Ecuador: Investing
Ecuador is open to FDI in most sectors, with strategic sectors reserved for management by state-owned or -controlled companies, including energy, telecommunications, non-renewable natural resources, transportation, hydrocarbon refining, water, biodiversity, and genetic patrimony. As such, FDI inflows remain relatively low compared to other countries in the region. According to UNCTAD’s World Investment Report 2023, FDI inflows increased to USD 788 million in 2022, up by 21.7% year-on-year, with the total stock of FDI estimated at USD 22.2 billion by the end of the same period, around 19.1% of the country’s GDP. Nearly 80% of foreign investment is in the oil sector, making the country heavily reliant on this industry, which strongly influences FDI.
Under President Guillermo Lasso, the government of Ecuador has pursued an ambitious economic reform agenda aimed at stimulating investment, with a goal of attracting USD 30 billion in investment throughout his four-year administration. However, political instability has undermined the investment outlook, with opposition to President Lasso's administration hindering attempts to enact investment and economic reforms. Violent protests in June 2022 led to an impeachment attempt against President Lasso and inflicted significant economic losses. In response, the Lasso administration imposed a 12-month moratorium on additional oil and mining concessions to quell protests, complicating investment in extractive industries. Ecuador faces challenges in structuring tenders and public-private partnerships that are bankable, transparent, and competitive, deterring private investment. Widespread corruption further complicates the investment environment. While Ecuador operates as a dollarized economy with relatively few restrictions on foreign investment and profit repatriation, apart from a currency exit tax, the 2008 Constitution retains the right for the state to oversee strategic sectors through state-owned or state-controlled enterprises. Despite these challenges, foreign entities are allowed 100% equity ownership in Ecuador, with sector-specific laws dictating private sector participation in strategic sectors. Ecuador currently lacks a centralized, national-level investment screening mechanism for FDI, with each government ministry evaluating investments independently. This absence exposes Ecuador to potential risks associated with unscrupulous companies and raises concerns about national security. Ecuador ranks 104th among the 132 economies on the Global Innovation Index 2023 and 115th out of 184 countries on the latest Index of Economic Freedom.
| 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 | 2020 | 2021 | 2022 |
|---|---|---|---|
| FDI Inward Flow (million USD) | 1,095 | 647 | 788 |
| FDI Stock (million USD) | 20,763.2 | 21,410.5 | 22,198.5 |
| Number of Greenfield Investments* | 18.0 | 16.0 | 19.0 |
| Value of Greenfield Investments (million USD) | 680 | 704 | 254 |
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.
| 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% |
| 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.
| 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: May 2024
