Human Capital Ecuador

Growth in education depends on whether or not the individuals have an inventive to invest in the future. The correct incentives are needed in order to accomplish growth in developing countries. The correct amount of government and technology must be available. Equador is currently moving toward political stability. In the health report that the World Health Organization published this year, it is stated that between 2001 and 2005 there were nine different health ministers. Social stability is a huge factor leading to health and educational gains.

William Easterly discusses Gregory Mankiw’s analysis on investment in education in order to achieve economic development. Gregory Mankiw found a 78% connection between education and income difference among nations. Mankiw explains that investment in education and human capital must be hand and hand in order to accomplish growth. In regards to education, Easterly says that Mankiw’s connection between investment in education and gdp growth is not strong since the evidence leads to another conclusion. You would think that if the supply of unskilled to skilled decreased than wages to skilled labor would increase. If skilled wages increase, drawing skilled labor from abroad, his conclusion would be correct. But since current evidence shows that skilled labor consistently flows from low supplied areas to developed saturated areas (known as brain drain). Easterly’s statement that incentives alter people’s decisions is stronger and not Mankiw’s sweeping conclusion that there is a strong positive relationship between education and income growth. So, Easterly says there exists an optimal level of education, societal incentives, physical capital which creates an environment for economic growth. [1]

Burns and Charlip explain that essential infrastructure such as efficient transportation are necessary in order to accomplish a health economy. So if transportation is not in place then education and health care are infrastructures that are not as developed as they should be. [2] In 2001 dentists and physicians tended to be concentrated in urban areas, while nurses and obstetricians lived were in the rural areas. In 2003 there were 15.6 physicians for every 10,000 people 5.3, nurses, 1.7 dentists, 1.8 obstetricians, and 9.8 nurses assistants per 10,000 person. When Dartmouth research is compared to the UN human resources section of the health report we see that Equador’s and us physician to population ratio is very similar, even though the U.S. is slightly higher. The us rate is .0016[3] and Equador’s is .00156[4]

The UN report on health says that investment in research and development in 2003 was.07% of the GDP. It appropriated 8 million USD in 2005 and 26million in 2007. This report discusses Political stability, and water sanitation in relation to Health care in Equador. (Health in the Americas,2007)[5]

Political Instability-

“Political instability from 2001 -2005 caused problems in governance and social violence and increased corruption, administrative instability and lack of continuity in public management. This situation affected the dynamics of the health sector and its potential reform. The repeated replacement of authorities”(nine ministers of health between 2001-2005) (Health in the Americas 2007)

Water and sanitation investment-

“In its 2003 national water and sanitation policy, the government identified the need for an investment of approximately $150million per year to eliminate the existing deficit in water and sanitation services for 2001-20010. It is estimated that 42$ million are required for this same period for the final disposal of solid wastes in 180 municipalities in the country”

Works Cited

Burns, Bradford; Charlip, Julie Latin America: A Concise Interpretive History.

Prentice Hall, Upper Saddle River, New Jersey 07458

Charles L. Taylor and David A. Jodice, World Handbook of Political and Social Indicators,Third Edition,

Yale University Press, New Haven and London, 1983

Easterly, William The elusive Quest for Growth

MIT Press, Cambridge, Massachusetts 02142. 2001.

World Health Organization, HEALTH IN THE AMERICAS, 2007.VOLUME II–COUNTRIES

Department of Chronic Diseases and Health Promotion
Avenue Appia 20 , 1211 Geneva 27 , Switzerland

Population Reference Bureau , Education for all Global Monitoring Report.
1875 Connecticut Avenue, NW , Suite 520 Washington, DC 20009-5728 USA
E-mail: popref@prb.org

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[1] Easterly; Elusive Quest for Growth.

[2] Burns; Charlip. Latin America.

[3] Charles L. Taylor and David A. Jodice

[4] Charles L. Taylor and David A. Jodice

[5] World Health Organization(Health in the Americas 2007)

Foreign Aid Ecuador

Ecuador- Foreign Aid.

Ecuador is a country divided over the Andean mountains. Its mountainous environment creates high transportation costs which hinder trade. Ecuador has required aid since, among many factors, it is a region that experiences frequent natural disasters that destroy crops and drive the cost of living up. According to balance of payment reports Ecuador has received loans from other countries such as, Venezuela, U. S. and neighboring countries. Foreign aid in Ecuador has been given in many ways including foreign direct investment.

Foreign aid is best, when it is a combination of foreign direct investment and domestic development. Prospects of The nationalized oil company and foreign oil companies have created an expansion of trade possibilities. In The U.S Department of Commerce report on Foreign Economic trends and their implications for the U.S. it states that the state of the petroleum company CEPE is expanding its productive capacity, and 12 foreign consortia are carrying out exploration activities. Investment by these foreign firms may exceed $200 million during 1989. This was a huge addition to the exporting capability of Ecuador then and since then, there has been much development.

Development in LDC’s depends on connecting research with implementation, Democratization, proliferation of markets, civil institutions according to Julious Court.[1]Aid and development have been volatile in the Ecuador region. Records on Ecuador seem to suggest that it is a rich with natural resources, capable people, but that its environment along the Andean mountains offers inhabitants a fair share of obstacles to growth and sustainability. Jeffery sachs offers insight into the problems that Ecuador has faced when he says:

This area has experienced economic decline because 1. Geographical difficulties, such as, impassable mountains, etc, have stood in the way. 2. This regions society suffers from sharp social divisions among ethnic groups. The European descended population tends to be much richer than the indigenous and Mestizo populations. 3. This region is vulnerable to extreme external shocks, both natural (, earthquakes, floods, droughts) and economic. [2]

According to the U.S. State Department in an October 2007 Report:

The U.S. and Ecuador have maintained common goals of fostering democratic institutions, combating narcotrafficking, building trade, and investment. The United States assisted Ecuador’s economic development directly through the agency for international development (USAID) and through multilateral organizations such as inter American development bank and the world bank. The U.S. is Ecuador’s principal trading partner. In 2006 Ecuador exported about 6.7 billion in products to the U.S. for over ten years Ecuador has benefited from duty free entry for certain of its exports under the Andean trade preferences act and received additional trade benefits under the Andean Trade Promotion and Drug Eradication Act (ATPDEA) in 2002.[3]

Foreign aid is needed in a country when production within that country is below the level that it need to remain sustainable. Some trade and sharing of technology are beneficial in order for the Ecuadorian quality of life to rise. This is a principal that is gained from Adam Smith’s writings about the wealth of nations. Each country will benefit from trading with others. Less Developed countries will especially gain from trade if it engages in trade with a technologically advanced one. It learns techniques and practices that were developed over long periods of time. So, foreign trade takes place in many ways. Weather a neighboring country’s business invest in Ecuador or of they loan useful equipment to them there is benefit. When Ecuador’s neighbors assist in helping to find sustainable ways to meet production demands, that is best. It appears that Ecuador is now a major exporter of banana and other agricultural crops. The European Union, and North Atlantic Trade Agreement are to major forces that have been organizing trade with Ecuador.

Works Cited

Court, Julius. Hovland, Ingle, Young John. Bridging Research and policy in development: Evidence and the Change Process. Oversees Development Institute. Bourton on Dunsmore, Rugby, Warwickshire, CV23 9QZ , UK

John S. Odell, Negotiating Trade Developing Countries in the WTO and NAFTA

Cambridge University Press, The Edinburg Building, Cambridge, UK 2006

Lancaster, Carol.; Van Dusen, Ann. Organizing U.S. Foreign Aid : Confronting the Challenges of the Twenty-first Century Washington, D.C Brookings Institution Press, 2005. Sachs, Jeffery. The End of Poverty; Economic Possibilities for Our Time. Pengui Books Ltd, 80 Strand , London WC2R ORL, England 2006. U.S. Department of Commerce. Foreign Economic Trends and Their Implications for the United States. U.S. Department of Commerce 1401 Constitution Ave., NW Washington, DC 20230 1989

U.S. State department. Background Note: The Republic of Ecuador U.S. Department of State
2201 C Street NW, Washington, DC 20520

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[1] (Bridging Research and Policy)

[2] Sachs “End of Poverty”(p. 71)

[3] (U.S. State Department)

Ecuador

Ecuadorian Government has been a country that has struggled to control drug trafficking, facilitate trade, and maintain a stable government and economy. Ecuador is located between Colombia and Peru. Its Capital city is Quito with a population of 1.6 million people. Guayaquil (2.4 million) is another major city.
According to the U.S. State Department, The Ecuador government is a republic that declared independence from Spain in 1822. It is formed with an executive branch, congress, and provincial courts. There are over a dozen political parties. Voting is obligatory for citizens 18-65 years of age. [1]

The 1998 constitution provides for 4-year terms of office for the president, vice president, and members of Congress, although none of the last three democratically-elected presidents finished their terms. Presidents may be re-elected after an intervening term; legislators may be re-elected immediately. The executive branch currently includes 24 ministries (including coordinating ministries with inter-governmental responsibility). Provincial leaders (called prefects) and councilors, like mayors, city councilors, and rural parish boards, are directly elected. Congress meets throughout the year except for recesses in July and December. Congress is divided into 20 seven-member subject committees. Justices of the Supreme Court are appointed by the Congress for life; members of the Constitutional Court serve four years. Ecuador Maintains an embassy in the United States with consulates dispersed throughout the U.S. Ecuador has experienced Economic growth at 1.5% per year[2]

There are many political parties in Ecuador.Ecuador’s political parties have historically been small, loose organizations that depend more on populist, often charismatic leaders to retain support than on programs or ideology. Frequent internal splits have produced great factionalism. No party has won the presidency more than once through elections since the return to civilian government in 1979. [3]

Ecuador has experienced political instability. From 1997-2006 the Ecuadorian Roldosista Party(PRE), won the Presidency on a platform that promised populist economic and social policies. It challenged what Buckram termed as the power of the nation’s oligarchy. During Buckrams administration there was heavy suspicion of corruption. Buckram was deposed by the congress in February 1997 on grounds of alleged mental incompetence. In his place, congress named Fabian Alarcon interim president. Ecudors fragmented multi party system has cause unrest and contributed to the political instability that it experiences. [4] (Social Christian Party, or PSC), Partido Roldosista Ecuatoriano (Ecuadorian Roldosist Party, or PRE), Izquierda Democrática (Democratic Left,or ID), and Democracia Popular (Popular Democracy, or DP)? have consolidated and together have won about three-fourths of the vote. This has occurred

within the framework of a highly fragmented and atomized system. Just as important,

however, is the increasing share of the vote that these parties have managed

to accumulate over time. One of the prominent characteristics of the

Ecuadorian party system is this apparently contradictory combination of fragmentation

and concentration. The large number of parties that win seats in

Congress and gain access to representational positions in provincial and local assemblies

is offset by the predominance of a relatively small number of parties.

Generally speaking, the parties have demonstrated a greater ability than independents

to secure voters support. William Easterly noted, in Creative destruction, in the 19^th, and 20^th century, Ecuador, Costa Rica, Peru, and Syria all had unpredictable government policies that tended to discourage investment in the future through innovation. [5] Ecuador shares U.S. concerns over narcotics trafficking and international terrorism, and has energetically condemned terrorist actions. The government has maintained Ecuador virtually free of coca production since the mid-1980s, and is working to combat money laundering and the transshipment of drugs and chemicals essential to the processing of cocaine (with U.S. support). It has recently given greater priority to combating child labor and trafficking in persons.[6]

Ecuador has experienced large amounts of growth over time but has also experienced setbacks in relations with its major trading partner (United States). It is structured as a multi party democracy which does not have a majority party. This has proven to discourage investment. Instable government policies and lack of overall government investment in infrastructure has hindered trade. United States was one of Ecuador’s major trading partners and aid givers. Until the Ecuadorian government non compliance with hydro carbon treaty. The Ecuadorian government also showed resistance in anti drug trafficking security that the U.S. implemented, causing stunted relations with the U.S.

Works Cited

Central Intelligence Agency World Fact Book

Office of Public Affairs Washington, D.C. 20505

Easterly, William The elusive Quest for Growth

MIT Press, Cambridge, Massachusetts 02142. 2001.

U.S. State department Note: The Republic of Ecuador U.S. Department of State
2201 C Street NW, Washington, DC 20520

Mainwaring, Scott(editor). Crisis of Democratic Representation in the Andes.

Palo Alto, CA, USA: Stanford University Press, 2006. p 10-127.

http://site.ebrary.com/lib/sjsu/Doc?id=10156554&ppg=119

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[1] (U.S. State Department)

[2] (World Fact Book)

[3] (U.S. State Department)

[4] (mainwaring pg.101)

[5] (Easterly Ch.9”Creative Destruction)

[6] (World Fact Book-country note)

U.S weak dollar

Tourists aren't only taking advantage of favorable exchange rates, they're also unwittingly helping the US through what might otherwise be an economic disaster.

With the dollar near its lowest rate against the pound in 26 years, and its lowest rate against the euro ever, many Europeans are looking at the US the way some Americans have long viewed Latin America and the Caribbean and, once upon a time, Europe -- a cheap place to flex their strong currency.

The situation is more than just a potential blow to Americans' self-image, it could be a blow to the world economy as some central bankers worry about "currency tension," and many countries move trillions of dollars out of their foreign reserves and buy euros instead.

The dollar's fall has been so drastic, it has seeped into the popular consciousness. In his last video, rapper Jay-Z cruised the streets of New York flashing not a stack of Benjamins, but a fistful of euros.

The dollar had been at relatively low levels against the pound and euro for most of this year, but in April it broke the US$2 to &POND;1 barrier and the exchange rate started to make headlines in Britain.

Environmental data

THE 10 WARMEST YEARS

1998: 0.52C (above the 1961-1990 average)

2005: 0.48C

2003: 0.46C

2002: 0.46C

2004: 0.43C

2006: 0.42C

2007 (provisional): 0.41C

2001: 0.40C

1997: 0.36C

1995: 0.28C

Ecuador

Ecuador throws down oil gauntlet

By Jane Monahan Washington When Ecuador's left-wing President Rafael Correa drastically increased the state's share of oil revenues in October, and oil minister Galo Chiriboga also announced that contracts with foreign oil companies had to change, industry analysts said the country had gone too far. Correa's recent electoral win has strengthened his hand After all, foreign firms currently account for about half of Ecuador's total crude production of more than 500,000 barrels a day (bpd). And while Petroecuador, the state oil corporation, accounts for the rest, it continues to be plagued by mismanagement and debt, analysts say. The proposed increase in the government's share of windfall oil profits - those obtained whenever world oil prices exceed those established in existing contracts - was also huge. The tax went up from 50% of windfall oil profits to 99%. That would net the government $830m a year more in revenues, assuming world oil prices stay at current levels. The principal oil companies affected - Spain's Repsol, China's Andes Petroleum, Brazil's state company Petrobras, French-owned Perenco and US-owned City Oriente - were already unhappy. There will be much less incentive for the companies to increase exploratory work and production Simon Pachano, university professor, Quito They objected strongly when the state's share of windfall oil profits was increased for the first time, to 50%, in a law passed in 2006. But President Correa, who has been in office since January, is coming from a position of strength. He decreed the oil tax hike within hours of winning a landslide victory in a vote and more than 60% of the seats in a new national assembly, which has started rewriting the country's constitution and forging ahead with his radical agenda. Poverty reduction Mr Correa, a former finance minister who has a PhD in economics, also explained the move in his decree. He said the government would spend the extra oil money on services, roads and electricity for the poor, which was wildly popular. Ecuador is Latin America's fifth-biggest oil producer. But World Bank estimates show that some 56% of the country's 13.4 million people live in poverty. That figure rises to more than 80% for indigenous Ecuadoreans, who are mainly small farmers in mountainous highlands. Mr Chiriboga and Mr Correa believe justice is on their side But confronting the foreign oil companies is risky. Take the controversy over changing the oil contracts. In announcing the change at a recent press conference, Mr Chiriboga said the companies could comply by reducing their levels of participation in existing production-sharing contracts with Petroecuador. Otherwise, they could switch to new service contracts, where they earn a fixed fee for specific services such as prospecting and production, but the state owns all the oil once it is extracted from the ground. Mr Chiriboga, whose ministry is now in talks with the oil companies over the latest oil tax increase and the new contracts, said his objective was to find a solution that offered both sides "a reasonable profit". But Simon Pachano, a professor at the Latin American University of Social Sciences in Quito, Ecuador's capital, says that in either case, "there will be much less incentive for the companies to increase exploratory work and production, or to invest in machinery." As a result, because Ecuador's oil industry accounts for 40% of the country's exports and more than a third of government revenues, there is a risk that the nation's economy may suffer, if investment and production in the oil sector declines. Legal wrangles There is also a risk of litigation, as shown by the US's City Oriente, the smallest of the principal oil firms in Ecuador with only a 3,000 bpd output. It won a favourable ruling in November from the World Bank's International Centre for the Settlement of Investment Disputes over the first oil tax increase approved last year. Ecuador's Constitutional Assembly has already begun its work And Antonio Brufau, chief executive of Repsol, the biggest oil multinational now in Ecuador, with a 65,000 bpd output, referred to Mr Correa's new oil tax hike at a meeting in Chile in November, saying: "This [measure] to us is one that does not allow us to operate within a reasonable corporate environment." Complicating matters further, Mr Correa's repudiation of the current oil contracts is not just about foreign oil companies, but also the previous Ecuadorean governments, run by conservative political elites, that agreed to them. "The contracts have not benefited Ecuador. The problem is also the previous governments. This is widely recognised, " Mr Pachano says. Mr Correa is an ally of Venezuela's President Hugo Chavez - and, like him, is not shy about using colourful rhetoric on occasions. He maintains justice is on his side. Most of the existing oil contracts were agreed when international oil prices averaged $24 a barrel, before they started rising in 2003. But, said Mr Correa at a press conference during a state visit to China in November, Ecuador was still receiving just $3 to $4 in taxes from oil sales, even though the price of crude has risen to about $90 a barrel. "These are the extraordinary benefits that the investors haven't done anything specific to receive. The benefits should go to the owner of the resources," Mr Correa declared - in other words, the citizens of Ecuador.

Banking Problems

Is the credit crunch finally over?

It has been a dramatic week on the financial markets, with the US central bank cutting interest rates and the UK government coming to the rescue of savers at the Northern Rock.

So is the crisis over, or are there still some big problems remaining?

WHERE'S THE BAD DEBT?

The crisis began when US mortgage companies made hundreds of billions of dollars of inappropriate loans to individuals with poor credit histories.

These debts were then packaged up and sold to financial institutions around the world, who then sold it on to pension funds and hedge funds.

We still don't know where these bad debts are concealed in the financial system.

And until we do, banks will still be reluctant to lend to each other, and investors will be suspicious of the health of the financial sector.

UNFREEZING THE CREDIT CRUNCH

The reluctance by banks and other financial institutions to lend money, because they are not sure how risky it might be, is gumming up the financial system.

Despite the injection of hundreds of billions of dollars and euros, interest rates on inter-bank lending are still unusually high. And banks are tightening up on their lending to individuals and companies, restricting the amount of lending as well as making loans more expensive.

There are also hundreds of billions of dollars worth of short-term debt obligations that will fall due in the next six months, which could further depress the market if no buyers can be found for them.

WILL THE HOUSING MARKET CRASH?

The overhang of bad mortgages is depressing the US housing market. Thousands of people are having their homes repossessed, and with a glut of homes on the market prices are dropping.

Mortgage companies are finding it difficult to raise money even to lend to sound borrowers. So despite a pledge by the US government to help, house building is at a record low.

Although there are far fewer sub-prime mortgages in the UK, mortgage lenders like Northern Rock are also finding it difficult to raise the cash to pay for additional mortgage lending. So it could become harder to get a mortgage, and it could cost more - and both these expectations are lowering house price inflation.

WILL THERE BE A WORLD RECESSION?

A big slowdown in the housing market could have serious economic consequences.

Construction is a big part of the economy, and people who move house are also more likely to buy consumer goods like washing machines. The tightening up of credit and worries about mortgage repayments may make everyone more nervous about borrowing money to buy big-ticket items like cars.

There are already signs of an economic slowdown in the US, the world's biggest economy. And if it deepens, it could dampen down the economic recovery underway in Europe and Japan. The UK, as a major exporting nation, would also be affected.

WILL THE DOLLAR PLUMMET?

The effect on the rest of the world economy could be worse if the US dollar begins to fall in value.

The dollar is already weak because of the huge trade deficit the US runs with the rest of the world - nearly $1 trillion - which has been a big boost to the world economy. But if the US economy slows, and interest rates are cut sharply, the dollar will become a less attractive currency and could fall further.

This in turn would make imports into the US more expensive, and make it harder for exporters like Britain to win orders. A big decline could also force countries like China, which hold $1.3 trillion in currency reserves, mainly in dollars, to diversify their holdings, further depressing the greenback.

WHO'S TO BLAME?

Politicians and financial institutions are trading accusations about who is to blame for the crisis.

In the UK, the governor of the Bank of England is under fire for not intervening earlier to prevent the Northern Rock crisis from getting out of hand.

In the US, the central bank, the Federal Reserve, is under fire in Congress for not regulating sub-prime mortgage lending properly.

And both bankers and politicians have blamed the credit rating agencies for certifying as safe many of the bad debts which had been bundled up and sold. There is a growing move to tighten up international regulation of the financial sector - but worries about whether this can be done without inhibiting financial innovation.

IS THERE A SILVER LINING?

Many economists believe that the crisis is also an opportunity for rebalancing the economy, which has become overly dependent on consumer spending financed by cheap credit and government borrowing.

An increase in household savings, encouraged by higher interest rates for savers, could lead to more long-term investment.

And a mild economic slowdown in the US, coupled with a gradual reduction in the value of the dollar, could help rebalance the world economy, which has become overly dependent on the US as the engine of world economic growth.

12/11/2007

Monetary Theory, Economic History of the United States , Development Economics, and Securities Investments are the Highlight of my week as I head into finals this weekend!

Monetary Theory has been a wild ride. I have been surveying thought on money supply over the last 70 years. John Keynes, Walras, Milton Freedman, Alan Greenspan and David Ricarian theories are who im reading about. I must say that this has been an interested and sometimes confusing area of study.

The main school of thought today centered around the causes of Agregate demand. a major contributer to the incongruencies of thought in the past was the lack of clear data that represents key truths about economic measurements.

Economic Development in South America has been an interesting study .I recently finished writing a paper on Healthcare, Government, and Foreign aid in Ecuador. The Evolution of the World bank, IMF, and other international institutions. The World Banks was created after World War Two to serve as part of the Marshall plan in foreign aid to defeated or undeveloped parts of the world. since then it has gone from a war reparation agency to a economic development agency that lends to countries. these loans are part of large public infrastucture projects such as Roads, bridges, hospitals, etc.


Today ALgerian UN building was bombed by an organization call Al Queda. Thats Crazy!

What do extremest have against a United Nations organization?