major macro economic indicators
|2020||2021||2022 (e)||2023 (p)|
|GDP growth (%)||-7.8||4.2||2.7||2.5|
|Inflation (yearly average, %)||-0.3||0.1||3.5||2.4|
|Budget balance (% GDP)||-7.1||-1.5||-0.6||-0.5|
|Current account balance (% GDP)||2.7||2.9||2.7||2.6|
|Public debt (% GDP)||60.9||62.2||58.9||56.2|
(e): Estimate (f): Forecast *All non-financial public sector
- Significant mineral potential (copper, gold, etc.), oil and gas
- Tourism potential (flora, fauna, heritage)
- Climate diversity allowing for many crops
- Marine resources: number one exporter of shrimp and prawns
- Relatively low inflationary risk due to full dollarization
- Oil-dependent economy
- High seismic risk: volcanic eruptions
- Competitiveness subject to the evolution of the dollar because of full dollarization
- Largely informal economy and low qualification of the workforce
- History of sovereign default
- Deficient business environment: corruption, opaque public procurement, interventionism
- Weak domestic and foreign private investment
Continuing moderate economic recovery
In 2022, the economy will continue to pick up supported by private consumption and gross fixed investment. Private consumption (around 59% of GDP) will remain the main driver of the economy as pandemic related measures are lifted, and the vaccination campaign reaches the target (60-70% of population vaccinated at end 2021 ), making households‘ demand stronger. Despite the economy being fully dollarized, inflation should still increase as international commodities prices will remain high. Gross fixed investment (25% of GDP) will moderately increase as President Lasso’s administration has not sufficient legislative support , despite the submission of a reform package (“Law for Creating Opportunities”) in September 2021. An executive decree might be the solution, as President Lasso issued one to attract private investments in the electricity sector (late October 2021). We expect limited investments in the oil sector as Mr. Lasso wants to diversify from it. Four major mining projects (gold and copper) are expected to begin during his mandate. Government consumption (14%) will be moderated as the 27-month Extended Fund Facility (EFF) for USD 6.5billion agreed on with the IMF in September 2020 by the former Moreno administration, and renegotiated with Lasso’s administration, comprises a pledge to cut spending. Exports of crude and refined oil products will slightly increase as global demand is growing and international prices are expected to slightly increase, and Ecuador, not anymore an OPEC member, is free to increase its production. Shrimp, canned fish, bananas, cocoa and cut flowers are other main exports, which will benefit from U.S. and European demand, although some issues in terms of delivery chains are expected.
Ample fiscal consolidation and an improved external position
The current account should again be in surplus in 2022 as the global economy continues to pick up. The trade in goods surplus will persist. Oil and non-oil exports will remain resilient, while imports might see an increase as domestic demand gets stronger. Additionally, we expect advanced discussions with the U.S. over a free trade agreement and the regional trade bloc k (Pacific Alliance), which might positively impact trade. The services deficit should remain significant, as inbound tourism is slowly recovering. The primary income deficit will be moderated following the restructuring of the sovereign debt in 2020 (total amount worth USD 17.4 billion in bonds). Meanwhile, secondary income will be in surplus as workers’ remittances from the U.S., Spain, and Italy have significantly increased . Foreign companies’ direct investment might return as the Lasso administration’s reforms boost confidence. FX reserves are expected to remain under 5 months of imports. After years of deficit, the budget balance should record a minor surplus in 2022 as authorities are expected to increase the upper income tax bracket and the wealth tax. Oil Additionally, there should be financing within the IMF’s EFF (USD 1.7 billion ). Moreover, Ecuador received the equivalent of USD 934 million in Special Drawing Rights from the IMF in August 2021, an amount that was put in an account with the central bank. Non-resident holding of total public debt is relatively high (75%). Official creditors own 40% of total external debt.
Reforms submitted to cohabitation and social unrest
In the second round of the presidential election (April 2021), the centre-right Creando Oportunidades party candidate, Guillermo Lasso won. However, with the National Assembly dominated by leftist parties, his policies could face some headwinds. His initial strong popular support that could have led the National Assembly to compromise has been eroded by his emergence in the Pandora Papers and the 60-day nationwide state of emergency enforced since late October 2021 to fight drug trafficking . As the presence of rival drug cartels is increasing (entailing bloody riots in jails) and that poverty and inequality (especially regarding minorities) have grown with the pandemic, we expect additional social unrest in 2022, which could derail fiscal consolidation and other reforms.
Last updated: February 2022
Cheques are still a frequently used means of payment for commercial transactions in Ecuador. Nevertheless, the use of cheques is declining, due to a growing preference for electronic payments for transactions of all values.
Credit transfers are used for both high-value and low-value payment transactions. High-value and urgent inter-bank transfers are usually cleared via the Banco Central Ecuatoriano (BCE). Inter-bank transfers can include capital, money and foreign exchange market transactions, as well as public sector and commercial payments. Transfer instructions can be submitted via paper-based instructions or through online systems such as SWIFT.
Cash is frequently used, particularly for low-value transactions.
Amicable negotiations are a crucial step in successful debt collection management. These negotiations are highly detailed and cover aspects including the number of instalments, write-offs, guarantees, collateral, grace periods and interest.
Ecuador’s judicial system comprises courts, administrative bodies, autonomous bodies and subsidiary bodies. The jurisdictional bodies responsible for administering justice are the National Court, regional courts, law courts, law tribunals and Justice of the Peace courts.
The Judicial Council is the governing body responsible for the administration, supervision and discipline of the judicial function. The judicial system also encompasses subsidiary bodies, such as notaries, auction services, foreclosure services, legal custodians and other bodies, as determined by law.
The Código Orgánico General de Procesos (COGEP), a new legal code in force since May 2017, should help to speed up procedures.
Under the new legal code, trials can be in the form of Executive Judgments or Ordinary Judgments.
Executive proceedings are initiated by filing a written complaint with the Court. Supporting documents (such as the pagaré or letra de cambio) should be attached to the claim. Cases are assigned to a judge who then has 45 working days to decide whether the claim is complete. The judge then hands down precautionary measures within the following 90 days. The judge orders a single audience 120 days later, during which he delivers a sentence.
Ordinary proceedings are initiated by filing a written complaint with the Court. The case is then assigned to a judge who has 60 working days to decide whether the claim is complete. The judge then issues a writ ordering the serving of the written complaint to the debtor. The debtor has 90 days to respond with a written defence. The judge then orders a single audience during which he will deliver a sentence.
Enforcement of a Legal Decision
A domestic judgment becomes final and enforceable after any appeals have been exhausted. The judge of the court of first instance is responsible for enforcing judgments and issues a writ of execution ordering the relevant party to comply with the judgment within five working days. If the order is not complied with within the five-day period, the judge orders the seizure of the debtor’s assets in order for them to be auctioned off.
The Ecuadorian Civil Procedure Code sets out the requirements for the enforcement of foreign judgments, in accordance with the appropriate treaties, international conventions and Ecuadorian law. The approval procedure begins with a phase of knowledge gathering (for ordinary trials) that is performed in the defendant’s domicile court before admitting the execution. Ecuador has signed and ratified a number of international treaties for the recognition and enforcement of foreign judgments, including the Inter-American Convention on Extraterritorial Validity of Foreign Judgments and Arbitral Awards.
There are two phases in Ecuador’s insolvency proceedings:
The objective of this phase is to ensure that the debtor company can continue to operate, by putting into place signed agreements with all of its recognised creditors.
Bankruptcy proceedings entail the sale of the debtor company and its assets, with profits from the said sales being used to pay its debts to creditors.