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ECUADOR: An Introduction

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Ecuador aims to have a stable 2020 and continue its efforts to ensure legal and fiscal stability in order to attract foreign investment, a crucial element of public policy. Important government agencies and the Ministry of Production headline such initiatives.

A combination of promotion of private investment as a means to revamp the economy and more technical controls of public spending have increased exterior perception of the government and have been the basis for agreements with external entities such as the IMF. In December 2019, these organisations approved second and third combined reviews of performance of Ecuador with regards to its economic programme supported by the Expanded Service of the IMF. This has been viewed as a significant achievement and as an important step in order to secure future disbursements.

General public policies launched as part of the government’s Prosperity Plan (2018-2021) continue to be the focus of public agenda, including objectives such as:

- Increasing productivity

- Reducing public debt and deficit

- Exoneration of income tax to new investments

- Promoting investment and job creation

- Increasing Ecuador’s credibility in foreign markets

- Eliminating unnecessary public institutions and expenditure

- Increasing revenue from public assets and infrastructure

- Effective payment of Ecuador’s international obligations

- Increasing oil production, promote responsible mining operations

While some measures implemented in 2019, especially related to the elimination of subsidies (fossil fuel), brought temporary social unrest, the government is determined to balance social interest with fiscal responsibility.

The Ecuadorian economy is expected to grow around 0.7% in 2020. Most experts, including the Ecuadorian Central Bank, have positive projections of a modest recovery after years of adjustment.

Ecuador’s continuous struggle to increase productivity is also a central point in the country’s agenda. As Ecuador uses the US dollar as currency (which is perceived as an important cause of economic stability), it is crucial to increase its participation in foreign markets with competitive local products. The commercial treaty with the European Union continues to bring important opportunities in that regard.

In addition, the government has announced labour reforms to modernise the labour market in order to promote formal employment while reducing excessive regulatory pressure; while these reforms have been delayed for some time, an approach to update the labour legal framework and recognise new ways of employment remains as a valuable objective.

Important legal reforms that have been passed include a new Commerce Code, which incorporated regulations to several contracts previously ignored by Ecuadorian legislation in the fields of distribution, agency and franchising. The approach is to create clear rules and there are no major legal preferences or protections for local parties as in other jurisdictions. This should bring further certainty to many international commercial transactions.

The government has continued its approach to promote private investment by implementing several strategies such as concessions of public works and public-private partnerships, which have been implemented in part and announced by the government in sectors such as electricity, infrastructure and transportation.

In the hydrocarbon industry, the government expects to increase production and has entered into several contracts with private companies offering incentives to investments that allow such incremental production. A potential recovery of international oil prices would also bring important income and increase activity in general.

The mining industry has been slowly transformed from projections to reality. President Moreno’s administration has acknowledged the importance of developing this industry, with a more pacific coexistence between miners and environmental activists. While discussions relating to the exploitation in sensitive ecological areas continues, in 2019 the first gold and copper industrial exports began, giving a much-needed impulse to the industry.

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. This has been especially palpable in the pharmaceutical industry and sanitary registration of such products.

In the telecommunications market, the government aims to increase access to internet and has reformed the telecommunications law to offer advantages to tech companies and reducing the rates for spectrum use, among other measures.

In dispute resolution matters, local arbitration for commercial disputes is available in the largest urban centres and the country is becoming more knowledgeable in the management of handling important commercial disputes. The court system was benefited by major reforms to civil and administrative procedure in 2016, and terms to resolve disputes are now perceived as reasonable.  

Important pieces of legislation that may be approved in 2020 notably include a new Health Code that has important implications to several industries such as processed foods and pharmaceuticals; and a very delayed data protection law that has been in the works for years, an area where Ecuadorian legislation has been clearly behind other jurisdictions.

Lastly, on the political scene, the second half of the year will bring relevant news as the presidential election that will be held in the first quarter of 2021 is expected to be heavily contested, and definitive candidates and tendencies will be revealed as that date nears.