Ecuadorian economic, commercial, and investment policies are subject to frequent changes, can increase the risks and costs of doing business in Ecuador, and may limit investment decisions.  Overly burdensome and unpredictable bureaucratic processes pose a challenge for many firms.  Ecuador does not have formal processes to conduct environmental consultations (consulta ambiental) – a preliminary step for the Ministry of Environment to issue environmental permits to firms – or Indigenous community consultations (consulta previa).  The Constitutional Court’s August 2023 decision to suspend environmental consultations halted 178 projects, including key infrastructure projects.  Likewise, the use of local or national referendums – such as the 2023 Yasuni referendum that will halt petroleum exploitation in parts of the Amazon – threatens investments and business operations for firms.

Regulations and standards are another area of concern for U.S. businesses in Ecuador.  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 conduct public hearings with relevant stakeholders prior to voting on legislation.  In the area of standards, there have been proposals to adopt European standards at the exclusion of U.S. standards.

The government procurement process in Ecuador remains challenging for many U.S. companies.  Fiscal challenges limit the government’s ability to make significant purchases of products and services.  A lack of transparency and competitive bidding conditions in the public tender process have resulted in U.S. bidders being excluded from key projects such as infrastructure development and project management.  A focus on low-cost over best value procurement results in the government choosing low quality vendors that may drive up costs over the long-term.  The U.S. government is also collaborating with Ecuadorian counterparts on initiatives such as the Global Procurement Initiative (GPI), a U.S. Trade and Development Agency (USTDA) partnership that encourages Ecuadorian contracting authorities to focus on long-term value and best practices in public procurement.

Enforcement against intellectual property (IP) infringement in Ecuador remains challenging despite the Ecuadorian government’s 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, Ecuador’s National Service of Intellectual Rights (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.

Ecuador does not have a free trade agreement or a bilateral investment treaty with the United States, putting it at a disadvantage with neighbors Colombia and Peru.  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 struggles to find a balance between the rights of local communities, environmental protection, and foreign investment.  Ecuador’s 2008 Constitution obligates the State to consult local communities (many of which are Indigenous) prior to initiation of projects passing through their lands through a process that is free, informed, and culturally appropriate (known as FPIC).  Separately, the Ecuadorian government requires environmental consultations as a preliminary step for the Ministry of Environment to issue environmental permits.  Though nonbinding, environmental consultations protect the legal right of local communities to be consulted regarding any municipal decision or authorization that directly affects the environment within that community.  Per the Constitutional Court, the National Assembly needs to pass laws to legally define protocols for environmental consultations and FPIC.  The lack of legal clarity on these processes is delaying infrastructure projects, particularly in the mining and energy sectors, and is a major factor in social unrest for Indigenous groups frustrated by unmet demands.