Doing business in Ecuador: Ecuador trade and export guide
Updated 3 September 2014
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This publication is available at https://www.gov.uk/government/publications/exporting-to-ecuador/doing-business-in-ecuador-ecuador-trade-and-export-guide
Brexit
Learn about changes for UK exporters to Ecuador if the UK leaves the EU without a deal.
Managing risk
Find out how UK companies can control risks when doing business in Ecuador.
Export opportunities and advice
Find more export advice and explore opportunities overseas on great.gov.uk.
1. Ecuador export overview
Ecuador is the ninth largest economy for UK exports in Latin America.
Contact a Department for International Trade (DIT) Ecuador export adviser for a free consultation if you are interested in exporting to Ecuador.
Contact UK Export Finance (UKEF) about trade finance and insurance cover for UK companies. You can also check the current UKEF cover position for Ecuador.
Many UK companies are already doing business in Ecuador, including BUPA, Unilever, Shell, Glaxosmith Kline, Grant Thornton, G4S and AON Risk Services.
Benefits for British businesses exporting to Ecuador:
- expanding middle class
- Ecuador expected to join the European Union (EU)-Andean Free Trade agreement
- USD adopted as legal tender (dollarisation)
2. Challenges of doing business in Ecuador
There are certain challenges to doing business in Ecuador. These include:
- ranks 107 out of 177 on Transparency International’s corruption perceptions index
- can take up to a year to set up a business
- high import taxes on luxury items
- import quotas on some items
- finding a local partner can be difficult
- no Investment Promotion and Protection Agreement (IPPA)
IPPAs that previously existed were deemed incompatible with Ecuador’s constitution. However, the British/Ecuadorean Chamber of Commerce does have an arbitration centre.
Read the Foreign and Commonwealth Office’s (FCO) Overseas Business Risk report for Ecuador.
3. Growth potential
3.1 Economic growth
Ecuador has been severely impacted by falling oil prices as oil represents 40% of total exports. According to the World Bank, Gross Domestic Product (GDP) growth in 2015 was 0.3%, down from 3.7% in 2014. The World Bank is forecasting a -4% contraction of the economy for 2016 and 2017.
3.2 Free trade agreements
In July 2014 Ecuador concluded negotiations with the EU to join the Andean agreement that exists with Peru and Colombia. This agreement is expected to come into force at the beginning of 2017 subject to approval from the EU Parliament. This is an important step for Ecuador trade with the EU and it will open up new opportunities for British companies.
Ecuador is a member of the Andean community and has expressed interest in joining Mercosur.
4. UK and Ecuador trade
Ecuador is a growing market for the UK. The UK exported £119 million of goods to Ecuador in 2015, making it the ninth ranked market within Latin America for UK exports.
British exports to Ecuador include:
- pharmaceuticals
- transport equipment
- chemical materials/products
- professional scientific equipment
- education services
5. Opportunities for UK businesses in Ecuador
Department for International Trade (DIT) provides free international export sales leads from its worldwide network. Search for export opportunities.
In Ecuador all major public projects select their suppliers of products and services through public tenders. The tenders are published on the SERCOP website (Spanish only).
5.1 Education
Poor schooling remains a weak link in the Ecuadorean economy. The education system is not producing the skills needed in the labour market. The government is trying to implement new tools into the education system to address the shortcomings.
There are opportunities for UK companies in the following areas:
- the scholarship programme
- improving teacher training standards
- improving English teaching standards
- provision of assessment tools
- the construction of a public university and research centre called ‘Yachay City of Knowledge’
Contact cristina.moreno@fco.gov.uk for more information on the education sector.
5.2 Mining
The Ecuadorean government is promoting opportunities in the mining sector to diversify the economy.
The new mining ministry is keen to involve British companies. The Ecuadorean government is seeking USD 600 million of foreign investment into the sector in 2016, rising to USD 1 billion in 2017 and USD 1.5 billion in 2018.
There are opportunities for UK companies in:
- environmental and geological services
- tunnelling and infrastructure works
- power generation
- pipes, screening, handling material equipment and mining tools
- health and safety products and services
- vehicles and rail products and services
- laboratory and mineral test equipment and services
- water management products and services
- technological services such as mapping the territory
Contact cristina.moreno@fco.gov.uk for more information on the mining sector.
5.3 Infrastructure
The housing market is growing fast in major cities because of the increasing middle class.
A new underground railway system is currently being built in Quito. The first part and second part of the project is under the concession of the municipality and the national government.
In addition, new opportunities might arise with the Habitat III conference taking place in Quito late this year.
There are also opportunities for development of:
- new roads
- ports
- airports
- underground railways
- housing
- Private and Public Projects (PPP)
Contact cristina.moreno@fco.gov.uk for more information on the infrastructure sector.
5.4 Renewable energy and environment
The Ecuadorean government is looking to enhance the renewable energy sector. It intends to move from a petroleum based system to a more environmentally friendly renewable system.
This will create opportunities for projects in:
- hydro-electric
- geothermal
- wind
- water
- infrastructure
- Information Technology (IT)
Contact cristina.moreno@fco.gov.uk for more information on the environment sector.
5.5 Oil and gas
Oil and related services are important to Ecuador’s economy. There are opportunities for:
- technology
- security products
- know-how
- training
Contact cristina.moreno@fco.gov.uk for more information on the oil and gas sector.
6. Start-up considerations
British companies can approach the Ecuadorean market in several ways:
- export direct
- set up an agency
- appoint a distributor
- open a branch
- form a joint venture
It is highly recommended that you have an Ecuadorean partner for setting up a business. For direct exports it is advisable to have a local representative, either on a commission basis or as an importer/distributor.
In order to do businesses with government agencies or a government owned company you need a local agent or a subsidiary/branch in Ecuador.
You should seek legal advice as the tax and legal obligations of each business structure can differ. The Department for International Trade (DIT) team in Ecuador can provide a list of lawyers.
7. Legal considerations
‘Honeymoon’ periods of between 6 months and 1 year are recommended prior to signing lengthy agency contracts. The legal system is complex and slow.
Companies are always advised to seek legal/taxation advice before entering into a joint venture or similar type of partnership. Lists of local lawyers and chartered accountants are available from the Department for International Trade (DIT) team in Ecuador.
7.1 Labeling and packaging regulations
The government has changed several labelling and packaging regulations in order to promote better quality products in Ecuador.
The Instituto Ecuatoriano de Normalización (INEN) can provide guidance on labelling.
7.2 Intellectual Property (IP)
An Intellectual Property Rights Law was passed on 22 April 1998. It established that that the state recognises and guarantees the intellectual property acquired in accordance with:
- the law
- the decisions of the Andean Community
- the international agreements in force in Ecuador
The terms exceed those set out by the World Trade Organisation (WTO), which provides only a minimum margin of protection.
In practice, there is little policing of the laws and piracy is widespread.
8. Tax and customs considerations
8.1 Tax
Ecuador currently charges a 5% tax on currency leaving the country.
The tax equivalent of Value Added Tax (VAT) in Ecuador is called Impuesto al Valor Agregado (IVA). IVA is usually set at 12%, but this will increase up to 14% for a year (from June 2016 until June 2017).
Ecuador has a service tax that applies to products that require a service element, such as food, catering, and hotels. This is set at 10%.
8.2 Import controls
An import licence, known as a ‘documento unico de importación’ (DUI), is required for import. It can be issued for most categories of goods without difficulty.
There is a small list of prohibited items and some goods require approval by the Ministry of Industries (MICIP).
Applications for import permits must be accompanied by a copy of the order showing:
- the names of the importer and shipper
- the class of the merchandise
- quantity
- weight
- measurements
- Free on Board (FOB) and Cost Insurance and Freight (CIF) values
Permits are valid for one shipment only, with the exception of merchandise that requires many shipments or because of lack of cargo space.
8.3 Commercial samples and temporary imports
Samples of no commercial value sent by post are duty free and are exempt from documentation requirements.
Other samples are subject to duty and the same documentation requirements as ordinary commercial consignments. However, they can be imported temporarily without payment of duty, by posting a bond for the amount of the duty. Re-export of the samples must take place within 3 months.
8.4 Customs duties
Ecuador’s import tariffs range from 5% to 20% for most products. However, with new safeguard measures introduced at the beginning of 2015 some tariffs have risen 65 to 70%. These measures will be extended until June 2017.
Automobiles, alcohol beverages and some other goods are subject to a tariff of 40% when imported from countries outside the Andean Region.
Duties on all goods are paid on the CIF price according to their value.
There are a range of customs charges including inspection, warehousing, verification and security.
You can find more about import tariffs in the Market Access Database.
9. Business behaviour
Personal contact with potential and existing clients and regular visits to the market are vital.
If you speak Spanish it is a definite advantage, as not all business people speak English.
10. Entry requirements
You don’t need a visa to enter Ecuador, but you should hold a valid passport with at least 6 months validity remaining. You will be given a 3 month tourist visa on arrival.
10.1 Travel advice
If you’re travelling to Ecuador for business, check the Foreign and Commonwealth Office (FCO) travel advice page beforehand.
11. Contacts
Contact the Department for International Trade (DIT) team in Ecuador for more information and advice on opportunities for doing business in Ecuador.