THE GOOD LIFE

Ecuador 2012 | ECONOMY | FOCUS: ECONOMIC DEVELOPMENT

As the government offers incentives to encourage investments in technology, value-added production, and sustainable development, Ecuador's drive to promote the well being of its citizens is providing a range of new opportunities.

The concept of buen vivir, or good living, was enshrined in the new Ecuadorean constitution in 2008. The slogan has played a central role in guiding the government's current policy for long-term economic and social development. The concept originates in indigenous Andean traditions, which focus on the importance of living in balance with both nature and society and is a rough translation of the indigenous Quechua phrase sumak kawsay. In the Ecuadorean context, buen vivir is a very broad concept defined in terms of social justice, human rights, and the rights of nature. The 2008 constitution outlines the importance of these rights for the long-term economic development of the country. As Verónica Sión de Josse, Coordinating Minister of Industry and Productivity, explained to TBY, “the government of Ecuador favors investments that will be profitable while adding value, generating social inclusion, and respecting the rights of nature, consumers, workers, and the state. Ecuador is the first country to recognize these rights as a legal body. Under these axes we are generating a productive economic model that contributes to economic growth and incorporates elements of sustainability."

To put these principles into practice, the government has developed the National Plan for Buen Vivir as part of its overall economic development strategy. The plan lays out specific objectives and strategies to incorporate the principles of social justice and green growth across all sectors of the economy, and to promote expansion that is sustainable and fair. Among the most important strategies, the government is focusing on three areas: promoting investment in sustainable, productive value-added industries; improving national IT and telecommunications infrastructure; and promoting the growth of a sustainable green economy.

ECONOMIC DIVERSIFICATION

One of the top priorities of the current government is promoting the diversification of the economy and the growth of sustainable, productive, value-added industries based on knowledge and technology. The government has already implemented a wide range of strategies to work toward this goal, through programs such as the Productive Transformation Agenda, the Organic Code of Production and Investments, and the Investment for Buen Vivir plan. Through the Productive Transformation Agenda and the Organic Code of Production and Investments, the government has identified 14 key sectors across the economy with significant potential for value-added generation and implemented a series of incentives to encourage domestic and foreign investment. Investors can receive tax breaks on any expenses related to training or human capital improvement, as well as any activities that promote growth or create jobs in under-developed areas. Investors in productive industries can also benefit from an exemption from customs duties on the import of capital goods or raw materials. In addition, the government is working to support small businesses, and has shifted a significant amount of public spending from large businesses to micro-, small-, and medium-sized enterprises (MSMEs), with 73% of government purchases in 2010 spent on MSMEs, up from 52% in 2009.

IT INFRASTRUCTURE

As part of its push to build the knowledge and technology economy, the government is also working to invest in the country's ICT infrastructure, and to ensure that all Ecuadoreans have access to telecommunications technology and education. The 2008 constitution recognizes the right of all citizens to have access to ICT technology, and emphasizes the role of the state in helping to facilitate this access. The National Plan for Buen Vivir also recognizes the importance of IT infrastructure and an IT-literate workforce for the development of a knowledge-based, high-tech economy. As a result, the government has prioritized improving national IT and telecommunications infrastructure to facilitate economic growth. The first stage of this strategy is to ensure that all schoolchildren have access to a computer and that all local government bodies have access to the technology necessary to facilitate access at a community level. Already, the number of internet users has doubled from 1.3 million in 2008 to 2.7 million in 2010. In addition, the country is now investing six times more in science and technology than it did under the three previous governments.

SUSTAINABLE DEVELOPMENT

Environmental sustainability is an important part of the concept of buen vivir, and as such, Ecuador's constitution is the first in the world to recognize the rights of nature. The government has made sustainability and green growth an important priority and has placed a great deal of emphasis on promoting investment in sustainable development and the green economy. Investors are eligible for tax breaks if they make investments in alternative energy resources or any improvements that increase energy efficiency or reduce energy consumption. Also, as Minister Sión de Josse explained to TBY, “up to 100% of expenses for the acquisition of clean production facilities or the implementation of renewable energy systems [solar, wind, and others] are also tax deductible."

The effort to grow the green economy is an integral part of the government's drive to move away from the reliance on primary and extractive industries for export income. As a result, the government is also encouraging communities and industries to find new ways of making natural resources profitable and sustainable, such as promoting eco-tourism. One such strategy is the Yasuní-ITT Initiative, through which Ecuador aims to generate alternative income from the large oil and timber reserves that exist at Yasuní National Park. In exchange for leaving the resources in the national park untouched, Ecuador is looking to receive support from the international community. In turn, Ecuador plans to invest in economic mechanisms that will assist indigenous communities living in the park to develop ways of using their natural resources, such as sustainable forestry management and eco-tourism.

The government's current efforts to target investment at projects that support buen vivir are a significant opportunity for investors and a signal for the future direction of Ecuador's economic growth.