Foreigners generally enjoy the same rights as Ecuadorians, with the limitations set forth in the Political Constitution of the Republic and the law, and have no political rights. The State promotes and facilitates selective immigration and requires foreigners to engage in the activities for which they were authorized.

Decision 291 of the Commission of the Cartagena Agreement, published in the Supplement to Official Registry No. 682 of May 13, 1991

Executive Decree No. 415 of January 8, 1993, published in Official Registry No. 106 of January 13, 1993

Additional standards:

Corporate Law

Law on Banks and Financial Institutions

Law on Aliens

Ministry of Industry, Commerce, Integration and Fisheries (MICIP), Central Bank of Ecuador, Superintendency of Companies, Bank Superintendency.

Article 1 of the Decision clearly defines foreign investment as: "foreign contributions by foreign individuals or corporations to the capital of a company, in the form of freely convertible currency or physical or tangible goods, such as industrial plants, new and reconditioned machinery, new and reconditioned equipment, spare parts, parts, pieces, raw materials, and intermediate goods.

Also deemed to be foreign direct investment are investments made in national currency using resources that may rightfully be remitted abroad and reinvestment made under the current regime."

Subregional or neutral foreign direct investment must be registered with the Central Bank of Ecuador. Registration of foreign direct investment may be requested by the foreign investor, said investor’s representative, or the legal representative of the company making the investment.

Any foreign individual or corporation may resort to the foreign investment regime.

No citizens or residents may resort to the foreign investment regime.

Companies determined to be mixed companies because of the composition of their capital cannot make foreign direct investments.

Under Ecuadorian legislation, there is no time limit on the status of foreign investor.

Under the current provisions, business activity is conducted in a context of free competition with access to all sectors of the economy. The Foreign Nationals Department of the Ministry of the Interior issues Class IV immigrant visas, under Article 10 of the Law on Aliens, to persons who are to assume administrative, technical, or specialized functions in companies or institutions established in the country, whether such duties are to be performed by virtue of an employment contract, power of attorney, or legal representation.

Executives or employees recruited abroad may repatriate their earnings in freely convertible currencies, without any restrictions as there is a free foreign exchange market in Ecuador.

Free competition

Open economy

Private sector enterprises providing basic services traditionally provided by the public sector

Downsizing government

Eliminating unnecessary procedures and bureaucratic red tape to enable productive activities to develop adequately.

Through legal and constitutional provisions assuring freedom of association, enterprise, and work.

Under the State Constitution, all Ecuadorians and legal resident aliens have the right to work. There is no economic discrimination as the remuneration for each productive sector is set by law.

Based on current legal provisions, both public and private enterprises (local and foreign) compete on equal terms. There are no differences or exclusive benefits for either sector.

Foreign individuals and corporations may make investments in Ecuador in all sectors of the economy, without restriction, and on equal terms with Ecuadorian individuals and corporations. In addition, Ecuadorian legislation does not consider real rights or intellectual property rights to be capital contributions.

The following response answers both questions 3.3 a) and b):

The Ecuadorian economy functions through basic sectors. The public sector is comprised exclusively of State-owned enterprises.

The areas of economic activity reserved exclusively for the State are:

a) Nonrenewable natural resources and, in general, subsoil products and all minerals and substances that may by nature be different from the subsoil.

b) Drinking water, electrical energy, and telecommunications services.

c) Strategic enterprises as defined by law.

The State is active in those business sectors or economic activities which, because of their scale or scope, can have a decisive economic or political influence and which must seek the social interest. These areas are as follows, mainly: telecommunications, electrical energy, hydrocarbons, mining, national security, real property in border areas, protective forests.

Article 2 of the Telecommunications Law establishes that it is a function of the State to direct, promote, execute, regulate, and control telecommunications activities by directly providing services or taking measures in advocacy of the national interest.

The State may grant authorization to other individuals or corporations to establish or operate telecommunications facilities.

The generation, distribution, and marketing of electrical energy is the responsibility of the State, (a new draft law on electrification that admits foreign investment is currently being debated in Congress).

Article 5 of the Mining Law establishes that all substances existing in the national territory are inalienably and in perpetuity under the control of the State, irrespective of their form, origin, and physical state; whether they are to be found in or on the surface of the soil, in the seabed or sea waters. The State may authorize the conduct of mining activities by nationals or foreigners in the interest of efficient mining resource use. The reform of the Mining Law is expressly aimed at providing more attractive conditions for foreign investment.

The law provides that radio or television broadcasting channels or frequencies are national assets which the State regulates through the National Radio and Television Broadcasting Council, authorizing these services throughout the national territory. It stipulates that individuals holding concessions for these services must be Ecuadorians by birth and that the corporations must also be Ecuadorian and may have no more than 25% foreign investment.

The Fishing Law reserves this activity for the national and mixed companies defined in the law. Under the law, foreign investment in companies is admissible but may not exceed 49% of the company’s equity capital.

The Constitution establishes prohibitions for foreigners regarding border property, as provided in the law.

The Forestry Law also establishes restrictions in favor of the State but envisages the possibility of granting concessions.

See response to question 3.3 a) above.

The Government of Ecuador has signed bilateral agreements on free trade and protection of foreign investments.

There are no restrictions on incoming foreign investment other than those cited above.

The National Government, through the National Modernization Council (CONAM), plans to hand over to the private sector, through concessions and/or direct sales, such major sectors as telecommunications, electricity, domestic marketing of fuel, roads, customs, airports, postal services, civil registry services.

The Law on State Modernization, Privatization, and Provision of Public Service through Private Initiative establishes the principles, standards, and legal framework for inflows of foreign capital. These legal provisions have aroused the interest of large foreign consortia in participating in this process.

The Corporate Law provides for the establishment of branches of companies incorporated abroad to conduct regular business activities in Ecuador.

Foreign direct, subregional, and neutral investment may be made in all sectors of the economy under the same terms applicable to investments by Ecuadorian individuals and corporations.

The country grants equal treatment to all foreign investors, irrespective of their nationality. Ecuadorian legislation does not contain standards and provisions related to MFN treatment.

The State Constitution recognizes that ownership, in any form, constitutes a right recognized and guaranteed by the State for the organization of its economy, in accordance with its social function.

Grounds for expropriation: a) public utility, and b) social interest.

The following criteria constitute grounds of social interest:

a) A declaration stating that real property is to be transformed in a particular way or used in a specific manner.

b) Said declaration must be based on an ordinance or law or approved by the plans regulating urban development and the identification of urban areas for immediate development.

The Political Constitution of the State determines that, in order to enforce the right to housing and environmental conservation, municipalities may expropriate, reserve, and control areas for future development, in accordance with the law.

To construct housing of social interest or implement urban development and low-cost housing programs, any person may request the municipality to expropriate property located in urban development areas that has not been developed and has been owned by the same person for at least five years. Likewise, any undeveloped property 10,000 m² or larger must be developed within two years of notification to that effect, otherwise it may be expropriated by the municipality.

To determine the price of property subject to expropriation, the rules established in the Code of Civil Procedure, as well as the Municipal Law and other laws shall apply:

The price may be set by contract or by the courts

The price is set by:

a) Municipal appraisal

b) Appraisal of the DINAC (National Appraisal and Property Registry Department)

c) Appraisal by the civil court judge

The price must be paid to the owner of the property in cash, by certified check, or by swap, within the time limits set by the municipality or the State, by mutual agreement with the expropriated party.

Ecuadorian law provides the expropriated party with judicial recourse in matters of expropriation only to determine the amount that should be paid as a fair price.

The authorities may take possession of the expropriated property prior to paying compensation only if they have a writ of authorization from the civil court judge.

In Ecuador, the following standards regulate intellectual property:

a) Decision 344 of the Cartagena Agreement. Common Industrial Property Regime of October 21, 1993.

b) Decision 351 of the Cartagena Agreement. Common Copyright Regime of January 25, 1994.

c) Copyright Law of July 30, 1976.

d) Copyright Law Regulations.

e) Decree-Law on Phonogram Producers.

f) Law Against Musical Piracy.

g) Decree 1282 of December 21, 1983 Regulating Software.

h) Inter-American Convention of Buenos Aires on Literary and Artistic Property.

i) Havana Convention Amendment.

j) Bolivarian Agreement on Literary and Artistic Property.

k) Inter-American Convention on Copyright on Literary, Scientific, and Artistic Works.

l) International Convention on the Protection of Artists, Interpreters and Performers, Phonogram Producers and Broadcasting Organizations.

m) Universal Copyright Convention.

Foreign investment may be made in freely convertible currencies or physical or tangible goods, such as industrial plants, new and reconditioned machinery, new and reconditioned equipment, spare parts, parts and pieces, raw materials, and intermediate goods.

There are no restrictions. Profits and capital may be remitted after payment of the relevant taxes.

Profits distributed in the country or remitted abroad and any other benefit remitted or credited to an account and derived from income exempt from the flat tax are not subject to any additional income taxes.

Recipients of profits or dividends remitted or deposited abroad are taxed at the rate of 25% of their taxable income, after deduction of tax credits.

Recipients of income other than profits or dividends remitted, paid, or deposited abroad, pay a flat rate of 33% on taxable income.

The income tax of 25% levied on corporations may be used as a tax credit for foreign corporations, branches incorporated abroad, or individuals not resident in Ecuador.

The profits earned by contractors from service provision in the exploration and exploitation of hydrocarbons are subject to income tax at the flat rate of 44.4%. Profits reinvested in the country are taxed at the reduced rate of 25%.

There are different types of exchange markets:

a) The official market

b) The intervention-free market

c) The free market/P>

Both foreign investment and royalty payments derived from technology transfer contracts have access to the latter market.

The country’s Tax Regime Law provides for equal tax treatment of foreign and national investment. When general and specific benefits were eliminated from the Development Laws, tax incentives were abolished.

a) Income tax

b) Value Added Tax (VAT) - 10%

c) Excise tax (ICE)

Companies with national or foreign capital incorporated in Ecuador and branches domiciled in the country and permanent establishments of foreign corporations not domiciled in the country, which earn taxable income, are taxed at the rate of 25% of their taxable base.

a) Profit remittances abroad: there is no additional tax. Recipients of profits pay a rate of 25%, after deduction of tax credits.

b) Remittances other than profits or dividends pay 33%.

c) Tax credit: the income tax of 25% levied on corporations can be used as a tax credit for their shareholders, partners, or co-owners, when these are branches of foreign corporations, companies incorporated abroad, or individuals nonresident in Ecuador.

d) Income tax on hydrocarbon-related activities: 44.4%. In the case of reinvestment: 25%.

The payments indicated in the law, which are made abroad, are deductible and not subject to income tax.

There are no standards of this type in the current tax legislation.

Ecuador has signed agreements to avoid double taxation with the following countries:

Argentina

Brazil

Spain

Mexico

Switzerland

The United States

Germany

Andean Community countries (Decision 40)

Agreements with Belgium and England have been officially approved and submitted to the National Congress for ratification.

There are no special incentives; the same incentives for national investors apply.

Neither is there any investment insurance.

Foreign investors have the same rights and obligations as national investors and are subject to the laws of the Republic regarding and legal acts and transactions entered into or taking effect in the national territory.

The State may submit any disputes that might arise in relation to the implementation of the Common Regime of Treatment of Foreign Capital and Trademarks, Patents, and Royalties to arbitration tribunals established in accordance with international treaties.

The National Government currently participates in the promotion, analysis, and approval of investment promotion and protection agreements, which are basic instruments for ensuring the security of capital and foreign investments. It also establishes clear rules for dispute settlement and arbitration, in accordance with international law.

Ecuador has signed an agreement with the Overseas Private Investment Corporation (OPIC), a private agency in the United States, for the protection of investments of U.S .corporations.

Regarding industrial property, the country has signed a bilateral agreement with the United States on the protection and enforcement of intellectual property rights, which is before the National Congress for ratification. Ecuador is also a member of the International Center for Settlement of Investment Disputes (ICSID) and the United Nations Commission on International Trade Law (UNCITRAL).

The National Government has entered into international investment promotion and protection agreements with several countries. Agreements are currently in effect with: Argentina, Chile, France, United Kingdom, Paraguay, Switzerland, El Salvador, and Venezuela.

Agreements with Bolivia and the Republic of China have been signed and are pending ratification by the National Congress. Negotiations for signing agreements with Germany, Canada, Spain, and Romania the United States, are in progress. The revision of the Treaty with Uruguay is under negotiation and notes have been exchanged.

Article 140 of the Constitution states: "The Constitution is the Supreme Law of the State. Secondary rules and others of lower rank shall conform to constitutional precepts. The laws, decrees, ordinances, provisions, or international treaties or agreements which in any way conflict with the Constitution or alter its statutes are null and void."

Yes, as international law is incorporated into the country’s domestic legislation, investment protection agreements can be invoked as constituent elements of the law of the Republic.

In Ecuador, the current laws determine that the national entities competent to handle foreign investment are:

a) Ministry of Industry, Commerce, Integration, and Fishereis, which establishes the policies and legal standards for foreign investment.

b) Central Bank of Ecuador, which is the entity responsible for registration of the foreign investment brought into the country.

c) Superintendency of Companies, which is responsible for the control and supervision of companies established in the country; and

d) Bank Superintendency, which is the control and supervisory agency for private banks, finance and insurance and reinsurance companies operating in Ecuador.