As the 1980's drew to a close, Ecuador remained a lower middleincome nation with a gross domestic product [GDP
] of US$9.4 billion, or US$940 per capita. In South America, only Peru, Bolivia, and Guyana had a lower per capita GDP. Agriculture [primarily bananas, coffee, and cacao
] and fishing were still important sectors of the economy, together providing 40 percent of export earnings in 1989. Petroleum, the other major export commodity, produced 50 percent of export earnings in the same year. Nevertheless, services, especially trade and financial services, constituted the fastest-growing economic sector and by the end of the 1980s employed almost half of the work force. Manufacturing also played a small but growing role in the economy.
Historically, Ecuador's economy has been characterized by the dichotomy, and sometimes bitter rivalry, between the large-scale, export-oriented agricultural enterprises of the Coast
] and the smaller farms and businesses of the Andes
]. Unlike many developing countries that have highly centralized infrastructures, Ecuador had two banking, communications, transportation, and trade centers--one in Guayaquil
to handle the country's export trade and the other in Quito
to serve the populace in the Sierra
. Manufacturing was divided also, with Guayaquil
The discovery of substantial new petroleum deposits in 1967 spurred economic growth and a shift away from traditional agriculture to manufacturing and services. The government invested much of its petroleum revenue in domestic development programs. The rapid growth years in the 1970s were followed by hardship in the 1980s, however, as petroleum prices fell and the entire economy slumped.
Two administrations in the 1980s tried different approaches to restoring the economy. President Leon Febres Cordero Ribadeneyra
] applied free-market principles and deregulation, policies that initially promoted growth. Wage increases and high inflation, however, ultimately erased most gains. President Rodrigo Borja Cevallos
] replaced the free-market approach with state intervention and imposed an austerity program. His policies resulted in new economic growth, but inflation and unemployment remained at record high levels.
Ecuador's chronically large foreign debt continued to stifle economic growth. Having borrowed heavily during the boom years of the 1970s, the government found itself unable to meet its foreign debt obligations at the end of the 1980s. An earthquake in 1987, which damaged the country's crude petroleum pipeline, further curtailed import earnings. Although by 1989 Ecuador had resumed its foreign debt payments and was again exporting oil, the nation's economic future remained uncertain.