Country Risk: Ecuador

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Location and Size

Ecuador is located in western South America, bordering the Pacific Ocean at the Equator, between Colombia and Peru. It’s land area is 276,841 sq. km., which is about the size of Colorado, and includes the Galapagos Islands.

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Government

Ecuador’s government is a representative democratic republic with 24 provinces.

Branches:

• Executive: Chief of State and Head of Government – President Guillermo Lasso; Vice President Alfredo Borrero; cabinet appointed by the President
• Legislative: unicameral National Assembly including 124 seats with members elected through a party-list proportional representation system to serve 4 years
• Judicial: National Court of Justice; Constitutional Court

Legal System

Ecuador has a civil law legal system based on the Chilean civil code with modifications.

The country has not accepted compulsory International Court of Justice (ICJ) jurisdiction with reservations. It does accept International Criminal Court jurisdiction.

The Ecuadorian judicial system is inefficient and vulnerable to political interference. Court delays are significant, and judgments are inconsistent.

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People

• Population: 17,483,326 (2023 est.)
• Population growth rate: 1.1% (2023)
• Languages: Spanish (Castilian) 93% (official), Quechua 4.1%, other indigenous 0.7%, foreign 2.2%; note – (Quechua and Shuar are official languages of intercultural relations; other indigenous languages are in official use by indigenous peoples in the areas they inhabit)
• Literacy: 94.48% (2023 est.)
• Ethnic Make-up: Mestizo (mixed Amerindian and White) 71.9%, Montubio 7.4%, Amerindian 7%, White 6.1%, Afroecuadorian 4.3%, Black 1%, other 2.3%(2023 est.)
• Religions: Roman Catholic 68.8%, Evangelical 15.4%, Adventist 1.2%, Jehovah’s Witness 1%, other 1.3%, agnostic or atheist 1.4%, none 10.1%, don’t know/no response 1% (2023 est.)

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Economy

The Ecuadorean economy is very dependent on a limited number of commodities including oil, gold, copper, seafood, flowers, coffee, cocoa, and sugar, which represent 90% of Ecuador’s exports. It’s petroleum resources have accounted for more than half of the country’s export earnings and approximately two-fifths of public sector revenues in recent years.

Limited access to international financing forced the government to reduce expenditure levels and cover a budgetary financing gap with loans from international financial institutions, funds from Ecuador’s Social Security Institute, and financing from China.

Leading Markets (2023): US 45%, Peru 7.7%, Venezuela 6.5%, Colombia 4.6%, Panama 4.6%, Chile 4.2%

Leading Exports – Commodities: petroleum, bananas, cut flowers, shrimp, cacao, coffee, wood, fish

Leading Suppliers (2023): China 9.4%, Colombia 9.1%, Brazil 4.2%, Venezuela 3.9%

Leading Imports – Commodities: industrial materials, fuels and lubricants, non-durable consumer goods

Top Industries: petroleum, food processing, textiles, wood products, chemicals

Top Agricultural Products: bananas, coffee, cocoa, rice, potatoes, manioc (tapioca), plantains, sugarcane; cattle, sheep, pigs, beef, pork, dairy products; fish, shrimp; balsa wood

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Comparative Economic Indicators – 2023

Economic Data from CIA World Factbook

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Credit and Collections

Dispute Resolution

In Ecuador, civil courts are primarily divided by territory and hierarchy. Both divisions overlap at the third level of hierarchy, where there is only one national court for the whole country. Regarding that hierarchy, there is a first level of civil courts that handles all the cases from a specific territory within the province. At this level, only one judge manages each case.

Additionally, there is the court of appeals or provincial court, with one of each per province, except for provinces that do not handle many claims, such as the Galapagos Islands. In the court of appeals, three judges sit and handle each case, and a ruling is issued by majority vote. Similar to the first level, the number of judges varies by the amount of claims each province handles, with a minimum of three per case.

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Risk Assessment

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Business Climate

Economic Freedom (2023 Index of Economic Freedom): Ecuador’s economic freedom score is 55.0, making its economy the 119th freest in the 2023 Index. Ecuador is ranked 24th out of 32 countries in the South and Central America/ Caribbean region, and its overall score is far below world and regional averages. The government’s policy of continual expansion into economic sectors has considerably undermined economic freedom forcing the private sector to compete with a growing public sector in what has become a restrictive entrepreneurial environment.

Regulatory System: Ecuador’s regulatory system is not transparent. Government officials and private Ecuadorian businesses have used regulations and questionable legal maneuvers to affect foreign company operations. Some foreign companies have been required to make additional payments not negotiated in original agreements.

Intellectual Property Rights: There is a widespread local trade in pirated audio and video recordings, computer software, and counterfeit activity regarding brand name apparel in Ecuador. Enforcement against intellectual property infringement, which is the purview of the national police and the customs authority, has been ineffective.

Corruption: The rule of law in Ecuador is undermined by pervasive corruption. Illicit payments for official favors and thefts of public funds are common.

Political Violence: Ecuador does not have a tradition of substantial guerrilla activity, nor of frequent violence as a result of demonstrations or political instability. Crime, however, is a serious concern, especially in the larger cities. Violent crime has significantly increased over the last few years, with American citizens being victims of crimes, including homicides, armed assaults, robberies, sexual assaults, and home invasions.

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Business Protocol

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