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Stylised facts on the Economy of Ecuador in 2018

Stylised facts on the Economy of Ecuador in 2018:

1. Real estate bubble
2. Rising levels of private debt
3. Low salaries with respect to private debt and real estate market values
4. Low interest rates with respect to the intrinsic political uncertainty and default risk of the debtors
5. Adoption of the US$ as the national currency, that veils the underlying pressures on the currency from the international flows of capital
6. Inflow of foreign capital that is attracted by the adoption of the US$ (thus no risk of devaluation of the currency)
7. Asset bubble
8. Financialization of the economy
9. Dependency from the oil industry for about 36% of the national exports
10. Deep interconnection with  the US (and its satellites) economy and financial system - if the US economy contracts, so does Ecuador.

Conclusion: in case of a global recession with a reduction of the oil price and contraction of demand from oil from abroad, as Ecuador has renounced to its monetary independence then the sole adoption of fiscal austerity may contribute to reduce the internal demand for foreign products (imports), deflate asset prices and restore the competitiveness of the manufacturing export industry - in order to maintain a balanced commercial trade balance.

 - Luca Bindi, LL.M. (Vaduz)

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