Google translation - minimal clean-up.

El Comercio Quito - Ecuador | 30 de junio del 2008

Business Editors

The country's economy did not lift its head in 2007 and first half this seems to be its continuation. 3.10 percent is the growth that the Government hopes to achieve this year.

The increasing rise in the price of a barrel of crude, up U.S. $ 140, has not been sufficient incentive for the production of hydrocarbon increase. Just between January and May, state oil exports stopped at Fisco additional USD 903 million, compared to what occurred in the same period of 2007. But delays in projects to increase oil production Petroproducción even forced to reduce the targets for the remainder of the year at 6.4%.

The state expects a significant increase in production until next September.

In the fiscal sector, public investment barely reached 26.1%, despite a higher income and having concentrated resources management in the Ministry of Finance. The same minister coordinator of the Economic Policy, Pedro Paez, acknowledged at a conference at the National Polytechnic School that there are resources, but lacking in what projects to invest. Meanwhile, private investment is on standby, due to political uncertainty surrounding the new constitution.

This uncertainty and lack of incentives has caused people to channel their income and remittances for consumption, generating greater circulating on the streets. This coupled with rising food prices as a result of floods and rising costs of raw materials at the international level, pushed annual inflation in May this year to 9.29%.

For Ivan Angulo, FAO representative, in general terms the winter left a negative balance in agricultural production. It damaged roads and this affected the supply chain. Although on the Coast, the production of rice and corn rose. In export productss, bananas increased in volume and by export. Cocoa recorded an increase in sales because of a good quotation, but the volume fell due to shortage. For Angulo, policies and continuity of the same, are lacking in this sector.

If this is compounded in that trade matters, Ecuador does not find its way - so far this year alone has realized an agreement with Chile-and the dollar continues to devalue, the first half was difficult for the Government, as recognized Paez .

Sector tax

More state revenues and little public investment

The Government opted to public investment to meet the goals of growth and greater market control to prevent rising inflation. However, public investment barely reached 26.14% to U.S. $ 5 441.27 million, which plans to invest this year. In this first half, the Executive had more resources, following the adoption of the Law on Petroleum Recovery Fund. Through this legislation succeeded in consolidating the state revenue into an account and focused its management on Finance. The budget increased from USD 10 357 million to over USD 15 000 million, while the Reserve Free Access exceeded U.S. $ 6 000 million. In these six months, moreover, showed an increase in capital-affected by the wage hike, Human Development Fund, which struck in annual inflation which closed in May at 9.29%.

Floods impact mainly in higher food prices and hence in escalating inflation.

Agriculture

The price of inputs affected the agro

The agricultural sector has a negative balance. There was a greater price increase production costs by high values of agrochemical inputs, believes Francisco Roman, director of the Ecuadorian Confederation of Agricultural Services. There is difficulty in getting seed potato, lentil and rice and access to credit. Therefore, prices of potatoes, beans, milk and rice increased. Nevertheless, Roman believes that food shortages in the world will lead to more planting and possible overproduction, which will drop the price. With the rice, however, he said that he has controlled the price to producers, but not to speculators (?) that raise the price. On the other hand, production of rice and corn was very good. We collected 607 000 tons of rice compared to 518 000 2007. In corn, the harvest was higher than 2007, but not enough for self-sufficiency. The scheme had offered subsidies and incentives for producers. This in order to cope with rising costs.

Oil

The production goals were not met

The oil sector (public and private) grew by 1.3% over the next six months, compared to same period of 2007, despite the growing increase in the price of crude, which reached USD 140. According to the private oil in the first quarter investments were down pending a clear scenario for the renegotiation of their contracts, which began in January and still does not stop. In addition, four foreign oil co's filed claims before international tribunals. Most questioned the increased sharing of oil revenues for the state.

State production was no better, with the exception of Block 15, which grew by 10.9%. It was expected that the daily production of Petroproducción is 175 000 barrels within six months, but was barely 168 000 barrels. This prompted the departure of Fernando Zurita of the presidency of the state. The official explained that began with a drilling rig, while they should be 11. To date, hired seven, but the results will begin to see since September.

Financial System

The provision does not grow at the rate of deposits

The financial system liquidity priority to greater financial intermediation this semester. While deposits grew at a rate of 30.2%, loans increased only 14%. The criteria for approving loans are more demanding, so unless customers access to new loans or renewals. The main reason for the slowdown in credit will anchor in determining the maximum interest rates by the Central Bank of Ecuador. As a matter of the Association of Private Banks, the methodology of calculating the ceiling is irrational because antitécnicos criteria are used to lower costs. Faced with this position, the Government agreed to resume talks, despite months before did not give any results. Another factor that keeps the sector are expected to beat the constitutional texts, in which the Assembly seeks to be declared a service activity to law enforcement.

The profits of banks fell as a result of the elimination of commissions.

Industries

The elimination of tariffs helped the industry

Private entrepreneurs and analysts agree that the best measure that was adopted since January was the reduction of tariffs for 141 subheadings that relate to capital goods. Among the goods are agricultural machinery production, mixed burners, mechanical feeders, among others. These products had until February-when the Council of Foreign Trade and Investment-adopted resolution tariffs of between 5% and 15%. "We applaud the measure, but it is important to make progress on a far-reaching industrial policy," said Sebastian Borja, the Chamber of Manufacturers of Pichincha. This policy will be the main challenge of the newly appointed Industries minister, Javier Abad, who said that building bridges of dialogue between the Government and employers. In addition, managed the approval of the Public Procurement Act and the Economic Competition which will fight monopolies. These projects were approved in the House but was delayed their delivery.

External Trade

Ecuador is without a clear trade roadmap.

The country's trade balance is positive thanks to rising oil prices at international level, but not by an increase in the sale of non-oil products. "Ecuador has failed to realize any trade agreement to open more markets," said Patricio Donoso, president of the National Federation of Chambers. One reason, he says, is because the country insists its treaties include components for cooperation and political dialogue, "as if FTAs are not included and that delaying the negotiations." That happened with the agreement that is negotiated between the Andean Community of Nations and the European Union, where there is no clear path, although it is important because the demand of the European market is not oil but agriculture.

Chancellor said that the agreement will be signed only if it suits the interests of the country and that have been made infrastructure to facilitate the flow of goods from the productive areas to ports and airports. Under this argument, the country has failed to make progress on any trade agreement.

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