Ecuador: An Overview

During 2025, Ecuador continues to navigate an evolving political landscape shaped by security imperatives, fiscal consolidation, and the implementation of reforms initiated since late 2023. Following the 2025 general elections, the executive has maintained public order and institutional strengthening at the centre of its agenda, sustaining broad public backing for anti-crime initiatives and co-operation with international partners. The 2024 security-focused referendum – authorising broader tools to combat organised crime, enhancing co-ordination among security forces, and enabling deeper international co-operation – continues to frame legislative and judicial developments. Engagement with the United States on public safety and transnational crime remains active and has supported operational capabilities and training. In the National Assembly, the administration governs through issue-based coalitions rather than a stable single-party majority, but has nonetheless advanced priority measures with cross-bench support.

Main Legislative Developments Under the Current Government

The government has continued to advance its legislative programme, building on earlier steps in energy reliability, security policy, and modernisation of regulatory frameworks. Key developments and proposals have concentrated on:

• national security;
• prevention of money laundering, including modernisation of monitoring systems and enhanced oversight of high-risk sectors and entities;
• access to employment and regulation of protections for employees with disabilities; and
• regulations governing NGOs.

An attempt to materially reform the Constitution was halted in a referendum held in November 2025. The general view is that this outcome allows for continuity of the legal panorama and reduces uncertainty and potential political instability.

On fiscal policy, measures aligned with an IMF-supported programme remain in place to address the deficit and reinforce credibility, including:

• maintaining the VAT rate at 15%;
• continuing temporary contributions on extraordinary corporate profits;
• sustaining targeted levies on extraordinary profits in the financial sector; and
• preserving a reduced but still applicable tax on outbound cash remittances, coupled with specific exemptions.

A political and fiscal achievement for the regime in the later part of 2025 was the elimination of a public subsidy on Diesel, which had cost more USD1 billion annually.

These steps have supported fiscal discipline, lowered financing risks, and helped maintain access to official and market funding.

Economic Outlook

Ecuador’s 2025 outlook is one of cautious stabilisation. After export headwinds in 2024, non-oil exports have shown a gradual recovery in 2025, led by agricultural products – particularly shrimp, bananas, cacao, and coffee – despite price and sanitary challenges in global markets. Mining remains a strategic pillar for medium-term investment; flagship assets continue to progress through permitting, community engagement, and subsequent feasibility phases, even as timelines are shaped by social and environmental due diligence. The IMF’s multi-year arrangement, totalling approximately USD4 billion, underpins fiscal anchors and supports reforms to strengthen revenue administration, improve public financial management, and advance a gradual, targeted recalibration of fuel subsidies with compensatory social measures.

Market indicators reflect improved but still cautious sentiment. Inflation remains low and contained – consistent with dollarisation – contributing to purchasing power stability. However, vulnerabilities to external shocks persist, including oil price volatility and climate-related stress on hydroelectric generation. The severe 2024 drought and power rationing accelerated efforts to diversify generation sources, upgrade transmission, and attract private capital. New frameworks and procurement schemes facilitate medium-scale private generation and faster permitting, along with cross-border electricity purchases to buffer supply during periods of hydrological stress.

Public debt remains manageable but constraining, hovering in the mid-40s to low-50s% of GDP, depending on methodology and valuation. The government is pursuing liability management and sustainability-linked instruments, including conservation finance structures that channel resources towards priority environmental areas such as the Amazon and marine reserves, with workstreams to expand these models under evaluation.

Trade and Foreign Investment

Trade policy remains a pillar of the growth strategy. The United States continues as the leading destination for non-oil exports, with efforts focused on improving market access predictability and technical co-operation. The economic co-operation agreement with South Korea, signed in 2023, has begun to diversify destinations for higher-value non-oil goods. The trade agreement with China entered into force and has broadened opportunities for key exports, including shrimp, minerals, bananas, wood products, and cocoa, while also requiring domestic sectors to adjust to increased competition.

Foreign investment continues to target technology, healthcare, logistics, renewable energy, and financial services. The M&A pipeline remains active, supported by improving macro certainty, maturing corporate governance practices, and gradual simplification of regulatory procedures. Policy emphasis on legal certainty, contract enforceability, and streamlined approvals has bolstered investor confidence, although execution risks and security costs remain key considerations in due diligence.

Dispute Resolution

Ecuador remains a party to the New York Convention and maintains a modern arbitration framework. Constitutional recognition of ADR supports party autonomy on choice of law and forum, subject to public policy limits. Investment protection agreements and domestic instruments that recognise international arbitration continue to provide additional layers of protection to foreign investors, reinforcing the jurisdiction’s reliability for cross-border contracting and project financing.

Recent and Upcoming Political Events

With the 2025 electoral cycle concluded, the government’s agenda is centered on consolidating security gains, anchoring fiscal sustainability, and executing pro-competitiveness reforms. Policy priorities include targeted subsidy reform with social compensation, energy system resilience, streamlined permitting for investment, and measures to raise productivity and formal employment. While investment decisions slowed around the electoral calendar, the post-election period has seen a resumption of deal activity and capital deployment, particularly where regulatory clarity has improved. The emphasis on energy diversification, public integrity, and environmental stewardship is expected to support investment and growth through late 2025, albeit with ongoing sensitivity to external shocks and domestic security dynamics.

Ecuador’s near-term outlook is one of measured stability and pragmatic reform. Structural challenges – public debt constraints, exposure to commodity and climate shocks, and social inequality – remain, but a combination of fiscal anchors, institutional strengthening, and targeted openness to investment provides a credible platform for gradual, sustainable growth.