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Ecuador

Economics

Texaco's discovery of oil in Ecuador in 1967 initially seemed to be a harbinger of good news: the small nation's first oil boom during the 1970s spurred the nation's economy and fattened the state's coffers. But over the following decades, Ecuador's unstable government misappropriated much of its newfound wealth and soon began to borrow heavily against future proceeds to develop its nascent oil industry. Today, Ecuador is in debt to the tune of $14 billion, and oil money makes up 40 percent of the country's export earnings and one-third of the government's total revenues. The lifeline of Ecuador's economy has become anchored to its oil business.

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Most people in Ecuador have not reaped financial benefits from oil.
Ecuador's oil wealth has also polarized its population along class lines. Though billions of dollars in oil profits have poured into the country, most Ecuadorians have seen few tangible improvements to their lives. Sixty percent of Ecuadorians live in poverty, and this number can grow as high as 75 percent in rural areas such as those found in the country's eastern Oriente region, where most of Ecuador's oil reserves are located. As the state and foreign companies have continued to press for more oil development in these areas, Ecuador's indigenous Indian tribes have grown more forceful in their demands that the government respect their lands and distribute more of the wealth generated by oil to their communities.

Thanks in large part to an increase in oil exports made possible by the construction of a new oil pipeline, Ecuador's economy today looks to be rebounding from the deep recession that recently gripped the country. However, despite the stabilization of its economy, political analysts have already begun to see cracks within populist President Lucio Gutierrez's young administration that may deepen as the struggle over the future of the nation's oil reserves continues toward the boiling point.

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