Ecuador is an upper middle-income country that depends heavily on the export of raw materials and is vulnerable to external shocks. The growth of the economy relies almost entirely on high oil prices. The country uses the US Dollar as a national currency, therefore there is no monetary or exchange rate policy which could help with the absorption of external shocks. Ecuador is regarded as one of the least ’investor-friendly’ countries in the Americas, with a very low foreign direct investment inflow, due to what is perceived as an uncertain legal framework for foreign investors.
In the period 2014-2020, EU cooperation supported sustainable and inclusive economic growth strategies that have contributed to economic diversification, export promotion, and poverty reduction efforts by the Government. It is opportune to mention some of the lessons learned from the implementation of our Multiannual Indicative Programme (MIP) 2014-2020, such as the importance of managing assistance programmes while incorporating local authorities and academics in the process.
Following our joint assessment of Ecuador with the EU Member States and the European development banks, and subsequent consultations with national authorities, civil society, and the private sector, the 2021-2027 MIP identifiesthree priority areas as the main areas where European cooperation can make a substantive impact:
Support for sustainable trade and investments
The EU is a major provider of technical and financial support aimed at helping Ecuador adopt domestic regulations to EU legislation in several fields. We believe that the country needs to increase its productivity and competitiveness to be able to compete with neighbouring countries and attract national and foreign direct investments, which can bring innovation and technology transfers, generate employment, and contribute to the country’s economic stability.
Enhance climate and environment action on green innovation and productivity
Ecuador is facing the challenges that come with the intensification of industrial activity and changing consumption patterns. Despite several initiatives aimed at improving resource extraction and use, sustainable consumption, reuse of waste materials to manufacture new products, and energy efficiency over the last decade, green innovation and productivity have until recently mostly been unsuccessful. We support climate change action, circular economy, and bio-economy to provide a framework for the transition to a more diversified, post-oil economy, based on responsible management of natural resources, increasing the share of production with high technological intensity, and incorporating value-added, private export-oriented research in benefit of the youth and future generations.
The quality of public administration is important for economic competitiveness and societal wellbeing. Ecuador’s institutions remain fragile, so we aim at building a more credible, and efficient institutional framework embedded in a more inclusive and cohesive society. Areas of intervention may include public finance management, decentralization and support to subnational government, anti-corruption, domestic revenue mobilization, macroeconomic policy, democratic participation, civil society, social protection, welfare services policy, planning and administration, statistical capacity building, and training of public administration employees.
The Multiannual Indicative Programme (MIP) for Ecuador for 2021-2024 amounts to €40 million.
Priority area 1: ‘Support to sustainable trade and investments’ promotes sustainable supply chains and strengthens the business and investment climate. Moreover, it plans to improve the productivity and competitiveness of SMEs and cooperatives with a special focus on sectors with high social impact and export development promoting public-private partnership, while minorities and vulnerable groups fully enjoy and exercise their equal economic, labour, and social rights.
Priority area 2: ‘Enhance climate and environment action on green productivity and innovation’ intends to increase the implementation of circular economy and bio-economy policies with the participation of main public and private actors with a social and gender-balanced approach. It also advances the implementation of green innovation and circular economy practices with the private sector, local authorities, and higher education system while improving long-term strategies and climate adaptation plans through local authorities.
Priority area 3: ‘Good governance’ aims to strengthen the efficiency, effectiveness, and transparency of public administration and decentralized public management and decision-making processes such as enhancing the independent work of oversight bodies in order to undertake effective technical evaluations. This can also involve inspections of the executive and conduct performance monitoring available to the public, increasing the equal participation of women, men, girls, and boys, in decision-making processes, in all spheres, and at all levels of political and public life. This includes online, taking on leadership roles, enjoying and exercising their human rights, and seeking redress if these rights are denied.