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The papers here have been buzzing the last few weeks with the overnight draconian steps of the government to limit imports. The government is implementing import substitution-protect local industry and make every thing possible local. It doesn’t sound bad in theory. But this policy is going to have a lot of consequences-maybe higher prices, less choice, and lower quality, at least in the short run. Because of a trade deficit and zero control over monetary policy (Ecuador is on the US dollar), the country could literally run out of dollars if it doesn’t:

  • increase exports or the value of current exports
  • decrease imports
  • find dollars somewhere else

So, with oil prices declining, and oil being the main source of revenues for the government, and imports increasing in the last few years, the government has gone into crisis mode. The first signs were the ridiculous and sudden halting of imported meat and french fries for fast food companies like McDonald’s and Burger King. They did this under the pretense that they did not meet the new standards and certifications the government is now requiring for all imported goods. This standards and certifications requirements was another shotgun measure to slow imports-but they didn’t give any one any forewarning, and industry created quite a stir. No one is importing anything that can be made cheaper here and of better quality. Even many imported goods are of equal or better quality and cheaper. Just one small example, Baskin Robbins Ice Cream (imported) is $8.00 a quart. Locally made ice cream from Cyrano/Corfu, a well-known gourmet shop with presence all over Quito, is $10 a quart. So how the government believes that overnight, the country is suddenly going to start producing all the goods it needs of top quality at a competitive price (due to the new standards and certifications the govenrment is requiring) is anyone’s guess. And how they’re going to do it for the same or lower price as imported goods-well, that’s an even bigger question. The most likely outlook for the next six to twelve months is this:

  • There will be a lack of replacement parts and imported goods in many sectors. I’ve already heard of speculation because nobody’s sure just how far this is going to go.
  • Many imported foods, cosmetics, appliances, and other items will start becoming scarce due to hoarding and speculation.
  • Local goods will slow start to replace some imported items, at a higher cost and probably of lesser quality.

Welcome to Destination Ecuador!

Welcome to Destination Ecuador! My family and I have been living in Ecuador for the last four and a half years. We’ve dealt with the worst kinds of red-tape, searched out or ended up making hard-to-find ingredients ourselves, imported equipment for making chocolate confections, learned the import-export business...Continue >>

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