Glossary -- Ecuador

fiscal year (FY)

Calendar year.

gross domestic product (GDP)

A measure of the total value of goods and services produced by the domestic economy during a given period, usually one year. Obtained by adding the value contributed by each sector of the economy in the form of profits, compensation to employees, and depreciation (consumption of capital). The income arising from investments and possessions owned abroad is not included, only domestic production. Hence, the use of the word domestic to distinguish GDP from GNP (q.v.).

gross national product (GNP)

Total market value of all final goods and services produced by an economy during a year. Obtained by adding GDP (q.v.) and the income received from abroad by residents less payments remitted abroad to nonresidents.

import substitution

An economic development strategy that emphasizes the growth of domestic industries, often by import protection using tariff and nontariff measures. Proponents favor the export of industrial goods over primary products.

International Monetary Fund (IMF)

Established along with the World Bank (q.v.) in 1945, the IMF is a specialized agency affiliated with the United Nations that takes responsibility for stabilizing international exchange rates and payments. The main business of the IMF is the provision of loans to its members when they experience balance-of-payments difficulties. These loans often carry conditions that require substantial internal economic adjustments by the recipients.

sucre (S/)

The national currency. From 1971 to 1981, the sucre was pegged to the United States dollar at S/25=US$1. Because this rate overvalued the sucre and dampened exports, the government allowed a steady devaluation of the currency throughout the first half of the 1980s. By 1985, the official exchange rate averaged S/69=US$1. In August 1986, President León Febres Cordero Ribadeneyra (1984-88) transferred all private sector transactions to the higher free market rate and determined to close the gap between that rate and the official intervention rate through regular currency adjustments. The official rate averaged S/123=US$1 in 1986 and S/170=US$1 in 1987. Responding to growing external indebtedness, capital flight, and rising inflation, the free market rate climbed to S/400=US$1 by March 1988. In response, Febres Cordero established a controlled rate for imports and exports and limited movement to within 10 percent of the prevailing official rate of S/250=US$1. As was the case in the early 1980s, the severely overvalued official currency (the free market rate climbed to S/550=US41 by July 1988) hindered export activity. Upon assuming the presidency in August 1988, Rodrigo Borja Cevallos (1988- ) devalued the controlled rate to S/390=US$1 and adopted a program to further devalue the currency by 30 percent per year. In May 1989, Borja accelerated this program to nearly 40 percent per year. Consequently, the official rate averaged S/526=US$1 and had closed to within 6 percent of the free market rate.

terms of trade

Number of units that must be given up for one unit of goods received by each party (e.g., nation) to a transaction. The terms of trade are said to move in favor of the party that gives up fewer units of goods than it did previously for one unit of goods received, and against the party that gives up more units of goods for one unit of goods received. In international economics, the concept of "terms of trade" plays an important role in evaluating relationships between nations.

World Bank

Informal name used to designate a group of three affiliated international institutions: the International Bank for Reconstruction and Development (IBRD), the International Development Association (IDA), and the International Finance Corporation (IFC). The IBRD, established in 1945, has the primary purpose of providing loans to developing countries for productive projects. The IDA, a legally separate loan fund but administered by the staff of the IBRD, was set up in 1960 to furnish credits to the poorest developing countries on much easier terms than those of conventional IBRD loans. The IFC, founded in 1956, supplements the activities of the IBRD through loans and assistance specifically designed to encourage the growth of productive private enterprises in the less developed countries. The president and certain senior officers of the IBRD hold the same positions in the IFC. The three institutions are owned by the governments of the countries that subscribe their capital. To participate in the World Bank group, member states must first belong to the International Monetary Fund (IMF--q.v.).

NOTE: The information regarding Ecuador on this page is re-published from The Library of Congress Country Studies and the CIA World Factbook. No claims are made regarding the accuracy of Ecuador Glossary information contained here. All suggestions for corrections of any errors about Ecuador Glossary should be addressed to the Library of Congress and the CIA.

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