Tourism Doing Business

Tourism Doing Business - Investing in Ecuador

Investing in Ecuador

The World Tourism Organization (UNWTO) has signed a cooperation agreement with the Development Bank of Latin America (CAF) with the main objective of promoting investments in the Americas through technical cooperation and capacity building for the development of the Tourism Sector and to redesign an investment framework where education, innovation and sustainability are the fundamental pillars.

The investment guide "Tourism Doing Business, Investing in Ecuador” is the first result of this collaboration, constituting a Tourism Investment tool developed for the Republic of Ecuador which aims to present the favourable conditions of the country to attract foreign direct investment (FDI) in the tourism sector. It highlights the solid economic recovery experienced in the years following the pandemic and the positive projections of economic growth for the coming years. The performance of the economic sectors and their contribution to Ecuador’s GDP is analysed, highlighting the recovery of sub-sectors related to tourism, such as accommodation and food services.

The guide also compares Ecuador’s growth prospects with those of other countries in Latin America and the Caribbean. According to data from the Central Bank of Ecuador (BCE), the outlook for 2023 points to 2.6% growth; reports from the IMF and ECLAC coincide in projecting growth above the regional average for Ecuador in 2023. Likewise, macroeconomic indicators such as inflation, GDP per capita growth and aspects related to employment, informality and public debt are examined.

The second chapter of the report focuses on FDI flows in Ecuador and the Latin American and Caribbean region. It highlights the recovery of these investments in the region and details the industries that receive the greatest flow of FDI in the country, as well as their origin by country and continent. The flow of FDI in the tourism sector and its impact on employment in the sector is analysed. According to the Ministry of Tourism (MINTUR), more than USD 639 million dollars in signed investment contracts for tourism services were registered for the period 2018-2022. In addition, financial transactions of FDI in new projects in tourism are examined, placing Ecuador among the ten countries with the most new projects (greenfield investments) in tourism in the region according to data from fDi Markets of the Financial Times and the UNWTO. The report also analyses venture capital investments in Ecuador and both public and private efforts in this area. Venture capital funds and initiatives, angel investors and seed capital are identified and characterized, as well as the destination of funds allocated to ventures and the sectors in which they operate.

The third chapter highlights the advantages of investing in Ecuador, such as the development opportunities in the tourism sector, the country’s natural wealth, its unique geographical location and its stable legal framework. The focus on sustainability in the promotion of tourism and investment in this sector is highlighted. It also describes taxation aspects and requirements for establishing and operating a branch or company in the country.

Chapter four discusses green investments and their relationship to the tourism sector and the Sustainable Development Goals (SDGs). It examines climate-adapted investments, climate risks and investment models for climate change adaptation. Ecuador’s efforts in response to these challenges are highlighted, such as the National Climate Change Adaptation Plan and climate adaptation and investment programmes. It describes the first debt-for-nature conversion carried out in Ecuador. To date, this is the largest debt-for-nature conversion completed in the world. The operation consists of an $85 million Inter-American Development Bank (IDB) guarantee and a $656 million U.S. Development Finance Corporation (DFC) political-risk insurance to Ecuador to purchase existing public debt at better terms. This debt purchase with cheaper financing will generate lifetime savings of more than $1.126 billion. It is estimated that this operation will generate savings to finance conservation activities of USD 323 million. These resources will be used to create the Galapagos Life Fund (GLF) according to IDB and MINTUR data.

The last chapter analyses Ecuador's positioning in the tourism sector globally and regionally, highlighting its contribution to the country’s GDP. It examines factors affecting the competitiveness of the sector, such as international tourism revenues, tourism enterprises and sub-sectors, employment generation and sustainable innovation. A comparison is also made in terms of cost/quality ratio in the hotel sub-sector.

In summary, Ecuador has experienced a solid economic recovery after the pandemic and has established a favourable environment to attract foreign direct investment. The country has a broad range of tourism offerings based on its natural wealth and biodiversity, as well as a stable legal framework. About 20% of Ecuador's territory has been constituted as protected natural areas, which constitutes an exceptional opportunity for the promotion of green investments. These investments, whose objective is to promote the protection and conservation of nature, allow present and future generations to have spaces that remind us of the importance of living in harmony with the planet. In this regard, the incentive scheme for attracting investment, together with trends in the field of conservation and conservation finance, generates an environment conducive to increasing investment flows, both national and foreign, in the tourism sector, while also promoting the diversity of the cultural and natural riches that it offers.

Likewise, the development of tourism innovation programmes is encouraged to incorporate the deployment of technology in the value chain of the tourism sector and the adaptation of innovations in Small and Medium Enterprises (SMEs). Furthermore, startups have been growing in a diverse manner. This will accelerate the process of growth and job creation through innovative investments to promote sustainable tourism with green investment instruments together with innovation for the decarbonization and digitalization of the sector.