THE BUSINESS YEAR: ECUADOR 2022
The Business Year: Ecuador 2022 is our seventh annual publication on the Ecuadorian economy, marked by the impact of COVID-19 and a major shift along the political spectrum following the election of Guillermo Lasso.
To the surprise of many and after two failed candidacies in 2013 and 2017, Lasso was elected president with 52.36% of the vote, making him the first with an openly right-wing vision since the 2000s. This puts Ecuador somewhat at odds with many countries in Latam, including Chile, Peru, and Mexico, which continue to trend left.
A key objective of this publication is to measure the extent to which Lasso has fueled the business landscape with optimism. On the one side, public finances have experienced all-time highs, with Ecuadorian bonds posting some of the best performances globally, growing national reserves, and oil prices well above budgeted prices. Ecuador has recovered much of its international credibility and has left behind bitter memories, such as when it was forced to restructure USD17.4 billion of debt with multilateral organizations, including the IMF.
Indeed, Lasso’s now-famous catchphrase, “More of Ecuador in the world and more of the world in Ecuador,” has become a perfect reflection of the country’s commercial policy. Ecuador is prioritizing the formation of a free trade and bilateral investment agreements network that will make its economy comparable to those of other regional economies. New trade deals are considered a strategic requirement to create economies of scale, given Ecuador’s relatively small population of 17 million. Considerable steps have been made for Ecuador to join the Pacific Alliance as a full member, while negotiations are well underway for FTAs with China and the US.
However, despite the positive results on different fronts and the economic optimism brought by Lasso, the administration is not without its challenges. It has the difficult task of translating the country’s improving financial performance into a better quality of life for everyone across the social spectrum.
Elsewhere, Lasso and his political movement CREO only account for 13 out of the 137 seats in Ecuador’s national assembly, which considerably limits the government’s reformist agenda. One noteworthy example was the March 2022 rejection by the assembly of Lasso’s Investments Act, the objective of which was to bring reforms serving to catalyze USD30 billion in investments and generate 2 million jobs under a commitment to promote PPPs. Despite this blow, government officials have declared that economic reforms will come in other forms that do not necessarily require the assembly’s approval.
In this scenario of economic optimism, it is also worth mentioning the economic sectors covered in this publication that are expected to further contribute to Ecuador’s economic momentum. With more private-sector involvement, oil is expected to undergo a capacity expansion to double production to 800,000 barrels of oil equivalent per day in the next five years, which will need private-sector investment worth about USD12 billion. Another extractive sector, mining, is positioning itself as Ecuador’s “new oil,” with two large-scale mines, Mirador and Fruta del Norte, already producing. Indeed, 2021 closed with an alltime record of USD2 billion in mining exports, 99% higher than the figure in 2020. Minerals are already Ecuador’s fourth main export after oil, banana, and shrimp. Projects in energy generation, infrastructure, and health are also part of the country’s portfolio of projects where private-sector involvement is being sought via PPPs.
Amidst all this, The Business Year: Ecuador 2022 seeks to continue to document the country’s course through C-level interviews across a wide spectrum of sectors, bringing to the international business community first-hand information on the factors that are shaping this transformational process and its pace.