Ecuador - Economic development
In 1992–93, a major macroeconomic adjustment program was introduced, featuring a sizable currency devaluation (35%) and substantial increases in domestic fuel and electricity prices. Free trade agreements with Colombia, Venezuela, and Bolivia were signed, and new investment regulations were adopted to open up the economy to foreign investment and eliminate previous bureaucratic impediments. In April 1993, Ecuador qualified for Andean Trade Preference Act benefits, and became a member of the WTO in 1996.
High debt service obligations and external payments arrears to commercial banks impaired Ecuador's economic growth during the rest of the 1990s. The economy basically fell apart in 1999, despite aid throughout the decade from multilateral donors. In 2000, Ecuador accepted a $600 million loan from the International Monetary Fund (IMF), IBRD, and the Andean Development Corporation; while it rescheduled loan payments on $600 million with the Paris Club. This was part of a total $2 billion package from multilateral aid agencies to take place over a period of three years. In order to receive the money, the government was required to undertake a privatization program, and increase the price of petrol by 60%. Total external debt in 2001 reached $14 billion, most of which was in default. The country adopted the US dollar as legal tender in 2000.
In March 2003, Ecuador negotiated a 13-month, $205-million Stand-By Arrangement with the IMF. In 2002, economic growth was slow, due in part to tax cuts, a drop in oil output, large increases in a public wage bill, and a high-level corruption scandal. The government that took office in 2003 pledged to eliminate arrears, resolve remaining problems with closed banks, and modernize state-owned enterprises. Completion of a new Transandean Oil Pipeline was seen as a sign of potential output growth.