The morning after a World Cup soccer victory is an optimal time to interview a foreign minister, it turns out.
In this case, it’s a Saturday morning after Ecuador’s come-from-behind 2-1 defeat of Honduras. It is days before Ecuador is eliminated, when anything still seems possible. And as Ricardo Patino says, “What I love is that there are many Latin American countries – Chile, Colombia, Brazil – that are in first place.”
He’s in Toronto to participate in Inti Raymi, an Incan festival of the sun and celebration of the harvest. He would also like to put Ecuador on the map of more investors, companies and tourists, as the country seeks to drum up foreign capital.
Ecuador, an Andean country with a population of 15.5 million, has long been eschewed by investors in favour of countries such as Colombia and Peru, which have more fervently courted capital. While its neighbours have rolled out the red carpet, in the form of tax credits or reduced barriers to doing business, Ecuador has acquired a reputation for red tape and legal uncertainties.
There are reasons why investors have stayed away. The country opted to default on its debt in 2008 (its President called foreign bondholders “true monsters”). The World Bank puts it in 135th spot in its ease-of-doing-business list, behind India and Yemen.
Yet change is afoot that merits closer attention. Economic growth has been above 4 per cent for the past several years. Last month, Ecuador issued its first bond since its default, and it has now allowed the International Monetary Fund to carry out a long-overdue review of its economy. Growth has also trickled down, reducing poverty and inequality and strengthening the middle class, the World Bank notes.
A good chunk of the country’s oil revenues are flowing into infrastructure. That shift that has already lured Canadian companies such as Aecon Corp., which was the lead contractor in building Quito’s international airport (opened in February last year, it also boasts the longest runway in Latin America).
Ecuador’s economy has long rested on oil and bananas. Mr. Patino says the country is diversifying its economic base, and that foreign companies have a key role to play in that process – provided they play by its rules.
“We are different from some other countries in the world that perhaps get more foreign investment, but don’t put any conditions or don’t regulate activities [such as worker safety or the environment]… In Ecuador, that’s not our policy,” said Mr. Patino, who is an economist. “Companies must have a reasonable profit, but that’s not everything.”
He rattles off a list of growth areas: green energy, manufacturing, steel plants, port expansions, improved highways and plans to tilt toward a knowledge economy, where his country could benefit from Canada’s expertise in science and technology.
Canadian companies are entering Ecuador in mining (Cornerstone Capital Resources Inc. and Ecuador Gold and Copper Corp.) and in energy (Ivanhoe Energy). They’re not just natural resources companies, however. Imax Corp. now has one theatre in the country, with two more pending, while HolaEcuador Property Development Inc. is a Canadian real estate developer selling ocean-front vacation and retirement properties there.
Muthu Chandrasekaran, vice-president of corporate strategy at Calgary-based infrastructure inspection company Pure Technologies Ltd., reckons he has made hundreds of trips to the country since 2008 for his company, which has analyzed aging water pipes and recommended where improvements should be made in the coastal city of Guayaquil.
It was a tough process – endless meetings, snarled traffic, political change, navigating the tax system and developing contacts. “You really need boots on the ground,“ says Mr. Chandrasekaran.
Six years later, patience has paid off. Ecuador has a less-crowded field of competitors and the country has become more open to foreign investment, he says. His firm plans to open an office in the country as it takes on more work and is using Ecuador as a springboard for more projects in the Andean region.
Ecuador may be open for business, but not at any cost. A bitter court case with Chevron Corp. over oil pollution in the Amazon region has proven instructive. “I hope we’ve learned a positive lesson,” Mr. Patino says, “that when companies come to Ecuador, they create wealth and make reasonable profits but they don’t leave behind a destroyed environment.”