This information is derived from the State Department's Office of Investment Affairs’ Investment Climate Statement. Any questions on the ICS can be directed to EB-ICS-DL@state.gov

Policies Toward Foreign Direct Investment

Ecuador is open to FDI in most sectors. The 2008 Constitution established that the state reserves the right to manage strategic sectors through state-owned or controlled companies. The sectors identified are energy, telecommunications, non-renewable natural resources, transportation, hydrocarbon refining, water, biodiversity, and genetic patrimony. Although Ecuador recently took some steps intended to attract FDI, its overall investment climate remains challenging as economic, commercial, and investment policies are subject to frequent change. FDI inflow remains very low when compared to other countries in the region.

In general, the legal complexity resulting from the inconsistent application and interpretation of existing laws and regulations increases the risks and costs of doing business in Ecuador. Disputes with U.S. companies can become politicized, especially in sensitive areas such as the energy sector. Ecuador has been involved in several high profile investment disputes with U.S. companies. Chevron, Conoco Phillips, Occidental Petroleum Corporation, and Murphy Oil Corporation were awarded damages in international arbitration rulings against Ecuador in the last two years.

The Institute for Export and Investment Promotion (PRO ECUADOR) is Ecuador’s export promotion agency. PRO ECUADOR maintains U.S. offices in Chicago, Los Angeles, Miami, and New York.

Limits on Foreign Control and Right to Private Ownership and Establishment

One hundred percent foreign equity ownership is allowed without the need for authorization or prior screening in sectors open to domestic private investment.

For license and franchise transactions, no limits exist on royalties that may be remitted, although financial outflows are subject to a five percent capital exit tax. All license and franchise agreements must be registered with the Ecuadorian Intellectual Property Institute (IEPI). In addition to registering with the Superintendence of Companies, Securities, and Insurance, foreign investors must register investments with Ecuador’s Central Bank for statistical purposes.

Sectors of interest to Foreign Investors:

  • Automotive: the Ministry of Foreign Trade announced September 30, 2016, the elimination of quotas for automobile imports beginning January 1, 2017. This action removed an important restriction on U.S. automobile exports to Ecuador.

  • Petroleum: per the 2008 Constitution, all subsurface resources belong to the state. The petroleum sector is controlled by two state owned enterprises (SOEs). Most fuel prices are controlled and subsidized by the central government.

  • Mining: the Ecuadorian government has taken steps to reduce taxes in the mining sector in order to attract FDI. Presidential Decree 475, published in October 2014, altered the windfall tax calculation. The Organic Law for Production Incentives and Tax Fraud Prevention, passed in December 2014, included provisions to improve tax stability and lower the income tax rate in the mining sector.

  • Electricity: the Organic Law for the Public Service of Electric Energy, which took effect in January 2015, permits some private sector participation and foreign investment in Ecuador’s electricity sector. Per the 2008 Constitution, the electricity sector is a public service and strategic sector.

  • Telecommunications: in February 2015, Ecuador’s National Assembly passed a telecommunications law that requires telecommunications companies to pay a percentage of revenue to the government. This requirement applies to providers of cellular and fixed line telephone service, internet service, and subscription television with more than 30 percent of market share. The payments range from 0.5 to 9 percent of revenue.

  • Media: the 2013 Communications Law introduced a requirement that advertising disseminated in Ecuador must have 80 percent domestic content. It also requires that television and radio frequencies are distributed 33 percent to private media, 33 percent to public media, and 34 percent to community media.

The government controls a large share of radio, television, and other press holdings. Article 312 of the Constitution prohibits shareholders and representatives of financial institutions from media ownership. In addition, the 2011 Organic Law for Regulation and Control of Market Power prohibits anyone possessing more than a six percent interest in a media company from investing in any other business sector.

Other Investment Policy Reviews

In the past three years, Ecuador has not conducted an investment policy review with the Organization for Economic Cooperation and Development (OECD), World Trade Organization (WTO), or United Nations Conference on Trade and Development (UNCTAD).

Business Facilitation

A newly created company will at a minimum be required to register with the Superintendence of Companies, the municipal government, the Internal Revenue Service, and the Social Security Institute. The Superintendence of Companies, Securities, and Insurance offers information for registering businesses on its website.

Outward Investment

Ecuador does not restrict foreign investors from investing abroad. Foreign investments are subject to a capital exit tax of five percent.

In February 2017, voters passed a government-backed referendum prohibiting elected officials and public servants from having financial interactions with official lists of tax havens and other suspect jurisdictions. The lists include several U.S. states and territories. The National Assembly has one year to implement the prohibition.

 

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