in 2006. In 2007,
exports were bolstered by the nearly 50% increase in nickel prices;
however, prices are expected to fall in 2008, contributing to a
slowdown in GDP growth for the year. Although the country has long
been viewed primarily as an exporter of sugar, coffee, and tobacco,
in recent years the service sector has overtaken agriculture as the
economy's largest employer due to growth in tourism and free trade
zones. The economy is highly dependent upon the US, the source of
nearly three-fourths of exports, and remittances represent about a
tenth of GDP, equivalent to almost half of exports and
three-quarters of tourism receipts. With the help of strict fiscal
targets agreed to in the 2004 renegotiation of an IMF standby loan,
President FERNANDEZ has stabilized the country's financial
situation, lowering inflation to less than 6%. A fiscal expansion is
expected for 2008 prior to the elections in May and for Tropical
Storm Noel reconstruction. Although the economy is growing at a
respectable rate, high unemployment and underemployment remains an
important challenge. The country suffers from marked income
inequality; the poorest half of the population receives less than
one-fifth of GNP, while the richest 10% enjoys nearly 40% of
national income. The Central America-Dominican Republic Free Trade
Agreement (CAFTA-DR) came into force in March 2007, which should
boost investment and exports and reduce losses to the Asian garment
industry.

Ecuador
Ecuador is substantially dependent on its petroleum
resources, which have accounted for more than half of the country's
export earnings and one-fourth of public sector revenues in recent
years. In 1999/2000, Ecuador suffered a severe economic crisis, with
GDP contracted by more than 6%, with a significant increase in
poverty. The banking system also collapsed, and Ecuador defaulted on
its external debt later that year. In March 2000, Congress approved
a series of structural reforms that also provided for the adoption
of the US dollar as legal tender. Dollarization stabilized the
economy, and positive growth returned in the years that followed,
helped by high oil prices, remittances, and increased
non-traditional exports. From 2002-06 the economy grew 5.5%, the
highest five-year average in 25 years. The poverty rate declined but
remained high at 38% in 2006. In 2006 the government of Alfredo
PALACIO