Ecuador is a South American country of 18 million people and among the top ten largest economies in Latin America. The country’s three largest commercial hubs are Guayaquil, Quito, and Cuenca. The cities of Guayaquil, Quito, Cuenca, Manta, and Ambato all boast an American Chamber of Commerce. Ecuador ranked 129th out of 190 economies for overall ease of doing business in the World Bank’s most recent Doing Business survey for 2020. The country has a relatively low English proficiency level with most day-to-day business being conducted in Spanish.
Ecuador’s gross domestic product (GDP) totaled USD 113.8 billion in 2022. The Ecuadorian Central Bank reported 4.2 percent GDP growth in 2021 and 2.9 percent GDP growth in 2022. Analysts project the economy will slow to 1.5 percent GDP growth in 2023 as the economy cools. Ecuador’s inflation clocked in around 3.7 percent in 2022, the lowest value in Latin America. The government successfully completed its $6.5 billion, 27-month Extended Fund Facility with the International Monetary Fund in January 2023. While the government took positive steps to improve fiscal stability in 2022, the fiscal situation deteriorated in 2023 as political instability, a high sovereign risk premium, low foreign direct investment (FDI), low oil prices, and high public expenditures complicate the outlook.
Ecuador suffers from high levels of poverty and labor vulnerability. Unemployment stands at a mere 3.2 percent. Still, the informal sector accounts for 54 percent of employment, only 35 percent of the working-age population is fully employed, and some 27 percent of the country (46 percent of the rural population) lives in poverty. Inflexible labor laws, a high minimum wage, and high costs for firing workers disincentivize formal employment and exacerbate inequality.
Foreign Direct Investment (FDI) flows remain lackluster as political instability threatens the investment outlook. According to the Ecuadorian Central Bank, Ecuador attracted a mere $829 million in FDI in 2022, or approximately 1.2 percent of GDP. Ecuador has traditionally struggled to structure tenders and public-private partnerships that are bankable, transparent, and competitive. This has discouraged private investment and attracted companies that lack a commitment to quality construction, accountability and transparency, environmental sustainability, and social inclusion. Ecuador ranks as 101 out of 180 countries on Transparency International’s 2022 Corruption Perception’s Index. In addition, economic, commercial, and investment policies are subject to frequent changes and can increase the risks and costs of doing business in Ecuador.
The United States is Ecuador’s top trading partner – accounting for 28 percent of its exports and 23 percent of its imports – and Ecuador was the United States’ 39th largest trade partner in 2022. In 2022, two-way trade reached $18.3 billion, up 38 percent from 2021. Key U.S. exports to Ecuador include minerals, fuel, machinery, electrical machinery, and processed foods. Major Ecuadorian exports to the United States include oil, shrimp, bananas, mining products, tuna, cacao, and cut flowers.
The United States does not have a free trade agreement with Ecuador. In 1990, the United States and Ecuador signed the Trade and Investment Council Agreement (TIC). The two governments updated the TIC in December 2020 by signing the Protocol on Trade Rules and Transparency. The Protocol entered into force in August 2021 following National Assembly ratification. The agreement updates the TIC with new annexes in four areas: Trade Facilitation and Customs Administration, Good Regulatory Practices, Anti-Corruption, and SMEs.
Ecuador adopted the U.S. dollar as its currency in 2000. There is no foreign exchange risk in selling or investing in Ecuador, allowing for investment with minimal restrictions and repatriation of capital with a 3.5 percent capital exit tax through 2024.
Political Environment
President Daniel Noboa entered office on November 23, 2023, following his election victory on October 15, 2023. Former President Guillermo Lasso ran a pro-trade, pro-business administration with center-right policies from 2021 to 2023 and enjoyed a strong bilateral relationship with the United States. Under his administration, the United States expanded cooperation with Ecuador on security, trade, and strengthening institutions. President Lasso dissolved the National Assembly and called snap legislative and presidential elections in May 2023 when facing an impeachment attempt. Noboa will serve the remainder of Lasso’s term, until May 2025.
Visit the U.S. Department of State’s website for background on the country’s political and economic environment: