Report on the economy of Ecuador

 CIRCULATING COPY - TO BE RETURNED TO REPORTS DESK IHTERlJATIONAL B.l\.llK FOl RECONS'!'::mcTIDN ANIJ DEVELOPiU:NT HEPORT Oi·I THE ECONCl~Y OF ECUADOR Economic Denartment Pr~pared by: Dr. Harold Larsen -i!l r l • ··,1 l - ,. l._lp I ,I :I '' I ~ I I I J ~ I if If I  ECUADOR ESSENTIAL STATISTICS Area: 150.000 square miles Population; 3.5 million Currency: Unit: sucre ~ Parrty: 13.50 sucres ~ $1 (u.s.) Trade Statistics: . Total I~orts 1947: Equivalent to US$ 44.8 million (6o4 million sucres) Total ·Exports 1947: Equivalent to US$ 44 ..1 million (594 million sucres) Official Exchange Transactions'· on Account of: _Inports 1947: US$ 53.5 million Exports 1947: US$ 47.0 million National Income in 1946: Estimated roughly as equivalent to US$ 150 million (per capita US$ 43) Budget in 1947: 590 million sucres (US$ 43.7 million) Total national finances (including extra-budgetary funds) in s~~lus in 1947 Internal .D3bt of National Government: 97 million sucres (US$ 7. 2 million) ExternaJ. Debt; Principal in Default: US$ 12,619,000 EX-Im Bank, June I94S: US$ 7,705,606 Wholesale Prices: 1939; · 100 ~1947: 368 May 194S:. 416 Net Exchange Reserves: December 3l, 1946: US$ 29~3 million J'une 30, 1946: US$ 22.7 million ~=m~g~ ~7947: US$ 25.4 million US$ 21.9 million ·Q.isbursed Ex-I.m. Bank 'ans, June 1948: US$ 10,100,241  TABLE OF CONTEUTS Page Strcl!!la~r ••• • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • i I. GeogrSl)hiC ••.•..•.•...•..••..••..•••.••.•...••••••..•• l II. Occupations and Income ••.•.•••...•....•..•••.•.••••.•• 5 III. ~icultural Production •••••••.••...•....•••.•••••...• ................................... (a) The Sierra 8 (b) The Coast .................................... 14 IV. Mineral Production .................................... 19 V. Manufacturing Production •••••••••••••••••••••••••••••• 20 VI. Domestic Trensport and Commerce •••••••.••••••••• , ••••• 24 (a) Tran~ort ••·•••••••••••••••····~··••••••••••• 24 (b) Commerce •••••••••••••• , •• ~·············~··••• 25 VII. Official Development Finance •••••••••••••••••••••••••• 30 /'VIII. Government Finance and Inflation···········~·········· 34 /IX. International Trade and the Balance of Payments • •••••• 4o X. External Debt Record •••••••...•.••.•..••.••. , ••••••••• 48 / XI. Political ............................................. . 51 Statistical Anpendix ••••••••••••••••.••••••••••••••••• IT07E: Sou~ce of r~~e fran nLatin 11.:·terica'1 - b;r PC"Pston E. James. co-,;rricht, 1:/ 1:2, by the ::.::y PYPSs, Inc. Used by sion.  ECUADOR AND SOUTHERN COLOMBIA SU~fACE CONfiGURATION ~ANDES lf:.::-:::IINTERMONT BASINS E7.2j COASTAL HILLY BELT 1:<};:-J PLAINS AND LOWLANDS .A. CHIEF VOLCANIC PEAKS 0, GUAVAS RIVER I T. TULCAN RIVER Q 0 SCALE I MILES 0 ECUADOR AND SOUTHERN COLOMBIA POPULATION URBAN • MORE THAN 100,000 • LESS THAN 100,000 RURAL • EACH DOT ~000 CAUCA SCALE 100 I I MILES B.BOdVAR L.R. LOS R(os ORIENTE ..... ········  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 nat"U.ro:::. resources strikingly rich. Her best potential resources are agricultural; owing to geographical configuration, she can obtain the output of tem- 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 tech.."'lical 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 popula- tion is locatedt is already pressing against local focd output. The situa- 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 throug..'f). 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 chan@esp 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 fore.ign 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 1920's. Rice exports expanded greatly during the war, but retention of r.oa.rkets is doubtful. Coffee e.x.poi 'lt.s have been increasing in value but not in volUL.le; rem.--:;ining agricultural exports are at present minor non-staples. 5. Expansion of coastal agriculture is rather a matter of il.:lproving the farming environment (in transport, crop processing, and credit facili- 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. l!.ll 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 4.5 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 prod:l.l.ction, 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 prac- 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 ·surrounding the farm, notably roads, irrigation, crop processing and storage, and rural credit facilities. 9. Such immediate action might be supported by esta"blis.hment 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 o£ farm machinery would then be con- 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 t\U'es 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 • 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 finar.ce 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 exchar.ge rate system installed in i.'ilay 1947 (with Iiv:F advice and concurrence) to meet rapid loss of foreign exchange reserves. The system has bern success- ful in slowing the rate of loss • but not in co!l'q)J,.etely preventing it; mid- year e:xpectat ions were for a loss of foreign exchange of some US$ 5 million in 1948. Recent action reclassifyin& 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 tm·1ard 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 imme- diately south of the equator, which passes 13 miles north of Q.uito. The area of the country has never been measured, but is estimated as 150, COO square miles \".ri thin the frontiers resulting fror.1 the war with Peru in 1942; the area west of the Andean crest is about 60,000 square miles. 14. Ecuador is divided by nature into tru-ee separate ree;;ions, of which only two are in effective occupation: (a) The sea-coast plain (about 28,000 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 1,000 feet in altitude. I::: the north it shares t.b...e double rainy season of Colomb:i,a, 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 Decem- 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, a'ld 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-v:ater  -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, 154,000) is larger than ~ito (population 1942, 139,000), and is the commercial capital of the country. (b) The Andean Highlands or Sierra, (about 25,000 square miles) comprises the sec;ond 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 '1''hich 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 · Density Square of Kilometers % ··Number ·% Ponulation Sierra 70,344 23 1168.6,748 61 26.8 Costa 68,633 23 1Joo?,Ol8 33 14.. 6 Oriente 153,143 51 189,005 6 1.2 Calapag"S Islands 7,880 j 2,192 - .a/ a/ 0~2 Mieratory 300,000 100 3;089,078 4,115 ·- 100 10;2 15; Very little, however, of the total area is under cultivation. It was estimated in 191.:.6 that about 90 ~)er cent of the coast and 60 per cent of the Sierra was suitable for cultivation; that is, about 25,000 and 1),000 square miles respectively. Of the total of Lo,ooo square miles of cultivable land~ only about 1$,000 was under cultivation in 1946~ 16. No census of the population has ever been in Ecuador. In 1892 estimated nopulation was 1.27 million; in 1942, 3:09 million, and in January 1948, 3;L!7 million, with crude birth rate of 37.9 oor . thousand; and crude death rate of 20.1 per thousand in 1942.- Estimated v ~ composition of the 1942 population was: Y"hi te per 10.0 cent Mestizo ner l-t1.0 cent Indian per 39.0 cent Negro :Iulatto ner 5.0 cent Other 5.o Per cen·~ 100.0 ner cent a/ less than 0.5. !/ Just over half these deaths oc~urred in the are r,roun of 0-4 years in 1942.  ... 4- 17. At the same date, the literacy rate was estimated at 20 pe~ qent; s~i~literacy at 20 per cent, and illiteracy at 60 per cent,  -5- II. OCCUPA...mtOUS AND INCOiv:ES 18, There having been no census, there is no at~curate information under this beading. 19. The Economic Department of the Ecuadorian Central Bank has esti- mated that of a total population of 3.,34 million in 1946. 1,285,000, or J9,o per cent, were gainfully employed, in the following occupations: Agriculture, Forestry, etc, 820.000 Mining 10,000 Building and Repairing 6o.ooo 5% Manufacturing and Processing 10,000 5% Services (communication, com- merce, government, etc.) 325,000 26% 100% 20. No valid estimate of national inco~e exists. At the request of tne International Monetary :fund, the Technical Adviser to the Central Bank of Ecuador, Mr. L. A. Carbo, estimated national inccue in 1946 as 2,009.6 million sucres or US$ 149 million. Although this estimate is probably too l.ow' ];/ it is clear tha.t 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 Sdvancei:t below, .Paragraphs 87 and 88.  -6- To tal Monthly Average Monthly Population Income Income per Fw~ly Number of Amount t .\tount People % (SUcres) % (Sa~res) Upper Cla~s 4o,ooo 1.33 28,000,000 14.4o 2,300 . Middle Class 96o.ooo 32.00 96,000,000 49.50 400- L ·'J~ "'~ Lower Class 2,000,000 66.67 70,000,000 36.10 140 ...-- -~ ~ pt'' \:WI. ' 3,000,000 100.00 194,000,000 100.00 100.,00 ¥SliP! C...,.._.....~ ... "~ Note: At the of:Dcial rat~ of 13.50 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 ll2,l4o proprietors in 1944, whose holdings may be summarized as follows: Per cent of Value of Rural ProEerties Number of Proprietors 9.16 4o 29-33 l,lOO 30.41 10,400 20.30 37,200 10.80 63,4oO 100.00 112,J.4o 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 v.rith those made in Peru and Bolivia, Ecuador by subjective judgment compares very favorably with the tv:o 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 somethi:1e;; he very freqj.l 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 £cuadc~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 srJ.Orter.Y This conclusion cannot be demonstrated statistically. It results from a 11feel 11 d.eri ved from. personal observe,tions in the respective coun- tries.  -8- III. AGRICULTURAL l?ROIDCTION 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 ~·by 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 e:x:haustion., To anticipate subsecpent conclusions, her problem of development through agricultural progress breaks doT<!D. 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 consumption.· Their pat tern of tilled fields,. grazing land,. trees and flower.Jl is almost Y Flowers bloom all year round. The main tree is the eucalyptus,· intro- duced 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 liiu.ropean in appearance, but not unfortunately in productivity. Agricultural Production of the Sierra 1939 194o - 1941 (Hundreds of pounds) - 1942 ',Th.eat 49Q,OOO 611,300 534,300 527,499 Potatoes 1,201,000 1,476,400 1,386,120 1,146,000 Rye 72,500 79.900 159,495 115,000 Lentels 46,000 42,4oO 37,955 cs.ooo Corn 816,700 1,349,300 1,308,062 1,315,200 Barley 85),000 795.700 903,600 911,000 Cotton 45,000 42,020 Kidney :Beans 80,000 29. In addition, about 1,000,000 hectares (2.47 m~llion acres) are devoted to pasture supporting epproximate1y 683,000 cattle, 1.45 million sheEf.\ 107,000 ST,rrine and 320,000 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 11,000 feet and higher. The result is a picturesque scene, but one which reveals a near Malthusian situation in the man-land ratio., r;•rith 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 highlands• or a change to increasing reliance upon the out- 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 full.f 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 be- 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 suscep- 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 improve- 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 'llil!>roductive. To use mecba.nical equipment ":"i thout at the same time adopting eq..J.ally modern methods of soil conservation way well be disastrous, and that perhaps within no long period. 35. Even apart from this physical dane;er, 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, a.1d the fl~t paramo is some 2,000 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 pop.Uation 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 press>..lre which is causing the thrust to higher ground is relieved until population increase again overtakes out- put. Against that time, however, the higher ground vrould remain  -12- availfible,Y 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 trac- tors. It will embrace the wl:o le range of agricultural practices, from better seed types to crop rotation and fertilizers, including in some valleys irrigation. It is a matter rr,ther of agricultural education than of~"?dtlgagricultural appliances, and probably experiment under the peculiar regional conditions will need to precede education. Improve- 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 dis- couraged; but it is not the wl:ole 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 n.Ot 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 viitb..."lolding quasi-feudal labor dues, and devoting whole time to cultivation of their own plots• 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 agri- cultural money v.rages to rise is weakened. 4o. There vrould seem to be good possibilities of increasing pas- toral agriculture in the highlands, 1J'rith 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 imp1·ove 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 Andea."1 ridge it self. 41. The Ecuadorian Government has not included any explicit propo- sals for highland agriculture (other than irrigation) in its present ap- proach to the .Bank. It has, however, suggested the Bank finance $1 mil-. lion of agricultural tractors and equipment, to be handled by agricul- 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 con- 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 effe.ctive use. This  - 14. ~- is clearly sound, for flat valley ground, ,already populated, is more use- ful than higher, sloping, and more exposed ground., . The Ecuadorian Govern..,. ment has included purchase of eq.1 ipment for irrig?.tion works to the value of $500,000 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 <Nl 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, GuayaqJ.il, is larger than Q;uito, and less remote f;ror.-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; ta.gua, kapok, oil-bearing vegetable nuts, balsa ?rood, rubber, etc. Y For use by the Caja de K«,go as required both in tile highlands and on the lowlands.  -15- 46. .Agricultural Production of the Coast 1939 ~ 1941 1942 (limdreds of pounds) Rice 957,164 872,890 1,230,4oO 1,610,489 Cacao 392,000 263.300 333,250 315.782 Coffee 343,800 369,000 310,000 190,633 Bananas (1,000 bunches) 4,090 3,913 4,568 4,265 Oranges (COO's) 103,000 lQ9,.6oO 80,550 75.000 Cotton 200,800 156,800 155,910 111,500 Tobacco 24,o43 4o, 765 22,349 29.539 47. It has been estimated that about 500,000 hectares (1 ,235, 500 acres) are devoted to pastures on the coast, supporting approximately 425,000 cattle and 36,000 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 lo,vlands as well as the highlands.  -16- problems, the solution of ,.hlch in detail may lack precedent.Y The suitability of cacao to Ecuadorian conditions arises in part from the very small l.abor 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 cond.ttions. Others r1.JJ:i3 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 planta- tion enterprise. The flow to market of such productswould be increased. by :i,mproved 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-.ll- tural credits, and {in some areas) the institution of health services. With the opening up of the region in this manner 'ii'ould 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 appro- 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 11'Ji 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 ll!.ould be rel;tti 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 develop- ment occurs it will be along many simultaneous fronts; but the front i'Jhiclf is lagging and Ina¥ continue to lag is the provision of basic social ccp i- 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 fe.cilities, 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 program.woUld total  - 18 .... $2.5 million in foreign exchange cost )J The bulk of this ($1 .. 5 million) is allocated to wechaniza.tion of rice cultivation alone, the benefit being principally in resulting improved export position. The remainder, $1 mil- lion. is for mechanization of other agricultural produc~s, apparently mainly lowland (those products specifically mentioned being 11 cotton, sugar,. oil-bearing seeds and other specified products 11 ) , 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 v'Ould 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 Com:;any. Production of crude petrolewn shows a sl:i.c;l1t rising tendency while exnorts have declined steadily a~: more refined . 1/ products are consumed domestically: 56. Oil exploration to the I:ast o£' the Andes,in the Amazonian region, is proceedinc, under concession to tl-1e Shell Oil Go'1~1any. 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 ·will be a pipe line over U:e Anc'es (estimated to cost USiD93 million) and this the com!"'any is not -r;E1inz: to undertake unless assured of an outnut of at least 100,000 barrels a day. 57. The only other :i.rn"rJortant minine activities are those of gold, silver conper and lead, conducted by the South ~~erican Develoument ~ Company and the Cotapaxi :Sxplora tion ConJ:1any. War-time 'lr oduction peaks were 1942 for gold and CO')per; 1944 for silver and lead. Si.nce these res:;ective peaks, production has ~-~clined, narticularly in copper and lead, although not to 1933 lsvels7 1938 1947 (millio~1s of barrels) Production, crude petroleum 2.25 2.36 Exports, II II 1.07 •94 Production, refined petroleum .37 1.28 (See Table No._Jl_, Statistical Appendix. Production 1938 War Peak 19h7 Gold (000 troy ounces) 4'4,"5" l03.tJ 5o.5 Silver (000 troy ounces) 82~0 hhl.3 156.9 Co~per (000 pounds) 2.7 9678.8 331.6 Lead (000 pounds) 2.1 161-+8.8 h98.h  -20- 58.. Ecuadorian trade statistics list exports of crude pet;~.·oleum 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, hm'·'ever, is of di:-1inish·- 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 v'!hole 7 V. ~'J\.NUFACTURING PEODUCTION 59. There are virtually no stC:ltistics on manufacturing in Ecuador, and none which present any comprehensive view. It is ho~·-rever clear that there is very Uttle industrial factory pr:Jc.hJ.ction, and obser- vation in the country leaves one with an impression of the nresent i>ilporta.nce of handicraft production. 60. The most inportant consuxner-good factory industrj_es are te:x- t~}~~breweri~-~~ oth€7r beve:races, shoes a.r:d leather _;:roduc~s, buttons ~..,.d:~<t.';''"'""'''fr and nails. Textile production., using domestically produced cotton, pro- duces cotton piece-goods, and wool, rayon and hem:;> textiles, supplying almost all domestic demand for low-quality products.. The only ir;J.Dcrtant producer-good factory industry is cement, the plants being located near Guayaquil. ?./ Lack of domestic technical lmow-how and of cap::Ltal, and the low level of domestic effective demand, account for the sli~ht develop- ment of faetory industries, whose r;rowth on any scale belonc;s to a 1ter stage of economic development. y Value of nineral exports· as nercentare of value of all exports: 1929 26.0 nercent 1933 43.0 n 1939 39.7 " 1946 11~5 " 1947 6.9 ,, Production and irrport statistics for cement ::tre civen in Table IJo • .2__, Statistical Appendix.  - 21- 61. Uuch of finished commodity y.>roduction is at the handi.craft stage, both for nroducer and consumer goods. In Quito and Guayaquil one sees many small 11 shops 11 producing metal, leather and wood manu- factures largely by manual methods. It is an illuminating co~~entary on the shallow growth of industrial specialization that the ll.1ission did not see any shops selling ready-made women's clothing. All women's 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 30,000 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 un- 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 manu- 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 ass:1.st in stimulating agricultural development. Some progress being made in this direction, notably in vegetable oil expressing plants. 'I'he 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 rr:illion, the justification being both the saving of foreign exchange expended upon cement imports and reduction of load upon the only rail- way connecting lovrlands and hichla.nds. 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 >'lould be readily undertaken by orivate enterprise, particularly when it is remembered that railway freiehts 1•rould protect highland production from lowland competition. 6h. No sueeestions regarding increase of electric power output have come fror,1 the Government; indeed, the official statistical services have no data upon installed capacities and demand. C:nly in Quito and Guayaquil are present industrial uses of electric po'.'l/'er of any i:r:1portance. Elsewhere, su'IJply is from snall municipal plants (mainly therraal) for house- hold consumption. It appears that demand ma:r 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 sev.;:;ral urban centers such as Qui to and Hiobamba. Sone ttne i::-1 the i'uture 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. Dm:IEST!C THANSPOR.T AND COi:l'ERCE 66. The space devoted to ag.riculture in this report reflects its importance in the Ecuadorian economy. As has been said, further develop- 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 improve- ment of transport to knit the economy tocether and to encot1.rae;e 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 and.little opportunity of increasing pro- duction. In much of Ecuador the principal transport vehicle is the mule, whose patience and endurance under hea\Jr 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 im- Ilosing extraordiP..a:::·y vehicular d.e_?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 somew!1at traffic in the dry season. A single e;radinr operation, smoothin:,: thE: dirt surface at the end of the v'ret season, would .cive accelJtable usa- bility in the dry :)eriod, v1hich in the populated coastal ;}rovince of ic,anabi, for example, is eight ~aonths of the year., At -_;resent th.e so1e transport link for cor.unodities between loYrlands and the hi:hlands is the Guayaquil to Quito (and beyond) railway. This link is nrobaoly nearing saturation point vdth present equipment, and its strencthening, both by railway im.!,Jrovement and all-·weather hichway construction, is obviously desirable; it ·;:ill probably become essential yri thin five years. (b) Commerce 70. Physical transport alone, ho>.';ever, is not the only ope c-ation ofcarriaee required to intecrate a reeion internally, and to bind to- cether the various regions. There are also tL:; physical and the finan- cial aspects of comr:1odity holdinr;, involving the stora;:::e and vrhere necessaF'J 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 tr;o 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~:Jo:r-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 •. 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 granar- ies, and experience of similar situations elsewhere suzf:!ests that losses by deterioration and infestation may be significant; no direct evi- dence an.the incidence of this factor in Ecuador ~as obtained by the Mission. The!'e 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 of·medieval Europe. 73. Roads alone would not create an environment favorable to change in this position, although lack of roads na:r well in."libi t change • In addition, suitable credit facilities for the finance of co~~odity holding through time are necessary. 74. Hany complaints were voiced to the Hission ree;arding 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 sim?le 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, i.e., vror!cing 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 ecor:orny. To the extent that banks met more fully the >Jeak seasonal credit re- quirements for croo movement and storage, individual nrivate re::oources are relieved of the :1eak burden and available for other investments. 75.. Thus io;;rovement of the '':techanisr:, by 1.1hich the banking system provides working capital for co;rr:tercial 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 undevelo:,:>ed econom;;r 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 banki:::1g nrovision of workinrr capital should keep step with tot.:::.l 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 nec:licible. It v'rill presumably not alrmys remain so, and ~Jart of the modifications of the bankin~ system shou1d be attract Clli":1U1 atively such sav- ings in the fom of savinc do')Josi ts. This 1.muld increase the, extent to which 'Danks can safely fl!'ovide capital, It will be a much later before small private savincs are directly in- vested in commerce or industry throu;::h joint stock r.1ethods. There is no stock-exchance in Ecuador.  -28- 76. It is, of course, just as important that the ava.ilabi 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 high- 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 commodi- 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) l?ayment 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 11'1nn c;y..,ectcd l'uturc ir;f] 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 shortac,e of capital, whether short or long-- term~ reflecting in interest rates as a genuine scarcity price. 79• 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 influence· 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 . y acceDtable,· as a price mechanisn nethod of selectin~ ~ most urofitable uses of limited funds• ..... ;·;here exoected urivate nrofit did not seem ..l. - - to parallel social desirability, loans at lower rates (i.e., subsidized terms) could be made, perhaps through reconstituted Development Banks.; Prima facie, however, such loans 1.•rould not be short-term. On'this interpre£aion, the situation in Ecuador differs signifi- cantly from that in Peru,; - ~I 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 ar,ricul tural credit. It is not necessar::r to expand greatly upon this, since it too is a consequence capi- tal shortage. 82. Imnrovement would seem to be alonrr the route of nroper UE<e . - 1/ of existing Development Banks (or their successors-) effectively in the earlier stages as lending agencies of Government. VII. OFFICIAL DEV''LOPHl~NT FH·IfJ!CE 83. In the circurnstances of a country like Ecuador, the greater part of domestic capital forr:1ation requires official , directly or indirectly, i f i t 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 si;":nificant rate are lar:::;ely 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 throue;h 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 1.n ca9i tal formation V There are thirteen reaional Development with an un:irn;Jress:tve 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 su!1nly of short-term credit >rill in ,;?art re:wesent formation. A developing economy which nec:lected these items in :11C!.nn2.1~:~ or forecastinc total ca.:?ital investnent would be very vulnerable indeed to inflation induced by over-investment. 86. 17here voluntary savings are J.ow, the only w·a:· to sir;nificant rate of capital formatton can emerge without inflation is an equi- valent amount of savine forced throur;h taxation. One '.'.'ould look for a relatively hir:sh level of taxation to national income, and for a rela- tively high proportion of exnenditures ca:Di tal purposes to total Government expenditures. On both these counts Ecuadorian e:lq)erience seems ira.:?re s sive. 87. In 1946 total budr.:etary and sped.al revenue rms disclosed as 536.8 million sucres; in the sa..'1le :rear., an est:Lnate ·:!J.aced national income at 2,009.6 million sucres. This a proym~tion of 27 ·!er come, a proportion so hic:h that in fact it lacks credence. In assess- inc total tax burden, part of the revenues of Government monorolies, and all of munici.:?al revenues should be included; if this be done, y the proportion becomes 37 per cent. In addition, new exchance taxes yielded 97.3 million sucres in 1947. :Mono_!)oly "participations'' (i.i., direct disbursements for public :!_Jurposes) were 35.3 million sucres in 1946; munici~al income was 180.3 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 223.7 million sucres, or slichtl:r over 30 per cent of revenues.Y 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 t1·aveler. 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, Treasur:r officials informed the Mis- sion that tax evasion was estirnated at some 30 per cent of ta."'{ revenues, 1/ This makes such capital expenditures 11,2) 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 (90.0 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 t:.'Pe that the United Nations Department of Economic Affairs rendered to Venezuela in 1947~Y involvin£; revision of the structure of the budget, of budcetary audit practices, and the like .. f:/ Report~d' in UN Document E/CN 1/SubJfti .4 - 21 ,June 1948 {l{ostricted)  - 34 - VIII. 001/EHNl(i:Ei~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 nx:mopolies 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 assesr,·.gggrega.te Government revenues and expencii tures, and vir- tuall;y 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 1 operations of 23.4 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 BanJ:JI mirrors the over-all result of Government finance; such recourse increased !/ In 1946, for example, the monopolies contributed 53.57 million sucres to the general revenue, and disbursed 35.26 million to municipalities, (14.5 million on "general participation," and 16.52 million sucres for 11 special participation" of "'>hich an example is a new electricity plant at Ambato, the state railways (9.2 million), etc.. gj i'iith only three years of disclosed deficit since 1938. See Table 12 in Statistical Appendix. 2/ Central Bank loans ·to Government less Govertllllent deposits in banks.  - 35- 48.0 million sucres over the nine-year period 1939 to 1947 inelusivel./ an average of 5.3 million sucres annually. &lch averaging. however, con- ceals very important differences between the three periods within the nine years to tal. 94. The table on the next page su.mnari zes the factors causing in- crease of domestic money su;pply. It is computed by rearrangemm t of the balance sheets of the Central Bank, all commercial banks, and all develop- ment banks, and is thus a table shoring changes in items in a rearranged aggregate balance sheet of the Ecuadorian banking system. 95• The first t\'70 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 343.7 million sucres (or 255 per cent), and in the next three )'ee.ra 290.4 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 ex- 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 e.xpansi on of f/ As calculated by IBRD Mission, loans to Government including ali loans to official agencies. A recent calculation by the IMF Research Depart- ment, covering Government operations only, places the aggregate 9 years deficit at 34,5 million sucres~ See Table 12 in Statistical Appendix.  - 36- BANKING CHANGES ~0015 SucresJ Jan. 1939 Jan. 1944 Jan. 1947 Jan. 1948 to to to to· Dec. 1943 Dec. 1946 nee. 19.47 Jun:e 19h8 t~ ~arsJ ~~ iears) tr·:70 ~~r1 t~ 'mo~~h~2 Central rcrk loans to·c~vt~ 16,174 Central B~r~ Loans to Public -1 6,978 f f 160,260 :;. 2_,283 - 1- p881 67,548 .... 23,695 1- 39,763 Commercial Bank Loans and Investments .J. 187,554 f. 14,624 8,8h4 1- 2~.. ~49 Development Baru{ Loans and Investments .J. 14,227 .;. 136,818 ~ 644 1- 26,090 1.. 224,933 f. 313,985 .. 11,)40 1- 68,107 Net Bank Foreign Exchange :;. 260,774 f 94,662 - 53,203 - u6, 112 7 485,707' 7 408,647 - I 64,543 7 • 21,395 Notes in Circulation Public Monetary Deposits f 16o,907 -A 162,868 1-131,729 1-. 128,914 - 23,205 - 68;734 - 1- 17,290 19,620 Government Deposits f. 19,968· :;. 29,768 .;. 9,050 2,366 7 343,743 '7 290,411 .' .... 82,.889 - 36 Public Time Deposits ;. 116,834 ~ 42,053 1~004 f 3,17j y 7 46o,517 7 3J2,464 - - ~ 83,893 3,137 Absorbed by Banking System 1-, 2.5;130 ·~ 76,183 1- 19,350 18,2.58 7 485,707 11 f 4o8,647 - 64,543 7 21,395 I Net Government Borrowing from Banks ... 3,794 .J. 131,492 - 79,738 - 32,745 Deposits in Central Bank in foreign money (not included above} ex... pressed in Sucres: Government Public ~ 4,486 25;242 - 633 .J. 78,964 - 871 78,814 . .J. - 11059 4;h97 I ·~~ ~ T29J 728 7 78,331 .... 79,685 7 IIIII 3,1+38 I .. y Made urt as I:o11mlfs: Cas~.... •••••••••••••• ~ •••••••• - •••• .J. 26.6 1- 36,7 - 22~7 ... 9.9 ... ~ ~ ~ Other assets less other liabilities.;~ .4 33.0 29,3 18~8 Capital and Reserves~:- .... •., •••• 4 ,. • • 52 •.1 1- 79-.9 26 .. o 27.8 I I • Ill ri ••• 7 2.5.1 7 76.2 7 19.4 7 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 ex- change reserves of the Centrel Bank fell 93.5 million sucres or 7. 7 mil- lion dollars to a level of 292.7 million sucres or 21 .. 7 million dolJ.ars, In li.taY 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 J"ielded considerable "profit n in sucres; it is in effect a new imposition of import taxes, and such profits 11 are in reality additional fiscal revenue.Y 11 It was of the essence of the E\md' 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 92.9 million sucres (or 11-per cent) i~ one year. Al- thoUtgb., however, Central Bank loans to Government (and also col'll!Wrci al jJ At this point only the domestic aspects of this measure are empha- sized. In a later section the external or balance of ~ent aspects will be taken up. Y Such revenue from exchange taxes yielded 97.5 million sucres in 1947 • m.d in July 1948 was running at g to 10 jllillion sucres a month; this revenue is not, of course, taken into the budgets •.  - 38 - bank loans and investments) fell, the actual deflation _was largely caused through loss of foJ"eign exchange rather than over~all reduction of domestic bank lending. For, in response to vigorous ~oilpla.ints 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 eJg;>anding 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 su.pply would be too severe, and the Central Bank has in fact adopted a compensatory policy to prevent further reduc- 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, 19l.!8, 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 estab- lished. In mid-September the Fund app:ro ved such clla.nged dest ina.tion 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 PA'D.:lEN'TS 103. Ecuador exports agricultural products (rice, cacao, coffee, tropical fruits, balsa wood), mineral products (crude petrolel.Uil, gold, silver, copper and lead) and handicraft products (panama hats).Y lo4. Approximately one tr..ird of Ecuadorian exports (including minerals) go to the United States. The proportion rose during the war, due to V·Iar-time demand for strategic ra.w materials, but is now tending to revert to pre-war levels. Loss of European markets has been partly compensated by g;ain 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, gro1''ing t-vith population, and. in the key pro- ducts of wheat and fats would be e:x;pected to grow still faster if econowic development raises n~ss living standards witl10ut increasing domestic output of these prodv.cts. For increased consumption of wheat products and fats is in part t.he definition of rising living standards for a very poor population. fJ See Table No.13' in Statistical Appendix for composition of exports.  -41- 106• .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 sup- 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 do·ubtful; 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. 1 No balmce of payments estimates e.Jd. st for Ecuador. / Growth of foreign exchange holdings over the war period, however, indicates a strongly favorable balmce, ~let reserves which were equivalent to 40.9 million sucres in December 1939 rose to 396.2 million sucres (29.4 mil- 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 bet,RSen the balance on official transactions and the move- 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 25.7 18.5 t 7.2 1943 35-5 27.9 t 1·5 t U.l 1944 42.3 34~4 t 7.9 f 8.8 1945 35.3 39.4 - 4.1 - 7-.2 1946 47.1 41.5 f 5.6 t 1.. 9 1947 48.8 57.9 - 9.1 ..... 3.8 112. From December 1946 to IV.tay 1947 net foreign excha."lge reserves fell US$ 7.7 million, from US$ 29.4 million to US$ 21.7 million. In May 1947 the advice of the International More tary Fund was sought, with re- sults summarized as follows in a recent Fund. document.Y The lfund 1 s Mission arrived in Ecuador in Y;ay 1947. It was not advisable at that time to contemplate devaluation, which would. have made the infla:tionary 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 recom- mendations were issued in June. The main features of the new system were as follows; Y Economic S\u"Vey of Ecuador, RD 672 - P 43-44  - 43- The elimination of all quantitative import, export, or (a) exchan~ restrictions, licenses and quotas, with the exception of a few absolute prohibitions of some luxury imports; (b) The checld.ng of excessive import demand through a five- sucre (33 per cent) surcharge on non-essential imports; (c) The suspension of nearly all exchange sales for non- trade transactions and the creation of a free market • 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. T'nis is still in operation. The beneficial effects of these reforms were felt immediately. In June the trade deficit ~as reduced to only $0.7 million and in July to $0.,6 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 $1.5 million. and in November and December there were small deficits of only $0,1 million and $0.7 million, respectively. In short, the deficit for the year was about $9.9 million in its gross gold and foreign exchange reserves. Du.rin.g the same period international liabilities of the Central Bank showed a reduction of about $6 million. Therefore~ the net deficit was around $3.9 million, 95 per cent being in the first half-yeer and before advice had been received from the Fundrs Mission. 113. It should be emp.ha.sized that this .multiple-rate system of exchange control is entirely freed' cp.entitative controls. Excessive import demand is checked by the higher rates upon imports deemed non- essential, the list of which is knol"lD. and published. .Anyone presenting sucres is provided with exchange at the appropriate rate upon list A and B goods, and the free rate is influenced by occasional releases of offi- cial exchange into the free market. The system, that is, utilizes the inter-play of the price mechanism rather than the b'W."lilmlcracy of quanti- tive controls or quotas.  - u4- 114. Loss of exchange continues, however, despite considerable reduc- tion of imports. Gross international reserves declined US$ 1.8 million, and net reserves US$ 3.5 million, in the first six months of 1948. Offi- cial transactions January to June 1948 are surmrarized in the following table~ 1947 1948 Jan. to June Jan. to June (Millions of Dollnrs) Receipts From Exports 16.3 16.7 From other Transactions (1) 5. 6 4.4 Total 21.9 21.1 Payments For Imports 28.9 21.9 For other Transactions 2.3 1.0 Total. 31.2 22 .. 9 :Balance Change in Gross Reserves - 9.3 - 1.8 (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 e:xport realizations for the remainder of the year. 'l,he most critical here is rice, 1.'1:hose y.>rice is falling and the crops accumulating in the rice mills."±./ 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 doJ.Jers. Thus France has asked for 6,000 tons of rice from Indo-China instead of ~cuador, and Greece for 2,000 tons from kVPt in place of Ecuador as supplier. A recent favorable sale of rice-to Haiti has somewhat improvea the cu..ITent 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-- ing official exchange budget may, therefore, have to be modified down- . [l/ ward.. on any pxuient calculation.- 116. '"~or: Recei1:ts and Sales of Foreign hchange (Thousands of. U. S. Iollars) 1948 1947 Estimated Actual BECEIPTS !?Worts Rice Cacao 13.~ la,4~ 11, l ,2 Other products 10,700 12,371 Total Exports 35,4oo 42,120 Foreign companies 5,300 4,842 Others 800 1,883 41,500 48,845 SALES Imports 44,800 53,499 Services 3,200 4,470 4B.. ooo 57.969 117. In this situation of continuing presSlre. one step has been t?ken, and others are under consideration. The one taken relates to o:ffi- cial imports, representing an average pf 20 per cent of total imports. Importation of cigarettes, liquor, matches and other things by the State t.'ionopolies is especial:l¥ significant. These were formerly provided with exchange tax-free• i.e., at the ~owest rate of 13.50. From July 26, they a,fe required to pay the ordinary import rate of 15.o4 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 (i.e., 15.o4 or 20.o4) 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~i­ lwru:ries,Y and/ or a chenge of nominal exchange parity, vri th or mithout a narrowing of the spread between the rates. Here pressure from e:xporters, 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, ser- vice would require exchange equivalent to US$ 378,000 in 1949 (of which US$ 368,000 would be required in dollars), and would rise to US$ 4o2,0CO 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$ 1,410,000 in 1949, rise to a second maxilliUID of US$ 1,394,000 in 1951, and then progressively decline. Upon the assumption the,t &-Im Bank loans undisbursed on June 30, 1948 are all fully drawn before their maturity, total debt service charges would be US$ 1,533,000 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$ 21,343 1000 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•.7 per cent of estimated 1948 receipts, and for 1952, 4.8 per cent and 5.6 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 th• 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, tech- nical and managerial abi li ty.  - 47-A - Note on Official Exchange Transactions Official exchange transactions for the first.six 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 'I'.'Bre some unexpecteci.ly favorable rice eA.-port sales; total export receipts were US$ 8 million larger than forecast on page 45. Imports were held close to forecast. Official Exchange Transactions (full year - n~illions of dollars) Receipts: Exports 1947 - 42.1 - 1948 43.6 Foreign Co~anies L1.8 h.2 Other 1.9 .7 48.8 i:8.5 Payments: Imports 53.5 Lt5.2 Foreign Comoanies 0.6 .2 Other 14.9 2.8 58.0 Balance: Change in Grass Reserves -o.J y does not agree because of rounding. January 26, 1949  -48- X. EXT.ERiJAL 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 currm.c1 (u.. s. (u.s. of p~t} Dollars) Dollars) Dollar obligations , {Gueyaquil & Qui to Ry,) $ 12,26),000 12,263,000 12,263.000 12/31/47 Sterling obligations :.:b 71,000 286,000 286,000 6/30/47 Franc obligations ( Oie Francaise de Chemin de Fer 1 'l!quateur ) Fcs. 8,386,000 70,.000 70,000 6/30/47 12,619,.000 l2,6l9,000 .·· .. Note: The Government of Ecuador o¥ms about 75 per cent of the stock of the Guayaquil and 1,uito 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 11l!quateur 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 Debts· 122. Debts to the United States Government are of three types:" first, the loans by the Export-Import ~.which were outstanding on June 30, 1948 in the amount of $7, 705,606~ second,. the aJIDunts due· because of purchases of surplus property totaled $484, 567 on March 31, 1948; and third,. the obligations arising out of the lend-lease settle- ment, the amount of 1f:'hich is not available. (Total. lend-lease assistance }j. This section of the Report was .prepared by Mr, Paul Dickens .. to Ecuador amounted to $7 •795,000 .. ) 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, $500,000 ($1,000,000 authorized) was outstanding, the total to be repaid by 1966. Debt History l2ij. Upon partition of the old Republic of Colombia~ ·Ecuador was apportioned 21.5 per cent of the original Colombian debt by the conver- 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 (#!,reemen.Jl was reached• 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 November,l9ll 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 due.Jam1ary 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 Jazru.a.ry 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.-· XI •. POLITICAL 129• 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 •. T')tal votes cast in the recent Presidential elections were 289,164, from a total Population of some 3.5 million. 130· 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. Velasco's assumntion of the Presidency. 131.. On June 30, 1946, new elections to the r::onstitutional Assembly ·were held. The only party :partici!Jatine 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. - 12•.. Being compUisory for men, voluntary for woraen. 132• A new Constitution was promulgated in January 1947. 133· On August 23, 1947, a bloodless coup d'etat, led by Colonel Carlos !Iancheno, Minister of Defense in Dr. Velasco's Cabinet, deposed rresident Velasco, who fled the country to Colombia for the second time• 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, 134:· 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, however.J vrho ·was 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 S?ecial session of the Zcuadorian Concress accepted the resignation of Dr. Veintimilla, and elected Senor Carlos Julios Arosernena, head of the Banco C.e Descuento at Gua~raquil and a non-party man, as Vice President with nov;ers as Acting President until September 1, 1~48. Senor Arosemena formed a mainly Liberal Cabinet, with one representative each of the Conser- vatives and the Socialists. Coneress also ~onfinned the Council of State 1 s view that Dr"' Velasco had forfeited the Presidency by abandoning his post.• 136.. On June 6, 1948, 'Presidential elections were held. The three parties represented v;ere 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 115,835 Flor 112,052 Enriques 53,601 Invalid 27 676 289!164 137 • 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 Cone:ress, and assumed power September 1, 1948. The ·presidential term of office is four years. The Vice Presidential results were: Conservative: !1!anuel Sotomayor y Luna llu,008 Liberal: Dr. Abel Gilbert 113,213 Radical: Dr. Cueva Tamarz 5h,07h 281,29> 139, Senor Plaza was born in Nmv York, U.S.A., forty-two ;years ago; his fatter,, the late General Leonidas Plaz~, was President of Ecuador in 1901-05, and 1912-16. ·Senor 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~tcy· 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 "'t4" In executing any policies, he will, of course, be handi- capped by the lack of a fully efficient Civil Service. The position in Ecuador is the same as that in othel· 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.  ECUADOR STATISTICAL APPENDIX TABLE 1. Oil Production and Exports 2 •. Cement Production and Imports 3•. Yfueat Production and Imports 4. Rice Production and Exports '· 6. Rice Exports by Destination Cacao Production and Exports 7 •.. Coffee Production and Exports 8. Cotton, Tobacco & Sugar Production & Sugar Imports 9. State Railways;· Lines & Rolling Stock 10. State Railways: Merchandise Hauled 11. Population and Roads by Provinces lZ... Budgetary Receipts and Expenditures 13. Exports of Principal Commodities, Volume & Value 14 •. Imports Classified by Groups, Value 15. Exports by Destination, Value 16. Imports by Source, Value 17. Balance of Trade by Major Regions 18. Exehanee Reserves and Banking Position 19. Price ·Indices 20. Status of Ex-Im Balli< Loans  ECU.AIOR .Table 1 .. Oil Production and Expo·rts (thousands of American gallons) Crude ou Gasoline Produced EJt;ported •Refined ·produced 1938 94,586 78,696 15,500 41,654 1939 97.125 68,819 17,679 : .• 141 194o 98,654 70,~99 23,001 6,162 1941 65,382 38.,362 25,914 6,462 1942 95,671 68,516 29,489 7,2l.7 1943 97,211 65,003 34,635 8,076 1944 121,469 82,520 38.,083 8,927 1945 109,855 73.897 38,752 10,059 1946 97,9+7 52,412 45,213 12,271 1947 99,140 39.359 53,949 16,587 Source: J3o1etin, Banco Central del Ecuador  ECUADOR Table No. 2. CEMEHT PRODUOTIOllT AliD IMl?OR'l'S (metric tons) Production Imports Tot.al 1929 17,782 1937 1.5,699 10,082 2.5,781 ' 1938 14,2.54 13,373 27,627 1939 14,249 12,013 26,262 1940 16,.512 10,93.5 27,447 1941 17,213 2,_846 20,,0.59 1942 19,802 s.,o98 24,900 1943 27,.56o 933 28,793 1944 34,691 1,.590 36,281 194.5 37.,.504 953 38,458 1946 38,496 3,114 41,610 1947 33,231 1,494!1 1948 20,484JJ l/ First six months. Sources: Production: Eoletin, Banco Central del Ecuador. Trade: Ministerio de.Economia.  ECUAJX)R Table J.,. Wheat and Wheat Flour Production and I::r»?rts (thousands of kilos) Wheat Production Imports Exports Consumption 194o 28,120 • 73 28,o47 1941 24,578 36 24,542 1942 24,265 • 76 24,189 1943 22,034 * 22,034 1944 23,251 912 24,175 1945 23,115 2,733 180 25,667 1946 25,852 4,532 23 30;361 1947 2l,o66 4,94f)J 11/ Vfueat Flour 1938 10,743 9,981 n.a.. 1939 7,864 16,638 n.a. 1940 7.996 8,-592 275 16,312 1941 7,225 11,823 286 18,762 1942 7,.161. 23.497 161 30,498 1943 7,461 9,862 *' 17,.322 1944 5,216 24,023 29,239 1945 5,;1.74 25,137 30,311 1946 7.~38 11,313 g 18,813 1947 5,943 18,86?}) 4Y * Less than 500 kilos Y First 6 months Sources; Ecuador en Cifres,. a~d Ministerio de Economia  (.',B EQU@OR RI03 PRODUCTION A£P ~OR~S Vo1wnfJ Value Production · E~orts 3xoorts (metric tons) (thousand sucres) ~e· 1926-30 ?,047 1931 26,)04 8,255 1,881 1932 23.584 3,842 936 1933 29,863 6,449 1934 39,270 5,282 1935 39,008 22,907 6,667 1936 31,699 8,734 1937 39,036 1,2)3 1938 52,136 2o.oso 10,864 1939 44,027 9,62? z 6,555 1940 40,144 18,343 14,632 ,...-··· .;<i:t 0 ;;~ )'~ ... :.'/.(,"1 ·:;·~ ,t .: :,-; ~ J" £'; 1'70 '1941 56,596 20,546 23,265 1942 ?5,873 32,028 51,460 1943 100,949 46,992 93,837 1944 ao.6o7 64,604 127,105 1945 53,168 29,318 60,395 1946 102,048 66,918 203,243 1947 112,711 6~209fl, 2rfj:u.ft 1948 ":· tloo ' 1 .,. " $'\:" ...,,''• tt (: ;;r t ~i*i&n.-§00-.lf!·ks. '-.~J:rst~·-ns,.mcnths .. gJ Provisional. Sources: Production: Boletin, Banco Central del 39uador~ Trade: Ministerio de Econom1a..~ ,~;r.-,;. ~f'l.,. ]r:.•~.-····' f .~}~·~---i  Table No. 5'!" RIQ]; E.Xl?ORTS (in million po~ds) Average ~ Jan. to~ Destination 1937-41 1943 1944 1945 1946 1~ June-194 Cuba 2 81 88 5S 46 12 24 Peru 13 20 29 0 0 0 s Venezuela 6 0 17 4 17 49 )j Colombia 4 ~ 0 }./ 2 13 2 Panama 2 'R.f 2 hi 5 4 1 Jamaica. 0 0 0 0 16 1 0 Philippines 0 0 0 0 20 0 0· India 0 0 0 0 0 38 0 Dominican Republic 0 .0 0 0 0 Other Countries 4 •• ~., 6 6 'f4~/ .:1 r 2 ·; I 1[0 . TOTALS 31 105 142 6S 130 13? 34 !!/ P:reliminary~ R} Less than )OO,OOO.pounds. sf Ineludes 6 million pounds to Mexico and 5 million t·o Greece •. · s,u£~§.8:._ .Foreig!l Crops and Markets, Offi:ee of Foreign Agrtcultura.l Relations,, u•. S.ll~artment of Agriculture, May 3l, 1948 •.. p •. 402. First six months of 1948 from ibid, August 16,. 1948, p •. 120.  tf.I ECUADOR Cacao Production and ~orts ' Volume Estimated Production ~rts Exports (metri.c tons) ( 000 sucres) Average 191i-15 4o,625 18,6o9 1916;...20 n .({. 43,547 26,073 l921-25 36,825 26.746 1926-30 21,319 27,531 1931-35 15,980 16,647 1936..:40 17.4o4 37.424 1940 12,108 11.208 29,354 i941 15·330 14,433 34,365 1942 14,652 13,762 40,327 1943 19.,030 18.161 51,.794 1944 15,,058 13,735 41.985 1945 17,759 16.827 53.547 1946 17.689 16,526 74.935 1947 19.459 188,208 ·"",)(.e.t.) "·(;' !'· .Sources·: 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, ~ Mini sterio de Economia . -•....,,..:>( 1 J 11'1,' . .•r ...., t'• •'\•'•' . .,\"... ,1).,r (o, ( •  Table 7. ECUADOR Coffee Production and Exports Volume Value Estimated Production EXports Exports (Metric TohS) {000 Sucres) 1921-25 average 5,147 5,9~9 1926-30 II 7,571 11,530 193D-35 " 10,047 10,945 1936-40 II 13,811 18,546 1940 16,158 14,571 16,J83 1941 14,260 11.;847 23,827 1942 9,016 6,140 17,278 1943 14,144 12,340 33,176 1944 16,598 14,458 35,626 1945 12,999 10,737 33,863 1946 9,948 7,636 34,839 1947 12,522 8,970 43,524 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.  Table B. ECUADOR Production of Cotton, Tobacco & Sugar & Sugar Imports (000 Kilos) PRODUCTION IMPORTS YEAR Raw Cotton Tobacco Sugar Sugar 19.37 17,528 5,310 1938 1,519 22,950 11,068 1939 9,2.37 1,106 26,950 12,387 1940 7,213 1,875 27,835 38 1941 7,172 1,028 30,421 6 1942 8,165 1,359 27,858 33 1943 26,799 184 1944 2.3,151 784 1945 32,474 21,455 1946 33,544 .3,060 1947 33,480 Sources: Production of Cotton and Tobacco, Ecuador en Cifres, 1942. Sugar Production and Imports.., Ministerio de Economia.  ECUAOOR Table 9 .. State Railways Rolling Stock Length Locomotives (Number) (Kilometers) (number) 1re'lght Passenger Gu.eyaquil-Qp.ito 452 39 319 41 Gua¥aquil-SalinaJ:./ 150 6 22 24 -~ito-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 1,199 64 4o.y/ llG!/ !/ Narrow-gauge line gj On uncompleted lin,e ~ito-Esmeraldas 21 Of which 4 are rail-cars ' . ' "jj Of Vihich 61 are rail-cars Source: lviinisteria de Economia  ECUAOOR Table 10. Railway Transport (thousands of metric tons) Products .Agricultural Animal Mineral Forest Manufactures Others Total 1938 163.9 19 .. 3 16.0 12.2 103.4 5.8 320.5 1939 131.8 14.3 17.2 13.8 96.1· 5.8 279.l 194<> 171.4 14.4 23.3 21.9 147.2 29.8 4os.o 1941 161.3 18.4 27.7 20.9 154.3 28.9 411.5 1942 180.9 22.4 28.0 27.2 163.1 32.8 454.3 1943 184.1 28.0 35a4 37.6 193-3 38.4 516.8 1944 201.1 25.0 26.3 29.9 C5J7 .3 35.2 524.8 19.45 188.8 29-5 35.0 23.8 223.4 29.2 529.6 1946 194.1 29-9 46 •.4 25.8 217.0 37·7 550.8 :+947 178.7 29.9 51 . 0 18.0 208.5 41.9 527.9 Source; l3oletin, Banco Ce~~nu del Ecuador  Table 11. Population and Boads Poeation :Roads (Kilometers) Province Jan. 1, 1948 Main Secondary In Construction Carehi 86,663 174.4 119.1 105.0 Imbabura 158,896 181.8 210.0 181.0 Finchincha 350,149 4)1.3 370.3 67.0 Cotopaxi 215,232 64.2 4o6.o 97.0 Tungurahua. 222,963 229.0 181.0 30.0 Chimborazo 298,64o 166.4 331.6 274.0 Bolivar 121,653 187.7 129.4 204.5 Canar 133.971 58.0 58.0 130.0 A'ZUaY 284,982 105.3 219.0 63.0 Loja 238,705 114.0 4s6.o 143.0 El Oro 93.752 100.5 237.8 65.0 Quayas 482,843 390.0 336.7 370.0 Los Rios 148,428 93.3 463.2 105.0 Manabi 381,538 362.7 1,lo6.1 197.0 Esmerald.as 66,4o5 5.0 19 .. 0 284.0 Frov.. Orientales 181,071 .;,465.891 2.663,6 4,673.;2 2t3l5•5 Source: Direccion .General de Estadistica y Censos  Table No. 12. ECUADOR DISOLOS3D BUDGETARY R303IFTS Alf.D EXP3NpiTURES (Total of ordinar,y and extra-ordinary budgets and special accounts) {thousand of sucres) Total Total Receipts Expenditures Diff~reuce 1938 132,320.4 142,913.4 .... 10,683.0 1939 131,699 ..6 126,768.7 .j. 4,930.9 1940 126,271.0 123,135·.0 f :;.136.0 1941 154,762.4 158,661.5 - 3,.899.1 1942 166,745.5 148,925.1 .f. 17,820.4 1943 211,.261.4 210,1.42.9 .j. ltll8-.5 1944 314,531.8 303,103.8 .f 11,428.0 1945 405,103.8 417,455.0 ... 12;351.·2 1946 536.782.2 535,239.4 + 1.542.8 1947 669,664.'7 659.385.8 .j. 10,278•9 11 !/~I 'JJ!( ·.' ; ,. :.... •; ,,',I ..l ,r ,. 7 ' ':" !I : 1 . Source: ::ao.letin, Banco Central del Ecuador ., -'· /L r ' "··  ECUA:OOR: EXPORTS OF PRINCIPAL COMMODITIES, 1937-47 Table 13. VOLUME (thousand metric tons) 1937 i9.:;8 . 1939 194o 1941 1942 1943 1944 194.5 1946 194711 1.;2 20.0 9.6 18.3 20 •.5 32.0 47~0 64.6 29.3 66.9 66,;) 21.8 19.1 1.5.3 11.2 14.4 13.8 18.2 13.7 16.8 16 •.5 20.3 14~ 48.; i,JI 13.7 .5.5~.5 12.9 14.6 47.2 11.8 34 •.2 6.1 22.6 12.3 14 •.5 10.7 7.6 9.0 .53·3 1.5.8 1).9 17.8 3.5·.511 72 •.5 34;.5 19~2 2.5.1 18.3 14•4 13 .. 2 11.2 10.3 12~0 13'.2 12.1 1.-4 1.6 1.6 1..5 1.8 3.0 2.2 2.8 2~0 1..3 0.1 1.;4 1··9 . 2~2 2.1 4.7 9.0 13.6 9;3 7.4 2.8 n.a .. ~> {i824) (1387) (944) (1036) (1981) (2.516) ( 27.56) (4373) (4462) (4947) _0.1 284,9 24.5.4 227.4 220.1 120.1 216,7 206.2 2.51.3 244.6 164.0 13.5.8 Ltrates 7~3 14.0 7.6 s.o 3~3 ).9 2.6 1.0 VALUE (thousand sucres) 610 10,864 6,.5.5.5 14,632 23,26.5 .51,460 93,837 127,10.5 60,39.5 203,242 201,111 49,98.5 39•276 37•033 29;3.54 34,364 40,)26 .51,794 4lt98.5 .53,.547 74,93.5 188,208 24,613 16,.703 1,5;227 16;)84 23,827 17,278 33.176 3.5.~26 33,863 :;4;839 43 •.524 5•691 7;.5.58 7t006 6;448 4,6.58 _J, 107 2,1.59 1,898 2,872 7,38~- 24;3.5.5 18,242 7~146 9,60.5 8,6o6 6,120 ?,201 6,274 6,209 9,264 1),02 14,994 4,048 4,300 4,298 3~866 6.979 35,481 23,316 38,043 26,5.53 15,111 979 lt363 2~134 2,724 3,168 8,450 2,5,613 43,419 31,877 18 • .509 7,12.5 n.a.. 8,048 . . 6, 234 4,981 6,509 16,231 22,121 25,191 69,033 69,J87 81.,962 4,662 21,989 26;374 25.020 24,862 13,425 24,820 23,796 28,788 28,107 18,253 15,902 .trates 10,16.5 16,090 13,134 38,609 27,208 29,013 18,075 809 a.tes 18,682 35,297 41,204 39,907 29,426 25.374 27,476 26,4.57 15,482 24,858 25,334 10,774 13,210 13,49.5 3 ,9.50 16,869 32,775 2L,068 32,402 30,902 38,326 n •. a_. 164,_045 169;096 167,148 167,8.51 199,704 298,690 393,115 466,631 377,894 537,131 619;859 t:·• • ' Note: Dash (---) signifies zero or less than 50 metric tons nly. or ~00 sucres. a.ta expressed in quantities other than weight. Sourc!is.: 193 data from unpubli~hed Zcuadorian trado stati~tics pa.rtment of Commerce official data; at U;S. Department of Commerce; 1938 nnd 1939 from Direccion Nacional de Estadistica, Er.uad6r 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.  value of Imports by Groups, 1937-Lt-.5 Volu.me and ·~alue of Selected Individual Imports, 1937-46 (Value in thousand Sucre~) 1~37 1~38 1~39 1940 1941 ~942 ~~43 1944 194.5 1946 ~ tobacco 19~731 20~ 37'.5 24~874 16~)6.5 19,04'3 37~.540 33,270 70,915 82,984 tone 5,127 7.194 1,9.58 6,~4e8 5t298 8 .. 11!8 6,717 8,)69 9,04) J.gS 12,888 13,Jl5 14,.522 17.702 19,556 2.5~1.52 31~700 43,196 32~830 21,627 2.5~272 21,4.5.5 28{.532 21"619 18,923 17,073 53~400 JB,oo6 articles 20,649 21~.593 2.5,.5.59 29,437 22,636 19~$13 1.5,447 32~624 38.797 13~505 11,961 12~654 1.5~976 1.5,667 18,899 14~8?8 18~388 22.89.5 11res .5~829 7 • .524 6,066 9,38.5 8,3;3 '14,353 14,.116 11.a99 9,812 ilk 22,912 )0,868 24~7'.5 27 t 7.50 2.5,993 42~916 68,928 'n~l79 69.-11.3 9,376 10,,2}8 10,038 12,.118 11;34.5 13,932 1.5,856 19,186 20,042 ,-,•. al 131,643 148,320 14?,86o 173.7.53 149,499 199,71.5 217,983 33ltl.56 323,,524 (Volume in thousand metric tons) (Value in thous~tnd sucres) 5·3 11.1 12.4 0 ..2 7.8 .· 21.5 ).1 1,9?4 .5 •.534 6,38.5 26 4 24 130 12,622 . 8,13.5 o.s 0.9 2.7 4•.5 246 12.2 io.o - i6.6 8.6 11.8 9.9 775 24.0 2,290 •, 25~1 ),842 11.4 23.5 8,2.5.5 6,)88 7,449 5,076 ?,013 14,609 ?,337 24,070 26,388 13,123 1.9 0.7 1.1 1.1 1.4 2.9 2.3 '4.6 . 6.7 '4.6 2,187 1,824 2,695 2,9.4-3 2,9J9 8,182 8,8.53 . 14,6)1 21,699 22,709 10.1 i;.4 i2.o i0.9 2.8 .5.1 0.9 1.6 1.0 ).,1 804 l,l.J{)6 1.,667 1,.546 .577 866 321 349 246 639 ~. hides & skins & manufactures, & miScellaneous ~s zero or less than .50 metric tons -·Note: 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  ECUAOOR: Exports by Countries, 19}7-47 (Value in thousand sucres) Table - 15 1937 1938 19:39 1940 1941 1942 1943 1944 1945 1946 1947 --·-------· 80,4.58 lt2,865 116t-J78 1,50,05.5 196,9.53 293,081 386,483 46lt-909 372~549 463~378 sa4~68J .54,422 63,418 8),2.54 1t0,496 14.5 •.558 168,.58.5 2)9,238 267,10.5 218,018 227,291 262,.887 26 20 65 17 2,228 78 124 7,)41 17,17.3 630 610 949 1,281 1,055 1,)98 5~.526 2,5,686 78;52.3 85,382 61,478 75,890 23,481 2;899 4,.955 2,109 .3,.568 162 1,163 4.J54 2,526 4,197 4,4~ 1,4.50 5,027 6,335 4,972 .5,.i92 5;28!5 7,42.5 4,546 7,379 10,286 9,798 1.5,537 1 5 5 17 57 13? 291 54'} 444 574 6,996 8 .. 662 9,188 8,714 13•764 7,238 15,316 1.3,900 11,223 6~07l 14,.503 11'"717 2,908 12,544 5. 730 7,896 3,767 21,215 22,608 29,233 4,243 6,703 7,965 51 15 24 8 532 3,620 1,603 539 2,336 . 11,.579 3,749 80 207 862 4,070 9,991 17,096 1,275 17~428 6~973 27,431 80,.541 1,943 2,135 5',229 6,039 1,965 5:435 3,021 4,827 15~702 2.5~137 51~854 ·;. 667 740 991 z,o83 3,358 11,412 4,286 4,282 3~-970 13,064 5~864 1.799 419 2;218 875 2,865 12,299 9,644 14,900 13,714 9.6.53 11.6.55 J 89 82 2,..527 1,.247 964 326 )24 250 4,.114!1 2~985 . 1,024 1,514 1,068 2,205 7,173 2,650 2, 744 8,.871 7,694 J2, 5811 . 17..39~ 77,029 61,869 43,688 11,945 1,503 5,550 6,335 4,108 4,075 36,783 61,998 32) 6)3 1,187 490 58 186 2,164 4,021 J,217 3.5;974 4,411 29,595 7,909 11,277 6,156 69 3,477 - 1,183 5,492 4,876 2.,6)8 359 1,860 29 7~467 489 255 J2 100 280 1,155 1,239 1,265 3,827 3~961 20,539 13t521 10.802 2,254 5 706 4,177 6;313 l,Bi;? 2•610 1,415 3,615 3, 758 4,.251 822 -· 6. 2,842 1,8?8 13.546 12,962 3.592 2,531 4,12~ 162 7.~ 10;0,52 8,643 1,693 3•521 3~400 2,751 320 40 118 231 222 5,404 J.! 4,894 6.337 4,201 6,548 5,478 1,175 5 45 40 1,.611 50,950 6,261 4,132 .~l ··' 5,386 5,452 - 8 1,17.) - - 15 45,988 5 11 7S 5 25 567 92S 33 ~- 76 18 966 151 150 3,419 38 29 858 2 45 78 467 (continuation on next na.e?e') ·  ~GUJ.LOR: ~xnorts by Countries, 1937-47 (falue in thousPnd sucres) T~ble-15 continued .....,. ·-~---....., -~-,.·""· . -· _, ·-- ~~---.,.,.~~- --.--.,. ""-·--~·--------·.- -···--··-- 193? 1938 1939 1940 1941 1942 1943 1944 1945 1946 1947 _I --· -·- ---~- .. ------ ·- ..• ··-· - 4 7 5 5 5 219 1,087 218 153 529 368 73 49 297 569 1,230 35,.140 789 28,137 207 144 379 J68 73 49 297 559 1,104 605 11 9 10 126 43 150 6,355 !±/ 353 54,045 169,096 167,148 167,851 199,704 298,690 39J,115 466,631 377,894 537,131 619,859 ~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. Prima.rily 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 r.assion, July, 1948.  Table-H) ECUAOOR: Imports by Countr~es, 1937-1947 l937 1938 1939 1940 1941 1942 1943 1944 1945 1946 1947 I (() ~ {Value in thousand sucres) +' -> 128,423 200,061 "' L,520 63,151 83,984 115,382 186,958 311,989 302~329 363,403 517,582 .j.' u:, . .:t 2,086 51,311 71,950 103,214 110,422 138,729 103,583 173,776 178,821 240,233 429,.906 Q) ;:.:; 0 \,.} "f""'; 811 674 2,436 1,.815 2,150 5,265 6,538 12,178 20,912 'd S.; U> 551 3J258 ro c, 1 :n 4 4,144 3,042 8 99 14 23 295 178 8~011 210 h ("-! \..0 ·.-1 "';;! 186 324 237 957 2~991 8,492 18~376 15~239 17,232 10~574 3,121 4 ·- 2,375 2,310 1,959 2,476 3,016 4,735 7,930 7~696 11~201 15~564 14,.755 §wfi! ·.-1 1"\ fli 4 6 343 1~823 3J064 4,110 3~612 6,0J5 h 0"\H 2,739 2,109 3,789 1,7?4 2,352 7.949 9~934 17,845 23~ 616 15,59t 18~727 ~rl'd ... (!) 328 164 457 2,498 612 733 10,892 10,902 20,003 16.,684 11,981 o...c: &l'+l!.ll m·a J63 2,464 1,297 507 1,161 500 -- 1.438 - 5,565 2 20,668 39,979 23 46,654 115 33,684 1~128 33,034 1,192 6~486 'd+>'-' 15~~ (() m na 1 311 2,297 5,515 130 •.-I rl • +> 15 31 68 245 995 1,516 2,804 25,326 6,124 5,956 ,3,472 ..O<ll~ 149 280 269 332 550 208 270 389 707 839 655 a~ § (1) Cl! 16!276 15,885 ~-g ~ 4-,209 72,986 38 09? 14,33J 9!813 1721~9 45!194 80!928 1,701 35,767 2 ,7 7 3.3 1,.202 67 47 61} 19 2 eo El g 0 0 3,250 11,462 8,094 12,980 10,124 8,108 13,634 12,513 11,984 28,392 40,983 ¢1-t'+l~ 1,803 718 1,687 ot:.· r- 66 ..::t -P 4-,114 6,.465 7.339 6,30? 475 34 22 2 889 7,279 ~!;:led (!) 682 4,824 rl<ll 3.?6o 4,685 '1,573 7,144 308 12 <Dno ...., •.-1 1~896 2,550 1,466 1,624 64 1 58 5,090 1,052 1,489 794 945 293 224 21 1,373 9,062 9, 703 fJ ~ ~ 5 r- P; +" 0) u. na 868 881 423 10 1 8 223 1,3?5 1,162 4,823 1,264 1,675 877 1,017 1~52? 2,380 3,129 4~326 6,851 ()'; rl .. . 1"\ r=l ·r-l cn~oo l=l ,...: 7,274 3,074 2,609 3.595 980 349 1,041 905 599 1~543 3~134 ... • ..::t 2,281 3,882 op.., a' ;, 724 11,939 8,983 19,951 6,239 1,439 3,0?4 5,478 5,736 ¢1-t ~,§ rl 173 302 262 238 -w; 14 2'76 -rr;. 472 ---s9l cti!.llm:>. .,.,259 10,949 7,810 18,190 4,414 170 16 4 +>U;::!'d 5 +>P~ t-:1 ~-.-: 935 712 728 1,.278 1,281 1,715 1,314 2,685 3,185 4,465 3,151 530 105 143 221 306 240 95 89 582 541 2,089 ~/ .. (f) 1!l 21 1.2 80 1!f 196 122 169 125 1J .n ~-T~ 0 109 218 .:lllL . 250 m 46? §2 .12_ 28 119 112 --sB"_l_ I ~ 0 ---- '- .,643 148,315 147,860 173,?53 149,499 199,715 21 ?~ 983 331,156 323,524 414,266 604,479 ms. may not a.1ways 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.  ECUAroR: Balance of Trade by Area, 1937-47 (thousand sucres) Table 17 \fRlSTERN HEMISPHERE {includin.g Philinuines} YEAR United States Other Total Eurone Other Countries World Total 1937l Exports 54~lt-22 26~036 80~!-~-.sa 77~029 6~559 164,04.5 Imports .52,086 9~434 61,.520 64~209 5,-912 131,643 Balance 2,336 16,602 18,938 12,820 647 32,40.5 1938t Exports 63,418 39,447 102~86.5 61,869 4,361 169~096 Imports .51,311 11,840 63,1.51 72~986 12~ 178 148,31.5 Balance 12,107 27~607 39,.714 -11,117 - 7,817 20,781 1939~ Exports 83,2.54 33,124 116~378 43,688 7,082 167,148 - Imports 71,9.50 12,034 83,984 .54,505 9,372 147,860 :Balance 11,304 21,090 32,394 -10,817 -2,290 19,288 1940& Exports 100,496 49,5.59 15Cl,.0.55 11,94.5 .5,8.51 167,8.51 Imports 103,214 12~ 168 11.5,382 38~090 20,281 173.753 :Balance -2,718 37.391 34 .. 673 -26,14.5 -14,430 - 5,902 194H Exp(\rts 14.5 •.558 .51,39.5 196,9.53 1,..503 1,248 199,704 Imports 110,422 18,001 128 .. 423 14,333 6,743 149,499 Balance 35,136 33.394 68,530 -12,830 -.5,495 50,20.5 1942: Exports 168;.585 124~496 293,081 .5t5.50 59 298,690 Imports 138~729 48,229 186,9.58 9 .. 813 2,944 199,715 :Balance 29,8.56 76,267 106,123 -4,263 -2.885 98,97.5 NOTE: Areas may not always add to world t~tals, because of rounding. Source: 1937 and 1947 fr<tm unuublished Ecuadorian Trade Statistics at U.S. Department of Commerce .. 1938-46 frem Ecuador, Ministerio de Economia, data furnished Mission, July, 1948. (Table 17 continued on next page)  ECUADOR~ Balance of Trade by Area, 1937-47 (thousand sucres) Table 17 (oonttnued) WESTERN HEMISPHEL~ (including Phili~ines} YEAR United States Other Total Euro:Qe Other Countries World Total 1.2!:!J.: Exports 239;238 147~245 386~483 6;335 29? 393;115 Imports 103,583 96~478 200~061 16,276 1,646 217,983 Balance 135,655 50,769 186,422 -9~941 -1,.)49 1?5,132 1944: Exports 267,105 194,804 461,909 4~108 .614 466~631 Imports 173.776 138,213 311,989 15~885 3~282 331~156 Balance 93,329 56,591 149,920 -11,779 -2,668 135,475 12!!.5.: Exports 218,018 154~531 372,549 4,075 1,270 377,894 Imports 178,821 123,508 302,).29 17,159 4,035 323,524 Balance 39,197 31,023 70,220 -13,084 -2,765 54,)70 1946:l) Exp<>rts 227,291 264,224 49J.,515 36,783 8~833 537,131 Imports 240~233 123,170 36J,403 45~194 5,670 414,266 Balance -12,942 141,054 128,112 -8,411 3,163 122.865 12!!:Z= Exports 262,887 241,796 504,683 61,998 53,179 619,859 Imports 429,906 8?,676 517,582 80,928 5,969 604,4?9 Balance -167,019 154,120 -12,899 -18,930 47,210 15,380 1/ Only year in which substantial Philippine trade. NOTE: Areas may not always add to world total, becasue of rounding. Sources: 1937 and 1947 from unpublished Ecuadorian Trade Statistics at u.s. Department of Commerce. 1938-46 from Ecuador, Ministerio de Economia, data furnished IBRD Mission, July, 1948.  ECUADOR: Exchange Reserves, & Banking Position (million sucres) Table 18 ~ EXCHANGJ;- r .. TIC C:QEDITS OF CENTRAL B.Al~K 4 • Domestic MOliEY SUP;ELY Govl t. tAL BANK Gov't. Official Bus,. Other Credits Current A/C Den sits ~L JJj} To(;)2f (4) Entities Indvls, Total. Banks of O~mtl Currenc;l Denosits l.; Tt:ttal (lJ) (.5) (6) (7) (8) Banks & (10) '11 (12) Indvls. (9) 16 10 26 51 1 116 62 64 127 6 23 4.8 26 7 40 73 4 129 74 66 14'.) 12 27 3·7 )9 7 29 66 4 144 73 71 144 7 28 3"7 29 8 24 62 4 159 78 73 151 8 31 5.6 26 8 22 55 5 183 8\l 103 183 6 32 8.1 37 ? 28 ?2 8 201;) 120 119 239 ·.·. 11 )6 15.2 37 21 22 79 9 255 169' 1'7~ ' 345 16 57 26.) 34 27 22 83 13 378 ZJa:. 26e 492 27 71 )4.? 60 37 2.0. 117 9 385 295 308 602 41 74 Z?.5 105 73 11 189 26 493 321 312 634 63 98 28.2 153 81 10 244 24 536 35·~ 354 704 59 90 24.2 104 44 93 241 2 565 329 284 613 66 77 22.1 110 51 99 260 2 56? 313 278 591 71 ?8 21.5 102 47 101 250 2 573 )06 294 599 75 76 22.5 97 45 95 237 2 585 299 299 597 6? 75 21.9 100 44 98 242 1 591 307 297 604 81 75 21.4 98 35 111 244 4 6)4 315 295 610 81 72 )20 295 614 72 .on of $1.250,0CC beginning in December, 1946 • .ars,. .ge liabilitieS', but including Stabilization Fund in 1945, and GolC. Certific'Ct':'"' in 194) • :ial banks, and fomento banks. :ial bc1.nkst and fomento banks. sits of commercial banks, and time deposits of fomento banks. .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 Coal Quito ~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  Status of u. s. Export-Import Bank Loans to ~cuador g,s of June·10o·l9lt§ Gross Cancel- Net Amount Amount l'l'a.me l~umbar Purpose Authorized lations Authorized Repe.id Outstandin~ Undisbursed 6/J0/48 6/J0/48 Republic of Ecuador ( 262 Haterials, equip. & { )16 services $ 6,480,000 $20,810 $6,459,170 $1,279.775 ~)5,-l/19·.395 _ _ _ _ __ Ecuador Develo'PI!lent Corp. 5,000,000* Pan-American High,,ray (Cuenca.-Loja) 1,2JO,OOO Agricultural Research & Experiments 50,000 Raihray Equipment 200,000 i•iunicipali ty of 'iui to (Republic of Ecuador) )28 Haterials, equip. ~~. 4,000,000 4,000,000 28;880 6o6,120 -:h365;000-· services - ,.,ater 1·1orks i•Iunicipali ty of Guayaquil )28 i<iaterials, equip. & (Republic of Ecuador) services - ~~rater ,,orks 4,000,000 4,000,000 ?,167 41?,592 .},575-'t 2:-41:.. Republic of Ec~ador J4J Pan-American Hig:h1·ray (Guamote-Tambo) 1,980,000 -1 t-9&hOOO- -}7,500 -l:-y5Q2-, 500 44G.ooo Republic of Ecuador 432 ../,u.evedo-Hanta High't·ray (additional credit) 2,?20,000. 2,?20,000 2,?20,000 $19,180,000 , *Of t'lhich $2,500,000 "'tts used on the Quevedo-I•ianta High\'TaY '. \ \ '\. IBRD Statistics Sectio s;,pte~ber 24, 1948 ' \