BUSINESS

Doing Business in Ecuador

In Ecuador in recent years, Public Investment has been the driving force of the economy. However, the current economic situation has motivated government authorities to make a change in relation to the investment policy necessary to maintain the same level of execution of works in the country. Now, it is the private sector that should take advantage of the opportunity and openness that the government is offering, through tools and benefits.

Incentives of the Production Code

The Production Code in Ecuador has the following types of incentives:

  • General
  • Sectoral
  • Specific for innovation, export and green production
  • For the productive improvement of MSMEs
  • For territorial development

GENERAL ORDER: for all the productive investments of the country they are new or previous.

SECTORIALS: Prioritized sectors, strategic substitution of imports, promotion of exports, new companies and those that open their capital.

FOR INNOVATION, EXPORTATION AND GREEN PRODUCTION: Additional Deductions for the calculation of the Income Tax, for expenses and investments in:

  • Technical training aimed at research, development and technological innovation.
  • Expenses in improving the productivity of the company.
  • International promotion expenses of the company and its products.
  • Purchase of machinery and equipment for cleaner production, and for the implementation of renewable energy systems (solar, wind or similar), or mitigation of environmental impact.

For the promotion of productive transformation, special development economic zones (ZEDES), which can be of three types: technological transfer, industrial development for export and logistics.

TO IMPROVE PRODUCTIVITY Microenterprises, small and medium enterprises (MSMEs) and actors of the popular and solidary economy (AEPS)

  • The National Guarantee Fund is created, so that the State can provide co-guarantee and that producers can access private financing. Share the risk.
  • Obligatory of inclusive purchases for the State for MSMEs and AEPS
  • Special regime to access the stock market.
  • Temporary investment of the state in high-value companies, through risk capital programs, to later democratize participation to suppliers, AEPS and workers.
  • Government co-financing programs for productivity improvements, entrepreneurship, innovation, quality, exportable offer and its promotion.

FOR TERRITORIAL DEVELOPMENT

  • Companies that develop investments in depressed and border areas, may benefit from additional deductions.

To these benefits must be added the Government Decree opens the doors to investments and participation of the private sector. The construction of works and projects in strategic sectors with investments and participation of the private sector is made possible after the issuance of the Regulation of the Public-Private Partnership Regime, promulgated by Executive Decree 582. This Decree establishes the rules for a "private developer" generate projects in strategic sectors and public services, which will be approved by the "public promoter".

With the issuance of this Decree, private companies will be able to invest in the areas of strategic sectors, provision of public services of electricity, roads, port, airport and rail infrastructures, both in new projects and in those already in execution.

The regulation is based on Article 100 of the Organic Code of Production and it must be taken into account that the decree determines that this must go to a Bidding process. The regulation contemplates 18 requirements that private proponents must meet to participate in public sector projects, whether new or already in execution. Once the private initiative is considered of public interest, the governmental entities or public companies have a period of 180 days to carry out the complementary studies and the necessary validations.

Other tools to achieve the active participation of the private sector in the economy and Public Contracting of Ecuador.

Article 27 of the Regulation to the Public Procurement Law, which provides for the possibility of submitting proposals for financing granted by the bidders themselves or by investors, state organizations, or financial or credit institutions and institutions, to cover the entire project or to complement a part of it. In this case, the financing offered will be one of the aspects to be evaluated and qualified within the determination of the best cost foreseen in the Law.

In the Constitution of the current Republic it is expected that the State will establish public companies for the management of strategic sectors, the provision of public services, the sustainable use of natural resources or public goods and the development of other economic activities. But in the following article it is clarified that "The State may delegate participation in strategic sectors and public services to joint ventures in which it has a majority shareholding. The delegation will be subject to the national interest and respect the deadlines and limits set by law for each strategic sector. "And more importantly:" The State may, exceptionally, delegate to the private initiative and the popular and solidarity economy, the exercise of these activities, in the cases established by law."

The Organic Law of Public Enterprises contemplates the associative capacity, in function of which the public companies, for the fulfillment of their aims and business objectives, can constitute any type of association, strategic alliances, mixed economy companies with public or private sectors in the national or international scope or of the sector of the popular and solidary economy. It is important to highlight that the selection of private participation in this type of associations must be carried out through public tender, with the exception of partnerships with public companies of the international community or its subsidiaries.

It only takes that from businessmen, including foreign companies, there is interest to do business in Ecuador, who obviously to look after their businesses and investments should seek the necessary legal advice to participate in these projects. In case you or your company are interested, do not hesitate to contact us.

At LÓPEZ RIBADENEIRA we have a team of expert professionals ready to help you. The firm LÓPEZ RIBADENEIRA also offers foreign companies and / or private investors who wish to do business in Ecuador, a complete and comprehensive advisory and management service for the formalization of the most suitable corporate form for their interests in our country, the use of the tools and benefits to the investor, the identification and accompaniment in pre-contractual processes and business opportunities, as well as for the establishment and obtaining of all the necessary permits for the activity sought before the different public entities. This integral service includes the constitution of the company, advice for the entry of resources and capital goods to Ecuador for production with a special tax treatment, the hiring of personnel, compliance with corporate and tax obligations, participation in public procurement processes and structuring of administrative contracting figures that may include obtaining financing for foreign companies that come to our country; and, legal advice and support during the activities of the company or the investor in our country.

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Av. Orellana E9-195 y Av. 6 de Diciembre, Edificio Alisal de Orellana, of. 502-504. Quito-Ecuador
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