A former high school classmate and cherished old friend when reconnecting with Roger through Facebook quoted the old saying: "When God closes a door, he opens a window." The years have seen a number of life changes for us that make that adage ring true. After being blessed with good fortune, a wonderful son and great experiences, we decided to look out that window and prepare for more of what this wonderful life has to offer. We hope through our blog to share our journey from this point forward with family, with friends and with many others. Hopefully we'll make some new friends along the way. We hope you find our tales of some interest, even amusement and perhaps an inspiration for you to treat each and every day as an opportunity and an adventure to share with those who are an important part of your life.

Friday, July 5, 2013

Ecuadorian economics and its impact on prospective new residents! (Part I)

The recent closure of the financial offices of the Coopera Ltda, the third financial institution to be forcibly closed within the past year (two credit unions and one bank), caused a number of inquiries and questions from readers and friends in the states.  I thought it might be appropriate to give some economic background on this country many of you are interested in.  It may help put the closure of this popular financial institution into a better understood perspective.  It will also help many newcomers to understand that, even though the official Ecuador currency is the U.S. dollar, the economy and financial realities of life are much different here than in the US.

You do need to understand the Ecuadorian economy because it impacts almost everything you'll be examining in considering a move here:  Why is medical care so affordable and the cost of fine wine and electronics so high?   A used car costs what???   Why is there there so much petty crime?  Why is long term rent cheap in comparison to the cost of purchasing a house.  Why are my credit cards almost worthless?  We all looked at Ecuador because of its affordability and the opportunity to enjoy a retirement lifestyle much more accommodating than we could have in the US.  It should not be surprising to us that there are some economic trade offs for that kind of reward.  Many come as a surprise to newcomers but mostly because they haven't done enough background checking and homework on the economic realities of life here.

Anyway, here we go.  Please do recognize that if what I  write generates a lot of questions, that's a strong indication you need to be prepared to do some of your own due diligence and research!

When you arrive at one of its international airports, visit its resorts and its three largest cities and focus on the vibrancy, the amenities,  and the colonial beauty at such affordable prices, it is sometimes difficult to equate Ecuador with a lot of the rest of Latin American.   You certainly don't get the impression of a country struggling to climb out of a third world economic abyss. But not so long ago, that was very much the case.   Consider this:  Just about 12 years ago, the minimum wage in this country was $53 per month and 69% of the entire population lived below the poverty line. The two biggest sources of foreign income was Ecuadorians living in North America sending money home and Ecuadorians living in Europe sending money home.  Just a year prior, every financial institutional in the country except one FAILED (that's correct, only one survived, just barely) .

Financial institution closures still occur on an average of about two a year and financial institutions here probably would love to have the public confidence rating numbers of the US Congress!  Government hasn't fared much better in its stability.   During the past two decades, the majority of men elected to the presidency of this country failed to complete their first term, only one (the current President) won his first term outright without a run-off, and only one (yep, same guy) successfully ran for reelection. We don't have the rate of kidnappings and murders and outright civil war that exists in Mexico, but be aware, random burglary, robbery, extortion and fraud do occur in higher frequency here than what you are accustomed to in the US and the reasons are largely economic.

That's the reality but there are also some silver linings amongst these clouds:  Ecuador does have one of the fastest improving economies in Latin America:  Effective this year, the minimum wage for Ecuadorians has increased six fold over what it was twelve years ago.  At the end of last year, the percentage of the population living below the poverty level was down substantially to 27.3%.  There is an average of 10,000 new residents a year due to Ecuadorians returning home to live!  While our government still has pockets of bureaucratic problems and corruption, they are being addressed.  While the government does still seems to behave strangely to outsiders, it has become more stabilized and institutionalized.  For the first time in modern Ecuadorian history, it has the confidence of a majority of the population.  For the first time there has been major reform in police and bureaucratic corruption, there's even a new community police force in major cities.  The country's improvement in infrastructure is slowly bringing some of the benefits of prosperity formerly enjoyed almost exclusively by major urban areas to the rest of the country.  There has, truly, been remarkable progress in recent years!

Is this a country on the move?...yes, yes, yes!  Has it solved all its former problems?, no, no!

While the middle class is growing at a great rate, there is still a huge level of poverty and a large disparity between have and have-nots.  In some respects, the rapidly growing economy and the appearance of a large prosperous middle class along with an influx of affluent ex-patriates from abroad has accentuated the disparity.  Ecuador still has many of the social and civil issues that that disparity fosters and festers.  Distrust, deflection and deception became, in Ecuador's darkest economic hours,  essential skills of survival for most residents.  Despite their being in conflict with traditional Ecuadorian social and family values, those skills are still all too commonly in use today.   In fact, many of the challenges and frustrations of living everyday life in Ecuador today can be traced to this turbulent economic history.  It will impact you and will be a factor you will have to deal with if you become an expatriate resident.

This subject will be continued in our next blog to be labeled: " Ecuadorian economics and its impact on prospective new residents!  (Part II)"   It will deal specifically with financial institutions today and will touch more specifically on concerns to have in utilizing those entities.

An important note of caution to readers:

 Most of the information cited in this blog was presented as I was able to discern it at the time of this posting.  Being marginally conversant with the language and with the difficulty in reading Ecuadorian legal and technical reports, this may have resulted in inaccuracies in some select specific details.  Knowing that blogs such as this tend to have a very long term readership, I also caution readers that all things DO change with time in Ecuador and many things may have changed by the time you read this.  What was important to me was to give you, the reader,  a reasonable representative overview of the subject as it exists today. This should will allow you to gain some perspective and then be prepared to go forth and do your own due diligence and research if this perspective causes you to have reason to do so!


  1. Thanks so much for the kind words, Connie. Coming from someone who writes as well as you do, we consider that very high praise!