The Ecuador-Canada Trade Deal 2025
A Tale of Conflicting Interests
Ecuador – An Economy Faced with Struggle:
Ridden by an amalgamation of both structural and peripheral challenges, the Ecuadorian economy has, at a minimum, faced compounding hardships in recent times. Insecurities have been propelled by political uncertainties, and the lingering effects of droughts in 2024 have contributed to a widespread energy crisis. Nearly 80% of the country’s electricity generation relies on hydropower, yet a combination of operational and cost-effective issues have limited this to great effect. In the third quarter of 2024, Ecuador’s economy shrank 1.5% year-on-year, following a 4% contraction in the previous quarter, reflecting a downturn in such economic conditions over the past decade.
Moreover, an overdependence on the oil sector leaves little flexibility to cope with volatile global oil prices. As a result, markets are contended with difficulties in effectively responding to external shocks. As strenuous and gruelling as the past couple of years have been for the economy, it is most crucial today to overcome the hurdles and drive for stable, sustainable economic growth in the long-term. However, this is easier said in theory than done in practice. With a national debt sliding above $63 billion, Ecuador’s regional infrastructural development, which could be suited to promote job creation (demand-side growth) or create spare capacity (supply side growth), is heavily constrained to Quito if at all. So the question arises, how can President Daniel Noboa seek to conquer this intricate maze of obstacles?
The Free Trade Deal – A Step in the Right Direction:
As aforementioned, navigating towards the so-called treasure of ‘economic prosperity’ requires a period of transition. Perhaps strengthening diplomatic ties could do the trick? A trade deal, per chance? In February, President Noboa announced that Ecuador and Canada successfully negotiated a new trade deal to realign market access for goods, services and investment. Its key provisions include: reductions in tariffs (an initiative seemingly antiquated in 2025), cooperation on digital trade and an emphasis on environmental standards and regulations. Once implemented, this will oversee a removal of duties on 97.2% of tariff lines covering Canada’s imported goods. This is particularly favourable for the Ecuadorian economy since it facilitates an increase in their trade diversification, which may directly ensure the economy is no longer over-reliant on the oil sector, for example.
If we shift our focus towards the macroeconomic theory, cuts in the cost barrier to export tropical fruits, textiles and seafood incentivises Ecuadorian producers across industries to expand towards markets overseas due to a higher profit margin. Lower costs per unit may also culminate in gaining an absolute advantage over competing countries such as Colombia and Costa Rica, thereby growing international competitiveness for local firms. Nationally, this could attract foreign direct investment, which could be revolutionary in funding infrastructural development along the poorest regions such as the Amazon Basin. Data shows upwards of 46% of Ecuadorians in rural areas were living in poverty in 2023; nearly 3 in 10 people living on under $90 per capita per month. An increase in exports would likely prompt a boost in employment opportunities for locals due to a rise in derived demand across these sectors, pivotal in driving the economy forwards. Of course, these economic advancements are thoroughly infatuated with the logical nature of macroeconomics, so the question whether the trade deal would yield such advantageous outcomes is less clear.
Indigenous Unrest – The Dilemma:
On a surface level, this free-trade deal seems to be a win-win situation for both countries – job creation, environmental protection and expansion of markets to state a few benefits. Unfortunately, however, this is only part of the story: its plot remains incomplete. In the late 1990s, concerns were raised over the definition of ‘sustainable development’, and more specifically its criterium. The World Commission on Culture and Development carried the case to integrate culture as the fourth pillar of sustainability (behind environmental, social and economic studies). By 2005, the concept of cultural identity and diversity became a central focus in discussions surrounding the topic within the United Nations, deemed as conducive to foster ideal conditions for sustainable development. Having considered this, we must now acknowledge the deep rooted culture inherent across Ecuador, and most importantly, what truly crafts the country’s identity.
Home to over a dozen indigenous groups such as the Shuar and the Quechua people, Ecuador’s landscape is embedded with traditions formed over generations. However, the very trade deal promised to grapple the country out of economic turmoil may in turn jeopardise indigenous culture beyond repair. A key example can be pictured in the province of Morona Santiago, bordered solely by a mountain range, rivers and trees, where Canadian copper mining company Solaris Resources pose as a severe danger to the indigenous way of life. The prospect of such habitat degradation in the pursuit of economic ambitions has led to widespread unrest in both domestically and overseas. Organisations such as Amnesty International, National Confederation of Indigenous Peoples in Ecuador and the Canadian Labour Congress have sparked a sense of alarm over the deal. Given the fragility etched into the Ecuadorian economy today, further political turbulence instigated by civil unrest is certainly contrary to what the country requires so desperately.
A Foresight:
This article is titled as a ‘tale of conflicting interests.’ Upon an initial glance, one would likely expect this to mark a conflict in interest 3 between the two trading partners – Ecuador and Canada. But the truth stretches far beyond this. It symbolises a macroeconomic dilemma economists will strive to answer for generations to come. Some may liken it to a trade-off between environment and the economy, others to a standoff between industry and man. Overall, my stance remains unchanged from before writing this article. Whilst the free-trade deal could stand as a fundamental driver for local sectors to thrive in the short-term, the Ecuadorian economy requires a long-term structural shift, which will take decades before being viewed as rewarding. For the trade deal to fulfil its responsibilities, it must serve to respect indigenous rights, moving away from its exploitative nature. As for the indigenous culture, I share the idea that its preservation is equally as meaningful as development in this matter – economic progress simply cannot compensate for lost identity.
