1. Economic Opportunity and Indigenous Peoples in Ecuador Christian Borja-Vega (World Bank) Trine Lunde (World Bank/Johns Hopkins University) “Economic Opportunity and Indigenous Peoples in Latin America” Conference at Georgetown University, Washington DC February 9, 2007

2. Study Background

3. Indigenous Peoples in Ecuador The political influence of indigenous nations have increased greatly over the past decade as indigenous groups have shown great capacity to mobilize and to negotiate with the national government At the same time, indigenous peoples continue to be among the poorest groups in Ecuador (Hall and Patrinos, 2006). –Indigenous households have lower human capital endowments (health and education) - even after controlling for per capita consumption –The probability of being poor is higher for indigenous individuals and households, even after controlling for education, health and other factors

4. An overview of the Indigenous Population in Ecuador (cont.) Estimates of Ecuador’s indigenous population ranges from 7-9% to one- third of the population, depending on the methods used Estimates in this report are based on language spoken at home and using this identifier the indigenous population is measured at 17% of total population, or 2.25 million individuals Concentration of Indigenous Peoples by Geographic Areas

5. An overview of the Indigenous Population in Ecuador There are 13 indigenous nations present in the three regions of the country : –In the Amazon Basin: Achuar, A'I Cofán, Huaorani, kichwa, Secoya, Shiwiar, Shuar, Siona y Zápara –In the Coastal regions: Awá, Chachi, Epera y Tsa’chila –In the Andean region: The Quichua nation - culturally a highly diverse group – constitute more than 90 percent of the indigenous population in Ecuador

6. Source: Census, 2001. SIISEc Percentage of Poor Indigenous Population Percentage of Poor People (UBN), 2001 0 20 40 60 80 100 IndigenousAfro- american MestizoWhiteTotal Source: Leon-Guzman, 2002 Poverty Incidence and Indigenous Peoples

7. Income Generating Activities and the Labor Market

8. Employment and Labor Outcomes Indigenous are more likely to be occupied in unskilled labor in both rural and urban areas and engage more in agricultural labor in rural areas 87 percent of indigenous in rural areas report having a second occupation or activity RuralUrbanRuralUrban Unskilled75.50%70.80%64.90%56.60% Agriculture62.60%15.00%51.80%10.10% Two activities86.60%5.30%21.50%17.40% IndigenousNon-indigenous

9. Indigenous are more likely to be occupied in agricultural labor, unskilled labor; or farming activities Infrastructure (i.e. electrification) and education substantially reduce the likelihood of being involved in these low-pay agricultural activities Determinants of Occupations OccupationGroup with More Likelihood Electrification Household Conditions Years of Education Informal CommerceIndigenousMarginally EnhancesMarginally HindersModerately Hinders Agriculture in Small FarmsIndigenousStrongly HindersMarginally HindersModerately Hinders Formal Skilled AgricultureIndigenousStrongly HindersMarginally HindersModerately Hinders Subsistence AgricultureIndigenousStrongly HindersModerately HindersStrongly Hinders ManufacturingNon-indigenousModerately EnhancesMarginally HindersModerately Hinders ConstructionNon-indigenousModerately EnhancesMarginally HindersModerately Enhances Other ServicesNon-indigenousStrongly EnhancesMarginally HindersModerately Enhances Factor Affecting Occupation Outcome

10. Indigenous have a lower probability of participating in waged employment, both in rural and urban areas While the indigenous/non-indigenous gap is greater among youth in rural areas, it grows with age in urban areas Probability of Participating in Waged Employment Rural Areas 0.1 0.3 0.5 0.7 1921232527293133 Age IndigenousNon-indigenous Urban Areas 0.1 0.3 0.5 0.7 1921232527293133 Age

11. Urban Areas Head without Education Primary or LessMore than 6 years of Education IndigenousNon-Indigenous Rural Areas 0% 20% 40% 60% 80% 100% Head without Education Primary or LessMore than 6 years of Education Education and Probabilities of Waged Employment

12. In areas with large indigenous population, those who engage in non-waged agricultural work, show a high concentration of activity, while waged agricultural employment is associated with a more diversified economic activity Overall, the activities of indigenous engaged in any form of agricultural activity are more concentrated than similarly engaged non-indigenous Diversification of economic activities is generally lower in rural areas than urban areas Informal Commerce Unpaid agricultural work Subsistence farming Family Helper IndigenousNon-Indigenous More Concentrated More Diversified Concentration and Diversification of Economic Activity

13. Differences in Entrepreneurial Activity In rural areas, only between 2 and 4 percent of small to medium-sized indigenous businesses/farms have access to formal credit Credit seems is less linked to size for non-indigenous businesses where between 9 to 15 percent has access to credit, irrespective size In urban areas, indigenous entrepreneurs have less schooling (2.7 years) than non-indigenous peers (5.5 years of schooling Also, the average number of family members involved in entrepreneurial activities is higher among the indigenous

14. Indicators of farm productivity suggest that these differences in education, access to credit and the use of equipment and machinery affect the returns to agricultural activities. Monthly harvests are nearly twice as large among non-indigenous very small farms and nearly three times as large for small farms. Differences in Entrepreneurial Activity

15. Interests Rates of Formal Business Credit, Rural Areas 0% 20% 40% 60% Very SmallSmallAll IndigenousNon-indigenous

16. Social Network Effects on Economic Outcomes, School Attendance and Child Labor

17. Social Capital Indigenous have strong social ties within their family and community circles Non-indigenous are however much more endowed with ‘weaker’ ties, that is connections to more distant friends, acquaintances and colleagues In rural communities, both of these types of social capital are stronger among the bilingual indigenous population when compared to those who only speak an indigenous language

18. Social network effects seem to reinforce indigenous/ non- indigenous differences and current employment patterns –Positive network effect on participation in agricultural activities among indigenous males in rural areas –Positive network effect on the participation of females in agricultural activities both in rural and urban areas –Positive effect on participation of both indigenous and non- indigenous females in handicrafts and informal commerce in rural areas Access to basic infrastructure and social networks can be strongly complementary –Access to basic infrastructure, such as water, sanitation and electricity, strengthens social network effects that motivate entrepreneurial activities among indigenous in rural areas Social Network Effects on Economic Outcomes

19. Social Network Effects on School Attendance and Child Labor Social network effects on school attendance –Networks positively affect school attendance irrespective of geographic area or ethnicity –Effects are stronger for males than females, and stronger for non-indigenous than indigenous –When looking at urban areas separately, there is no network effect on the school attendance of indigenous children and youth Social network effects on child labor –Less evidence of positive network effects –In urban areas, social networks reduces child labor, but only among non-indigenous males

20. Concluding Recommendations Two broad policy recommendations can be made –Facilitate acquisition of human capital (formal schooling and training) and access to credit in order to raise returns to labor and other economic activity among the indigenous –Look for ways in which social networks can work not only as aids to get by but also as catapults for moving indigenous households ahead and mobilizing communities toward development projects Further research is needed on the role of land in explaining and addressing differential economic outcomes –The size and quality of land, as well as land ownership structures crucially affect income generating strategies in rural areas where most indigenous live –The distribution of land is highly unequal and has remained unchanged in the last twenty-five years. –The indigenous stand to gain from policies that facilitate access to land, as well as policies that improve tenure security and facilitate land transactions

21. Gracias!