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making amends

The foreign trade minister of Ecuador, Pablo Campana, talks to Jacopo Dettoni about the country's public investment strategy, the sectors into which it is seeking investment, and how the new government of Lenin Moreno is rebuilding some of the international relationships jeopardised by his predecessor.

Q: Ecuador was not a champion of foreign investment during [former president] Rafael Correa’s years; FDI amounted to only 0.7% of GDP in 2016. What are you doing to lure investors back to your country?

A: There has been a lot of [public] investment done in Ecuador in the past seven years. We have developed a lot infrastructure, as well as hydro power and wind power capacity, so that we have a clean and low-cost energy base. Now is the time to move on to agribusiness and basic industries such as copper, aluminium and oil refining. We are focusing on turning Ecuador into an exporter of value-added products, not only raw commodities.

Q: A 5% tax on currency outflows has been a great source of income for the state, but also a major impediment to foreign investment. Are you planning to drop it?

A: We have to remember that Ecuador is a dollarised country. In order to remain a dollarised country, we have to protect the state’s finances. We are in the process of evaluating the 5% tax on currency outflows, which doesn’t apply to strategic projects within the country’s four free economic zones anyway. That tax is generating $1.2bn in fiscal revenues every year; we will have to find coverage for it if we want to drop it.

Q: What are the main reforms that the government of Lenin Moreno will pursue to make Ecuador more conducive to domestic and foreign investment?

A: What concerns the foreign trade ministry is that we are refreshing relations with partners such as the US and the UK, to have stronger relations with them.

Q: One of Mr Correa’s last decrees terminated 16 active bilateral investment treaties [BITs] with some of the countries you are now visiting to promote investment: the US, China and the UK. Are you happy with that decision? Will Mr Moreno’s government ever reconsider signing new BITs?

A: The main reason why BITs were terminated was that they were unconstitutional. It’s our priority to finalise the draft of a new BIT model to be considered by the president’s office in the next four weeks and delivered to the embassies in these 16 countries. We will make it a priority to negotiate [these BITs] again.

Q: The new government has been promoting a portfolio of projects worth about $33bn. What has been the feedback from investors so far?

A: So far, I’ve been in China, the US and the UK. There is a lot of appetite for new projects and a lot of liquidity in the market, for many reasons. Besides, Ecuador is a dollarised country with political stability, good projects, tax incentives for strategic projects and it is now opening up to the world. I can’t say that the country had this vision three or four years ago, but right now, the vision from President Moreno is to work closely with the private sector at home and abroad.

Q: Are investors not worried about an economic cycle that has struggled to adjust to the new reality in the oil and dollar markets, with both the International Monetary Fund and the World Bank expecting a recession in 2017 and 2018?

A: I didn’t feel these worries in the past four weeks, in which I’ve spent abroad. Ecuador is a country of opportunities, with many industrial projects that need to be developed – especially projects in the hydrocarbons, hydropower, mining and oil refining sectors.

This article is sourced from fDi Magazine
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