How are you planning to increase Ecuador’s exports to the UK?
Minister Ontaneda: Ecuador has a very diverse export offer. Even if you strip out petroleum you see that we have earned a leadership position in many international markets with products such as banana, shrimp, cacao and flowers. They are our traditional export products where we have worked over many years to gain a strong position in the EU, the US and Asia.
We are fortunate to have this base of solid export products, however, our challenge at the moment is to diversify with new goods and services. These can be agroindustrial, which build on our strong existing exports, but also in new areas. To achieve this diversification, we have to improve our productivity so that more of our exports can be competitive in international markets. At the Ministry we have been identifying consumer trends in our key markets and planning how our local production can exploit these opportunities. We are fortunate that the geographic and natural diversity of Ecuador means that we can grow a wide variety of agricultural products and therefore serve many different market niches.
What opportunities will that export growth create for investors?
MO: To help boost our productivity we are developing an incentive programme to encourage international investment in Ecuadorian export projects. Our programme offers tax incentives and a stable, favourable regulatory environment that supports exporters. The crucial thing for your readers to understand is that this emphasis on productivity-led exports is part of a fundamentally different economic model. Ecuador has a dollarized economy, which brings many benefits – for example currency stability for international investors. However, that also creates a higher cost structure than in neighbouring countries, such as Peru and Colombia that can devalue their currencies. The previous Ecuadorian government relied on heavy borrowing to sustain dollarization. However, we completely reject that route. Instead we are improving productivity so that our goods can compete in the international market regardless of the dollar. That boost to exports also helps to balance our current account, reducing the need for external financing. Since coming to power this government has enacted a series of laws to improve conditions for investors and they are already starting to take effect. In the last 18 months Ecuador has seen a large increase in FDI, which shows that international investors have faith in our new business climate.
How strong is the relationship between the UK and Ecuador?
MO: I am in close contact with the British Ambassador, Katherine Ward, and our two countries now have a great political and commercial relationship. Previously, despite the political problems, there has been strong and growing trade between the two countries. Now, with the more positive political context, we expect that trade to grow even more quickly.
The bilateral relationship is in its best ever moment and that creates all sorts of business opportunities. I am focused on attracting more UK investment to Ecuador. We have our trade office in London, ProEcuador, which acts as a first point of contact for British firms that want to learn more about the opportunities in our country.
Explain how this government’s attitude to private investors is different to its predecessor.
MO: British investment, and international investment in general, has been low in Ecuador over the past decade because there was little confidence. We see examples from around the world of how, when countries inspire confidence in the business environment and judicial system, they attract international capital.
With this government we’ve been building a judicial framework that offers guarantees to international investors, so they can be sure the rules of the game won’t change. Guarantees that investors can have their returns, which is their main priority. Last year we passed a law to boost production, attract investment, increase employment and achieve fiscal stability. We are now adding to that with extra measures to further help investment and boost production. That’s why we’ve seen investment grow under this government.
In addition to our laws there have also been historic international agreements. For example, the deal with the IMF, shows a new level of financial responsibility and transparency. For international investors it’s a strong sign that Ecuador is back as a serious member of the global community. International integration is key for us. That’s why we signed the Continuity Agreement with the UK, why we are looking to join the Pacific Alliance and why we are strengthening our ties with key export markets in Asia and North America.
We realise that the world is becoming ever more integrated and for a small country like Ecuador to ride the coming waves of technology and innovation it is essential that we are part of international trade and investment networks. This government is trying to prepare the country so that it can ride the highway of growth. We know that trends such as the fourth industrial revolution and agriculture of the future, have the potential to catapult our country forwards. Ecuadorian people are hardworking and it’s the role of this government to help the country position itself so that our citizens can benefit from the coming changes in the global economy.
Ecuador is one of only two Latin American countries to default in the 21st century; is that now part of the past?
MO: When it comes to international investment the government of 2008 had a diametrically opposed view to the present administration. That is demonstrated by the laws, business environment and macroeconomic position that we have built during this administration. Investment decisions are based on perception so we have been very careful to send the right messages to the international community. Moreover, we have reinforced the new regulatory landscape, ensuring that it can’t be easily changed on future political whims. By signing up to international alliances and treaties we have guaranteed that future Ecuadorian governments will have to respect international investors’ rights. For example, the IMF deal hasn’t been easy for Ecuador but it’s important to help us have working arrangements with other multilaterals and the international financial community.