Investing

flag Ecuador Ecuador: Investing

FDI in Figures

Ecuador is open to FDI in most sectors. However, sectors considered strategic reseve the right to be managed by state-owned or -controlled companies. These sectors include energy, telecommunications, non-renewable natural resources, transportation, hydrocarbon refining, water, biodiversity, and genetic patrimony. As such, FDI inflows remain very low compared to other countries in the region. According to UNCTAD’s World Investment Report 2022, FDI inflows decreased to USD 621 million in 2021. However, there was an overall rise in the value of greenfield investments during the same period (which totalled USD 720 million). Nearly 80 per cent of foreign investment is in the oil sector, so the country is heavy reliant on this sector and, therefore, it strongly influences FDI. In 2021, the stock of FDI increased to USD 21,3 billion. Nevertheless, access to businesses in Ecuador continues to be a challenge: labour regulations are very complex and government policies tend to be very interventionist, especially in the oil sector.

According to the Economist Business Environment, Ecuador ranks 71 out of the 82 countries reviewed for their investment climate. Ecuador's key strengths are the country's significant mineral, oil and gas potential; a diverse climate that allows for a wide range of crops; marine resources; low inflationary risk due to fully dollarised economy, free trade zones, relaxed labour laws also allow the companies to hire workers temporarily, and great tourism potential. However, some of the country's weaknesses include the fact that the economy is heavily oil-dependent, a large informal sector and low-skilled workforce, state interventionism, and low levels of domestic and foreign private investment. Ecuador is working towards opening up to the world and further attract foreign investment. In order to reach its goals, the country passed the Productive Promotion and Attraction of Foreign Investment Law in 2018. The law includes big tax benefits to new investments in Ecuador and applies to both new companies and previously existing ones. Additionally, it addresses the condonations of interest, charges and fines of outstanding tax obligations and other obligations with different types of authorities. Other than the law, the country set a series of measures to attract FDI, such as the rethinking its Bilateral Investment Treaties and the process to sign a trade agreement with the United States. Ecuador also has public agencies that are responsible for the promotion and facilitation of trade, commerce and investment in the region, including the Ministry of Foreign Trade and Investment and Pro Ecuador, an agency that promotes and provides assistance to foreign investors looking to establish a commercial presence in they country. However, in spite of the government's efforts to attract FDI, the overall investment climate remains uncertain, as economic, commercial, and investment policies are subject to frequent change. Recently, China has become the largest investing country in Ecuador. However, in terms of region, investment from Latin American countries takes the lion's share. The Chinese oil company CNPC has invested over USD 10 billion in a refinery construction project (Rafinería del Pacífico) and expressed interest in downstream projects. The Canadian company Lundin Gold Inc. is in the process of developing the Fruta del Norte gold mine in southeast Ecuador. The underground gold mine - which is expected to operate for 15 years - will be Ecuador’s largest, and is predicted to eventually have an annual production of approximately 340,000 ounces of gold.

 

Country Comparison For the Protection of Investors

  Ecuador Latin America & Caribbean United States Germany
Index of Transaction Transparency* 2.0 4.1 7.0 5.0
Index of Manager’s Responsibility** 5.0 5.2 9.0 5.0
Index of Shareholders’ Power*** 6.0 6.7 9.0 5.0

Source: Doing Business - Latest available data.

Note: *The Greater the Index, the More Transparent the Conditions of Transactions. **The Greater the Index, the More the Manager is Personally Responsible. *** The Greater the Index, the Easier it Will Be For Shareholders to Take Legal Action.

 
Foreign Direct Investment 202020212022
FDI Inward Flow (million USD) 1,095647788
FDI Stock (million USD) 20,763.221,410.522,198.5
Number of Greenfield Investments* 18.016.019.0
Value of Greenfield Investments (million USD) 680704254

Source: UNCTAD - Latest available data

Note: * Greenfield Investments are a form of Foreign Direct Investment where a parent company starts a new venture in a foreign country by constructing new operational facilities from the ground up.

 

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Tax Rates

Value added tax (VAT) - Impuesto al valor agregado (Local name)
12% (standard rate).
Exempt items include: sale of a business; mergers, spin-offs and conversions of companies; donations to charities; transfers of stock, shares and other negotiable instruments; real estate rental payments and related maintenance costs.
Zero-rated items include: education; health services; public supply of electricity, drinking water and sewerage services; rent for housing purposes; financial securities exchanges; electric kitchens with induction systems for domestic use; solar panels and plants for wastewater treatment; LED lamps; electric vehicle chargers; unprocessed food; agricultural goods (such as certified seeds, plants and roots) and equipment; drugs and veterinary products; paper, newspapers, magazines, books and publishing services; exported goods; transport of persons and materials and air cargo transport; provision of webpage domains, servers (hosting) and cloud computing.
Company Tax
25%
Withholding Taxes
Dividends: 0% (non-resident)/10% (resident in a tax haven); Interest: 0 (on loansobtained from non-resident financial institutions, specialized non-financial entities qualified by the Ecuadorian authorities and multilateral organizations)/25%; Royalties: 25% (non-resident)/35% (resident in a tax haven)
Social Security Contributions Paid By Employers
12.15% of the minimum monthly taxable wages of each contribution category.
Other Domestic Resources
Internal Revenue Service of Ecuador
Overview of Ecuador's tax measures in response to Covid-19
Consult Doing Business Website, to obtain a summary of the taxes and mandatory contributions.
 
 

Individual Taxes

Personal income tax Progressive rates from 0% to 35%
Up to USD 11,212 0%
From USD 11,212 to USD 14,285 5%
From USD 14,285 to USD 17,854 10%
From USD 17,854 to USD 21,442 12%
From USD 21,442 to USD 42,874 15%
From USD 42,874 to USD 64,297 20%
From USD 64,297 to USD 85,729 25%
From USD 85,729 to USD 114,288 30%
Above USD 114,288 35%
 
 

Country Comparison For Corporate Taxation

  Ecuador Latin America & Caribbean United States Germany
Number of Payments of Taxes per Year 8.0 28.2 10.6 9.0
Time Taken For Administrative Formalities (Hours) 664.0 327.5 175.0 218.0
Total Share of Taxes (% of Profit) 34.4 46.8 36.6 48.8

Source: Doing Business - Latest available data.

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Investment Opportunities

Tenders, Projects and Public Procurement
Inter-American Development Bank, Tenders in South America
DgMarket, Tenders Worldwide
Setting Up a Company
Consult Doing Business Website, to know about procedures to start a Business in Ecuador.
Useful Resources
Corporation for promotion of exports and investment (only in Spanish)
 

Business Setup Procedures

Setting Up a Company Ecuador Latin America & Caribbean
Procedures (number) 11.00 8.00
Time (days) 48.50 25.22

Source: Doing Business.

 
 
 

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Latest Update: November 2023