eecucoreahufs2011

A 21st Century Country Paradigm

Hankuk University of Foreign StudiesSeoul, Korea

April 13, 2011

Ecuador: Posición Geográfica Estratégica• Panama canal• 3,5 hours flight time to the USA.• Direct flight and sea connections with Europe• Closest port between Asia and South America

Area 284,561 Km2

Population 14.7 million

Labor force 4.5 million

GDP (nominal) 2010 USD$64.119 billion (est.)

Economic Growth2010

3.6 %

Per capita GDP(nominal)

US$4,928

Ecuador, South America

Área cuadroso información

Hoja paraTexto Información

extenso

An ethical economy

An ethical management of our

economy is at the center of our

country development.

Our government has decided to bolster

the rights of our society and the

environment, through innovative, clear

regulations that encourage efficient

business operations, while ensuring

respect for nature, our workers and our

society as a whole.

the human being is not

just another factor in

production, it is in itself the reason

for production


Necessary reform of the State

Actions Results

Constituent Assembly

Tax amendments

Elimination of extreme

outsourcing

Production Code

Modern institutional framework

Fiscal stability

Fair labor relations

Incentives and a clear framework

for investment


Development model and the role of the State

The Production Code sets out a new, modern legal framework, encouraging private investment.

The code specifically highlights the Government's model for economic development and transformation of our production matrix

Monetary policy based on dollarization.

General incentives for private investment to make our country more competitive.

Plus additional Incentives in specific sector with high potential to serve internal and external markets and to shift in productive matrix from the export of primary products to that of added value products. To consult list of sectors go to www.mcpec.gob.ec


Protection for Private Investment

Legalincentives Agreed

arbitration

Investmentcontracts

Safe investment

Production and Investment Code allows for the protection of

private investment with all these instruments.


An intelligent investment

7 Strategic reasons

1. Mega-diverse country and tourism

2. Growing and stable economy

3. Strategic location and logistic axis

4. Human talent5. Access to Andeanand world’s markets..

7. Dollarized economy.

6. Protection and Incentivesfor the investor.

Korea

ECUADOR: Why invest in Ecuador?

1The most megadiverse compact

country of the world, rich and diverse culture and unique tourist attractions


Hoja paraTexto Información

extenso

The eco-centre of the world: the most compact an mega diverse per m2

The eco-centre of the world : multiple peoples of different cultures live in peace

The Constitution of Ecuador is the first one that recognizes the nature’s rights (pacha mama: mother Earth)

Where the world is at your hand

Galápagos Archipiélago

Cuenca and Quito: Cultural World Heritage

Sangay National Park

Ecuador International Living´s Top 1 country to Retire in 2010

In terms of cost of real state, special benefits, cost of living, culture, health, infrastructure, safety/stability and weather.

Source: International Living magazine

ECUADOR: Why invest in Ecuador?

2 A growing, sound and stableeconomy

4.15

4.76

3.43 3.27

8.82

5.74

4.75

2.04

7.24

0.36

3.73

2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010*

GDPAnnual Growth rate (%)

*Provisional dataSource: BCE

GDP GROWTH

2.98

5.90

3.90

3.46 3.84

7.04

5.05

3.95

8.03

0.91

4.60

2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010

Non-Petroleum GDP

Annual Growth Rate (%)

Provisional dataSource: BCE

NON OIL GDP GROWTH

6.96% 6.81%

4.99%

7.44%

12.80%12.59%

12.09%

0.00%

2.00%

4.00%

6.00%

8.00%

10.00%

12.00%

14.00%

0

1000

2000

3000

4000

5000

6000

7000

8000

1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010

USD

mill

ions

Formación bruta de capital fijo Otros de capital Gastos de Capital del SPNF/ PIB (Eje Derecho)

Estimated data as of 2010Source: BCE

Public Investment Evolution/ Nominal GDP

Gross fixed capital formation Others from capital Capital expenses of SPNF/GDP

18.72%

16.73%

21.51%

24.22%

0.00%

5.00%

10.00%

15.00%

20.00%

25.00%

30.00%

0

2,000,000

4,000,000

6,000,000

8,000,000

10,000,000

12,000,000

14,000,000

16,000,000

1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010

Dat

a in

US

mili

ons

Formación bruta de capital fijo Gastos de Capital del SPNF/ PIB (Eje Derecho)

Dynamism of Investment: FBKF/Nominal GDP

Gross fixed capital formation Capital expenses of SPNF/GDPNon-financial public sector

Solvency: Debt/GDPSince 2002, the ratio between public debt to GDP has been decreasing, placing the DEBT/GDP ratio as favourable compared to the levels of other countries in the region.

7% 7% 5% 8%

23%19%

14%15%

30%

25%

20%23%

2007 2008 2009 2010

Ecuador-Public Debt/PIB

Deuda Pública Interna / PIB Deuda Pública Externa/PIB

6% 10%22%

61%

3%

19% 17%

11%

4%

8%

25% 27%34%

65%

11%

ECUADOR PERU COLOMBIA BRASIL CHILE

PERCENTAGE RATIO DEBT/GDP 2007-2009

Deuda Pública Interna Deuda Pública Externa

Source: BCESource: Central Banks of each country

Internal Public Debt/GDP External Public Debt/GDP Internal Public Debt External Public Debt

8,0% growth in the first, second, and third quarters of 2010 compared with 2009.

Manufacturing: Annual growth per quarter(Excludes petroleum refinement)

Source: BCE

8.8% 8.8% 8.5%6.4%

0.67%

-1.3%-2.9% -2.5%

3.1%

7.0%8.0%

-4.0%-2.0%0.0%2.0%4.0%6.0%8.0%

10.0%

I II III IV I II III IV I II III

2008 2009 2010


Source: BCE

5.5%

8.5% 8.9%

3.5%

-0.6%

-3.8% -4.3%

-0.58%

4.6%

8.7% 8.8%

-6.0%-4.0%-2.0%0.0%2.0%4.0%6.0%8.0%

10.0%

I II III IV I II III IV I II III

2008 2009 2010

Commerce: Annual growth per quarter(Excludes petroleum refinement)


8,8% growth in the first, second, and third quarters of 2010 compared with 2009.

Export: sustained 10% growth rates since 2000

100

150

200

250

300

350

2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010

Non Oil Exports Index (2000=100)

Ecuador has a vigorous economy, backed by an increase in disposable income and by credit growth.

Dynamic private consumer activity

63.8% 63.6%64.2%

60.2%

57.9%

54.0%

55.0%

56.0%

57.0%

58.0%

59.0%

60.0%

61.0%

62.0%

63.0%

64.0%

65.0%

ECUADOR PERU COLOMBIA BRASIL CHILE

CFH Average/PIB 2007-2009

Source: Central Banks of each country

Source: INEC, ENEMDUR 2003-2010Production: MCDS-SIISE

9.3

6.7 6.7 6.35.0 5.2

5.9 6.5 6.25.0

11.5

8.67.9 7.8

6.1 6.47.3 7.9 7.7

6.15.1

3.24.4

3.73.0 2.8 3.0

3.6 3.2 2.8

0.01.02.03.04.05.06.07.08.09.0

10.011.012.013.0

Dec-03 Dec-04 Dec-05 Dec-06 Dec-07 Jun-08 Dec-08 Dec-09 Jun-10 Dec-10

% u

nem

ploy

men

t

NacionalUrbanoRural

Lowest unemployment rate of the Andean Region

National Urban Rural

Ecuador offers a solid and solvent economy with low levels of public and privatedebt. Foreign investment should complement domestic investment, thusreverting the substitution (crowding out) process.

Less leveraged economy: Businesses, households, Government, IFI’s

14% 14%

20% 19% 19% 17% 17% 15%13% 12%

9%

30%27%

21% 20% 21%23% 24% 25% 26% 28%

31%

0%5%

10%15%20%25%30%35%

2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010

Evolution DEP/GDP-Credit/GDP

Deuda Externa Privada / PIB Crédito/PIB

Source: Superintendence of Banks

Credit /GDPExternal Private Debt/GDP

A healthy financial system

The Ecuadorean financial system is a healthy one with robust growth in capital formation and credit allocation.

479

562

-

100

200

300

400

500

600

2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010

Growth in obligations with the public and financial system loan portfolio

Year 2000= 100

OBLIGACIONES CON EL PUBLICO CARTERA

155

100

150

60

80

100

120

140

160

180

2007 2008 2009 2010

Growth in obligations with the public and financial system loan portfolio

Year 2007= 100

OBLIGACIONES CON EL PUBLICO CARTERA

Source: Superintendent of Banks

OBLIGATIONS WITH THE PUBLIC LOAN PROTFOLIO OBLIGATIONS WITH THE PUBLIC LOAN PROTFOLIO

Indicator- average2005-2009 COLOMBIA INDONESIA VIETNAM TURQUIA SUDAFRICA ECUADOR

Inflation, consumer prices (annual %) 5,22 9,27 10,83 9,20 6,76 4,26

GDP growth (annual %) 4,37 5,62 7,35 3,20 3,65 4,0

Per capita GDP (US$ at current prices) 4.465,57 1.892,96 823,83 8.222,40 5.617,50 3.540,03 Accumulated External debt (% GDI) * 23,6% 30,2% 32,3% 41,2% 15,1% 23,3%Commercial Credit balance of goods and services (% of GDP) (2,45) 3,49 (10,03) (4,07) (1,94) 1,93 Fixed creation of gross capital (% of GDP) 20,90 26,29 34,73 20,40 20,07 22,99

* Relation between total volume of foreign debt and GNI (information from countries as of 2009)Source: World Bank

Big opportunities for ethical and responsible investment.

3 Strategic location

ECUADOR IS A STRATEGIC LOCATION FOR ASIAN AND MIDDLE EAST INVESTORS:

Airport Development AreaSurface : 70 Has.

ECUADOR

Infrastructure

Ecuador: Public Investment, by sector 2007-2010USD$

354 MM

512 MM

1.103 MM

1.398.MM

-

200,000,000

400,000,000

600,000,000

800,000,000

1,000,000,000

1,200,000,000

1,400,000,000

2007 2008 2009 2010

Agropecuario Rec. Nat. (Electr) Comunicaciones EducaciónNat. Res (energy) EducationRoad infraestructure

agricultural infrastructure

Connectivity in Ecuador

Fuente: MINTUR (Plan de Marketing Internacional)

Ground transport infrastructure

National Airport

International Airport

Ship piers (in study)

Source: Ecuador´s Ministry of Tourism

Great Human Talent and

Social Indicators

4

Source: MF

Social Investment as GDP %

4.44.6

3.8 3.93.6

2.9

4.5 4.64.3

4.3 4.6 4.7

5.9

7.3

8.0 8.2

1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010

Education rates

75.891.1

92.8

41.8 47.9

56.8

20.8 22.8

32.2

2003 2004 2005 2006 2007 2008 2009 2010 jun

Education rate

Básica Bachillerato Superior

16.1 24.2

44.2

5.2 6.6

19.4

2003

2004

2005

2006

2007

2008

2009

2010

jun

Education rateIndigenous population

Bachillerato Superior

77.9 76.8

85.9

2003 2004 2005 2006 2007 2008 2009 2010 jun

Children who study without working (%)

Source INEC, ENEMDUR 2001- June 2010Production: MCDS-SIISENote: in 2002 the poll sample was only from urban areas

64.4

55.249.9

44.642.2 37.6

36.7 35.0 35.1 36.0 33.0 32.8

39.5

30.926.6

22.7 21.616.9 16.5 15.5 15.7 15.4 14.8 13.1

0.0

10.0

20.0

30.0

40.0

50.0

60.0

70.0

2000 2001 2002 2003 2004 2005 2006 2007 Jun-08 2008 2009 Jun-10 2010

Inci

denc

epe

r per

son

(%)

PobrezaExtrema …

PovertyExtreme poverty

Decrease in poverty (by income)

Inequality reduction

0.59

0.56

0.54

0.5

0.58

0.54

0.51

0.49

0.54

0.49

0.50

0.44

Dec-00 Dec-01 Dec-02 Dec-03 Dec-04 Dec-05 Dec-06 Dec-07 Jun-08 Dec-08 Dec-09 Jun-10 Dec-10

Gini Coefficient by income equality

NationalUrbanRural

5 Access to Andean and

Global Markets

• Agreement with MercosurProvides Ecuador with the potential to exportapproximately 4.000 products with no tariffs toBrazil and Argentina.

• GSP PLUS – European UnionProvides Ecuador with the potential to exportapproximately 7.800 products with no tariffs.

Access to Regional and Global Markets


Incentives for Private Investment

6


General Incentives for investments

Reduction from 25% to 22% on the Income Tax (IT)rate:1% each year from the date the Code will be in force

Exemption from the minimum Income Tax calculation for incremental expenses new employment or salary increases, acquisition of new assets for productivity and technology improvements and cleaner production.

For new companies: exemption from the minimum tax payment for the first 5 years.

Exemption from Currency Outflow Tax (ISD)for payments sent overseas to pay foreign loans, with a term of over one year and at a rate not higher than that authorized by the Ecuadorean Central Bank (BCE).


General Incentives for investments

Additional deductions in the calculation of income tax as mechanisms to encourage improvements in productivity, innovation and eco-efficient production.

Benefits for the opening-up of capital, such as the deferment of Income Tax for companies that offer investment options to external parties.

Those established for special development zones, providing they meet the qualifying criteria.


Incentives for New Investment In Priority Sectors

Total exemption from income tax and advance payment thereof, for 5 years, for new investments made in priority sectors of the economy.

Fresh and processed foodstuff sector

Metalworkingsector

Petrochemical sector Tourism sector

+ STRATEGIC SECTORS FOR EXPORT PROMOTION AND IMPORT SUSTITUTION

Renewable Energysector

Logistics servicessector

Biotechnology andapplied software

sector

Forestry and agroforestry chain,

and resulting manufactured

products sectors

Pharmaceuticalsector


Incentives for green production

For Income Tax calculation purposes,there will be an additional deduction of100% from the expense of purchasingmachinery and equipment for cleanerproduction, and for the implementationof renewable energy systems (solar,Aeolic, or similar), or for the mitigationof environmental impact.


Incentives for Investment in Economically Depressed Areas

Companies making investments in economicallydepressed areas may take advantage, for the first 5years, of the additional 100% deduction on expenditurefor new jobs created in the area,..

A “depressed area” will be defined by indicators, suchas lower human, economic, and social development.


Incentives for ZEDE(Special Economic Development Zones)

A further reduction of 5 percentage points on Corporate IncomeTax, for managers and operators of ZEDE (in Spanish), on a permanentbasis (17% TOTAL). If said managers and operators are in aPreferential Sector and it is a new investment, 0% income tax appliesfor 5 years.

The import of goods will have a 0% VAT rate.

Foreign goods, while they remain in said territory, will not be subject to the payment of tariffs.

Managers and operators will have tax credit on the VAT paid on their local purchases of services, supplies and raw materials for their production processes.

Exemption from the Currency Outflow Tax (ISD in Spanish) for payments of imports and payments sent overseas to pay off foreign financing.


Incentives for private companiesthat open their capital structure

Companies choosing to open up their capital structureand sell shares to their workers, will have thefollowing benefits:

1. Deferment of 5 years on Income Tax and ITAnticipated payments.

2. Interest exemption on loans for financing theshares purchase.

Espacio para texto y título Espacio para texto y título

Infrastructure´s investment opportunities

Manta´s Inter-continental Logistic Platform

MANTA iNTER-CONTINENTAL LOGISTIC PLATFORM: MULTI MODAL OPERATION: PORT, AIRPOT, FLUVIAL, TRANSPORT


ECUADOR

Seaport development of Manta: Gateway and transhipment port

• Natural depth of 12 mt.

• Container and general cargo transit

• Half a million containers per year potential

• Entryway to the two-ocean axis, Pacific-Atlantic

• Entry to cruise liners

Manta’s intercontinental and multi-mode logistics platform

Long distance air and maritime transportation to

Asia

Short and mid-distance air/maritime (cabotage) /land transportation

Short and mid-distance air/land and river transportation to Manaos, Brazil

Logistics platform binds logistics infrastructures in the same geographical spot:Deep water portInternational airportZEDE (Special Economic Development Zone)

Short and mid-distance air, maritime (cabotage) , land transportation to Peru

Manta: an efficient cargo and passenger connexion with Asia

Tahiti

Manta

Beijing

SeoulShanghai

Hong Kong

MANTA

MANTA

Continent: American – South AmericaCountry: EcuadorProvince: ManabíGeographic 0°57’ Latitude South Location: 80° 43’ Longitude WestClimate: Tropical dryAltitude (average): 6 m. s. n. mRain: 210 m. m.Average Temperature: 26° C in winter

24° C in summer

Bogotá 500 NMPanamá 600 NMMéxico 1600 NMLima 700 NMChile 2000 NMBuenos Aires 2376 NMSao Paolo 2406 NM

Guayaquil: 190 kmsQuito: 400 kmsCuenca : 446 kmsNorth border: 687 kms with Colombia South border : 466 kms with Perú

It’s the closest point to Asia from the western coast of South America. 7 days, 24 hours air operationIt’s 25 miles from the international traffic

route.It’s 56 miles from the Equator.It’s 24 hours from the Panama Canal.No visa required.


LEVEL: -14 M.

DEVELOPMENT STAGE 1: 2011 – 2013Total estimated investment (infrastructure and

equipment): 162 MILLION DOLLARS

550 METERS OF BREAKWATERTERM: 1 YEAR

10 acres OF STORAGE YARDSTERM: 1 YEAROperational Capacity : 200 mil TEUS/año

310 METERS OF CONTAINER BERTHTERM: 1.5 YEARSLEVEL: – 14 M .

100 METERS OF FISHING BERTHTERM: 1 YEAR

DREDGINGTERM :1 YEAR

225 METERS OF INTERNATIONAL BERTHTERM: 1 YEAR

EXTENSION110 METERS OF INTERNATIONAL BERTH 2TERM: 1 YEAR

4 acres OF STORAGE YARDSTERM: 1 YEAROperational Capacity :50.000 TEUS/year

EXTENSION110 METERS OF INTERNATIONAL BERTH 2 TERM: 1 YEAR

PORT – AIRPORT CONNECTION

AIRPORT8 km

PORT

PORT – AIRPORT INTEGRATED SYSTEMThere is a fast way connecting the Port with the Airport in 6 minutes,

making it a great comparative advantage with the region.

EXCELLENT CLIMATIC CONDITIONS 99% OF THE YEAR


MANTA: AIRPORT ADVANTAGES Airport at sea level; Easy instrumental procedures, obstacle free; Alternative Airports at less than 25 minutes

(SALINAS and GUAYAQUIL); Airport with quality services and standard

operations for customers according to airline; Shortest distance to Asia Manta- Tahiti- Asia Route in process Pilot training school for Latin America

Freeways

2012: delegation to private sector of US.5.520 millionHighways

Tourism

Ecuador tourist routes

Source: Tourism Marketing Plan of Ecuador. Ministry of Tourism

Source: Ecuador´s Ministry of Transportation and Public Infrastructure.

Embassy of Ecuador in the Republic of [email protected]

Thank You!!!

Thank You!!!

A Paradigm for the 21st Century

mailto:[email protected]

eecucoreahufs2011

Education

investment code

nominal ecuador

ecuadorpublic debtpib200930

constitution of ecuador

dynamism of investment

gdp us

fbkfnominal gdp

ecuador international