Ecuador - Military Spending

On 08 March 2015 Defense Minister Fernando Cordero reported an increase of $90 to $135 in the amount of supply of military personnel, with the aim of improving the quality of life and nutrition of the country's soldiers. The announcement was made at a meeting with 3,500 members of the three branches of the Armed Forces stationed in Quito. Among other objectives it was reported on military severance pay, a subject on which there have been rumors and misinformation among staff. The appointment took place at the Coliseum at the University of the Armed Forces (ESPE) and was also attended by the head of the Joint Command, Luis Garzón, and the commanders of the Land and Air Forces, among other authorities.

Ecuador spent $2.3 billion on the military in 2011. In the region, Ecuador spends the highest percent of GDP on the military alone: 2.74 percent in 2010. The Andean country also had the highest percent increase in military spending in the world; from 2002 to 2011, military expenditures rose by over 200 percent. By national budgets in 2010, Ecuador was the most invested in military expenditures according to its GDP (2.74%), followed by Colombia (1.89%), Suriname (1.49%), Bolivia (1,47 %), Chile (1.40%), Guyana (1.31%) and Uruguay (1.06%). The rest spent less than 1%.

Military expenditure (% of GDP) in Ecuador was last measured at 2.73 in 2014, according to the World Bank. Military expenditures data from SIPRI are derived from the NATO definition, which includes all current and capital expenditures on the armed forces, including peacekeeping forces; defense ministries and other government agencies engaged in defense projects; paramilitary forces, if these are judged to be trained and equipped for military operations; and military space activities. Such expenditures include military and civil personnel, including retirement pensions of military personnel and social services for personnel; operation and maintenance; procurement; military research and development; and military aid (in the military expenditures of the donor country).

Excluded are civil defense and current expenditures for previous military activities, such as for veterans' benefits, demobilization, conversion, and destruction of weapons. This definition cannot be applied for all countries, however, since that would require much more detailed information than is available about what is included in military budgets and off-budget military expenditure items. (For example, military budgets might or might not cover civil defense, reserves and auxiliary forces, police and paramilitary forces, dual-purpose forces such as military and civilian police, military grants in kind, pensions for military personnel, and social security contributions paid by one part of government to another.)

Ecuador's total military spending by 1996 was estimated at around US$500 million per year. Of this amount, over half was utilized for personnel, operations, and maintenance. The remainder was used for the purchase of equipment. By 2009 the budget was about $650-million, of which the Army accounted for about 50%.

A series of unfavorable economic developments in the second half of the 1980s, beginning with the decline in oil revenues in 1986 and a devastating earthquake in March 1987, curtailed national government outlays, including spending on the armed forces. The precipitous drop in the value of Ecuadorian currency meant an escalation of the cost of imported weapons, on which the armed forces almost entirely depended.

In September 1988, the new administration of Rodrigo Borja Cevallos cancelled a US$106-million contract with Argentina for the purchase of armored vehicles and other equipment. Even prior to this, other planned procurements, such as the purchase of planes for an additional fighter squadron, had to be postponed. In 1987 the Ecuadorian government reported that defense expenditures totalled 32.0 billion sucres--equivalent to US$188 million at the prevailing rate of exchange. The defense budget for 1987 did not reflect the cut that followed the earthquake. The corresponding figure for defense in 1986 was 20.4 billion sucres, equivalent to US$166.2 million.

Although defense expenditures apparently declined after the end of military rule in 1979, it was difficult to draw conclusions about trends in defense spending owing to a number of factors, including variations in the dollar-sucre exchange rate. Analysts believed that the true cost of defense exceeded the officially budgeted figures by a considerable amount because of unreported nonbudgetary spending. The armed forces covered these costs, which observers believed to have been as high as the official defense expenditures in some years, through profits from business enterprises owned by the military and receipts from the sale of petroleum abroad. A portion of revenues from petroleum production above a stipulated level was allocated to a special military account, but the amount involved and the formula by which it was calculated remained confidential. Low oil production levels and depressed prices in the late 1980s necessitated a sharp curtailment of imports of military equipment.

The United States Arms Control and Disarmament Agency (ACDA) estimated Ecuador's military expenditures at US$250 million in 1987. ACDA noted, however, that this estimate omitted most arms acquisitions. According to ACDA, annual defense spending had risen over a ten-year period from US$150 million in 1978. If defense expenditures for 1978 were converted to 1987 dollars, however, they would come to US$245 million--nearly equal to the 1987 expenditures in purchasing power. The lowest levels of defense spending during the decade were in 1983 and 1984, when military outlays fell below US$160 million, calculated in 1987 dollars.

According to ACDA's analysis, based on 1987 data, Ecuador's annual defense expenditures of US$25 per capita were lower than the average for Latin America as a whole (US$36 per capita), although well above comparable figures for Brazil and Colombia. The defense budget of its larger neighbor and rival, Peru, was four times as great per capita. The number of persons in military service per 1,000 population (4.4 in 1987) almost mirrored the average for Latin America as a whole, although it was higher than the figure for Brazil or Colombia and lower than that for Peru. Military expenditures constituted 15.3 percent of central government expenditures in 1987 and 2.6 percent of gross national product (GNP). These ratios compared to 10.4 percent of central government expenditures and 2.0 percent of GNP for Latin American countries as a whole, but were again well beneath the corresponding figures for Peru.

The military states that defense expenses are an investment, that this expense cannot be blamed for the lack of attention to the social needs of the population. It also sustains that the levels of expenses are minimal in relation to the menace confronting the country and it would be dangerous to weaken the defense and collective security systems.