Ecuador - Foreign investment



The government welcomes foreign investment and has substantially decreased regulatory barriers in recent years, though Ecuador's economy retains a considerable statist and protectionist orientation. As a member of the Andean Pact, Ecuador's foreign investment policy is governed largely by the parameters of Andean Pact Decisions 291 and 292 of May 1991, which provide for equal treatment of foreign and domestic investors, and unrestricted remittance of profits overseas. As of 8 January 1993, foreign investment was allowed without previous authorization in virtually all sectors of the economy that were open to domestic private investment, with total repatriation permitted.

In 1997 the government passed a law on promoting foreign investment. Investment in telecommunications and electricity were opened in 2000, when the government announced plans to sell half of the rights in each sector. In 2001 a new mining law went into effect designed to spur increased foreign investment in Ecuador's considerable untapped mineral reserves. The law provides for 30-year, renewable concessions of up to 5,000 hectares (with no limit on the number of concessions per investor), with exploration and production covered by a single license and environmental regulation under a single, central authority. Licensing fees are called "conservation patents" and increase over the life of the concession. Concessions can be both transmitted (passed on to heirs) and transferred (rented, leased, or sold.) Four major mining companies were awarded concessions in 2002.

Foreign oil companies still have to work with PetroEcuador, the state oil company, which is judged to be sorely in need of foreign investment funds, particularly after the government default in 1999 and near-collapse of domestic banking system. In 2003, PetroEcuador's problems—production was 35% below the level in 1990—were under study by an international financial group headed by the IMF, which will doubtless prescribe more openness to foreign investment in the sector.

The annual average inflow of foreign direct investment (FDI) in Ecuador amounted to $740.5 million in 1997 to 2000. In 2001 and 2002, the annual FDI inflow rose over 75% (to $1.33 billion and $1.28 billion, respectively), contrary to the worldwide trend of sharp decreases in inward FDI.

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