Ecuador

In-depth country-focused analysis on Ecuador's economic, political and operational risk environment, complemented by detailed sector insight

Ecuador

Our comprehensive assessment of Ecuador's operating environment and the outlook for its leading sectors are formed by bringing together a wealth of data on global markets that affect Ecuador, as well as the latest industry developments that could impact Ecuador's industries. This unique integrated approach has given us an impeccable track-record for predicting important shifts in the markets, ensuring you’re aware of the latest market opportunities and risks in Ecuador before your competitors.

Ecuador Operational Risk Coverage (9)

Ecuador Operational Risk

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BMI View : High security risks and an unfavourable trading environment make Ecuador a risky proposition for market entry and exploitation. However, good and improving demographics and skill bases, combined with similarly developing logistical capabilities, make the country an intriguing prospect for employing a workforce or transiting freight between continents. Overall, Ecuador is ranked 32nd out of 42 Latin American nations in BMI's Operational Risk Index, with a score of 43.0 out of 100.

Ecuador has an abundance of crime and security risks. The country's overstretched and underfunded police force leave plenty of room for criminal groups to flourish and, despite recording a declining murder rate, overall crime has gone up, especially in Ecuador's blooming...

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Ecuador Crime & Security

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BMI View: Ecuador is a safe place for foreign business travellers, expatriate workers and tourists, though we cannot rule out a deterioration in the security environment in the coming years. There is little geopolitical risk, since major border disputes with neighbours Peru and Colombia have been settled. While the country has a limited number of defence agreements, and a smaller military compared to its most likely aggressors, we stress that a conflict is highly unlikely. However, foreigners are vulnerable to elevated criminal risks which we flag as a concern. Overall, Ecuador is a regional underperformer in the BMI Crime and Security Risk Index, with a score of 22.1...

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Ecuador Labour Market

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BMI View: Overall, Ecuador boasts a large labour force and a growing pool of skilled workers providing significant opportunities, and recent reforms cutting down on unemployment and underemployment. However, onerous regulations, a high degree of unionisation, and a generally unfriendly business environment keep costs high. As a result, Ecuador sits in the middle of pack in Latin America with regards to Labour Market risks.

Ecuador has a Labour Market Risk score of 53.4 out of 100. This puts it in 10 th place in Latin America, between Mexico and Venezuela (which have scores of 54.6 and 52.9 respectively), and 11.2 points behind regional leader Chile.

Availability of Labour risks is relatively muted in Ecuador, due to a substantial labour force and favourable demographics. Indeed, Ecuador has a large pool of unskilled workers to fill a substantial number of jobs in the agricultural and...

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Ecuador Logistics

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BMI View : Ecuador's strong trade flows and large market size make the country an attractive destination for investors. Companies breaking into - or expanding in - the country, will however face logistics risks. The uneven extent and quality of its transport network increases lead times, which, coupled with bureaucratic hurdles, raises operating costs. Overall, the country scores an above average 55.4 out of 100 in the BMI Logistics Risks Index, placing it in a competitive place regionally for investors, ranking ninth out of 42 Latin American states.

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Ecuador Trade & Investment

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BMI View: Ecuador remains one of the more unattractive countries in the region from a trade and investment perspective. While the market is technically open to investment, a number of regulatory changes since 2007 have acted as a significant deterrent. Combined with high levels of corruption, significant red tape and poor enforcement of intellectual property laws, this has acted to stymie foreign investment. While we have seen the government take modest steps to improve the business environment, and expect a return to capital markets in the coming year, we believe that fundamentally there will be little significant shift in policy, keeping us cautious. We have given Ecuador a score of 37.5 out of 100 in our Trade and Investment Risk Index, putting it in 22nd place in the greater Latin America and Caribbean region, between the Dominican Republic (38.1) and Guatemala (36.4), and well behind the region's top performer, Barbados (61.2).

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Ecuador Industry Coverage (5)

Autos

Ecuador Autos

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The import restrictions in place will have a considerable effect on Ecuador's vehicle sales and production over 2015. BMI forecasts vehicle sales to fall 23.1% over the year and for vehicle production to decline by 18.0%.

This decline is primarily on the back of Ecuador announcing a series of measures aimed at curbing autos imports in an effort to protect local producers from import price effects of devaluation and the strong depreciations in the currencies of Ecuador's key trade partners in the Andean and Latin American regions.

In 2013, the country's auto sector was weighed down by a weakness across the economy, specifically poor private consumption growth. Vehicle output dropped 16.2% and domestic sales declined 6.3%. 2014 saw the reversal of this downward trend, where an upturn across the economy spurred commercial vehicle and passenger car sales. However,...

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Infrastructure

Ecuador Infrastructure

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BMI View: We currently forecast 3.9% real growth for Ecuador's construction industry in 2015. This is considerably lower than the 9.5% average of the last five years as we expect falling oil prices to considerably weaken infrastructure growth.

Key Trends And Developments

  • We believe Ecuador's infrastructure industry growth is highly unsustainable as it relies heavily on revenues from oil exports.

  • As such, falling oil prices will have a detrimental impact on the government's capacity to spend in infrastructure development, particularly for projects in the planning stage. Our Oil & Gas team forecasts Brent to average USD59/bbl in 2015.

  • While strong demand for infrastructure had...

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Oil & Gas

Ecuador Oil & Gas

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BMI View: Ecuador's upstream sector will experience very modest growth over the remainder of the decade, but its downstream sector is likely to shift to net exporter status by 2019. We hold a modest growth outlook for the country as a result of limited upstream prospects amid a lower oil price environment, coupled with continued uncertainty regarding the future of Ecuador's largest untapped oil field

Headline Forecasts (Ecuador 2013-2019)
2013 2014e 2015f...

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Pharmaceuticals & Healthcare

Ecuador Pharmaceuticals & Healthcare

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BMI View: A growing demand for imported medicines, increasing rates of medical tourism and the government's legalisation of tax incentives for foreign business will aid in improving Ecuador's appeal to multinational pharmaceutical companies over the next ten years. The country's fast growing healthcare market will also benefit investors, though limited medical access and drug shortages in Ecuador will remain barriers to the country's otherwise positive outlook.

Headline Expenditure Projections

Pharmaceuticals: USD1.5bn in 2014 to USD1.6bn in 2015; +3.5% in US dollar terms.

Healthcare: USD7.3bn in 2014 to USD7.7bn in 2015; +5.0% in US dollar terms.

Risk/Reward...

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Telecommunications

Ecuador Telecommunications

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Regulatory changes at the beginning of 2015 continue to advance the more controversial aspects of operating in Ecuador's telecoms market. In the past, the government has shown a tendency to protect CNT from private competition and the new regulation instituted during 2015 will not change this trend, with additional taxation and high cost of 4G spectrum licences. The launch of 4G by Claro and Movistar will bring competition to this segment where CNT has operated exclusively since 2013. Broadband will be one of the fastest growing sectors over our forecast period, backed by CNT investment in fibre and coverage expansion beyond major towns and cities.

Although 4G services were launched by incumbent Corporacion Nacional de Telecomunicaciones in late 2013, we see little prospect of the service taking off before more spectrum is awarded to other players. The move to...

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