Constraints arise for Ecuador's radicalism.

To read the alarming reports about Ecuador in the international financial press, one would think that the country was on the verge of collapse. Certainly, the tone of the rhetoric used by the current, ostensibly left leaning, president (inaugurated mid-January 2007) is worrisome. Broad hints that Ecuador was not prepared to pay its sovereign obligations unnerved many investors.

And the recent secretly video taped remarks by Ecuador's Finance Minister in a February 12, 2007 meeting with an investment firm to the effect that he, the Finance Minister, was prepared to "scare" the financial markets created a scandal in Ecuador. One participant in the meeting, the person who leaked the tape in May 2007 and who had recently been fired by the Finance Minister, said the purpose of the video was to blackmail bondholders. The source of this reporting is the venerable Financial Times (FT) (London) in a July 12, 2007 story.

In addition, moves by the Ecuadorian President to manipulate bank interest rates to benefit the poor created a stir. Even the worldwide microcredit institution FINCA weighed in against that proposal, according to a July 6, 2007 report in the Christian Science Monitor (Boston).

And according to a July 18, 2007 report filed on the Dow Jones newswires, the Ecuadorian legislature voted against the President's bank interest rate scheme. Before the lopsided vote, 71-19 against, the measure was generally expected to pass.

One of the Ecuadorian President's campaign promises was that he would reform what is widely seen as a biased, cronyism oriented legislature. And, indeed, the legislature is quite conservative. In September 2007, the government will convene what it is calling a Constituent Assembly to rewrite Ecuador's constitution. This is seen as a power play on the part of the President. But recent emerging constraints on the President's power indicate that there may be some surprises.

Growth is slowing in Ecuador. International Monetary Fund (IMF) statistics show GDP growing 2.7 percent in 2007, compared with 4.2 percent in 2006.

ECUADOR NEEDS JOBS AND INSTITUTIONAL REFORM

The population growth rate for Ecuador is above the regional average, due in part to a birth rate of 27 per thousand inhabitants, which is above the average of 21 per thousand for South America. Job creation has not kept up with growth of the labor force in recent years, and it is unlikely that the situation will improve further in 2007. Official unemployment (2006) is running about 10.6 percent, and underemployment is estimated at 47 percent.

Ecuador's population reached 13-million people mid-2006, which amounted to just over 3.5 percent of South America's 378-million inhabitants. According to data released by the Population Reference Bureau (PRB), Ecuador's population will reach 18-million by 2025. Also, according to that source, Ecuador is going to have a population of 20-million people in 2050.

The PRB revealed that a substantial 61 percent of Ecuador's population lived in urban areas during 2006, and that the country's population density is a comparatively low 121 people per square mile. Ecuador is slightly smaller in land area than The Philippines, which has over 6.5 times as many residents. The CIA's World Factbook, indicates that 33 percent of Ecuador's population was birth to 14 years old in 2006, while 62 percent was 15 to 64 years old, and 5 percent of the populace was 65 years of age and over.

The CIA estimates the country's population growth rate at 1.55 percent for 2007. According to the United Nations Population Division, in 2050, 20 percent of Ecuador's population will be birth to 14 years old, 58 percent will be 15 to 59, and 22 percent of the populace will be 60 years of age and over.

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