Victor Carvajal, the finance ministry spokesman, said that the 2012 budget would increase by about 8.6% to US$26bn.
Thanks to the strength of oil prices, there are few signs of strain in the economy.
However, inflation in the 12 months to August was 4.84%, which was the highest 12-month rate since May 2009. Prices rose 0.49% month-on-month. Producer prices are also flashing amber, rising 1.41% month-on-month and 5.1% year-on-year in August.
Food prices are the big problem. Global commodity price increases; internal supply problems and increasing consumer demand are pressuring costs, according to the economic policy ministry. The index of food prices was up 7.3% in the 12 months through August, as droughts in coastal areas and flooding in the highland Andes damaged crops.
Diversifying export markets: Ecuador is very interested in signing a trade deal with Turkey. Turkey, however, is unwilling to open up fully its agricultural market to Ecuadorean products. The Turks nevertheless want Ecuador to open up its market for industrial goods to Turkish products. The two countries have held two rounds of negotiations, but unless the Turks relent on agricultural protection, the Ecuadoreans say that the talks will go nowhere.
Neither is it clear whether China, which has become Ecuador’s major creditor, will agree to Acuerdos de Comercio para el Desarrollo (trade agreements for development). Much like the US, China prefers Free Trade Agreements (FTAs).
On 9 September Ecuador resumed FTA talks with the European Union (EU). The Ecuadorean team is headed by the deputy foreign trade minister, Francisco Rivadeneira. The negotiations were broken off two years ago.
The Ecuadorean government is under pressure from agricultural producers to clinch a deal with the 27 EU member countries. Flower exports to the EU, at US$132m in the first eight months of 2011, account for about 20% of Ecuador’s total flower exports. Vegetable growers are even more dependent on the EU: 52% of Ecuador’s broccoli exports go to the EU. Overall, 31% of Ecuador’s non-oil exports go to the EU.
