Conservative Ecuadorian president Guillermo Lasso took office on May 24 with a gargantuan task on his hands. The 65-year-old former banker begins his term with significant challenges ahead, in an oil-rich Latin American country still reeling from the coronavirus pandemic.
Ecuador has suffered the world’s second worst rate of excess deaths from Covid-19 since the pandemic began, according to analysis by the Financial Times. Gross domestic product (GDP) contracted by 7.5% in 2020, and is forecast to recover by 2.5% this year. Meanwhile, government debt has jumped to 65.1% of GDP — its highest level in decades.
But with plans to make the country more investor-friendly and review the $6.5bn lending programme agreed with the International Monetary Fund last September, Mr Lasso aims to have more success than his predecessor Lenín Moreno by using free-market policies to kickstart the economy.
He speaks to fDi about plans to restore confidence through an ambitious programme to vaccinate more than half of Ecuador's population, and invite domestic and foreign investors to drive the recovery.
Q: How do you plan to kickstart Ecuador’s economy?
A: There will be no economic kickstart whatsoever if our population doesn’t get the vaccine. That’s why our administration has proposed to vaccinate nine million Ecuadorians in the first 100 days of our government. Once we achieve that goal, the productive sector and the population will be more confident in returning to normality. My administration will guarantee legal certainty to attract foreign and national investment.
We are committed to working tirelessly for the wellbeing of the Ecuadorian people. We will demonstrate that the government is here to create conditions to live a free and joyful life, based on their will. We will not prosecute nor point fingers towards anybody because they do not share our way of thinking. We will respect, now and always, the diversity and plurality of our people.
Q: How will you achieve your ambitious vaccination target?
A: The previous administration reserved a mixed portfolio of around 20 million vaccine doses for the Ecuadorian people. Also, we have had conversations with the ambassador of the Russian government in Ecuador and we agreed a supply agreement for the Sputnik V vaccine. This agreement means more vaccines for more Ecuadorians.
Due to the transition process, our vaccination programme started on May 31. In the run-up, all public and private health facilities, and mobile brigades, were ready to vaccinate our people based on the established calendar. We already have 150,000 doses for people that are a priority to vaccinate during that time.
Q: How do you plan to improve Ecuador's investment and business climate?
A: Over the past 15 years, Ecuador’s annual foreign direct investment (FDI) did not exceed 2% of GDP. These low numbers are a result of applying a capital exit tax since 2008 and a high emerging market bond index spread, which averaged 2395 basis points in 2020.
In this regard, Ecuador will offer legal security for its current and future investments to regain credibility in international markets. Additionally, we will promote public–private partnerships (PPPs). To this end, we will reform the PPP regulations to reduce the paperwork involved in the approval of projects and facilitate the arrival of private investment in the country. In tax matters, new investors will not pay income tax for the next 30 years, and we will remove the 5% capital exit tax progressively during the four years of government.
Q: Which sectors do you believe have the most promising opportunities for FDI in Ecuador?
A: Ecuador is a rich country — culturally, naturally, and historically. Every economic sector has the potential for prosperity. Since the beginning of our presidential race, we stated that we would double the oil production in the country, and the mining sector has plenty of potential — it could generate more than $860m by 2024. We are aware of the environmental concerns that the increased activity of these sectors implies; still, we want to assure the Ecuadorian people and the international community that we will comply with the highest international environmental standards and certifications, compensations in case of environmental violations, and the usage of advanced technologies to reduce the environmental impact.
The tourism sector has many promising opportunities since more people are getting vaccinated around the world, and here in the country, international and national travel are gaining strength again. More dollars will get into the economy and kickstart any businesses related to the sector, directly and indirectly. Also, we’ve seen the importance of the agricultural industry during the pandemic and throughout our history. This sector generates many jobs, and we are committed to improving the conditions of the industry and its workers, its productivity and access to new technologies.
However, our administration is very confident in all sectors that comprise our economy. Our government will leave behind no economic or social sector; we will guarantee legal certainty for national and foreign investment, and the proper conditions with less paperwork and fewer taxes.
Q: How will you balance FDI attraction into Ecuador’s extractive sectors with greater environmental safeguards?
A: We will establish a clear legal framework for investors, and respect the intangible zones and the decisions of the locals. Operations in the extractive sector will have to comply with the highest international environmental standards and certifications. In addition, our administration will promote the use of modern technologies to minimise environmental impact.
We will also establish the obligation to repair and compensate for diminishing ecological quality standards, emissions, prevention or decontamination plans. Our government will rigorously assess and monitor such operations on an ongoing basis.
Q: Any closing thoughts?
A: We are an administration that's committed to improving the wellbeing of our people. We will work hard to eradicate hunger in our country, improve public health services and fulfil the promise of free education at any level for everyone. Our government will not tolerate violence of any sort against anybody, and we will act severely to punish those who perpetrate acts that are against human rights and our law.
We are a country of law and order, and our government will respect the rule of law. We will enforce national and international agreements to improve the living standards of our people. As I stated before, we will guarantee legal certainty for national and foreign investment, and the proper conditions with less paperwork and fewer taxes.
Guillermo Lasso took office as Ecuador’s 47th president on May 24, 2021. He is the country's first centre-right politician in nearly two decades.
This article first appeared in the June/July print edition of fDi Intelligence. View a digital edition of the magazine here.