Andean Group - December 2005 (ISSN 1741-4466)

The interior minister, Galo Chiriboga, denied that there was any chance of a constituent assembly ending dollarisation. The country dollarised in 2000 but the initiative has not completely slain inflation, though it has brought it down from the hyperinflationary levels of the late 1990s. In 2004 inflation was 6.5%, well above the US rate. It's hard to see how, if an all-powerful constituent assembly were called, the government could prevent it from discussing dollarisation. In September inflation rose by 0.65%. In October the rate accelerated again. As US inflation also rose in those months, driven by higher oil prices, Ecuador did nOt lose competitiveness. Ecuador's oil prices are pegged so the inflation drivers came from elsewhere in the economy.

Rising prices show that demand is strong in the economy and so the growth of the first two quarters certainly extended into the third quarter and, judging by the inflation rate in October, the fourth as well. One indicator of this is the steadiness in the value of consumer goods imports. These are running at over US$200m a month or about 25% up on 2004. Imports of raw materials and semi-finished goods are also strong, up by over 30% year on year at about US$250m a month. Another sign of economic confidence is the strength of the demand for credit. In September loan demand increased by 2.7% compared with August.

Inflation: In October the rate was 0.79%, up on September's 0.65%. The October figure brought the 12 month rate to 3.63%.

Oil windfall: The government reckons that its oil export earnings this year will be US$2.1bn or US$826m more than it had budgeted. The overwhelming bulk of this money will be used to pay for imports of fuel, whose prices have also risen. The government calculates that US$$622m will go on this. In the first 10 months of 2005, oil exports came to US$1.85bn. The average export price was US$42.75 a barrel. The export volume is running at 147,280 bpd.