major macro economic indicators
|2020||2021||2022 (e)||2023 (p)|
|GDP growth (%)||-7.8||4.2||2.6||2.2|
|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 changes in the dollar owing to full dollarisation
- 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
- Ecuador is a transit point for drugs on route to the US and Europe, which is a cause of violence and gang activity
Continuing economic recovery
In 2023, the economy is expected to fully fill the GDP gap triggered by the COVID-19 pandemic. Private consumption (roughly 62% of GDP) will remain the main driver of the economy amid a stable job market, and as consumer price pressures ease somewhat. Despite relevant fuel subsidies (estimated at 2.6% of GDP in 2022) and the fact that the economy is fully dollarised, domestic prices were not completely spared in 2022 by the sharp rise seen in international commodities. Meanwhile, gross fixed investment (21% of GDP) will increase at a slower pace, dampened by climbing global borrowing cost, by President Lasso’s lack of legislative support (hampering the passage of a more pro-business agenda) and by recurrent social pressures to stall projects due to environmental matters. Government spending (15%) will be moderated by the lack of fiscal headroom. In this regard, in September 2020, the previous Moreno administration and the IMF agreed to a 27-month Extended Fund Facility (EFF) for USD 6.5 billion, which Lasso’s administration took over after renegotiating and compromising over the pledge to cut public spending. Exports will grow, despite weakened global growth affecting the major markets for Ecuador´s foreign sales (such as the US, China, Panama and the European Union). Aquaculture -horticulture, agriculture, and agro-industry exports (chiefly shrimp, canned fish, bananas, cocoa and cut flowers) as well as crude- and refined-oil product exports (both of which contribute to 32% of total foreign sales) will slightly increase as their international prices remain at durably historically elevated levels, and Ecuador, which is no longer an OPEC member, is free to increase its oil production.
Low fiscal deficit and external account surplus, with creditors’ help
The current account should return to surplus in 2023, notably driven by the trade balance surplus (3.1% of GDP in 2021), with the pace of export growth exceeding that of imports. Meanwhile, the secondary income surplus (3.7% of GDP) should decrease as workers’ remittances from the U.S., Spain, and Italy weaken somewhat in light of the expected worsening of their job markets. Additionally, the services deficit (-2.4% of GDP) should narrow, as inbound tourism continues to recover and as freight costs curb. Furthermore, the primary income deficit (-1.6% of GDP) will reduce following restructuring of sovereign debt with China in September 2022 (providing relief worth some USD 1.4 billion until 2025). In addition, foreign exchange reserves at September 2022 assured an import coverage of 3.4 months.
Regarding the fiscal accounts, the budget balance should still record a slight deficit in 2023, with public revenues favoured by a rise in activity and the durably historically high oil prices. In addition, multilateral lending (including the World Bank, CAF, Inter-American Development Bank, in addition to the IMF) will remain the main source of financing. Gross public debt, 74% of which is external (48% owed to multilaterals and 38% to markets), is expected to keep to its downward trend thanks to the primary surplus and resilient growth.
Weak governability hampers the likelihood of moving ahead with a pro-business agenda
The centre-right President Guillermo Lasso, who took office in May 2021, faces a governability challenge with the National Assembly dominated by leftist parties and declining popularity. For example, in March 2022, Parliament rejected and shelved Lasso's investment bill, which the ruling party considered vital to the country's economic recovery (a new version was being drafted in October 2022). Moreover, in June 2022, strikes rocked the country for 18 days due to high fuel prices and the consequent increase in the cost of living. Initiated by the indigenous group CONAIE (Confederación de Nacionalidades Indígenas del Ecuador), other sectors joined the protests, affecting oil production and commercial activity. The same group also called for Lasso’s impeachment that was supported by opposition members at the end of June 2022, which Lasso narrowly survived. Social unrest only eased when the government and CONAIE reached a preliminary 90-day agreement. Following months of talks, in October 2022, the two sides reached a deal, which created a mechanism for differentiating fuel prices to ensure that subsidies only benefit the most vulnerable sector of the population and wrote off some small-scale farmers’ debts. It also defined a moratorium on 15 oil blocks and suspended some mining concessions until a new law was introduced. Nevertheless, the president of CONAIE pointed out that a strategic plan for the implementation of these agreements is still pending. The risk of renewed social unrest cannot be ruled out. In addition, overcrowding in Ecuadorian gaols has also prompted increases in violence (at least 400 people have died in custody since late 2020), the blame for which the government places on drug gangs that are retaliating for its efforts to combat them. The current government has called a state of emergency over rising crime on several occasions. Regarding foreign policy, in November 2022 the country agreed to create a fair trade working group with the US to explore potential negotiations on labour, the environment and digital trade. In addition, in January 2022, the Pacific Alliance announced that Ecuador was a candidate for accession to the group as a full member.
Last updated: February 2023
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.