The Central bank of Ecuador (ECB) reported that Foreign Direct Investment (FDI) in Ecuador was $1.0169 billion in 2020. Despite the fact that it was a pandemic year, and in most countries in the region there were falls compared to the previous year, the figure for Ecuador reveals a slight recovery compared to the FDI registered in 2019 ($961.5 million).
However, it is lower than that achieved in 2018, which was $1.388 billion.
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Alberto Acosta, editor of Weekly Analysis, says Foreign Direct Investment in Ecuador has been very low throughout history. Although in 2020 the result is relatively good, it is a low percentage, in relation to the economy and even more so when compared to neighboring countries.
In fact, the amount of Ecuadorian FDI is far from the amounts of countries such as Colombia and Peru, but in 2020 these countries had a sharp fall, due to the pandemic, while Ecuador had a growth. Colombia had an amount of FDI of $6.788 billion in 2020. However, it is 35% lower than in 2019 when FDI had been registered for $10.465 billion.
Peru also obtained a higher result than Ecuador, it brought in $1.558 billion FDI. However, that figure represents 75% less FDI than in 2019 when, it had $8.882 billion.
These results are in line with ECLAC forecasts, which predicted a fall in FDI in Latin America due to the pandemic in 2020 of between 45% and 55%.
Acosta says the important thing about FDI is that in addition to the money that enters the economy, it helps to generate production and wealth and for this it introduces new technology to the country. It must be understood that the investor does not only get to collect wealth, but to create it, he says. At the end of the day, the investor gets more than he invested, because he makes a profit, and in the process, he has created sources of work and wealth.
Mine investments lead FDI again
According to the classification by activity made by the ECB, $411.1 million of last year’s FDI came from the exploitation of mines and quarries.
In second place was services provided to companies with $217.1 million, and in third place construction $170 million.
According to the Chamber of Mining, investment in mining has generated an important contribution to the inflow of FDI. In 2018, the mining sector captured 53% ($742 million) of Foreign Direct Investment (FDI); in 2019, mining reached 42.11% ($394 million); and in 2020 those $411.1 million represented 40% of the investment. Thus, the Chamber says that mining has become the economic activity that has attracted the most foreign capital to Ecuador in recent years.
Additionally, according to the ECB, in a favorable scenario, the projected investment for 2020-2023 of strategic and second-generation projects would amount to $1.058 billion. On this issue, the Chamber said that investors require clearer rules, as legal uncertainty keeps investments away. It also reported that despite the global crisis, investors continue to bet on Ecuador; at the end of 2020 and at the beginning of 2021 there have been important capital placements in the projects Warintza de Solaris ($ 80.6 million), Fortuna de Lucky ($5 million), Loma Larga of INV ($6.1 million) and Salazar Resources ($6.5 million).
One of the largest projects in the world, Cascabel, intends to start its production in Ecuador in 2025.
Mining investments for the community continue during pandemic
The two large-scale mining companies that have mines in the south of the country, ECSA (Mirador) and Lundin Gold (Fruta del Norte), have invested several million dollars in community plans, as well as in responding to the pandemic.
The company EcuaCorriente SA (ECSA) has made an investment of $7.8 million in ten years as part of compliance with the Community Relations Plan and the Environmental Management Plan of the Mirador Mine; while Lundin Gold, between 2015 and 2020 has invested $22 million.
Regarding the social responsibility programs, both companies have attached importance to the training and education of the population.
ECSA reported that within the educational field, $465,000 was invested in its university scholarship program, through which 25 young people have managed to earn a university degree and obtain a third-level professional degree.
Meanwhile, Lundin Gold highlights educational projects such as the Extraordinary Baccalaureate with more than 200 graduates from the province. There is also the Training Program for Mining Operations, with which it trained 306 Mine operators and Zamora Chinchipe Process Plant operators. They also have 170 students enrolled in 56 university courses at various universities in the country.
Due to the COVID-19 pandemic, ECSA, in coordination with different institutions, local and sectional governments, implemented the Health Emergency Support Plan, with an investment of more than $200,000. In addition, the company has helped with vaccination and deworming campaigns for cattle, and preventive health programs such as support for the government strategy “Doctor of the Neighborhood,” among other activities.
Lundin Gold also worked on health issues and reported that in this plan it has invested approximately $570,000 in strengthening government programs and prevention initiatives such as “Doctor of the Neighborhood” and “Shaking hands without shaking hands,” as well as provision of hospital infrastructure, medical equipment and disinfection materials and financing of food kits for vulnerable groups.
Both companies have also provided the surrounding towns with infrastructure, including parks, bridges, and roads, among other things.