Hit hard by higher commodity and fuel prices and the drop of the U.S. dollar, constructions prices in Ecuador and Latin America generally, have shown a sharp escalation in recent months. Most of the increase comes in the area of materials, particularly steel, concrete, electrical, plumbing and other project components. Costs for new condos in Quito, Guayaquil and Cuenca are running 12% to 15% higher than they were at the end of 2007, according to a Quito construction trade organization that tracks industry trends. Coastal condos are as much as 20% more expensive.

Residential construction costs have not risen as rapidly due to the fact that more of the materials used in housing construction are mostly locally produced. Ecuadorian labor costs have held relatively stable during the past year. The trade association sees construction inflation for single family homes running at approximately 7% through the first half of 2008.

Construction costs are showing similar rises in other countries popular with foreigner investors, with Panama, Costa Rica and Mexico being the hardest hit. In Panama City, developers of at least three major projects have declared bankruptcy in 2007, citing cost increases as the reason. Experts believe that construction inflation will continue for several months with prices stabilizing by the end of 2008.