Statistics make an overwhelming case that Ecuador is in economic recession. The Central Bank has reported three consecutive quarters of negative growth, including recent numbers showing the economy contracting three percent in the first quarter of 2016. Unemployment stands at 5.9%, its highest level in eight years. Construction has fallen by more than 50% and new car sale sales by 30%. Although international tourism has grown slightly, Ecuadorians are traveling less and spending less in hotels and restaurants.
Eye-witness accounts also support the recession case. The streets of Cuenca, Quito, and Guayaquil have seen sizeable increases in the number of informal street vendors, peddling everything from sweaters and perfume to strawberries and empanadas.
Yet, according to Ecuador’s Central Bank director, Diego Martínez, the country is not officially in recession. He claims that the bank considers three factors in determining the country’s fiscal health: unemployment, inflation, and bank deposits and loans, the numbers for which all show the economy in much better shape than in 1999, the last year the government admitted it was in a recession.
Mauricio Pozo, former Minister of Finance, says that Martinez is playing loose with the facts. “You can’t arbitrarily change the technical definition of a recession,” he says. “I agree we are much better off than countries like Venezuela and Syria, but the economy has fallen off significantly over the past years,” he says. He adds that the 5.9% unemployment rate ignores the the government’s own under-employment rate of 54%. “You can’t cover the sun with your finger,” he says.
Pozo also says the comparison to 1999 is not fair. “That was Ecuador’s worst crisis of the 20th century. Inflation was near 100%, unemployment almost 20%. If we have to descend to that level to be in a recession, things could get much worse and the government will still claim that everything is just fine.”
Economics professor Santiago Oleas at the Universidad San Francisco, Quito, agrees with Pozo. “Yes, inflation is low in the first quarter statistics but they do not reflect recent tax increases that are driving up the costs of basic goods and services,” he says. “You will see an increase when the taxes are included in the calculations.” He adds: I don’t see the point in denying the obvious. Ask almost anyone on the street and they will tell you these are hard times.”
The economists don’t deny Martinez’s claim that the economy may be bottoming out and that a rebound could begin by the end of year. This is also the assessment of private bankers and the national Chamber of Commerce.
“Yes, there is some good news but I see a slow recovery,” says Albert Stein, who advises Latin America investment funds. “Despite recent dips, oil prices will rise over both the near- and long-term, and the U.S. dollar will weaken. This is will be slow process, however.”