ECUADOR: An Introduction

Political Overview

In 2025, Ecuador continues to navigate its evolving political landscape following the recent national elections. President Daniel Noboa, who initially took office on 23 November 2023, has now secured a full four-year mandate after a successful re-election campaign. The election, which was closely contested against Luisa Gonzalez’s left-wing and progressive party associated with former President Rafael Correa, ultimately reinforced Noboa’s centrist and pro-reform agenda. The administration’s focus on public safety and institutional strengthening remains central, with the government maintaining strong public support for its security initiatives. The 2024 referendum, which empowered the armed forces in combating organised crime and introduced specialised constitutional courts, continues to shape the legislative and judicial landscape. The government’s openness to US co-operation on public safety and its willingness to allow foreign military and law enforcement collaboration have further contributed to Ecuador’s political stability and favourable investment climate. The current administration is the first in ten years to hold a majority in the National Assembly and has significantly more political capital than its predecessors.

Main Legislative Developments Under the Current Government

The Noboa administration has continued to advance its legislative agenda after re-election, building on earlier successes in the energy market and economic reforms. Key legislative developments are aimed at further regulating the following key issues:

• national security;
• prevention of money laundering, requiring modernised systems of control and greater overseeing of NGOs; and
• access to employment and regulation of protection for employees with disabilities.

The administration is also pushing for specific constitutional reforms to:

• modify current entities that appoint heads of control agencies;
• reduce the number of legislators; and
• allow for some flexibility in the work market.

In addition, the government has implemented further fiscal measures to address the public deficit and align with International Monetary Fund (IMF) standards, including:

• maintaining the increased VAT rate at 15%;
• continuing the special contribution on extraordinary corporate profits;
• sustaining the tax on extraordinary profits from private financial institutions; and
• keeping the 5% cash remittance tax in place.

These measures have been instrumental in maintaining fiscal discipline and ensuring continued access to foreign funding.

Economic Outlook

Ecuador’s economic performance in 2025 reflects a period of cautious optimism. The country has recovered from the 9% decrease in exports experienced in 2024, with agricultural exports – particularly shrimp, coffee, cacao and bananas – showing robust growth. The mining sector remains a key driver of investment, with the Cascabel mining project now fully operational and attracting significant foreign capital. The government’s agreement with the IMF, which provided approximately USD4 billion for structural reforms, has underpinned fiscal stability and enabled the gradual elimination of fuel subsidies – a process that continues to be closely managed to avoid social unrest.

The country’s risk rating has remained stable, reflecting improved market perceptions of Ecuador’s repayment capacity. Inflation is controlled at 2.8%, supporting economic stability. However, the country remains vulnerable to external shocks, particularly fluctuations in oil prices and the impact of climate events on hydroelectric power generation. The severe drought in the north Andean region in late 2024, which led to electricity shortages and emergency rationing, has prompted the government to accelerate the diversification of energy sources and encourage private investment in energy production. New legal frameworks now allow private investors to develop projects up to 100 MW, with streamlined permitting and preferential purchase agreements designed to prevent future energy crises.

Public debt remains at 45% of GDP, limiting fiscal flexibility. The government has continued to pursue innovative solutions, such as public debt conversion agreements aimed at protecting environmentally sensitive regions, including the Amazon. Efforts to replicate these agreements in other areas are ongoing.

Trade and Foreign Investment

Trade relations remain a cornerstone of Ecuador’s economic strategy. The United States continues to be the primary destination for non-oil exports, and the government is actively seeking to preserve and enhance favourable trade conditions. The economic co-operation treaty with South Korea, signed in October 2023, has already begun to yield results, with a notable increase in non-oil exports to that market. The commerce treaty with China has also strengthened bilateral trade, with key exports including shrimp, lead and copper concentrate, bananas, balsa, wood products and cocoa.

Foreign investment continues to flow into strategic sectors such as technology, health and financial services. The M&A environment remains active, with both local and international parties demonstrating increased sophistication and confidence in the Ecuadorian market. The government’s commitment to legal certainty and streamlined regulatory processes has further enhanced the country’s attractiveness as an investment destination.

Dispute Resolution

Ecuador remains a signatory of the New York Convention and upholds a robust arbitration law. The constitutional support for alternative dispute resolution (ADR) methods provides international companies with legal assurances regarding choice of law and jurisdiction clauses. Investment protection agreements are in place, offering additional security for foreign investors and reinforcing Ecuador’s reputation as a reliable jurisdiction for cross-border business.

Recent and Upcoming Political Events

With the national elections concluded and President Noboa’s administration firmly in place, the government’s focus has shifted to consolidating recent gains in public safety, fiscal responsibility and economic reform. The administration is working to maintain public confidence and international market trust, particularly as it implements further structural reforms and manages the gradual removal of fuel subsidies. While investment activity slowed in the lead-up to the elections, the post-election period has seen renewed interest and increased capital flows into key sectors. The government’s proactive approach to energy diversification and environmental protection is expected to drive further investment and economic growth throughout the remainder of 2025.

Ecuador’s political and economic outlook for the coming year is characterised by stability, cautious optimism and a continued commitment to reform. The challenges of public debt, external vulnerability and social inequality remain, but the government’s pragmatic approach and strong mandate provide a solid foundation for addressing these issues and fostering sustainable growth.