Located in the middle of the Andes, Ecuador stands out globally as an attractive destination for commercial opportunities. The petroleum-rich nation borders Colombia in the north and Peru in the east and south. Ecuador is diverse and has coastal areas, the highlands, the Galápagos islands amongst other areas. The region’s climate has created the perfect conditions for agricultural production, and with the rise of globalization, Ecuador has turned into an exporting powerhouse. Ecuador is a leading manufacturer and exporter of raw materials around the world.
In fact, Ecuador exported over USD$16 billion worth of goods in 2018. Additionally, the economic growth rate has shown a stable upward trend since the end of the financial crisis in 1999. In 2017, the Gross Domestic Product (GDP) in Ecuador was worth USD$103.06 billion.
In 2000, Ecuador made the decision to adopt the US dollar as the national currency. Since then, the region has seen an increase in economic stability, and it has become one of the most stable economies in Latin America. As a consequence, Ecuador avoids all complications that arise from exchange rate fluctuations and conversion costs when international banking transactions are involved.
The Ecuadorian government remains committed to quality higher education for its citizens. This commitment can be seen through its offerings of international scholarships (masters, PhDs, and medical specialties) to its citizens in foreign universities. This shows the governments desire to ensure that Ecuador remains active in the global marketplace. In the last 10 years, approximately 30,000 scholarships have been granted in a wide range of academic majors.
Traditionally, Ecuador has been a leading global exporter, which has been a key contributor to GDP growth. Some key Ecuadorian exports include oil, banana, shrimp, flowers, cocoa, among others. These developed sectors are popular amongst investors and receive the bulk of FDI in the region. In recent years, the development of infrastructure – roads, improvement & modernization of ports and airports and investment in education projects have contributed to the growing attractiveness of the region for investment, especially for those involved in the trading.
Attractive Investment Destinations
Ecuador is a biodiverse nation and its geographic distribution includes 4 regions each with different and unique geographical and meteorological features. These are the Sierra, the Coast, the Amazon, and Insular Region. The Sierra, for example, has the largest mountain range in the world. This area produces products such as wood, corn, fruits, and roses, many of which are exported abroad.
Secondly, there is the Cost, a region with access to the Pacific Ocean through a major modernized port system. The main commercial activities in this area include the production of shrimp, banana, cocoa, coffee and, in general, a wide variety of tropical and subtropical fruits. As the area grows in popularity for commerce and also tourism, business opportunities arise in areas such as luxury hotels, tourism companies, and restaurants.
Probably the most well-known area in Ecuador is the Amazon. In this part of Ecuador, the government has shown a renewed commitment to stimulating local economic growth. One example of this is through the construction of new transport routes, creating easy access to Peruvian and Brazilian markets. As a commitment to further growth in the tourism sector, the government supports the constructions of new eco-lodges who have connections to ecotourism activities.
Finally, the Insular Region is a unique place that supports biodiversity projects, animal and plant conservation projects, scientific research and tourism. There is an incentive applicable to priority sectors such as tourism outside of Quito and Guayaquil. Companies are, according to this new incentive, exempt from paying income tax for 5 years.
The General Framework for Investments in Ecuador
In the last fifteen years, a series of new regulations related to tax and customs duties have been implemented, creating an ideal scenario for investors. These legislative changes include tax incentives and improved mechanisms for dispute resolution, among others.
Ecuador, as a show of commitment to being involved in the global market, has entered various trade agreements and double taxation avoidance agreements. Some examples of these free trade agreements include the European Union, Andean Community (CAN), MERCOSUR, ALADI, Guatemala, Nicaragua, El Salvador, EFTA. These trade agreements give Ecuador competitive advantages for importing and exporting goods.
The current legal and political framework created by the Ecuadorian government has the objective of attracting foreign investment into the region. Less than a year ago, the ‘Productive Promotion and Attraction of Foreign Investment Law’ was established. This fresh regulatory framework boosts and encourages investments and applies tax incentives in certain circumstances.
It is important to note that companies who reinvest their profits in Ecuador may be eligible for a reduction of 10% in their income tax; providing yet another reason to consider doing business in Ecuador.
Ecuador has some public agencies that are responsible for the promotion and facilitation of trade, commerce and investment in the region. These entities include the Ministry of Foreign Trade and Investment, which establishes investment policies and Pro Ecuador, who promotes and provides assistance to foreign investors looking to establish a commercial presence in Ecuador.
The Ministry of Foreign Trade and Investment and the ProEcuador are ready to promote Ecuador as an attractive region to do business, and each of the regions in Ecuador offer unique opportunities for foreign businesses.
Nevertheless, it can be challenging to begin operations in Ecuador without the right local support. Biz Latin Hub has been assisting companies to successfully conduct business in Latin America since 2014. Our local team of experts can assist you with your business expansion to Ecuador. For personalized support, reach out to a member of our team [email protected] We are ready when you are.