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Ecuador Real
Estate Archive XII
Updated July, 23 2005
By
Gary Scott
To help you get a feel of Ecuador
real estate we have posted this special archive that lists many of the hundreds
of messages we have shared with our readers about Ecuador real estate this decade.
Ecuador
We are at Hotel Quito that sits
atop a high mountain overlooking the bustle of Quito. Above the melee it faces
down into a jumbled mixture of mankind. Tall skyscrapers sit next to decrepit
block shacks with rusting tin roofs. Looking east the hotel backs onto a huge
rift that drops immediately down and runs for several miles before opening into
the broad valley of Tumbaco, Quito's favorite suburb. From rooms at the back of
the hotel, the lobby, huge lush gardens and swimming pool, and stunning views
of sunrise...all of these are exquisitely stunning amenities. Each morning Rosetta
rays smash through masses of morning clouds and tint the valley views in a soft
pink glow. At twilight the panorama, unfolds as millions of lights awaken in the
dusk and twinkle through the altitude thinned air like a million Christmas ornaments.
Our upcoming International Business
Made EZ course will be held at this hotel and will feature a number of speakers
including business consultants, rose growers, timber merchants (teak and other
hardwoods), textile experts, artisans and real estate brokers.
One speaker is Rolf Stern President
of BDO Stern. His firm is the leading consulting, advising firm in Ecuador and
his economic updates always help clarify the current economic position in Ecuador.
Here are my notes from his session at our last
course to prepare for what we will share at the next course.
To begin Rolf compared the financial
position of Ecuador with Argentina by showing that Ecuador has 12 million people
compared to Argentina's 35 million. Ecuador's government debt is 14 billion dollars
versus Argentina's 130 billion., plus Ecuador's annual deficit this year is expected
to be 2% of the GNP compared to Argentina's 30%.
Then we saw the breakdown the
Ecuadorian GNP which is US $17,981 million or US$1,396 per capita. This production
breaks into 19.2% commerce and hotels, 18. 3% in manufacturing, 11.1% government
services, 17.2% agriculture, hunting and fishing, 9.6% in transport, 11.6% petroleum
and mines, 4% construction, 5.1% financial services and 10% other.
Inflation in 1999 was 60%, 2000,
50%, 2001, 22% and was 12% in 2002. It will be very important to see if this following
trend continued.
The balance of trade was a positive
.9 billion in 1999, 1.2 billion in 2001 and is expected to fall to a .4 billion
deficit in 2002.
The deficit and balance of trade
are both expected to balance when the new oil pipeline completed last year will
be able to more than double oil exports to 710,000 barrels a day. There are at
least 15 to 20 years of reserves in the Oriente. The anticipation of the extra
oil is expected to reduce inflation, plus dollarization has brought interest rates
down from 75%. Rates have been 9% to 16% corporate rates and 18% to 19% personal
rates (credit card rates). This will add 4.5 billion or 30% to the government
income and create a surplus.
Rolf pointed out that the country
has thrown out two presidents in four years without a drop of blood and that the
nation has added considerable political maturity in this process. However there
appears to be a scarcity of leadership for the upcoming elections which begin
October 2002, with the second election December 2002 and the new administration
taking office January 2003.
Local prices and costs are moving
up now and will have faster appreciation past 2004 when the new pipeline begins
pumping. Partial decentralization will create opportunities at the municipal and
provincial levels, but politics will continue to be a distraction from July 2002
when the 90 day campaign period begins. Labor costs have risen from 65 cents an
hour to 85 cents an hour.
Good points about investing in Ecuador include...
Investment from abroad is welcome.
Equal treatment is given to local and foreign investors. Practically all sectors
are open to investors. Profits and capital can be repatriated without restriction.
There is a good labor pool and good private sector partners available.
There is OPIC investment protection
available and there is a USA treaty of Reciprocal Promotion and Protection of
Investments, including debt equity programs when established, plus the USA Andean
Preference Law that allows about 5,000 products into the USA duty free is being
renegotiated. He noted that this agreement will be merged into the Western Hemisphere
Trade Agreement which will allow even more goods to flow freely between Ecuador
and North America. Also there is an active presence of the USA Embassy and Department
of Commerce, plus good protection of intellectual property, including franchises
and trademarks from abroad.
We also learned that the corporate
income tax rate (which is only 25% of profits) can be reduced to 15% if annual
profits are reinvested.
Rolf predicted that Ecuador real
estate prices were at an all time low in 2000 and that they are generally moving
up though there are pockets of bargains still left. He believes that the rises
will accelerate in 2003.
Learn about Ecuador real estate and investing
in teak
We have continual Ecuador
real estate tours.
I hope to see you in Ecuador. Until then, good
investing!
Gary
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