Industrialization occurred later in Ecuador than in most other Latin American countries. As late as 1960, the small industrial sector consisted almost entirely of textile production, food processing, and artisan activity. Manufacturing began to develop in the mid-1960s, and during the 1970s, spurred by petroleum revenues and exports to other nations in the Andean Common Market (Ancom, also known as the Andean Pact), manufacturing became the most dynamic sector of the economy. Manufacturing stagnated in the 1980s, however, with an average annual growth of only 0.8 percent for the period 1981-87. In 1987 it accounted for over 17 percent of the GDP.
Food processing and textile manufacturing accounted for almost 60 percent of the total value of manufacturing in 1986. Nonmetallic minerals and metals comprised 12 percent of the total value; all other industries accounted for the balance.
Most industrial establishments were small and barely more than handicraft operations. A government industrial census in the early 1980s listed more than 35,000 firms, but only 28 of these had more than 500 employees; more than 31,000 had from 1 to 4 workers. Individual proprietors owned and managed most firms. Shoemaking shops, woodworkers, or furniture makers represented nearly half of the establishments listed in the census.
Guayaquil was the most important industrial center, followed by Quito. Together the two cities accounted for about two-thirds of total factory employment. Agricultural and beverage processing plants, sawmills, shipyards, iron foundries, and cement and chemical plants were Guayaquil's main industries. Textile production and food processing topped the list of industrial activities in Quito. The government had made an attempt in the early 1970s to disperse industrial activity by promoting industrial parks in other cities, with some success.
Sugar refining, rice milling, and flour milling were among the largest sectors in the food-processing industry. Two sugar mills dominated the industry and processed most of the sugar used domestically. Rice milling was concentrated in the Costa and consisted of numerous publicly owned mills, as well as many smaller private ones. Most flour mills were located near larger cities in the Sierra and used locally grown wheat; the three large flour mills near Guayaquil used mainly imported wheat. Ecuador also had a large baking industry, and nearly all cities had commercial bakeries producing bread and cakes.
The textile industry, which ranked next to food processing in value of production, was concentrated in the Sierra, where it originated as an outgrowth of home weaving. Most textile plants remained small, although one Quito firm was among the largest employers in the country.
The construction industry showed a steady decline during the 1980s and accounted for only about 4 percent of the GDP in 1987. Because over 95 percent of the construction in Ecuador resulted from government-financed projects, the industry remained highly vulnerable to periods of austerity in government spending. Indeed, the sector's only growth year in the decade of the 1980s occurred in 1987, reflecting large-scale highway rebuilding after the earthquake. High interest rates and a shortage of cement also hampered construction projects.
Artisan activity constituted a large part of the manufacturing labor force. Although many of the artisans had considerable skills in such occupations as weaving, their wages were among the lowest in the labor force, and as machine-weaving became more widespread their skills were increasingly obsolete. In the 1980s, the government offered special credits and loans to encourage a transition from artisan workshops to small factories.
The largest number of artisans produced clothing and furniture. This group included dressmakers, tailors, shoemakers, cabinetmakers, and carpenters. Several thousand additional artisans were goldsmiths or silversmiths.
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