Ecuador looks to India for better trade and investments

This country has a population of 15 million only, but has gold reserves of 225.000 tons, 12.500 tons of silver and produces about 350.000 barrels of oil per day. Rich in natural resources, Ecuador is right DSCN0075 (2)on the equator. The Ambassador of Ecuador in India, Mr. Villagomez spoke to THE BLUE MOON Editor, Amit Mittal about how Ecuador and India can increase bilateral trade. Some excerpts:

How do you think economic relations between India and Ecuador can be improved keeping in mind the geographical distance between the two?

At a time when we are doing well economically and politically after reducing poverty in significant manner and building infra-structure and above all after achieving a social coalition, there is huge potential for Indian investors to come to Ecuador. Though Mahindra and Tata are present there, we are offering a lot of tax incentives to attract more companies. Even though we are doing well, we need more cooperation and India is a good partner for such cooperation. Indian companies can benefit from the incentives. India has become a powerful country in the past two decades in almost all fields and is a role model for all developing countries. We had our embassy in India between 1973-77, then 85-86 and then from 2005 onwards we are here; the strength of our diplomats has gone up from three to seven now.

Were there any specific reasons for these breaks in maintaining an embassy in New Delhi?

Not to my knowledge, but so far as I can make out, it was possibly the authorities in Ecuador who thought that having an embassy was expensive, but now we have great interest in India. We have embassy here and we want that India should also open an embassy in Ecuador. At the moment India has an embassy in Bogota, Colombia which takes care of consular services in three countries – Colombia, Costa Rica and Ecuador.

Ever since President Rafael Correa came to power in 2007 Ecuador has political stability. On 24 May he became President for the third time.

What are the incentives for investors that you are mentioning?

Attracting foreign investment in different export-oriented sectors is one of the main objectives of the country.  For foreign investment Ecuador offers privilege location, extended production diversity, great potential in agri-business, fishery, aquaculture, forestry, mining, tourism and services with advantages like productive and trainable labour force, favourable legislation towards foreign investment, preferential commercial access to different markets and US dollar as official currency.

 We also have special offers for people who have excelled in their fields. Under a program called ‘Prometeo’ we offer jobs to experts who have retired, because the retirement age in Ecuador is 70 years for government officers, it used to be 65 years earlier. We have about ten Indians working under this scheme in Ecuador and there are 15 more applicants waiting. We also have another project called ‘yachai’ under which we are making a ‘city of knowledge’ where companies can carry out research and production. Under this scheme Indian companies can benefit by using the research on agriculture and medicine.

Ecuador’s domestic market is not too big as the population is just about 15 million, but the neighbouring markets are open for trade offering many opportunities.

Our only reservation is that the investment should comply with the norms like rights of Nature. Ecuador is the first country to incorporate protection of Nature.

What is the quantum of FDI in Ecuador? How much is from India and China?

In 2012 the total foreign direct investment in Ecuador was around $8 billion. FDI from India was almost negligible. China accounted for 50 per cent of the FDI. Chinese companies are investing in a big way in oil, mining and infra-structure.

Since Chinese companies are investing in a big way in Ecuador, what is the quantum of reserves of oil and other minerals?

Ecuadorian mining reserves of gold amount to 225.000 tons; 237.500 tons of copper and 12.500 tons of silver. Oil production is about 350.000 barrels per day.

Is there no interest shown by Indian investors?

Indian companies have shown interest in oil. India’s public sector company ONGC Videsh is one of them.  Private sector companies from India have evinced interest in many sectors including forestry and agriculture. There has been export of teak wood to India.

What are the incentives that Ecuador is offering to FDI?

FDI is allowed in any sector of the economy, without requiring a previous authorization, there are equal rights and treatment for both FDI and national investment, right to repatriate profits, complete liberty to negotiate investments registered in the country, among others.

Ecuador offers three types of tax incentives.  For export trade units established in free trade zone there is  100 per cent exemption, with the possibility of extension, on  import and export duties on all goods and services authorized, taxes on profits for 20 years,  export taxes, local sales, as well as on repatriation profits for 20 years, municipal and capital taxes for 20 years, no restrictions on profits repatriation or foreign currency management and special customs regime, among other benefits. 

What is the status of trade with India?

We have a total trade of $250 million with India wherein Indian exports to Ecuador amount to $230 million and Ecuadorian exports to India are just $20 million. Our main goal is to improve the balance of trade with India.

Are there reasons for little export to India? Is it because of the distance between the two?

We are doing very well in European Union and Japan. With India there are some tariff and non-tariff measures like licensing, but during the recent visit of the Indian Minister of State for Trade (Commerce and Industry), Mrs.  D. Purandeswari to Ecuador, a memorandum of understanding was signed which, we hope, will open new possibilities. We call it trade agreement for development. Barriers can be reduced by both sides. India can import canned tuna fish, prawns and sardines of which we are the second largest producers after Thailand. We can also export broccoli and asparagus. We are the first in banana producing countries, but India produces enough bananas for its domestic consumption. We can also provide processed marine food. Indian companies can invest in oil sector, also the mining sector which is opening up; we discovered the biggest gold mine five years ago.

Tourism can be explored. We are the second smallest country in Latin America, but we have the biggest bio-diversity. A tourist can enjoy three different regions in a day; one can visit the Capital Quito, go to the world famous Galapagos Islands and end up with the Amazonic forest. Forest is spread on one third of our country’s total area.

Of course there are limitations like the absence of a direct air link. We had proposed an air transport agreement, we are willing to sign it, but the Indian side has not shown much interest. Ecuador can be promoted along with the neighbouring  countries in a tourism package.

On the political level, we have bilateral political consultations every two years. The third such meeting took place in Quito and the fourth one is scheduled for September this year in India.

Are you self-sufficient in energy and what forms are you using to generate power?

We are more than open to clean energy products like wind and solar products. We depend on hydro-electric plants for power followed by oil fired ones. At the moment we are importing energy, but there are plans to develop 12 hydro-electric projects. There is a private company SEFTECH from India which has shown interest in hydro-electric projects, but nothing from public sector.

What is the status of visa for Indian visitors to Ecuador?

There is no visa required for tourists up to a stay of 90 days, but nationals of Ecuador require a visa to come to India.

Are there high level political exchanges in near future?

The visit of President of Ecuador is now pending. The President is willing to come for a State visit. After September maybe our Minister for External Affairs will come to India. We are very optimistic about this meeting; we have already spoken to the Indian Ministry of External Affairs.

Our relations with India at high level are very good. We are asking for the establishment of Indian Embassy in Ecuador, such a step will be highly appreciated and will help us prepare for the visit of the President Correa to India.