Ecuador’s banking sector is being restructured in the wake of a crippling liquidity crisis three years ago.
Reforms prompted by the 1999 crisis, in which the government was forced to take control of many of Ecuador’s private banks, center on refinancing these institutions prior to their return to the private sector.
The effects of the upheaval are still being felt and are an important issue in Ecuador’s dealings with the IMF, with whom it hopes to reach a new standby loan agreement to succeed an accord which expired last December.
This was the first time in 15 years that Ecuador had been able to successfully complete an IMF deal – a sign of relative financial stability as the government pushes through its reforms.

State-owned banks are also being trimmed and reorganized, although it remains unclear whether they, too, are ultimately destined for private ownership.
Either way, local bankers believe that, like the economy, Ecuador’s financial markets are on a new course. “The era of speculative investment is over because the market rates are in line with the fall in inflation,” says Carlos Izurieta, general manager of Banco General Rumiñahui, a private bank that helps finance projects such as collective schemes in agriculture and other non-oil sectors.
“The system is much more efficient,” he continues. “As a bank, we try to support the various sectors that are taking part in this effort to reduce costs and produce more income, because the country can no longer generate income through the central bank’s printing presses.”

Pedro Merlo, executive president of Seguros Colonial, the country’s biggest insurer, says the insurance market in Ecuador is worth about $320 million in premiums annually, half of which derives from the public sector. “That leaves around $140 million in premiums for the 42 insurance companies in Ecuador. In other words, if you don’t do business with the public sector, you do not have a business, period.”
Colonial, which specializes in insurance for the energy sector, covers most types of risk, except life and medical. The firm, which was created eight years ago, has an 18 percent share of the total insurance market.