Companies that decide to start exporting products or do business internationally, in general, need to facilitate a favorable scenario for their investments.
This reduces uncertainty and optimizes the allocation of resources for business expansion to an international market. A key principle to ensure security in your expansion is building a sound legal strategy. For this, it’s recommended you seek legal assistance.
Learn the techniques to build the right strategy to take your Ecuadorian company across borders.
Internationalize your Ecuadorian Company? Understand relationships and regulations
It’s important to understand which international regulations and agreements Ecuador is committed to.
Foreign trade activities have three levels of regulation. They are multilateral trade agreements, regional or bilateral trade agreements, and national regulations. The purpose of these three regulations is to eliminate and decrease possible issues at the border. As well as to reduce the impact of the rules applicable to importing products- indirect barriers to trade.
Ecuador is a current member of the World Trade Organization (WTO), the Andean Community, and the Latin American Integration Association (ALADI). These organizations all promote trade and integration among member countries. However, be aware that they may also impose certain binding in-house regulations as well.
In 2016, Ecuador signed a commercial agreement with the European Union (EU), Colombia and Peru. The country also has agreements for preferential market access at various levels with several countries:
- Latin American trade bloc Mercosur, which includes Brazil, Argentina, Paraguay and Uruguay
- El Salvador
Relations between Ecuador and the United States are subjected to a program of tariff preferences that extend out to 2020, and are approved within the framework of the Generalized System of Preferences (GSP). During 2018, Ecuador signed an Inclusive Economic Partnership Agreement with the countries of the European Free Trade Association. Ecuador is also seeking membership to the Pacific Alliance, a bloc made up of Chile, Colombia, Mexico and Peru.
Research and analysis
Identify the framework that sets the legal requirements for access to your desired market. Check if Ecuador has a current trade agreement with the country of destination, as they typically involve reduced barriers to trade for certain goods and industries.
Research any tariff preferences and how best your business could approach them for optimal export value. Check any licenses or quotas that might be in force in your destination country for your product(s). Check biosecurity, sanitary or phytosanitary requirements, and if your product could be considered a restricted import in any way.
Analyze any technical or quality standards, and standards for packaging and labeling in the industry your product falls within. The regulations outlined by the EU, Mercosur and Andean Community state that businesses must conduct studies at both regional and national levels to ensure compliance with regulations at both levels. The EU additionally requests that exporters examine the national regulations of their intended destination country for their product as well.
Finally, identify the local tax and regulatory structure in your destination country.
Build your commercial strategy
Ecuador companies wishing to export their product or expand internationally must undertake careful commercial planning and build a sound legal strategy. You must also have a safe environment for your investments and investors. You need to ensure long-term success through deliberate development of your commercial activities in your chosen market.
Optimizing your productive capacity in a new market relies on organization through a sales expansion plan. Use information you’ve gathered from your research and analysis to build a plan around conditions of access and participation in the new market.
Consider the contractual alternatives that best suit the needs of your intended operations, to ensure and protect the interests of the company.
Determine the final cost of your product in the destination market, considering any import tariffs, legal and operational fees.
Ecuadorian export environment
The Central Bank of Ecuador in 2018 non-oil exports reached $12,804.4 million, an increase of 4.9% over the value exported in 2017. In addition, there was an increase of 2.8% in the export volume.
There are five products in Ecuador that are the most common exports. These products are shrimp, banana, cocoa, tuna, and coffee. This represents 59.3% of exports. Exports of the 10 most important non-traditional products reached up to 35.1% of the country’s total exports. This means that only 15 products represent over 90% of the total value of Ecuador’s exports.
This pattern is largely present in Ecuador’s trade relations with the EU and Andean Community. Ecuador does however serve the latter as its main customer. In 2018, Ecuador’s value of exports to the Andean Community represented US$502.3 million. US$217.2 and US$34 million worth of exports went to the United States and EU respectively.
Ecuador’s experience in traditional export products gives local businesses well-traveled roads to follow when considering their export or expansion potential.
Seek local assistance
Even with the best-made plans and carefully thought-out strategies, it’s unwise to penetrate a new market alone.
As Ecuador’s complex legal and financial requirements change frequently, there’s a chance your destination country’s regulatory models take a different form.
Seeking local legal and commercial representation, and even outsourcing your financial requirements, can insure your business from setbacks. Reduce the burden on your own shoulders by getting expert help, so you can focus on your core business operations. This way, your business can stay compliant and up to date on reporting requisites, mitigating the risk of penalties.
Contact us for help
If you’re making your move into a new market and have questions about finding high-quality legal, commercial and financial services to support your business, Biz Latin Hub can help.
With 13 offices worldwide, our teams of local and expatriate experts offer a comprehensive range of professional multilingual market entry and back-office services to ensure your company’s success in Latin America and Australia.
Contact us at [email protected] to find out how we can help you do business.