The U.S. Department of State’s Investment Climate Statements provide information on the business climates of more than 170 economies and are prepared by economic officers stationed in embassies and posts around the world. They analyze a variety of economies that are or could be markets for U.S. businesses. The Investment Climate Statements are also references for working with partner governments to create enabling business environments that are not only economically sound, but address issues of labor, human rights, responsible business conduct, and steps taken to combat corruption. The reports cover topics including Openness to Investment, Legal and Regulatory Systems, Protection of Real and Intellectual Property Rights, Financial Sector, State-Owned Enterprises, Responsible Business Conduct, and Corruption.
Executive Summary
The Government of Ecuador under President Guillermo Lasso 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.
To access the ICS, visit the U.S. Department of State Investment Climate Statements website.