BUSINESS HOURS

Increasingly aware of the fact that there are no sustainable social policies without sound economic and financial management, Ecuador has switched into business mode. Proof of this are two recent economic reforms: the Productive Development Law and the Tax Simplification and Progressivity Law. This chapter addresses, via representatives from the business community, the current trends shaping Ecuador’s new economic focus. Regarding foreign trade, it is clear that Ecuador is determined to open its frontiers and make its products more accessible in international markets, especially the US, the country’s main commercial partner, with which an FTA is being negotiated. According to the Ecuadorian Federation of Exporters (FEDEXPOR), progress is also being made with other regions in terms of trade. “Additionally, we see opportunities in Eastern Europe, specifically Russia. Negotiations are taking place with Japan and South Korea, as well as with Costa Rica and Guatemala,” stated Daniel Legarda, FEDEXPOR’s Executive President, in an interview with The Business Year. Nevertheless, the most important move reflecting Ecuador’s commitment to liberal economic principles is its aim to join the Pacific Alliance bloc with Mexico, Colombia, Peru, and Chile. Concerns, however, have been expressed in some quarters over Ecuador’s capacity to compete on equal terms with other members if more extensive economic reforms are not realized first. Joining the Pacific Alliance would, however, not only boost trade, but also send a powerful message to international investors. Mining has become the biggest FDI pull into Ecuador, and the country is offering myriad opportunities in oil, tourism, infrastructure, telecommunications, and logistics, especially through PPAs, which have been revamped under the aforementioned Productive Development Law. In order to continue attracting investment, the country is working on reestablishing a network of bilateral investment treaties, which were deemed void by the previous administration. Despite these developments, the IMF expects Ecuador to post zero or close-to-zero GDP growth for the 2019-2021 period. However, this could allow Ecuador to more confidently build toward stronger growth later in the decade. Much of the pace of reforms and their success will depend on social stability, which entered a critical phase in October 2019 after the announcement of a set of economic measures that included the withdrawal of oil subsides, leading to weeks-long strikes. Looking forward, the country’s leaders will have to seek ways to take decisive steps for the economy in a more seamless way and keep building a stronger economic environment not only based on pro-business reforms, but also on trust and longterm planning.