Poverty in Ecuador

The note looks at poverty in Ecuador,
assessing macroeconomic developments through its policies to
maintain stability with fiscal discipline, and increase
economic productivity and competitiveness, in particular,
the 1998/99 crisis, the 2000 dollarization and their effect
on poverty. From 1990 to 2001, national consumption-based
poverty rose from 40 to 45 percent, and the number of poor
people increased from 3.5 to 5.2 million. Poverty increased
by over 80 percent in urban areas at the Costa and the
Sierra, was stable in the rural Costa, and rose 15 percent
in the rural Sierra. Poverty rates continued to be highest
in rural areas, but rapid urbanization increased the number
of poor people living in urban areas. Employment is the main
income source, frequently the only one, for most urban
families. Thus policies that generate employment and wage
income are crucial for reducing urban poverty. The 1998/99
crisis sent employment and real labor income plummeting,
urban poverty rose, and poor urban households resorted to
various coping strategies, such as increased labor force
participation, and migration. Poverty declined slowly after
2000, reflecting just a weak formal employment creation. It
is stipulated social expenditures could be used more
effectively, for significant improvements are needed in
education provision, and quality, especially in rural areas,
while health service coverage must be expanded and
integrated better across different subsystems, and providers.