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South America / Ecuador

The state of play: FDI in Ecuador

Ecuador is a relatively small FDI destination within South America, and the country saw shrinking inflows in 2019. However, it has recently introduced a public-private partnership law and tax incentives to draw in investors.

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President of Ecuador Lenin Moreno is working to improve its largely underwhelming FDI performance. (Photo by Rodrigo Buendia/AFP via Getty Images)

Banco Central del Ecuador reported that a total of $202.5m in foreign direct investment (FDI) came into the country in the first quarter of 2020. This is in line with the first quarter of 2019, when the country attracted $209m in FDI.

However, Ecuador’s strong reliance on the oil sector and exporting raw materials to China might put the country under strain given how both have been hit by the Covid-19 pandemic.

According to the central bank, Ecuador’s FDI stood at $937.6m at the end of 2019, down from $1.4bn in 2018.

The UN Conference on Trade and Development’s (UNCTAD) 2020 World Investment Report stresses that China is an important importer of raw materials for many other countries in South America, including Argentina, Brazil and Venezuela.

Ecuador struggles to build an FDI-friendly environment

Ecuador has one of the lowest levels of FDI inflows in Latin America and has been taking measures to make itself a more attractive destination, efforts that have continued throughout the Covid-19 outbreak.

UNCTAD reports that, like other countries, in the wake of the pandemic Ecuador implemented measures to encourage the joint use of technology protected by intellectual property rights in an effort to speed up research and development, and to facilitate the mass production of needed treatments, diagnostics and vaccines.

Covid-19 measures aside, Ecuador has provided additional tax incentives for foreign investors and has taken steps to increase private sector investment in the country’s economy. In 2018, it passed the Productive Development Law, a public-private partnership law, and changed tax and regulatory policies for the mining sector.

However, corruption is still perceived as a serious hurdle to investing into Ecuador. In 2019, the country ranked 93rd among the 198 countries surveyed for Transparency International’s Corruption Perceptions Index.