Ecuador is a country that has traditionally based its economy on its natural resources, both renewable and non-renewable. In this sense, Ecuador is no stranger to mineral exploration and exploitation activities. For example, the country has great experience in the production of oil and its derivatives.
This experience, which it has had for more than half a century, generates an important basis for the correct development of mining projects derived from the discovery of new deposits and important mineral sources in the country. Mining in Ecuador has not always been the most accessible business venture due to heavy government intervention, though, despite the country’s unexplored natural wealth.
Now that the government is paring back legislation around mining activities, the sector opens up for foreign commercial activities. Mining and related services companies are therefore offered an attractive opportunity for future international investment in Ecuador.
Overview: mining in Ecuador
Significant mineral deposits have been confirmed in Ecuador for decades. It is widely known that certain regions of Ecuador have traditionally witnessed important findings of gold, copper and silver mining deposits. The Zaruma and Loja sectors, for example, house significant reserves for gold.
Though a dominant sector in Ecuador, mining wasn’t reaching its full potential due to unclear and heavily regulated compliance requirements. This included large tax and revenue contributions from companies to the government, which restricted the profitability of Ecuadorian mining operations.
However, the country is expecting to see more large-scale mining projects as a result of recent law reforms intended to open the sector up.
New deposits develop investment potential
Ecuador has made several significant discoveries of global significance in its mineral deposits. The Fruta del Norte and Cascabel projects are testament to the business opportunity for local and foreign mining companies in the country. These projects are boosting the country’s production of gold and copper, and also its reputation on the world stage for its mining potential.
New mining laws introduced in June 2019 have unlocked the commercial environment in mining and peripheral service sectors, as the government has reduced the levels of intervention in mining business activities.
The country also expects to see a boom regarding the investigation and exploration of potential deposits of ‘rare earth’ and other types of minerals that are not regularly explored, but very useful for day-to-day products. Lithium is a key example of this: this light metal is essential for the manufacture of batteries, which make it one of the most covetable minerals in the world. Ecuador’s lithium sources could make this country more competitive than some of its regional counterparts such as Chile and Bolivia, whose restrictive regulations largely deter exploration into their world-class lithium reserves.
With this, Ecuador becomes an interesting focus of opportunities for mining industries, and a flow-on development of the mining services eco-system.
Mining services industries set to grow
Investors are turning to the Ecuadorian mining services industries for new commercial opportunities, as the country’s profitability in mining grows. Notably, there are two large groups of services related to mining activities where many mining service operators are taking advantage of this development.
The first set of mining-related activities that offer attractive opportunities is the range of services that require specific and technical knowledge.
These services include:
- geographic and geological research support services
- architectural infrastructure
- structural and process designs
- chemical treatments
- production and materialization
- environmental management
- operational supervision.
The second group of services encompasses a wide range of activities that do not require mining-specific expertise, such as:
- transport support
- cleaning and site maintenance
- security services
- food and catering
- administrative activities
- financial services
- logistical support.
Countries with a strong mining services prowess and good international connections to the region, such as Australia, have the potential to capitalize on this growing need in Ecuador.
How can these services help?
The government is set on increasing Ecuador’s attractiveness as a mining destination for international companies. Now that it has set a comparatively more digestable 2019-2030 mining agenda, its focus is on providing other competitive benefits for miners.
Mining service companies can help with Ecuador’s improving image for mining, and support a growing mining ecosystem. While new operators are considering their expansion into the country, both the technical and more general service providers could act now to snap up contracts and partnerships with these new arrivals.
By getting ahead of the curve, service companies have the opportunity to establish themselves and a client base. Options for doing so are varied: service-savvy entrepreneurs choose to form or incorporate a company, or open a foreign branch or subsidiary in the country.
Breakdown of the June 2019 mining reform
As mentioned above, in June 2019 the Ecuadorian government presented a new policy and set of legal initiatives to encourage national and foreign investment in mining. These policies are based on five main axes:
- Boost national and foreign investment
- Increase the country’s mining production
- Eliminate illegal mining operations
- Impose requirements to generate environmentally and socially sustainable mining
- Build a strong legal framework and specific national administrative processes to support the sector.
Likewise, these policies seek to generate sustainable and responsible mining procedures, not only from an environmental perspective, but also considering the cultural impact of these types of activities.
Get legal services support for your mining operations
Due to the above considerations, if you or your company is dedicated to the provision of mining services or related activities, Ecuador can become an attractive destination to expand or strengthen your business.
If you’re considering expanding your mining services to Ecuador, and need assistance to comply with the processes derived from these legal and administrative processes, reach out to Biz Latin Hub. Our team of local and expatriate professionals provides expert mining legal services for companies in Latin America. Contact one of our country managers in the different jurisdictions of Latin America at [email protected] and we will see how we can help you and your company in Ecuador and throughout Latin America.
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