In 2019, the Ecuadorian government has continued its efforts to attract foreign investment, supported by recently enacted legislation and a clear shift in public policy.
Such initiatives have been crystallised on several fronts, for example, the enactment of The Law for Optimisation and Efficiency of Administrative Procedures and the Law for Reactivation of the Economy, which include significant reforms to remove obstacles for investors and promote efficient public services.
The government has also launched the "Prosperity Plan (2018-2011)" whose main objectives are to:
- Increase productivity
- Reduce public debt and deficit
- Income tax exemption for new investments
- Promote investment and job creation
- Increase Ecuador's credibility in foreign markets
- Reduce and focus public subsidies
- Eliminate unnecessary public institutions and expenditure
- Increase revenue from public assets and infrastructure
- Effective payment of Ecuador's international obligations
- Increase oil production, promote responsible mining operations
Ecuador has also coordinated measures with the IDB after decades to attain sustainable economic growth and consolidate social benefits. The three pillars of these coordinated measures are: i) strengthen public finances; ii) foster productivity; iii) develop the private sector.
As part of this dialogue, IDB has approved financing to Ecuador in the amount of USD3.4 billion to invest in several activities that align with these measures.
The Ecuadorian economy saw interannual growth of 0.6% for the first trimester of 2019, according to figures published by the Ecuadorian Central Bank.
In order to foster productivity, the government has announced labour reforms to modernise the labour market and promote formal employment while reducing excessive regulatory pressure.
To promote private investment, the government has continued to implement several strategies such as:
Several concessions of public works and public-private partnerships have been announced by the government in sectors such as electricity, infrastructure and transportation.
Ecuador changed its status from an "observant" to "associate" country in The Pacific Alliance and participated in a summit in July 2019 with the aim to become a full member in the near future. This will allow the country to reinforce commercial relationships with Peru, Colombia, Chile and Mexico, and paves the way towards free trade within the Alliance.
Ecuador has been accepted as a member of the OECD Development Centre, which is an important indicator of the improved international perception of the country.
In the hydrocarbon industry, the government expects to first recover a production of 550,000 barrels per day and increase this production to up to 700,000 barrels per day in 2021. This will mean offering oil fields to private companies and public bidding rounds.
Regarding the mining sector, President Moreno's administration has acknowledged the importance of developing this industry, with a more peaceful coexistence between miners and environmental activists. Other significant changes regarding the mining industry involve the elimination of windfall tax and the reduction of capital gains tax, among others.
Although some industries have powerful regulatory agencies that require significant initial licences such as the food, medicine, agrochemical and telecommunications industries, important reforms aim to expedite most day-to-day procedures, incorporate electronic means to file petitions and waive certain requirements.
In dispute resolution matters, local arbitration for commercial disputes is available in the main urban centres. A set of procedural reforms in 2016 moving towards an oral litigation system has also helped to speed up the ordinary justice system. More importantly, Ecuador has reformed several internal rules of civil procedure to allow for the execution of foreign arbitral awards.
Typically, investment contracts promoted by the government, as well as public-private alliances, include standard international arbitration clauses for disputes that may arise with private investors.
The government continues to seek the participation of local and foreign private investors as a key to development, and positive interactions with the international community and private sector are evident including increased participation in public policy decisions.