What primary sectors are you targeting to attract more foreign investment, and how do you envision the new law boosting investments?
The Ecuadorian government has by legal mandate divided the economy into priority and strategic sectors, and this new regulation is designed to enhance investments in both. For example, in strategic areas related to mining, refining, copper, aluminum, and oil, the government is looking to attract more foreign investors because local supply is insufficient. The Foreign Trade Ministry has worked hard to promote large investment projects in those areas, which have an estimated USD25 billion in projects needed. On the other hand, the government aims to provide strong incentives, with exemptions from income taxes ranging from eight to 20 years, depending on the sector or province, in agro-industry, technology, renewable energy, road services, and logistics, among others. These new legal rules, plus the extensive promotional activities being done with the Ecuadorian commercial offices around the world, are generating a great deal of international attention.
Addressing unemployment, currently at 5%, is another objective of the new law. What are your expectations with this policy change?
By the middle of 2019, we should have an adequate accounting of how these policies have helped us reduce unemployment. We have estimates of investment and employment growth, though exact unemployment reduction figures have not yet been made clear.
What are your expectations for the tourism sector with the new legislation?
Tourism in Ecuador has grown considerably in recent years; in fact, it became the third-most important source of income for the country. We have a growing tourism sector, especially from overseas. For example, Quito is now one of the most visited capitals in Latin America. Investments in hotels have also been considerable. In 2018, we approved three new important hotels in investment contracts, and we know of a request for a new chain being installed on the outskirts of Quito. Investments and incentives are strong in this sector, and tourism is exempt from income tax for up to 20 years if the investment is made in the provinces of Manabí or Esmeraldas. This will have an interesting impact on the results.
What is the most important aspect of these new tax incentives and fiscal policies?
For starters, Ecuador used to have a regulation prohibiting investment from companies based in tax havens, which is no longer the case. Ecuador can now receive capital from everywhere, on the condition that companies remain transparent about their corporate information. On the other hand, the policy of tax incentives encourages companies making foreign currency to enter the country, thus generating new sources of employment. In this way, we promote productive development, take care of dollarization, and boost employment.
What are the main challenges to implementing the new legislation and how will you overcome them?
We have identified two main challenges: the materialization and diffusion of the new legislation. To overcome the former, we are working on a regulation that will allow investors to easily apply for benefits. On the other hand, we are working with institutions directly related to the places we are visiting to promote the benefits of the new regulation. We want to communicate the importance of this new legislation locally and internationally.