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Ecuador Opens Up 50 Major Investment Opportunities

Ecuador Opens Up 50 Major Investment Opportunities

$30 Billion in Public-Private Partnerships to Boost FDI
Ecuador Investment opportunities
Ecuador has turned its situation around since the start of the pandemic, which left the country’s finances in disarray. (Canva)

Ecuador Opens Up 50 Major Investment Opportunities

1170 658 Paz Gómez

Content

  1. What is Ecuador doing to improve its attractiveness?
  2. Which are the new investment opportunities?
  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.

Made with Visme Infographic Maker

 

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Energy
Project
Contract
Timeline
Scope
Details
Unconventional Renewable Energy Plants Concessionfor 20–30 years Operational from 2024
  • Design
  • Construction
  • Operation & maintenance
  • Funding
Concession periods vary according to the technology: hydroelectric (30 years), eolic and photovoltaic (25), and biomass (20).
Natural-Gas Power Plant Concessionfor 25 years 2-year construction
  • Design
  • Construction
  • Operation & maintenance
  • Funding
Capex: $600 million

IRR: 10–15 percent

Northeastern Oil Transmission System Concession for 30 years 3-year construction
  • Construction
  • Operation & maintenance
  • Funding
Capex: $386 million

IRR: 10–15 percent

Cardenillo Hydroelectric Dam Concession for 30 years 6-year construction
  • Design
  • Construction
  • Operation & maintenance
  • Funding
Capex: $1.3 billion

IRR: 10–15 percent

Santiago Hydroelectric Dam Concession for 30 years 6-year construction
  • Design
  • Construction
  • Operation & maintenance
  • Funding
Capex: $3 billion

IRR: 10–15 percent

Sopladora Hydroelectric Plant Concession for 25 years In operation
  • Operation & maintenance
  • Funding
Capex: $1 billion

IRR: 10–15 percent

Machala Thermogas Station Concession for 25 years 2024
  • Design
  • Construction
  • Operation & maintenance
  • Refurbishment
  • Funding
Capex: $600–650 million

IRR: 10–15 percent

 

.
Hydrocarbons
Project
Contract
Timeline
Scope
Details
Ronda Intracampos II Oilfield Production Sharing Contract 4-year exploration

20-year development

  • Exploration
  • Development
  • Transfer to the state
Capex: $731 million

Average production: 18,000–22,000 bpd

Sacha’s Block 60 Oilfield Production Sharing Contract 4-year exploration

20-year development

  • Exploration
  • Development
  • Transfer to the State
Capex: $2.88 billion

Average production: 65,000 bpd

Coastal High-Conversion Oil Refinery PPP To be confirmed
  • Design
  • Construction
  • Operation & maintenance
  • Funding
Capex + Opex: $4.5 billion

 

.
Infrastructure
Project
Contract
Timeline
Scope
Details
Loja-Catamayo Highway Expansion PPP for 30 years 3-year construction
  • Design
  • Construction
  • Operation & maintenance
  • Funding
Capex: $86 million

Toll-based revenue

Montecristi-La Cadena Highway Redesign PPP for 30 years 3-year construction
  • Design
  • Construction
  • Operation & maintenance
  • Funding
Capex: $63.9 million

Toll-based revenue

Esmeraldas Port Station Revamp PPP for 30 years 3-year construction
  • Construction
  • Operation & maintenance
  • Funding
Capex: $109.5 million

Fee-based revenue

IRR: 15 percent

Southern Guayaquil Highway Construction PPP To be confirmed
  • Design
  • Construction
  • Operation & maintenance
  • Funding
Toll-based income
Highway Weight-Control System PPP In operation
  • Design
  • Construction
  • Operation & maintenance
  • Funding
Capex: $12 million

Opex: $20 million

Santo Domingo Logistics Center PPP for 25 years 2-year construction
  • Design
  • Construction
  • Operation & maintenance
  • Funding
Capex: $53.8 million

Opex: $118.5 million

IRR: 17 percent

National Railway System Modernization To be confirmed To be confirmed
  • Design
  • Operation & maintenance
  • Refurbishment
  • Funding
Fee-based income

 

.
Real Estate
Project
Contract
Timeline
Scope
Details
Mastodontes Residential Complex PPP for 14 years 1-year construction
  • Design
  • Construction
  • Funding
Capex: $175.1 million

IRR: 17.59 percent

Public Housing Development PPP 5-year leasing with purchase option
  • Design
  • Construction
  • Operation & maintenance
  • Funding
For rent and sale

 

.
Mining
Project
Contract
Timeline
Scope
Details
Sigchos Deposit Joint venture, mining-rights transfer, and production 10-year exploration
  • Initial exploration
  • Advanced exploration
  • Economic valuation
  • Development
10,850 hectares

Porphyry copper–gold deposits

Unacota Deposit Joint venture, mining-rights transfer, and production 10-year exploration
  • Initial exploration
  • Advanced exploration
  • Economic valuation
  • Development
Limestone

2,747 hectares

La Tronera Deposit Joint venture, mining-rights transfer, and production 10-year exploration
  • Advanced exploration
  • Economic valuation
  • Development
Limestone

162 hectares

Isimanchi Deposit Joint venture, mining-rights transfer, and production 10-year exploration
  • Advanced exploration
  • Economic valuation
  • Development
Limestone

225 hectares

Cascabel Mine Mining license holder: SolGold 2-year valuation Economic valuation Porphyry copper-gold-silver mine

4,979 hectares

Capex: $10–10.5 billion

IRR: 25.7–26.5 percent

Lifetime: 49 years

Cangrejos Mine Mining license holder: Lumina 4-year exploration Advanced exploration Porphyry copper-gold mine

6,283 hectares

Capex: $1.9 billion

IRR: 16.2 percent

Lifetime: 25 years

La Plata Mine Mining license holder: Atico 4-year exploration Advanced exploration Porphyry copper-gold-silver-zinc deposit

2,235 hectares

Capex: $117.8 million

IRR: 24 percent

Lifetime: 9 years

Curipamba Mine Mining license holder: Curimining 4-year exploration Advanced exploration VMS copper-gold deposit

2,235 hectares

Capex: $289.2 million

IRR: 40.5 percent

Lifetime: 15 years

Waritza Mine Mining license holder: Solaris 4-year exploration Initial exploration Porphyry copper-molybdenum mine
Rumiñahui Mine Mining license holder: Adventus 4-year exploration Initial exploration Gold and copper mine
Blanca Mine Mining license holder: Carnegie Ridge Resources 4-year exploration Initial exploration Epithermal gold-copper mine

7,300 hectares

La Hueca Mine Mining license holder: Cruz de Sol 4-year exploration Initial exploration Porphyry gold-copper mine

16,000 hectares

Condor Mine Mining license holder: Luminex 4-year exploration Initial exploration Porphyry and epithermal gold-copper mine
Ciudades Perdidas Mine Mining licensee holder: Aurania 4-year exploration Initial exploration Sedimentary and epithermal gold-zinc-copper mine

 

.
Telecommunications
Project
Contract
Timeline
Scope
Details
Internet Community Centers Delegation for 5 years 3-year execution
  • Refurbishment
  • Operation & maintenance
  • Funding
Capex: $10.9 million

IRR: 18 percent

Fee-based income

Galápagos Submarine Cable Private investment

for 25 years

1-year construction

7-year investment recovery

  • Design
  • Construction
  • Operation & maintenance
  • Funding
Capex: $50 million

IRR: 15 percent

Fee-based income

Caribbean Submarine Cable Private investment for 25 years 2-year construction

6.4-year investment recovery

  • Design
  • Construction
  • Operation & maintenance
  • Funding
Capex: $73.8 million

IRR: 18 percent

Fee-based income

3G/4G Rural Expansion Private investment 2021–2025
  • Planning
Capex: $63.9 million
Passive Telecommunications Infrastructure Sale In operation Divestment from public company Infrastructure worth $165.57 million

 

.
Environment
Project
Contract
Timeline
Scope
Details
Vindobona Wastewater Treatment Center PPP 7-year construction
  • Design
  • Construction
  • Operation & maintenance
  • Funding
Capex: $792.4 million

 

.
Culture
Project
Contract
Timeline
Scope
Details
Pumapungo Museum Restoration PPP 180-day construction
  • Refurbishment
  • Operation & maintenance
  • Funding
Capex: $680,000
Rumicucho Historical Farm Restoration PPP 180-day construction
  • Refurbishment
  • Operation & maintenance
  • Funding
Capex: $870,000
National Arts and Crafts School PPP 1-year construction
  • Design
  • Refurbishment
  • Funding
Capex: $2.8 million
Tourism-Oriented Archeological Sites PPP 1-year execution
  • Operation & maintenance
  • Refurbishment
  • Funding
Capex: $260,000

 

.
Sports
Project
Contract
Timeline
Scope
Details
High-Performance Athletes PPP 2021–2025 Training and sponsoring 510 athletes Estimated investment: $16.9 million
Refurbishment of Sports Ministry’s Centers PPP 180-day construction
  • Design
  • Refurbishment
  • Operation & maintenance
  • Funding
Capex: $10.6 million
Carpuela Sports Center Refurbishment PPP 1-year construction
  • Design
  • Refurbishment
  • Funding
Capex: $2.8 million
National Fitness-Promotion Plan PPP 2021–2025 Payment based on availability Estimated investment: $7.23 million

 

.
Health
Project
Contract
Timeline
Scope
Details
Nationwide Primary Health-Care Improvement PPP 4-year construction
  • Refurbishment
  • Operation & maintenance
  • Funding
Capex + Opex: $910.4 million
Nationwide Secondary and Tertiary Health-Care Improvement PPP 4-year construction
  • Refurbishment
  • Operation & maintenance
  • Funding
Capex + Opex: $565.74 million

 

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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.

.

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.

Paz Gómez

Paz Gómez is an Econ Americas analyst and a widely published economic commentator. Based in Quito, she leads the firm's office in Ecuador. She holds an MS in digital currency and blockchain from the University of Nicosia, Cyprus, and a BA in international relations and political science from San Francisco University of Quito. She is a cofounder and the academic coordinator of Libre Razón, a classical-liberal think tank in Quito, Ecuador. Follow her on Twitter and LinkedIn.

All stories by:Paz Gómez

Paz Gómez

Paz Gómez is an Econ Americas analyst and a widely published economic commentator. Based in Quito, she leads the firm's office in Ecuador. She holds an MS in digital currency and blockchain from the University of Nicosia, Cyprus, and a BA in international relations and political science from San Francisco University of Quito. She is a cofounder and the academic coordinator of Libre Razón, a classical-liberal think tank in Quito, Ecuador. Follow her on Twitter and LinkedIn.

All stories by:Paz Gómez
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