President Noboa leads country through its greatest transformation
Dollarization, modernization and socio-economic development top the agenda

Over the last several years, Ecuador has undergone some of the most significant changes in its history — peace with Peru, the rise and fall of President Mahuad, shutdown of the nation’s banking system, modernization and privatization processes, and an economic crisis that led the country into dollarization. While these changes have presented Ecuador with many challenges, investment opportunities exist in all of its productive sectors.

In January 1990, then-President Jamil Mahuad was overthrown by a coup driven by displeased indigenous groups and military forces that were unhappy with his decision to decrease government expenditure for the armed forces. Gustavo Noboa, who was then Vice President, stepped into the presidency by Constitutional Decree at a time when the nation’s political and economic crises were at a peak.

Gustavo Noboa’s first presidential action was to implement dollarization in Ecuador. The exchange rate was set at a fixed $25,000 sucres per US dollar. As a result, the new president’s administration has had to address exorbitant inflation and make numerous adjustments to the nation’s new economic model. From enacting fiscal reforms to adapting an entire legal system to a new currency, Ecuador is transforming itself into a new nation, based on productivity, competitiveness, transparency and democracy.

Gustavo Noboa, who was rector of the Catholic University of Guayaquil before becoming Vice President, is finding that his greatest challenge is dealing with the opposing political forces that have hindered his executive power to push through many items on his agenda. They have opposed, for example, an increase in the added value tax, which was a stipulation of the agreement President Noboa had reached with the International Monetary Fund (IMF) for a stand-by program estimated at $400 million. They have also opposed privatization of state-owned electricity companies, which in the past have been inefficient, as proven by the occurrence of many shortages and blackouts, and have become economic burdens to the government. (President Noboa has declared that these companies will be auctioned for concessions within the coming months.)

In just two years, President Noboa’s administration has stabilized Ecuador’s economy and set in place conditions that will yield an estimated 5% growth, the highest in Latin America. This projected growth is mostly due to billion dollar investments in Ecuador’s petroleum sector. One of President Noboa’s most important acts has been signing a law allowing for construction of a new heavy crude oil pipeline (OCP) by a private consortium. The construction of the OCP had been debated for the last decade. It is an essential infrastructure for growth of the petroleum sector, which is Ecuador’s greatest GDP contributor.

High on President Noboa’s list of priorities is increasing Ecuador’s competitiveness in the world arena. Through the Ministry of Commerce he has instituted the National Council on Competitiveness, comprised of government and private sector leaders, whose main concern is transforming Ecuador’s productive sectors into more efficient, competitive and globalized divisions of the economy.

By signing a peace treaty with Peru, its neighbor to the south, President Noboa has strengthened Ecuador’s reputation as an island of peace, while increasing opportunities for both countries. In Colombia, however, to Ecuador’s north, narco-guerilla and paramilitary groups pose yet-unsolved problems for this peace focused president.

In the short time he has been president, Gustavo Noboa has proven his genuine desire to establish government policies that foster growth and continuity and has engaged in transparent political practices that reinforce Ecuador’s status as a democracy. His intentions and actions should speak well for him in next year’s elections.