It's impossible to leave Ecuador empty-handed. Local artisan traditions have been thriving here for thousands of years. Take a trip up to the market in Otavalo (one of the best local handicraft markets in all of South America), and you'll find an amazing array of hand-woven goods, including alpaca scarves, gloves, sweaters, colorful bags, tapestries, and ceramics. In the neighboring towns, you can buy leather goods and beautifully crafted hand-carved wood products. Keep in mind that Ecuadorians are not hagglers. At the markets, the prices are never fixed, but don't expect to spend hours negotiating. In the first few minutes, you can convince the seller to lower the price by a few dollars, but that's it. When vendors say that the price is final, it's usually not going to go any lower.
Cuenca is the largest producer of Panama hats in the world. These aren't your typical Panama Jack hats -- these are stylish beauties worn by the likes of Julia Roberts and Queen Elizabeth. Ceramics are also a specialty in Cuenca.
In Quito, you can find most everything from handcrafted silver jewelry to pre-Columbian masks. The Ecuadorian artists have done an excellent job of using traditional techniques to create products that appeal to modern-day tastes.