The government of Ecuador under President Guillermo Lasso has adopted an ambitious economic reform agenda to drive investment. Following the April 2021 election of one of the region’s most pro-business presidents in decades, private sector leaders in Ecuador emphasized the “Lasso Effect” in investment, given the surge of optimism. “More Ecuador in the world and more of the world in Ecuador” – President Lasso’s key message for his presidency – includes the administration’s drive to attract $30 billion in investment over his four-year administration. With investment facilitation becoming a central pillar of public policy, the Lasso administration launched the “Ecuador Open for Business” initiative in 2021 to promote investment, particularly through public-private partnerships (PPPs). In 2022, the initiative held investment forums in eight countries, including the United States.
The Ecuadorian government has taken positive steps to improving fiscal stability. The government successfully completed its $6.5 billion, 27-month Extended Fund Facility with the International Monetary Fund in January 2023. The Ecuadorian Central Bank reported a 2.9 percent GDP growth in 2022 and projects the economy will grow 2.6 percent in 2023. Ecuador’s inflation clocked in around 3.7 percent in 2022, the lowest value in Latin America. The Ecuadorian government remains committed to the sustainability of public finances and to continue a fiscal consolidation path. The fiscal deficit narrowed to 1.7 percent of GDP in 2022, the lowest since 2013, due to improved tax collection, prudent public spending, and high oil prices.
Still, foreign direct investment (FDI) flows remain lackluster as political instability threatens the investment outlook. Lasso’s opposition, which has a majority in the Ecuadorian National Assembly, frustrated the administration’s attempts to pass investment and other economic reforms. Violent protests in June 2022 resulted in an impeachment attempt against President Lasso and a loss of over $1 billion for the economy. To end the protests, the Lasso administration made major concessions that complicated investment in the extractives industries, including a 12-month moratorium on additional oil and mining concessions. The National Assembly initiated new impeachment proceedings against President Lasso in March, kicking off a one-to-two-month legislative process to reach an impeachment vote. The impeachment proceedings resulted in Ecuador’s country risk climbing to nearly 2,000 points, constricting access to capital.
Ecuador remains a challenging investment climate despite the current administration’s attempts to attract investors. Serious budget deficits and the COVID pandemic forced the government to employ cost-cutting measures and limit public investment. Ecuador has traditionally struggled to structure tenders and public-private partnerships that are bankable, transparent, and competitive. This has discouraged private investment and attracted companies that lack a commitment to quality construction, accountability and transparency, environmental sustainability, and social inclusion. Corruption remains widespread, and Ecuador is ranked in the bottom half of countries surveyed for Transparency International’s Perceptions of Corruption Index. In addition, economic, commercial, and investment policies are subject to frequent changes and can increase the risks and costs of doing business in Ecuador.
Russia’s war of aggression against Ukraine resulted in a short-term shock to the Ecuadorian economy, given Russia was a major export market and Ecuador imported key products such as fertilizer and sunflower oil from the region. Ecuador identified alternative markets for its exports and alternative suppliers for Russian imports. Still, supply chain disruptions and worldwide price increases for certain products like fertilizer negatively impacted the economy. While inflation was a modest 3.7 percent in 2022, sharp increases in the price of transportation and the basic food basket are major concerns for poor and middle-class households.
Ecuador is a dollarized economy that has few limits on foreign investment or repatriation of profits, with the exception of a currency exit tax. It has a population that generally views the United States positively, and the Lasso administration has expanded bilateral ties and significantly increased cooperation with the United States on a broad range of economic, security, political, and cultural issues.
Petroleum and Gas: Petroleum is Ecuador’s main export and a priority for the Lasso administration in attracting investment. Per the 2008 Constitution, all subsurface resources belong to the State, and the petroleum sector is dominated by one state-owned enterprise (SOE), Petroecuador, that cannot be privatized. The Hydrocarbons Law regulates the Ecuadorian oil and gas industry. Executive Decree 95 published July 2021 opened private sector participation in oil exploration and production, with a goal to double oil production to 1 million barrels per day by 2028. However, the Lasso administration rescinded Executive Decree 95 in June 2022 as a concession to Indigenous groups following violent nationwide protests. The government also reduced the price of certain fuels by 15 cents per gallon and pledged to implement targeted fuel subsidies. Importantly, the government promised to advance legislation to establish free, prior, and informed consultation with Indigenous communities before starting new extractive projects, as mandated by the Constitution. Following a 90-day dialogue with Indigenous communities, the Ecuadorian government also conceded to a 12-month moratorium on granting new oil concessions, pending the passage of a community consultation law. Separately, the government rescinded the 2021 Hydrocarbon Regulations after Ecuador’s Constitutional Court rendered unconstitutional the migration of fee-for-service contracts to production sharing agreements and the delegation of active oil fields to private companies. Total oil production in 2022 was 176 million barrels, up 1.7 percent from 2021 production.
The Ecuadorian government launched the Intracampos II exploratory oil block tender in October 2022. Intracampos II is expected to draw $2.1 billion in investment and produce an additional 18,000-24,000 barrels per day. Given its declining and underdeveloped gas fields, the government also plans to launch a tender for its Amistad offshore gas field in 2023. Additionally, the government announced potential tenders for a South-East concession, a private operator for the Esmeraldas refinery, and another to build and operate a new Euro 5 quality refinery.
Mining: The Ecuadorian government plans to accelerate mining development to increase revenues and diversify its economy, with mining representing $12 billion of the Lasso administration’s $30 billion investment drive. Ecuador’s mining exports generated $2.77 billion in 2022, a 34 percent increase over 2021 mining exports. Analysts forecast that mining could become Ecuador’s third biggest export by 2025 generating over $4 billion in annual export revenues and comprising 15 percent of total exports. Executive Decree 151, published August 2021, seeks to promote private sector participation in mining exploration and production. The decree allowed for private sector investment and joint ventures with the state-owned mining enterprise. It also seeks to combat illegal mining and establishes an Advisory Board to guide the government on best practices for responsible mining. The Lasso administration amended Executive Decree 151 following the June 2022 protests by establishing that mining may not be carried out in the following areas: protected areas and ancestral territories, areas declared intangible, archaeological sites, and water protected areas.
The June 2022 nationwide Indigenous-led protests targeted mining. Protesters shut down several mining operations demanding that the government conduct constitutionally mandated community consultations prior to granting new concessions. Following a 90-day dialogue with Indigenous communities, the Ecuadorian government also conceded to a 12-month moratorium on granting additional mining concessions pending passage of a community consultation law. Ecuador’s Constitutional Court affirmed communities have the right to vote on whether to allow large-scale mining projects near their water sources in a September 2020 ruling on a plebiscite proposed by the Cuenca municipality. Mining companies plan to begin exploitation operations in Loma Larga, La Plata, and Curipamba in 2024, representing $1 billion in near term investment for Ecuador. Ministry of Energy and Mines officials plan to announce a phased reopening of the cadastre in 2023, beginning with opening new concessions in non-conflict territories, followed by processing the backlog of over 200 concession applications dating back to 2018. Ecuador has two operating mines — a gold mine operated by a Canadian company and a copper mine operated by a PRC-affiliated company. In 2022, the government did not issue any new mining concessions.
Illegal mining continues to be a principal threat to expanding legal mining operations and investment. Illegal miners undertook violent attacks on legal mining concessions throughout Ecuador in 2022, and the Ecuadorian government lacks sufficient security resources and funding to protect legal mining concessions. President Lasso declared illegal mining a national security threat in January 2023, as transnational criminal organizations increasingly exploited Ecuador’s gold resources. The declaration paved a path for military and police interventions to protect mining sites. Illegal mining hotspots are concentrated in six Ecuadorian provinces – Azuay, Morona Santiago, El Oro (Zaruma-Portovelo), Zamora Chinchipe, Imbabura, and Esmeraldas.
Electricity: Hydroelectric electricity accounts for 90 percent of Ecuador’s electricity generation. Domestic electricity production fell short of demand in 2022 due to long term droughts and ongoing construction issues at the PRC-built 1500 MW Coca Codo Sinclair (CCS) hydropower plant forcing Ecuador to import electricity and increase its fossil-fuel power plant production. CCS hydro power plant, designed to provide 30 percent of Ecuador’s electricity, has never generated its total installed power capacity and has been undergoing repairs since it began operating in 2016. CCS is also at risk from regressive erosion from the adjacent Coca River.
The government plans to develop wind, solar, hydro, biomass, biogas, geothermal, biofuel, combined cycle, and gas-fired electrical generation plants to diversify Ecuador’s energy matrix. It awarded a 200 MW solar tender (El Aromo) and a 110 MW wind tender (Villonaco II) to private operators in 2020. The El Aromo project signed a concession agreement in March 2023, and is working on other required documents prior to securing financing and starting construction. The Energy Ministry released tenders in 2021 for a 500 MW renewable energy block (hydro, solar, wind, biomass and biogas), a 400 MW Natural Gas Combined Cycle Power Plant (CCCP), and a Northeast Transmission System. The Energy Ministry has not yet awarded the contracts and plans to do so in 2023. The government imported its first liquefied natural gas (LNG) cargo January 2022.
Telecommunications: The Ministry for Telecommunications and Information Society (MINTEL) launched in August 2022 a Digital Transformation Agenda to reduce the digital divide, strengthen public sector digitalization, and foster a digital culture. The roadmap comprises seven main pillars: digital infrastructure; culture and digital inclusion; digital economy; emerging technologies for sustainable development; digital government; interoperability and data processing; and digital security and trust. The administration’s priority remains promoting the deployment of broadband networks and rural connectivity. In addition, the Lasso administration is open to implementing the necessary processes for the identification, valuation, and allocation of frequency bands to promote the development of new technologies and the use of frequencies free-of-cost for temporary experimental use, or in case of emergencies.
In 2021, MINTEL received the valuation report for the 2.5 GHz (gigahertz) and 700 MHz (megahertz) bands from the International Telecommunication Union (ITU). The cost set is reserved. Likewise, MINTEL asked the ITU for the valuation of the 3.5 GHz, 850 MHz, 900 AWS (Advance Wireless Service), and 1900 MHz band, which in turn will allow for new players in the market and the future deployment of the fifth generation of technologies (5G). Three 5G technology connectivity tests have taken place in Ecuador, though there is no target date for the beginning of 5G commercial operations.
The government started the renegotiation of concession contracts with mobile network operators in 2022 for the provision of the Advanced Mobile System (AMS). Per the law, the negotiation can extend for two years, though the operators’ concessions expire in 2023. Telecoms regulator ARCOTEL and the private sector are currently analyzing new terms and conditions for concession rights and frequency. The current negotiations do not include the frequency bands for the 5G network and are instead focused on the frequencies currently assigned to operators.
E-Commerce: Since the COVID-19 pandemic, e-commerce in Ecuador has experienced exponential growth. In 2022, according to Ecuador’s Chamber for Innovation and Technology (CITEC), e-commerce sales totaled approximately $3.84 billion. CITEC projects online sales will reach $6.1 billion by 2025, with an average annual per-user revenue rising from $602 to $921. According to CITEC’s latest report, 79 percent of Ecuadorians purchase goods or services online at least once a year and 79 percent of Ecuadorian businesses maintain some form of online presence. This figure includes not only purchases made through a dedicated web platform (e.g., Amazon), but also sales made through social networks, for which payment may be made offline or through separate online services. The sectors with the highest market penetration (number of users making online purchases) were electronics and fashion. While many Ecuadorians are interested in purchasing online, they are limited in their ability to receive international shipments due to logistics and customs problems upon arrival in Ecuador. The Ministry of Production launched the National E-Commerce Strategy in 2021, establishing a framework for facilitating the digital transformation in the country. The strategy focuses on strengthening the current legal framework, capacity building for small and medium enterprises (SMEs), and improving logistics and payment gateway capabilities. Since the issuance of the National E-Commerce Strategy, no new regulations have entered into force to facilitate its application and the objectives set forth therein.
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 state-controlled companies. The sectors identified are energy, telecommunications, non-renewable natural resources, transportation, hydrocarbon refining, water, biodiversity, and genetic patrimony (flora, fauna, and ancestral knowledge). Although in recent years Ecuador took steps to attract FDI, its overall investment climate remains challenging as economic, commercial, and investment policies are subject to frequent change. From January to September 2022 (latest information available), FDI flows to Ecuador were $861 million, a 59 percent increase compared to 2021 levels ($543 million) and 12 percent lower than 2020 levels ($979 million). FDI continues to be low compared to other countries in the region.
There are no laws or practices that discriminate against foreign investors, but 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. According to market analysts, under the prior Correa administration, disputes involving U.S. companies were politicized, especially in sensitive areas such as the energy sector. This resulted in several high-profile international investment dispute cases, with companies awarded damages in international arbitral rulings against Ecuador in the last few years.
Limits on Foreign Control and Right to Private Ownership and Establishment
Foreign and domestic private entities are allowed to establish and own business enterprises and engage in all forms of remunerative activity, with limitations in strategic sectors as enumerated in the Constitution. The State may, exceptionally, delegate participation in strategic sectors and public services to the private sector if specific sector laws allow it. For instance, the Mining Law permits private companies to operate in the sector through mining concessions and the Hydrocarbons Law allows private companies to operate through participation contracts for hydrocarbons exploration and/or exploitation. In both sectors, the private companies pay royalties to the State and provide various types of legal guarantees. One hundred percent foreign equity ownership is allowed.
Ecuador does not have a single, national-level interagency investment screening mechanism for FDI. Each government ministry analyzes investments and assesses FDI risks. The lack of an investment screening mechanism makes Ecuador vulnerable to unscrupulous companies and increases national security risks.
For license and franchise transactions, no limits exist on royalties that may be remitted, although financial outflows are subject to a capital exit tax (ISD). Executive Decree 643 issued in January 2023 establishes the reduction of the ISD from 4 percent to 3.75 percent through June 2023, 3.5 percent from July to December 2023, and 2 percent for 2024. President Lasso signed September 2021 Executive Decree 182 removing the ISD on the international aviation and maritime cargo sectors. All license and franchise agreements must be registered with the National Service for Intellectual Property Rights (SENADI). 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.
In 2020, Ecuador conducted an investment policy review with the United Nations Conference on Trade and Development (UNCTAD), published in 2021. Information can be found at: https://unctad.org/node/34311. In the past three years, Ecuador has not conducted an investment policy review with the Organization for Economic Cooperation and Development (OECD).
ProEcuador (https://www.proecuador.gob.ec/) is the government entity responsible for promoting economic development through exports, imports, and investment in Ecuador. The institution forms a Vice Ministry within the Ministry of Production, Foreign Trade, Investments and Fisheries (MPCEIP) and has 27 offices in 23 countries, including three in the United States.
A newly created company will at a minimum be required to register with the Superintendence of Companies, Securities, and Insurance (http://www.supercias.gob.ec/), the municipal government, the Internal Revenue Service (SRI), and the Social Security Institute (IESS). The registry with the Superintendence of Companies is an online process as of April 2019. The simplified joint-stock company (SAS) came into effect in May 2020 following the enactment of the Organic Law on Entrepreneurship and Innovation. According to the Superintendency of Companies, there were 19,629 new companies in Ecuador in 2022 and 81 percent were filed as SAS.
On February 7, 2023, the Organic Law for Digital and Audiovisual Transformation came into force. The law’s main provisions include the implementation of electronic signatures in both public and private institutions, tax incentives for audiovisual production, rules for electronic securities, judicial summons through electronic mechanisms, transfer of company shares by electronic means, and regulatory sandboxes.
Ecuador does not restrict domestic investors from investing abroad. ProEcuador is responsible for promoting outward investment from Ecuador. Foreign investments are subject to a 3.75 percent capital exit tax (ISD) through June 2023, 3.5 percent from July to December 2023, and two percent for 2024. The 2021 Tax Reform Law enumerates several ISD payment exemptions to productive investment, under certain conditions. In July 2021, the Lasso administration announced a gradual ISD dismantling by sector, quickly followed up with an Executive Decree immediately eliminating ISD on the international aviation and maritime cargo sectors.
In February 2017, voters passed a government-backed referendum prohibiting elected officials and public servants from having financial dealings in tax havens and other suspect jurisdictions. The list includes several U.S. states and territories that do not have state income taxes. The prohibition entered into force in September 2017.
In 1990, the United States and Ecuador signed the Trade and Investment Council Agreement (TIC). The two governments updated the TIC in December 2020 by signing the Protocol on Trade Rules and Transparency. The Protocol entered into force in August 2021 following National Assembly ratification. The agreement updates the TIC with new annexes in four areas: Trade Facilitation and Customs Administration, Good Regulatory Practices, Anti-Corruption, and SMEs.
The Lasso administration’s tax reform legislation passed into law November 2021 with the aim of increasing tax collection by $1.9 billion over the next two years. Through progressive taxation, the tax reform increased collection in 2022 by more than $900 million and additional collections in 2023 are expected to reach some $1.1 billion. Key elements of the tax law include:
Temporary contribution for individuals with equity exceeding $1 million with rates between 1.0 and 1.5 percent in 2022.
Temporary contribution of 0.8 percent for corporations with equity exceeding $5 million in 2022 and 2023.
The possibility for individuals and corporations to pay a single tax to regularize assets abroad not declared in Ecuador, paying tax rates between 3.5 and 5.5 percent.
Permanent increase in the income tax rate for individuals according to a tax schedule, with the highest rate rising to 37 percent.
Possibility to enter mediation with the tax authority on tax auditing process.
Modifications to indirect taxes (VAT and Special Consumption Tax – ICE) on specific products.
Progressive tax regime for micro-businesses with rates between 1.0 and 2.0 percent.
Cloud and web hosting services face a 12 percent digital services VAT.
During the Correa administration, Ecuador’s National Assembly voted in 2017 to terminate the country’s 12 bilateral investment treaties, including its agreement with the United States. The Government of Ecuador notified the U.S. government of its withdrawal from the Bilateral Investment Treaty (BIT) on May 18, 2017, effective May 18, 2018. Investments made prior to withdrawal are covered for 10 years, but the abrogated BIT covers no new investments in Ecuador.
Ecuador has signed agreements to avoid double taxation with 24 countries including Argentina (1983), Germany (1987), Spain (1994), Canada (2002), Mexico (2002), the Andean Community (2005), China (2015), Belarus (2018), Russia (2019), and Japan (2020). Ecuador does not have an agreement to avoid double taxation with the United States.
Ecuador signed the Tax Information Exchange Agreement (TIEA) with the United States in April 2021 and it entered into force in September 2022. Ecuador does not have a bilateral taxation treaty with the United States. Ecuador is not a member of the OECD Inclusive Framework on Base Erosion and Profit Shifting.
Ecuadorian economic, commercial, and investment regulatory policies are subject to frequent changes, can increase the risks and costs of doing business in Ecuador, and may limit investment decisions. National and municipal level regulations can conflict with each other. Regulatory agencies are not required to publish proposed regulations before enactment, and rulemaking bodies are not required to solicit public comments on proposed regulations, although there has been some movement toward public consultative processes. Government ministries generally consult with relevant national actors when drafting regulations, but not always and not broadly. The National Assembly does socialize proposed legislation and hold public hearings with relevant stakeholders prior to voting on legislation.The Superintendency of Market Power Control (SCPM) is the Ecuadorian government entity responsible for monitoring and controlling the proper functioning of the national market and preventing market power abuse by resident and non-resident entities. In 2023, SCPM published guidelines for the public and private sector on fair competition, which includes prohibitions against cartels and price/territory fixing. The guidelines extend to public procurement. SCPM has responsibility for sanctioning or fining companies following unfair practices.
Regulatory Framework Levels Most Relevant for Foreign Entities
Approved by the National Assembly or a Constituent Assembly. The Constitution can be modified through various mechanisms such as amendment, reform, citizen initiative, or referendum.
Ratified by the State (Executive Branch or National Assembly, depending on Constitutional Court decision).
Organic and Ordinary laws
Issued by the National Assembly either on its own initiative or by the instances provided for in other laws, such as citizen initiative, local governments (GADs), or regulatory control entities.
Issued by local governments (GADs – prefectures, municipalities, and parish councils) on issues under their legal purview and pertaining to only GAD territories.
Agreements and ministerial resolutions
Issued by government ministries on specific issues according to issues under their legal purview. These cannot conflict with current legal framework.
For the implementation of laws.
Regulatory Control Entities
Resolutions within the scope of their legal purview
Superintendencies (Banks, Companies, Securities, and Insurance, Credit Unions and Cooperatives, Telecommunications, Market Power Control, Information and Communication), Comptroller General’s Office, Ecuadorian Tax Service (SRI), Financial and Economic Analysis Unit (UAFE), Public Procurement Service (SERCOP), Social Security Institute (IESS), Ombudsman Office, Citizen Participation and Social Control Council (CPCCS)
The government does not promote or require companies’ environmental, social, and governance (ESG) disclosures to facilitate transparency and/or help investors and consumers distinguish between high- and low-quality investments.
The Government of Ecuador publishes regulatory actions in the Official Registry and posts them online at https://www.registroficial.gob.ec/. Publicly listed companies generally adhere to International Financial Reporting Standards (IFRS). While there are some transparency enforcement mechanisms within the government, they tend to be weak and rarely enforced. There are no identified informal regulatory processes led by private sector associations or nongovernmental organizations.
International Regulatory Considerations
Ecuador is a member of the Andean Community of Nations (CAN) along with Bolivia, Colombia, and Peru. Ecuador is an associate member of the Southern Cone Common Market (MERCOSUR). Ecuador is a member of the World Trade Organization (WTO) and notifies draft regulations to the WTO Technical Barriers to Trade (TBT) Committee. Ecuador ratified the WTO Trade Facilitation Agreement on October 16, 2018.
Legal System and Judicial Independence
Ecuador has a civil codified legal system. Systemic weakness in the judicial system and its susceptibility to external pressures constitute challenges faced by U.S. companies investing in Ecuador. While Ecuador updated its Commercial Code in May 2019, enforcement of contract rights, equal treatment under the law, intellectual property protections, and unstable regulatory regimes continue to be concerns for foreign investors.
Laws and Regulations on Foreign Direct Investment
Ecuador does not have specific laws on FDI, but several laws affect overall investment. The Organic Law for Production Incentives and Tax Fraud Prevention, passed in December 2014, includes provisions to improve tax stability and lower the income tax rate in the mining sector. The Organic Law of Incentives for Public-Private Associations and Foreign Investment from 2015 includes provisions to improve legal stability, reduce red tape, and exempt public private partnerships from paying income and capital exit taxes under certain conditions. The 2021 Tax Reform Law repealed the zero-tariff income tax incentives included in previous legislation and replaced them with income tax reductions. These range from three to five percentage points of the current corporate income tax rate (25 percent), provided the compliance with certain conditions. Investments done under the prior legal framework will continue to enjoy the benefits offered from that legislation. In October 2022, President Lasso issued Executive Decree 586, which outlined the requirements to access aforementioned income tax reductions, established national and foreign investment promotion as a national policy, outlined the procedure to approve investment contracts, and determined that the value of the accumulated tax incentives may not exceed the amount of the investment.
ProEcuador’s website https://www.proecuador.gob.ec/ provides a guide for investors in English and Spanish and highlights the procedures to register a company, types of incentives for investors, and relevant taxes related to investing in Ecuador.
Competition and Antitrust Laws
The SCPM reviews transactions for competition-related concerns. Ecuador’s 2011 Organic Law for Regulation and Control of Market Power includes mechanisms to control and sanction market power abuses, restrictive market practices, market concentration, and unfair competition. The SCPM can fine up to 12 percent of gross revenue of companies found to be in violation of the law.
Expropriation and Compensation
The Constitution establishes that the State is responsible for managing the use and access to land, while recognizing and guaranteeing the right to private property. It also provides for the redistribution of land if it has not been in active use for more than two years.
The Article 101 of the 2015 Telecommunications Law grants permission for the occupation or expropriation of private property for telecommunication network installation provided there are no other economically viable alternatives. Service providers must assume costs associated with the property’s expropriation or occupation.
The Ecuadorian government has not taken measures for direct or indirect expropriation of private property outside of these examples.
ICSID Convention and New York Convention
Ecuador withdrew from the International Centre for the Settlement of Investment Disputes (ICSID Convention) in 2010 and rejoined the Convention in 2021. Ecuador is a signatory to the convention on the Recognition and Enforcement of Foreign Arbitral Awards (1958 New York Convention). The 2018 Productive Development Law clarifies the permissibility of international investor-state arbitration under the 2008 Constitution and includes provisions permitting arbitration at venues within Latin America.
Investor-State Dispute Settlement
Ecuador’s National Assembly voted in 2017 to terminate its 12 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, 2017, with the effective date of May 18, 2018. The treaty further specifies that all U.S. investments in place at the date of termination enjoy the protections of the treaty for the subsequent 10 years. There have been numerous claims against Ecuador under the BIT that have gone to international arbitration. There are two active cases involving U.S. companies awaiting a final decision.
International Commercial Arbitration and Foreign Courts
Several U.S. companies operating in Ecuador, most notably in the petroleum sector, have filed for international arbitration due to investment dispute claims. The Government of Ecuador in the past treated these disputes as a political issue, speaking negatively about investors involved in these cases. Several claims in international arbitration have been active disputes for decades. Payment of arbitration awards generally takes longer than a year, although the Government of Ecuador has paid all final awards. Ecuador’s 2008 Constitution limited investor-state arbitration to regional arbitration entities and was the primary driver of the 2017 termination of BITs.
With the goal of protecting consumers and preventing a real estate bubble, in June 2012 the National Assembly approved a law that allows homeowners to default on their first home and car loan without penalty if they forfeit the asset. The provisions do not apply to homes with a market value of more than 500 times the basic 2023 monthly salary (currently $225,000) or vehicles worth more than 100 times the basic monthly salary (currently $42,500).
In cases of foreclosure, the average time for banks to collect on debts is 5.3 years, usually taking 4.5 years for courts to approve the initiation of foreclosures. After the appointment and acceptance of an auctioneer, it takes about six months for the auction to take place.
The 2021 Tax Reform repealed the zero-tariff income tax incentives included in previous legislation and replaced them with income tax reductions. The law provides a five-percentage point reduction of the current corporate income tax rate (25 percent) for companies that sign an investment contract, and a three-percentage point reduction for companies that do not sign an investment contract. Other tax benefits include: 1. exemption from income tax withholdings on payments originating from external financing granted by foreign financial institutions; 2. exemption from the capital exit tax on principal and interests on external credits; 3. exemption from the capital exit tax on imports of raw materials, capital goods and inputs, up to the maximum amount established on the investment contract; and 4. exemption from taxes on foreign trade (tariffs and value added taxes) on imports of raw materials, capital goods and inputs, up to the maximum amount established on the investment contract. Investments done under the prior legal framework will continue to enjoy the benefits offered from that legislation until the validity of those benefits expires. In December 2015, Ecuador’s National Assembly approved a Public-Private Partnership law intended to attract investment. The law offers incentives, including the reduction of capital exit tax for investors in certain projects; however, very few projects have been approved by the Secretariat of Public-Private Investments. It designates Latin American arbitration bodies as the dispute resolution mechanism. The law came into effect upon publication in the Official Registry on December 18, 2015. The Ecuadorian government is moving toward a Public-Private Partnership model to attract investments – particularly in the energy and transportation sectors – but does not yet offer sovereign guarantees or joint financing for those projects.
Foreign Trade Zones/Free Ports/Trade Facilitation
The 2010 Production Code authorized the creation of Special Economic Development Zones (ZEDEs) that are subject to reduced taxes and tariffs. The government considers the extent to which projects promote technology transfer, innovation, and industrial diversification when granting ZEDE status; foreign-owned firms have the same investment opportunities as national firms. According to Ministry of Production, Foreign Trade, Investment and Fisheries, three maritime ports are operational ZEDEs.
Visa and residency requirements are relatively relaxed and do not inhibit foreign investment.
Performance and Data Localization Requirements
There are no requirements for foreign IT providers to turn over source code and/or provide access to encryption. The Law for the Development of Technological Financial Services (Fintech Law) came into force in December 2022, amending Article 146 of the Ingenuity Code that established the forced localization of strategic sector and national security data. The reform eliminated forced data localization and, in its place, established a classification of data that includes open, reserved, and confidential data. With this, companies that do not have data centers in Ecuador will now be able to provide storage services that were previously restricted. However, the law maintains restrictions for forced data localization for reserved and confidential data for national security reasons. Regulations for the implementation of the Fintech Law are pending.
In May 2021, Ecuador´s first Personal Data Protection Law went into effect. One of its provisions establishes that the international transfer of personal data can only be made to organizations or economic territories that provide adequate levels of protection. Companies do not need prior authorization for data transfer. The regulating body, yet to be created, will define what these adequate levels entail. The law also establishes fines on data protection infractions that will come into force in mid-2023. The penalties range between 0.7 percent and 1.0 percent of revenues based on business volume. Regulations are still pending for the law’s implementation.
In 2016, Ecuador’s National Assembly passed the Code of the Social Economy of Knowledge, Creativity, and Innovation (Ingenuity Code), covering a wide range of intellectual property matters. Article 148 of the Code establishes that agencies must give preference to open-source software with content developed in Ecuador when procuring software for government use. Executive Decree 1073 of June 2020 mandated an order of preference when procuring software for the government: 1) Open-Source; 2) Ecuadorian-Developed; 3) Software with Some Ecuadorian Content; and 4) Internationally Developed.
Foreign citizens are allowed to own land. Mortgages are available, and the property title registration system is generally reliable.
Intellectual Property Rights
Enforcement against intellectual property (IP) infringement in Ecuador remains challenging despite the Ecuadorian government good-faith efforts to improve IP protection and notable progress in combatting digital piracy, carrying out border measures in coordination with customs authorities, and identifying IP cases for criminal prosecutions. In April 2016, the United States Trade Representative moved Ecuador from Priority Watch List to Watch List in its annual Special 301 Report on intellectual property, and Ecuador has remained on the Watch List since that time. In December 2020, SENADI issued implementing regulations for the Code of Knowledge, Creativity, and Innovation Social Economy (Ingenuity Code) – the legislation that covers intellectual property rights. The regulations do not fully address concerns raised by the U.S. government and various stakeholders on issues related to copyright exceptions and limitations, patentable subject matter, and geographical indications (GIs), including opposition procedures for proposed GIs, the treatment of common food names, and the protection of prior trademark rights.
In August 2021, the National Assembly approved reforms to the Ingenuity Code to strengthen the prevention of and fight against illicit trade, boost local industry, and promote e-commerce. According to SENADI officials, these reforms have been instrumental in preventing the entry of counterfeit goods transiting the country and resulted in an increase of border measures in 2022. The National Assembly also approved reforms to the Organic Integral Penal Code in 2021 that clarified criminal IP violations. SENADI officials plan additional reforms to the Ingenuity Code, particularly in granting the Ecuadorian Customs Service (SENAE) ex-officio authority, deterring illegal camcording, and modernizing regulations to combat online piracy. SENADI has limited enforcement capacity and remains hampered by a lack of funding and personnel due to budget limitations. SENADI was established in January 1999 to handle patent, trademark, and copyright registrations. The entity reports information on its activities on its website at http://www.propiedadintelectual.gob.ec/.
The 2014 Law to Strengthen and Optimize Business Partnerships and Stock Markets created the Securities Market Regulation Board to oversee the stock markets. Investment options on the Quito and Guayaquil stock exchanges are very limited. Sufficient liquidity to enter and exit sizeable positions does not exist in the local markets. Although the Lasso administration will further reduce the capital exit tax to two percent until 2024, the tax inhibits free flow of financial resources into the product and factor markets. Ecuador is a small market that has relied almost exclusively on the financial sector to undertake medium and short-term financing operations. Foreigners can access credit on the local market. In 2021, the Central Bank of Ecuador (BCE) designed a new methodology to set interest rates aimed at increasing financial inclusion and including technical factors for better determination. Despite these changes, the government continues setting interest rate ceilings and controls.
Money and Banking System
Ecuador is a dollarized economy, and its banking sector is healthy. According to the Ecuadorian Central Bank’s Access to the Financial System Report, as of September 2020, 75 percent of the adult (over 15 years old) population (8.5 million people) has access to financial products and services. As of December 2022, Ecuador’s banks hold in total$56.9 billion in assets, with the largest banks being Banco Pichincha with $15.7 billion in assets, Produbanco with nearly $7 billion, Banco Guayaquil with $6.9 billion, and Banco Pacifico with $6.9 billion. The Banking Association (ASOBANCA) estimates 3.1 percent of loans are non-performing. Foreigners require residency to open checking accounts in Ecuador.
Ecuador’s Superintendence of Banks regulates the financial sector. Between 2012 and 2013, the financial sector was the target of numerous new restrictions. By 2012, most banks had sold off their brokerage firms, mutual funds, and insurance companies to comply with constitutional changes following a May 2010 referendum. The amendment to Article 312 of the Constitution required banks and their senior managers and shareholders with more than six percent equity in financial entities to divest entirely from any interest in all non-financial companies by July 2012. These provisions were incorporated into the Anti-Monopoly Law passed in September 2011.
The 2021 Law for the Defense of Dollarization established that the Monetary and Financial Policy and Regulation Board be divided into a Monetary Policy and Regulation Board and a Financial Policy and Regulation Board. The latter should oversee the interest rate system jointly with the BCE as the technical entity. The law gives the Financial Policy and Regulation Board the ability to prioritize certain sectors for lending from private banks. The Financial Policy and Regulation Board sets maximum interest rates caps in accordance with the Monetary and Financial Code. There are 24 private banks in Ecuador as of December 2022.
A 2018 BCE resolution that ordered electronic money accounts closure effectively eliminated electronic currency. However, banks handle transactions by electronic or digital means for transferences and/or payments to transfer resources and/or payments according to the authorization of the Superintendence of Banks. BCE resolutions were integrated into the Codification of Monetary, Financial, Insurance, and Securities Resolutions. This regulatory body requires all financial transfers (inflows and outflows) to be channeled through the BCE’s accounts. In principle, the regulation increases monetary authorities’ oversight and prevents banks from netting their inflows and outflows to avoid paying the ISD.
Foreign Exchange and Remittances
Ecuador adopted the U.S. dollar as the official currency in 2000. Foreign investors may remit 100 percent of net profits and capital, subject to a currency exit tax (ISD) of 3.75 percent through June 2023, 3.5 percent from July to December 2023, and two percent for 2024. There are no restrictions placed on foreign investors in transferring or repatriating funds associated with an investment.
Resolution 107-2015-F from Ecuador’s Monetary and Finance Board issued in July 2015 exempted some payments to foreign lenders from the capital exit tax. Among other requirements, the duration of the loan must be more than 360 days, the loan must be registered with the Central Bank, and the resources must be destined for specific purposes, such as to fund small businesses or social housing.
The Financial Action Task Force (FATF) announced October 2015 that it had removed Ecuador from the list of countries with strategic deficiencies in anti-money laundering and countering the financing of terrorism (AML/CFT) regimes. Ecuador is a member of the Financial Action Task Force (FATF) of Latin America (GAFILAT), a FATF-style regional body. Ecuador advanced through its 2022 mutual evaluation process and received its final evaluation in December 2022. Ecuador’s recent mutual evaluation report is available at: https://www.fatf-gafi.org/en/publications/Mutualevaluations/MER-Ecuador-2023.html
Sovereign Wealth Funds
The Government of Ecuador does not maintain a Sovereign Wealth Fund (SWF). Approved in July 2020, Ecuador’s Public Finance Law (COPLAFIP) established a Fiscal Stabilization Fund to invest excess revenues from extractive industries and hedge against oil and metal price fluctuations.
Ecuador’s Coordinator of Public Companies (EMCO EP) coordinates and controls the policies and actions of all public companies, their subsidiaries, affiliates, agencies, and business units, as constituted by the Executive Function. EMCO EP also identifies those SOEs that may be created, merged, split, or liquidated.
Ecuador has a total of 12 SOEs. The major SOEs include those for petroleum (Petroecuador), electricity (Electricity Corporation of Ecuador – CELEC – and the National Corporation for Electricity – CNEL), and telecommunications (National Corporation of Telecommunications – CNT). In 2022, EMCO published online the total assets, liabilities, and equity of the eight SOEs in the process of liquidation. Some SOEs published online information on earnings, expenditures, and budget execution. Still, SOEs’ financial information is limited, and they lack independently audited balance sheets. SOEs generally do not have professionally audited financial statements. The Ministry of Economy and Finance approves SOEs’ annual budgets and often slows distribution of funds to SOEs to compensate for other government expenditures.
As of September 2021, the 12 SOEs combined have approximately 30,000 employees. As part of the government’s austerity measures to deal with the pandemic-related economic crisis, the Lasso administration continued with the SOE liquidation processes started in May 2020. As of February 2023, there were five liquidated SOEs, including Strategic Ecuador (a social development firm using profits from natural resource revenues), the Public Pharmaceutical Company, the Public Cement Company, Siembra (a science and technology research firm formerly called Yachay City of Knowledge), and High-Performance Training Centers for athletes. Six SOEs are in the process of liquidation, including the public airline (TAME), the Ecuadorian Railways Company, an agricultural storage company (National Storage Units), the public media company, a manufacturing company (Fabrec EP), and the Ecuadorian Post Office. In February 2021, the government announced that the Ecuadorian Post Office will be replaced by Ecuador Postal Services (SPE).
The 2009 Organic Law of Public Enterprises regulates SOEs. SOEs are most active in areas designated by the 2008 Constitution as strategic sectors. SOEs follow a special procurement regime with greater flexibility and limited oversight. The Organic Law of Public Enterprises requires SOEs to follow generally accepted accounting principles. Still, SOEs are not required to follow the same accounting practices as the central government, nor do they have to participate in the electronic financial management system used in most of the public sector for budget and accounting management. In general, public companies operate under market considerations as provided in the Organic Law of Public Enterprises. However, SOEs are eligible for government guarantees and face lower tax burdens than private companies. The Public Procurement Law establishes that public companies should prefer suppliers of goods/services that incorporate the largest percentage of Ecuadorian components or promote the participation of the popular and solidarity economy, and/or small and medium businesses, through the application of proportional margins of preference compared to other suppliers, market reserve, and/or preferential subcontracting. Said provisions could hinder private sector competition. Ecuador SOEs do not compete internationally and do not invest in the United States.
Ecuador is not party to the Government Procurement Agreement (GPA) within the framework of the World Trade Organization.
The Ecuadorian Constitution prohibits privatization of state-owned enterprises. Still, the Ecuadorian government is seeking to offer long-term concessions and joint-venture agreements with its SOEs to operate some of its assets in strategic sectors including oil and gas exploration and production, electricity generation, and mining. In addition, the Production Ministry (MPCEIP) is considering projects to be developed as potential PPPs.
Article 66 of the 2008 Constitution guarantees the right to pursue economic activities in a manner that is socially and environmentally responsible. Civil society groups such as the Institute of Corporate Social Responsibility and the Ecuadorian Consortium for Social Responsibility promote responsible business conduct. Many Ecuadorian companies have programs to further responsible business conduct within their organizations. Ecuador joined the Extractive Industries Transparency Initiative (EITI) in October 2020. The country must comply with additional requirements to become a full member. In December 2022, the Multi-Stakeholders Group – MSG (formed by government, civil society, and industry representatives) – requested an extension until June 2023 to submit its first country report citing extenuating circumstances such as the nationwide protests, leadership changes at Ministry of Energy and Mines (MEM), and difficulties with World Bank financing, as justifications for the extension request.
The Ecuadorian government has not instituted or proposed requirements for businesses to conduct due diligence or reporting regarding human rights or other responsible business conduct issues.
A number of local and Indigenous communities are active in opposing extractive industry projects in their territories, though some communities have welcomed responsible companies that are generating employment and bringing benefits to the local people. The Ecuadorian government is legally obligated to carry out free, prior, and informed consultations (consulta previa) with Indigenous groups and other communities per the Ecuadorian Constitution and its commitments under International Labor Organization Convention 169 and the United Nations Declaration on the Rights of Indigenous Peoples. Ecuador does not have a law that outlines how to perform this community consultation process. Ecuador’s Organic Law for Citizen Participation also mandates free, prior, and informed consultations on matters that may impact the environment, culture, and social wellbeing of local people. Ecuador’s 2018 Organic Law for the Integral Planning of the Amazon Region provides for the distribution of extractive industry income for the benefit of local communities affected by the sector’s operations. Still, few financial benefits have trickled down to local communities historically and instead royalties often serve to cover expenses from national and subnational government agencies.
Ecuador’s failure to establish protocols for consultations with Indigenous groups and other local communities have led to political tensions and protests particularly in areas with oil drilling and mining projects. Local and Indigenous opposition to mining projects has stalled numerous mining concessions in recent years, including the San Carlos-Panantza Copper Mine and the Rio Blanco Gold Mine. During the dialogue between the Ecuadorian government and Indigenous groups following June 2022 nationwide protests, the government committed to drafting community consultation legislation to establish clear protocols and seek National Assembly approval. Indigenous people and their organizations are seeking more equitable and transparent processes that empower Indigenous nations to attract extractives in their territories and negotiate fair royalties.
Ecuadorian law prohibits all forms of forced or compulsory labor, including all forms of labor exploitation and child labor. Article 42 of the labor code establishes that all companies engaged in global or domestic supply chains are required by law to pay minimum wage, ensure eight-hour workdays, and pay into social security. The Ministry of Labor’s (MoL) Directorate for Control and Inspections is responsible for enforcement of labor laws. The Department of Labor’s Bureau of International Labor Affairs added four new products in 2022 for a total of eight Ecuadorian products on its list of goods produced by child labor or forced labor in violation of international standards, as required under the Trafficking Victims Protection Reauthorization Act (TVPRA) of 2005. These new products are bovines, hogs, poultry, and rice, in addition to bananas, bricks, flowers, and gold included in the previous TVPRA reporting. MoL officials received reports of child labor and conducted inspections but did not furnish specific or aggregated data on the number of inspections or child labor incidences in the production of goods included on the TVPRA list.
Ecuador’s flower production consortium, in coordination with the International Labor Organization and the MoL, undertook a series of efforts to eliminate child labor from flower farms in 2020. The MoL reported that labor inspections of large flower farms in 2020 in Pichincha province did not find instances of child labor. This positive outcome is largely because these farms are part of the Business Network for a Child-Labor-Free Ecuador and are committed to the elimination of child labor. Despite their progress, flower exporting consortiums continue to resist a diagnostic survey to demonstrate the elimination of child labor.
According to international organizations, adolescents below age 15 engage in dangerous working conditions in the artisanal gold mining near the borders with Colombia and Peru. Most gold mining is in southern Ecuador near Peru. Adolescents engaged in hazardous unregulated mining operations faced exposure to mercury and other hazardous chemicals. Government officials admitted difficulty in monitoring for child labor in the unregulated artisanal gold mining sector, particularly in relatively inaccessible border areas. Government and civil society sources did not report child labor in mining for export-oriented firms.
Nationally the government does not mandate local employment in any industry. However, the Organic Law of the Amazon, approved by the National Assembly in May 2018, mandates that any company, national or foreign, operating within the area covered by the law (the Amazon Basin) must hire at least 70 percent of their staff locally, unless they cannot find qualified labor from that area. The 2015 Organic Law for the Special Regime of the Galapagos (LOREG) and its regulations enacted in April 2017 include the mandatory hiring of local residents. The law stipulates non-residents can be hired only if companies demonstrate there are no local candidates with the required skill set.
Ecuador adopted its National Climate Change Strategy (2012-2025) in 2012 and released a National Climate Finance Strategy in 2021. Ecuador launched a National Climate Adaptation Plan in February 2023. In April 2021, Ecuador committed to reaching net-zero emissions by 2050 and launched workshops to develop a National Decarbonization Plan in August 2022. The private sector is involved in the development of the National Decarbonization Plan. Major industries, such as the energy sector, are specifically highlighted in Ecuador’s First Nationally Determined Contribution (NDC), but specific expectations have not been released. The second NDC is due in 2024.
Article 74 of Ecuador’s Constitution (2008) restricts the government from selling any natural resource, which the Ecuadorian Ministry of Environment and Ecological Transition (MAATE) has interpreted to restrict Ecuador from participation in market-based emissions reduction solutions, such as carbon bonds or exchanges. MAATE is developing a general framework and regulations governing carbon offset projects and hopes to release them in mid-2023. Once the regulations have been issued, the resulting carbon offset projects will open for investment. In 2021, Ecuador launched the “Ecuador Zero Carbon Program,” a voluntary eco-labeling initiative in which private sector entities can earn the Ecuador Zero Carbon certification based on efforts to reduce emissions. Ecuador has instituted tax incentives, income tax discounts, and other tax incentives for individuals and entities invested in carbon capture.
Additionally, Environment Ministry officials consider Ecuador’s REDD+ (Reducing Emissions from Deforestation and Forest Degradation) projects the country’s most successful climate-related programs. Currently Ecuador is working with United Nations Development Program through the Green Climate Fund and Global Environment Facility-funded ProAmazonia program, which is part of the country’s Bosques Para BuenVivirREDD+ Action Plan.
Agriculture remains the primary driver of deforestation in Ecuador. Per the Ministry of Agriculture, the primary export commodities driving deforestation are palm oil, bananas and plantains, cacao, and wood. The primary domestic commodities associated with deforestation are corn, rice, sugarcane, and livestock. In 2019, the Ministry of Production launched the Polo Forestal program, which aims to kick start a pulp and cellulose industry in Ecuador by replacing 60,000 hectares (232 square miles) of palm oil plantations with eucalyptus. Illegal mining is also a growing driver of deforestation.
In August 2021, the National Public Procurement Service (SERCOP) and MAATE signed an inter-institutional agreement with the aim of coordinating actions that allow generating policies that promote and facilitate the implementation of sustainable public procurement. The agreement includes commitments regarding the development of environmental sustainability criteria for government suppliers, establishment of adequate environmental management and climate compatible development, promotion of capacity building processes relevant to the achievement of this agreement, and the implementation of sustainable public procurement. SERCOP is currently developing the strategy.
Corruption is a serious problem in Ecuador. Ecuadorian courts have recently tried numerous cases of corruption, resulting in convictions of high-level officials, including former President Rafael Correa, former Vice President Jorge Glas (although the judiciary recently granted him early release), and former Vice President Maria Alejandra Vicuña, among others. U.S. companies have cited corruption as an obstacle to investment, with concerns related specifically to non-transparent public tenders, dispute resolution, and payment of arbitration awards.
Ecuadorian law provides criminal penalties for corruption by public officials, but the government has not implemented the law effectively, and officials have engaged in corrupt practices. Ecuador ranked 101 out of 180 countries surveyed for Transparency International’s 2022 Perceptions of Corruption Index and received a score of 36 out of 100. High-profile cases of alleged official corruption involving state-owned petroleum company PetroEcuador and Brazilian construction firm Odebrecht illustrate the significant challenges that confront Ecuador with regards to corruption. The Ecuadorian National Assembly approved anti-corruption legislation in December 2020. The legislation, which reforms the Comprehensive Organic Penal Code, creates new criminal acts, including circumvention of public procurement procedures, acts of corruption in the private sector, and obstruction of justice. It also includes 11 provisions reforming the laws governing the public procurement system and the Comptroller General’s Office. Moreover, the reforms included compliance as a compulsory mechanism for preventing private corruption. In December 2022, Ecuador named 14 specialized judges against corruption and organized crime to a new court design to prosecute the country’s most significant corruption and money laundering cases. In May 2021 Ecuador approved the Asset Forfeiture Law – a critical piece of legislation to seize the illicitly gained assets of organized crime and corruption. The final step for implementing the law was the creation of the specialized court. The National Assembly passed additional legislation in December 2022 that enables the government to sell seized assets more rapidly.
Illicit payments for official favors and theft of public funds reportedly take place frequently in addition to attacks and threats against judges, prosecutors, and other officials. Drug gangs killed at least three prosecutors and one judge in 2022. Dispute settlement procedures are complicated by the lack of transparency and inefficiency in the judicial system. Offering or accepting a bribe is illegal and punishable by imprisonment for up to five years. The Comptroller General is responsible for the oversight of public funds, and there are frequent investigations and occasional prosecutions for irregularities.
Ecuador ratified the UN Anticorruption Convention in September 2005. Ecuador is not a signatory to the OECD Convention on Combating Bribery. The 2008 Constitution created the Citizen Participation and Social Control Council (CPCCS), tasked with preventing and combating corruption, among other responsibilities. The 2018 national referendum converted the CPCCS from an appointed to a popularly elected body. In December 2008, President Correa issued a decree that created the National Secretariat for Transparency (SNTG) to investigate and denounce acts of corruption in the public sector. The SNTG became an undersecretariat and was merged with the National Secretariat of Public Administration in June 2013. President Moreno established the Anticorruption Secretariat within the Presidency in February 2019 but disbanded it in May 2020 for allegedly intervening in corruption investigations conducted by the Office of the Attorney General. In 2022, the Lasso administration reestablished the Anticorruption Secretariat, whose main role is to design public policy for increased transparency inside the executive branch. The CPCCS can receive complaints and conduct investigations into alleged acts of corruption. Responsibility for prosecution remains with the Office of the Attorney General.
Resources to Report Corruption
Alleged acts of corruption can be reported by dialing 159 within Ecuador. The CPCCS also maintains a web portal for reporting alleged acts of corruption: http://www.cpccs.gob.ec. The Office of the Attorney General actively pursues corruption cases and receives reports of corruption as well.
Contact at the government agency or agencies that are responsible for combating corruption:
Consejo de Participacion Cuidadana y Control Social
Santa Prisca 425 Entre Vargas y Pasaje Ibarra,
Edificio Centenario, Quito
+(593 2) 395 7210 Comunicacion@cpccs.gob.ec
Citizenship and Development Foundation – FCD
Av. Eloy Alfaro and Av. 6 de Diciembre.
Monasterio Plaza Bldg. Of. 1003
(+593 2) 3332 526 firstname.lastname@example.org
Social and Indigenous groups initiated widespread, violent street protests in June 2022 for 18 days over their opposition to government economic policies. The protests resulted in eight deaths (including a soldier) and caused more than $1 billion in damages and losses. The protests centered on increasing fuel subsidies in response to the government’s gradual fuel subsidy reductions. The Catholic Church mediated a dialogue with the government, leading to the freezing of fuel subsidies, a promise to implement targeted fuel subsidies, and other concessions. Despite more than 200 agreements reached in a 90-day dialogue between the government and Indigenous groups, the Confederation of Indigenous Nationalities of Ecuador (CONAIE) withdrew from negotiations with the government in February 2023, claiming the government had not complied with agreements and threatening renewed protests. CONAIE’s withdrawal coincided with opposition legislators’ attempt to remove President Lasso through an impeachment trial, which remains ongoing in the National Assembly and will likely conclude in mid-May.
Large-scale protests pose a regular challenge to Ecuador’s political stability. Opposition to the government’s decision to remove fuel subsidies led to nationwide violent protests in October 2019. The protests paralyzed the country for 11 days, causing significant property damage, including to petroleum and telecommunications infrastructure. A dialogue between the government and indigenous protest leaders, mediated by the United Nations and the Catholic Church, led to the government’s decision to restore the fuel subsidies. Widespread public protests in 1997, 2000, and 2005 contributed to the removal of three elected presidents before the end of their terms. Large-scale but peaceful demonstrations against the Correa government occurred in June 2015.
Violence related to drug-trafficking organizations broke records in 2022, particularly in Ecuador’s port cities. Deadly prison riots have left more than 500 prisoners dead since 2020. The Executive has submitted to the National Assembly updated regulations aimed at ensuring public safety and control of prison systems. The National Assembly continues to debate and analyze security sector reforms.
As of December 2022, Ecuador’s Statistics Institute (INEC) registered a 64.6 percent workforce participation rate and an unemployment rate of 3.2 percent. However, the official underemployment rate is 19.4 percent and an estimated 54.3 percent of workers labor in the informal sector, illustrating significant labor vulnerabilities. Semi-skilled and unskilled workers are relatively abundant at low wages. The supply of available workers is high due to layoffs in sectors affected by Ecuador’s flat economic growth since 2014. The COVID-19-related economic crisis is estimated to have resulted in the loss of 230,000 jobs in the formal sector in 2020. As of December 2022, INEC reported a gain of some 92,000 formal jobs since the pandemic. In addition, first Colombian and then Venezuelan migrants added to the informal labor pool in recent years. The National Wages Council and Ministry of Labor Relations set minimum compensation levels for private sector employees annually. The minimum basic monthly salary for 2023 is $450 per month – one of the highest minimum wages in South America.
Ecuador’s Production Code requires workers be paid a dignified wage, defined as an amount that would enable a family of four with 1.6 wage earners to be able to afford basic necessities. INEC determines the cost and the products that are considered basic necessities. In December 2022 the monthly cost of basic necessities was $763.44 while the official family wage level is at $793.33. As December 2022, INEC estimated 36 percent of workers had adequate employment, which is defined as working a 40-hour work week and earning at least minimum wage. INEC defines adequate employment as earning at least the minimum basic salary working 40 hours per week.
Ecuador’s National Assembly approved in June 2020 limited labor reforms in an emergency law (Humanitarian Law) valid for two years to address the economic impacts of COVID-19. These reforms allowed for the reduction of working hours up to 50 percent and salary up to 45 percent; ability to modify a labor contract with mutual agreement between employer and employee; new temporary contracts for new investments that can be changed to permanent contracts at the end of the temporary period; and layoffs without severance payments only when the company closes entirely.
Ecuador’s National Assembly passed a labor reform law in March 2016 intended to promote youth employment, support unemployed workers, and introduce greater labor flexibility for companies suffering from reduced revenue. The law established a new unemployment insurance program, a subsidized youth employment scheme, temporary reductions in workers’ hours for financially strapped companies, and nine months of unpaid parental leave.
The Law for Labor Justice and Recognition of Work in the Home, which included several changes related to labor and social security, took effect in April 2015. The law limits the yearly bonus paid to employees, which is equal to 15 percent of companies’ profits and is required by law, to 24 times the minimum wage. Any surplus profits are to be handed over to Ecuadorian Social Security Institute (IESS). The law also mandates that employees’ 13th and 14th-month bonuses be paid in installments throughout the year instead of in lump sums. Employees have the option to opt out of this change and continue to receive the payments in lump sums. The law eliminated fixed-term employee contracts and replaced them with indefinite contracts, which shortens the allowable trial period for employees to 90 days. The law also allows participation in social security pensions for non-paid work at home.
The Labor Code provides for a 40-hour work week, 15 calendar days of annual paid vacation, restrictions and penalties for those who employ child labor, general protection of worker health and safety, minimum wages and bonuses, maternity leave, and employer-provided benefits. The 2008 Constitution bans child labor, requires hiring workers with disabilities, and prohibits strikes in most of the public sector. Unpaid internships are not permitted in Ecuador.
Most workers in the private sector and at SOEs have the constitutional right to form trade unions, and local law allows for unionization of any company with more than 30 employees. Private employers are required to engage in collective bargaining with recognized unions. The Labor Code provides for resolution of conflicts through a tripartite arbitration and conciliation board process. The Code also prohibits discrimination against union members and requires that employers provide space for union activities.
Workers fired for organizing a labor union are entitled to limited financial indemnification, but the law does not mandate reinstatement. The Public Service Law enacted in October 2010 prohibits public sector workers in strategic sectors from joining unions, exercising collective bargaining rights, or paralyzing public services in general. The Constitution lists health; environmental sanitation; education; justice; fire brigade; social security; electrical energy; drinking water and sewerage; hydrocarbon production; processing, transport, and distribution of fuel; public transport; and post and telecommunications as strategic sectors. Public workers who are not under the Public Service Law may join a union and bargain collectively since they are governed by the provisions under the Labor Code. Approximately 3 percent of the total workforce was unionized, with the number of public and private unions registered by the Ministry of Labor decreasing by half since 2017. Labor unions and associations reported difficulties in registering unions in the Ministry of Labor due to excessive requirements and ministry staff shortages.
DFC operates in Ecuador under a pre-existing Overseas Private Investment Corporation (OPIC) agreement and has not negotiated an amendment to or replacement of the existing agreement. DFC has signed several loan agreements aimed at increasing local bank lending to SMEs and female entrepreneurs. Since 2019, DFC has mobilized nearly $900 million in financing to support Ecuadorian SMEs, mainly those led by women. In 2022, DFC signed an agreement with Ecuadorian bank Banco Pichincha for $200 million in SME financing. DFC projects in Ecuador include SME financing, housing, health care, and telecommunications sectors. DFC plans to expand its Ecuador portfolio to include financing for renewable energy projects and climate change initiatives. The existing agreement does not require prior host government approval of U.S. government investment support for a proposed project.
Ecuador is a signatory to the Multilateral Investment Guarantee Agreement.
* Source for Host Country Data: Source for Host Country Data: Central Bank of Ecuador (BCE). BCE publishes FDI calculated as net flows only. Outward Direct Investment statistics are not published by the Central Bank of Ecuador.
Table 3: Sources and Destination of FDI
Direct Investment from/in Counterpart Economy Data
From Top Five Sources/To Top Five Destinations (US Dollars, Millions)
Inward Direct Investment
Outward Direct Investment
“0” reflects amounts rounded to +/- USD 500,000.
*Source: Central Bank of Ecuador – September 2022 data. The Central Bank publishes FDI calculated as net flows only. The Central Bank does not publish Outward Direct Investment statistics