rotation and fertilizers including in some
valleys irrigation It is a matter rrther of agricultural education
than of~dtlgagricultural appliances and probably experiment under
the peculiar regional conditions will need to precede education Improveshy
ment will necessarily be slov1 but along these lines it can be sound and
permanent
38 Wher~ lfL mere importation of mechanical methods Vi thout
understanding of their dangers in speeding soil destruction by wind and
water erosion may permanently damage the region The somewhat gradual
mechanization of agriculture is of course to be expected and not disshy
couraged but it is not the wlole answer to development in highland
Ecuador
39 It seems that there is at present no over-all agricultural
lfibor sl1ortage in the Sierra and mechanization is nOt therefore called
for to relieve an adverse manpower position It seems however that
some of the larger estates are experiencing difficulty in obtaining their
labor requirements because Indian tenants are viitblolding quasi-feudal
labor dues and devoting whole time to cultivation of their own plotsbull
As a result hacienda holders are attracted to mechanization as an
escape from growing difficulties in obtaining and supervising labor upon
Y As it would not if destructi ve1y formed at this stage
-13-
their ovm land To the extent they are successful the tendency for agrishy
cultural money vrages to rise is weakened
4o There vrould seem to be good possibilities of increasing pas-
toral agriculture in the highlands 1Jrith improvement in both numbers and
strains of cattle and sheep If adequate arable development occurred in
the valleys the main grazing grounds could be the higher land not then
required for arable purposes ~lith dairy cattle on the valley margins or
on valley ground not well suited to arable use Such pastoral development
would be desirable not only to imp1middotove nutrition in Ecuador itself 1 but
as a possible new export of meats fats and hides to meat deficient
Republics notably Peru Early export would probably be on the hoof
along the Andea1 ridge it self
41 The Ecuadorian Government has not included any explicit propo-
sals for highland agriculture (other than irrigation) in its present apshy
proach to the Bank It has however suggested the Bank finance $1 mil-
lion of agricultural tractors and equipment to be handled by agriculshy
tural stations located at strategic places both in the coastal
provinces and the highlands 11 without further elaboration of the
intended highland use of such ecp ipment The description given above
suggests that the usefulness of agriculture machire ry depends to a conshy
siderable extent on the place plan and purpose for rhich it is to be
used
42 In some of the highland valleys (for example in Cotopaxi end
~ound Biobamba) rainfall is deficient and irrigation would increase
valley output by bringing more valley ground into effective use This
- 14 ~-
is clearly sound for flat valley ground already populated is more useshy
ful than higher sloping and more exposed ground The Ecuadorian Govern
ment has included purchase of eq1 ipment for irrigtion works to the value
of $500000 in its present approach to the Barik Assessed against the
requirements for economic development the request is sound provided of
course such equipment is effectively used
(b) The Ooast
43 The condition and nationel significance of agriculture on the
tropical coastal plains is quite different from that ltNl the Sierra The
area as a whole is less densely populated and in some parts such as the
Province of Esmeraldas is very sparsely populated Its principal pro-
ducts are exported The population has more mixed blood than the highland
people and is oore corumercially active and minded There is little feel-
ing of community of interest with the highlmds the rrincipal coastal
city GuayaqJil is larger than Quito and less remote fror-1 outside
influence
44 In terms of reported area devoted to its cultivation cacao
is the principal crop of the coast The table on the following page
shows output of main crops
45 Cacao is not however the most important export crop by value
being surpassed by both rice and panama rats (a handicraft product of the
region) Nor does the table show those products which result from
gatherage of mild growth tagua kapok oil-bearing vegetable nuts
balsa rood rubber etc
Y For use by the Caja de Klaquogo as required both in tile highlands and on the lowlands
-15-
46 Agricultural Production of the Coast
1939 ~ 1941 1942
(limdreds of pounds)
Rice 957164 872890 12304oO 1610489
Cacao 392000 263300 333250 315782
Coffee 343800 369000 310000 190633
Bananas (1000 bunches) 4090 3913 4568 4265
Oranges (COOs) 103000 lQ96oO 80550 75000
Cotton 200800 156800 155910 111500
Tobacco 24o43 4o 765 22349 29539
47 It has been estimated that about 500000 hectares (1 235 500
acres) are devoted to pastures on the coast supporting approximately
425000 cattle and 36000 swine
48 There is no doubt that the coast is an extremely rich agricul-
tural area although toward the south it is increasingly hampered by
shortage of water in the dry season And rt is overwhelmingly the
principal foreign exchange producing region of the country Yet it is
largely undeveloped by any modern standards lacking roads and almost
all basic civic amenities (water supply sewage paved streets etc) in
the provincial towns The development of a tropical agricultural region
without large labor supply _rill raise many interesting and some new
J Irrigation ~rks are in execution and others planned in various places and the irrigation equipment which it has bee11 suggested the Bank might finance would presumably be used on the lovlands as well as the highlands
-16-
problems the solution of hlch in detail may lack precedentY The
suitability of cacao to Ecuadorian conditions arises in part from the very
small labor requirements of the crop At bottom advance will lie along
the route of crop improvement and mechanization the difficulty will be
the proper application of mechanization crop by crop Some tropical pro-
ducts may never be suitable for mechanical cultivation being those whicl
would require intensive hand cul ti vat ion and may therefore not be appro-
priate for Ecuadorian condttions Others r1JJi3 be suitable only if grown on
relatively large plantations
49 Clearly for the foreseeable future many lowland products will re-
main at the stage of gathering of nld natural growth rather than plantashy
tion enterprise The flow to market of such productswould be increased
by improved access notably road core truction anQ at the same time road
building ~~uld seem to be a condition precedent for spread of plantation
methods particularly plantations using mechanical equipment lilliE diate
measures for the over-all agricultural development of the region may not
be directly agricultural at ell they are rather the provision of roads
and transport facilities the provision of long and medium term agric-llshy
tural credits and in some areas) the institution of health services
With the opening up of the region in this manner iiould come more clearly
perceived opportunity for better agricultural use of the land particu-
larly if effective demand for the products is transmit ted back to the
cultivator through establishment of product processing plants where approshy
priate for example in vegetable oils and tagua (vegetable ivory)
] This is the situation which in Brazil for example in an earlier technical epoch was 11 solvedll by importation of Negro slave lebor
-17-
50 As in the Sierra there are good possibilities for pastoral
development on the lowlands Some progress is already being made in this
direction with experiment in breeding more suitable cattle types through
crossing 11Ji th imported Indian brahmin strains Grazing for beef is not
highly labor intensive and this development is very promising since
export to other Republics by sea llould be reltti vely easy In the first
stages export would presumably be upon the hoof ith later development
of meat packing
51 There seems to be no single bottleneck or restraint upon devel~
ment presently existing all other conditions being favorable If developshy
ment occurs it will be along many simultaneous fronts but the front iJhiclf
is lagging and Inayen continue to lag is the provision of basic social ccp ishy
tal (roads water supplies health services etc) that is of those
things which no single private individual or corporation can provide for
itself Given these and the institution of suitable domestic credit
fecilities the rest may be accomplished by private domestic ini tiat1ve
52 The development plans of the Ecuadorian Government as outlined
in a Memorandum dated April 8 give much weight to lowland agriculture
The establishment of agricultural stations to provide farmers wi~h
disease-resisting cacao plants~ tecl1nical advice and credit facilities
is CD ntemplated no foreign exchange would be recpired all funds being
local currency The rehabilitation of cacao formerly a leading export
crop is desirable although development of cacao sources elsewhere may
prev~nt recapture of the position formerly held by Ecuador
53 A proposed agricultural mechanization programwoUld total
- 18
$25 million in foreign exchange cost )J The bulk of this ($1 5 million)
is allocated to wechanization of rice cultivation alone the benefit being
principally in resulting improved export position The remainder $1 milshy
lion is for mechanization of other agricultural produc~s apparently
mainly lowland (those products specifically mentioned being 11cotton sugar
oil-bearing seeds and other specified products11) the exclwnge benefit
forecast being principally through reduction of import a
54 Different criteria ~~ould be used in assessment of these two
projects The judgment on that for rice will depend upon forecast of
world rice markets and in particular upon expectations regarding rorld
demand for rice from the dollar area The validity of mechanization in
cotton sugar oil-bearing seeds and other lowland products will depend
first upon the technical possibilities for such mechanization a matter
not yet fully explored If sudl technical possibilities are favorable
effective mechanization vOuld constitute sound development upon the low-
lands which are relatively sparsely populated
Y Some part of which would be for the benefit of highland agriculture if machinery stations be established there
--19 -
IV MI-~RAL PHODUCTION
55 Ecuadorian mineral nroduction covers only a few products and
important the wells of the lowlands being exploited by the nglo-
Ecuadorian Oil Comany Production of crude petrolewn shows a slicl1t
rising tendency while exnorts have declined steadily a~ more refined 1
products are consumed domestically
56 Oil exploration to the Iast opound the Andesin the Amazonian
region is proceedinc under concession to tl-1e Shell Oil Go1~1any
Three wells have been drilled without success and tvro arc beinc
deepened Cost of this exploration to ciate j_s around US)23 million
If oil is found its only outlet middotwill be a pipe line over Ue Ances
(estimated to cost USiD93 million) and this the comany is not -rE1inz
to undertake unless assured of an outnut of at least 100000 barrels a
day
57 The only other irnrJortant minine activities are those of gold
silver conper and lead conducted by the South ~~erican Develoument ~
Company and the Cotapaxi Sxplora tion ConJ1any War-time lr oduction peaks
were 1942 for gold and CO)per 1944 for silver and lead Since these
resective peaks production has ~-~clined narticularly in copper and
lead although not to 1933 lsvels7
crude petroleum II II
1938 (millio~1s of 225 107
Production Exports Production refined petroleum 37
1947 barrels)
236 bull94
128 (See Table No_Jl_ Statistical Appendix
Production Gold (000 troy ounces) Silver (000 troy ounces) Co~per (000 pounds) Lead (000 pounds)
1938 445 82~0 27 21
War Peak l03tJ hhl3
96788 161-+88
19h7 5o5
1569 3316 h98h
-20-
58 Ecuadorian trade statistics list exports of crude pet~middotoleum
and minerals separately from that of other commodities even in aggre-
gate figures underlining the fact the exploitation is in foreign hands
and hence colonial in nature This aspect hmmiddotever is of di-1inishmiddot-
ing importance as now the foreign exchange realized from such mineral
exports accrues to the Central Bank and as in any event nineral ex-1)
ports form a diminishing proportion of the vhole 7
V ~JNUFACTURING PEODUCTION
59 There are virtually no stCltistics on manufacturing in Ecuador
and none which present any comprehensive view It is ho~middot-rever clear
that there is very Uttle industrial factory prJchJction and obser-
vation in the country leaves one with an impression of the nresent
igtilportance of handicraft production
60 The most inportant consuxner-good factory industrj_es are tex-
t~~~breweri~-~~ otheuro7r beveraces shoes ard leather _roduc~s buttons ~d~lttfr
and nails Textile production using domestically produced cotton pro-
duces cotton piece-goods and wool rayon and hemgt textiles supplying
almost all domestic demand for low-quality products The only irJDcrtant
producer-good factory industry is cement the plants being located near
Guayaquil Lack of domestic technical lmow-how and of capLtal and
the low level of domestic effective demand account for the sli~ht develop-
ment of faetory industries whose rrowth on any scale beloncs to a 1ter
stage of economic development
y Value of nineral exportsmiddot as nercentare of value of all exports 1929 260 nercent 1933 430 n 1939 397 1946 11~5 1947 69
Production and irrport statistics for cement tre civen in Table IJo bull 2__ Statistical Appendix
- 21-
61 Uuch of finished commodity ygtroduction is at the handicraft
stage both for nroducer and consumer goods In Quito and Guayaquil
one sees many small 11 shops11 producing metal leather and wood manushy
factures largely by manual methods It is an illuminating co~~entary
on the shallow growth of industrial specialization that the ll1ission
did not see any shops selling ready-made womens clothing All
womens clothing shops displayed only materials in the bolt as in
pioneer days elsewhere
62 One handicraft industry of great importance in exports is
the production of panama hats It has been estimated that 30000
families are occupied vrhole or art-time upon this nroduction and
at times (for example 1945) they have provided the largest single
export item by value The grmvth and treatment of the fiber and the
weaving of the hat is entirely an Indian handicraft industry the
Yteaving of a high-quality hat taking three months The fiber is erown
and the best hats woven in the lowlands Its future ir-mort nee is unshy
certain as the competition of Italy and the Fhilinpines is again felt
in low-_)rice woven hats the boom emjoyed during the war nay recede
63 Ecuador in its ~resent and foreseeable development is an
agricultural country with no immediate movement toward industrialization
EcuAdorians met by the Mission themselves stated this The growth of
factory industry will be slow that of small shop and handicraft manushy
facture somewhat less slow It vmuld seem as stressed later in this
report that there is room for grm~h of processing of agricultural
products Statistically such processing would be classed as industrial
production but is oroperly the finishing stage of agricultural productior
- 22-
to secure improved durability and portability of perishable products
This would increase effective demand imnacting upon the farm and ass1st
in stimulating agricultural development Some progress being made in
this direction notably in vegetable oil expressing plants Ihe only
non-agricultural project suggested by the -r~cuadorian Government has -eer
a cement plant located in the highlands at a foreign exchanr~e cost of
$2 rrillion the justification being both the saving of foreign exchange
expended upon cement imports and reduction of load upon the only railshy
way connecting lovrlands and hichlands Growth of cement use accompanies
economic development assessment of this project (engineering questions
apart) would involve tainly questions of timing location and finance
matters which are really all aspects of the single question whether
such a project may not be one for private direct investment Initial
expectation would be that were all factors favorable to the success of
the project it gtlould be readily undertaken by orivate enterprise
particularly when it is remembered that railway freiehts 1bullrould protect
highland production from lowland competition
6h No sueeestions regarding increase of electric power output
have come fror1 the Government indeed the official statistical services
have no data upon installed capacities and demand Cnly in Quito and
Guayaquil are present industrial uses of electric poler of any ir1portance
Elsewhere suIJply is from snall municipal plants (mainly therraal) for house-
hold consumption It appears that demand mar be ahead sunply in cost
towns very frequently voltages are maintained around 80 instead of the
rated 110
- 23 -
65 Shortage of electric nower is not however hamoering
economic development at this stage although it may soon do so in
sevral urban centers such as Qui to and Hiobamba Sone ttne i-1 the
iuture the possibility of large hydro-electric vrorks on the eastern 1
side of the Andes will merit attention
y Where the rivers are fast and clear on the western side they carry much silt
- 24-
VI DmIESTC THANSPORT AND COilERCE
66 The space devoted to agriculture in this report reflects its
importance in the Ecuadorian economy As has been said further developshy
ment will for sometime be mainly agricu1tural
67 Present restraints upon that development are not located
solely or perhaps even nrincipally on the farm there are many
features of the general economic environment which operate to hamper
even purely agricultural development There is great room for improveshy
ment of transport to knit the economy tocether and to encot1raee grovrth
of output
(a) Transport
68 Without roads there can be little regional or inter-regional
intergration Fithout that intergration (which for some regions and
some crops would open upon the world at the gatewa~r of a oort) there
can be but small inducement andlittle opportunity of increasing proshy
duction In much of Ecuador the principal transport vehicle is the mule
whose patience and endurance under heaJr load is matched by that of the
Indian
69 As regards roads the requirement is both more roads and
better roads capable of bearinr modern vehicular traffic The roads
traveled by the 1Jission are uniformly bad both slowing traffic and imshy
Ilosing extraordiPamiddoty vehicular de_reciation Ultimately no coubt
there vdll be an adequate system of all-rreather roads in Ecuador For
the immediate future the more modest tarset is to attain a reasonable
system of roads civine access to the creater art of roducine areas
- 25-
in the dry season At present the unsurfaced access roads are cut to
pieces by --vater erosion in the wet season and consolidated somew1at
traffic in the dry season A single eradinr operation smoothin thE
dirt surface at the end of the vret season would ci ve accelJtable usashy
bility in the dry )eriod v1hich in the populated coastal rovince of
icanabi for example is eight ~aonths of the year At -_resent the so1e
transport link for corunodities between loYrlands and the hihlands
is the Guayaquil to Quito (and beyond) railway This link is nrobaoly
nearing saturation point vdth present equipment and its strencthening
both by railway imJrovement and all-middotweather hichway construction is
obviously desirable it middotill probably become essential yri thin five
years
(b) Commerce
70 Physical transport alone hogtever is not the only ope c-ation
ofcarriaee required to intecrate a reeion internally and to bind toshy
cether the various regions There are also tL physical and the finanshy
cial aspects of comr1odity holdinr involving the storae and vrhere
necessaFJ the partial processing of products to reduce perishability
and the avail~bility of mechanisms of short-term finance extendine over
crop periods In Ecuador these tro aspects are closely related
71 Apart from some export crops there is virtually no crop or
food processinG undertaken And in the export crops processing
is the minimum necessary to secure portability Eice is nilled but not
polished cacao is sun dried coffee is dried and within only recent
years washed fruit is exported whole Some new e~Jor-ts may require
further processing and installation of plant starting or is in
- 26-
advanced discussion for example vegetable oil processing (although
for sometime no eXport surplus of vegetable oils is 11~11 and fish
canning
72 Nor is there any important ~recessing of domestic food pro-
duction for home consumption bull There is no freezing or canning of meat
which is taken to market on the hoof There are only two or three
very small butter factories and no whole milk orocessing Cereals
of course are not highly perishable but there are no silos or granarshy
ies and experience of similar situations elsewhere suzfests that losses
by deterioration and infestation may be significant no direct evishy
dence anthe incidence of this factor in Ecuador ~as obtained by the
Mission Thee is little storage of grass on the coast in silos or
as hay and in the dry season slaughter of cattle because of lack of
feed is at times necessary In short the situation is not so very
dissimilar to that ofmiddotmedieval Europe
73 Roads alone would not create an environment favorable to
change in this position although lack of roads nar well inlibi t change bull
In addition suitable credit facilities for the finance of co~~odity
holding through time are necessary
74 Hany complaints were voiced to the Hission reearding lack of
short-term banking credit for crop movement and storage and for medium
and long-term agricultural investment and no doubt there is signifi
cant lack of such credits But this is not the result of some simle
institutional defect of the b~~inc and credit structure even though
institutional improvement may be necessary It is fundamentally a
- 27-
reflection of the fact that Ecuador is extremely poor in disposable
capital available for even short-term investment ie vrorcing capi-
tal Improvement of short-term credit facilities for what in advanced
communities are regarded as purely commercial purposes would in effect
represent an increase of capital intensity in the Ecuadorian ecororny
To the extent that banks met more fully the gtJeak seasonal credit re-
quirements for croo movement and storage individual nrivate reoources
are relieved of the 1eak burden and available for other investments
75 Thus iorovement of the techanisr by 11hich the banking system
provides working capital for corrtercial or inciustrial (in the sense of
crop processing) purposes is itself an act of investment rather than
merely an institutional rationalization ilnd as such carry the
usual consequences of investment in an undevelogted economr with very
law voluntary savings To the extent that additional credits are not
matched by savings sewhere (either voluntary or forced through
taxation) they will be inflationary in effect just as an
additional act of long-term investment would be Increase of banki1g
nrovision of workinrr capital should keep step with totl capital for-_ - - 1 mation of which it is one aspect7
It is implicitly assumed in the foregoine that at nresent in Ecuador the amount of small voluntary savinrrs is neclicible It vrill presumably not alrmys remain so and ~Jart of the modifications of the bankin~ system shou1d be attract Clli1U1 atively such sav-ings in the fom of savinc do)Josi ts This 1muld increase the extent to which Danks can safely flovide capital It will be a much later before small private savincs are directly in-vested in commerce or industry throuh joint stock r1ethods There is no stock-exchance in Ecuador
-28-
76 It is of course just as important that the availabi lity of
working capital should not lag behind as it is that it should not run
ahead The Bank should ensure that any long-term investment projects it
may assist to finance do not effectively starve the rest of the econo~
of working capital in the process of avoiding inflation
77 There is also the question of the price of short-term lending
that is of the level of interest rates The Ecuadorian is a highshy
interest rate eoonomy The legal maximum for commercial short-term loans
is 10 per cent having recently been increased from 7 per cent legal
maximum rates however are not systematically enforced by commercial
banks themselves At a time when the legal maximum was 7 per cent
going rate for 90 day loans secured upon properly warehoused commodishy
ties and with third party endorsement was 12 pe+ cent
78 This very high structure of interest rates seems open to
obvious criticism but is in fact probably not Tiholly unjustifiable in
the present conditions of Ecuador It is the cumulative result of many
factors so that more official prescription of lower rates would be
quite ineffective These factors seem to be
(a) Interest proper~
(b) layment for risk bearing arising in part out of a
low rating upon individual credit and in part from
the institutional conditions (such as embryonic
commercial and financial ruarkets) which seriously
reduce the liquidity of any asset other than money
itself
-29
(c) An clcmmt 0f discount 111nn cyectcd luturc irf] utinn
reducing the real value of the pa~nent for lending
(d) An element of monopoly which upon purely subjective
judgment may be the least ilJI9ortant of these several 1
factors7
(e) The real shortace of capital whether short or long--
term~ reflecting in interest rates as a genuine
scarcity price
79bull Of those factors the di~ount upon expected future in-
flation increases prices at a rate of 12 ner cent per annum a money
interest rate of 12 per cent per annum is a real rate of zero If
therefore inflation could be controlled a substantial reduction of
money interest rates could be hoked for At the same tine while
inflation continues high interest rates probably have small influencemiddot
in encouraging money savings
80 Even without inflation ans until the su~1ly of available
real capital improves relatively high interest rates may well be
acceDtablemiddot as a price mechanisn nethod of selectin~ most urofitable y ~
uses of limited fundsbull middothere exoected urivate nrofit did not seem l - -
to parallel social desirability loans at lower rates (ie subsidized
terms) could be made perhaps through reconstituted Development Banks
Prima facie however such loans 1bullrould not be short-term
~I -Onthis interprepoundaion the situation in Ecuador differs signifishycantly from that in Peru
tt is suggested that a powerful point of intervention would be to limit commercial banking dividends distributed to not more than say 7 per cent The high profits nmv earned by commercial banks would then progressively accumulate until liberalization of lending becomes virtually forced by accumulation of funds representing genuine corporation saVings
- 30-
81 The discussion of private finance has so far upon
short-term credits there is an even larger nroblem in the
intermediate and long-term arricul tural credit It is not necessarr
to expand greatly upon this since it too is a consequence capi-
tal shortage
82 Imnrovement would seem to be alonrr the route - 1 of nroper UElte
of existing Development Banks (or their successors-) effectively
in the earlier stages as lending agencies of Government
VII OFFICIAL DEVLOPHl~NT FHmiddotIfJCE
83 In the circurnstances of a country like Ecuador the greater
part of domestic capital forr1ation requires official directly
or indirectly if it is to occur on any scale are too
small and too narrowly held to permit much -rowth this roL1te
andthose few who are able to save at any sinificant rate are larely
uninterested in the efficiency of ~reduction
84 Official finance may be either direct or indirect direct
throueh works executed by Government or 0JUblic bodies indirect
throueh lending institutions such as Dev~lopment Banlcs capitalized
from public funds In either case funds are diverted to investment
purposes by Govern~ent intervention
85 Thus Development Bank lending for productive purposes (for
example long-term acricul tural credit) is an item 1n ca9i tal formation
V There are thirteen reaional Development with an unirnJresstve record of manaeement Their possible reconstitution is under discussion
-31-
rather than a mere institutional rationalization of the credit mech-
anism Indeed as has been stressed in the last section even im-
proved su1nly of short-term credit gtrill in art rewesent
formation A developing economy which neclected these items in 11Cnn21~~
or forecastinc total caital investnent would be very vulnerable indeed
to inflation induced by over-investment
86 17here voluntary savings are Jow the only wmiddotamiddot to sirnificant
rate of capital formatton can emerge without inflation is an equi-
valent amount of savine forced throurh taxation One ould look for a
relatively hirsh level of taxation to national income and for a rela-
tively high proportion of exnenditures caDi tal purposes to total
Government expenditures On both these counts Ecuadorian elq)erience
seems irare s si ve
87 In 1946 total budretary and spedal revenue rms disclosed
as 5368 million sucres in the sa1le rear an estLnate middotJaced national
income at 20096 million sucres This a proym~tion of 27 middoter
come a proportion so hich that in fact it lacks credence In assess-
inc total tax burden part of the revenues of Government monorolies
and all of municial revenues should be included if this be done y
the proportion becomes 37 per cent In addition new exchance taxes
yielded 973 million sucres in 1947
Mono_)oly participations (ii direct disbursements for public _Jurposes) were 353 million sucres in 1946 munici~al income was 1803 million sucres in 1947 (1946 not available)
32-
88 It is very difficult to accept the conclusion that Ecuadorian
revenues form so high a proportion of national income it would seem
that the estimate of national income is too low Nevertheless tax
revenues are clearly a sizable percentace of national income
89 At the request of the Mission an official estimate of total
official expenditures on capital account was prepared Total income of
Government municipalities provincial councils and other public
entities was ~iven as 7S4 million sucres and total capital expenditure
from that income as 2237 million sucres or slichtlr over 30 per cent
of revenuesY It is difficult to feel confident that effective capi-
tal formation on this scale actually occurred certainly there is
little evidence visible to the eye of the t1middotaveler
90 Notwithstanding such doubts the fiscal evidence is of a
fairly hich proportion of tax revenues to national inco~e and of a
hich proportion of revenue allocated to capital investment It would
seem that the fiscal mechanism exists for domestic capital fo~~tion
what may be required is more effective expenditure of allocated funds-
Before a development plan envisa~ing the expenditure of still more funds
was adopted it would be desirable to examine closely administrative
and technical efficiency in the use of existing funds
91 On the side of revenue Treasurr officials informed the Mis-
sion that tax evasion was estirnated at some 30 per cent of ta revenues
1 This makes such capital expenditures 112) per cent of 1946 national income which a~ain seems very high indeed
The two largest items are Government public works (8)4 million sucres) and municipal works (900 million sucres)
- 33-
particularly in income and land tax It might well be advantareous
on the sides both of revenue and of expenditure for Ecuador to obtain
technical assistance of the tPe that the United Nations Department of
Economic Affairs rendered to Venezuela in 1947~Y involvinpound revision
of the structure of the budget of budcetary audit practices and the
like
f Report~d in UN Document ECN 1SubJfti 4 - 21 June 1948 lostricted)
- 34 -
VIII 001EHNl(iEi~T FINANCE AND INRATlON
92 What may be called 11multiple budget practices exist in Ecuador
as in other Latin American countries There is an annual Ordinary Budget
one or more Extraordinary Budgets( tro in 1947) end a number of Special
Accounts (twenty-five in 1946) not included in the general budgetary
accounts The State operates nxmopolies in tobacco liquor salt and
matches part of whose profits are taken into the ordinary budget as
revenue and part used directly for public purposes It is thus diffi-
cult to assesrmiddotgggregate Government revenues and expencii tures and vir-
tually impossible to detail the purposes of expenditure to ascertain
accurately public capital formation by way of public morks and the like
9 Taking the disclosed figures on the ordinary and extraordinary
budgets and tne special accounts there has been a net surplus over the
past ten years 1operations of 234 million sucres~ This however is
not an accurate reflection of the true aggregate position because the
Government operations are not ~holly included in these disclosed ac-
counts But since the Government has no source of internal funds other
than the Central Bank the net recourse of Government to Central BanJJI mirrors the over-all result of Government finance such recourse increased
In 1946 for example the monopolies contributed 5357 million sucres to the general revenue and disbursed 3526 million to municipalities (145 million on general participation and 1652 million sucres for 11 special participation of gthich an example is a new electricity plant at Ambato the state railways (92 million) etc
gj iiith only three years of disclosed deficit since 1938 See Table 12 in Statistical Appendix
2 Central Bank loans middotto Government less Govertllllent deposits in banks
- 35-
480 million sucres over the nine-year period 1939 to 1947 inelusivel
an average of 53 million sucres annually amplch averaging however con-
ceals very important differences between the three periods within the
nine years to tal
94 The table on the next page sumnari zes the factors causing in-
crease of domestic money supply It is computed by rearrangemm t of the
balance sheets of the Central Bank all commercial banks and all developshy
ment banks and is thus a table shoring changes in items in a rearranged
aggregate balance sheet of the Ecuadorian banking system
95bull The first t70 periods 1939-1943 end l943-l946f were both
periods of heavy inflation_ During the first five years notes in cir
culation and monetary deposits increased 3437 million sucres (or 255 per
cent) and in the next three )eera 2904 million sucres (or 61 per cent)
But the causal structure was quite different in the two periods
96 In the first inflation was almost wholly induced by external
factors (favorable balance of paYments causing increase of foreign exshy
change holdings) the major domestic factor being expansion of commercial
bank loans and investments in this period deficit Government finance
was not a causal factor
97 In the next three-year period 1943-1946 however the major
inflationary factors change deficit Government finance and expansi on of
f As calculated by IBRD Mission loans to Government including ali loans to official agencies A recent calculation by the IMF Research Departshyment covering Government operations only places the aggregate 9 years deficit at 345 million sucres~ See Table 12 in Statistical Appendix
- 36-
BANKING CHANGES ~0015 SucresJ
Jan 1939 Jan 1944 Jan 1947 Jan 1948 to to to tomiddot
Dec 1943 Dec 1946 nee 1947 June 19h8 t~ ~arsJ ~~ iears) trmiddot ~~r1 t~ mo~~h~2
Central rcrk loans tomiddotc~vt~ f 16174 f 160260 - 701p88 23695 Central B~r~ Loans to Public -1 6978 2_283 1- 67548 1- 39763 Commercial Bank Loans and
Investments J 187554 f 14624 88h4 1- 2~ ~49 Development Baru Loans and
J 14227 136818 ~ 644 1- 26090 Investments
1 224933 f 313985 11)40 1- 68107 Net Bank Foreign Exchange 260774 f 94662 - 53203 - u6 112
7 485707 7 408647 I
7 bull - 64543 21395
Notes in Circulation f 16o907 1-131729 - 23205 - 17290 Public Monetary Deposits -A 162868 1- 128914 - 68734 1- 19620 Government Deposits f 19968middot 29768 9050 2366
7 343743 7 290411 82889 - 36 Public Time Deposits 116834 ~ 42053 1~004 f 317j
y 7 46o517 7 3J2464 83893 ~ -- 3137
Absorbed by Banking System 1- 25130 middot~ 76183 1- 19350 18258 7 485707
11 f 4o8647 64543 I - 7 21395
Net Government Borrowing J 131492 from Banks 3794 - 79738 - 32745
Deposits in Central Bank in foreign money (not included above ex pressed in Sucres
Government ~ 4486 - 633 871 - 11059 Public 25242 J 78964 - 78814 J 4h97
T29J 728 7 I
7 IIIII middot~~ ~ I
78331 79685 31+38
y Made urt as Io11mlfs
Cas~ bullbullbullbullbullbullbullbullbullbullbullbullbullbull ~ bullbullbullbullbullbullbullbull - bullbullbullbull J 266 1- 367 - 22~7 99 Other assets less other liabilities~ ~ 4 330 ~ 293 ~ 18~8 Capital and Reserves~- bull bullbullbullbull 4 bullbull 52 bull 1 1- 79-9 26 o 278
7 I
7 7 I
7 bull Ill ri bullbullbull
251 762 194 18)
Subtract increase
37-
Davelopment Bank lending dominE)te the position Expansion of commercial
bank lending is relatively negligible while a comparatively small role is
played by balance of payment influences
98 From the end of 1946 the general financial situation deterior-ated
rapidly in five months from January 1947 to ~~ay 1947 net foreign exshy
change reserves of the Centrel Bank fell 935 million sucres or 7 7 mil-
lion dollars to a level of 2927 million sucres or 21 7 million dolJars
In litaY 1947 an IMF Mission arrived in Ecuador (at the request of the
Government) and in June 1947 a multiple exchange rate system with import
classification was introduced upon the advice and with the concurrence of
the Fund Operation of this system Jielded considerable profit n in
sucres it is in effect a new imposition of import taxes and such
11profits 11 are in reality additional fiscal revenueY It was of the
essence of the Emd s attitude in Ecnador that the exchange difficulties
bad arisen through domestic inflation and that these addi tiona reve-
nues should therefore be applied only in reduction of Government debt to
the Central Bank
99 The effect of such policy is clearly seen in the third column
of the table Inflation is checked notes in cirmlation and monetary
deposits falling 929 million sucres (or 11-per cent) i~ one year Alshy
thoUtgb however Central Bank loans to Government (and also colllWrci al
jJ At this point only the domestic aspects of this measure are emphashysized In a later section the external or balance of ~ent aspects will be taken up
Y Such revenue from exchange taxes yielded 975 million sucres in 1947 bull md in July 1948 was running at g to 10 jllillion sucres a month this revenue is not of course taken into the budgets bull
- 38 -
bank loans and investments) fell the actual deflation _was largely
caused through loss of foJeign exchange rather than over~all reduction
of domestic bank lending For in response to vigorous ~oilplaints of
credit shortage the Central Bank greatly increased its loans to the
public almost fully offsetting reduction of its loans to Government
In the first six months of 1948 there was no significant contraction
of money supply banking loans to the public eJggtanding to offset the
deflationary effects af an adverse balance of payments and of Government
debt reduction
100 The exchange surcharge multiple rate system was in operation
through August 1948 proceeds being devoted to reduction of Government
debt to the Central Bank~ But there has bean concern lest the resulting
deflation of domestic money supply would be too severe and the Central
Bank has in fact adopted a compensatory policy to prevent further reducshy
tion through continuing to expand lending to the public arid through
quasi-open-market pur~e of mortgage bonds to the amount of 17 million
sucres by July 10 19l8 when further purchases were discontinued
101 To avoid the netcessity for such compensatory policy the Cen-
tral Bank proposed to the Government that the destination of reveme from
exchange taxes should be changed Instead of being applied in reduction
of debt the proposal was that they should be useci instead to create a
development fund tt to be administered by the Cent~al Bank unless a
planned Development Institute or other competent authority is estabshy
lished In mid-September the Fund appro ved such cllanged dest ination of
these revenues 90 per cent of which will in future be applied in finance
of development and 10 per cent in stabilization of Government bond prices
-39-
This removes a check upon inflation which has operated for some fifteen
months unless Central and commercial bank lending policies recognize
this changed situation further inflation may follow even if the Budgetary
accounts run no deficit
102 At the same time this change does provide a source of local
currency finance for development projects
-40-
IX INTERNATIONAL TRAIE AND THE BALANCE OF PADlENTS
103 Ecuador exports agricultural products (rice cacao coffee
tropical fruits balsa wood) mineral products (crude petrolelUil gold
silver copper and lead) and handicraft products (panama hats)Y
lo4 Approximately one trird of Ecuadorian exports (including
minerals) go to the United States The proportion rose during the war
due to VmiddotIar-time demand for strategic raw materials but is now tending
to revert to pre-war levels Loss of European markets has been partly
compensated by gain of n$w export markets at least for a time and
especially for rice Countries in the Far East whose rice production
fell during war such as the Philippines and in Latin America whose
Eastern sources of supply were cut off such as Cuba and Venezuela
have provided demand for Ecuadorian rice This outlet however may not
last much longer
105 On an average of years 1938 to 1943 about 15 per cent of
Ecuadorian imports are foodstuffs wheat and lard being the largest
items and 85 per cent are manufactured goods and equipment Import
of foodstuffs is however gro1ing t-vith population and in the key pro-
ducts of wheat and fats would be expected to grow still faster if
econowic development raises n~ss living standards witl10ut increasing
domestic output of these prodvcts For increased consumption of wheat
products and fats is in part the definition of rising living standards
for a very poor population
fJ See Table No13 in Statistical Appendix for composition of exports
-41-
106bull Before the war (average of the years 1937 to 1933 ) the Americas
supplied 49 per cent of Ecuadorian imports by value the United States
alone supplying 41 per cent Germany provided 22 per cent of total
imports and the United Kingdom only 8 per cent Europe as a whole supshy
plying 45 per cent
107 In 1946 and 1947 the Americas provided 86 per cent of total
imports the United States supplying 66 per cent EUrope as a source of
imports fell to 12 per cent although the United Kingdom maintained its
relative position (7 per cent) Whether the United Kingdom can expand
its provision of imports for Ecuador JDaY be domiddotubtful on the one hand
the loss of Germany as a supplier pzo vides an opportunity on the
other the competitive industrial position of the United States may make
it difficult for the United Kingdom to fill this gap
No balmce of payments estimates eJd st for Ecuador1
Growth
of foreign exchange holdings over the war period however indicates a
strongly favorable balmce ~let reserves which were equivalent to 409
million sucres in December 1939 rose to 3962 million sucres (294 milshy
lion dollars) in December 1946
109 Official purchases and sales of exchange are shown in the fol-
lowing table together with corresponding movements of exchange reserves
The difference betRSen the balance on official transactions and the moveshy
ment in reserves arises from transactions on the free market
110 During the war import and exchange controls were nominal
there being no shortage of dollars nor any decrease of exchange reserves
jJ Except for the ~eriod January to May 1948
-42-
Loss of exchange reserves in 1945 led to a tightening of control on an
allocation of quotas smong users of exchange Import permi ts were
granted on the basis of former imports by merchants At the end of
1946 controls were relaxed on an extensive list of imports items and
the consequent loss of exchange has led to difficultieQ
Ul Official Official Balance Changes in Purchases Sales on Net
Official International Trans- Reserves actions
(Millions of u S Dollars)
1942 257 185 t 72
1943 35-5 279 t 1middot5 t Ul
1944 423 34~4 t 79 f 88
1945 353 394 - 41 - 7-2
1946 471 415 f 56 t 1 9
1947 488 579 - 91 38
112 From December 1946 to IVtay 1947 net foreign exchalge reserves
fell US$ 77 million from US$ 294 million to US$ 217 million In May
1947 the advice of the International More tary Fund was sought with reshy
sults summarized as follows in a recent Fund documentY
The lfund 1 s Mission arrived in Ecuador in Yay 1947 It was not advisable at that time to contemplate devaluation which would have made the inflationary situation worse An emergency program was therefore proposed Essential and semi-essential imports were to be distic5~ished and a surcharge of 5 sucres p3r dollar imposed on the semi-essential group as a check against their excessive import New decrees including many of the recomshymendations were issued in June
The main features of the new system were as follows
Y Economic SuVey of Ecuador RD 672 - P 43-44
- 43-
(a) The elimination of all quantitative import export or exchan~ restrictions licenses and quotas with the exception of a few absolute prohibitions of some luxury imports
(b) The checldng of excessive import demand through a fiveshysucre (33 per cent) surcharge on non-essential imports
(c) The suspension of nearly all exchange sales for nonshytrade transactions and the creation of a free market bull narrowly limited in volume and comprising mostly all transactions that are uncontrollable in practice plus a snall amount of domestically produced gold
(d) Exchange for a small amount of the least essential goods was made available in the free market
(e) One of the basic aspects of this plan was the steriliz~ tion of all proceeds from the import surcharge which was placed in a fund for the extraordinary amortization of the government debt to the Central Bank Tnis is still in operation
The beneficial effects of these reforms were felt immediately In June the trade deficit ~as reduced to only $07 million and in July to $06 million By August for the first time in 3 monthsl there was a small surplus In September the deficit was smci l -j)O 5 million In October there was a surplus of $15 million and in November and December there were small deficits of only $01 million and $07 million respectively
In short the deficit for the year was about $99 million in its gross gold and foreign exchange reserves During the same period international liabilities of the Central Bank showed a reduction of about $6 million Therefore~ the net deficit was around $39 million 95 per cent being in the first half-yeer and before advice had been received from the Fundrs Mission
113 It should be emphasized that this multiple-rate system of
exchange control is entirely freed cpentitative controls Excessive
import demand is checked by the higher rates upon imports deemed non-
essential the list of which is knollD and published Anyone presenting
sucres is provided with exchange at the appropriate rate upon list A and
B goods and the free rate is influenced by occasional releases of offi-
cial exchange into the free market The system that is utilizes the
inter-play of the price mechanism rather than the bWlilmlcracy of quanti-
tive controls or quotas
- u4-
114 Loss of exchange continues however despite considerable reduc-
tion of imports Gross international reserves declined US$ 18 million
and net reserves US$ 35 million in the first six months of 1948 Offishy
cial transactions January to June 1948 are surmrarized in the following
table~
Receipts From Exports From other Transactions (1)
Total
Payments For Imports For other Transactions
Total
Balance Change in Gross Reserves
1947 Jan to June
1948 Jan to June
(Millions of Dollnrs)
163 5 6
167 44
219 211
289 219 23 10
312 22 9
- 93 - 18
(l) Includes purchases of domestically produced gold deposits received in foreign currencies and borrowing from corres~ pondents abroad
115 Prospects for the remainder of the year moreover are not goo~
It is estimated that loss of international reserves over the whole year
may be aboat US$ 6 million Whether the deficit is in this region de-
pends largely upon actual export realizations for the remainder of the
year lhe most critical here is rice 11hose ygtrice is falling and the
crops accumulating in the rice millsplusmn Latest information is that
f Countries receiving allocations of Ecuadorian rice under International Emergency Food Council allocations have been requesting a change in source of supply owing to shortage of doJJers Thus France has asked for 6000 tons of rice from Indo-China instead of ~cuador and Greece for 2000 tons from kVPt in place of Ecuador as supplier A recent favorable sale of rice-to Haiti has somewhat improvea the cuITent position
-45-
plantings for the October crop are substantially reduced Wet weather bas
led to some loss of the cacao crop Receipts from exports in the follow-shy
ing official exchange budget may therefore have to be modified down- [l
ward on any pxuient calculation-
116 ~or Recei1ts and Sales of Foreign hchange
(Thousands of U S Iollars)
1948 1947 Estimated Actual
BECEIPTS
Worts Rice 13~ la4~ Cacao 11 l 2 Other products 10700 12371
Total Exports 354oo 42120
Foreign companies 5300 4842 Others 800 1883
41500 48845
SALES
Imports 44800 53499
Services 3200 4470
4B ooo 57969
117 In this situation of continuing presSlre one step has been
tken and others are under consideration The one taken relates to offishy
cial imports representing an average pf 20 per cent of total imports
Importation of cigarettes liquor matches and other things by the State
tionopolies is especiallyen significant These were formerly provided with
exchange tax-freebull ie at the ~owest rate of 1350 From July 26 they
afe required to pay the ordinary import rate of 15o4 on sll supplies for
J See note on page 47 -A
- 46-
their ovm use (such as office supplies) and the same rates as private
importers (ie 15o4 or 20o4) on all imports to be sold to the public
(such as wheat flour fats cigarettes etc) accord~ng to the classifi-
cation of the goods
118 Remaining possibilities seem to be a partial reclassification
of imports removing items from List A as essentials to List B as se~ishy
lwruriesY and or a chenge of nominal exchange parity vri th or mithout
a narrowing of the spread between the rates Here pressure from
exporters particularly from rice exporters may be hee~vily in favor of
an increase of the dollar buying rate with consequential changes of
selling rates
119 The present loss of foreign exchange is occurring ~rithout any
service being met upon defaulted foreign debt although service of Ex-Im
Bank loans is being made If it be assumed for purposes of calculation
that Ecuador reaches an agreed settlement identical to the Chilean sershy
vice would require exchange equivalent to US$ 378000 in 1949 (of which
US$ 368000 would be required in dollars) and would rise to US$ 4o20CO
in 1954 Adding service upon Ex-Im Bank loans outstanding on June 30
1948 and other known but small indebtedness total debt service would
increase to US$ 1410000 in 1949 rise to a second maxilliUID of US$ 1394000
in 1951 and then progressively decline Upon the assumption thet amp-Im
Bank loans undisbursed on June 30 1948 are all fully drawn before their
maturity total debt service charges would be US$ 1533000 in 1949 rise
On August 21 a number of import items were changed from List A to List B the aggregate import value (when granted exchange at List A rate) affected being US$ 7 million
-47-
to US$ 213431000 in 1952 and again would progressively decline These
last service charges rould be for 1949 3 1 per cent of 1947 actual
official foreign exchange receipts and 3 bull 7 per cent of estimated 1948
receipts and for 1952 48 per cent and 56 per cent of 1947 actual
and 1948 estimated exchange receipts respectively
120 Estimating prospects from this point in time Ecuador does not
seem to be a country able to afford assumption of any great additional
burden of debt service payable in dollars The amount that could wi thbull
out hardship or distortion be squeezed out of the balance of payments
by no means corresponds to the development needs of the country Any
start must therefore be modest and cumulative rather than spectacular
and precarious and this conclusion fits with other controlling factors
in the over-all situation notably the supply of administrative techshy
nical and managerial abi li ty
- 47-A -
Note on Official Exchange Transactions
Official exchange transactions for the firstsix months of
1948 are given on page 44 of this report Results for the full year
are now available and reveal that earlier expectations regarding the
probable 1948 balance of payments deficit were unduly nessimistic
Cacao export values have been lar~er than expected and in the last
period of the year there IBre some unexpectecily favorable rice eA-port
sales total export receipts were US$ 8 million larger than forecast
on page 45 Imports were held close to forecast
Receipts
Exports Foreign Co~anies Other
Payments
Imports Foreign Comoanies Other
Balance
Change in Grass Reserves
Official Exchange Transactions (full year - n~illions of dollars)
1947 -421
L18 19
488
535 06 149
580
y does not agree because of rounding
January 26 1949
1948 -436 h2 7
i85
Lt52 2
28
-oJ
-48-
X EXTERiJAL DEBT BEoomJ
121 The position of public long-term external bonded (excluding
inter-governmental) indebtedness of Ecuador is as follows
Amount in Default AmoUpt Outstandi~ ~ e Interest D~te
~In currmc1 (u s (us of p~t Dollars) Dollars)
Dollar obligations Gueyaquil amp Qui to Ry) $ 1226)000 12263000
286000 12263000
286000 123147
63047 Sterling obligations Franc obligations ( Oie
b 71000
Francaise de Chemin de Fer 1 lquateur ) Fcs 8386000 70000 70000
12619000 l26l9000
middotmiddot Note The Government of Ecuador oyenms about 75 per cent of the
stock of the Guayaquil and 1uito Railway and guarm tees the bonds and certificates which are largely held in England The franc obligations of the Cie Francaise de Chemin de Fer 11lquateur are not included in the offi cial statement of the public debt nevertheless the Government does recognize some liability for them and during the last few years has engaged in Degotiations for their retirement
Inter-governmental Debtsmiddot
122 Debts to the United States Government are of three types
63047
first the loans by the Export-Import ~which were outstanding on
June 30 1948 in the amount of $7 705606~ second the aJIDunts duemiddot
because of purchases of surplus property totaled $484 567 on March 31
1948 and third the obligations arising out of the lend-lease settleshy
ment the amount of 1fhich is not available (Total lend-lease assistance
j This section of the Report was prepared by Mr Paul Dickens
to Ecuador amounted to $7 bull 795000 )
123 In addition Ecuador is indebted to the Government of Venezuela
in connection with the establishment of a joint shipping company Late
data are not available but as of February 1947 $500000 ($1000000
authorized) was outstanding the total to be repaid by 1966
Debt History
l2ij Upon partition of the old Republic of Colombia~ middotEcuador was
apportioned 215 per cent of the original Colombian debt by the convershy
sion of l834a Between 1834 and 1854 no interest was paid The period
1855 to 1908 was marked by numerous adjustments and defaults
125 In 1898 the Guayaquil and Q]lito Railway Companyt s first mort-
gage 5 per cent loan of 1899 was issued It was expressed in dollars but
was in reality an English loan In 1908 a new (reemenJl was reachedbull
which was to be a final settlemet of all past disputes and controversies
between the Government and the Guayaquil end ~ito Railway Company and
the bondholders In 19~-10 the Government defaulted on the new agree-
ment In Novemberl9ll payments were resumed on the railway debt on)y
but a revolution caused a further suspension from December 1911 until
lfarch 1912 Subsequently service was partially resumed on the external
debt until July 1914
126 From August 1914 to July l9l8 no paYments were made on eny
foreign obligations except that service on the prior lien railway bonds
had been maintained up to and including the January 1915 coupon By
rf Negotiated settie~nt
-50-
1920 interest and sinking fund on the prior lien railway bonds had been
brought up to date but service on all other obligations ~ed in
arrears In 1926 interest on the salt loan of 1908 was brought up to
date but default took place on the coupon dueJam1ary 2 1927
127 The outstanding bonds of the prior lien issue were redeemed~~
January 1929 at VIhich time the January 1914 coupon was paid on the
5 per cent first mortgage bonds of 1897 In the case of the salt loan
of 1908 sinking fund was resumed in July 1928 and interest was paid
to Jazruary 1929 inclusive None thereafter Sums due from July 2 19C3
to January 2 1931 inclusive deposited with Central Bank in sucres
were used for governmental purposes after December 1931 No payments
were made after January 1929 on the external debt of Ecuador
128 Up to the end of 1948 no acceptable arrangement had been pro-
posed by the Ecuadorian Government for the resumption of interest and
sinking fund payments on external loans
-51-middot
XI bull POLITICAL
129bull Recent political history in Ecuador has been turbulent
although contest fo~ power at the top has not greatly affected the
bulk of the population Suffrage extends to all literate citizens 1
over twenty-one years of aee-but the requirement of literacy effect-
ively excludes the Indian bull T)tal votes cast in the recent Presidential
elections were 289164 from a total Population of some 35 million
130middot On May 28 1944 a few days prior to a scheduled ceneral
election an uprising occurred and Dr Jose Haria Velasco Ibarra
assumed office as President Dr Velasco had been President before
but following a coup dletat in August 1935 after he had been in
Presidential office less than a year he fled to Colombia and re-
mained in exile for several years On July 23 191-4 general elections
for a Constitutional Assembly to draft a new Constitution were held
Installed on August 10 the first Act of the new Assembl3r which was
predominantly Conservative was to confirm the legality of Dr
Velascos assumntion of the Presidency
131 On June 30 1946 new elections to the ronstitutional
Assembly middotwere held The only party particiJatine in these elections
was the Conservative The Liberals R~dicals Socialists and Commu-
nists abstained on the crounds that President Velasco did not offer
them sufficient guarantees On Aucust 3 1946 there vrere a number
of arrests following an abortive uprising and on Aueust 11 the Con-
stitutional Assembly re-elected Dr Velasco to the Presidency (by 43
to 10) for a term of office to last to September 1 1948
12bull Being compUisory for men voluntary for woraen -
132bull A new Constitution was promulgated in January 1947
133middot On August 23 194 7 a bloodless coup detat led by Colonel
Carlos Iancheno Minister of Defense in Dr Velascos Cabinet deposed
rresident Velasco who fled the country to Colombia for the second timebull
Next day Colonel Mancheno proclaimed himself Acting President and
formed a five-man Socialist-Liberal Cabinet despite the absolute
Conservative majority in the Assembly A week later however on
August 31 a counter-revolutionary military movemont broke out in the
north and the counter-revolutionaries captured Quito on September 2
134middot Colonel llancheno resigned the ActinG Presidency and dis
appeared the sa1ne day Dr Suarez Veintimilla who had been Vice
President under Dr Velasco and the former conservative Uinister
resumed control of the GoverPment Next day September 3 a Council
of State in Quito declared that Dr Velasco had by abandoning his
post terminated his functions as Chief of the State Dr Velasco
howeverJ vrho middotwas by this time in the Argentine declared that his
remo~al to Colombia had been forced and announced his intention of
returning to Ecuador to resume office
1~ On Seytember 15 1947 a Secial session of the Zcuadorian
Concress accepted the resignation of Dr Veintimilla and elected
Senor Carlos Julios Arosernena head of the Banco Ce Descuento at
Gua~raquil and a non-party man as Vice President with novers as
Acting President until September 1 1~48 Senor Arosemena formed a
mainly Liberal Cabinet with one representative each of the Consershy
vatives and the Socialists Coneress also ~onfinned the Council of
State 1 s view that Dr Velasco had forfeited the Presidency by abandoning
his postbull
136 On June 6 1948 Presidential elections were held The
three parties represented vere the Conservatives (Dr Manuel Elicio
Flor Torreo) the Liberals (Galo Plaza Lasso) and the Radical (Genera1
Alberto Enriques Gallo) Final results were announced as
Plaza 115835
Flor 112052
Enriques 53601
Invalid 27 676 289164
137 bull Doubt persisted until this month (August) as to who would
receive the election The Electoral College had been invalidating
votes on technical Grounds and as interim returns and invalidities
were announced it was noticed that the majority of the latter were
being deducted from the Plazavote After conferences the Electoral
College revalidated all votes and conducted a re-scrutiny on less
strict basis Senor Plaza has been declared to be the rfjSident-Elect
by the Ecuadorian Coneress and assumed power September 1 1948 The
middotpresidential term of office is four years
The Vice Presidential results were
Conservative 1anuel Sotomayor y Luna llu008
Liberal Dr Abel Gilbert 113213
Radical Dr Cueva Tamarz 5h07h 28129gt
139 Senor Plaza was born in Nmv York USA forty-two years
ago his fatter the late General Leonidas Plaz~ was President of
Ecuador in 1901-05 and 1912-16 middotSenor Plaz who had been taken to
Ecuador as an infant accomnanied his father in exile to the United
States and attended the University of California the University of
Maryland and the Georgetown School of Foreign Service in ~7ashington
l4o Senor Plaza returned to Ecuador in 1930 and for the next
fourteen years operated the family estates there reclaiming them from
virtual bankru~tcymiddot to prosperous and efficient state He has for
example been active in encouraging the breeding of new cattle strains
is President of the Ecuadorian Holstein-Friesian Association and oper-
ates a butter factory on his estates with a Danish ~anarer He was
ar Minister from 1938-40 and Ambassador to Cashington from 19h4-46
l In executing any policies he will of course be handishyt4
capped by the lack of a fully efficient Civil Service The position
in Ecuador is the same as that in othelmiddot Latin American countries
that the Civil Service is naid on low salary sca1e and lacks compe-
tent administrators Such lack is an aspect of the general shortage
of technical ability in the country
TABLE
1
2 bull
3 bull
4
middot 6
7 bull
8
9
10
11
lZ
13
14 bull
15
16
17
18
19
20
ECUADOR
STATISTICAL APPENDIX
Oil Production and Exports
Cement Production and Imports
Yfueat Production and Imports
Rice Production and Exports
Rice Exports by Destination
Cacao Production and Exports
Coffee Production and Exports
Cotton Tobacco amp Sugar Production amp Sugar Imports
State Railwaysmiddot Lines amp Rolling Stock
State Railways Merchandise Hauled
Population and Roads by Provinces
Budgetary Receipts and Expenditures
Exports of Principal Commodities Volume amp Value
Imports Classified by Groups Value
Exports by Destination Value
Imports by Source Value
Balance of Trade by Major Regions
Exehanee Reserves and Banking Position
Price middotIndices
Status of Ex-Im Ballilt Loans
ECUAIOR Table 1
Oil Production and Expomiddotrts
(thousands of American gallons)
Crude ou Gasoline Produced EJtported bullRefined middotproduced
1938 94586 78696 15500 41654
1939 97125 68819 17679 bull 141
194o 98654 70~99 23001 6162
1941 65382 38362 25914 6462
1942 95671 68516 29489 72l7
1943 97211 65003 34635 8076
1944 121469 82520 38083 8927
1945 109855 73897 38752 10059
1946 979+7 52412 45213 12271
1947 99140 39359 53949 16587
Source J3o1etin Banco Central del Ecuador
ECUADOR Table No 2
1929
1937
1938
1939
1940
1941
1942
1943
1944
1945
1946
1947
1948
l First six months
CEMEHT PRODUOTIOllT AliD IMlORlS (metric tons)
Production Imports
17782
15699 10082
14254 13373
14249 12013
16512 10935
17213 2_846
19802 so98
2756o 933
34691 1590
37504 953
38496 3114
33231 14941
20484JJ
Sources Production Eoletin Banco Central del Ecuador Trade Ministerio deEconomia
Total
25781
27627
26262
27447
20059
24900
28793
36281
38458
41610
ECUAJX)R Table J
Wheat and Wheat Flour Production and Irraquorts
(thousands of kilos)
Wheat
Production Imports Exports Consumption
194o 28120 bull 73 28o47 1941 24578 36 24542
1942 24265 bull 76 24189
1943 22034 22034
1944 23251 912 24175 1945 23115 2733 180 25667
1946 25852 4532 23 30361
1947 2lo66 494f)J 11
Vfueat Flour
1938 10743 9981 na
1939 7864 16638 na
1940 7996 8-592 275 16312
1941 7225 11823 286 18762
1942 7 161 23497 161 30498
1943 7461 9862 17322
1944 5216 24023 29239
1945 5174 25137 30311
1946 7~38 11313 g 18813
1947 5943 1886) 4Y
Less than 500 kilos Y First 6 months
Sources Ecuador en Cifres a~d Ministerio de Economia
~emiddot 1926-30
1931
1932
1933
1934
1935
1936
1937
1938
1939
1940 -middotmiddotmiddot
1941 ~ )~ (1
1942
1943
1944
1945
1946
1947
1948
~iiampn-sect00-lfmiddotks
-~Jrst~middot-nsmcnths
gJ Provisional
(B EQUOR
RI03 PRODUCTION ApoundP ~OR~S
Vo1wnfJ Production middot E~orts
(metric tons)
26)04
23584
29863
39270
39008
31699
39036
52136
44027
40144 ltit middotmiddot~ 0 56596
5873
100949
ao6o7
53168
102048
112711
047
8255
3842
6449
5282
22907
8734
12)3
2ooso
962
18343 t - ~ J
20546
32028
46992
64604
29318
66918
6~209fl middot tloo 1
$ bull
tt ( r t
z
Value 3xoorts
(thousand sucres)
1881
936
6667
10864
6555
14632 pound 170
23265
51460
93837
127105
60395
203243
2rfjuft
Sources Production Boletin Banco Central del 39uador~ Trade Ministerio de Econom1a~ ~r- ~fl ]r bull ~-middotmiddotmiddotmiddot f ~~middot~---i
Average Destination 1937-41
Cuba 2
Peru 13
Venezuela 6
Colombia 4
Panama 2
Jamaica 0
Philippines 0
India 0
Dominican Republic 0
Other Countries 4
TOTALS 31
Preliminary~
RIQ] EXlORTS (in million po~ds)
1943 1944 1945
81 88 5S
20 29 0
0 17 4
~ 0
Rf 2 hi 0 0 0
0 0 0
0 0 0
0 0 0
bullbull ~ 6 6
105 142 6S
R Less than )OOOOOpounds
Table No 5
1946 ~ Jan to~
1~ June-194
46 12 24
0 0 s 17 49 )j
2 13 2
5 4 1
16 1 0
20 0 0middot
0 38 0
0
1 f4~ 2
r middot I
130 13 34
sf Ineludes 6 million pounds to Mexico and 5 million tmiddoto Greece bull middot
1[0
supound~sect8_ Foreigl Crops and Markets Offiee of Foreign Agrtcultural Relations u bull Sll~artment of Agriculture May 3l 1948 bull p bull 402 First six months of 1948 from ibid August 16 1948 p bull 120
Average 191i-15
191620
l921-25
1926-30
1931-35
193640
1940
i941
1942
1943
1944
1945
1946
1947
tf I
ECUADOR
Cacao Production and ~orts
Volume
Estimated Production ~rts
(metric tons)
n (
12108
15middot330
14652
19030
15058
17759
17689
19459
4o625
43547
36825
21319
15980
174o4
11208
14433
13762
18161
13735
16827
16526
Exports ( 000 sucres)
186o9
26073
26746
27531
16647
37424
29354
34365
40327
51794
41985
53547
74935
188208
middot)(et) middot( middot
Sourcesmiddot Estimated production Ministerio de Economia E~orts to 193~ Estadisticas de las Exportaciones del
Ecuador 1940-1942 subsequently El Trimestie Estadistico del Ecuador Number 1
1 ~ Mini sterio de Economia -bull gt(
111 t bull r r (o J bull bullbullbull 1) ( bull
ECUADOR
Coffee Production and Exports
Volume Estimated Production EXports
(Metric TohS)
1921-25 average 5147
1926-30 II 7571
193D-35 10047
1936-40 II 13811
1940 16158 14571
1941 14260 11847
1942 9016 6140
1943 14144 12340
1944 16598 14458
1945 12999 10737
1946 9948 7636
1947 12522 8970
Table 7
Value
Exports 000 Sucres)
59~9
11530
10945
18546
16J83
23827
17278
33176
35626
33863
34839
43524
Source Estimated production - Ministerio de Economia
Exports t~ 1936-40 - Estadisticas de las Exportaciones del
Ecuador 1940-1942 - subsequently El
Tremestre Estadistico del Ecuador Number 1
and Ministerio de Economia
YEAR
1937
1938
1939
1940
1941
1942
1943
1944
1945
1946
1947
ECUADOR
Production of Cotton Tobacco amp Sugar amp Sugar Imports (000 Kilos)
Raw Cotton
9237
7213
7172
8165
PRODUCTION
Tobacco
1519
1106
1875
1028
1359
Sugar
17528
22950
26950
27835
30421
27858
26799
23151
32474
33544
33480
Table B
IMPORTS
Sugar
5310
11068
12387
38
6
33
184
784
21455
3060
Sources Production of Cotton and Tobacco Ecuador en Cifres 1942
Sugar Production and Imports Ministerio de Economia
ECUAOOR Table 9
State Railways
Length Locomotives Rolling Stock (Number)
(Kilometers) (number) 1relght Passenger
Gueyaquil-Qpito 452 39 319 41
Guayenaquil-SalinaJ 150 6 22 24
-~i to-CarcbiY 222 6 23 22
Bahia-Chone 78 3 12 g
Sibambo-Azogues 117 3 6 ll
Puerto Bolivar-Piedras 155l 7 21 10
Puerto Bolivar-Pasaje 55
1199 64 4oy llG
Narrow-gauge line
gj On uncompleted line ~ito-Esmeraldas
21 Of which 4 are rail-cars
jj Of Vihich 61 are rail-cars
Source lviinisteria de Economia
1938
1939
194ltgt
1941
1942
1943
1944
1945
1946
+947
ECUAOOR
Railway Transport
(thousands of metric tons)
Products
Agricultural Animal Mineral Forest Manufactures
1639 19 3 160 122 1034
1318 143 172 138 961middot
1714 144 233 219 1472
1613 184 277 209 1543
1809 224 280 272 1631
1841 280 35a4 376 193-3
2011 250 263 299 C5J7 3
1888 29-5 350 238 2234
1941 29-9 46 bull 4 258 2170
1787 299 51 0 180 2085
Source l3oletin Banco Ce~~nu del Ecuador
Table 10
Others Total
58 3205
58 279l
298 4oso
289 4115
328 4543
384 5168
352 5248
292 5296
37middot7 5508
419 5279
Table 11
Population and Boads
Poeation Roads (Kilometers) Province Jan 1 1948 Main Secondary In Construction
Care hi 86663 1744 1191 1050
Imbabura 158896 1818 2100 1810
Finchincha 350149 4)13 3703 670
Cotopaxi 215232 642 4o6o 970
Tungurahua 222963 2290 1810 300
Chimborazo 29864o 1664 3316 2740
Bolivar 121653 1877 1294 2045
Canar 133971 580 580 1300
AZUaY 284982 1053 2190 630
Loja 238705 1140 4s6o 1430
El Oro 93752 1005 2378 650
Quay as 482843 3900 3367 3700
Los Rios 148428 933 4632 1050
Manabi 381538 3627 1lo61 1970
Esmeraldas 664o5 50 19 0 2840
Frov Orientales 181071
465891 26636 46732 2t3l5bull5
Source Direccion General de Estadistica y Censos
1938
1939
1940
1941
1942
1943
1944
1945
1946
1947
Source
r
Table No 12 ECUADOR
DISOLOS3D BUDGETARY R303IFTS AlfD EXP3NpiTURES
(Total of ordinary and extra-ordinary budgets and special accounts)
thousand of sucres)
Total Receipts
1323204
131699 6
1262710
1547624
1667455
2112614
3145318
4051038
5367822
6696647 11 ~I JJ( middot
Total Expenditures
1429134
1267687
123135middot0
1586615
1489251
2101429
3031038
4174550
5352394
6593858 bull I
aoletin Banco Central del Ecuador
-middot middotmiddot
Diff~reuce
106830
j 49309
f 1360
- 38991
f 178204
j ltll8-5
f 114280
12351middot2
+ 15428
j 10278bull9 r 7
l I 1
L
ECUAOOR EXPORTS OF PRINCIPAL COMMODITIES 1937-47 Table 13
VOLUME (thousand metric tons)
1937 i98 1939 194o 1941 1942 1943 1944 1945 1946 194711
12 200 96 183 20 bull 5 320 47~0 646 293 669 66) 218 191 153 112 144 138 182 137 168 16 bull 5 203 14~ iJI 137 129 146 118 61 123 14 bull 5 107 76 90 48 55~5 53middot3 472 34 bull 2 226 158 1)9 178 35middot511 72 bull 5 345 19~2 251 183 14bull4 13 2 112 103 12~0 132 121 1-4 16 16 15 18 30 22 28 2~0 13 01 14 1middotmiddot9 2~2 21 47 90 136 93 74 28 na
~gt i824) (1387) (944) (1036) (1981) (2516) ( 2756) (4373) (4462) (4947) _01 2849 2454 2274 2201 1201 2167 2062 2513 2446 1640 1358
Ltrates 7~3 140 76 so 3~3 )9 26 10
VALUE (thousand sucres)
610 10864 6555 14632 23265 51460 93837 127105 60395 203242 201111 49985 39bull276 37bull033 29354 34364 40)26 51794 4lt985 53547 74935 188208 24613 16703 15227 16)84 23827 17278 33176 35~26 33863 4839 43 bull 524 5bull691 7558 7t006 6448 4658 _J 107 2159 1898 2872 738~- 24355
18242 7~146 9605 86o6 6120 201 6274 6209 9264 1)02 14994 4048 4300 4298 3~866 6979 35481 23316 38043 26553 15111 979 lt363 2~134 2724 3168 8450 25613 43419 31877 18 bull 509 7125 na 8048 6 234 4981 6509 16231 22121 25191 69033 69J87 81962 4662
21989 26374 25020 24862 13425 24820 23796 28788 28107 18253 15902 trates 10165 16090 13134 38609 27208 29013 18075 809 ates 18682 35297 41204 39907 29426 25374 27476 26457 15482 24858 25334
10774 13210 13495 3 950 16869 32775 2L068 32402 30902 38326 n bull a_
164_045 169096 167148 167851 199704 298690 393115 466631 377894 537131 619859 tmiddotbull bull
Note Dash (---) signifies zero or less than 50 metric tons nly or ~00 sucres ata expressed in quantities other than weight Sourcis 193 data from unpubli~hed Zcuadorian trado stati~tics
at US Department of Commerce 1938 nnd 1939 from partment of Commerce official data Direccion Nacional de Estadistica Eruad6r en Cifras ~7 from Banco Central Boletin 1940 and subsequont ~ears from Banco Centrll jto~n sterio de Economia and from M1nister1o c Economia data furn she
Mission July 1948
~ tobacco tone JgS
articles
11res ilk
al
value of Imports by Groups 1937-Lt-5 Volume and middot~alue of Selected Individual Imports 1937-46
(Value in thousand Sucre~)
1~37 1~38 1~39 1940 1941 ~942
19~731 20~ 375 24~874 16~)65 19043 37~540 5127 7194 1958 6~4e8 5t298 8 118
12888 13Jl5 14522 17702 19556 25~152 21627 25~272 21455 28532 21619 18923 20649 21~593 25559 29437 22636 19~$13 13~505 11961 12~654 15~976 15667 18899 5~829 7 bull 524 6066 9385 833 14353
22912 )0868 24~75 27 t 750 25993 42~916 9376 1028 10038 12118 11345 13932
-bull
131643 148320 1486o 173753 149499 199715 (Volume in thousand metric tons) (Value in thous~tnd sucres)
5middot3 111 124 194 5 bull 534 6385 26 4 24
os 246 -
122 ioo i66 86 118 235 8255 6)88 7449 5076 013 14609
19 07 11 11 14 29 2187 1824 2695 294-3 29J9 8182
101 i4 i2o i09 28 51 804 llJ)6 1667 1546 577 866
~ hides amp skins amp manufactures amp miScellaneous
~~43 1944 1945
33270 70915 82984 6717 8)69 904)
31~700 43196 32~830 17073 53~400 JBoo6 15447 32~624 38797 14~88 18~388 22895 14116 11a99 9812
68928 n~l79 69-113 15856 19186 20042
217983 33ltl56 323524
78 middot 0 2 215 130 12622
09 27 775 2290
99 240 bull 25~1 337 24070 26388
23 46 67 8853 146)1 21699
09 16 10 321 349 246
~s zero or less than 50 metric tons -middotNote Columns may not ahmys add to totals because of rounding Denartment of Commerce official sources - 19)8-42 Direccion Nacional de Estadistica Ecuador en Cifras [inisterio de Economia El Trimestre Estadistico del Ecuador
1946
)1 8135
4 bull 5 )842
114 13123
46 22709
)1 639
ECUAOOR Exports by Countries 197-47 (Value in thousand sucres) Table - 15
1937 1938 1939 1940 1941 1942 1943 1944 1945 1946 1947 --middot-------middot
80458 lt2865 116t-J78 150055 196953 293081 386483 46lt-909 372~549 463~378 sa4~68J 54422 63418 8)254 1t0496 145 bull 558 168585 2)9238 267105 218018 227291 262887
26 20 65 17 2228 78 124 7)41 17173 630 610 949 1281 1055 1)98 5~526 25686 78523 85382 61478 75890 23481
2899 4955 2109 3568 162 1163 4J54 2526 4197 44~ 1450 5027 6335 4972 5i92 5285 7425 4546 7379 10286 9798 15537
1 5 5 17 57 13 291 54 444 574 6996 8 662 9188 8714 13bull764 7238 15316 13900 11223 6~07l 14503 11717 2908 12544 5 730 7896 3767 21215 22608 29233 4243 6703 7965
51 15 24 8 532 3620 1603 539 2336 11579 3749 80 207 862 4070 9991 17096 1275 17~428 6~973 27431 80541
1943 2135 5229 6039 1965 5435 3021 4827 15~702 25~137 51~854 middot 667 740 991 zo83 3358 11412 4286 4282 3~-970 13064 5~864
1799 419 2218 875 2865 12299 9644 14900 13714 9653 11655 J 89 82 2527 1247 964 326 )24 250 41141 2~985
1024 1514 1068 2205 7173 2650 2 744 8871 7694 J2 5811 17 39~ 77029 61869 43688 11945 1503 5550 6335 4108 4075 36783 61998
32) 6)3 1187 490 58 186 2164 4021 J217 35974 29595 11277 69 - 29 4411 7909 6156 3477 1183 5492 4876 26)8 359 1860 7~467
489 255 J2 100 280 1155 1239 1265 3827 3~961 20539 13t521 10802 2254 5 706 4177 6313 2bull610 3615 4251 -middot 2842 13546 lBi 1415 3 758 822 6 188 12962 3592 2531 412~ 162 7~ 10052
8643 1693 3bull521 3~400 2751 320 40 118 231 222 5404 J 4894
6337 4201 6548 5478 1175 5 45 40 1611 50950 6261 4132 5386 5452 117) -
~l - - 15 45988 5 middotmiddot 7S 8 5 25 567 92S 11
33 ~- 76 18 966 151 150 3419
38 29 858 2 45 78 467
(continuation on next naee) middot
~GUJLOR ~xnorts by Countries 1937-47 (falue in thousPnd sucres) T~ble-15 continued
middot-~--- -~-middotmiddot -middot _ middot-- ~~---~~- ---- -middot--~middot--------middot- -middotmiddotmiddot--middotmiddot--193 1938 1939 1940 1941 1942 1943 1944 1945 1946 1947 _I --middot -middot- ---~- ------ middot- bull middotmiddot-middot -
4 7 5 5 5 219 1087
218 153 529 368 73 49 297 569 1230 35140 789 28137
207 144 379 J68 73 49 297 559 1104 605 11 9 10 126 43
150 6355 plusmn
353 54045 169096 167148 167851 199704 298690 39J115 466631 377894 537131 619859
~S Columns may not always add to totals because of rounding
Dash (-) signifies zero or less than 500 sucres
Primarily Guadeloupe and Jamacia
Primarily British West Indies and Netherlands West Indies
Primarily Denmark Spain and Norway
Primarily Java
~ces 1937 and 1947 from unpublished Ecuadorian Trade Statistics at U s Department of Commerce
1938-46 from Ecuador Ministerio de Economia data furnished IBIID rassion July 1948
Imports by Countr~es 1937-1947 Table-H)
ECUAOOR
l937 1938 1939 1940 1941 1942 1943 1944 1945 1946 1947 I (()
Value in thousand sucres) ~ + -gt L520 63151 83984 115382 128423 186958 200061 311989 302~329 363403 517582 j
u t 2086 51311 71950 103214 110422 138729 103583 173776 178821 240233 429906 0
Q) f
811 674 551 2436 1815 3J258 2150 5265 6538 12178 20912 d S Ugt ro c 1 n 4 4144 3042 8 99 14 23 295 178 8~011 210 h middot-1
(- 0
186 324 237 957 2~991 8492 18~376 15~239 17232 10~574 3121 4 middot-2375 2310 1959 2476 3016 4735 7930 7~696 11~201 15~564 14755 sectwfi
middot-1 1 fli 4 6 343 1~823 3J064 4110 3~612 60J5 h 0H
2739 2109 3789 174 2352 7949 9~934 17845 23~ 616 1559t 18~727 ~rld ()
328 164 457 2498 612 733 10892 10902 20003 16684 11981 oc ampl+lll
mmiddota J63 1297 1161 -- - 2 23 115 1~128 1192 d+gt-
2464 507 500 1438 5565 20668 39979 46654 33684 33034 6~486 15~~ (()
na 1 311 2297 5515 130 bull-I m rl bull +gt
15 31 68 245 995 1516 2804 25326 6124 5956 3472 Oltll~
149 280 269 332 550 208 270 389 707 839 655 a~ sect (1) Cl 4-209 72986 ~ 38 09 1433J 9813 16276 15885 1721~9 45194 80928 ~-g 1701 35767 2 7 7 33 1202 67 47 61 19 2 El 0 0 eo g 3250 11462 8094 12980 10124 8108 13634 12513 11984 28392 40983 cent1-t+l~
1803 718 1687 otmiddot r-
4-114 6465 7339 630 475 34 22 2 66 889 7279 t -P () ~led
36o 4685 1573 7144 308 12 682 4824 rlltll ltDno
1~896 2550 1466 1624 64 1 58 5090 bull-1
fJ ~ ~ 1052 1489 794 945 293 224 5 21 1373 9062 9 703 P + na 868 881 423 10 1 8 223 135 r- 0) u
1 r=l middotr-l
1162 4823 1264 1675 877 1017 1~52 2380 3129 4~326 6851 () l=l rl
7274 3074 2609 3595 980 349 1041 905 599 1~543 3~134 cn~oo bull t
724 11939 8983 19951 6239 2281 1439 304 3882 5478 5736 op a cent1-t ~sect rl
173 302 262 238 -w 14 276 -rr 472 ---s9l ctillmgt
259 10949 7810 18190 4414 170 16 4 5 +gtUd ~-- ~
935 712 728 1278 1281 1715 1314 2685 3185 4465 3151 +gtP t-1
530 105 143 221 306 240 95 89 582 541 2089 ~ (f)
1l 21 12 80 1f 196 122 169 125 1J n ~-T~
0
109 218 lllL 250 m 46 sect2 12_ 28 119 112 I ~ --sB_l_ 0 ---- -
643 148315 147860 17353 149499 199715 21 ~ 983 331156 323524 414266 604479 ms may not a1ways add up to t ta1s because of rounding Dash (-) signifies zero or less than 500 sucres ~ country breakdown not given in source g) of which 591 from Syria 2Z3 from China 264 from Straits Settlements 1 Sumatra and 264 from Iran
YEAR
1937l
1938t
1939~ -
1940amp
194H
1942
Exports Imports Balance
Exports Imports Balance
Exports Imports Balance
Exports Imports Balance
Exp(rts Imports Balance
Exports Imports Balance
ECUAroR Balance of Trade by Area 1937-47 (thousand sucres)
fRlSTERN HEMISPHERE including Philinuines
United States Other Total Eurone
54~lt-22 26~036 80~-~-sa 77~029 52086 9~434 61520 64~209 2336 16602 18938 12820
63418 39447 102~865 61869 51311 11840 63151 72~986 12107 27~607 39714 -11117
83254 33124 116~378 43688 71950 12034 83984 54505 11304 21090 32394 -10817
100496 49559 15Cl055 11945 103214 12~ 168 115382 38~090 -2718 37391 34 673 -26145
145 bull 558 51395 196953 1503 110422 18001 128 423 14333 35136 33394 68530 -12830
168585 124~496 293081 5t550 138~729 48229 186958 9 813 29856 76267 106123 -4263
Table 17
Other Countries World Total
6~559 164045 5-912 131643
647 32405
4361 169~096 12~ 178 148315
- 7817 20781
7082 167148 9372 147860
-2290 19288
5851 167851 20281 173753
-14430 - 5902
1248 199704 6743 149499
-5495 50205
59 298690 2944 199715
-2885 98975
NOTE Areas may not always add to world t~tals because of rounding
Source 1937 and 1947 frlttm unuublished Ecuadorian Trade Statistics at US Department of Commerce 1938-46 frem Ecuador Ministerio de Economia data furnished Mission July 1948
(Table 17 continued on next page)
YEAR
12J Exports Imports Balance
1944 Exports Imports Balance
125 Exports Imports Balance
1946l) Expltgtrts Imports Balance
12Z= Exports Imports Balance
ECUADOR~ Balance of Trade by Area 1937-47 (thousand sucres)
WESTERN HEMISPHEL~ (including Phili~ines United States Other Total EuroQe
239238 147~245 386~483 6335 103583 96~478 200~061 16276 135655 50769 186422 -9~941
267105 194804 461909 4~108 173776 138213 311989 15~885 93329 56591 149920 -11779
218018 154~531 372549 4075 178821 123508 302)29 17159 39197 31023 70220 -13084
227291 264224 49J515 36783 240~233 123170 36J403 45~194 -12942 141054 128112 -8411
262887 241796 504683 61998 429906 8676 517582 80928
-167019 154120 -12899 -18930
1 Only year in which substantial Philippine trade
NOTE Areas may not always add to world total becasue of rounding
Table 17 (oonttnued)
Other Countries World Total
29 393115 1646 217983
-1)49 15132
614 466~631 3~282 331~156
-2668 135475
1270 377894 4035 323524
-2765 54)70
8~833 537131 5670 414266 3163 122865
53179 619859 5969 60449
47210 15380
Sources 1937 and 1947 from unpublished Ecuadorian Trade Statistics at us Department of Commerce 1938-46 from Ecuador Ministerio de Economia data furnished IBRD Mission July 1948
~ EXCHANGJ-tAL BANK
ECUADOR Exchange Reserves amp Banking Position (million sucres)
r 4 bull TIC CQEDITS OF CENTRAL BAl~K Domestic Govt Official Bus Other Credits
MOliEY SUPELY Current AC
JJj To()2f (4) Entities Indvls Total Banks of O~mtl Currencl Denosits l (6) (7) (8) (10) (5) Banks amp 11
Indvls (9)
16 10 26 51 1 116 62 64 48 26 7 40 73 4 129 74 66 3middot7 )9 7 29 66 4 144 73 71 37 29 8 24 62 4 159 78 73 56 26 8 22 55 5 183 8l 103 81 37 28 2 8 201) 120 119
152 37 21 22 79 9 255 169 17~ 26) 34 27 22 83 13 378 ZJa 26e )4 60 37 20 117 9 385 295 308 Z5 105 73 11 189 26 493 321 312 282 153 81 10 244 24 536 35middot~ 354 242 104 44 93 241 2 565 329 284
221 110 51 99 260 2 56 313 278 215 102 47 101 250 2 573 )06 294 225 97 45 95 237 2 585 299 299 219 100 44 98 242 1 591 307 297 214 98 35 111 244 4 6)4 315 295
)20 295
on of $12500CC beginning in December 1946 bull
ars
Ttttal (12)
127 14) 144 151 183 239 345 492 602 634 704 613
591 599 597 604 610 614
ge liabilitieS but including Stabilization Fund in 1945 and GolC CertificCt in 194) bull ial banks and fomento banks ial bc1nkst and fomento banks sits of commercial banks and time deposits of fomento banks
Table 18
Govl t Den sits ~L
(lJ)
6 23 12 27 7 28 8 31 6 32
middotmiddot 11 )6 16 57 27 71 41 74 63 98 59 90 66 77
71 8 75 76 6 75 81 75 81 72
72
1 1 Boletin - Superintendencia de Bancos Boletin - Unpublished data furnish~d MF bY Banco Central of Ecuador
Table 19 ECUADOR
Price Indices
WHOLESALE Rents Export Fooa in
YEAR Goods and Quito - Coal ~1) (2) (3)
1937 100
1938 83 100
1939 95 100 153
19h0 95 106 16h
1941 96 113 150
1942 114 146 172
1943 114 183 187
19h4 118 218 219
1945 133 266 254
1946 203 320 315
1947 297 364 516
19h8 (March) 294 379
(liay) 416
(July) 389
llame l~umbar
Republic of Ecuador
Status of u s Export-Import Bank Loans to ~cuador
Purpose
gs of Junemiddot10omiddotl9ltsect
Gross Authorized
Cancel- Net lations Authorized Repeid
Amount Amount Outstandin~ Undisbursed
6J048 6J048
( 262 )16
Haterials equip amp services $ 6480000 $20810 $6459170 $1279775 ~)5-l19middot395 _____ _
ibulliunicipali ty of iui to (Republic of Ecuador)
ibullIunicipali ty of Guayaquil (Republic of Ecuador)
Republic of Ec~ador
Republic of Ecuador
Ecuador DeveloPIlent Corp
Pan-American Highray (Cuenca-Loja)
Agricultural Research amp Experiments
Raihray Equipment
5000000
12JOOOO
50000 200000
)28 Haterials equip ~~ 4000000 services - ater 1middot1orks
)28 iltiaterials equip amp services - ~~rater orks 4000000
J4J Pan-American High1middotray (Guamote-Tambo)
432 uevedo-Hanta Hightmiddotray (additional credit)
1980000
220000
$19180000
Of tlhich $2500000 tts used on the Quevedo-Ibullianta HighTaY
4000000 28880
4000000 167
-1 t-9amphOOO- -7500
220000
6o6120 -h365000-middot
41592 575-t 2-41
-l-y5Q2- 500 44Gooo
220000
IBRD Statistics Sectio spte~ber 24 1948
-7-
be said that comparing observations in Ecuador vrith those made in Peru
and Bolivia Ecuador by subjective judgment compares very favorably with the
tvo latter The Ecuadorian Indian seems to be on a perceptibly higher stan-
dard of life both in the highlands and on the coast than the Indians seen
in Peru and Bolivia Vhile his land holding is small it yields somethi1e
he very freqjl ently possesses livestock such as pigs and chickens has cot-
ton clothing drying on a line a~d often cultivates flowers and keeps
pigeons By American standards he is undoubtedly on the poverty level by
Latin American standards he may be a little off it
24 At the other end of the scale the wealthy upper class are pro-
bably not as wealthy as the Peruvian upper clas~h and the Bolivian elite
in operating in poundcuadc~the upper class lacks the rich property of mines
Thus while income is of course unevenly distributed in Ecuador as else-
wnere the range between the wealthy and the InJian may well be less tban
elsewhere The line of income distribution is of aboat the same slope
but probably significantly srJOrterY
This conclusion cannot be demonstrated statistically It results from a 11feel 11 deri ved from personal observetions in the respective counshytries
-8-
III AGRICULTURAL lROIDCTION
25 Ecuadorian development is largely a matter of increasing the out-
put of and improving internal and external trade in agricultural products
There appears to be no enduring geographic or physical reason ~middotby this can
not be accomplished She possesses soils and climate ranging from the
tropical to the temperate soils which in some areas are very fertile and in
others are in danger of exhaustion To anticipate subsecpent conclusions
her problem of development through agricultural progress breaks doTltD into
separate aspects all involving improved technique
(a) increasing arable yields from areas already cultivated
(b) improving pastures and stock in grazing areas
(c) enlarging both arable and pastural areas (including irrigation)
(d) improving roads in rural areas
26 Achieving these objectives involves providing more adequate
domestic credit for short- medi~ and long-term agricultural requirements
27 In application however interpretation of these problems is very
different in the two occupied regions of the country the Sierra and the
Coastal Lovrlands no generalization can cover both
(a) TLe Sierra
28 The occupied inter-Andean valleys are a region of temperate
agriculture producing almost exclusively for local consumptionmiddot Their
pat tern of tilled fields grazing land trees and flowerJl is almost
Y Flowers bloom all year round The main tree is the eucalyptusmiddot introshyduced some 70 years ago end used for all purposes (~indbreaks fuel 1
and lumber) affording a striking example of the effect of introduction of one plant upon regional habitability-
-9-
Western liiuropean in appearance but not unfortunately in productivity
Agricultural Production of the Sierra
1939 194o 1941 1942 - -(Hundreds of pounds)
Theat 49QOOO 611300 534300 527499
Potatoes 1201000 1476400 1386120 1146000
Rye 72500 79900 159495 115000
Lentels 46000 424oO 37955 csooo Corn 816700 1349300 1308062 1315200
Barley 85)000 795700 903600 911000
Cotton 45000 42020
Kidney Beans 80000
29 In addition about 1000000 hectares (247 m~llion acres) are
devoted to pasture supporting epproximate1y 683000 cattle 145 million
sheEf 107000 STrrine and 320000 goats
30 Yields are low in all Sierrean agricultural activities the
standing VJheat and barley crops are so thin that the ground can be seen
through them Yet the greater part (some 6o per cent) of the people of
Ecuador live in the Sierra and population is increasing at about 2 per
cent per annum The effect upon land use under existing tecnniques is
clearly visible cultivated areas are being pushed higher and higner up
the hillsides (slopes of 30 to 40 degrees being used) and onto the
fJparamon the high plateau betvreen adjacent valleys at altitudes of
11000 feet and higher The result is a picturesque scene but one which
reveals a near Malthusian situation in the man-land ratio rbullrith static
-10-
technical practices It is a situation which cannot remain unchanged if
economic development is to occur in the region
31 There sean to be three possible lines of advance increase of
output from highland areas in present use the bringing into use of new
ground in the highlandsbull or a change to increasing reliance upon the outshy
put of non-highland areas
32 The third possibility is not one for the immediate future It
involves either large-scale migration from highland areas to lowland
regions or a large transport program linking highlands and lowlands
together with growth of non-~ricultural activities on the highlands to
provide a cash income with which to purchase 11 imported 11 foodstuffs This
second possibility may indeed be the trend of ultimate development but
offers no irmnediate easement Large-scale internal population movement
from highland to lowland is probably impossible since the Andean
Indian (of different stock to the coastal Indian) is fullf acclimatized
both mentally and physically to life at high and temperate altitudes and
little suited to life on tropical lowlands
33 The two remaining lines of advance would both seec to increase
highland agricultural output But there is an important difference beshy
tween increasing output from valley land in rr esent use and bringing new
and higher land into arable use The first is a complex problem suscepshy
tible only of relatively slow solution the second is seemingly simple
and capable of quick result yet basically less sound offering only
temporary improvement
34 The thurst onto higher ground is already evident and the area
-11-
taken in could probably be greatly enlarged by efficient use of tractors
and modern plows Such use of mechanical equipment would thus give quick
increase of agricultural output but it is very doubtful whether improveshy
ment induced by these means alone could be long maintained The greatest
~r particularly on sloping land is that deep plowing may lead to
soil erosion so serious that land becomes finally llilgtroductive To use
mecbanical equipment i thout at the same time adopting eqJally modern
methods of soil conservation way well be disastrous and that perhaps
within no long period
35 Even apart from this physical daneer there is the virtual cer-
tainty that new land however plowed would gradually sink in fertility
end hence output unless farmed by better agricultural practices than
those now followed in highland Ecuador The present attraction of the
higher land is principally good natural fertility beine virgin ground
On all other counts this higher land is less advMtageous than the valley
floors the va)ley sides are steeply sloping a1d the fl~t paramo is some
2000 feet higher bare windswept and devoid of habitation It would
seem obvious that it is pastoral rather than arable ground were it not
for the pressure upon arable output of the region
36 The pressure today however rises from the relation betwem
popUation and output rather than that betvreen population and arable
area Productivity in the Andean valley is low and can certainly be
improved If improved the pressgtlre which is causing the thrust to
higher ground is relieved until population increase again overtakes outshy
put Against that time however the higher ground vrould remain
-12-
availfibleY and other lower regions may be coming under effective use
37 To increase output of the populated valleys is not a simple mat-
ter responsive to single policies such as simple mechanization by tracshy
tors It will embrace the wlo le range of agricultural practices from
better seed types to crop rotation and fertilizers including in some
valleys irrigation It is a matter rrther of agricultural education
than of~dtlgagricultural appliances and probably experiment under
the peculiar regional conditions will need to precede education Improveshy
ment will necessarily be slov1 but along these lines it can be sound and
permanent
38 Wher~ lfL mere importation of mechanical methods Vi thout
understanding of their dangers in speeding soil destruction by wind and
water erosion may permanently damage the region The somewhat gradual
mechanization of agriculture is of course to be expected and not disshy
couraged but it is not the wlole answer to development in highland
Ecuador
39 It seems that there is at present no over-all agricultural
lfibor sl1ortage in the Sierra and mechanization is nOt therefore called
for to relieve an adverse manpower position It seems however that
some of the larger estates are experiencing difficulty in obtaining their
labor requirements because Indian tenants are viitblolding quasi-feudal
labor dues and devoting whole time to cultivation of their own plotsbull
As a result hacienda holders are attracted to mechanization as an
escape from growing difficulties in obtaining and supervising labor upon
Y As it would not if destructi ve1y formed at this stage
-13-
their ovm land To the extent they are successful the tendency for agrishy
cultural money vrages to rise is weakened
4o There vrould seem to be good possibilities of increasing pas-
toral agriculture in the highlands 1Jrith improvement in both numbers and
strains of cattle and sheep If adequate arable development occurred in
the valleys the main grazing grounds could be the higher land not then
required for arable purposes ~lith dairy cattle on the valley margins or
on valley ground not well suited to arable use Such pastoral development
would be desirable not only to imp1middotove nutrition in Ecuador itself 1 but
as a possible new export of meats fats and hides to meat deficient
Republics notably Peru Early export would probably be on the hoof
along the Andea1 ridge it self
41 The Ecuadorian Government has not included any explicit propo-
sals for highland agriculture (other than irrigation) in its present apshy
proach to the Bank It has however suggested the Bank finance $1 mil-
lion of agricultural tractors and equipment to be handled by agriculshy
tural stations located at strategic places both in the coastal
provinces and the highlands 11 without further elaboration of the
intended highland use of such ecp ipment The description given above
suggests that the usefulness of agriculture machire ry depends to a conshy
siderable extent on the place plan and purpose for rhich it is to be
used
42 In some of the highland valleys (for example in Cotopaxi end
~ound Biobamba) rainfall is deficient and irrigation would increase
valley output by bringing more valley ground into effective use This
- 14 ~-
is clearly sound for flat valley ground already populated is more useshy
ful than higher sloping and more exposed ground The Ecuadorian Govern
ment has included purchase of eq1 ipment for irrigtion works to the value
of $500000 in its present approach to the Barik Assessed against the
requirements for economic development the request is sound provided of
course such equipment is effectively used
(b) The Ooast
43 The condition and nationel significance of agriculture on the
tropical coastal plains is quite different from that ltNl the Sierra The
area as a whole is less densely populated and in some parts such as the
Province of Esmeraldas is very sparsely populated Its principal pro-
ducts are exported The population has more mixed blood than the highland
people and is oore corumercially active and minded There is little feel-
ing of community of interest with the highlmds the rrincipal coastal
city GuayaqJil is larger than Quito and less remote fror-1 outside
influence
44 In terms of reported area devoted to its cultivation cacao
is the principal crop of the coast The table on the following page
shows output of main crops
45 Cacao is not however the most important export crop by value
being surpassed by both rice and panama rats (a handicraft product of the
region) Nor does the table show those products which result from
gatherage of mild growth tagua kapok oil-bearing vegetable nuts
balsa rood rubber etc
Y For use by the Caja de Klaquogo as required both in tile highlands and on the lowlands
-15-
46 Agricultural Production of the Coast
1939 ~ 1941 1942
(limdreds of pounds)
Rice 957164 872890 12304oO 1610489
Cacao 392000 263300 333250 315782
Coffee 343800 369000 310000 190633
Bananas (1000 bunches) 4090 3913 4568 4265
Oranges (COOs) 103000 lQ96oO 80550 75000
Cotton 200800 156800 155910 111500
Tobacco 24o43 4o 765 22349 29539
47 It has been estimated that about 500000 hectares (1 235 500
acres) are devoted to pastures on the coast supporting approximately
425000 cattle and 36000 swine
48 There is no doubt that the coast is an extremely rich agricul-
tural area although toward the south it is increasingly hampered by
shortage of water in the dry season And rt is overwhelmingly the
principal foreign exchange producing region of the country Yet it is
largely undeveloped by any modern standards lacking roads and almost
all basic civic amenities (water supply sewage paved streets etc) in
the provincial towns The development of a tropical agricultural region
without large labor supply _rill raise many interesting and some new
J Irrigation ~rks are in execution and others planned in various places and the irrigation equipment which it has bee11 suggested the Bank might finance would presumably be used on the lovlands as well as the highlands
-16-
problems the solution of hlch in detail may lack precedentY The
suitability of cacao to Ecuadorian conditions arises in part from the very
small labor requirements of the crop At bottom advance will lie along
the route of crop improvement and mechanization the difficulty will be
the proper application of mechanization crop by crop Some tropical pro-
ducts may never be suitable for mechanical cultivation being those whicl
would require intensive hand cul ti vat ion and may therefore not be appro-
priate for Ecuadorian condttions Others r1JJi3 be suitable only if grown on
relatively large plantations
49 Clearly for the foreseeable future many lowland products will re-
main at the stage of gathering of nld natural growth rather than plantashy
tion enterprise The flow to market of such productswould be increased
by improved access notably road core truction anQ at the same time road
building ~~uld seem to be a condition precedent for spread of plantation
methods particularly plantations using mechanical equipment lilliE diate
measures for the over-all agricultural development of the region may not
be directly agricultural at ell they are rather the provision of roads
and transport facilities the provision of long and medium term agric-llshy
tural credits and in some areas) the institution of health services
With the opening up of the region in this manner iiould come more clearly
perceived opportunity for better agricultural use of the land particu-
larly if effective demand for the products is transmit ted back to the
cultivator through establishment of product processing plants where approshy
priate for example in vegetable oils and tagua (vegetable ivory)
] This is the situation which in Brazil for example in an earlier technical epoch was 11 solvedll by importation of Negro slave lebor
-17-
50 As in the Sierra there are good possibilities for pastoral
development on the lowlands Some progress is already being made in this
direction with experiment in breeding more suitable cattle types through
crossing 11Ji th imported Indian brahmin strains Grazing for beef is not
highly labor intensive and this development is very promising since
export to other Republics by sea llould be reltti vely easy In the first
stages export would presumably be upon the hoof ith later development
of meat packing
51 There seems to be no single bottleneck or restraint upon devel~
ment presently existing all other conditions being favorable If developshy
ment occurs it will be along many simultaneous fronts but the front iJhiclf
is lagging and Inayen continue to lag is the provision of basic social ccp ishy
tal (roads water supplies health services etc) that is of those
things which no single private individual or corporation can provide for
itself Given these and the institution of suitable domestic credit
fecilities the rest may be accomplished by private domestic ini tiat1ve
52 The development plans of the Ecuadorian Government as outlined
in a Memorandum dated April 8 give much weight to lowland agriculture
The establishment of agricultural stations to provide farmers wi~h
disease-resisting cacao plants~ tecl1nical advice and credit facilities
is CD ntemplated no foreign exchange would be recpired all funds being
local currency The rehabilitation of cacao formerly a leading export
crop is desirable although development of cacao sources elsewhere may
prev~nt recapture of the position formerly held by Ecuador
53 A proposed agricultural mechanization programwoUld total
- 18
$25 million in foreign exchange cost )J The bulk of this ($1 5 million)
is allocated to wechanization of rice cultivation alone the benefit being
principally in resulting improved export position The remainder $1 milshy
lion is for mechanization of other agricultural produc~s apparently
mainly lowland (those products specifically mentioned being 11cotton sugar
oil-bearing seeds and other specified products11) the exclwnge benefit
forecast being principally through reduction of import a
54 Different criteria ~~ould be used in assessment of these two
projects The judgment on that for rice will depend upon forecast of
world rice markets and in particular upon expectations regarding rorld
demand for rice from the dollar area The validity of mechanization in
cotton sugar oil-bearing seeds and other lowland products will depend
first upon the technical possibilities for such mechanization a matter
not yet fully explored If sudl technical possibilities are favorable
effective mechanization vOuld constitute sound development upon the low-
lands which are relatively sparsely populated
Y Some part of which would be for the benefit of highland agriculture if machinery stations be established there
--19 -
IV MI-~RAL PHODUCTION
55 Ecuadorian mineral nroduction covers only a few products and
important the wells of the lowlands being exploited by the nglo-
Ecuadorian Oil Comany Production of crude petrolewn shows a slicl1t
rising tendency while exnorts have declined steadily a~ more refined 1
products are consumed domestically
56 Oil exploration to the Iast opound the Andesin the Amazonian
region is proceedinc under concession to tl-1e Shell Oil Go1~1any
Three wells have been drilled without success and tvro arc beinc
deepened Cost of this exploration to ciate j_s around US)23 million
If oil is found its only outlet middotwill be a pipe line over Ue Ances
(estimated to cost USiD93 million) and this the comany is not -rE1inz
to undertake unless assured of an outnut of at least 100000 barrels a
day
57 The only other irnrJortant minine activities are those of gold
silver conper and lead conducted by the South ~~erican Develoument ~
Company and the Cotapaxi Sxplora tion ConJ1any War-time lr oduction peaks
were 1942 for gold and CO)per 1944 for silver and lead Since these
resective peaks production has ~-~clined narticularly in copper and
lead although not to 1933 lsvels7
crude petroleum II II
1938 (millio~1s of 225 107
Production Exports Production refined petroleum 37
1947 barrels)
236 bull94
128 (See Table No_Jl_ Statistical Appendix
Production Gold (000 troy ounces) Silver (000 troy ounces) Co~per (000 pounds) Lead (000 pounds)
1938 445 82~0 27 21
War Peak l03tJ hhl3
96788 161-+88
19h7 5o5
1569 3316 h98h
-20-
58 Ecuadorian trade statistics list exports of crude pet~middotoleum
and minerals separately from that of other commodities even in aggre-
gate figures underlining the fact the exploitation is in foreign hands
and hence colonial in nature This aspect hmmiddotever is of di-1inishmiddot-
ing importance as now the foreign exchange realized from such mineral
exports accrues to the Central Bank and as in any event nineral ex-1)
ports form a diminishing proportion of the vhole 7
V ~JNUFACTURING PEODUCTION
59 There are virtually no stCltistics on manufacturing in Ecuador
and none which present any comprehensive view It is ho~middot-rever clear
that there is very Uttle industrial factory prJchJction and obser-
vation in the country leaves one with an impression of the nresent
igtilportance of handicraft production
60 The most inportant consuxner-good factory industrj_es are tex-
t~~~breweri~-~~ otheuro7r beveraces shoes ard leather _roduc~s buttons ~d~lttfr
and nails Textile production using domestically produced cotton pro-
duces cotton piece-goods and wool rayon and hemgt textiles supplying
almost all domestic demand for low-quality products The only irJDcrtant
producer-good factory industry is cement the plants being located near
Guayaquil Lack of domestic technical lmow-how and of capLtal and
the low level of domestic effective demand account for the sli~ht develop-
ment of faetory industries whose rrowth on any scale beloncs to a 1ter
stage of economic development
y Value of nineral exportsmiddot as nercentare of value of all exports 1929 260 nercent 1933 430 n 1939 397 1946 11~5 1947 69
Production and irrport statistics for cement tre civen in Table IJo bull 2__ Statistical Appendix
- 21-
61 Uuch of finished commodity ygtroduction is at the handicraft
stage both for nroducer and consumer goods In Quito and Guayaquil
one sees many small 11 shops11 producing metal leather and wood manushy
factures largely by manual methods It is an illuminating co~~entary
on the shallow growth of industrial specialization that the ll1ission
did not see any shops selling ready-made womens clothing All
womens clothing shops displayed only materials in the bolt as in
pioneer days elsewhere
62 One handicraft industry of great importance in exports is
the production of panama hats It has been estimated that 30000
families are occupied vrhole or art-time upon this nroduction and
at times (for example 1945) they have provided the largest single
export item by value The grmvth and treatment of the fiber and the
weaving of the hat is entirely an Indian handicraft industry the
Yteaving of a high-quality hat taking three months The fiber is erown
and the best hats woven in the lowlands Its future ir-mort nee is unshy
certain as the competition of Italy and the Fhilinpines is again felt
in low-_)rice woven hats the boom emjoyed during the war nay recede
63 Ecuador in its ~resent and foreseeable development is an
agricultural country with no immediate movement toward industrialization
EcuAdorians met by the Mission themselves stated this The growth of
factory industry will be slow that of small shop and handicraft manushy
facture somewhat less slow It vmuld seem as stressed later in this
report that there is room for grm~h of processing of agricultural
products Statistically such processing would be classed as industrial
production but is oroperly the finishing stage of agricultural productior
- 22-
to secure improved durability and portability of perishable products
This would increase effective demand imnacting upon the farm and ass1st
in stimulating agricultural development Some progress being made in
this direction notably in vegetable oil expressing plants Ihe only
non-agricultural project suggested by the -r~cuadorian Government has -eer
a cement plant located in the highlands at a foreign exchanr~e cost of
$2 rrillion the justification being both the saving of foreign exchange
expended upon cement imports and reduction of load upon the only railshy
way connecting lovrlands and hichlands Growth of cement use accompanies
economic development assessment of this project (engineering questions
apart) would involve tainly questions of timing location and finance
matters which are really all aspects of the single question whether
such a project may not be one for private direct investment Initial
expectation would be that were all factors favorable to the success of
the project it gtlould be readily undertaken by orivate enterprise
particularly when it is remembered that railway freiehts 1bullrould protect
highland production from lowland competition
6h No sueeestions regarding increase of electric power output
have come fror1 the Government indeed the official statistical services
have no data upon installed capacities and demand Cnly in Quito and
Guayaquil are present industrial uses of electric poler of any ir1portance
Elsewhere suIJply is from snall municipal plants (mainly therraal) for house-
hold consumption It appears that demand mar be ahead sunply in cost
towns very frequently voltages are maintained around 80 instead of the
rated 110
- 23 -
65 Shortage of electric nower is not however hamoering
economic development at this stage although it may soon do so in
sevral urban centers such as Qui to and Hiobamba Sone ttne i-1 the
iuture the possibility of large hydro-electric vrorks on the eastern 1
side of the Andes will merit attention
y Where the rivers are fast and clear on the western side they carry much silt
- 24-
VI DmIESTC THANSPORT AND COilERCE
66 The space devoted to agriculture in this report reflects its
importance in the Ecuadorian economy As has been said further developshy
ment will for sometime be mainly agricu1tural
67 Present restraints upon that development are not located
solely or perhaps even nrincipally on the farm there are many
features of the general economic environment which operate to hamper
even purely agricultural development There is great room for improveshy
ment of transport to knit the economy tocether and to encot1raee grovrth
of output
(a) Transport
68 Without roads there can be little regional or inter-regional
intergration Fithout that intergration (which for some regions and
some crops would open upon the world at the gatewa~r of a oort) there
can be but small inducement andlittle opportunity of increasing proshy
duction In much of Ecuador the principal transport vehicle is the mule
whose patience and endurance under heaJr load is matched by that of the
Indian
69 As regards roads the requirement is both more roads and
better roads capable of bearinr modern vehicular traffic The roads
traveled by the 1Jission are uniformly bad both slowing traffic and imshy
Ilosing extraordiPamiddoty vehicular de_reciation Ultimately no coubt
there vdll be an adequate system of all-rreather roads in Ecuador For
the immediate future the more modest tarset is to attain a reasonable
system of roads civine access to the creater art of roducine areas
- 25-
in the dry season At present the unsurfaced access roads are cut to
pieces by --vater erosion in the wet season and consolidated somew1at
traffic in the dry season A single eradinr operation smoothin thE
dirt surface at the end of the vret season would ci ve accelJtable usashy
bility in the dry )eriod v1hich in the populated coastal rovince of
icanabi for example is eight ~aonths of the year At -_resent the so1e
transport link for corunodities between loYrlands and the hihlands
is the Guayaquil to Quito (and beyond) railway This link is nrobaoly
nearing saturation point vdth present equipment and its strencthening
both by railway imJrovement and all-middotweather hichway construction is
obviously desirable it middotill probably become essential yri thin five
years
(b) Commerce
70 Physical transport alone hogtever is not the only ope c-ation
ofcarriaee required to intecrate a reeion internally and to bind toshy
cether the various regions There are also tL physical and the finanshy
cial aspects of comr1odity holdinr involving the storae and vrhere
necessaFJ the partial processing of products to reduce perishability
and the avail~bility of mechanisms of short-term finance extendine over
crop periods In Ecuador these tro aspects are closely related
71 Apart from some export crops there is virtually no crop or
food processinG undertaken And in the export crops processing
is the minimum necessary to secure portability Eice is nilled but not
polished cacao is sun dried coffee is dried and within only recent
years washed fruit is exported whole Some new e~Jor-ts may require
further processing and installation of plant starting or is in
- 26-
advanced discussion for example vegetable oil processing (although
for sometime no eXport surplus of vegetable oils is 11~11 and fish
canning
72 Nor is there any important ~recessing of domestic food pro-
duction for home consumption bull There is no freezing or canning of meat
which is taken to market on the hoof There are only two or three
very small butter factories and no whole milk orocessing Cereals
of course are not highly perishable but there are no silos or granarshy
ies and experience of similar situations elsewhere suzfests that losses
by deterioration and infestation may be significant no direct evishy
dence anthe incidence of this factor in Ecuador ~as obtained by the
Mission Thee is little storage of grass on the coast in silos or
as hay and in the dry season slaughter of cattle because of lack of
feed is at times necessary In short the situation is not so very
dissimilar to that ofmiddotmedieval Europe
73 Roads alone would not create an environment favorable to
change in this position although lack of roads nar well inlibi t change bull
In addition suitable credit facilities for the finance of co~~odity
holding through time are necessary
74 Hany complaints were voiced to the Hission reearding lack of
short-term banking credit for crop movement and storage and for medium
and long-term agricultural investment and no doubt there is signifi
cant lack of such credits But this is not the result of some simle
institutional defect of the b~~inc and credit structure even though
institutional improvement may be necessary It is fundamentally a
- 27-
reflection of the fact that Ecuador is extremely poor in disposable
capital available for even short-term investment ie vrorcing capi-
tal Improvement of short-term credit facilities for what in advanced
communities are regarded as purely commercial purposes would in effect
represent an increase of capital intensity in the Ecuadorian ecororny
To the extent that banks met more fully the gtJeak seasonal credit re-
quirements for croo movement and storage individual nrivate reoources
are relieved of the 1eak burden and available for other investments
75 Thus iorovement of the techanisr by 11hich the banking system
provides working capital for corrtercial or inciustrial (in the sense of
crop processing) purposes is itself an act of investment rather than
merely an institutional rationalization ilnd as such carry the
usual consequences of investment in an undevelogted economr with very
law voluntary savings To the extent that additional credits are not
matched by savings sewhere (either voluntary or forced through
taxation) they will be inflationary in effect just as an
additional act of long-term investment would be Increase of banki1g
nrovision of workinrr capital should keep step with totl capital for-_ - - 1 mation of which it is one aspect7
It is implicitly assumed in the foregoine that at nresent in Ecuador the amount of small voluntary savinrrs is neclicible It vrill presumably not alrmys remain so and ~Jart of the modifications of the bankin~ system shou1d be attract Clli1U1 atively such sav-ings in the fom of savinc do)Josi ts This 1muld increase the extent to which Danks can safely flovide capital It will be a much later before small private savincs are directly in-vested in commerce or industry throuh joint stock r1ethods There is no stock-exchance in Ecuador
-28-
76 It is of course just as important that the availabi lity of
working capital should not lag behind as it is that it should not run
ahead The Bank should ensure that any long-term investment projects it
may assist to finance do not effectively starve the rest of the econo~
of working capital in the process of avoiding inflation
77 There is also the question of the price of short-term lending
that is of the level of interest rates The Ecuadorian is a highshy
interest rate eoonomy The legal maximum for commercial short-term loans
is 10 per cent having recently been increased from 7 per cent legal
maximum rates however are not systematically enforced by commercial
banks themselves At a time when the legal maximum was 7 per cent
going rate for 90 day loans secured upon properly warehoused commodishy
ties and with third party endorsement was 12 pe+ cent
78 This very high structure of interest rates seems open to
obvious criticism but is in fact probably not Tiholly unjustifiable in
the present conditions of Ecuador It is the cumulative result of many
factors so that more official prescription of lower rates would be
quite ineffective These factors seem to be
(a) Interest proper~
(b) layment for risk bearing arising in part out of a
low rating upon individual credit and in part from
the institutional conditions (such as embryonic
commercial and financial ruarkets) which seriously
reduce the liquidity of any asset other than money
itself
-29
(c) An clcmmt 0f discount 111nn cyectcd luturc irf] utinn
reducing the real value of the pa~nent for lending
(d) An element of monopoly which upon purely subjective
judgment may be the least ilJI9ortant of these several 1
factors7
(e) The real shortace of capital whether short or long--
term~ reflecting in interest rates as a genuine
scarcity price
79bull Of those factors the di~ount upon expected future in-
flation increases prices at a rate of 12 ner cent per annum a money
interest rate of 12 per cent per annum is a real rate of zero If
therefore inflation could be controlled a substantial reduction of
money interest rates could be hoked for At the same tine while
inflation continues high interest rates probably have small influencemiddot
in encouraging money savings
80 Even without inflation ans until the su~1ly of available
real capital improves relatively high interest rates may well be
acceDtablemiddot as a price mechanisn nethod of selectin~ most urofitable y ~
uses of limited fundsbull middothere exoected urivate nrofit did not seem l - -
to parallel social desirability loans at lower rates (ie subsidized
terms) could be made perhaps through reconstituted Development Banks
Prima facie however such loans 1bullrould not be short-term
~I -Onthis interprepoundaion the situation in Ecuador differs signifishycantly from that in Peru
tt is suggested that a powerful point of intervention would be to limit commercial banking dividends distributed to not more than say 7 per cent The high profits nmv earned by commercial banks would then progressively accumulate until liberalization of lending becomes virtually forced by accumulation of funds representing genuine corporation saVings
- 30-
81 The discussion of private finance has so far upon
short-term credits there is an even larger nroblem in the
intermediate and long-term arricul tural credit It is not necessarr
to expand greatly upon this since it too is a consequence capi-
tal shortage
82 Imnrovement would seem to be alonrr the route - 1 of nroper UElte
of existing Development Banks (or their successors-) effectively
in the earlier stages as lending agencies of Government
VII OFFICIAL DEVLOPHl~NT FHmiddotIfJCE
83 In the circurnstances of a country like Ecuador the greater
part of domestic capital forr1ation requires official directly
or indirectly if it is to occur on any scale are too
small and too narrowly held to permit much -rowth this roL1te
andthose few who are able to save at any sinificant rate are larely
uninterested in the efficiency of ~reduction
84 Official finance may be either direct or indirect direct
throueh works executed by Government or 0JUblic bodies indirect
throueh lending institutions such as Dev~lopment Banlcs capitalized
from public funds In either case funds are diverted to investment
purposes by Govern~ent intervention
85 Thus Development Bank lending for productive purposes (for
example long-term acricul tural credit) is an item 1n ca9i tal formation
V There are thirteen reaional Development with an unirnJresstve record of manaeement Their possible reconstitution is under discussion
-31-
rather than a mere institutional rationalization of the credit mech-
anism Indeed as has been stressed in the last section even im-
proved su1nly of short-term credit gtrill in art rewesent
formation A developing economy which neclected these items in 11Cnn21~~
or forecastinc total caital investnent would be very vulnerable indeed
to inflation induced by over-investment
86 17here voluntary savings are Jow the only wmiddotamiddot to sirnificant
rate of capital formatton can emerge without inflation is an equi-
valent amount of savine forced throurh taxation One ould look for a
relatively hirsh level of taxation to national income and for a rela-
tively high proportion of exnenditures caDi tal purposes to total
Government expenditures On both these counts Ecuadorian elq)erience
seems irare s si ve
87 In 1946 total budretary and spedal revenue rms disclosed
as 5368 million sucres in the sa1le rear an estLnate middotJaced national
income at 20096 million sucres This a proym~tion of 27 middoter
come a proportion so hich that in fact it lacks credence In assess-
inc total tax burden part of the revenues of Government monorolies
and all of municial revenues should be included if this be done y
the proportion becomes 37 per cent In addition new exchance taxes
yielded 973 million sucres in 1947
Mono_)oly participations (ii direct disbursements for public _Jurposes) were 353 million sucres in 1946 munici~al income was 1803 million sucres in 1947 (1946 not available)
32-
88 It is very difficult to accept the conclusion that Ecuadorian
revenues form so high a proportion of national income it would seem
that the estimate of national income is too low Nevertheless tax
revenues are clearly a sizable percentace of national income
89 At the request of the Mission an official estimate of total
official expenditures on capital account was prepared Total income of
Government municipalities provincial councils and other public
entities was ~iven as 7S4 million sucres and total capital expenditure
from that income as 2237 million sucres or slichtlr over 30 per cent
of revenuesY It is difficult to feel confident that effective capi-
tal formation on this scale actually occurred certainly there is
little evidence visible to the eye of the t1middotaveler
90 Notwithstanding such doubts the fiscal evidence is of a
fairly hich proportion of tax revenues to national inco~e and of a
hich proportion of revenue allocated to capital investment It would
seem that the fiscal mechanism exists for domestic capital fo~~tion
what may be required is more effective expenditure of allocated funds-
Before a development plan envisa~ing the expenditure of still more funds
was adopted it would be desirable to examine closely administrative
and technical efficiency in the use of existing funds
91 On the side of revenue Treasurr officials informed the Mis-
sion that tax evasion was estirnated at some 30 per cent of ta revenues
1 This makes such capital expenditures 112) per cent of 1946 national income which a~ain seems very high indeed
The two largest items are Government public works (8)4 million sucres) and municipal works (900 million sucres)
- 33-
particularly in income and land tax It might well be advantareous
on the sides both of revenue and of expenditure for Ecuador to obtain
technical assistance of the tPe that the United Nations Department of
Economic Affairs rendered to Venezuela in 1947~Y involvinpound revision
of the structure of the budget of budcetary audit practices and the
like
f Report~d in UN Document ECN 1SubJfti 4 - 21 June 1948 lostricted)
- 34 -
VIII 001EHNl(iEi~T FINANCE AND INRATlON
92 What may be called 11multiple budget practices exist in Ecuador
as in other Latin American countries There is an annual Ordinary Budget
one or more Extraordinary Budgets( tro in 1947) end a number of Special
Accounts (twenty-five in 1946) not included in the general budgetary
accounts The State operates nxmopolies in tobacco liquor salt and
matches part of whose profits are taken into the ordinary budget as
revenue and part used directly for public purposes It is thus diffi-
cult to assesrmiddotgggregate Government revenues and expencii tures and vir-
tually impossible to detail the purposes of expenditure to ascertain
accurately public capital formation by way of public morks and the like
9 Taking the disclosed figures on the ordinary and extraordinary
budgets and tne special accounts there has been a net surplus over the
past ten years 1operations of 234 million sucres~ This however is
not an accurate reflection of the true aggregate position because the
Government operations are not ~holly included in these disclosed ac-
counts But since the Government has no source of internal funds other
than the Central Bank the net recourse of Government to Central BanJJI mirrors the over-all result of Government finance such recourse increased
In 1946 for example the monopolies contributed 5357 million sucres to the general revenue and disbursed 3526 million to municipalities (145 million on general participation and 1652 million sucres for 11 special participation of gthich an example is a new electricity plant at Ambato the state railways (92 million) etc
gj iiith only three years of disclosed deficit since 1938 See Table 12 in Statistical Appendix
2 Central Bank loans middotto Government less Govertllllent deposits in banks
- 35-
480 million sucres over the nine-year period 1939 to 1947 inelusivel
an average of 53 million sucres annually amplch averaging however con-
ceals very important differences between the three periods within the
nine years to tal
94 The table on the next page sumnari zes the factors causing in-
crease of domestic money supply It is computed by rearrangemm t of the
balance sheets of the Central Bank all commercial banks and all developshy
ment banks and is thus a table shoring changes in items in a rearranged
aggregate balance sheet of the Ecuadorian banking system
95bull The first t70 periods 1939-1943 end l943-l946f were both
periods of heavy inflation_ During the first five years notes in cir
culation and monetary deposits increased 3437 million sucres (or 255 per
cent) and in the next three )eera 2904 million sucres (or 61 per cent)
But the causal structure was quite different in the two periods
96 In the first inflation was almost wholly induced by external
factors (favorable balance of paYments causing increase of foreign exshy
change holdings) the major domestic factor being expansion of commercial
bank loans and investments in this period deficit Government finance
was not a causal factor
97 In the next three-year period 1943-1946 however the major
inflationary factors change deficit Government finance and expansi on of
f As calculated by IBRD Mission loans to Government including ali loans to official agencies A recent calculation by the IMF Research Departshyment covering Government operations only places the aggregate 9 years deficit at 345 million sucres~ See Table 12 in Statistical Appendix
- 36-
BANKING CHANGES ~0015 SucresJ
Jan 1939 Jan 1944 Jan 1947 Jan 1948 to to to tomiddot
Dec 1943 Dec 1946 nee 1947 June 19h8 t~ ~arsJ ~~ iears) trmiddot ~~r1 t~ mo~~h~2
Central rcrk loans tomiddotc~vt~ f 16174 f 160260 - 701p88 23695 Central B~r~ Loans to Public -1 6978 2_283 1- 67548 1- 39763 Commercial Bank Loans and
Investments J 187554 f 14624 88h4 1- 2~ ~49 Development Baru Loans and
J 14227 136818 ~ 644 1- 26090 Investments
1 224933 f 313985 11)40 1- 68107 Net Bank Foreign Exchange 260774 f 94662 - 53203 - u6 112
7 485707 7 408647 I
7 bull - 64543 21395
Notes in Circulation f 16o907 1-131729 - 23205 - 17290 Public Monetary Deposits -A 162868 1- 128914 - 68734 1- 19620 Government Deposits f 19968middot 29768 9050 2366
7 343743 7 290411 82889 - 36 Public Time Deposits 116834 ~ 42053 1~004 f 317j
y 7 46o517 7 3J2464 83893 ~ -- 3137
Absorbed by Banking System 1- 25130 middot~ 76183 1- 19350 18258 7 485707
11 f 4o8647 64543 I - 7 21395
Net Government Borrowing J 131492 from Banks 3794 - 79738 - 32745
Deposits in Central Bank in foreign money (not included above ex pressed in Sucres
Government ~ 4486 - 633 871 - 11059 Public 25242 J 78964 - 78814 J 4h97
T29J 728 7 I
7 IIIII middot~~ ~ I
78331 79685 31+38
y Made urt as Io11mlfs
Cas~ bullbullbullbullbullbullbullbullbullbullbullbullbullbull ~ bullbullbullbullbullbullbullbull - bullbullbullbull J 266 1- 367 - 22~7 99 Other assets less other liabilities~ ~ 4 330 ~ 293 ~ 18~8 Capital and Reserves~- bull bullbullbullbull 4 bullbull 52 bull 1 1- 79-9 26 o 278
7 I
7 7 I
7 bull Ill ri bullbullbull
251 762 194 18)
Subtract increase
37-
Davelopment Bank lending dominE)te the position Expansion of commercial
bank lending is relatively negligible while a comparatively small role is
played by balance of payment influences
98 From the end of 1946 the general financial situation deterior-ated
rapidly in five months from January 1947 to ~~ay 1947 net foreign exshy
change reserves of the Centrel Bank fell 935 million sucres or 7 7 mil-
lion dollars to a level of 2927 million sucres or 21 7 million dolJars
In litaY 1947 an IMF Mission arrived in Ecuador (at the request of the
Government) and in June 1947 a multiple exchange rate system with import
classification was introduced upon the advice and with the concurrence of
the Fund Operation of this system Jielded considerable profit n in
sucres it is in effect a new imposition of import taxes and such
11profits 11 are in reality additional fiscal revenueY It was of the
essence of the Emd s attitude in Ecnador that the exchange difficulties
bad arisen through domestic inflation and that these addi tiona reve-
nues should therefore be applied only in reduction of Government debt to
the Central Bank
99 The effect of such policy is clearly seen in the third column
of the table Inflation is checked notes in cirmlation and monetary
deposits falling 929 million sucres (or 11-per cent) i~ one year Alshy
thoUtgb however Central Bank loans to Government (and also colllWrci al
jJ At this point only the domestic aspects of this measure are emphashysized In a later section the external or balance of ~ent aspects will be taken up
Y Such revenue from exchange taxes yielded 975 million sucres in 1947 bull md in July 1948 was running at g to 10 jllillion sucres a month this revenue is not of course taken into the budgets bull
- 38 -
bank loans and investments) fell the actual deflation _was largely
caused through loss of foJeign exchange rather than over~all reduction
of domestic bank lending For in response to vigorous ~oilplaints of
credit shortage the Central Bank greatly increased its loans to the
public almost fully offsetting reduction of its loans to Government
In the first six months of 1948 there was no significant contraction
of money supply banking loans to the public eJggtanding to offset the
deflationary effects af an adverse balance of payments and of Government
debt reduction
100 The exchange surcharge multiple rate system was in operation
through August 1948 proceeds being devoted to reduction of Government
debt to the Central Bank~ But there has bean concern lest the resulting
deflation of domestic money supply would be too severe and the Central
Bank has in fact adopted a compensatory policy to prevent further reducshy
tion through continuing to expand lending to the public arid through
quasi-open-market pur~e of mortgage bonds to the amount of 17 million
sucres by July 10 19l8 when further purchases were discontinued
101 To avoid the netcessity for such compensatory policy the Cen-
tral Bank proposed to the Government that the destination of reveme from
exchange taxes should be changed Instead of being applied in reduction
of debt the proposal was that they should be useci instead to create a
development fund tt to be administered by the Cent~al Bank unless a
planned Development Institute or other competent authority is estabshy
lished In mid-September the Fund appro ved such cllanged dest ination of
these revenues 90 per cent of which will in future be applied in finance
of development and 10 per cent in stabilization of Government bond prices
-39-
This removes a check upon inflation which has operated for some fifteen
months unless Central and commercial bank lending policies recognize
this changed situation further inflation may follow even if the Budgetary
accounts run no deficit
102 At the same time this change does provide a source of local
currency finance for development projects
-40-
IX INTERNATIONAL TRAIE AND THE BALANCE OF PADlENTS
103 Ecuador exports agricultural products (rice cacao coffee
tropical fruits balsa wood) mineral products (crude petrolelUil gold
silver copper and lead) and handicraft products (panama hats)Y
lo4 Approximately one trird of Ecuadorian exports (including
minerals) go to the United States The proportion rose during the war
due to VmiddotIar-time demand for strategic raw materials but is now tending
to revert to pre-war levels Loss of European markets has been partly
compensated by gain of n$w export markets at least for a time and
especially for rice Countries in the Far East whose rice production
fell during war such as the Philippines and in Latin America whose
Eastern sources of supply were cut off such as Cuba and Venezuela
have provided demand for Ecuadorian rice This outlet however may not
last much longer
105 On an average of years 1938 to 1943 about 15 per cent of
Ecuadorian imports are foodstuffs wheat and lard being the largest
items and 85 per cent are manufactured goods and equipment Import
of foodstuffs is however gro1ing t-vith population and in the key pro-
ducts of wheat and fats would be expected to grow still faster if
econowic development raises n~ss living standards witl10ut increasing
domestic output of these prodvcts For increased consumption of wheat
products and fats is in part the definition of rising living standards
for a very poor population
fJ See Table No13 in Statistical Appendix for composition of exports
-41-
106bull Before the war (average of the years 1937 to 1933 ) the Americas
supplied 49 per cent of Ecuadorian imports by value the United States
alone supplying 41 per cent Germany provided 22 per cent of total
imports and the United Kingdom only 8 per cent Europe as a whole supshy
plying 45 per cent
107 In 1946 and 1947 the Americas provided 86 per cent of total
imports the United States supplying 66 per cent EUrope as a source of
imports fell to 12 per cent although the United Kingdom maintained its
relative position (7 per cent) Whether the United Kingdom can expand
its provision of imports for Ecuador JDaY be domiddotubtful on the one hand
the loss of Germany as a supplier pzo vides an opportunity on the
other the competitive industrial position of the United States may make
it difficult for the United Kingdom to fill this gap
No balmce of payments estimates eJd st for Ecuador1
Growth
of foreign exchange holdings over the war period however indicates a
strongly favorable balmce ~let reserves which were equivalent to 409
million sucres in December 1939 rose to 3962 million sucres (294 milshy
lion dollars) in December 1946
109 Official purchases and sales of exchange are shown in the fol-
lowing table together with corresponding movements of exchange reserves
The difference betRSen the balance on official transactions and the moveshy
ment in reserves arises from transactions on the free market
110 During the war import and exchange controls were nominal
there being no shortage of dollars nor any decrease of exchange reserves
jJ Except for the ~eriod January to May 1948
-42-
Loss of exchange reserves in 1945 led to a tightening of control on an
allocation of quotas smong users of exchange Import permi ts were
granted on the basis of former imports by merchants At the end of
1946 controls were relaxed on an extensive list of imports items and
the consequent loss of exchange has led to difficultieQ
Ul Official Official Balance Changes in Purchases Sales on Net
Official International Trans- Reserves actions
(Millions of u S Dollars)
1942 257 185 t 72
1943 35-5 279 t 1middot5 t Ul
1944 423 34~4 t 79 f 88
1945 353 394 - 41 - 7-2
1946 471 415 f 56 t 1 9
1947 488 579 - 91 38
112 From December 1946 to IVtay 1947 net foreign exchalge reserves
fell US$ 77 million from US$ 294 million to US$ 217 million In May
1947 the advice of the International More tary Fund was sought with reshy
sults summarized as follows in a recent Fund documentY
The lfund 1 s Mission arrived in Ecuador in Yay 1947 It was not advisable at that time to contemplate devaluation which would have made the inflationary situation worse An emergency program was therefore proposed Essential and semi-essential imports were to be distic5~ished and a surcharge of 5 sucres p3r dollar imposed on the semi-essential group as a check against their excessive import New decrees including many of the recomshymendations were issued in June
The main features of the new system were as follows
Y Economic SuVey of Ecuador RD 672 - P 43-44
- 43-
(a) The elimination of all quantitative import export or exchan~ restrictions licenses and quotas with the exception of a few absolute prohibitions of some luxury imports
(b) The checldng of excessive import demand through a fiveshysucre (33 per cent) surcharge on non-essential imports
(c) The suspension of nearly all exchange sales for nonshytrade transactions and the creation of a free market bull narrowly limited in volume and comprising mostly all transactions that are uncontrollable in practice plus a snall amount of domestically produced gold
(d) Exchange for a small amount of the least essential goods was made available in the free market
(e) One of the basic aspects of this plan was the steriliz~ tion of all proceeds from the import surcharge which was placed in a fund for the extraordinary amortization of the government debt to the Central Bank Tnis is still in operation
The beneficial effects of these reforms were felt immediately In June the trade deficit ~as reduced to only $07 million and in July to $06 million By August for the first time in 3 monthsl there was a small surplus In September the deficit was smci l -j)O 5 million In October there was a surplus of $15 million and in November and December there were small deficits of only $01 million and $07 million respectively
In short the deficit for the year was about $99 million in its gross gold and foreign exchange reserves During the same period international liabilities of the Central Bank showed a reduction of about $6 million Therefore~ the net deficit was around $39 million 95 per cent being in the first half-yeer and before advice had been received from the Fundrs Mission
113 It should be emphasized that this multiple-rate system of
exchange control is entirely freed cpentitative controls Excessive
import demand is checked by the higher rates upon imports deemed non-
essential the list of which is knollD and published Anyone presenting
sucres is provided with exchange at the appropriate rate upon list A and
B goods and the free rate is influenced by occasional releases of offi-
cial exchange into the free market The system that is utilizes the
inter-play of the price mechanism rather than the bWlilmlcracy of quanti-
tive controls or quotas
- u4-
114 Loss of exchange continues however despite considerable reduc-
tion of imports Gross international reserves declined US$ 18 million
and net reserves US$ 35 million in the first six months of 1948 Offishy
cial transactions January to June 1948 are surmrarized in the following
table~
Receipts From Exports From other Transactions (1)
Total
Payments For Imports For other Transactions
Total
Balance Change in Gross Reserves
1947 Jan to June
1948 Jan to June
(Millions of Dollnrs)
163 5 6
167 44
219 211
289 219 23 10
312 22 9
- 93 - 18
(l) Includes purchases of domestically produced gold deposits received in foreign currencies and borrowing from corres~ pondents abroad
115 Prospects for the remainder of the year moreover are not goo~
It is estimated that loss of international reserves over the whole year
may be aboat US$ 6 million Whether the deficit is in this region de-
pends largely upon actual export realizations for the remainder of the
year lhe most critical here is rice 11hose ygtrice is falling and the
crops accumulating in the rice millsplusmn Latest information is that
f Countries receiving allocations of Ecuadorian rice under International Emergency Food Council allocations have been requesting a change in source of supply owing to shortage of doJJers Thus France has asked for 6000 tons of rice from Indo-China instead of ~cuador and Greece for 2000 tons from kVPt in place of Ecuador as supplier A recent favorable sale of rice-to Haiti has somewhat improvea the cuITent position
-45-
plantings for the October crop are substantially reduced Wet weather bas
led to some loss of the cacao crop Receipts from exports in the follow-shy
ing official exchange budget may therefore have to be modified down- [l
ward on any pxuient calculation-
116 ~or Recei1ts and Sales of Foreign hchange
(Thousands of U S Iollars)
1948 1947 Estimated Actual
BECEIPTS
Worts Rice 13~ la4~ Cacao 11 l 2 Other products 10700 12371
Total Exports 354oo 42120
Foreign companies 5300 4842 Others 800 1883
41500 48845
SALES
Imports 44800 53499
Services 3200 4470
4B ooo 57969
117 In this situation of continuing presSlre one step has been
tken and others are under consideration The one taken relates to offishy
cial imports representing an average pf 20 per cent of total imports
Importation of cigarettes liquor matches and other things by the State
tionopolies is especiallyen significant These were formerly provided with
exchange tax-freebull ie at the ~owest rate of 1350 From July 26 they
afe required to pay the ordinary import rate of 15o4 on sll supplies for
J See note on page 47 -A
- 46-
their ovm use (such as office supplies) and the same rates as private
importers (ie 15o4 or 20o4) on all imports to be sold to the public
(such as wheat flour fats cigarettes etc) accord~ng to the classifi-
cation of the goods
118 Remaining possibilities seem to be a partial reclassification
of imports removing items from List A as essentials to List B as se~ishy
lwruriesY and or a chenge of nominal exchange parity vri th or mithout
a narrowing of the spread between the rates Here pressure from
exporters particularly from rice exporters may be hee~vily in favor of
an increase of the dollar buying rate with consequential changes of
selling rates
119 The present loss of foreign exchange is occurring ~rithout any
service being met upon defaulted foreign debt although service of Ex-Im
Bank loans is being made If it be assumed for purposes of calculation
that Ecuador reaches an agreed settlement identical to the Chilean sershy
vice would require exchange equivalent to US$ 378000 in 1949 (of which
US$ 368000 would be required in dollars) and would rise to US$ 4o20CO
in 1954 Adding service upon Ex-Im Bank loans outstanding on June 30
1948 and other known but small indebtedness total debt service would
increase to US$ 1410000 in 1949 rise to a second maxilliUID of US$ 1394000
in 1951 and then progressively decline Upon the assumption thet amp-Im
Bank loans undisbursed on June 30 1948 are all fully drawn before their
maturity total debt service charges would be US$ 1533000 in 1949 rise
On August 21 a number of import items were changed from List A to List B the aggregate import value (when granted exchange at List A rate) affected being US$ 7 million
-47-
to US$ 213431000 in 1952 and again would progressively decline These
last service charges rould be for 1949 3 1 per cent of 1947 actual
official foreign exchange receipts and 3 bull 7 per cent of estimated 1948
receipts and for 1952 48 per cent and 56 per cent of 1947 actual
and 1948 estimated exchange receipts respectively
120 Estimating prospects from this point in time Ecuador does not
seem to be a country able to afford assumption of any great additional
burden of debt service payable in dollars The amount that could wi thbull
out hardship or distortion be squeezed out of the balance of payments
by no means corresponds to the development needs of the country Any
start must therefore be modest and cumulative rather than spectacular
and precarious and this conclusion fits with other controlling factors
in the over-all situation notably the supply of administrative techshy
nical and managerial abi li ty
- 47-A -
Note on Official Exchange Transactions
Official exchange transactions for the firstsix months of
1948 are given on page 44 of this report Results for the full year
are now available and reveal that earlier expectations regarding the
probable 1948 balance of payments deficit were unduly nessimistic
Cacao export values have been lar~er than expected and in the last
period of the year there IBre some unexpectecily favorable rice eA-port
sales total export receipts were US$ 8 million larger than forecast
on page 45 Imports were held close to forecast
Receipts
Exports Foreign Co~anies Other
Payments
Imports Foreign Comoanies Other
Balance
Change in Grass Reserves
Official Exchange Transactions (full year - n~illions of dollars)
1947 -421
L18 19
488
535 06 149
580
y does not agree because of rounding
January 26 1949
1948 -436 h2 7
i85
Lt52 2
28
-oJ
-48-
X EXTERiJAL DEBT BEoomJ
121 The position of public long-term external bonded (excluding
inter-governmental) indebtedness of Ecuador is as follows
Amount in Default AmoUpt Outstandi~ ~ e Interest D~te
~In currmc1 (u s (us of p~t Dollars) Dollars)
Dollar obligations Gueyaquil amp Qui to Ry) $ 1226)000 12263000
286000 12263000
286000 123147
63047 Sterling obligations Franc obligations ( Oie
b 71000
Francaise de Chemin de Fer 1 lquateur ) Fcs 8386000 70000 70000
12619000 l26l9000
middotmiddot Note The Government of Ecuador oyenms about 75 per cent of the
stock of the Guayaquil and 1uito Railway and guarm tees the bonds and certificates which are largely held in England The franc obligations of the Cie Francaise de Chemin de Fer 11lquateur are not included in the offi cial statement of the public debt nevertheless the Government does recognize some liability for them and during the last few years has engaged in Degotiations for their retirement
Inter-governmental Debtsmiddot
122 Debts to the United States Government are of three types
63047
first the loans by the Export-Import ~which were outstanding on
June 30 1948 in the amount of $7 705606~ second the aJIDunts duemiddot
because of purchases of surplus property totaled $484 567 on March 31
1948 and third the obligations arising out of the lend-lease settleshy
ment the amount of 1fhich is not available (Total lend-lease assistance
j This section of the Report was prepared by Mr Paul Dickens
to Ecuador amounted to $7 bull 795000 )
123 In addition Ecuador is indebted to the Government of Venezuela
in connection with the establishment of a joint shipping company Late
data are not available but as of February 1947 $500000 ($1000000
authorized) was outstanding the total to be repaid by 1966
Debt History
l2ij Upon partition of the old Republic of Colombia~ middotEcuador was
apportioned 215 per cent of the original Colombian debt by the convershy
sion of l834a Between 1834 and 1854 no interest was paid The period
1855 to 1908 was marked by numerous adjustments and defaults
125 In 1898 the Guayaquil and Q]lito Railway Companyt s first mort-
gage 5 per cent loan of 1899 was issued It was expressed in dollars but
was in reality an English loan In 1908 a new (reemenJl was reachedbull
which was to be a final settlemet of all past disputes and controversies
between the Government and the Guayaquil end ~ito Railway Company and
the bondholders In 19~-10 the Government defaulted on the new agree-
ment In Novemberl9ll payments were resumed on the railway debt on)y
but a revolution caused a further suspension from December 1911 until
lfarch 1912 Subsequently service was partially resumed on the external
debt until July 1914
126 From August 1914 to July l9l8 no paYments were made on eny
foreign obligations except that service on the prior lien railway bonds
had been maintained up to and including the January 1915 coupon By
rf Negotiated settie~nt
-50-
1920 interest and sinking fund on the prior lien railway bonds had been
brought up to date but service on all other obligations ~ed in
arrears In 1926 interest on the salt loan of 1908 was brought up to
date but default took place on the coupon dueJam1ary 2 1927
127 The outstanding bonds of the prior lien issue were redeemed~~
January 1929 at VIhich time the January 1914 coupon was paid on the
5 per cent first mortgage bonds of 1897 In the case of the salt loan
of 1908 sinking fund was resumed in July 1928 and interest was paid
to Jazruary 1929 inclusive None thereafter Sums due from July 2 19C3
to January 2 1931 inclusive deposited with Central Bank in sucres
were used for governmental purposes after December 1931 No payments
were made after January 1929 on the external debt of Ecuador
128 Up to the end of 1948 no acceptable arrangement had been pro-
posed by the Ecuadorian Government for the resumption of interest and
sinking fund payments on external loans
-51-middot
XI bull POLITICAL
129bull Recent political history in Ecuador has been turbulent
although contest fo~ power at the top has not greatly affected the
bulk of the population Suffrage extends to all literate citizens 1
over twenty-one years of aee-but the requirement of literacy effect-
ively excludes the Indian bull T)tal votes cast in the recent Presidential
elections were 289164 from a total Population of some 35 million
130middot On May 28 1944 a few days prior to a scheduled ceneral
election an uprising occurred and Dr Jose Haria Velasco Ibarra
assumed office as President Dr Velasco had been President before
but following a coup dletat in August 1935 after he had been in
Presidential office less than a year he fled to Colombia and re-
mained in exile for several years On July 23 191-4 general elections
for a Constitutional Assembly to draft a new Constitution were held
Installed on August 10 the first Act of the new Assembl3r which was
predominantly Conservative was to confirm the legality of Dr
Velascos assumntion of the Presidency
131 On June 30 1946 new elections to the ronstitutional
Assembly middotwere held The only party particiJatine in these elections
was the Conservative The Liberals R~dicals Socialists and Commu-
nists abstained on the crounds that President Velasco did not offer
them sufficient guarantees On Aucust 3 1946 there vrere a number
of arrests following an abortive uprising and on Aueust 11 the Con-
stitutional Assembly re-elected Dr Velasco to the Presidency (by 43
to 10) for a term of office to last to September 1 1948
12bull Being compUisory for men voluntary for woraen -
132bull A new Constitution was promulgated in January 1947
133middot On August 23 194 7 a bloodless coup detat led by Colonel
Carlos Iancheno Minister of Defense in Dr Velascos Cabinet deposed
rresident Velasco who fled the country to Colombia for the second timebull
Next day Colonel Mancheno proclaimed himself Acting President and
formed a five-man Socialist-Liberal Cabinet despite the absolute
Conservative majority in the Assembly A week later however on
August 31 a counter-revolutionary military movemont broke out in the
north and the counter-revolutionaries captured Quito on September 2
134middot Colonel llancheno resigned the ActinG Presidency and dis
appeared the sa1ne day Dr Suarez Veintimilla who had been Vice
President under Dr Velasco and the former conservative Uinister
resumed control of the GoverPment Next day September 3 a Council
of State in Quito declared that Dr Velasco had by abandoning his
post terminated his functions as Chief of the State Dr Velasco
howeverJ vrho middotwas by this time in the Argentine declared that his
remo~al to Colombia had been forced and announced his intention of
returning to Ecuador to resume office
1~ On Seytember 15 1947 a Secial session of the Zcuadorian
Concress accepted the resignation of Dr Veintimilla and elected
Senor Carlos Julios Arosernena head of the Banco Ce Descuento at
Gua~raquil and a non-party man as Vice President with novers as
Acting President until September 1 1~48 Senor Arosemena formed a
mainly Liberal Cabinet with one representative each of the Consershy
vatives and the Socialists Coneress also ~onfinned the Council of
State 1 s view that Dr Velasco had forfeited the Presidency by abandoning
his postbull
136 On June 6 1948 Presidential elections were held The
three parties represented vere the Conservatives (Dr Manuel Elicio
Flor Torreo) the Liberals (Galo Plaza Lasso) and the Radical (Genera1
Alberto Enriques Gallo) Final results were announced as
Plaza 115835
Flor 112052
Enriques 53601
Invalid 27 676 289164
137 bull Doubt persisted until this month (August) as to who would
receive the election The Electoral College had been invalidating
votes on technical Grounds and as interim returns and invalidities
were announced it was noticed that the majority of the latter were
being deducted from the Plazavote After conferences the Electoral
College revalidated all votes and conducted a re-scrutiny on less
strict basis Senor Plaza has been declared to be the rfjSident-Elect
by the Ecuadorian Coneress and assumed power September 1 1948 The
middotpresidential term of office is four years
The Vice Presidential results were
Conservative 1anuel Sotomayor y Luna llu008
Liberal Dr Abel Gilbert 113213
Radical Dr Cueva Tamarz 5h07h 28129gt
139 Senor Plaza was born in Nmv York USA forty-two years
ago his fatter the late General Leonidas Plaz~ was President of
Ecuador in 1901-05 and 1912-16 middotSenor Plaz who had been taken to
Ecuador as an infant accomnanied his father in exile to the United
States and attended the University of California the University of
Maryland and the Georgetown School of Foreign Service in ~7ashington
l4o Senor Plaza returned to Ecuador in 1930 and for the next
fourteen years operated the family estates there reclaiming them from
virtual bankru~tcymiddot to prosperous and efficient state He has for
example been active in encouraging the breeding of new cattle strains
is President of the Ecuadorian Holstein-Friesian Association and oper-
ates a butter factory on his estates with a Danish ~anarer He was
ar Minister from 1938-40 and Ambassador to Cashington from 19h4-46
l In executing any policies he will of course be handishyt4
capped by the lack of a fully efficient Civil Service The position
in Ecuador is the same as that in othelmiddot Latin American countries
that the Civil Service is naid on low salary sca1e and lacks compe-
tent administrators Such lack is an aspect of the general shortage
of technical ability in the country
TABLE
1
2 bull
3 bull
4
middot 6
7 bull
8
9
10
11
lZ
13
14 bull
15
16
17
18
19
20
ECUADOR
STATISTICAL APPENDIX
Oil Production and Exports
Cement Production and Imports
Yfueat Production and Imports
Rice Production and Exports
Rice Exports by Destination
Cacao Production and Exports
Coffee Production and Exports
Cotton Tobacco amp Sugar Production amp Sugar Imports
State Railwaysmiddot Lines amp Rolling Stock
State Railways Merchandise Hauled
Population and Roads by Provinces
Budgetary Receipts and Expenditures
Exports of Principal Commodities Volume amp Value
Imports Classified by Groups Value
Exports by Destination Value
Imports by Source Value
Balance of Trade by Major Regions
Exehanee Reserves and Banking Position
Price middotIndices
Status of Ex-Im Ballilt Loans
ECUAIOR Table 1
Oil Production and Expomiddotrts
(thousands of American gallons)
Crude ou Gasoline Produced EJtported bullRefined middotproduced
1938 94586 78696 15500 41654
1939 97125 68819 17679 bull 141
194o 98654 70~99 23001 6162
1941 65382 38362 25914 6462
1942 95671 68516 29489 72l7
1943 97211 65003 34635 8076
1944 121469 82520 38083 8927
1945 109855 73897 38752 10059
1946 979+7 52412 45213 12271
1947 99140 39359 53949 16587
Source J3o1etin Banco Central del Ecuador
ECUADOR Table No 2
1929
1937
1938
1939
1940
1941
1942
1943
1944
1945
1946
1947
1948
l First six months
CEMEHT PRODUOTIOllT AliD IMlORlS (metric tons)
Production Imports
17782
15699 10082
14254 13373
14249 12013
16512 10935
17213 2_846
19802 so98
2756o 933
34691 1590
37504 953
38496 3114
33231 14941
20484JJ
Sources Production Eoletin Banco Central del Ecuador Trade Ministerio deEconomia
Total
25781
27627
26262
27447
20059
24900
28793
36281
38458
41610
ECUAJX)R Table J
Wheat and Wheat Flour Production and Irraquorts
(thousands of kilos)
Wheat
Production Imports Exports Consumption
194o 28120 bull 73 28o47 1941 24578 36 24542
1942 24265 bull 76 24189
1943 22034 22034
1944 23251 912 24175 1945 23115 2733 180 25667
1946 25852 4532 23 30361
1947 2lo66 494f)J 11
Vfueat Flour
1938 10743 9981 na
1939 7864 16638 na
1940 7996 8-592 275 16312
1941 7225 11823 286 18762
1942 7 161 23497 161 30498
1943 7461 9862 17322
1944 5216 24023 29239
1945 5174 25137 30311
1946 7~38 11313 g 18813
1947 5943 1886) 4Y
Less than 500 kilos Y First 6 months
Sources Ecuador en Cifres a~d Ministerio de Economia
~emiddot 1926-30
1931
1932
1933
1934
1935
1936
1937
1938
1939
1940 -middotmiddotmiddot
1941 ~ )~ (1
1942
1943
1944
1945
1946
1947
1948
~iiampn-sect00-lfmiddotks
-~Jrst~middot-nsmcnths
gJ Provisional
(B EQUOR
RI03 PRODUCTION ApoundP ~OR~S
Vo1wnfJ Production middot E~orts
(metric tons)
26)04
23584
29863
39270
39008
31699
39036
52136
44027
40144 ltit middotmiddot~ 0 56596
5873
100949
ao6o7
53168
102048
112711
047
8255
3842
6449
5282
22907
8734
12)3
2ooso
962
18343 t - ~ J
20546
32028
46992
64604
29318
66918
6~209fl middot tloo 1
$ bull
tt ( r t
z
Value 3xoorts
(thousand sucres)
1881
936
6667
10864
6555
14632 pound 170
23265
51460
93837
127105
60395
203243
2rfjuft
Sources Production Boletin Banco Central del 39uador~ Trade Ministerio de Econom1a~ ~r- ~fl ]r bull ~-middotmiddotmiddotmiddot f ~~middot~---i
Average Destination 1937-41
Cuba 2
Peru 13
Venezuela 6
Colombia 4
Panama 2
Jamaica 0
Philippines 0
India 0
Dominican Republic 0
Other Countries 4
TOTALS 31
Preliminary~
RIQ] EXlORTS (in million po~ds)
1943 1944 1945
81 88 5S
20 29 0
0 17 4
~ 0
Rf 2 hi 0 0 0
0 0 0
0 0 0
0 0 0
bullbull ~ 6 6
105 142 6S
R Less than )OOOOOpounds
Table No 5
1946 ~ Jan to~
1~ June-194
46 12 24
0 0 s 17 49 )j
2 13 2
5 4 1
16 1 0
20 0 0middot
0 38 0
0
1 f4~ 2
r middot I
130 13 34
sf Ineludes 6 million pounds to Mexico and 5 million tmiddoto Greece bull middot
1[0
supound~sect8_ Foreigl Crops and Markets Offiee of Foreign Agrtcultural Relations u bull Sll~artment of Agriculture May 3l 1948 bull p bull 402 First six months of 1948 from ibid August 16 1948 p bull 120
Average 191i-15
191620
l921-25
1926-30
1931-35
193640
1940
i941
1942
1943
1944
1945
1946
1947
tf I
ECUADOR
Cacao Production and ~orts
Volume
Estimated Production ~rts
(metric tons)
n (
12108
15middot330
14652
19030
15058
17759
17689
19459
4o625
43547
36825
21319
15980
174o4
11208
14433
13762
18161
13735
16827
16526
Exports ( 000 sucres)
186o9
26073
26746
27531
16647
37424
29354
34365
40327
51794
41985
53547
74935
188208
middot)(et) middot( middot
Sourcesmiddot Estimated production Ministerio de Economia E~orts to 193~ Estadisticas de las Exportaciones del
Ecuador 1940-1942 subsequently El Trimestie Estadistico del Ecuador Number 1
1 ~ Mini sterio de Economia -bull gt(
111 t bull r r (o J bull bullbullbull 1) ( bull
ECUADOR
Coffee Production and Exports
Volume Estimated Production EXports
(Metric TohS)
1921-25 average 5147
1926-30 II 7571
193D-35 10047
1936-40 II 13811
1940 16158 14571
1941 14260 11847
1942 9016 6140
1943 14144 12340
1944 16598 14458
1945 12999 10737
1946 9948 7636
1947 12522 8970
Table 7
Value
Exports 000 Sucres)
59~9
11530
10945
18546
16J83
23827
17278
33176
35626
33863
34839
43524
Source Estimated production - Ministerio de Economia
Exports t~ 1936-40 - Estadisticas de las Exportaciones del
Ecuador 1940-1942 - subsequently El
Tremestre Estadistico del Ecuador Number 1
and Ministerio de Economia
YEAR
1937
1938
1939
1940
1941
1942
1943
1944
1945
1946
1947
ECUADOR
Production of Cotton Tobacco amp Sugar amp Sugar Imports (000 Kilos)
Raw Cotton
9237
7213
7172
8165
PRODUCTION
Tobacco
1519
1106
1875
1028
1359
Sugar
17528
22950
26950
27835
30421
27858
26799
23151
32474
33544
33480
Table B
IMPORTS
Sugar
5310
11068
12387
38
6
33
184
784
21455
3060
Sources Production of Cotton and Tobacco Ecuador en Cifres 1942
Sugar Production and Imports Ministerio de Economia
ECUAOOR Table 9
State Railways
Length Locomotives Rolling Stock (Number)
(Kilometers) (number) 1relght Passenger
Gueyaquil-Qpito 452 39 319 41
Guayenaquil-SalinaJ 150 6 22 24
-~i to-CarcbiY 222 6 23 22
Bahia-Chone 78 3 12 g
Sibambo-Azogues 117 3 6 ll
Puerto Bolivar-Piedras 155l 7 21 10
Puerto Bolivar-Pasaje 55
1199 64 4oy llG
Narrow-gauge line
gj On uncompleted line ~ito-Esmeraldas
21 Of which 4 are rail-cars
jj Of Vihich 61 are rail-cars
Source lviinisteria de Economia
1938
1939
194ltgt
1941
1942
1943
1944
1945
1946
+947
ECUAOOR
Railway Transport
(thousands of metric tons)
Products
Agricultural Animal Mineral Forest Manufactures
1639 19 3 160 122 1034
1318 143 172 138 961middot
1714 144 233 219 1472
1613 184 277 209 1543
1809 224 280 272 1631
1841 280 35a4 376 193-3
2011 250 263 299 C5J7 3
1888 29-5 350 238 2234
1941 29-9 46 bull 4 258 2170
1787 299 51 0 180 2085
Source l3oletin Banco Ce~~nu del Ecuador
Table 10
Others Total
58 3205
58 279l
298 4oso
289 4115
328 4543
384 5168
352 5248
292 5296
37middot7 5508
419 5279
Table 11
Population and Boads
Poeation Roads (Kilometers) Province Jan 1 1948 Main Secondary In Construction
Care hi 86663 1744 1191 1050
Imbabura 158896 1818 2100 1810
Finchincha 350149 4)13 3703 670
Cotopaxi 215232 642 4o6o 970
Tungurahua 222963 2290 1810 300
Chimborazo 29864o 1664 3316 2740
Bolivar 121653 1877 1294 2045
Canar 133971 580 580 1300
AZUaY 284982 1053 2190 630
Loja 238705 1140 4s6o 1430
El Oro 93752 1005 2378 650
Quay as 482843 3900 3367 3700
Los Rios 148428 933 4632 1050
Manabi 381538 3627 1lo61 1970
Esmeraldas 664o5 50 19 0 2840
Frov Orientales 181071
465891 26636 46732 2t3l5bull5
Source Direccion General de Estadistica y Censos
1938
1939
1940
1941
1942
1943
1944
1945
1946
1947
Source
r
Table No 12 ECUADOR
DISOLOS3D BUDGETARY R303IFTS AlfD EXP3NpiTURES
(Total of ordinary and extra-ordinary budgets and special accounts)
thousand of sucres)
Total Receipts
1323204
131699 6
1262710
1547624
1667455
2112614
3145318
4051038
5367822
6696647 11 ~I JJ( middot
Total Expenditures
1429134
1267687
123135middot0
1586615
1489251
2101429
3031038
4174550
5352394
6593858 bull I
aoletin Banco Central del Ecuador
-middot middotmiddot
Diff~reuce
106830
j 49309
f 1360
- 38991
f 178204
j ltll8-5
f 114280
12351middot2
+ 15428
j 10278bull9 r 7
l I 1
L
ECUAOOR EXPORTS OF PRINCIPAL COMMODITIES 1937-47 Table 13
VOLUME (thousand metric tons)
1937 i98 1939 194o 1941 1942 1943 1944 1945 1946 194711
12 200 96 183 20 bull 5 320 47~0 646 293 669 66) 218 191 153 112 144 138 182 137 168 16 bull 5 203 14~ iJI 137 129 146 118 61 123 14 bull 5 107 76 90 48 55~5 53middot3 472 34 bull 2 226 158 1)9 178 35middot511 72 bull 5 345 19~2 251 183 14bull4 13 2 112 103 12~0 132 121 1-4 16 16 15 18 30 22 28 2~0 13 01 14 1middotmiddot9 2~2 21 47 90 136 93 74 28 na
~gt i824) (1387) (944) (1036) (1981) (2516) ( 2756) (4373) (4462) (4947) _01 2849 2454 2274 2201 1201 2167 2062 2513 2446 1640 1358
Ltrates 7~3 140 76 so 3~3 )9 26 10
VALUE (thousand sucres)
610 10864 6555 14632 23265 51460 93837 127105 60395 203242 201111 49985 39bull276 37bull033 29354 34364 40)26 51794 4lt985 53547 74935 188208 24613 16703 15227 16)84 23827 17278 33176 35~26 33863 4839 43 bull 524 5bull691 7558 7t006 6448 4658 _J 107 2159 1898 2872 738~- 24355
18242 7~146 9605 86o6 6120 201 6274 6209 9264 1)02 14994 4048 4300 4298 3~866 6979 35481 23316 38043 26553 15111 979 lt363 2~134 2724 3168 8450 25613 43419 31877 18 bull 509 7125 na 8048 6 234 4981 6509 16231 22121 25191 69033 69J87 81962 4662
21989 26374 25020 24862 13425 24820 23796 28788 28107 18253 15902 trates 10165 16090 13134 38609 27208 29013 18075 809 ates 18682 35297 41204 39907 29426 25374 27476 26457 15482 24858 25334
10774 13210 13495 3 950 16869 32775 2L068 32402 30902 38326 n bull a_
164_045 169096 167148 167851 199704 298690 393115 466631 377894 537131 619859 tmiddotbull bull
Note Dash (---) signifies zero or less than 50 metric tons nly or ~00 sucres ata expressed in quantities other than weight Sourcis 193 data from unpubli~hed Zcuadorian trado stati~tics
at US Department of Commerce 1938 nnd 1939 from partment of Commerce official data Direccion Nacional de Estadistica Eruad6r en Cifras ~7 from Banco Central Boletin 1940 and subsequont ~ears from Banco Centrll jto~n sterio de Economia and from M1nister1o c Economia data furn she
Mission July 1948
~ tobacco tone JgS
articles
11res ilk
al
value of Imports by Groups 1937-Lt-5 Volume and middot~alue of Selected Individual Imports 1937-46
(Value in thousand Sucre~)
1~37 1~38 1~39 1940 1941 ~942
19~731 20~ 375 24~874 16~)65 19043 37~540 5127 7194 1958 6~4e8 5t298 8 118
12888 13Jl5 14522 17702 19556 25~152 21627 25~272 21455 28532 21619 18923 20649 21~593 25559 29437 22636 19~$13 13~505 11961 12~654 15~976 15667 18899 5~829 7 bull 524 6066 9385 833 14353
22912 )0868 24~75 27 t 750 25993 42~916 9376 1028 10038 12118 11345 13932
-bull
131643 148320 1486o 173753 149499 199715 (Volume in thousand metric tons) (Value in thous~tnd sucres)
5middot3 111 124 194 5 bull 534 6385 26 4 24
os 246 -
122 ioo i66 86 118 235 8255 6)88 7449 5076 013 14609
19 07 11 11 14 29 2187 1824 2695 294-3 29J9 8182
101 i4 i2o i09 28 51 804 llJ)6 1667 1546 577 866
~ hides amp skins amp manufactures amp miScellaneous
~~43 1944 1945
33270 70915 82984 6717 8)69 904)
31~700 43196 32~830 17073 53~400 JBoo6 15447 32~624 38797 14~88 18~388 22895 14116 11a99 9812
68928 n~l79 69-113 15856 19186 20042
217983 33ltl56 323524
78 middot 0 2 215 130 12622
09 27 775 2290
99 240 bull 25~1 337 24070 26388
23 46 67 8853 146)1 21699
09 16 10 321 349 246
~s zero or less than 50 metric tons -middotNote Columns may not ahmys add to totals because of rounding Denartment of Commerce official sources - 19)8-42 Direccion Nacional de Estadistica Ecuador en Cifras [inisterio de Economia El Trimestre Estadistico del Ecuador
1946
)1 8135
4 bull 5 )842
114 13123
46 22709
)1 639
ECUAOOR Exports by Countries 197-47 (Value in thousand sucres) Table - 15
1937 1938 1939 1940 1941 1942 1943 1944 1945 1946 1947 --middot-------middot
80458 lt2865 116t-J78 150055 196953 293081 386483 46lt-909 372~549 463~378 sa4~68J 54422 63418 8)254 1t0496 145 bull 558 168585 2)9238 267105 218018 227291 262887
26 20 65 17 2228 78 124 7)41 17173 630 610 949 1281 1055 1)98 5~526 25686 78523 85382 61478 75890 23481
2899 4955 2109 3568 162 1163 4J54 2526 4197 44~ 1450 5027 6335 4972 5i92 5285 7425 4546 7379 10286 9798 15537
1 5 5 17 57 13 291 54 444 574 6996 8 662 9188 8714 13bull764 7238 15316 13900 11223 6~07l 14503 11717 2908 12544 5 730 7896 3767 21215 22608 29233 4243 6703 7965
51 15 24 8 532 3620 1603 539 2336 11579 3749 80 207 862 4070 9991 17096 1275 17~428 6~973 27431 80541
1943 2135 5229 6039 1965 5435 3021 4827 15~702 25~137 51~854 middot 667 740 991 zo83 3358 11412 4286 4282 3~-970 13064 5~864
1799 419 2218 875 2865 12299 9644 14900 13714 9653 11655 J 89 82 2527 1247 964 326 )24 250 41141 2~985
1024 1514 1068 2205 7173 2650 2 744 8871 7694 J2 5811 17 39~ 77029 61869 43688 11945 1503 5550 6335 4108 4075 36783 61998
32) 6)3 1187 490 58 186 2164 4021 J217 35974 29595 11277 69 - 29 4411 7909 6156 3477 1183 5492 4876 26)8 359 1860 7~467
489 255 J2 100 280 1155 1239 1265 3827 3~961 20539 13t521 10802 2254 5 706 4177 6313 2bull610 3615 4251 -middot 2842 13546 lBi 1415 3 758 822 6 188 12962 3592 2531 412~ 162 7~ 10052
8643 1693 3bull521 3~400 2751 320 40 118 231 222 5404 J 4894
6337 4201 6548 5478 1175 5 45 40 1611 50950 6261 4132 5386 5452 117) -
~l - - 15 45988 5 middotmiddot 7S 8 5 25 567 92S 11
33 ~- 76 18 966 151 150 3419
38 29 858 2 45 78 467
(continuation on next naee) middot
~GUJLOR ~xnorts by Countries 1937-47 (falue in thousPnd sucres) T~ble-15 continued
middot-~--- -~-middotmiddot -middot _ middot-- ~~---~~- ---- -middot--~middot--------middot- -middotmiddotmiddot--middotmiddot--193 1938 1939 1940 1941 1942 1943 1944 1945 1946 1947 _I --middot -middot- ---~- ------ middot- bull middotmiddot-middot -
4 7 5 5 5 219 1087
218 153 529 368 73 49 297 569 1230 35140 789 28137
207 144 379 J68 73 49 297 559 1104 605 11 9 10 126 43
150 6355 plusmn
353 54045 169096 167148 167851 199704 298690 39J115 466631 377894 537131 619859
~S Columns may not always add to totals because of rounding
Dash (-) signifies zero or less than 500 sucres
Primarily Guadeloupe and Jamacia
Primarily British West Indies and Netherlands West Indies
Primarily Denmark Spain and Norway
Primarily Java
~ces 1937 and 1947 from unpublished Ecuadorian Trade Statistics at U s Department of Commerce
1938-46 from Ecuador Ministerio de Economia data furnished IBIID rassion July 1948
Imports by Countr~es 1937-1947 Table-H)
ECUAOOR
l937 1938 1939 1940 1941 1942 1943 1944 1945 1946 1947 I (()
Value in thousand sucres) ~ + -gt L520 63151 83984 115382 128423 186958 200061 311989 302~329 363403 517582 j
u t 2086 51311 71950 103214 110422 138729 103583 173776 178821 240233 429906 0
Q) f
811 674 551 2436 1815 3J258 2150 5265 6538 12178 20912 d S Ugt ro c 1 n 4 4144 3042 8 99 14 23 295 178 8~011 210 h middot-1
(- 0
186 324 237 957 2~991 8492 18~376 15~239 17232 10~574 3121 4 middot-2375 2310 1959 2476 3016 4735 7930 7~696 11~201 15~564 14755 sectwfi
middot-1 1 fli 4 6 343 1~823 3J064 4110 3~612 60J5 h 0H
2739 2109 3789 174 2352 7949 9~934 17845 23~ 616 1559t 18~727 ~rld ()
328 164 457 2498 612 733 10892 10902 20003 16684 11981 oc ampl+lll
mmiddota J63 1297 1161 -- - 2 23 115 1~128 1192 d+gt-
2464 507 500 1438 5565 20668 39979 46654 33684 33034 6~486 15~~ (()
na 1 311 2297 5515 130 bull-I m rl bull +gt
15 31 68 245 995 1516 2804 25326 6124 5956 3472 Oltll~
149 280 269 332 550 208 270 389 707 839 655 a~ sect (1) Cl 4-209 72986 ~ 38 09 1433J 9813 16276 15885 1721~9 45194 80928 ~-g 1701 35767 2 7 7 33 1202 67 47 61 19 2 El 0 0 eo g 3250 11462 8094 12980 10124 8108 13634 12513 11984 28392 40983 cent1-t+l~
1803 718 1687 otmiddot r-
4-114 6465 7339 630 475 34 22 2 66 889 7279 t -P () ~led
36o 4685 1573 7144 308 12 682 4824 rlltll ltDno
1~896 2550 1466 1624 64 1 58 5090 bull-1
fJ ~ ~ 1052 1489 794 945 293 224 5 21 1373 9062 9 703 P + na 868 881 423 10 1 8 223 135 r- 0) u
1 r=l middotr-l
1162 4823 1264 1675 877 1017 1~52 2380 3129 4~326 6851 () l=l rl
7274 3074 2609 3595 980 349 1041 905 599 1~543 3~134 cn~oo bull t
724 11939 8983 19951 6239 2281 1439 304 3882 5478 5736 op a cent1-t ~sect rl
173 302 262 238 -w 14 276 -rr 472 ---s9l ctillmgt
259 10949 7810 18190 4414 170 16 4 5 +gtUd ~-- ~
935 712 728 1278 1281 1715 1314 2685 3185 4465 3151 +gtP t-1
530 105 143 221 306 240 95 89 582 541 2089 ~ (f)
1l 21 12 80 1f 196 122 169 125 1J n ~-T~
0
109 218 lllL 250 m 46 sect2 12_ 28 119 112 I ~ --sB_l_ 0 ---- -
643 148315 147860 17353 149499 199715 21 ~ 983 331156 323524 414266 604479 ms may not a1ways add up to t ta1s because of rounding Dash (-) signifies zero or less than 500 sucres ~ country breakdown not given in source g) of which 591 from Syria 2Z3 from China 264 from Straits Settlements 1 Sumatra and 264 from Iran
YEAR
1937l
1938t
1939~ -
1940amp
194H
1942
Exports Imports Balance
Exports Imports Balance
Exports Imports Balance
Exports Imports Balance
Exp(rts Imports Balance
Exports Imports Balance
ECUAroR Balance of Trade by Area 1937-47 (thousand sucres)
fRlSTERN HEMISPHERE including Philinuines
United States Other Total Eurone
54~lt-22 26~036 80~-~-sa 77~029 52086 9~434 61520 64~209 2336 16602 18938 12820
63418 39447 102~865 61869 51311 11840 63151 72~986 12107 27~607 39714 -11117
83254 33124 116~378 43688 71950 12034 83984 54505 11304 21090 32394 -10817
100496 49559 15Cl055 11945 103214 12~ 168 115382 38~090 -2718 37391 34 673 -26145
145 bull 558 51395 196953 1503 110422 18001 128 423 14333 35136 33394 68530 -12830
168585 124~496 293081 5t550 138~729 48229 186958 9 813 29856 76267 106123 -4263
Table 17
Other Countries World Total
6~559 164045 5-912 131643
647 32405
4361 169~096 12~ 178 148315
- 7817 20781
7082 167148 9372 147860
-2290 19288
5851 167851 20281 173753
-14430 - 5902
1248 199704 6743 149499
-5495 50205
59 298690 2944 199715
-2885 98975
NOTE Areas may not always add to world t~tals because of rounding
Source 1937 and 1947 frlttm unuublished Ecuadorian Trade Statistics at US Department of Commerce 1938-46 frem Ecuador Ministerio de Economia data furnished Mission July 1948
(Table 17 continued on next page)
YEAR
12J Exports Imports Balance
1944 Exports Imports Balance
125 Exports Imports Balance
1946l) Expltgtrts Imports Balance
12Z= Exports Imports Balance
ECUADOR~ Balance of Trade by Area 1937-47 (thousand sucres)
WESTERN HEMISPHEL~ (including Phili~ines United States Other Total EuroQe
239238 147~245 386~483 6335 103583 96~478 200~061 16276 135655 50769 186422 -9~941
267105 194804 461909 4~108 173776 138213 311989 15~885 93329 56591 149920 -11779
218018 154~531 372549 4075 178821 123508 302)29 17159 39197 31023 70220 -13084
227291 264224 49J515 36783 240~233 123170 36J403 45~194 -12942 141054 128112 -8411
262887 241796 504683 61998 429906 8676 517582 80928
-167019 154120 -12899 -18930
1 Only year in which substantial Philippine trade
NOTE Areas may not always add to world total becasue of rounding
Table 17 (oonttnued)
Other Countries World Total
29 393115 1646 217983
-1)49 15132
614 466~631 3~282 331~156
-2668 135475
1270 377894 4035 323524
-2765 54)70
8~833 537131 5670 414266 3163 122865
53179 619859 5969 60449
47210 15380
Sources 1937 and 1947 from unpublished Ecuadorian Trade Statistics at us Department of Commerce 1938-46 from Ecuador Ministerio de Economia data furnished IBRD Mission July 1948
~ EXCHANGJ-tAL BANK
ECUADOR Exchange Reserves amp Banking Position (million sucres)
r 4 bull TIC CQEDITS OF CENTRAL BAl~K Domestic Govt Official Bus Other Credits
MOliEY SUPELY Current AC
JJj To()2f (4) Entities Indvls Total Banks of O~mtl Currencl Denosits l (6) (7) (8) (10) (5) Banks amp 11
Indvls (9)
16 10 26 51 1 116 62 64 48 26 7 40 73 4 129 74 66 3middot7 )9 7 29 66 4 144 73 71 37 29 8 24 62 4 159 78 73 56 26 8 22 55 5 183 8l 103 81 37 28 2 8 201) 120 119
152 37 21 22 79 9 255 169 17~ 26) 34 27 22 83 13 378 ZJa 26e )4 60 37 20 117 9 385 295 308 Z5 105 73 11 189 26 493 321 312 282 153 81 10 244 24 536 35middot~ 354 242 104 44 93 241 2 565 329 284
221 110 51 99 260 2 56 313 278 215 102 47 101 250 2 573 )06 294 225 97 45 95 237 2 585 299 299 219 100 44 98 242 1 591 307 297 214 98 35 111 244 4 6)4 315 295
)20 295
on of $12500CC beginning in December 1946 bull
ars
Ttttal (12)
127 14) 144 151 183 239 345 492 602 634 704 613
591 599 597 604 610 614
ge liabilitieS but including Stabilization Fund in 1945 and GolC CertificCt in 194) bull ial banks and fomento banks ial bc1nkst and fomento banks sits of commercial banks and time deposits of fomento banks
Table 18
Govl t Den sits ~L
(lJ)
6 23 12 27 7 28 8 31 6 32
middotmiddot 11 )6 16 57 27 71 41 74 63 98 59 90 66 77
71 8 75 76 6 75 81 75 81 72
72
1 1 Boletin - Superintendencia de Bancos Boletin - Unpublished data furnish~d MF bY Banco Central of Ecuador
Table 19 ECUADOR
Price Indices
WHOLESALE Rents Export Fooa in
YEAR Goods and Quito - Coal ~1) (2) (3)
1937 100
1938 83 100
1939 95 100 153
19h0 95 106 16h
1941 96 113 150
1942 114 146 172
1943 114 183 187
19h4 118 218 219
1945 133 266 254
1946 203 320 315
1947 297 364 516
19h8 (March) 294 379
(liay) 416
(July) 389
llame l~umbar
Republic of Ecuador
Status of u s Export-Import Bank Loans to ~cuador
Purpose
gs of Junemiddot10omiddotl9ltsect
Gross Authorized
Cancel- Net lations Authorized Repeid
Amount Amount Outstandin~ Undisbursed
6J048 6J048
( 262 )16
Haterials equip amp services $ 6480000 $20810 $6459170 $1279775 ~)5-l19middot395 _____ _
ibulliunicipali ty of iui to (Republic of Ecuador)
ibullIunicipali ty of Guayaquil (Republic of Ecuador)
Republic of Ec~ador
Republic of Ecuador
Ecuador DeveloPIlent Corp
Pan-American Highray (Cuenca-Loja)
Agricultural Research amp Experiments
Raihray Equipment
5000000
12JOOOO
50000 200000
)28 Haterials equip ~~ 4000000 services - ater 1middot1orks
)28 iltiaterials equip amp services - ~~rater orks 4000000
J4J Pan-American High1middotray (Guamote-Tambo)
432 uevedo-Hanta Hightmiddotray (additional credit)
1980000
220000
$19180000
Of tlhich $2500000 tts used on the Quevedo-Ibullianta HighTaY
4000000 28880
4000000 167
-1 t-9amphOOO- -7500
220000
6o6120 -h365000-middot
41592 575-t 2-41
-l-y5Q2- 500 44Gooo
220000
IBRD Statistics Sectio spte~ber 24 1948
-8-
III AGRICULTURAL lROIDCTION
25 Ecuadorian development is largely a matter of increasing the out-
put of and improving internal and external trade in agricultural products
There appears to be no enduring geographic or physical reason ~middotby this can
not be accomplished She possesses soils and climate ranging from the
tropical to the temperate soils which in some areas are very fertile and in
others are in danger of exhaustion To anticipate subsecpent conclusions
her problem of development through agricultural progress breaks doTltD into
separate aspects all involving improved technique
(a) increasing arable yields from areas already cultivated
(b) improving pastures and stock in grazing areas
(c) enlarging both arable and pastural areas (including irrigation)
(d) improving roads in rural areas
26 Achieving these objectives involves providing more adequate
domestic credit for short- medi~ and long-term agricultural requirements
27 In application however interpretation of these problems is very
different in the two occupied regions of the country the Sierra and the
Coastal Lovrlands no generalization can cover both
(a) TLe Sierra
28 The occupied inter-Andean valleys are a region of temperate
agriculture producing almost exclusively for local consumptionmiddot Their
pat tern of tilled fields grazing land trees and flowerJl is almost
Y Flowers bloom all year round The main tree is the eucalyptusmiddot introshyduced some 70 years ago end used for all purposes (~indbreaks fuel 1
and lumber) affording a striking example of the effect of introduction of one plant upon regional habitability-
-9-
Western liiuropean in appearance but not unfortunately in productivity
Agricultural Production of the Sierra
1939 194o 1941 1942 - -(Hundreds of pounds)
Theat 49QOOO 611300 534300 527499
Potatoes 1201000 1476400 1386120 1146000
Rye 72500 79900 159495 115000
Lentels 46000 424oO 37955 csooo Corn 816700 1349300 1308062 1315200
Barley 85)000 795700 903600 911000
Cotton 45000 42020
Kidney Beans 80000
29 In addition about 1000000 hectares (247 m~llion acres) are
devoted to pasture supporting epproximate1y 683000 cattle 145 million
sheEf 107000 STrrine and 320000 goats
30 Yields are low in all Sierrean agricultural activities the
standing VJheat and barley crops are so thin that the ground can be seen
through them Yet the greater part (some 6o per cent) of the people of
Ecuador live in the Sierra and population is increasing at about 2 per
cent per annum The effect upon land use under existing tecnniques is
clearly visible cultivated areas are being pushed higher and higner up
the hillsides (slopes of 30 to 40 degrees being used) and onto the
fJparamon the high plateau betvreen adjacent valleys at altitudes of
11000 feet and higher The result is a picturesque scene but one which
reveals a near Malthusian situation in the man-land ratio rbullrith static
-10-
technical practices It is a situation which cannot remain unchanged if
economic development is to occur in the region
31 There sean to be three possible lines of advance increase of
output from highland areas in present use the bringing into use of new
ground in the highlandsbull or a change to increasing reliance upon the outshy
put of non-highland areas
32 The third possibility is not one for the immediate future It
involves either large-scale migration from highland areas to lowland
regions or a large transport program linking highlands and lowlands
together with growth of non-~ricultural activities on the highlands to
provide a cash income with which to purchase 11 imported 11 foodstuffs This
second possibility may indeed be the trend of ultimate development but
offers no irmnediate easement Large-scale internal population movement
from highland to lowland is probably impossible since the Andean
Indian (of different stock to the coastal Indian) is fullf acclimatized
both mentally and physically to life at high and temperate altitudes and
little suited to life on tropical lowlands
33 The two remaining lines of advance would both seec to increase
highland agricultural output But there is an important difference beshy
tween increasing output from valley land in rr esent use and bringing new
and higher land into arable use The first is a complex problem suscepshy
tible only of relatively slow solution the second is seemingly simple
and capable of quick result yet basically less sound offering only
temporary improvement
34 The thurst onto higher ground is already evident and the area
-11-
taken in could probably be greatly enlarged by efficient use of tractors
and modern plows Such use of mechanical equipment would thus give quick
increase of agricultural output but it is very doubtful whether improveshy
ment induced by these means alone could be long maintained The greatest
~r particularly on sloping land is that deep plowing may lead to
soil erosion so serious that land becomes finally llilgtroductive To use
mecbanical equipment i thout at the same time adopting eqJally modern
methods of soil conservation way well be disastrous and that perhaps
within no long period
35 Even apart from this physical daneer there is the virtual cer-
tainty that new land however plowed would gradually sink in fertility
end hence output unless farmed by better agricultural practices than
those now followed in highland Ecuador The present attraction of the
higher land is principally good natural fertility beine virgin ground
On all other counts this higher land is less advMtageous than the valley
floors the va)ley sides are steeply sloping a1d the fl~t paramo is some
2000 feet higher bare windswept and devoid of habitation It would
seem obvious that it is pastoral rather than arable ground were it not
for the pressure upon arable output of the region
36 The pressure today however rises from the relation betwem
popUation and output rather than that betvreen population and arable
area Productivity in the Andean valley is low and can certainly be
improved If improved the pressgtlre which is causing the thrust to
higher ground is relieved until population increase again overtakes outshy
put Against that time however the higher ground vrould remain
-12-
availfibleY and other lower regions may be coming under effective use
37 To increase output of the populated valleys is not a simple mat-
ter responsive to single policies such as simple mechanization by tracshy
tors It will embrace the wlo le range of agricultural practices from
better seed types to crop rotation and fertilizers including in some
valleys irrigation It is a matter rrther of agricultural education
than of~dtlgagricultural appliances and probably experiment under
the peculiar regional conditions will need to precede education Improveshy
ment will necessarily be slov1 but along these lines it can be sound and
permanent
38 Wher~ lfL mere importation of mechanical methods Vi thout
understanding of their dangers in speeding soil destruction by wind and
water erosion may permanently damage the region The somewhat gradual
mechanization of agriculture is of course to be expected and not disshy
couraged but it is not the wlole answer to development in highland
Ecuador
39 It seems that there is at present no over-all agricultural
lfibor sl1ortage in the Sierra and mechanization is nOt therefore called
for to relieve an adverse manpower position It seems however that
some of the larger estates are experiencing difficulty in obtaining their
labor requirements because Indian tenants are viitblolding quasi-feudal
labor dues and devoting whole time to cultivation of their own plotsbull
As a result hacienda holders are attracted to mechanization as an
escape from growing difficulties in obtaining and supervising labor upon
Y As it would not if destructi ve1y formed at this stage
-13-
their ovm land To the extent they are successful the tendency for agrishy
cultural money vrages to rise is weakened
4o There vrould seem to be good possibilities of increasing pas-
toral agriculture in the highlands 1Jrith improvement in both numbers and
strains of cattle and sheep If adequate arable development occurred in
the valleys the main grazing grounds could be the higher land not then
required for arable purposes ~lith dairy cattle on the valley margins or
on valley ground not well suited to arable use Such pastoral development
would be desirable not only to imp1middotove nutrition in Ecuador itself 1 but
as a possible new export of meats fats and hides to meat deficient
Republics notably Peru Early export would probably be on the hoof
along the Andea1 ridge it self
41 The Ecuadorian Government has not included any explicit propo-
sals for highland agriculture (other than irrigation) in its present apshy
proach to the Bank It has however suggested the Bank finance $1 mil-
lion of agricultural tractors and equipment to be handled by agriculshy
tural stations located at strategic places both in the coastal
provinces and the highlands 11 without further elaboration of the
intended highland use of such ecp ipment The description given above
suggests that the usefulness of agriculture machire ry depends to a conshy
siderable extent on the place plan and purpose for rhich it is to be
used
42 In some of the highland valleys (for example in Cotopaxi end
~ound Biobamba) rainfall is deficient and irrigation would increase
valley output by bringing more valley ground into effective use This
- 14 ~-
is clearly sound for flat valley ground already populated is more useshy
ful than higher sloping and more exposed ground The Ecuadorian Govern
ment has included purchase of eq1 ipment for irrigtion works to the value
of $500000 in its present approach to the Barik Assessed against the
requirements for economic development the request is sound provided of
course such equipment is effectively used
(b) The Ooast
43 The condition and nationel significance of agriculture on the
tropical coastal plains is quite different from that ltNl the Sierra The
area as a whole is less densely populated and in some parts such as the
Province of Esmeraldas is very sparsely populated Its principal pro-
ducts are exported The population has more mixed blood than the highland
people and is oore corumercially active and minded There is little feel-
ing of community of interest with the highlmds the rrincipal coastal
city GuayaqJil is larger than Quito and less remote fror-1 outside
influence
44 In terms of reported area devoted to its cultivation cacao
is the principal crop of the coast The table on the following page
shows output of main crops
45 Cacao is not however the most important export crop by value
being surpassed by both rice and panama rats (a handicraft product of the
region) Nor does the table show those products which result from
gatherage of mild growth tagua kapok oil-bearing vegetable nuts
balsa rood rubber etc
Y For use by the Caja de Klaquogo as required both in tile highlands and on the lowlands
-15-
46 Agricultural Production of the Coast
1939 ~ 1941 1942
(limdreds of pounds)
Rice 957164 872890 12304oO 1610489
Cacao 392000 263300 333250 315782
Coffee 343800 369000 310000 190633
Bananas (1000 bunches) 4090 3913 4568 4265
Oranges (COOs) 103000 lQ96oO 80550 75000
Cotton 200800 156800 155910 111500
Tobacco 24o43 4o 765 22349 29539
47 It has been estimated that about 500000 hectares (1 235 500
acres) are devoted to pastures on the coast supporting approximately
425000 cattle and 36000 swine
48 There is no doubt that the coast is an extremely rich agricul-
tural area although toward the south it is increasingly hampered by
shortage of water in the dry season And rt is overwhelmingly the
principal foreign exchange producing region of the country Yet it is
largely undeveloped by any modern standards lacking roads and almost
all basic civic amenities (water supply sewage paved streets etc) in
the provincial towns The development of a tropical agricultural region
without large labor supply _rill raise many interesting and some new
J Irrigation ~rks are in execution and others planned in various places and the irrigation equipment which it has bee11 suggested the Bank might finance would presumably be used on the lovlands as well as the highlands
-16-
problems the solution of hlch in detail may lack precedentY The
suitability of cacao to Ecuadorian conditions arises in part from the very
small labor requirements of the crop At bottom advance will lie along
the route of crop improvement and mechanization the difficulty will be
the proper application of mechanization crop by crop Some tropical pro-
ducts may never be suitable for mechanical cultivation being those whicl
would require intensive hand cul ti vat ion and may therefore not be appro-
priate for Ecuadorian condttions Others r1JJi3 be suitable only if grown on
relatively large plantations
49 Clearly for the foreseeable future many lowland products will re-
main at the stage of gathering of nld natural growth rather than plantashy
tion enterprise The flow to market of such productswould be increased
by improved access notably road core truction anQ at the same time road
building ~~uld seem to be a condition precedent for spread of plantation
methods particularly plantations using mechanical equipment lilliE diate
measures for the over-all agricultural development of the region may not
be directly agricultural at ell they are rather the provision of roads
and transport facilities the provision of long and medium term agric-llshy
tural credits and in some areas) the institution of health services
With the opening up of the region in this manner iiould come more clearly
perceived opportunity for better agricultural use of the land particu-
larly if effective demand for the products is transmit ted back to the
cultivator through establishment of product processing plants where approshy
priate for example in vegetable oils and tagua (vegetable ivory)
] This is the situation which in Brazil for example in an earlier technical epoch was 11 solvedll by importation of Negro slave lebor
-17-
50 As in the Sierra there are good possibilities for pastoral
development on the lowlands Some progress is already being made in this
direction with experiment in breeding more suitable cattle types through
crossing 11Ji th imported Indian brahmin strains Grazing for beef is not
highly labor intensive and this development is very promising since
export to other Republics by sea llould be reltti vely easy In the first
stages export would presumably be upon the hoof ith later development
of meat packing
51 There seems to be no single bottleneck or restraint upon devel~
ment presently existing all other conditions being favorable If developshy
ment occurs it will be along many simultaneous fronts but the front iJhiclf
is lagging and Inayen continue to lag is the provision of basic social ccp ishy
tal (roads water supplies health services etc) that is of those
things which no single private individual or corporation can provide for
itself Given these and the institution of suitable domestic credit
fecilities the rest may be accomplished by private domestic ini tiat1ve
52 The development plans of the Ecuadorian Government as outlined
in a Memorandum dated April 8 give much weight to lowland agriculture
The establishment of agricultural stations to provide farmers wi~h
disease-resisting cacao plants~ tecl1nical advice and credit facilities
is CD ntemplated no foreign exchange would be recpired all funds being
local currency The rehabilitation of cacao formerly a leading export
crop is desirable although development of cacao sources elsewhere may
prev~nt recapture of the position formerly held by Ecuador
53 A proposed agricultural mechanization programwoUld total
- 18
$25 million in foreign exchange cost )J The bulk of this ($1 5 million)
is allocated to wechanization of rice cultivation alone the benefit being
principally in resulting improved export position The remainder $1 milshy
lion is for mechanization of other agricultural produc~s apparently
mainly lowland (those products specifically mentioned being 11cotton sugar
oil-bearing seeds and other specified products11) the exclwnge benefit
forecast being principally through reduction of import a
54 Different criteria ~~ould be used in assessment of these two
projects The judgment on that for rice will depend upon forecast of
world rice markets and in particular upon expectations regarding rorld
demand for rice from the dollar area The validity of mechanization in
cotton sugar oil-bearing seeds and other lowland products will depend
first upon the technical possibilities for such mechanization a matter
not yet fully explored If sudl technical possibilities are favorable
effective mechanization vOuld constitute sound development upon the low-
lands which are relatively sparsely populated
Y Some part of which would be for the benefit of highland agriculture if machinery stations be established there
--19 -
IV MI-~RAL PHODUCTION
55 Ecuadorian mineral nroduction covers only a few products and
important the wells of the lowlands being exploited by the nglo-
Ecuadorian Oil Comany Production of crude petrolewn shows a slicl1t
rising tendency while exnorts have declined steadily a~ more refined 1
products are consumed domestically
56 Oil exploration to the Iast opound the Andesin the Amazonian
region is proceedinc under concession to tl-1e Shell Oil Go1~1any
Three wells have been drilled without success and tvro arc beinc
deepened Cost of this exploration to ciate j_s around US)23 million
If oil is found its only outlet middotwill be a pipe line over Ue Ances
(estimated to cost USiD93 million) and this the comany is not -rE1inz
to undertake unless assured of an outnut of at least 100000 barrels a
day
57 The only other irnrJortant minine activities are those of gold
silver conper and lead conducted by the South ~~erican Develoument ~
Company and the Cotapaxi Sxplora tion ConJ1any War-time lr oduction peaks
were 1942 for gold and CO)per 1944 for silver and lead Since these
resective peaks production has ~-~clined narticularly in copper and
lead although not to 1933 lsvels7
crude petroleum II II
1938 (millio~1s of 225 107
Production Exports Production refined petroleum 37
1947 barrels)
236 bull94
128 (See Table No_Jl_ Statistical Appendix
Production Gold (000 troy ounces) Silver (000 troy ounces) Co~per (000 pounds) Lead (000 pounds)
1938 445 82~0 27 21
War Peak l03tJ hhl3
96788 161-+88
19h7 5o5
1569 3316 h98h
-20-
58 Ecuadorian trade statistics list exports of crude pet~middotoleum
and minerals separately from that of other commodities even in aggre-
gate figures underlining the fact the exploitation is in foreign hands
and hence colonial in nature This aspect hmmiddotever is of di-1inishmiddot-
ing importance as now the foreign exchange realized from such mineral
exports accrues to the Central Bank and as in any event nineral ex-1)
ports form a diminishing proportion of the vhole 7
V ~JNUFACTURING PEODUCTION
59 There are virtually no stCltistics on manufacturing in Ecuador
and none which present any comprehensive view It is ho~middot-rever clear
that there is very Uttle industrial factory prJchJction and obser-
vation in the country leaves one with an impression of the nresent
igtilportance of handicraft production
60 The most inportant consuxner-good factory industrj_es are tex-
t~~~breweri~-~~ otheuro7r beveraces shoes ard leather _roduc~s buttons ~d~lttfr
and nails Textile production using domestically produced cotton pro-
duces cotton piece-goods and wool rayon and hemgt textiles supplying
almost all domestic demand for low-quality products The only irJDcrtant
producer-good factory industry is cement the plants being located near
Guayaquil Lack of domestic technical lmow-how and of capLtal and
the low level of domestic effective demand account for the sli~ht develop-
ment of faetory industries whose rrowth on any scale beloncs to a 1ter
stage of economic development
y Value of nineral exportsmiddot as nercentare of value of all exports 1929 260 nercent 1933 430 n 1939 397 1946 11~5 1947 69
Production and irrport statistics for cement tre civen in Table IJo bull 2__ Statistical Appendix
- 21-
61 Uuch of finished commodity ygtroduction is at the handicraft
stage both for nroducer and consumer goods In Quito and Guayaquil
one sees many small 11 shops11 producing metal leather and wood manushy
factures largely by manual methods It is an illuminating co~~entary
on the shallow growth of industrial specialization that the ll1ission
did not see any shops selling ready-made womens clothing All
womens clothing shops displayed only materials in the bolt as in
pioneer days elsewhere
62 One handicraft industry of great importance in exports is
the production of panama hats It has been estimated that 30000
families are occupied vrhole or art-time upon this nroduction and
at times (for example 1945) they have provided the largest single
export item by value The grmvth and treatment of the fiber and the
weaving of the hat is entirely an Indian handicraft industry the
Yteaving of a high-quality hat taking three months The fiber is erown
and the best hats woven in the lowlands Its future ir-mort nee is unshy
certain as the competition of Italy and the Fhilinpines is again felt
in low-_)rice woven hats the boom emjoyed during the war nay recede
63 Ecuador in its ~resent and foreseeable development is an
agricultural country with no immediate movement toward industrialization
EcuAdorians met by the Mission themselves stated this The growth of
factory industry will be slow that of small shop and handicraft manushy
facture somewhat less slow It vmuld seem as stressed later in this
report that there is room for grm~h of processing of agricultural
products Statistically such processing would be classed as industrial
production but is oroperly the finishing stage of agricultural productior
- 22-
to secure improved durability and portability of perishable products
This would increase effective demand imnacting upon the farm and ass1st
in stimulating agricultural development Some progress being made in
this direction notably in vegetable oil expressing plants Ihe only
non-agricultural project suggested by the -r~cuadorian Government has -eer
a cement plant located in the highlands at a foreign exchanr~e cost of
$2 rrillion the justification being both the saving of foreign exchange
expended upon cement imports and reduction of load upon the only railshy
way connecting lovrlands and hichlands Growth of cement use accompanies
economic development assessment of this project (engineering questions
apart) would involve tainly questions of timing location and finance
matters which are really all aspects of the single question whether
such a project may not be one for private direct investment Initial
expectation would be that were all factors favorable to the success of
the project it gtlould be readily undertaken by orivate enterprise
particularly when it is remembered that railway freiehts 1bullrould protect
highland production from lowland competition
6h No sueeestions regarding increase of electric power output
have come fror1 the Government indeed the official statistical services
have no data upon installed capacities and demand Cnly in Quito and
Guayaquil are present industrial uses of electric poler of any ir1portance
Elsewhere suIJply is from snall municipal plants (mainly therraal) for house-
hold consumption It appears that demand mar be ahead sunply in cost
towns very frequently voltages are maintained around 80 instead of the
rated 110
- 23 -
65 Shortage of electric nower is not however hamoering
economic development at this stage although it may soon do so in
sevral urban centers such as Qui to and Hiobamba Sone ttne i-1 the
iuture the possibility of large hydro-electric vrorks on the eastern 1
side of the Andes will merit attention
y Where the rivers are fast and clear on the western side they carry much silt
- 24-
VI DmIESTC THANSPORT AND COilERCE
66 The space devoted to agriculture in this report reflects its
importance in the Ecuadorian economy As has been said further developshy
ment will for sometime be mainly agricu1tural
67 Present restraints upon that development are not located
solely or perhaps even nrincipally on the farm there are many
features of the general economic environment which operate to hamper
even purely agricultural development There is great room for improveshy
ment of transport to knit the economy tocether and to encot1raee grovrth
of output
(a) Transport
68 Without roads there can be little regional or inter-regional
intergration Fithout that intergration (which for some regions and
some crops would open upon the world at the gatewa~r of a oort) there
can be but small inducement andlittle opportunity of increasing proshy
duction In much of Ecuador the principal transport vehicle is the mule
whose patience and endurance under heaJr load is matched by that of the
Indian
69 As regards roads the requirement is both more roads and
better roads capable of bearinr modern vehicular traffic The roads
traveled by the 1Jission are uniformly bad both slowing traffic and imshy
Ilosing extraordiPamiddoty vehicular de_reciation Ultimately no coubt
there vdll be an adequate system of all-rreather roads in Ecuador For
the immediate future the more modest tarset is to attain a reasonable
system of roads civine access to the creater art of roducine areas
- 25-
in the dry season At present the unsurfaced access roads are cut to
pieces by --vater erosion in the wet season and consolidated somew1at
traffic in the dry season A single eradinr operation smoothin thE
dirt surface at the end of the vret season would ci ve accelJtable usashy
bility in the dry )eriod v1hich in the populated coastal rovince of
icanabi for example is eight ~aonths of the year At -_resent the so1e
transport link for corunodities between loYrlands and the hihlands
is the Guayaquil to Quito (and beyond) railway This link is nrobaoly
nearing saturation point vdth present equipment and its strencthening
both by railway imJrovement and all-middotweather hichway construction is
obviously desirable it middotill probably become essential yri thin five
years
(b) Commerce
70 Physical transport alone hogtever is not the only ope c-ation
ofcarriaee required to intecrate a reeion internally and to bind toshy
cether the various regions There are also tL physical and the finanshy
cial aspects of comr1odity holdinr involving the storae and vrhere
necessaFJ the partial processing of products to reduce perishability
and the avail~bility of mechanisms of short-term finance extendine over
crop periods In Ecuador these tro aspects are closely related
71 Apart from some export crops there is virtually no crop or
food processinG undertaken And in the export crops processing
is the minimum necessary to secure portability Eice is nilled but not
polished cacao is sun dried coffee is dried and within only recent
years washed fruit is exported whole Some new e~Jor-ts may require
further processing and installation of plant starting or is in
- 26-
advanced discussion for example vegetable oil processing (although
for sometime no eXport surplus of vegetable oils is 11~11 and fish
canning
72 Nor is there any important ~recessing of domestic food pro-
duction for home consumption bull There is no freezing or canning of meat
which is taken to market on the hoof There are only two or three
very small butter factories and no whole milk orocessing Cereals
of course are not highly perishable but there are no silos or granarshy
ies and experience of similar situations elsewhere suzfests that losses
by deterioration and infestation may be significant no direct evishy
dence anthe incidence of this factor in Ecuador ~as obtained by the
Mission Thee is little storage of grass on the coast in silos or
as hay and in the dry season slaughter of cattle because of lack of
feed is at times necessary In short the situation is not so very
dissimilar to that ofmiddotmedieval Europe
73 Roads alone would not create an environment favorable to
change in this position although lack of roads nar well inlibi t change bull
In addition suitable credit facilities for the finance of co~~odity
holding through time are necessary
74 Hany complaints were voiced to the Hission reearding lack of
short-term banking credit for crop movement and storage and for medium
and long-term agricultural investment and no doubt there is signifi
cant lack of such credits But this is not the result of some simle
institutional defect of the b~~inc and credit structure even though
institutional improvement may be necessary It is fundamentally a
- 27-
reflection of the fact that Ecuador is extremely poor in disposable
capital available for even short-term investment ie vrorcing capi-
tal Improvement of short-term credit facilities for what in advanced
communities are regarded as purely commercial purposes would in effect
represent an increase of capital intensity in the Ecuadorian ecororny
To the extent that banks met more fully the gtJeak seasonal credit re-
quirements for croo movement and storage individual nrivate reoources
are relieved of the 1eak burden and available for other investments
75 Thus iorovement of the techanisr by 11hich the banking system
provides working capital for corrtercial or inciustrial (in the sense of
crop processing) purposes is itself an act of investment rather than
merely an institutional rationalization ilnd as such carry the
usual consequences of investment in an undevelogted economr with very
law voluntary savings To the extent that additional credits are not
matched by savings sewhere (either voluntary or forced through
taxation) they will be inflationary in effect just as an
additional act of long-term investment would be Increase of banki1g
nrovision of workinrr capital should keep step with totl capital for-_ - - 1 mation of which it is one aspect7
It is implicitly assumed in the foregoine that at nresent in Ecuador the amount of small voluntary savinrrs is neclicible It vrill presumably not alrmys remain so and ~Jart of the modifications of the bankin~ system shou1d be attract Clli1U1 atively such sav-ings in the fom of savinc do)Josi ts This 1muld increase the extent to which Danks can safely flovide capital It will be a much later before small private savincs are directly in-vested in commerce or industry throuh joint stock r1ethods There is no stock-exchance in Ecuador
-28-
76 It is of course just as important that the availabi lity of
working capital should not lag behind as it is that it should not run
ahead The Bank should ensure that any long-term investment projects it
may assist to finance do not effectively starve the rest of the econo~
of working capital in the process of avoiding inflation
77 There is also the question of the price of short-term lending
that is of the level of interest rates The Ecuadorian is a highshy
interest rate eoonomy The legal maximum for commercial short-term loans
is 10 per cent having recently been increased from 7 per cent legal
maximum rates however are not systematically enforced by commercial
banks themselves At a time when the legal maximum was 7 per cent
going rate for 90 day loans secured upon properly warehoused commodishy
ties and with third party endorsement was 12 pe+ cent
78 This very high structure of interest rates seems open to
obvious criticism but is in fact probably not Tiholly unjustifiable in
the present conditions of Ecuador It is the cumulative result of many
factors so that more official prescription of lower rates would be
quite ineffective These factors seem to be
(a) Interest proper~
(b) layment for risk bearing arising in part out of a
low rating upon individual credit and in part from
the institutional conditions (such as embryonic
commercial and financial ruarkets) which seriously
reduce the liquidity of any asset other than money
itself
-29
(c) An clcmmt 0f discount 111nn cyectcd luturc irf] utinn
reducing the real value of the pa~nent for lending
(d) An element of monopoly which upon purely subjective
judgment may be the least ilJI9ortant of these several 1
factors7
(e) The real shortace of capital whether short or long--
term~ reflecting in interest rates as a genuine
scarcity price
79bull Of those factors the di~ount upon expected future in-
flation increases prices at a rate of 12 ner cent per annum a money
interest rate of 12 per cent per annum is a real rate of zero If
therefore inflation could be controlled a substantial reduction of
money interest rates could be hoked for At the same tine while
inflation continues high interest rates probably have small influencemiddot
in encouraging money savings
80 Even without inflation ans until the su~1ly of available
real capital improves relatively high interest rates may well be
acceDtablemiddot as a price mechanisn nethod of selectin~ most urofitable y ~
uses of limited fundsbull middothere exoected urivate nrofit did not seem l - -
to parallel social desirability loans at lower rates (ie subsidized
terms) could be made perhaps through reconstituted Development Banks
Prima facie however such loans 1bullrould not be short-term
~I -Onthis interprepoundaion the situation in Ecuador differs signifishycantly from that in Peru
tt is suggested that a powerful point of intervention would be to limit commercial banking dividends distributed to not more than say 7 per cent The high profits nmv earned by commercial banks would then progressively accumulate until liberalization of lending becomes virtually forced by accumulation of funds representing genuine corporation saVings
- 30-
81 The discussion of private finance has so far upon
short-term credits there is an even larger nroblem in the
intermediate and long-term arricul tural credit It is not necessarr
to expand greatly upon this since it too is a consequence capi-
tal shortage
82 Imnrovement would seem to be alonrr the route - 1 of nroper UElte
of existing Development Banks (or their successors-) effectively
in the earlier stages as lending agencies of Government
VII OFFICIAL DEVLOPHl~NT FHmiddotIfJCE
83 In the circurnstances of a country like Ecuador the greater
part of domestic capital forr1ation requires official directly
or indirectly if it is to occur on any scale are too
small and too narrowly held to permit much -rowth this roL1te
andthose few who are able to save at any sinificant rate are larely
uninterested in the efficiency of ~reduction
84 Official finance may be either direct or indirect direct
throueh works executed by Government or 0JUblic bodies indirect
throueh lending institutions such as Dev~lopment Banlcs capitalized
from public funds In either case funds are diverted to investment
purposes by Govern~ent intervention
85 Thus Development Bank lending for productive purposes (for
example long-term acricul tural credit) is an item 1n ca9i tal formation
V There are thirteen reaional Development with an unirnJresstve record of manaeement Their possible reconstitution is under discussion
-31-
rather than a mere institutional rationalization of the credit mech-
anism Indeed as has been stressed in the last section even im-
proved su1nly of short-term credit gtrill in art rewesent
formation A developing economy which neclected these items in 11Cnn21~~
or forecastinc total caital investnent would be very vulnerable indeed
to inflation induced by over-investment
86 17here voluntary savings are Jow the only wmiddotamiddot to sirnificant
rate of capital formatton can emerge without inflation is an equi-
valent amount of savine forced throurh taxation One ould look for a
relatively hirsh level of taxation to national income and for a rela-
tively high proportion of exnenditures caDi tal purposes to total
Government expenditures On both these counts Ecuadorian elq)erience
seems irare s si ve
87 In 1946 total budretary and spedal revenue rms disclosed
as 5368 million sucres in the sa1le rear an estLnate middotJaced national
income at 20096 million sucres This a proym~tion of 27 middoter
come a proportion so hich that in fact it lacks credence In assess-
inc total tax burden part of the revenues of Government monorolies
and all of municial revenues should be included if this be done y
the proportion becomes 37 per cent In addition new exchance taxes
yielded 973 million sucres in 1947
Mono_)oly participations (ii direct disbursements for public _Jurposes) were 353 million sucres in 1946 munici~al income was 1803 million sucres in 1947 (1946 not available)
32-
88 It is very difficult to accept the conclusion that Ecuadorian
revenues form so high a proportion of national income it would seem
that the estimate of national income is too low Nevertheless tax
revenues are clearly a sizable percentace of national income
89 At the request of the Mission an official estimate of total
official expenditures on capital account was prepared Total income of
Government municipalities provincial councils and other public
entities was ~iven as 7S4 million sucres and total capital expenditure
from that income as 2237 million sucres or slichtlr over 30 per cent
of revenuesY It is difficult to feel confident that effective capi-
tal formation on this scale actually occurred certainly there is
little evidence visible to the eye of the t1middotaveler
90 Notwithstanding such doubts the fiscal evidence is of a
fairly hich proportion of tax revenues to national inco~e and of a
hich proportion of revenue allocated to capital investment It would
seem that the fiscal mechanism exists for domestic capital fo~~tion
what may be required is more effective expenditure of allocated funds-
Before a development plan envisa~ing the expenditure of still more funds
was adopted it would be desirable to examine closely administrative
and technical efficiency in the use of existing funds
91 On the side of revenue Treasurr officials informed the Mis-
sion that tax evasion was estirnated at some 30 per cent of ta revenues
1 This makes such capital expenditures 112) per cent of 1946 national income which a~ain seems very high indeed
The two largest items are Government public works (8)4 million sucres) and municipal works (900 million sucres)
- 33-
particularly in income and land tax It might well be advantareous
on the sides both of revenue and of expenditure for Ecuador to obtain
technical assistance of the tPe that the United Nations Department of
Economic Affairs rendered to Venezuela in 1947~Y involvinpound revision
of the structure of the budget of budcetary audit practices and the
like
f Report~d in UN Document ECN 1SubJfti 4 - 21 June 1948 lostricted)
- 34 -
VIII 001EHNl(iEi~T FINANCE AND INRATlON
92 What may be called 11multiple budget practices exist in Ecuador
as in other Latin American countries There is an annual Ordinary Budget
one or more Extraordinary Budgets( tro in 1947) end a number of Special
Accounts (twenty-five in 1946) not included in the general budgetary
accounts The State operates nxmopolies in tobacco liquor salt and
matches part of whose profits are taken into the ordinary budget as
revenue and part used directly for public purposes It is thus diffi-
cult to assesrmiddotgggregate Government revenues and expencii tures and vir-
tually impossible to detail the purposes of expenditure to ascertain
accurately public capital formation by way of public morks and the like
9 Taking the disclosed figures on the ordinary and extraordinary
budgets and tne special accounts there has been a net surplus over the
past ten years 1operations of 234 million sucres~ This however is
not an accurate reflection of the true aggregate position because the
Government operations are not ~holly included in these disclosed ac-
counts But since the Government has no source of internal funds other
than the Central Bank the net recourse of Government to Central BanJJI mirrors the over-all result of Government finance such recourse increased
In 1946 for example the monopolies contributed 5357 million sucres to the general revenue and disbursed 3526 million to municipalities (145 million on general participation and 1652 million sucres for 11 special participation of gthich an example is a new electricity plant at Ambato the state railways (92 million) etc
gj iiith only three years of disclosed deficit since 1938 See Table 12 in Statistical Appendix
2 Central Bank loans middotto Government less Govertllllent deposits in banks
- 35-
480 million sucres over the nine-year period 1939 to 1947 inelusivel
an average of 53 million sucres annually amplch averaging however con-
ceals very important differences between the three periods within the
nine years to tal
94 The table on the next page sumnari zes the factors causing in-
crease of domestic money supply It is computed by rearrangemm t of the
balance sheets of the Central Bank all commercial banks and all developshy
ment banks and is thus a table shoring changes in items in a rearranged
aggregate balance sheet of the Ecuadorian banking system
95bull The first t70 periods 1939-1943 end l943-l946f were both
periods of heavy inflation_ During the first five years notes in cir
culation and monetary deposits increased 3437 million sucres (or 255 per
cent) and in the next three )eera 2904 million sucres (or 61 per cent)
But the causal structure was quite different in the two periods
96 In the first inflation was almost wholly induced by external
factors (favorable balance of paYments causing increase of foreign exshy
change holdings) the major domestic factor being expansion of commercial
bank loans and investments in this period deficit Government finance
was not a causal factor
97 In the next three-year period 1943-1946 however the major
inflationary factors change deficit Government finance and expansi on of
f As calculated by IBRD Mission loans to Government including ali loans to official agencies A recent calculation by the IMF Research Departshyment covering Government operations only places the aggregate 9 years deficit at 345 million sucres~ See Table 12 in Statistical Appendix
- 36-
BANKING CHANGES ~0015 SucresJ
Jan 1939 Jan 1944 Jan 1947 Jan 1948 to to to tomiddot
Dec 1943 Dec 1946 nee 1947 June 19h8 t~ ~arsJ ~~ iears) trmiddot ~~r1 t~ mo~~h~2
Central rcrk loans tomiddotc~vt~ f 16174 f 160260 - 701p88 23695 Central B~r~ Loans to Public -1 6978 2_283 1- 67548 1- 39763 Commercial Bank Loans and
Investments J 187554 f 14624 88h4 1- 2~ ~49 Development Baru Loans and
J 14227 136818 ~ 644 1- 26090 Investments
1 224933 f 313985 11)40 1- 68107 Net Bank Foreign Exchange 260774 f 94662 - 53203 - u6 112
7 485707 7 408647 I
7 bull - 64543 21395
Notes in Circulation f 16o907 1-131729 - 23205 - 17290 Public Monetary Deposits -A 162868 1- 128914 - 68734 1- 19620 Government Deposits f 19968middot 29768 9050 2366
7 343743 7 290411 82889 - 36 Public Time Deposits 116834 ~ 42053 1~004 f 317j
y 7 46o517 7 3J2464 83893 ~ -- 3137
Absorbed by Banking System 1- 25130 middot~ 76183 1- 19350 18258 7 485707
11 f 4o8647 64543 I - 7 21395
Net Government Borrowing J 131492 from Banks 3794 - 79738 - 32745
Deposits in Central Bank in foreign money (not included above ex pressed in Sucres
Government ~ 4486 - 633 871 - 11059 Public 25242 J 78964 - 78814 J 4h97
T29J 728 7 I
7 IIIII middot~~ ~ I
78331 79685 31+38
y Made urt as Io11mlfs
Cas~ bullbullbullbullbullbullbullbullbullbullbullbullbullbull ~ bullbullbullbullbullbullbullbull - bullbullbullbull J 266 1- 367 - 22~7 99 Other assets less other liabilities~ ~ 4 330 ~ 293 ~ 18~8 Capital and Reserves~- bull bullbullbullbull 4 bullbull 52 bull 1 1- 79-9 26 o 278
7 I
7 7 I
7 bull Ill ri bullbullbull
251 762 194 18)
Subtract increase
37-
Davelopment Bank lending dominE)te the position Expansion of commercial
bank lending is relatively negligible while a comparatively small role is
played by balance of payment influences
98 From the end of 1946 the general financial situation deterior-ated
rapidly in five months from January 1947 to ~~ay 1947 net foreign exshy
change reserves of the Centrel Bank fell 935 million sucres or 7 7 mil-
lion dollars to a level of 2927 million sucres or 21 7 million dolJars
In litaY 1947 an IMF Mission arrived in Ecuador (at the request of the
Government) and in June 1947 a multiple exchange rate system with import
classification was introduced upon the advice and with the concurrence of
the Fund Operation of this system Jielded considerable profit n in
sucres it is in effect a new imposition of import taxes and such
11profits 11 are in reality additional fiscal revenueY It was of the
essence of the Emd s attitude in Ecnador that the exchange difficulties
bad arisen through domestic inflation and that these addi tiona reve-
nues should therefore be applied only in reduction of Government debt to
the Central Bank
99 The effect of such policy is clearly seen in the third column
of the table Inflation is checked notes in cirmlation and monetary
deposits falling 929 million sucres (or 11-per cent) i~ one year Alshy
thoUtgb however Central Bank loans to Government (and also colllWrci al
jJ At this point only the domestic aspects of this measure are emphashysized In a later section the external or balance of ~ent aspects will be taken up
Y Such revenue from exchange taxes yielded 975 million sucres in 1947 bull md in July 1948 was running at g to 10 jllillion sucres a month this revenue is not of course taken into the budgets bull
- 38 -
bank loans and investments) fell the actual deflation _was largely
caused through loss of foJeign exchange rather than over~all reduction
of domestic bank lending For in response to vigorous ~oilplaints of
credit shortage the Central Bank greatly increased its loans to the
public almost fully offsetting reduction of its loans to Government
In the first six months of 1948 there was no significant contraction
of money supply banking loans to the public eJggtanding to offset the
deflationary effects af an adverse balance of payments and of Government
debt reduction
100 The exchange surcharge multiple rate system was in operation
through August 1948 proceeds being devoted to reduction of Government
debt to the Central Bank~ But there has bean concern lest the resulting
deflation of domestic money supply would be too severe and the Central
Bank has in fact adopted a compensatory policy to prevent further reducshy
tion through continuing to expand lending to the public arid through
quasi-open-market pur~e of mortgage bonds to the amount of 17 million
sucres by July 10 19l8 when further purchases were discontinued
101 To avoid the netcessity for such compensatory policy the Cen-
tral Bank proposed to the Government that the destination of reveme from
exchange taxes should be changed Instead of being applied in reduction
of debt the proposal was that they should be useci instead to create a
development fund tt to be administered by the Cent~al Bank unless a
planned Development Institute or other competent authority is estabshy
lished In mid-September the Fund appro ved such cllanged dest ination of
these revenues 90 per cent of which will in future be applied in finance
of development and 10 per cent in stabilization of Government bond prices
-39-
This removes a check upon inflation which has operated for some fifteen
months unless Central and commercial bank lending policies recognize
this changed situation further inflation may follow even if the Budgetary
accounts run no deficit
102 At the same time this change does provide a source of local
currency finance for development projects
-40-
IX INTERNATIONAL TRAIE AND THE BALANCE OF PADlENTS
103 Ecuador exports agricultural products (rice cacao coffee
tropical fruits balsa wood) mineral products (crude petrolelUil gold
silver copper and lead) and handicraft products (panama hats)Y
lo4 Approximately one trird of Ecuadorian exports (including
minerals) go to the United States The proportion rose during the war
due to VmiddotIar-time demand for strategic raw materials but is now tending
to revert to pre-war levels Loss of European markets has been partly
compensated by gain of n$w export markets at least for a time and
especially for rice Countries in the Far East whose rice production
fell during war such as the Philippines and in Latin America whose
Eastern sources of supply were cut off such as Cuba and Venezuela
have provided demand for Ecuadorian rice This outlet however may not
last much longer
105 On an average of years 1938 to 1943 about 15 per cent of
Ecuadorian imports are foodstuffs wheat and lard being the largest
items and 85 per cent are manufactured goods and equipment Import
of foodstuffs is however gro1ing t-vith population and in the key pro-
ducts of wheat and fats would be expected to grow still faster if
econowic development raises n~ss living standards witl10ut increasing
domestic output of these prodvcts For increased consumption of wheat
products and fats is in part the definition of rising living standards
for a very poor population
fJ See Table No13 in Statistical Appendix for composition of exports
-41-
106bull Before the war (average of the years 1937 to 1933 ) the Americas
supplied 49 per cent of Ecuadorian imports by value the United States
alone supplying 41 per cent Germany provided 22 per cent of total
imports and the United Kingdom only 8 per cent Europe as a whole supshy
plying 45 per cent
107 In 1946 and 1947 the Americas provided 86 per cent of total
imports the United States supplying 66 per cent EUrope as a source of
imports fell to 12 per cent although the United Kingdom maintained its
relative position (7 per cent) Whether the United Kingdom can expand
its provision of imports for Ecuador JDaY be domiddotubtful on the one hand
the loss of Germany as a supplier pzo vides an opportunity on the
other the competitive industrial position of the United States may make
it difficult for the United Kingdom to fill this gap
No balmce of payments estimates eJd st for Ecuador1
Growth
of foreign exchange holdings over the war period however indicates a
strongly favorable balmce ~let reserves which were equivalent to 409
million sucres in December 1939 rose to 3962 million sucres (294 milshy
lion dollars) in December 1946
109 Official purchases and sales of exchange are shown in the fol-
lowing table together with corresponding movements of exchange reserves
The difference betRSen the balance on official transactions and the moveshy
ment in reserves arises from transactions on the free market
110 During the war import and exchange controls were nominal
there being no shortage of dollars nor any decrease of exchange reserves
jJ Except for the ~eriod January to May 1948
-42-
Loss of exchange reserves in 1945 led to a tightening of control on an
allocation of quotas smong users of exchange Import permi ts were
granted on the basis of former imports by merchants At the end of
1946 controls were relaxed on an extensive list of imports items and
the consequent loss of exchange has led to difficultieQ
Ul Official Official Balance Changes in Purchases Sales on Net
Official International Trans- Reserves actions
(Millions of u S Dollars)
1942 257 185 t 72
1943 35-5 279 t 1middot5 t Ul
1944 423 34~4 t 79 f 88
1945 353 394 - 41 - 7-2
1946 471 415 f 56 t 1 9
1947 488 579 - 91 38
112 From December 1946 to IVtay 1947 net foreign exchalge reserves
fell US$ 77 million from US$ 294 million to US$ 217 million In May
1947 the advice of the International More tary Fund was sought with reshy
sults summarized as follows in a recent Fund documentY
The lfund 1 s Mission arrived in Ecuador in Yay 1947 It was not advisable at that time to contemplate devaluation which would have made the inflationary situation worse An emergency program was therefore proposed Essential and semi-essential imports were to be distic5~ished and a surcharge of 5 sucres p3r dollar imposed on the semi-essential group as a check against their excessive import New decrees including many of the recomshymendations were issued in June
The main features of the new system were as follows
Y Economic SuVey of Ecuador RD 672 - P 43-44
- 43-
(a) The elimination of all quantitative import export or exchan~ restrictions licenses and quotas with the exception of a few absolute prohibitions of some luxury imports
(b) The checldng of excessive import demand through a fiveshysucre (33 per cent) surcharge on non-essential imports
(c) The suspension of nearly all exchange sales for nonshytrade transactions and the creation of a free market bull narrowly limited in volume and comprising mostly all transactions that are uncontrollable in practice plus a snall amount of domestically produced gold
(d) Exchange for a small amount of the least essential goods was made available in the free market
(e) One of the basic aspects of this plan was the steriliz~ tion of all proceeds from the import surcharge which was placed in a fund for the extraordinary amortization of the government debt to the Central Bank Tnis is still in operation
The beneficial effects of these reforms were felt immediately In June the trade deficit ~as reduced to only $07 million and in July to $06 million By August for the first time in 3 monthsl there was a small surplus In September the deficit was smci l -j)O 5 million In October there was a surplus of $15 million and in November and December there were small deficits of only $01 million and $07 million respectively
In short the deficit for the year was about $99 million in its gross gold and foreign exchange reserves During the same period international liabilities of the Central Bank showed a reduction of about $6 million Therefore~ the net deficit was around $39 million 95 per cent being in the first half-yeer and before advice had been received from the Fundrs Mission
113 It should be emphasized that this multiple-rate system of
exchange control is entirely freed cpentitative controls Excessive
import demand is checked by the higher rates upon imports deemed non-
essential the list of which is knollD and published Anyone presenting
sucres is provided with exchange at the appropriate rate upon list A and
B goods and the free rate is influenced by occasional releases of offi-
cial exchange into the free market The system that is utilizes the
inter-play of the price mechanism rather than the bWlilmlcracy of quanti-
tive controls or quotas
- u4-
114 Loss of exchange continues however despite considerable reduc-
tion of imports Gross international reserves declined US$ 18 million
and net reserves US$ 35 million in the first six months of 1948 Offishy
cial transactions January to June 1948 are surmrarized in the following
table~
Receipts From Exports From other Transactions (1)
Total
Payments For Imports For other Transactions
Total
Balance Change in Gross Reserves
1947 Jan to June
1948 Jan to June
(Millions of Dollnrs)
163 5 6
167 44
219 211
289 219 23 10
312 22 9
- 93 - 18
(l) Includes purchases of domestically produced gold deposits received in foreign currencies and borrowing from corres~ pondents abroad
115 Prospects for the remainder of the year moreover are not goo~
It is estimated that loss of international reserves over the whole year
may be aboat US$ 6 million Whether the deficit is in this region de-
pends largely upon actual export realizations for the remainder of the
year lhe most critical here is rice 11hose ygtrice is falling and the
crops accumulating in the rice millsplusmn Latest information is that
f Countries receiving allocations of Ecuadorian rice under International Emergency Food Council allocations have been requesting a change in source of supply owing to shortage of doJJers Thus France has asked for 6000 tons of rice from Indo-China instead of ~cuador and Greece for 2000 tons from kVPt in place of Ecuador as supplier A recent favorable sale of rice-to Haiti has somewhat improvea the cuITent position
-45-
plantings for the October crop are substantially reduced Wet weather bas
led to some loss of the cacao crop Receipts from exports in the follow-shy
ing official exchange budget may therefore have to be modified down- [l
ward on any pxuient calculation-
116 ~or Recei1ts and Sales of Foreign hchange
(Thousands of U S Iollars)
1948 1947 Estimated Actual
BECEIPTS
Worts Rice 13~ la4~ Cacao 11 l 2 Other products 10700 12371
Total Exports 354oo 42120
Foreign companies 5300 4842 Others 800 1883
41500 48845
SALES
Imports 44800 53499
Services 3200 4470
4B ooo 57969
117 In this situation of continuing presSlre one step has been
tken and others are under consideration The one taken relates to offishy
cial imports representing an average pf 20 per cent of total imports
Importation of cigarettes liquor matches and other things by the State
tionopolies is especiallyen significant These were formerly provided with
exchange tax-freebull ie at the ~owest rate of 1350 From July 26 they
afe required to pay the ordinary import rate of 15o4 on sll supplies for
J See note on page 47 -A
- 46-
their ovm use (such as office supplies) and the same rates as private
importers (ie 15o4 or 20o4) on all imports to be sold to the public
(such as wheat flour fats cigarettes etc) accord~ng to the classifi-
cation of the goods
118 Remaining possibilities seem to be a partial reclassification
of imports removing items from List A as essentials to List B as se~ishy
lwruriesY and or a chenge of nominal exchange parity vri th or mithout
a narrowing of the spread between the rates Here pressure from
exporters particularly from rice exporters may be hee~vily in favor of
an increase of the dollar buying rate with consequential changes of
selling rates
119 The present loss of foreign exchange is occurring ~rithout any
service being met upon defaulted foreign debt although service of Ex-Im
Bank loans is being made If it be assumed for purposes of calculation
that Ecuador reaches an agreed settlement identical to the Chilean sershy
vice would require exchange equivalent to US$ 378000 in 1949 (of which
US$ 368000 would be required in dollars) and would rise to US$ 4o20CO
in 1954 Adding service upon Ex-Im Bank loans outstanding on June 30
1948 and other known but small indebtedness total debt service would
increase to US$ 1410000 in 1949 rise to a second maxilliUID of US$ 1394000
in 1951 and then progressively decline Upon the assumption thet amp-Im
Bank loans undisbursed on June 30 1948 are all fully drawn before their
maturity total debt service charges would be US$ 1533000 in 1949 rise
On August 21 a number of import items were changed from List A to List B the aggregate import value (when granted exchange at List A rate) affected being US$ 7 million
-47-
to US$ 213431000 in 1952 and again would progressively decline These
last service charges rould be for 1949 3 1 per cent of 1947 actual
official foreign exchange receipts and 3 bull 7 per cent of estimated 1948
receipts and for 1952 48 per cent and 56 per cent of 1947 actual
and 1948 estimated exchange receipts respectively
120 Estimating prospects from this point in time Ecuador does not
seem to be a country able to afford assumption of any great additional
burden of debt service payable in dollars The amount that could wi thbull
out hardship or distortion be squeezed out of the balance of payments
by no means corresponds to the development needs of the country Any
start must therefore be modest and cumulative rather than spectacular
and precarious and this conclusion fits with other controlling factors
in the over-all situation notably the supply of administrative techshy
nical and managerial abi li ty
- 47-A -
Note on Official Exchange Transactions
Official exchange transactions for the firstsix months of
1948 are given on page 44 of this report Results for the full year
are now available and reveal that earlier expectations regarding the
probable 1948 balance of payments deficit were unduly nessimistic
Cacao export values have been lar~er than expected and in the last
period of the year there IBre some unexpectecily favorable rice eA-port
sales total export receipts were US$ 8 million larger than forecast
on page 45 Imports were held close to forecast
Receipts
Exports Foreign Co~anies Other
Payments
Imports Foreign Comoanies Other
Balance
Change in Grass Reserves
Official Exchange Transactions (full year - n~illions of dollars)
1947 -421
L18 19
488
535 06 149
580
y does not agree because of rounding
January 26 1949
1948 -436 h2 7
i85
Lt52 2
28
-oJ
-48-
X EXTERiJAL DEBT BEoomJ
121 The position of public long-term external bonded (excluding
inter-governmental) indebtedness of Ecuador is as follows
Amount in Default AmoUpt Outstandi~ ~ e Interest D~te
~In currmc1 (u s (us of p~t Dollars) Dollars)
Dollar obligations Gueyaquil amp Qui to Ry) $ 1226)000 12263000
286000 12263000
286000 123147
63047 Sterling obligations Franc obligations ( Oie
b 71000
Francaise de Chemin de Fer 1 lquateur ) Fcs 8386000 70000 70000
12619000 l26l9000
middotmiddot Note The Government of Ecuador oyenms about 75 per cent of the
stock of the Guayaquil and 1uito Railway and guarm tees the bonds and certificates which are largely held in England The franc obligations of the Cie Francaise de Chemin de Fer 11lquateur are not included in the offi cial statement of the public debt nevertheless the Government does recognize some liability for them and during the last few years has engaged in Degotiations for their retirement
Inter-governmental Debtsmiddot
122 Debts to the United States Government are of three types
63047
first the loans by the Export-Import ~which were outstanding on
June 30 1948 in the amount of $7 705606~ second the aJIDunts duemiddot
because of purchases of surplus property totaled $484 567 on March 31
1948 and third the obligations arising out of the lend-lease settleshy
ment the amount of 1fhich is not available (Total lend-lease assistance
j This section of the Report was prepared by Mr Paul Dickens
to Ecuador amounted to $7 bull 795000 )
123 In addition Ecuador is indebted to the Government of Venezuela
in connection with the establishment of a joint shipping company Late
data are not available but as of February 1947 $500000 ($1000000
authorized) was outstanding the total to be repaid by 1966
Debt History
l2ij Upon partition of the old Republic of Colombia~ middotEcuador was
apportioned 215 per cent of the original Colombian debt by the convershy
sion of l834a Between 1834 and 1854 no interest was paid The period
1855 to 1908 was marked by numerous adjustments and defaults
125 In 1898 the Guayaquil and Q]lito Railway Companyt s first mort-
gage 5 per cent loan of 1899 was issued It was expressed in dollars but
was in reality an English loan In 1908 a new (reemenJl was reachedbull
which was to be a final settlemet of all past disputes and controversies
between the Government and the Guayaquil end ~ito Railway Company and
the bondholders In 19~-10 the Government defaulted on the new agree-
ment In Novemberl9ll payments were resumed on the railway debt on)y
but a revolution caused a further suspension from December 1911 until
lfarch 1912 Subsequently service was partially resumed on the external
debt until July 1914
126 From August 1914 to July l9l8 no paYments were made on eny
foreign obligations except that service on the prior lien railway bonds
had been maintained up to and including the January 1915 coupon By
rf Negotiated settie~nt
-50-
1920 interest and sinking fund on the prior lien railway bonds had been
brought up to date but service on all other obligations ~ed in
arrears In 1926 interest on the salt loan of 1908 was brought up to
date but default took place on the coupon dueJam1ary 2 1927
127 The outstanding bonds of the prior lien issue were redeemed~~
January 1929 at VIhich time the January 1914 coupon was paid on the
5 per cent first mortgage bonds of 1897 In the case of the salt loan
of 1908 sinking fund was resumed in July 1928 and interest was paid
to Jazruary 1929 inclusive None thereafter Sums due from July 2 19C3
to January 2 1931 inclusive deposited with Central Bank in sucres
were used for governmental purposes after December 1931 No payments
were made after January 1929 on the external debt of Ecuador
128 Up to the end of 1948 no acceptable arrangement had been pro-
posed by the Ecuadorian Government for the resumption of interest and
sinking fund payments on external loans
-51-middot
XI bull POLITICAL
129bull Recent political history in Ecuador has been turbulent
although contest fo~ power at the top has not greatly affected the
bulk of the population Suffrage extends to all literate citizens 1
over twenty-one years of aee-but the requirement of literacy effect-
ively excludes the Indian bull T)tal votes cast in the recent Presidential
elections were 289164 from a total Population of some 35 million
130middot On May 28 1944 a few days prior to a scheduled ceneral
election an uprising occurred and Dr Jose Haria Velasco Ibarra
assumed office as President Dr Velasco had been President before
but following a coup dletat in August 1935 after he had been in
Presidential office less than a year he fled to Colombia and re-
mained in exile for several years On July 23 191-4 general elections
for a Constitutional Assembly to draft a new Constitution were held
Installed on August 10 the first Act of the new Assembl3r which was
predominantly Conservative was to confirm the legality of Dr
Velascos assumntion of the Presidency
131 On June 30 1946 new elections to the ronstitutional
Assembly middotwere held The only party particiJatine in these elections
was the Conservative The Liberals R~dicals Socialists and Commu-
nists abstained on the crounds that President Velasco did not offer
them sufficient guarantees On Aucust 3 1946 there vrere a number
of arrests following an abortive uprising and on Aueust 11 the Con-
stitutional Assembly re-elected Dr Velasco to the Presidency (by 43
to 10) for a term of office to last to September 1 1948
12bull Being compUisory for men voluntary for woraen -
132bull A new Constitution was promulgated in January 1947
133middot On August 23 194 7 a bloodless coup detat led by Colonel
Carlos Iancheno Minister of Defense in Dr Velascos Cabinet deposed
rresident Velasco who fled the country to Colombia for the second timebull
Next day Colonel Mancheno proclaimed himself Acting President and
formed a five-man Socialist-Liberal Cabinet despite the absolute
Conservative majority in the Assembly A week later however on
August 31 a counter-revolutionary military movemont broke out in the
north and the counter-revolutionaries captured Quito on September 2
134middot Colonel llancheno resigned the ActinG Presidency and dis
appeared the sa1ne day Dr Suarez Veintimilla who had been Vice
President under Dr Velasco and the former conservative Uinister
resumed control of the GoverPment Next day September 3 a Council
of State in Quito declared that Dr Velasco had by abandoning his
post terminated his functions as Chief of the State Dr Velasco
howeverJ vrho middotwas by this time in the Argentine declared that his
remo~al to Colombia had been forced and announced his intention of
returning to Ecuador to resume office
1~ On Seytember 15 1947 a Secial session of the Zcuadorian
Concress accepted the resignation of Dr Veintimilla and elected
Senor Carlos Julios Arosernena head of the Banco Ce Descuento at
Gua~raquil and a non-party man as Vice President with novers as
Acting President until September 1 1~48 Senor Arosemena formed a
mainly Liberal Cabinet with one representative each of the Consershy
vatives and the Socialists Coneress also ~onfinned the Council of
State 1 s view that Dr Velasco had forfeited the Presidency by abandoning
his postbull
136 On June 6 1948 Presidential elections were held The
three parties represented vere the Conservatives (Dr Manuel Elicio
Flor Torreo) the Liberals (Galo Plaza Lasso) and the Radical (Genera1
Alberto Enriques Gallo) Final results were announced as
Plaza 115835
Flor 112052
Enriques 53601
Invalid 27 676 289164
137 bull Doubt persisted until this month (August) as to who would
receive the election The Electoral College had been invalidating
votes on technical Grounds and as interim returns and invalidities
were announced it was noticed that the majority of the latter were
being deducted from the Plazavote After conferences the Electoral
College revalidated all votes and conducted a re-scrutiny on less
strict basis Senor Plaza has been declared to be the rfjSident-Elect
by the Ecuadorian Coneress and assumed power September 1 1948 The
middotpresidential term of office is four years
The Vice Presidential results were
Conservative 1anuel Sotomayor y Luna llu008
Liberal Dr Abel Gilbert 113213
Radical Dr Cueva Tamarz 5h07h 28129gt
139 Senor Plaza was born in Nmv York USA forty-two years
ago his fatter the late General Leonidas Plaz~ was President of
Ecuador in 1901-05 and 1912-16 middotSenor Plaz who had been taken to
Ecuador as an infant accomnanied his father in exile to the United
States and attended the University of California the University of
Maryland and the Georgetown School of Foreign Service in ~7ashington
l4o Senor Plaza returned to Ecuador in 1930 and for the next
fourteen years operated the family estates there reclaiming them from
virtual bankru~tcymiddot to prosperous and efficient state He has for
example been active in encouraging the breeding of new cattle strains
is President of the Ecuadorian Holstein-Friesian Association and oper-
ates a butter factory on his estates with a Danish ~anarer He was
ar Minister from 1938-40 and Ambassador to Cashington from 19h4-46
l In executing any policies he will of course be handishyt4
capped by the lack of a fully efficient Civil Service The position
in Ecuador is the same as that in othelmiddot Latin American countries
that the Civil Service is naid on low salary sca1e and lacks compe-
tent administrators Such lack is an aspect of the general shortage
of technical ability in the country
TABLE
1
2 bull
3 bull
4
middot 6
7 bull
8
9
10
11
lZ
13
14 bull
15
16
17
18
19
20
ECUADOR
STATISTICAL APPENDIX
Oil Production and Exports
Cement Production and Imports
Yfueat Production and Imports
Rice Production and Exports
Rice Exports by Destination
Cacao Production and Exports
Coffee Production and Exports
Cotton Tobacco amp Sugar Production amp Sugar Imports
State Railwaysmiddot Lines amp Rolling Stock
State Railways Merchandise Hauled
Population and Roads by Provinces
Budgetary Receipts and Expenditures
Exports of Principal Commodities Volume amp Value
Imports Classified by Groups Value
Exports by Destination Value
Imports by Source Value
Balance of Trade by Major Regions
Exehanee Reserves and Banking Position
Price middotIndices
Status of Ex-Im Ballilt Loans
ECUAIOR Table 1
Oil Production and Expomiddotrts
(thousands of American gallons)
Crude ou Gasoline Produced EJtported bullRefined middotproduced
1938 94586 78696 15500 41654
1939 97125 68819 17679 bull 141
194o 98654 70~99 23001 6162
1941 65382 38362 25914 6462
1942 95671 68516 29489 72l7
1943 97211 65003 34635 8076
1944 121469 82520 38083 8927
1945 109855 73897 38752 10059
1946 979+7 52412 45213 12271
1947 99140 39359 53949 16587
Source J3o1etin Banco Central del Ecuador
ECUADOR Table No 2
1929
1937
1938
1939
1940
1941
1942
1943
1944
1945
1946
1947
1948
l First six months
CEMEHT PRODUOTIOllT AliD IMlORlS (metric tons)
Production Imports
17782
15699 10082
14254 13373
14249 12013
16512 10935
17213 2_846
19802 so98
2756o 933
34691 1590
37504 953
38496 3114
33231 14941
20484JJ
Sources Production Eoletin Banco Central del Ecuador Trade Ministerio deEconomia
Total
25781
27627
26262
27447
20059
24900
28793
36281
38458
41610
ECUAJX)R Table J
Wheat and Wheat Flour Production and Irraquorts
(thousands of kilos)
Wheat
Production Imports Exports Consumption
194o 28120 bull 73 28o47 1941 24578 36 24542
1942 24265 bull 76 24189
1943 22034 22034
1944 23251 912 24175 1945 23115 2733 180 25667
1946 25852 4532 23 30361
1947 2lo66 494f)J 11
Vfueat Flour
1938 10743 9981 na
1939 7864 16638 na
1940 7996 8-592 275 16312
1941 7225 11823 286 18762
1942 7 161 23497 161 30498
1943 7461 9862 17322
1944 5216 24023 29239
1945 5174 25137 30311
1946 7~38 11313 g 18813
1947 5943 1886) 4Y
Less than 500 kilos Y First 6 months
Sources Ecuador en Cifres a~d Ministerio de Economia
~emiddot 1926-30
1931
1932
1933
1934
1935
1936
1937
1938
1939
1940 -middotmiddotmiddot
1941 ~ )~ (1
1942
1943
1944
1945
1946
1947
1948
~iiampn-sect00-lfmiddotks
-~Jrst~middot-nsmcnths
gJ Provisional
(B EQUOR
RI03 PRODUCTION ApoundP ~OR~S
Vo1wnfJ Production middot E~orts
(metric tons)
26)04
23584
29863
39270
39008
31699
39036
52136
44027
40144 ltit middotmiddot~ 0 56596
5873
100949
ao6o7
53168
102048
112711
047
8255
3842
6449
5282
22907
8734
12)3
2ooso
962
18343 t - ~ J
20546
32028
46992
64604
29318
66918
6~209fl middot tloo 1
$ bull
tt ( r t
z
Value 3xoorts
(thousand sucres)
1881
936
6667
10864
6555
14632 pound 170
23265
51460
93837
127105
60395
203243
2rfjuft
Sources Production Boletin Banco Central del 39uador~ Trade Ministerio de Econom1a~ ~r- ~fl ]r bull ~-middotmiddotmiddotmiddot f ~~middot~---i
Average Destination 1937-41
Cuba 2
Peru 13
Venezuela 6
Colombia 4
Panama 2
Jamaica 0
Philippines 0
India 0
Dominican Republic 0
Other Countries 4
TOTALS 31
Preliminary~
RIQ] EXlORTS (in million po~ds)
1943 1944 1945
81 88 5S
20 29 0
0 17 4
~ 0
Rf 2 hi 0 0 0
0 0 0
0 0 0
0 0 0
bullbull ~ 6 6
105 142 6S
R Less than )OOOOOpounds
Table No 5
1946 ~ Jan to~
1~ June-194
46 12 24
0 0 s 17 49 )j
2 13 2
5 4 1
16 1 0
20 0 0middot
0 38 0
0
1 f4~ 2
r middot I
130 13 34
sf Ineludes 6 million pounds to Mexico and 5 million tmiddoto Greece bull middot
1[0
supound~sect8_ Foreigl Crops and Markets Offiee of Foreign Agrtcultural Relations u bull Sll~artment of Agriculture May 3l 1948 bull p bull 402 First six months of 1948 from ibid August 16 1948 p bull 120
Average 191i-15
191620
l921-25
1926-30
1931-35
193640
1940
i941
1942
1943
1944
1945
1946
1947
tf I
ECUADOR
Cacao Production and ~orts
Volume
Estimated Production ~rts
(metric tons)
n (
12108
15middot330
14652
19030
15058
17759
17689
19459
4o625
43547
36825
21319
15980
174o4
11208
14433
13762
18161
13735
16827
16526
Exports ( 000 sucres)
186o9
26073
26746
27531
16647
37424
29354
34365
40327
51794
41985
53547
74935
188208
middot)(et) middot( middot
Sourcesmiddot Estimated production Ministerio de Economia E~orts to 193~ Estadisticas de las Exportaciones del
Ecuador 1940-1942 subsequently El Trimestie Estadistico del Ecuador Number 1
1 ~ Mini sterio de Economia -bull gt(
111 t bull r r (o J bull bullbullbull 1) ( bull
ECUADOR
Coffee Production and Exports
Volume Estimated Production EXports
(Metric TohS)
1921-25 average 5147
1926-30 II 7571
193D-35 10047
1936-40 II 13811
1940 16158 14571
1941 14260 11847
1942 9016 6140
1943 14144 12340
1944 16598 14458
1945 12999 10737
1946 9948 7636
1947 12522 8970
Table 7
Value
Exports 000 Sucres)
59~9
11530
10945
18546
16J83
23827
17278
33176
35626
33863
34839
43524
Source Estimated production - Ministerio de Economia
Exports t~ 1936-40 - Estadisticas de las Exportaciones del
Ecuador 1940-1942 - subsequently El
Tremestre Estadistico del Ecuador Number 1
and Ministerio de Economia
YEAR
1937
1938
1939
1940
1941
1942
1943
1944
1945
1946
1947
ECUADOR
Production of Cotton Tobacco amp Sugar amp Sugar Imports (000 Kilos)
Raw Cotton
9237
7213
7172
8165
PRODUCTION
Tobacco
1519
1106
1875
1028
1359
Sugar
17528
22950
26950
27835
30421
27858
26799
23151
32474
33544
33480
Table B
IMPORTS
Sugar
5310
11068
12387
38
6
33
184
784
21455
3060
Sources Production of Cotton and Tobacco Ecuador en Cifres 1942
Sugar Production and Imports Ministerio de Economia
ECUAOOR Table 9
State Railways
Length Locomotives Rolling Stock (Number)
(Kilometers) (number) 1relght Passenger
Gueyaquil-Qpito 452 39 319 41
Guayenaquil-SalinaJ 150 6 22 24
-~i to-CarcbiY 222 6 23 22
Bahia-Chone 78 3 12 g
Sibambo-Azogues 117 3 6 ll
Puerto Bolivar-Piedras 155l 7 21 10
Puerto Bolivar-Pasaje 55
1199 64 4oy llG
Narrow-gauge line
gj On uncompleted line ~ito-Esmeraldas
21 Of which 4 are rail-cars
jj Of Vihich 61 are rail-cars
Source lviinisteria de Economia
1938
1939
194ltgt
1941
1942
1943
1944
1945
1946
+947
ECUAOOR
Railway Transport
(thousands of metric tons)
Products
Agricultural Animal Mineral Forest Manufactures
1639 19 3 160 122 1034
1318 143 172 138 961middot
1714 144 233 219 1472
1613 184 277 209 1543
1809 224 280 272 1631
1841 280 35a4 376 193-3
2011 250 263 299 C5J7 3
1888 29-5 350 238 2234
1941 29-9 46 bull 4 258 2170
1787 299 51 0 180 2085
Source l3oletin Banco Ce~~nu del Ecuador
Table 10
Others Total
58 3205
58 279l
298 4oso
289 4115
328 4543
384 5168
352 5248
292 5296
37middot7 5508
419 5279
Table 11
Population and Boads
Poeation Roads (Kilometers) Province Jan 1 1948 Main Secondary In Construction
Care hi 86663 1744 1191 1050
Imbabura 158896 1818 2100 1810
Finchincha 350149 4)13 3703 670
Cotopaxi 215232 642 4o6o 970
Tungurahua 222963 2290 1810 300
Chimborazo 29864o 1664 3316 2740
Bolivar 121653 1877 1294 2045
Canar 133971 580 580 1300
AZUaY 284982 1053 2190 630
Loja 238705 1140 4s6o 1430
El Oro 93752 1005 2378 650
Quay as 482843 3900 3367 3700
Los Rios 148428 933 4632 1050
Manabi 381538 3627 1lo61 1970
Esmeraldas 664o5 50 19 0 2840
Frov Orientales 181071
465891 26636 46732 2t3l5bull5
Source Direccion General de Estadistica y Censos
1938
1939
1940
1941
1942
1943
1944
1945
1946
1947
Source
r
Table No 12 ECUADOR
DISOLOS3D BUDGETARY R303IFTS AlfD EXP3NpiTURES
(Total of ordinary and extra-ordinary budgets and special accounts)
thousand of sucres)
Total Receipts
1323204
131699 6
1262710
1547624
1667455
2112614
3145318
4051038
5367822
6696647 11 ~I JJ( middot
Total Expenditures
1429134
1267687
123135middot0
1586615
1489251
2101429
3031038
4174550
5352394
6593858 bull I
aoletin Banco Central del Ecuador
-middot middotmiddot
Diff~reuce
106830
j 49309
f 1360
- 38991
f 178204
j ltll8-5
f 114280
12351middot2
+ 15428
j 10278bull9 r 7
l I 1
L
ECUAOOR EXPORTS OF PRINCIPAL COMMODITIES 1937-47 Table 13
VOLUME (thousand metric tons)
1937 i98 1939 194o 1941 1942 1943 1944 1945 1946 194711
12 200 96 183 20 bull 5 320 47~0 646 293 669 66) 218 191 153 112 144 138 182 137 168 16 bull 5 203 14~ iJI 137 129 146 118 61 123 14 bull 5 107 76 90 48 55~5 53middot3 472 34 bull 2 226 158 1)9 178 35middot511 72 bull 5 345 19~2 251 183 14bull4 13 2 112 103 12~0 132 121 1-4 16 16 15 18 30 22 28 2~0 13 01 14 1middotmiddot9 2~2 21 47 90 136 93 74 28 na
~gt i824) (1387) (944) (1036) (1981) (2516) ( 2756) (4373) (4462) (4947) _01 2849 2454 2274 2201 1201 2167 2062 2513 2446 1640 1358
Ltrates 7~3 140 76 so 3~3 )9 26 10
VALUE (thousand sucres)
610 10864 6555 14632 23265 51460 93837 127105 60395 203242 201111 49985 39bull276 37bull033 29354 34364 40)26 51794 4lt985 53547 74935 188208 24613 16703 15227 16)84 23827 17278 33176 35~26 33863 4839 43 bull 524 5bull691 7558 7t006 6448 4658 _J 107 2159 1898 2872 738~- 24355
18242 7~146 9605 86o6 6120 201 6274 6209 9264 1)02 14994 4048 4300 4298 3~866 6979 35481 23316 38043 26553 15111 979 lt363 2~134 2724 3168 8450 25613 43419 31877 18 bull 509 7125 na 8048 6 234 4981 6509 16231 22121 25191 69033 69J87 81962 4662
21989 26374 25020 24862 13425 24820 23796 28788 28107 18253 15902 trates 10165 16090 13134 38609 27208 29013 18075 809 ates 18682 35297 41204 39907 29426 25374 27476 26457 15482 24858 25334
10774 13210 13495 3 950 16869 32775 2L068 32402 30902 38326 n bull a_
164_045 169096 167148 167851 199704 298690 393115 466631 377894 537131 619859 tmiddotbull bull
Note Dash (---) signifies zero or less than 50 metric tons nly or ~00 sucres ata expressed in quantities other than weight Sourcis 193 data from unpubli~hed Zcuadorian trado stati~tics
at US Department of Commerce 1938 nnd 1939 from partment of Commerce official data Direccion Nacional de Estadistica Eruad6r en Cifras ~7 from Banco Central Boletin 1940 and subsequont ~ears from Banco Centrll jto~n sterio de Economia and from M1nister1o c Economia data furn she
Mission July 1948
~ tobacco tone JgS
articles
11res ilk
al
value of Imports by Groups 1937-Lt-5 Volume and middot~alue of Selected Individual Imports 1937-46
(Value in thousand Sucre~)
1~37 1~38 1~39 1940 1941 ~942
19~731 20~ 375 24~874 16~)65 19043 37~540 5127 7194 1958 6~4e8 5t298 8 118
12888 13Jl5 14522 17702 19556 25~152 21627 25~272 21455 28532 21619 18923 20649 21~593 25559 29437 22636 19~$13 13~505 11961 12~654 15~976 15667 18899 5~829 7 bull 524 6066 9385 833 14353
22912 )0868 24~75 27 t 750 25993 42~916 9376 1028 10038 12118 11345 13932
-bull
131643 148320 1486o 173753 149499 199715 (Volume in thousand metric tons) (Value in thous~tnd sucres)
5middot3 111 124 194 5 bull 534 6385 26 4 24
os 246 -
122 ioo i66 86 118 235 8255 6)88 7449 5076 013 14609
19 07 11 11 14 29 2187 1824 2695 294-3 29J9 8182
101 i4 i2o i09 28 51 804 llJ)6 1667 1546 577 866
~ hides amp skins amp manufactures amp miScellaneous
~~43 1944 1945
33270 70915 82984 6717 8)69 904)
31~700 43196 32~830 17073 53~400 JBoo6 15447 32~624 38797 14~88 18~388 22895 14116 11a99 9812
68928 n~l79 69-113 15856 19186 20042
217983 33ltl56 323524
78 middot 0 2 215 130 12622
09 27 775 2290
99 240 bull 25~1 337 24070 26388
23 46 67 8853 146)1 21699
09 16 10 321 349 246
~s zero or less than 50 metric tons -middotNote Columns may not ahmys add to totals because of rounding Denartment of Commerce official sources - 19)8-42 Direccion Nacional de Estadistica Ecuador en Cifras [inisterio de Economia El Trimestre Estadistico del Ecuador
1946
)1 8135
4 bull 5 )842
114 13123
46 22709
)1 639
ECUAOOR Exports by Countries 197-47 (Value in thousand sucres) Table - 15
1937 1938 1939 1940 1941 1942 1943 1944 1945 1946 1947 --middot-------middot
80458 lt2865 116t-J78 150055 196953 293081 386483 46lt-909 372~549 463~378 sa4~68J 54422 63418 8)254 1t0496 145 bull 558 168585 2)9238 267105 218018 227291 262887
26 20 65 17 2228 78 124 7)41 17173 630 610 949 1281 1055 1)98 5~526 25686 78523 85382 61478 75890 23481
2899 4955 2109 3568 162 1163 4J54 2526 4197 44~ 1450 5027 6335 4972 5i92 5285 7425 4546 7379 10286 9798 15537
1 5 5 17 57 13 291 54 444 574 6996 8 662 9188 8714 13bull764 7238 15316 13900 11223 6~07l 14503 11717 2908 12544 5 730 7896 3767 21215 22608 29233 4243 6703 7965
51 15 24 8 532 3620 1603 539 2336 11579 3749 80 207 862 4070 9991 17096 1275 17~428 6~973 27431 80541
1943 2135 5229 6039 1965 5435 3021 4827 15~702 25~137 51~854 middot 667 740 991 zo83 3358 11412 4286 4282 3~-970 13064 5~864
1799 419 2218 875 2865 12299 9644 14900 13714 9653 11655 J 89 82 2527 1247 964 326 )24 250 41141 2~985
1024 1514 1068 2205 7173 2650 2 744 8871 7694 J2 5811 17 39~ 77029 61869 43688 11945 1503 5550 6335 4108 4075 36783 61998
32) 6)3 1187 490 58 186 2164 4021 J217 35974 29595 11277 69 - 29 4411 7909 6156 3477 1183 5492 4876 26)8 359 1860 7~467
489 255 J2 100 280 1155 1239 1265 3827 3~961 20539 13t521 10802 2254 5 706 4177 6313 2bull610 3615 4251 -middot 2842 13546 lBi 1415 3 758 822 6 188 12962 3592 2531 412~ 162 7~ 10052
8643 1693 3bull521 3~400 2751 320 40 118 231 222 5404 J 4894
6337 4201 6548 5478 1175 5 45 40 1611 50950 6261 4132 5386 5452 117) -
~l - - 15 45988 5 middotmiddot 7S 8 5 25 567 92S 11
33 ~- 76 18 966 151 150 3419
38 29 858 2 45 78 467
(continuation on next naee) middot
~GUJLOR ~xnorts by Countries 1937-47 (falue in thousPnd sucres) T~ble-15 continued
middot-~--- -~-middotmiddot -middot _ middot-- ~~---~~- ---- -middot--~middot--------middot- -middotmiddotmiddot--middotmiddot--193 1938 1939 1940 1941 1942 1943 1944 1945 1946 1947 _I --middot -middot- ---~- ------ middot- bull middotmiddot-middot -
4 7 5 5 5 219 1087
218 153 529 368 73 49 297 569 1230 35140 789 28137
207 144 379 J68 73 49 297 559 1104 605 11 9 10 126 43
150 6355 plusmn
353 54045 169096 167148 167851 199704 298690 39J115 466631 377894 537131 619859
~S Columns may not always add to totals because of rounding
Dash (-) signifies zero or less than 500 sucres
Primarily Guadeloupe and Jamacia
Primarily British West Indies and Netherlands West Indies
Primarily Denmark Spain and Norway
Primarily Java
~ces 1937 and 1947 from unpublished Ecuadorian Trade Statistics at U s Department of Commerce
1938-46 from Ecuador Ministerio de Economia data furnished IBIID rassion July 1948
Imports by Countr~es 1937-1947 Table-H)
ECUAOOR
l937 1938 1939 1940 1941 1942 1943 1944 1945 1946 1947 I (()
Value in thousand sucres) ~ + -gt L520 63151 83984 115382 128423 186958 200061 311989 302~329 363403 517582 j
u t 2086 51311 71950 103214 110422 138729 103583 173776 178821 240233 429906 0
Q) f
811 674 551 2436 1815 3J258 2150 5265 6538 12178 20912 d S Ugt ro c 1 n 4 4144 3042 8 99 14 23 295 178 8~011 210 h middot-1
(- 0
186 324 237 957 2~991 8492 18~376 15~239 17232 10~574 3121 4 middot-2375 2310 1959 2476 3016 4735 7930 7~696 11~201 15~564 14755 sectwfi
middot-1 1 fli 4 6 343 1~823 3J064 4110 3~612 60J5 h 0H
2739 2109 3789 174 2352 7949 9~934 17845 23~ 616 1559t 18~727 ~rld ()
328 164 457 2498 612 733 10892 10902 20003 16684 11981 oc ampl+lll
mmiddota J63 1297 1161 -- - 2 23 115 1~128 1192 d+gt-
2464 507 500 1438 5565 20668 39979 46654 33684 33034 6~486 15~~ (()
na 1 311 2297 5515 130 bull-I m rl bull +gt
15 31 68 245 995 1516 2804 25326 6124 5956 3472 Oltll~
149 280 269 332 550 208 270 389 707 839 655 a~ sect (1) Cl 4-209 72986 ~ 38 09 1433J 9813 16276 15885 1721~9 45194 80928 ~-g 1701 35767 2 7 7 33 1202 67 47 61 19 2 El 0 0 eo g 3250 11462 8094 12980 10124 8108 13634 12513 11984 28392 40983 cent1-t+l~
1803 718 1687 otmiddot r-
4-114 6465 7339 630 475 34 22 2 66 889 7279 t -P () ~led
36o 4685 1573 7144 308 12 682 4824 rlltll ltDno
1~896 2550 1466 1624 64 1 58 5090 bull-1
fJ ~ ~ 1052 1489 794 945 293 224 5 21 1373 9062 9 703 P + na 868 881 423 10 1 8 223 135 r- 0) u
1 r=l middotr-l
1162 4823 1264 1675 877 1017 1~52 2380 3129 4~326 6851 () l=l rl
7274 3074 2609 3595 980 349 1041 905 599 1~543 3~134 cn~oo bull t
724 11939 8983 19951 6239 2281 1439 304 3882 5478 5736 op a cent1-t ~sect rl
173 302 262 238 -w 14 276 -rr 472 ---s9l ctillmgt
259 10949 7810 18190 4414 170 16 4 5 +gtUd ~-- ~
935 712 728 1278 1281 1715 1314 2685 3185 4465 3151 +gtP t-1
530 105 143 221 306 240 95 89 582 541 2089 ~ (f)
1l 21 12 80 1f 196 122 169 125 1J n ~-T~
0
109 218 lllL 250 m 46 sect2 12_ 28 119 112 I ~ --sB_l_ 0 ---- -
643 148315 147860 17353 149499 199715 21 ~ 983 331156 323524 414266 604479 ms may not a1ways add up to t ta1s because of rounding Dash (-) signifies zero or less than 500 sucres ~ country breakdown not given in source g) of which 591 from Syria 2Z3 from China 264 from Straits Settlements 1 Sumatra and 264 from Iran
YEAR
1937l
1938t
1939~ -
1940amp
194H
1942
Exports Imports Balance
Exports Imports Balance
Exports Imports Balance
Exports Imports Balance
Exp(rts Imports Balance
Exports Imports Balance
ECUAroR Balance of Trade by Area 1937-47 (thousand sucres)
fRlSTERN HEMISPHERE including Philinuines
United States Other Total Eurone
54~lt-22 26~036 80~-~-sa 77~029 52086 9~434 61520 64~209 2336 16602 18938 12820
63418 39447 102~865 61869 51311 11840 63151 72~986 12107 27~607 39714 -11117
83254 33124 116~378 43688 71950 12034 83984 54505 11304 21090 32394 -10817
100496 49559 15Cl055 11945 103214 12~ 168 115382 38~090 -2718 37391 34 673 -26145
145 bull 558 51395 196953 1503 110422 18001 128 423 14333 35136 33394 68530 -12830
168585 124~496 293081 5t550 138~729 48229 186958 9 813 29856 76267 106123 -4263
Table 17
Other Countries World Total
6~559 164045 5-912 131643
647 32405
4361 169~096 12~ 178 148315
- 7817 20781
7082 167148 9372 147860
-2290 19288
5851 167851 20281 173753
-14430 - 5902
1248 199704 6743 149499
-5495 50205
59 298690 2944 199715
-2885 98975
NOTE Areas may not always add to world t~tals because of rounding
Source 1937 and 1947 frlttm unuublished Ecuadorian Trade Statistics at US Department of Commerce 1938-46 frem Ecuador Ministerio de Economia data furnished Mission July 1948
(Table 17 continued on next page)
YEAR
12J Exports Imports Balance
1944 Exports Imports Balance
125 Exports Imports Balance
1946l) Expltgtrts Imports Balance
12Z= Exports Imports Balance
ECUADOR~ Balance of Trade by Area 1937-47 (thousand sucres)
WESTERN HEMISPHEL~ (including Phili~ines United States Other Total EuroQe
239238 147~245 386~483 6335 103583 96~478 200~061 16276 135655 50769 186422 -9~941
267105 194804 461909 4~108 173776 138213 311989 15~885 93329 56591 149920 -11779
218018 154~531 372549 4075 178821 123508 302)29 17159 39197 31023 70220 -13084
227291 264224 49J515 36783 240~233 123170 36J403 45~194 -12942 141054 128112 -8411
262887 241796 504683 61998 429906 8676 517582 80928
-167019 154120 -12899 -18930
1 Only year in which substantial Philippine trade
NOTE Areas may not always add to world total becasue of rounding
Table 17 (oonttnued)
Other Countries World Total
29 393115 1646 217983
-1)49 15132
614 466~631 3~282 331~156
-2668 135475
1270 377894 4035 323524
-2765 54)70
8~833 537131 5670 414266 3163 122865
53179 619859 5969 60449
47210 15380
Sources 1937 and 1947 from unpublished Ecuadorian Trade Statistics at us Department of Commerce 1938-46 from Ecuador Ministerio de Economia data furnished IBRD Mission July 1948
~ EXCHANGJ-tAL BANK
ECUADOR Exchange Reserves amp Banking Position (million sucres)
r 4 bull TIC CQEDITS OF CENTRAL BAl~K Domestic Govt Official Bus Other Credits
MOliEY SUPELY Current AC
JJj To()2f (4) Entities Indvls Total Banks of O~mtl Currencl Denosits l (6) (7) (8) (10) (5) Banks amp 11
Indvls (9)
16 10 26 51 1 116 62 64 48 26 7 40 73 4 129 74 66 3middot7 )9 7 29 66 4 144 73 71 37 29 8 24 62 4 159 78 73 56 26 8 22 55 5 183 8l 103 81 37 28 2 8 201) 120 119
152 37 21 22 79 9 255 169 17~ 26) 34 27 22 83 13 378 ZJa 26e )4 60 37 20 117 9 385 295 308 Z5 105 73 11 189 26 493 321 312 282 153 81 10 244 24 536 35middot~ 354 242 104 44 93 241 2 565 329 284
221 110 51 99 260 2 56 313 278 215 102 47 101 250 2 573 )06 294 225 97 45 95 237 2 585 299 299 219 100 44 98 242 1 591 307 297 214 98 35 111 244 4 6)4 315 295
)20 295
on of $12500CC beginning in December 1946 bull
ars
Ttttal (12)
127 14) 144 151 183 239 345 492 602 634 704 613
591 599 597 604 610 614
ge liabilitieS but including Stabilization Fund in 1945 and GolC CertificCt in 194) bull ial banks and fomento banks ial bc1nkst and fomento banks sits of commercial banks and time deposits of fomento banks
Table 18
Govl t Den sits ~L
(lJ)
6 23 12 27 7 28 8 31 6 32
middotmiddot 11 )6 16 57 27 71 41 74 63 98 59 90 66 77
71 8 75 76 6 75 81 75 81 72
72
1 1 Boletin - Superintendencia de Bancos Boletin - Unpublished data furnish~d MF bY Banco Central of Ecuador
Table 19 ECUADOR
Price Indices
WHOLESALE Rents Export Fooa in
YEAR Goods and Quito - Coal ~1) (2) (3)
1937 100
1938 83 100
1939 95 100 153
19h0 95 106 16h
1941 96 113 150
1942 114 146 172
1943 114 183 187
19h4 118 218 219
1945 133 266 254
1946 203 320 315
1947 297 364 516
19h8 (March) 294 379
(liay) 416
(July) 389
llame l~umbar
Republic of Ecuador
Status of u s Export-Import Bank Loans to ~cuador
Purpose
gs of Junemiddot10omiddotl9ltsect
Gross Authorized
Cancel- Net lations Authorized Repeid
Amount Amount Outstandin~ Undisbursed
6J048 6J048
( 262 )16
Haterials equip amp services $ 6480000 $20810 $6459170 $1279775 ~)5-l19middot395 _____ _
ibulliunicipali ty of iui to (Republic of Ecuador)
ibullIunicipali ty of Guayaquil (Republic of Ecuador)
Republic of Ec~ador
Republic of Ecuador
Ecuador DeveloPIlent Corp
Pan-American Highray (Cuenca-Loja)
Agricultural Research amp Experiments
Raihray Equipment
5000000
12JOOOO
50000 200000
)28 Haterials equip ~~ 4000000 services - ater 1middot1orks
)28 iltiaterials equip amp services - ~~rater orks 4000000
J4J Pan-American High1middotray (Guamote-Tambo)
432 uevedo-Hanta Hightmiddotray (additional credit)
1980000
220000
$19180000
Of tlhich $2500000 tts used on the Quevedo-Ibullianta HighTaY
4000000 28880
4000000 167
-1 t-9amphOOO- -7500
220000
6o6120 -h365000-middot
41592 575-t 2-41
-l-y5Q2- 500 44Gooo
220000
IBRD Statistics Sectio spte~ber 24 1948
