Analysts believe that the lack of trade agreements and legal uncertainty, in addition to a high country risk, affect foreign direct investment. Tomorrow, the Minister of Economy and Finance will present the progress of the Economic Program and it is expected that the respective bill will be sent to the National Assembly.
In addition to the tax reforms announced, the expectation also focuses on the measures that will be adopted to attract new investments, a policy that has been announced by the President of the Republic and the ministers of the economic front.
In February, the Minister of Foreign Trade and Investment, Pablo Campana, presented a bill to the Executive that proposes a series of incentives for new investments. However, to date there are no known advances in their treatment. In the framework of international tours and appointments with foreign investors, Campana has said that this 2018 “will be a historic year for investments in Ecuador” and forecasts $ 15,000 million of direct private investment for the next five years.
Among the projects, in addition to the oil and mining companies that expect high levels of investment, is the Manabí Refinery, whose tender, which would be finalized next month, would add up to $ 10,000 million. Another way to attract new investments would be through the incentives proposed in the aforementioned law, such as the elimination of 5% of the Exit Tax on Foreign Exchange (ISD) for new investments in productive technology and the elimination of the payment of income tax.
How are the levels of foreign direct investment (FDI) currently? According to the Central Bank of Ecuador, in 2017 there were $ 606,425.4 million for this item, about $ 148,967.5 million less than 2016. The highest value according to the activity was in the manufacturing industry, with $ 143,096.1 million, followed by agriculture, with $ 124,421.9 million.
Among the reasons that analysts have consulted for the decrease in FDI in Ecuador are the lack of trade agreements, legal instability and country risk. José Xavier Orellana, consultant and former vice-minister and ex-adviser of the Ministry of Foreign Trade, considers that FDI has been quite low and has focused on the oil and mining sector. Due to legal uncertainty and changes from one moment to the next, uncertainty was created in any investor.
Orellana said: “We should be between $ 2,000 and $ 3,000 million to be within the low average of Latin American investment per year, and we are only close to $ 700 million.” Other influential factors for investors are the high country risk and the lack of bilateral investment treaties (currently called bilateral investment agreements), which are under analysis.
On the other hand, the analyst stressed that the aquaculture sector has attracted much attention from investors, who have opened balanced factories that have come together with the shrimp boom of the last year. On the other hand, for Miguel Ángel Puente, president of the Federation of Binational Chambers of Ecuador, the figures for foreign investment are quite low, compared to the region.
Colombia has items close to $ 12,000 million; Peru reaches $ 7,000 million, while Ecuador has not been able to overcome the threshold of $ 1,000 million. Trust is one of the fundamental points for investment in any country, said Puente.
One of the elements that can generate it is that there is regulatory stability and institutionality. “When there is a lack of institutionality, international markets or investors stop considering that there are adequate conditions (to invest).” Puente added that it is indispensable to show independence of the administration of the judicial function in the country. “We have to join efforts, both the public and private sectors. Let’s present Ecuador in an attractive way to the investor. ” (I)