Despite the pro-private business discourse, the arrival of foreign capital fell by more than 57% in the last year.
During 2021, Colombia received $9,402 million from Foreign Direct Investment (FDI). More than 80% of those capitals did not go to Extractive industries such as oil and mining, but to activities with more added value in industry and commerce.
On PeruDespite the unresolved issues of the pandemic and political instability, the FDI totaled more than $6.1 billion.
In both cases, a recovery was recorded with respect to the fall of 2020.
However, the situation in Ecuador it is diametrically different. Despite the speech private companyforeign investment fell instead of recovering, in the last year.
With preliminary data, prepared by the Central Bank of Ecuador (BCE), the FDI it reached $493 million in 2021. This amount represents $657 million less than the $1.15 billion reached in 2020, in the midst of the first wave of the spread of COVID-19.
Andrea Mendoza, economist and teacher, pointed out that this reduction is due to the fact that the new investments in the mining sector, after the consolidation of the only two large-scale mines in the country: Mirador and Fruta del Norte.
“Ecuador is still very dependent on Extractive industries. The current government has taken important steps in attracting Foreign direct investmentbut most of the approaches are still in the realm of good intentions”, he said.
Adjust laws to improve investment
At the beginning of this 2022 there has been good news such as the announcement of the installation of a Mercado Libre plant in the country; but, inside the Investment Law key changes must be included to make Ecuador a less risky destination for international investors.
“Incentives and facilities are important; but if real guarantees are not established, the capitals will look for better options. At the moment, there are resources that are coming from other countries in the region and that reality cannot be wasted”, Mendoza asserted.
How can Ecuador stop being a risky destination?
Óscar Del Brutto Andrade, a lawyer specialized in litigation and commercial arbitration, explained that, if the Investment Law is approved as sent by the Government, Ecuador will continue to be a risky destination for investors for three reasons.
In the first place, at any time, without the need for further support, a company representative may be prohibited from leaving the country.
Second, through the figure of calls constitutional precautionary measuresany judge is allowed to paralyze investments under the pretext of protecting constitutional rights.
Third, there is a long history of corrupt judicial processessuch as Chevron’s, which can end up in millions in compensation against the investors.
With all this background, Del Brutto Andrade proposes that key changes be added to the bill, which is currently close to the first debate in the Assembly.
The first thing is to declare the validity of the contractual clauses in which the amount of the investor’s liability is limited. With this, people who bring part of their capital to Ecuador will be able to calculate the maximum of their exposure and assess whether it is a good deal.
Second, reforms could be included that protect representatives from possible personal liability and limit the interference of constitutional precautionary measures in investment.
And, third, the law could allow the free transfer of shares so that the investor can sell their shares and shares, at any time, to those who are in a better position to diversify the risk.
“There is no committee or secretariat that can attract investors to a country that generates as many risks as Ecuador. Unless measures are taken to make the investor feel more secure, we will continue to live in a country where, in terms of foreign investment, nothing happens”, he pointed out. (JS)
