Conducting business in Ecuador, as a dollarized economy, offers a stable currency environment but requires foreign investors to navigate a specific set of legal, fiscal, and cultural practices.
While the government encourages foreign direct investment and allows for 100% foreign ownership in most sectors, establishing a company involves a series of mandatory steps and a reliance on local expertise.
Investment Climate and Key Sectors
Ecuador provides a market with potential, although it faces ongoing challenges related to legal certainty, bureaucracy, and security.
The country’s economy benefits from full dollarization, which eliminates foreign exchange risk. Strategic sectors like energy, telecommunications, and non-renewable natural resources are constitutionally reserved for state-owned or state-controlled companies, but private sector participation is permitted through concessions and contracts, particularly in mining and hydrocarbons.
Significant investment opportunities are present in various key sectors. Ecuador is a major global exporter of products like shrimp, bananas, and cacao, highlighting strong potential in the agriculture and aquaculture industries. Other attractive sectors for foreign investment include mining (gold, copper, etc.), electric power and renewable energy, and the services sector. The government offers incentives, such as tax exemptions for new investments in certain prioritized sectors and Special Economic Development Zones (ZEDEs).
Company Establishment and Legal Requirements
Foreign investors have several legal structures to choose from for their business, with the most common being the Simplified Stock Corporation (Sociedad por Acciones Simplificada or SAS), the Limited Liability Company (Compañía de Responsabilidad Limitada or Cía. Ltda.), and the Corporation (Sociedad Anónima or S.A.). The SAS, introduced in 2020, has gained popularity due to its flexibility and minimal capital requirement (as low as $1), and it can be formed with a single shareholder. A Limited Liability Company typically requires a minimum capital of $400, and a Corporation requires at least $800.
The company formation process, which can take several weeks, requires several mandatory steps, and it is highly recommended to engage a trusted local lawyer or contact to navigate the bureaucracy. The first essential step is to choose and reserve the company name through the Superintendency of Companies. Next, the company’s bylaws must be drafted and signed by a lawyer, and the initial capital must be deposited into a local “capital integration account.”
Following these initial steps, a public deed is required from a public notary, and the statutes must be approved by the Superintendency of Companies. The business must then be registered with the Mercantile Registry and subsequently obtain a Single Registry of Taxpayers (RUC) from the Internal Revenue Service (SRI), which serves as the business’s tax identification. All legal entities must appoint a President and a General Manager, who must be either Ecuadorian citizens or foreigners holding a valid visa. Furthermore, a resident legal representative is required for company registration. Finally, necessary municipal permits and an operating license must be secured, and for companies with employees, mandatory registration with the Ecuadorian Social Security Institute (IESS) is necessary.
Financial and Tax Obligations
Ecuador’s main corporate taxes include a Corporate Income Tax (CIT), generally set at 25%, and a standard Value Added Tax (VAT) rate of 12%. Additionally, withholding taxes are applicable on payments to non-residents.
Given the complexity of the tax landscape, which requires annual returns and financial statements, an external accountant is essential for managing the company’s financial compliance in accordance with SRI regulations.
Business Culture and Etiquette
Success in Ecuador relies heavily on establishing personal relationships and trust. Business is typically conducted with a formal approach; suits and ties are standard in the highland cities like Quito, while a more casual style is acceptable in coastal and Amazon regions. Spanish is the language of business, and any effort to use it will be appreciated.
Punctuality is expected from foreign counterparts, even though local business meetings may start later than the appointed time. Meetings often begin with small talk to build rapport before transitioning to business discussions. It is customary to address counterparts using their professional titles, such as Doctor or Ingeniero, followed by their last name.
In negotiations, patience is critical, as discussions can be lengthy, prioritizing thoroughness and consensus over quick decisions. Indirect communication is common; a soft response like “we’ll see” might indicate reluctance or disagreement.
For greetings, a handshake is the norm for initial or formal meetings, but a single cheek kiss is a common greeting among closer acquaintances.
When invited to an Ecuadorian home, a small gift such as wine or flowers is a kind gesture, but one should avoid lilies or marigolds, which are reserved for funerals.