As globalization continues to change the world and encourage businesses to step outside of their comfort zones, expansion into Latin American markets is becoming more common. For businesses of all shapes and sizes, having a presence in key markets on all four corners of the globe not only increases brand awareness and perception but unlocks new opportunities for long-term growth and expansion. Nowhere is this philosophy truer than in Ecuador.
With an accelerating economy, strong political leadership and government policies designed to encourage foreign direct investment, there has never been a better time to establish a business in Ecuador and take advantage of its growing middle classes, low barriers to entry, impressive trading relationships and low levels of risks. Below, we offer guidance on why you should look to incorporate a sales office in the country, and share advice on maximizing your investment in the country to create a powerhouse that enables truly global opportunities.
Since 2017, Ecuador’s economy has been on the rise, having struggled with an economic downturn in the early 2010s. Thanks in part to oil price increases and access to new financial markets such as the European Union, the country has seen a huge increase in growth in the past couple of years, making it an attractive option for foreign investors who are looking to grab a slice of the Latin American market and dominate in new international territories.
Another benefit of establishing a sales office in the country is its growing middle class. Data from the United Nations Program for Development (PNUD) shows that the country’s middle classes have grown from 14% to 35%, and in some areas of the country, as much as 45% of its population can be considered middle class. For B2B and B2C businesses, high levels of disposable income mean you can maximize profitability and sell more goods and services.
Low Barriers to Entry.
Once you have determined that you’d like to establish a sales office in the country, the next step is to form a company in Ecuador. The good news is that the process is relatively simple and straightforward, and there are low barriers to entry.
One reason why Ecuador has so much potential to foreign investors is its liberal investment regulations and business-friendly environment. Indeed, the government treats local and foreign businesses the same and offers benefits, tax breaks, and incentives, which creates a level playing field and allows foreign businesses who want to set up a sales office the same opportunities as locally established businesses.
It’s important to mention, however, that without prior local knowledge in legal and accounting, it can be tough to do business in the country and make a success of an international venture. Building the right team is critical to maximize investment and ensure long-term profitability. There are several Ecuadorian company types to consider when getting started, including a public or private Limited Liability Company (known as a Sociedad de responsabilidad Limitada in Spanish), an Unlimited Liability Company (ULC), a Partnership (general or limited), a Joint Venture, or a Sole Proprietorship. Finding the right one for your sales branch is important, but the chances are you’ll choose to incorporate a Limited Liability Company.
Growing Trading Relationships.
Back in the 80s and 90s, trade between the United States and Ecuador was at an all-time high, with US businesses investing hundreds of millions of dollars in the manufacturing sector to produce high-quality goods to sell back in their home country. Entrepreneurs were keen to take advantage of the low wages and tax-free capabilities of trading in Ecuador, and soon food, beverage, mining, telecommunications, and retail were all dominated by US brands. In the early 2000s, investment in the country dropped, but there has been a growth in business and bilateral investment between the United States and Latin American once again, and Ecuador is a key player, creating jobs and business opportunities in the country.
The European Union is another key trading partner with Ecuador, and after signing the Protocol of Accession of Ecuador to the EU’s Trade Agreement with Colombia and Peru, trade between the two territories have been on the increase. In 2016, more than €25.2 billion worth of bilateral trade took place between the EU and Andean states, and that figure is only set to rise as the United Kingdom departs from the EU and businesses look for new partners.
By establishing a sales office in Ecuador, you’ll not only be able to take advantage of the local economy but economies around the world. The country is part of several trade blocs and agreements, and the government actively campaigns on new trading relationships. The most recent is the Free Trade Agreement with Ecuador in Sauðárkrókur, Iceland, which is currently in negotiation and set to pass through law in 2019, unlocking new sales avenues.
Finally, by establishing a sales office or branch office in the country of Ecuador, you’ll be able to enter into the country without investing too much capital. Whilst establishing a fully-fledged business is more affordable than it would be in some other Latin American countries, you will still require significant funds to incorporate, purchase an office, hire staff, and market your products or services. With a sales office, on the other hand, you can rent an office and take advantage of professional employer organizations, effectively allowing you to outsource your employment in the country without having to form a new business or be responsible for those employees. Indeed, PEOs cover everything from salaries to human resources, meaning that you can utilize their skills when required without having a legal Ecuadorian presence, which not only reduces risk but allows you to ‘test the waters’ to see whether there is enough of a demand for your products and services in the country before a fully-fledged expansion.
Set up a Sales Office in Ecuador
Establishing a sales office in Ecuador offers numerous benefits, but one should not go into the process blindly. Relying on the assistance of an Ecuadorian business expert will ensure your organization remains compliant throughout the process, and that you can trade freely with other businesses and countries through an Ecuadorian sales base.
To find out more about how we can help, contact the Ecuadorian business experts at Biz Latin Hub at [email protected], and we’ll get back to you as soon as we can with a personalized solution designed to maximize profits and grow your business in the country.