Ecuador Opens Up 50 Major Investment Opportunities

Content

1. What is Ecuador doing to improve its attractiveness?
2. Which are the new investment opportunities?
   • Energy
   • Hydrocarbons
   • Infrastructure
   • Real Estate
   • Mining
   • Telecommunications
   • Environment
   • Culture
   • Sports
   • Health
3. Are there incentives for foreign investors?
4. What is the main risk of investing in Ecuadorian PPPs?

On November 18–20, the Ecuadorian government raised $3 billion in foreign direct investment (FDI) during the “Ecuador Open for Business” forum in Quito.

Ecuador has turned its situation around since the start of the pandemic, which left the country’s finances in disarray. In 2020, the South American nation received just $1.2 billion in FDI. By inviting FDI and improving the business environment, the Guillermo Lasso administration seeks to pump $30 billion into key industries through 50 public-private partnership (PPP) projects.

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What is Ecuador doing to improve its attractiveness?

1. A successful COVID-19 vaccination campaign: the government has worked closely with the private sector to reach 75 percent of the population and reopen the economy.
2. Fiscal discipline: the government has embarked on a cost-reduction overhaul that aims to slash the current deficit in half, to $2.4 billion, over one year.
3. Macroeconomic stability: the country’s international reserves have grown from $5 billion in November 2020 to $8.3 billion in November 2021.
4. Leveraging oil prices: according to Barclays, Ecuador’s 2021 deficit could fall to 1 percent, and GDP growth could reach 4 percent.
5. Increased legal certainty: President Lasso has issued decrees providing a clearer regulatory framework for oil and mining investments.
6. Cutting red tape: a one-stop shop for foreign investors, to be ready in 2022, will digitize and replace procedures with 35 different government entities.

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Which are the new investment opportunities?

During the forum, the Lasso administration unveiled 50 public-private projects across different industries to be funded through FDI.

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Energy

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Hydrocarbons

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Infrastructure

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Real Estate

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Mining

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Telecommunications

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Environment

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Culture

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Sports

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Health

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Are there incentives for foreign investors?

1. Corporate Taxes:

• All foreign investors receive a five-year exemption on the corporate tax. The tax rate is 17 percent in Special Economic Development Zones and 25 percent in the rest of the country.
• In mining, forestry, and oil industries, investors can be exempted for up to 12 years.
• In PPP projects, the corporate-tax exemption lasts 10 years.

2. Investment projects of $250,000 and more are eligible for a special contract to access international arbitrage and get additional tax benefits.

3. No taxes on the repatriation of dividends or on loan repayments to foreign institutions.

4. Tax credit from local purchases of goods or services.

5. Import-tariff exemptions for goods related to the investment project.

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What is the main risk of investing in Ecuadorian PPPs?

A major factor undermining investor confidence is political risk. Strife between the executive and legislative branches remains unresolved. Besides social discontent over Lasso’s probusiness economic policies, local and US authorities are investigating former government officials for corruption, which could have political ramifications.

Although the executive branch is boosting private-sector participation and foreign investment, the country’s legislation rests on many years of central planning that has impeded development. Ecuador’s political class still needs to come together to reform labor and corporate laws to promote entrepreneurship, job creation, and access to credit.