EXECUTIVE SUMMARY
Ecuador’s new right-of-center government is a break from the socialist administrations of recent years. Much of Latin America looks on as the new president embarks on a business-friendly agenda.
Under its new administration, Ecuador is keen to bolster its image as a business-friendly economy, yet aware of its responsibility to find the right balance between economy, society, and the environment.
NEW CAPTAIN ON DECK
President Guillermo Lasso officially took office on May 24, 2021. A two-time former candidate for the post, the 65-year-old former banker claimed a surprise victory in a historic election that has given the right its first win since 2003. The long-awaited moment for the founder of the Creando Oportunidades (CREO) movement also spells the end of a long period of left-wing government led by Rafael Correa and, later, Lenín Moreno, who had also led some pro-business reform efforts.
SHOT IN THE ARM
The government set an ambitious goal to vaccinate 9 million people in just 100 days after it took power in May 2021. To achieve this, it implemented what it called “vaccine diplomacy,” obtaining batches of different types of vaccines that would allow it to cover demand. It is estimated that the Ecuadorian state invested more than USD320 million in vaccines from laboratories such as Pfizer, AstraZeneca, Sinovac, and Cansino. Countries such as the US, China, Canada, Spain, and Chile, among others, responded in solidarity to Ecuador’s call for the provision of vaccines. Ecuador’s acclaimed vaccination campaign gave it some of the highest vaccination rates in the world and paved the way for economic reactivation.
PRIVATE SECTOR TO LEAD
The 2007-2017 period was marked by public sector-led growth, which left the country with an oversized public administration. The current government is encouraging the participation of the private sector in order to reduce its fiscal burden. This effort is not only easing pressure on the public treasury, but also generating foreign inflows of capital, as international companies are specifically targeted to take on projects. Amidst this scenario, PPPs are being redesigned and gaining prominence in strategic sectors such as energy, oil, mining, infrastructure, telecommunications, transport, and health, among other sectors.
The government expects USD30 billion in PPP investments up to 2025. Private investments have reached USD5 billion in contracts signed with the government in the 11 months since it took office, the highest figure on record for private investment contracts, reaching 220 projects and potentially leading to 130,000 direct jobs. The main sectors attracting these investments have been renewable energy, industrial production and manufacturing, aquaculture, telecommunications, logistics agribusiness, biotechnology, health, education, and metals.
OPEN-DOOR POLICY
Given its population of 17 million, Ecuador is aware of the need to open up its economy to create economies of scales and export in greater quantity to lower costs. Ecuador has an important pipeline of countries with which it hopes to strike FTAs. The country is said to be close to a deal with Mexico, which in turn would give Ecuador full membership in the Pacific Alliance, the eighth-largest trading bloc in the world. An FTA with South Korea is also on the cards and could be finalized in 2022. Discussions have also begun with China, while discussions with the US and Canada are expected to begin further down the road.
DOUBLE OIL PRODUCTION
Ecuador is seeking an investment of USD12 billion to double its oil production in the next five years based on a strategic plan. Petroecuador, the state-owned oil company, announced that an increase in oil production from around 400,000 barrels at present, equivalent to 80% of national crude oil production, to over 800,000 barrels by 2026 will be done through joint investments with private companies. Given the increasing oil prices, Petroecuador foresees adding an additional 100,000bpd to production, with an investment of USD437 million, closing the year at a production of 495,000bpd.
Additionally, the natural gas sector is making headway in Ecuador, currently concentrated at the underperforming Campo Amistad in the Gulf of Guayaquil, which produces 25 million cubic feet per day of gas, or the equivalent of 4,200bpd. However, the Amistad field may have 17 years of proven natural gas reserves, which could increase production to 90 million cubic feet per day.
A MINING JURISDICTION
Ecuador is the only country in the region that has so far remained mostly untouched by mining activity, with less than 10% of its territory explored for this purpose. That said, 2019 marked the kickoff of industrial mining in Ecuador with the start of the production phase of two major mining projects: Mirador, developed by China’s Ecuacorriente; and Fruta del Norte, developed by Canada’s Lundin Gold. There are other significant projects in the pipeline, including SolGold’s Cascabel, Lumina’s Cangrejos, Solaris’ Warintza, Adventus’ Curipamba, and Dundee’s Loma Larga.
Ecuador is being seen as the next market to be in to maintain a long-term sound portfolio of projects. On top of that, in the recently published Fraser Institute’s Annual Survey of Mining Companies for 2021 report, which analyzes 84 different mining jurisdictions and their attractiveness for investments, Ecuador’s score improved by 26% compared to 2020, from 57.95 to 72.79, making it one of the most attractive mining investment destinations, placing it 24th out of 84 countries.
KEY PLAYER IN INTERNATIONAL FOOD SECURITY
Most of Ecuador’s non-oil or mineral exports are food products, and the country ranks among the main world exporters of banana, shrimp, and tuna. Ecuadorian export companies have invested extensively in biosecurity and protocols to adapt their production to the demands of international market, and this was even more evidenced when COVID-19 disrupted international trade chains. With the reconfiguration of global demand for biosafe food, Ecuador had its strategy in place. Shrimp is the most emblematic example. It has become Ecuador’s most-exported non-oil product, displacing bananas and reaching USD5.3 billion in exports in 2021. This achievement has come hand in hand with the success of companies such as Santa Priscila, which exported USD1 billion worth of the product in 2021 and became the leading supplier in the US.
ENVIRONMENTAL PROTECTION
Although Ecuador is a small country, it is one of the most biodiverse, with 91 types of terrestrial ecosystems in the country. Of the 27 marine and coastal ecosystems in the world, 21 are located in Ecuador. In light of this, the government has the challenge to implement public policy that not only reduces the environmental impact of productive activities, but also promotes regenerative processes. In this sense, Ecuador was applauded at COP26 in Glasgow as it announced the creation of a new marine reserve in the Galápagos, adding 60,000sqkm to the archipelago’s existing reserves and increasing the protected area from 133,000sqkm to 193,000sqkm.
2021 NOVEMBER 19
The Ecuador Open for Business event takes place to promote the country’s open door to investors, business leaders, and world-class experts and discuss the latest issues surrounding investments and public-private partnerships.
2022 FEBRUARY 10
Ecuador presents an industrial clusters initiative involving public and private actors. The project is part of the government’s National Competitiveness Strategy
2022 MARCH 25
Ecuador officially qualifies for the World Cup to be held in Qatar from November 21 to December 18
2022 MAY 9
The end of mandatory face masks is announced, along with the lifting of almost all COVID-19 restrictions.
2022 JANUARY 26
Ecuador formally applies to join the Pacific Alliance during the XVI Pacific Alliance Summit in Bahía Malaga (Valle del Cauca).
2022 FEBRUARY 5
President Lasso meets with Chinese President Xi Jinping to discuss a government priority: an FTA with China
2022 MARCH 24
The US Senate Foreign Relations Committee passes the United StatesEcuador Partnership Act of 2022, recognizing Ecuador as a key democratic partner in Latin America
2022 MARCH 25
The National Assembly of Ecuador rejects President Lasso’s Investments Act, forcing the president to find new ways to move forward with his economic plan
2022 MAY 24
President Lasso makes a speech before the National Assembly. This marks his first year in office