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

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: Ecuador has a robust system of education, which bolsters the country's pool of available labour. However, its competitiveness is hindered by an inconsistent and underdeveloped logistics sector which increases supply chains costs. In addition, the country suffers from pervasive criminal activity and corruption, which, added to government monopoly on the attractive hydrocarbons industry, dampen foreign investment. Moreover, Ecuador's business environment is held back by a substantial tax burden, a largely unionised labour force and a significant degree of government intervention in the private sector. Taking these factors into consideration, Ecuador receives an overall score of 42.2 in the BMI Operational Risk Index, ranking the country 19 th in the region, in between El Salvador and Bolivia.

BMI highlights the risks emanating from its poor regulatory...

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Ecuador Crime & Security

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 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. It has little geopolitical risk, since major border disputes with neighbours Peru and Colombia having 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 28.0 out of 100, placing last in the regional comparison.

Ecuador has a fairly high level of crime, with the US State Department's Overseas Security Advisory Council (OSAC) rating the situation as 'critical' for both residential and non-residential crime. Property...

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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 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 and coupled with bureaucratic hurdles increases operating costs. Overall the country scores an above average 54.4 out of 100 in the BMI Logistics Risks Index, placing it in a competitive place regionally for investors, ranking eighth out of 28 Latin American states.

Ecuador's sizeable extractive industries - principally crude oil production - boost the country's market size, making the country more attractive than many others in the region. However, unpredictable trade policies and the perceived anti-business rhetoric of the Correa Government negatively impact investor sentiment. In addition, erratic access to power,...

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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 (4)

Autos

Ecuador Autos

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BMI maintains a relatively bullish outlook on the Ecuador autos sector in 2014, forecasting vehicle output growth of 7.6% and vehicle sales growth of 7.4% over the year.

This growth is primarily on the back of strong increases in the passenger car segment, which has relatively high volumes, although we expect to see a sustained uptick in the commercial vehicle segment.

The country's autos sector took a hit in 2013, with vehicle output dropping 16.2% and domestic sales declining 6.3%, on the back of weakness across the economy, specifically in private consumption growth. In 2014, however, BMI expects to see a broad recovery across the economy, with increases in business and private consumption and confidence leading to improvements in commercial vehicle and passenger car sales.

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Infrastructure

Ecuador Infrastructure

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BMI View: We maintain our construction industry growth forecast for Ecuador at 6.1% for 2014 and an average growth rate of 3.5% between 2015 and 2020, much lower than the double-digit growth seen in recent years. This deceleration comes on the back of a drop-off in government spending as a result of weakening oil revenue . This is exacerbated by Ecuador's persistently weak business environment and prohibitive financing conditions , which continue to isolate the infrastructure sector from private investment.

Key Trends And Developments

  • While a number of factors have boosted prospects for Ecuador's construction industry over the medium term, weaknesses...

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Oil & Gas

Ecuador Oil & Gas

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BMI View : Ecuador's upstream sector will experience very modest growth in the remainder of the decade, but its downstream sector could see transformation from being a net importer of refined products to a significant exporter of refined products by 2017.

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Headline Forecasts (Ecuador 2012-2018)
  2012 2013e 2014f 2015f

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Telecommunications

Ecuador Telecommunications

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Although 4G services were launched by incumbent Corporación 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 favour state-owned CNT does not bode well for its internationally-owned rivals Claro and Movistar, the operators that have the greatest potential for rolling out 4G services in the country. BMI believes that the country's politics is playing too large a role in telecoms policy, which will have long-term negative effects on the market's growth. Ecuador has passed 100% penetration and sees a notable slowdown in growth potential. Opportunities are in 3G and content, which should entice consumers to spend more.

Key Data

  • Mobile subscriptions will grow to 19mn by 2018, up...

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