Invest in Ecuador

Opportunities for Investment in Ecuador

The numerous opportunities for investing in Ecuador have made the country one of our favorite locations for overseas investing and retirement. Over the past few years, Ecuador has made a concerted effort to attract foreign investment by liberalizing its investment regulations. Equal treatment is given to local and foreign investors, so when you invest in Ecuador, you’ll receive the same rights of entry into any market as Ecuadorian citizens. Practically all sectors are open to investors and profits and capital can be repatriated without restriction.

Economic Outlook in Ecuador

Prices and costs are moving up and should continue to appreciate for the next several years. Inflation seems to be under control (based on data available through May 2004), and most economic indicators are positive.

There is a good labor pool available in Ecuador, which makes investing in Ecuador particularly attractive. Minimum compensation levels are set by the Ministry of Labor according to the job and industry and can be adjusted by Congress. The minimum compensation package is about $150 a month, and Ecuador has a wealth of good private sector partners available. All this boils down to a favorable environment to invest in a business in Ecuador.

The main economic watch areas are the continued and increased dependence on petroleum exports and the level of (and ability to pay) the debt…the latter issue being made more difficult by the political strain created as the indigenous groups push for increased public spending. President Rafael Correa has caused some concern because of his leftist policies, but as of mid-2007, he maintains that he supports investment in the country.

Where to Invest in Ecuador

According to the Ecuadorian government, it has been proven in previous cases that a country’s attempts to attract Foreign Direct Investment (FDI) are successful when just a small number of sectors are targeted. In the case of Ecuador, among the entire range of the country’s profitable sectors, only four sectors were chosen by virtue of their economic attractiveness on a curve of supply and demand relative to FDI. These sectors are:

• Agribusiness and forestry
• Tourism
• Real Estate
• Fishing and aquaculture.

If you’re looking to do business or invest in Ecuador, it pays to look into these areas. These sectors are where the government has focused its attention, so they’re likely where you’ll find the best investment incentives. Maybe you already have a thriving business in the U.S. and want to expand your market. The U.S. Commercial Service tracks trade with U.S. trading partners and keeps tabs on the growth areas where money is to be made importing U.S. goods. Here are the top six nonagricultural areas of greatest opportunity in Ecuador right now:

• Telecommunications
• Automotive parts and accessories
• Franchising
• Yarns
• Road and oil pipeline construction equipment
• Agricultural products.

Ecuador’s Free-Trade Zones Make Investing in Ecuador Much Easier

Into Ecuador’s free-trade zones you can import raw materials and machinery duty free and then export finished or semi-processed goods without paying any taxes. Businesses that occupy the free-trade zones have no restrictions on the repatriation of their profits, and they benefit from relaxed labor laws that allow them to hire workers on a temporary basis without supplying a year-long contract.

For more information, contact:

Ministry of Foreign Trade, Industrialization and Fishing,
Free Trade Zones Council, Av. Amazonas y Eloy Alfaro, Piso 1, Edificio MAG, Quito, Ecuador
tel. (593)2256-2565; fax (593)2256-2258; website: http://www.micip.gov.ec.

We’ve found that Rolf Stern of BDO Stern is an excellent resource for getting into a large business in Ecuador:
tel. (593)2256-6916; fax (593)2250-4477; e-mail: rstern@bdoconsulting-ec.com

Dollarization

A bold plan to "dollarize" the economy was instituted in 2000, removing the sucre from circulation and making the U.S. dollar the national currency. The effects have been dramatic. Dollarization has lowered the inflation rate, increased economic growth, and given business a solid basis for future planning. It has also eliminated the risk of your investments devaluing due to currency fluctuations.

Dollarization brings drawbacks as well as advantages as it significantly diminishes the country’s ability to respond to shocks–whether of an economic or political nature. The government’s funding requirements remain high, while the presidential administration has been prone to capitulating to pressure from public-sector employees for salary hikes. It also lacks a working majority in the unicameral National Assembly.

One Person Shops: The Small-business Angle of Investing in Ecuador

Your own small import/export concern is a great way to start business in Ecuador. Done on a small scale, buying merchandise in markets and shops overseas for resale back home can easily pay for your travel. Done on a larger scale, you can turn this kind of project into a steady income.
Ecuador is the ideal place to get started. The markets are overflowing with handicrafts, jewelry, sweaters, and the like…all on sale for bargain prices. From gold, silver, and leather goods to statuary, fine alpaca apparel, and magnificent textiles, the choices are endless. A little research around your hometown should give you an idea of what kind of goods will do well in your market.

Grow It and They Will Buy It

Although Ecuador is the world’s leading exporter of bananas and a world leader in rose production, significant opportunities exist in import markets for some agricultural goods. The top four identified by the U.S. Commercial Service include:

Cotton: The Ecuadorian textile industry has focused on developing export markets in recent years. Cotton imports are rising somewhat as a result of increased textile exports and decreased local cotton production; the local crop was hard hit by unfavorable weather conditions following the El Niño and La Niña phenomenon. The U.S. cotton export industry has an agreement with local producers using U.S. cotton to place the "Cotton USA" label on textile products, which has provided a boost to U.S. exports to Ecuador.

Yellow corn: Imported corn is mainly for the domestic poultry industry, and U.S. corn generally captures most of the market share. The poultry industry is growing at approximately 10% to 13% annually, and the shrimp industry at 3% during the last five years. The improved economic situation brought about by dollarization, along with the possibilities of taking advantage of the markets both in Colombia and Peru, may encourage corn and poultry exports to these markets.

Soybean meal: Imports of soybean meal by Ecuador are expected to continue at relatively high levels as domestic soybean production remains at historically low levels. The recovery of local consumption and the increased demand of poultry and eggs from the country’s northern and southern borders will encourage the use and importation of soybean meal.

Consumer food products: In spite of their higher cost, Ecuadorians continue to prefer U.S. food products. Beer, snack foods, meats, wines, and dairy products are all winners in this category. The economic crisis of 1999 and 2000 reduced imports from all sources including the U.S., and recovery will be gradual. However, the new economic model, tariff reductions, and relevant market trends are beginning to show results, including growing food imports.

Learn more about investment in Ecuador in IL Postcards.

Interested in investment opportunities in a different destination? Then check out these similar pages:

Investment in Honduras

Why Is Now a Great Time to Invest in Honduras?

Usually, you’d want to invest in a country for at least one of two reasons: Either there’s a market for your goods, or there are affordable resources. In Honduras, there are incentives on both counts. In Central America, the market for manufactured goods grew rapidly over the past decade and shows no signs of slowing.

Honduras has a wealth of resources to offer, including inexpensive labor and plenty of land for agriculture, forestry, mining, and tourism.

Agricultural products in Honduras include not only bananas, pineapples, and sugar cane, but also cantaloupes, other melons, and many vegetables. The country has the largest cultivated shrimp farm in the Americas. It is also the third-largest exporter of finished furniture to the United States. Mahogany is still available in Honduras, though it is no longer exported in mass quantities at wholesale prices. Most exported furniture is made from strong Honduran pine.

Investing in Honduran Real Estate

Before 1990, foreigners had to form a corporation to purchase land legally in the Bay Islands and the mainland; they were not allowed to buy land as individuals. Decree 1990 makes it possible for you to purchase some property as an individual–up to three-quarters of an acre. By forming a corporation–with the aid of a Honduran lawyer–you are allowed to purchase more than three-quarters of an acre. However, it’s really stretching the legal interpretation of the law.

You’ll most likely get your Honduran real estate without mishap. Nevertheless, be aware that locals are beginning to be more wary of foreigners. If it becomes a really hot political issue, lawmakers are likely to close up the loopholes the decree presently ignores. It’s an issue worth following, and a good lawyer will be able to give you the story on which way the political winds are blowing.

Forming Your Corporation in Honduras

That said, there are two kinds of corporations that will allow you to buy larger tracts of land in Honduras: limited partnerships and stock corporations. We suggest that you form a stock corporation to buy a large tract of land in the country. The ownership of a stock corporation is represented by stock certificates. In forming your corporation, you will retain full ownership of your property and will be entitled to the same rights as a Honduran citizen regarding property ownership. As a corporation, you face no restrictions on building on or developing your land.

Investing in Honduras’ Growing Tourism Sector

In 1992, the Honduran government created the tourism incentive law, which allows investors a 10-year holiday on profits gained from any government-approved project in tourism. This can be anything from a B&B to a gift shop, or a large residential development to a self-storage facility.

As a result of this new legislation, you’ll pay no income tax for 10 years on profits realized on your investment, and you’ll also be exempt from the 12% sales tax on materials needed to start your business (like wood and building materials). In addition to the tax advantages, you’ll be allowed to bring in all construction materials, equipment, machinery, spare parts, sports equipment–anything you need to put a government-approved project into operation–duty free. Since taxes and tariffs normally range from 5% to 120%, you can figure significant savings on extra costs.

To apply for government approval, be prepared to submit a mound of paperwork, including:
* Corporation papers
* Power of attorney
* Land survey
* Title deed to the property
* Set of plans for the development.

In cases where there may be an impact on the environment, you will also need to provide a feasibility study and an environmental impact study. Be patient with this process–it can take a year or more to get all the studies done and approved. The government is serious about protecting its valuable natural assets.

The Popular Apparel Market: Ready for Investment in Honduras

One of the most lucrative industries in Honduras is the apparel industry. Growing at a rate of 65% annually, it shows great potential.

Investing in Wood Products in Honduras

The Honduran wood products and furniture industry has existed for over 100 years. This long marriage between the natural hardwoods and the skilled labor that works with them has produced a high degree of productivity, technical skills, and managerial capabilities. The local industry has teamed up with numerous importers, distributors, and manufacturers and has established a reputation for quality and reliability.

Investments in Hand Carving in Honduras

Woodworking is a long-standing tradition in Honduras, and the artisans there create some of the most beautiful carvings in the world. A great variety of components and finished products are exported from Honduras, including bedroom and dining room furniture, kids’ room furniture, and occasional pieces. Woodwork from Honduras is of the highest quality, and skilled carvers who once did all their work by hand now use turning and carving machinery to complement their handiwork.

Investing in Electrical Products and Light Industrial Goods in Honduras

Appliance production and electrical products have been successful industries in Honduras for a long time. The country has a diversified industrial base and support industries that allow the manufacturing or assembling of new industrial and electrical products for export.

This newest investment sector in Honduras is attracting international companies to the free-trade/export-processing zones. Companies are also undertaking joint ventures with local companies to produce industrial and electrical goods for export.

Investing in the Agricultural Industry of Honduras

Honduras’ diverse and fertile climate is suitable for the cultivation of a variety of fruits and vegetables.

In addition to profiting from extremely productive crops like bananas, coffee, and pineapples, Honduras is now producing a great variety of winter-season fruits and vegetables for the U.S. and European markets.

Learn more about investing in Honduras in IL Postcards.

Interested in investment opportunities in a different destination? Then check out these similar pages:

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