In recent years, the Ecuadorian government took some steps in an attempt to attract foreign direct investment (FDI) such as passing a public-private partnership law and changing tax and regulatory policies for mining. Despite these efforts, FDI inflow to Ecuador has remained very low when compared to other countries in the region. In 2015, FDI inflow equaled about $1.3 billion, or about 1.3 percent of GDP. In 2014, FDI inflow was USD 772 million, or .76 percent of GDP. Ecuador’s FDI inflow was second lowest in the region in both of these years. Through the third quarter of 2016, the latest figures available, FDI inflow was USD 338 million, a 37 percent decline from the same period in 2015. The United States was the largest source of FDI in 2015 with $186 million; up from USD 10 million in 2014. Canada and China were the first and second largest sources of FDI in 2014 with USD 229 million and USD 79 million respectively.
Ecuador’s National Assembly voted on May 3 to terminate 12 of its bilateral investment treaties, including its agreement with the United States. The Government of Ecuador notified the U.S. government of its withdrawal from the BIT on May 18.
Corruption is a serious problem in Ecuador. Ecuador ranked in the bottom third of countries surveyed for Transparency International’s Corruption Perceptions Index. Two high-profile cases of alleged official corruption involving state-owned petroleum company PetroEcuador and Brazilian construction firm Odebrecht illustrate the challenges that confront Ecuador with regards to corruption.
Former-vice president Lenin Moreno won Ecuador’s April 2 presidential election and took office May 24. Moreno promised to continue the public sector-driven economic model of his predecessor including increased government spending on social welfare programs.
Economic, commercial, and investment policies are subject to frequent changes and can increase the risks and costs of doing business in Ecuador.
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. Foreign investors may remit 100 percent of net profits and capital, subject to a capital exit tax of 5 percent. Ecuadorian law requires private companies to distribute 15 percent of pre-tax profits to employees each year.