Ecuador Seeks to Reverse Course in New Direction

Ecuador, a country known for its rich biodiversity and tropical climate, is embarking on an economic transformation. The nation faced a challenging year in 2021, with a 2% contraction in GDP, the worst performance in the region. However, the government's strategic moves and international partnerships are setting the stage for an economic rebound.

In February 2023, the government secured a free trade deal with Canada, a move expected to provide a significant boost to the resource-rich mining sector. If momentum holds, mining could become Ecuador's third largest export category this year, with the potential to generate more than $4 billion annually. Three major mining projects—Curipamba, La Plata, and Loma Larga—are poised to move into the exploitation phase, representing roughly $1 billion in near-term capital inflows.

The mining sector is not the only sector experiencing growth. The government established two new free-trade zones, Posorja and Pascuales, in April 2023, aiming to attract more foreign investment. The rebound in non-manufactured exports, such as bananas, shrimp, and flowers, is also projected for 2025, buoyed by solid demand in US and European markets.

Ecuador's banking sector remains resilient, with strong profitability metrics, controlled credit risk, and available local and international funding. However, foreign direct investment (FDI) has taken a hit, falling more than 83% from its 2018 peak by 2024.

To address this, the government is planning an economic restructuring to position itself for growth in 2025. Boosted by the Sinopec deal, the government now projects as much as $42 billion in investment from foreign oil companies over the next five years. The companies that committed to developing the Sacha oil field in Ecuador include state-owned Petroamazonas and the Chinese company CNPC.

Infrastructure is another area of focus. A massive $72 billion is needed through 2030 to improve Ecuador's lagging transportation, energy, telecommunications, water, and sanitation infrastructure. Transportation and energy are the areas requiring the most extensive new investment, at $23 billion and $21 billion, respectively. Through public-private partnerships (PPPs), President Noboa aims to inject around $11 billion into the economy over the next several years to address historically deficient energy and road infrastructure.

The government's efforts to combat organized crime and establish new public-private partnerships are also paying off. A recent crackdown on organized crime and new PPPs are addressing security and infrastructure challenges in Ecuador.

Inflation in Ecuador ticked slightly below 0.5% year-over-year in April 2023, a positive sign for the economy. The country's economy is forecasted to grow by 2.5% in 2023 and 1.7% in 2024.

President Daniel Noboa was reelected in April 2023 with a stronger mandate and a working majority in the legislature. In a bid to further boost the economy, he has proposed a constitutional amendment allowing the establishment of foreign military bases in Ecuador. This move is seen as a strategic move to attract more foreign investment and strengthen the nation's position in the global arena.

The International Monetary Fund has provided a $6.55 billion extended fund facility to support Ecuador's economic recovery, running through 2027. Productive credit recorded an annual growth of 9.8% at the end of 2024, with an upward trend, i.e., an annual growth rate of 15.4% at the end of May 2025.

Ecuador's economic rebound is a journey towards prosperity, one that involves strategic partnerships, infrastructure development, and a commitment to combat organized crime. With President Noboa's strong leadership and the support of international organisations, Ecuador is poised for a brighter future.