This information is derived from the State Department's Office of Investment Affairs, Investment Climate Statement. Any questions on the ICS can be directed to EB-ICS-DL@state.gov
Last Published: 7/13/2017

Transparency of the Regulatory System

Economic, commercial, and investment policies are subject to frequent changes and can increase the risks and costs of doing business in Ecuador. Regulatory agencies are not required to publish proposed regulations before enactment and rulemaking bodies are not required to solicit public comments on proposed regulations. The ministries generally consult with relevant national actors when drafting regulations, but not always.

The Government of Ecuador publishes regulatory actions in the Official Registry and posts them online.

There are no identified informal regulatory processes led by private sector associations or nongovernmental organizations.
 

International Regulatory Considerations

Ecuador is a member of the Andean Community of Nations (CAN) along with Bolivia, Colombia, and Peru. Ecuador is an associate member of the Southern Cone Common Market (MERCOSUR).
 

Legal System and Judicial Independence

Ecuador has a civil codified legal system. Systemic weakness in the judicial system and its susceptibility to political and economic pressures constitute challenges faced by U.S. companies investing in Ecuador. Enforcement of contract rights, equal treatment under the law, intellectual property protections, and unstable regulatory regimes are concerns for foreign investors.
 

Laws and Regulations on Foreign Direct Investment

Ecuador does not have laws specifically on FDI. The Organic Law for Production Incentives and Tax Fraud Prevention, passed in December 2014, includes provisions to improve tax stability and lower the income tax rate in the mining sector.
 

Competition and Anti-Trust Laws

The Superintendence of Control of Market Power reviews transactions for competition-related concerns. Ecuador’s 2011 Organic Law for Regulation and Control of Market Power includes mechanisms to prevent, control, and sanction market power abuses, restrictive market practices, economic concentration, and unfair competition. The Superintendence of Control of Market Power, can fine companies found to be in violation of the law up to 12 percent of gross revenue.
 

Expropriation and Compensation

The Constitution establishes that the state is in charge of managing the use and access to land, while recognizing and guaranteeing the right to private property. It also provides for the redistribution of land if it has not in active use for more than two years. The 2015 Telecommunications Law allows expropriation of private land in accordance with the rules and procedures of the law when necessary for the installation of network infrastructure.
Under the U.S.-Ecuador BIT, expropriation can only be carried out for a public purpose, in a nondiscriminatory manner, and upon payment of prompt, adequate, and effective compensation.
 

Dispute Settlement

ICSID Convention and New York Convention

Ecuador withdrew from the International Centre for the Settlement of Investment Disputes (ICSID Convention) in 2010. Ecuador is a signatory to the convention on the Recognition and Enforcement of Foreign Arbitral Awards (1958 New York Convention).
 

Investor-State Dispute Settlement

Ecuador’s National Assembly voted on May 3 to terminate 12 of its bilateral investment treaties, including its agreement with the United States. The Government of Ecuador notified the U.S. government of its withdrawel from the BIT on May 18. Article 12 of the U.S.-Ecuador BIT specifies that the treaty is terminated 12 months after either side gives the other written notification of its intent to withdraw. The treaty further specifies that all U.S. investments in place at the date of termination enjoy the protections of the treaty for the subsequent ten years.
 

International Commercial Arbitration and Foreign Courts

A number of U.S. companies operating in Ecuador, most notably in the petroleum sector, have filed for international arbitration due to investment claims. The GOE has treated these disputes as a political issue, speaking negatively about investors involved in these cases.
 

Bankruptcy Regulations

Ecuador is ranked 157 out of 190 in the category of Ease of Resolving Insolvency in the 2016 World Bank's Doing Business Report.
With the goal of protecting consumers and preventing a real estate bubble, the National Assembly approved in June 2012 a law that allows homeowners to default on their first home and car loan without penalty if they forfeit the asset. The provisions do not apply to homes with a market value of more than 500 times the basic salary (currently USD187,500) or vehicles worth more than 100 times the basic salary (currently USD 37,500).

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