Firm Profile > Paz Horowitz Abogados > Quito, Ecuador

Paz Horowitz Abogados

Dispute resolution Tier 2

Paz Horowitz Abogados handles civil, administrative and constitutional claims for national and international clients. The team is also instructed in consumer protection matters and arbitration proceedings. Practice co-head Jorge Paz Durini combines corporate and dispute resolution expertise; recent work saw him representing KLM Airlines in a $20m civil suit alleging undefined damages. Senior associate Ricardo Velasco joined the team in 2018 from his position as Interim Deputy General Attorney at the General Attorney's Office; he and Agustin Acosta Cárdenas are also co-heads of the group. The firm further strengthened its contentious capabilities with the August-2019 hires of David García Ruiz (a former National Director of Legal Advice at the Judiciary Council, he also spent four year at Attorney General's Office), and Leyre Suarez, who has extensive experience of international business regulation, litigation and arbitration. César Molina Novillo is a key contact for contentious IP matters.

Real estate Tier 2

Paz Horowitz Abogados is frequently involved in the early stages of real estate projects, where it provides clients with comprehensive advice, including on project finance, tax planning and accounting structures. Practice head Veronica Mieles Guevara assisted Mafer Real Estate del Ecuador with the transfer of 70 properties in connection with a corporate transaction. She also advises Hilton Colon on the purchase of new offices. Jorge Paz Durini is also active in this area.

Corporate and M&A Tier 3

Paz Horowitz Abogados is a popular choice for clients from industry sectors including aviation, tourism, energy and real estate, among others, for corporate matters. Highlights included advising on the merger of real estate companies Aloagpark and Propiedades E Inmuebles Del Ecuador. Jorge Paz DuriniAgustín Acosta Cárdenas and Rocio Córdova jointly lead the practice. Juan Carlos Pérez is well versed in aviation and consumer law. Other clients include Cathay Pacific Airways, Aon Benfield and Aecon. Patricia Andrade Vásconez joined the firm from Noboa, Peña, Larrea & Torres Abogados in 2018.

Energy and natural resources Tier 3

The team at Paz Horowitz Abogados has experience in advising on engineering and acquisition contracts, investment planning and regulatory matters. Recent highlights include the group assisting Enami with creating a legal structure for an investment agreement with Codelco. Agustin Acosta Cárdenas advised Gransolar on a PPP regarding a solar energy project in the Galapagos Islands. Other noteworthy practitioners include practice head Jorge Paz DuriniJuan Carlos Pérez and associate Maria del Mar Heredia.

Intellectual property Tier 3

Paz Horowitz Abogados regularly assists with due diligence, audits and the protection of IP rights, but also advises on privacy rights and trade secrets, among other sub-specialities. In recent work, practice head Byron Robayo Arroyo filed an administrative action for Kylie Jenner Inc. opposing the registration of the mark 'Kim Kylie' to identify cosmetics. Companies like Innovation Ventures, Banco Solidario and Cby Holdings are also on the client roster. Name partner Bruce Horowitz -who was recently appointed the Ecuadorian representative of ICC FraudNet- and César Molina each have over 30 years' experience in the sector. Associates Mónica Cortez Izurieta and Lorena Sandoval Campaña are also noted. Former associate José Andrés Bedón left to join B.O.O.S Abogados in March 2019.

Labour and employment Tier 3

Paz Horowitz Abogados specialises in providing preventative advice in order to limit employee disputes and other administrative claims. Practice head Patricia Andrade is well versed in social security matters and labour law. The group routinely advises Halliburton on employee visa issues. Other clients include Lavanderías Norte, Safety Enforcement Seguridad Vial and Roche. Associate Xavier Montesdeoca is a key name for immigration matters.

Competition and antitrust Tier 4

Key contacts at Paz Horowitz Abogados include Jorge Paz DuriniByron Robayo Arroyo and senior associate Eduardo Esparza Paula. The group advises clients on a variety of matters, including unfair competition, abuse of dominant position and merger clearance. It also has experience advising on the evaluation of risks as well as on competition compliance. In July 2019, the firm launched an alliance with international trade and competition consultants, International Economics Consulting.

Founded in 1991, Paz Horowitz Abogados delivers practical and cost-effective legal services. Whether a Multinational enterprise, an investment fund, a local start-up, or international NGO, the firm delivers the legal power and understanding needed to fulfill clients’ goals. For Paz Horowitz and its clients, this means, ‘doing well by doing it right’.

The law firm focuses on quality rather than size to build its team, and when it comes to accepting new clients, it focuses on their business ethics and corporate responsibility. Paz Horowitz was the first law firm in Ecuador to sign the UN Women’s  Empowerment Principles and to join the UN Global Compact. Also, was recommended in Ecuador for The Latin America Corporate Counsel Association in Compliance and Anti-Corruption.
The firm and its lawyers are constantly recognized from the most important international legal guides.

Areas of practice
Corporate/commercial and M&A: Paz Horowitz is well-known for its extensive experience and knowledge in M&A transactions. Its team consists  Jorge Paz Durini, Juan Carlos Pérez, Rocío Córdova, David Benalcázar, Cesar Molina and Agustín Acosta Cárdenas, María del Mar Heredia and Gabriel Santelices, providing legal advice to clients in sectors such as aviation, real estate, floriculture, pharmaceutical, telecommunications, energy, oil and mining, importation and distribution of automobiles and tourism.

This department is best known for its hands-on advice and participation in  transactions, because its partners (not only associates) provide legal advice with the preparation of the legal documents. One of the key areas which Paz Horowitz is highly recognized for within the legal community is negotiation, M&A, corporate restructuring and project finance. The corporate team works side by side with its tax and accounting team to find viable solutions to issues that otherwise could be deal breakers.

Anti-corruption and anti-money laundering compliance: the firm provides compliance advice, due diligence, investigations, and works with clients to create ethics, and compliance systems that fit the client’s business and situation, as well as training courses that comply with the FCPA, ISO 37001 and local law requirements.

Licensed to practice law in the USA and Ecuador, and with a High Level Diploma in the Prevention of Corruption, Bruce Horowitz provides seminars and training courses on compliance with the US FCPA and other anti-corruption laws, and helps clients (along with Anti- Money Laundering expert Catalina Carpio) to use ethical negotiation principles and ‘positive deviance’ approaches to get what rightfully belongs to the clients in extortion situations.

Austin Acosta Cárdenas, Maria Elisa Holmes and Esteban Vivero, reinforce the compliance team.

Dispute resolution and litigation : Paz Horowitz has represented both national and foreign companies in legal claims of different kinds, such as civil, administrative and judicial proceedings, and constitutional claims. Besides the experience in a wide range of matters, the firm and its lawyers have also litigated in all major courts all around the country as well as the major international courts such as the Commission and Court of Inter American Human Rights, and Committees of the United Nations Organization, giving us a level of experience that other firms simply cannot equal. The team practice is based on a comprehensive view of business, the company’s reputation, and external factors that may be relevant to litigations.

One of the key matters in which Paz Horowitz is highly recognized within the legal community is their ability to advise in multidisciplinary areas such as public law, administrative law, constitutional law, civil law, contracts law and consumer protection matters.

This year the firm decided to hire two lawyers to strengthen and increase its litigation and conflict resolution team. David Garcia who has 14 years’ experience in public procurement and Leyre Suarez, recognized by Chambers & Partners as an Associate to watch in Dispute Resolution.

Intellectual property: the IP team produces creative and cutting-edge legal and consulting advice, principally focused on technology transfer, recognizing, protecting and negotiating IP assets. Byron Robayo, who leads the IP team, has advised  the World Intellectual Property Organization (WIPO), the Ecuadorian IP Office, and the Swiss and US Embassies in the use of IP as a tool for development.

The deep knowledge of IP, the speed, clarity, and frankness of communication are the most important tools the team has. It offers International IP services and advice for filing trademark applications, maintaining trademark portfolios and renewing trademark rights. It also assists in enforcing trademark rights in each particular jurisdiction including oppositions, cancellations customs measures, injunctive relief and infringement actions.

The IP team conducts all types of trademark searches in central American Countries, Andean Community, and others jurisdictions.

Energy, oil and mining: Paz Horowitz is one of Ecuador’s leading law firms in energy and natural resources. Its legal services involve negotiating and implementing engineering and acquisition contracts for electric and hydroelectric generators and facilities throughout the country. Led by Jorge Paz Durini, a great negotiator and excellent in oil and international contracts’ (as reported by Latin Lawyer 250), Juan Carlos Pérez, Rocio Córdova and Maria del Mar Heredia, clients say they come to Paz Horowitz for its broad experience in the natural resources and energy sector. The oil and gas team represents some of the largest investment ventures in Ecuador and participates in various renewable energy projects at national and international level.

The hydrocarbons practice represents some of the largest investment ventures in Ecuador, leading up, mid and downstream, exploration, exploitation, mature fields, transportation and distribution matters.

Tax: Paz Horowitz advises in tax compliance, audit requirements, complex tax transactions and litigation before the Ecuadorian authorities and courts. Its specialized team provides accounting, audit and project transactional support.

Labor and employment and immigration: this area is best known for providing integral advice to its clients with regards to their labor obligations  as employers. This practice area has taken a drastic change from previous years, delivering preventative advice in order to reduce lawsuit and administrative claims to the minimum. In 2019 the team has been successful in multiple cases of breach of contract, wrongful dismissal and profit sharing, including a 100 million claim against an oil company.

Patricia Andrade, who leads the team, is a social security and labor law expert. She offers clients the complete range of consulting because of her deep knowledge, ability to negotiate and to explain the risks and solutions that place us above other law firms.

Senior Associate Xavier Montesdeoca is praised for his immigration services to the firm’s multinational clients.

Real estate: Paz Horowitz Abogados is best known for combining legal principles and business solutions to make an advanced planning strategy for real estate projects, along with project finance of real estate projects.
The team led by Veronica Mieles  is one of the few that provides a combined service to real estate clients including tax planning, accounting structure and forecast of future results.

Competition law and international trade law: led by Eduardo Esparza, this area provides comprehensive legal and economic services on issues of Competition law and International Trade law,  in order to facilitate the participation of its clients in global markets.

The services include legal and economic counseling on issues related to Unfair Competition, Anti-competitive agreements, Bid rigging, Abuse of dominant position, Economic Dependence, Merger control, State Aid, WTO and trade agreements subscribed by Ecuador, Rules of origin, Dumping, subsidies and safeguards investigations, Non-tariff measures, among others.

Department Name Email Telephone
Dispute Resolution David Garcia 593 2 3982900
Dispute Resolution Leyre Suarez 593 2 3982900
Anticorruption/ Compliance Bruce Horowitz 593 2 3982900
Anticorruption/ Compliance Agustín Acosta Cárdena 593 2 3982900
Anticorruption/ Compliance Catalina Carpio 593 2 3982900
Aviation Juan Carlos Perez 593 2 3982900
Aviation Jorge Paz Durini 593 2 3982900
Competition Law Eduardo Esparza 593 2 3982900
Corporate Jorge Paz Durini 593 2 3982900
Corporate Juan Carlos Perez 593 2 3982900
Corporate Rocío Cordova 593 2 3982900
Corporate David Benalcazar 593 2 3982900
Corporate Agustín Acosta Cárdenas 593 2 3982900
Corporate Cesar Molina 593 2 3982900
Corporate María del Mar Heredia 593 2 3982900
Immigration Xavier Montesdeoca 593 2 3982900
Intellectual Property/Anticounterfeiting Byron Robayo 593 2 3982900
Intellectual Property/Anticounterfeiting Bruce Horowitz 593 2 3982900
Labour/Employment Patricia Andrade 593 2 3982900
Energy Jorge Paz Durini 593 2 3982900
Energy Rocio Cordova 593 2 3982900
Public Administration/Procurement Agustín Acosta Cárdenas 593 2 3982900
Public Administration/Procurement Jorge Paz Durini 593 2 3982900
Real Estate Verónica Mieles 593 2 3982900
Real Estate Jorge Paz Durini 593 2 3982900
Tax Sara Romero 593 2 3982900
Partners : 10
Other fee-earners : 33
Total staff : 72




Ecuador’s economy is the eighth largest in Latin America; its main exports are petroleum products, bananas, shrimp, flowers and fish. Ecuador produces one of the finest aroma cocoa in the world as well as high quality coffee, exports that are gaining importance in international markets. Ecuador also boasts large natural mineral reserves that have contributed to the development of projects to explore and extract copper, gold and iron. Ecuador is rich in natural resources and also has a young workforce and a not exploited domestic market, where GDP per capita has increased substantially in the last decade.

Due to Ecuador’s great potential of business activities in the mining, energy, tourism and agriculture industries, the government’s current policy is to provide legal stability to investors (foreign and local) and promote the execution of investment contracts. In 2018, the National Assembly passed the Law of Productive Development, Attraction of Investment, Employment Generation and Fiscal Stability (“Investment Law”) to improve the tax incentives established in the Organic Code of Production, Commerce and Investment (“COPCI”).

As a current state policy and through the Investment Law, the government also promotes investors to enter into an investment agreement for a period of 15 years in which guarantees the partial or total reduction of customs tariffs, legal stability, arbitration (domestic or international) income tax exception, currency remittance tax exemption for the importation of capital goods and raw materials, and for the payment of dividends.

Key Indicators

Ecuador´s Key Indicators 
Population  17,084,357 million 
Currency  US Dollar 
GDP Annual Growth  0.6% 
GDP per capita  $ 5185.09 US dollars 
IBRD/IDA Operations Approved by Fiscal year  90.50 Million 
Competitiveness index  55.85 points out of 100 
Unemployment Rate  5.6% 
Inflation  0.71% 
Interest Rate  8.02% 
Ease of doing business  123 of 190 economies 
Gold Reserves  16.9 Tones 
Capital Flows  1030 Million 
Crude Oil Production  531 BBl/1K 
Manufacturing Production  7.80% 

Sources: World Bank, Trading Economics, World Economic Forum. 

Sources: World Bank, Trading Economics, World Economic Forum.

Current Business Environment

3.1 General legal framework and investor’s rights

In the last year, Ecuador’s governmental policy has been directed to attract investment to the country and hence nowadays the country presents great opportunities for investors. The Constitution establishes equal conditions and non-discriminatory treatment for both, local and foreign investors, with regards to the administration, operation, expansion and transfer of their investments, granting them the same protection and security for their activities in Ecuadorian territory.

In general terms, investors have the following rights:

  • Freedom to produce and commercialize goods and services as well as to fix their prices in accordance with the national market.
  • Access to judicial, arbitral and administrative procedures and actions to control private speculative, monopoly or oligopoly practices as well as dominance market position abuse and other practices of unfair competition.
  • Freedom to import and export goods and services within the limits established in Ecuadorian legislation and international agreements.
  • Freedom to transfer abroad profit and dividends that come from foreign investment, respecting tax obligations, profit sharing with workers and other legal obligations that may apply.
  • Freedom to acquire and transfer shares, stocks, goods, real state or rights on property of third parties in accordance with the legal procedures established in Ecuadorian law.
  • Access to the national financial system.

3.2 Type of Companies in Ecuador

Ecuadorian Law establishes diverse structures to develop economic activities in Ecuador. Within the structures provided in the legislation, the main structures used are limited liability companies (compañía de responsabilidad limitada), corporation (compañía anónima), civil partnership (sociedad anónima civil), branches of foreign companies, and permanent establishments of foreign companies. Bellow a brief description of the preferred vehicles used for businesses in Ecuador:

a) Corporations (compañía anónima)

  • Minimum capital: US$ 800.00. At least 25% of the capital must be paid at the moment the company is incorporated. The remaining 75% can be paid within 24 months of incorporation.
  • Number of shareholders: minimum 2.
  • Shareholders liability: Shareholder’s liability is limited up to the amount of their contribution.
  • Legal Representation: General Manager, President (in absence of the General Manager)
  • Governing bodies: Shareholders Meeting and Board of Directors (optional).
  • Transfer of shares: Free transfer of shares. Transfers must be registered in corporate books and notified to the Superintendence of Companies and Internal Revenue Service.
  • Governmental entity of Control: Superintendence of Companies.

b) Limited liability companies (compañía de responsabilidad limitada)

  • Minimum capital: US$ 400.00. At least 50% of the capital must be paid at the moment the company is incorporated. The remaining 50% can be paid within 12 months of incorporation.
  • Number of shareholders: minimum 2 and maximum of 15.
  • Restrictions to shareholders: Banks, insurance companies, foreign corporations cannot be shareholders in a limited liability company.
  • Shareholders liability: Shareholder’s liability is limited up to the amount of their contribution.
  • Legal Representation: General Manager, President (in absence of the General Manager)
  • Governing bodies: Shareholders Meeting and Board of Directors (optional).
  • Transfer of shares: Transfer of shares requires the unanimous approval of the shareholders meeting. Agreements for the transfer of shares have to be made before a notary.
  • Transfers must be registered in corporate books and notified to the Superintendence of Companies and Internal Revenue Service.
  • Governmental entity of Control: Superintendence of Companies.

Branches of foreign companies

  • Minimum capital: US$ 2,000.00.
  • This amount requires registration in the Central Bank of Ecuador as foreign investment.
  • Legal Representation: Attorney-in-fact domiciled in Ecuador.
  • Governing bodies: Board of Directors of parent company.
  • Transfer of shares: Free transfer of shares at the country of parent company. No authorization is required in Ecuador.
  • Governmental entity of Control: Superintendence of Companies.

Civil Partnerships (sociedad anónima civil)

  • Minimum capital: No minimum capital established but in practice a minimum of US$ 800.00 is applied.
  • Number of shareholders: minimum 2.
  • Shareholders liability: Shareholder’s liability is limited up to the amount of their shares. Nevertheless, in practice they can respond with their personal goods.
  • Legal Representation: General Manager, President (in absence of the General Manager)
  • Governing bodies: Shareholders Meeting, Board of Directors (optional).
  • Transfer of shares: Free transfer of shares. Transfers must be registered in corporate books.
  • Governmental entity of Control: It is not subject to a governmental entity of control. This company is incorporated in a public deed before a Notary.

3.3 Tax Regulation

Bellow a brief description of the main taxes applicable to commercial activities in Ecuador:

a) Advanced Income Tax

This amount is calculated based on the amount reported for previous fiscal year: 0.2% of equity, 0.2% of costs and deductible expenses, 0.4% of taxable income and 0.4% of assets.

Advanced Income Tax becomes a tax credit for the payment of Income Tax.

b) Income Tax

Income tax taxes the rent obtained by persons and local and foreign companies. Under the Ecuadorian law, income refers to:

  • Income from Ecuadorian source obtained free of charge of from work or capital.
  • Income obtained from abroad by persons domiciled in Ecuador or by Ecuadorian companies.

The tax basis is the total taxable income, less returns, discounts, costs and expenses deductible and attributable to such income.

In general terms, the rate for companies is of 25%. Exceptionally, a tax rate of 28% may apply to the company if:

  • The company fails to annually report the information of its shareholders to the ultimate beneficiary owner.
  • If within the Company’s property chain there is a shareholder that is resident or established in a tax haven, in a jurisdiction with lower tax rate or a preferential tax regime, and the effective beneficiary is an Ecuadorian tax resident.

c) Income Tax Withholdings

Every company that acquires goods and hires services must act as withholding agent for Income Tax. Income tax withholding must be made within 5 days from the presentation of the sales receipt of invoice.

Tax rate is applied over the price of goods or services and it varies depending on the type of transaction. Usually, a tax withholding of 1% applies for the purchase of goods, and a tax withholding of 2% applies to services hired.

d) Value Added Tax

Tax on the value of transfer of ownership or import of goods, services, copyrights, industrial property and related rights. A 12% rate is applied over the price of goods and services. Some exceptions may apply to certain goods and services that will be taxed with a 0% rate.

e) Currency Remittance Tax (ISD)

The Currency Remittance Tax (“ISD”) taxes transfers in cash, through money orders, bank transfers, shipment, withdrawals or any payment of any kind, of currencies sent abroad, with the exception of an account clearing made with or without the intermediation of financial institutions.

The tax rate of 5% is applied over the value of the currency transfer.

This tax is declared and paid by the financial institution by which the financial operation is carried out.

3.4 Labor Regulation

Ecuadorian legislation establishes different types of employment contracts. Within the most common contracts we have:

a) Indefinite Contracts:

It is the most commonly used specially to hire employees for a continued and long period of time. A trial period for up to 90 days can be established, term in which the employer may terminate the labor relationship even without cause. Once the trial period ends, unjustified termination of the contract can cause the employer to pay compensation to the employee.

b) Eventual Contracts:

These contracts are used to hire employees for circumstantial events, as for example a circumstantial increase in production, replacement for temporary absences, etc. Under these contracts, an employee may be hired for a period no longer than 180 days. If the agreement is extended, than it automatically becomes an indefinite contract.

c) Contracts for a specific work:

Under these contracts, an employer may hire an employee for the execution of a specific work for a determined amount. These types of contracts are usually issued for construction purposes.

Independently from the type of contract selected, employees may work a maximum of 40 hours during the week that can be distributed in 8 daily hours, with a two consecutive day rest. Upon agreement, extra hours can be established as long as they do not exceed 12 hours during the week and 4 hours during the day. Exceptions can apply to employees in the livestock, flower, agricultural, banana and tourism industries in which working days can be extended to 6 days a week that can be divided in 20, 36 and 40 hours of work accordingly.

The basic salary for the year 2019 is US$ 394,00. Different salaries may apply to certain industries. Extra hours are paid as follows:

  • Between 06h00 and 24h00, an extra charge of 50%.
  • Between 24h00 and 06h00, an extra charge of 100%.
  • The extra charge for Saturdays and Sundays is of 100%, as long as the employees do not have 2 other resting days during the week.

In addition, employees are subject to additional rights that are herein detailed:

  • Thirteenth salary (Décimo tercer sueldo): An extra salary paid annually, payable in monthly installments or accumulated until December 24th.
  • Fourteenth salary (Décimo cuarto sueldo): An extra basic salary paid annually, payable in monthly installments or accumulated until March 15th for the coast region and August 15th for the highland region.
  • Reserve Fund (Fondo de Reserva): The worker or public official with a dependency relationship will be entitled to the monthly payment of the reserve fund by his employer, in a percentage equivalent to eight point thirty-three percent (8.33%) of the remuneration contributed to the Ecuadorian Institute Social Security, after the first year of work.
  • Contributions to the Social Security (Contribución al Seguro Social): The contributions to be made to the Social Security by the employer are the 11.15% of each monthly salary, and the employee must pay the 9.45% of its’s monthly salary.
  • General Profit Sharing: 15% of the net earnings of a company are distributed to all employees in the payroll. It can also apply to employees of companies that provide the company complementary services such as catering, security, cleaning and courier services. From the 15%, 10% is divided and distributed to all employees. The remaining 5% is distributed in accordance with the employee’s household.
  • Profit Sharing in mining, oil, and hydroelectric companies: as an exception to the general profit sharing rule, that the 15% of the annual profit must be distributed to all employees, in the case of mining, oil and hydroelectric companies it is only distributed 3% to all employees in the payroll, and 12% is distributed to the state.

3.5 Special Economic Development Zones (ZEDES)

Special Economic Development Zones (ZEDE) are limited geographic areas within the national territory and customs destinations that seek to attract investment by establishing tax, financial and customs benefits. The Organic Code of Production, Commerce and Investment establishes the following types of ZEDES:

a) Technology ZEDE: For activities related to the transfer and disaggregation of technology and innovation.

b) Industrial ZEDE: For operations of industrial oriented mainly for the export of goods with an aggregated value.

c) Logistic ZEDE: Development zone for logistic services as cargo storage for the purpose of consolidation, deconsolidation, classification, packaging, labeling, maintenance and repair of ships, aircraft vehicles and other related.

d) Touristic ZEDE: Zones destined for the development of touristic services and projects in accordance with the public policy to prioritize certain cantons and regions,

As of today Ecuador has five ZEDES: Yachay, Eloy Alfaro, Zede del Litoral, Posorja and Quito.

Incentives are extended to new investment projects to be developed in ZEDES such as:

  • 5% currency remittance tax to the importation of goods and services related to the authorized activity and for external financing operations.
  • VAT tax credit paid on the purchase of raw materials, supplies and services from the national territory that is incorporated in the production process.
  • 0% VAT tax rate on the import of goods exclusively related to the authorized zone or incorporated in some of the processes of productive transformation developed.
  • Foreign trade tax exemptions except for customs service fees.
  • Advanced income tax and income tax exemption for the first 10 years since the first fiscal year that generates operational income.
  • Reduction of up to 10% of the income tax rate for a period of 10 years once the exemption period expires.

3.6 Public Private Partnerships (“PPPs”)

A Public Private Partnerships (“PPP”) is the modality through which the Ecuadorian Government or the Municipalities entrust the private management or the execution of a specific public Project to the private sector. These PPPs can be established for the provision of goods, building infrastructure, or services. All terms and conditions of PPPs are set out in a contract that must be signed with the public entity.

Taking into account the incentives and current political and economic conditions of Ecuador, participating in PPP is an opportunity to be taken into account by national and foreign companies in Ecuador.

PPPs Incentives

The PPPs have, among others that might be agreed upon the contractual parties, the following incentives:

a) Legal stability: Present in delegated management contracts in which it is established that the State undertakes not to alter the conditions of said contracts.

b) Income tax Exemption: Companies that are structured for PPAs will have the benefit of income tax exemption for ten years in projects in the prioritized sectors determined by an inter-institutional committee. The ten-year term begins to run from the first fiscal year in which the company generates operating income.

c) Currency Tax Remittance Exemption: All companies that participate in an PPP will be exonerated from ISD in the following scenarios:

  • In the importation of goods for the execution of the public project, whatever the import regime used.
  • In the acquisition of services for the execution of the public project.
  • The payments made by the company to the financiers of the public project, including capital, interest and commissions, provided that the agreed interest rate does not exceed the reference rate at the date of registration of the credit. The benefit extends to subordinate loans, provided that the borrowing company is not in a situation of undercapitalization in accordance with the general regime.
  • The payments made by the company for distribution of dividends or profits to its beneficiaries, notwithstanding where they have their fiscal domicile.
  • Payments made by any person or company due to the acquisition of shares, rights or participations of the structured company for the execution of a public project in the PPPs modality or for transactions that fall on securities representing obligations issued for the financing of the public project.

d) Reduction of tariffs: Customs tariffs that are related to the PPPs projects will also be exonerated

The incentives mentioned above may be enjoyed for the term agreed upon in the contract, with the exception of the income tax exemption, which can only be 10 years.


Another benefit of PPPs is the possibility of resolving disputes that may arise during the term of the PPP through a domestic or international arbitration process. Therefore, PPPs are an investment mechanism that allows the private sector to be part of public projects with the security that in case of conflict they are subject to be resolved by an independent and international arbitral process.

3.7 Environmental Regulation

The highest environmental authority in Ecuador is the Ministry of Environment. The Municipalities also exercise powers assigned by the National System of Competencies and the Decentralized System of Environmental Management, according to the territorial circumscription of the project or activity.

The main environmental legal provisions are contained in the Organic Environmental Code, as well as in the Unified Text of Secondary Environmental Legislation (TULAS).

Principal Environmental Obligations

a. Every project that may cause environmental risk or impact must comply with the provisions of the Single Environmental Management System and obtain the corresponding Environmental License.

b. Prevention, control, monitoring and comprehensive repair. Plans, programs or projects that prioritize the prevention, control and monitoring of pollution, as well as the integral repair of environmental damage must be included in projects with potential environmental risk.

Authorizations and environmental regularization

In order to execute of public, private and mixed projects, according to their magnitude and risk, an authorization of the environmental authority is required. For the purposes of the permit to be obtained, the environmental impact must be classified as not significant, low, medium or high. Depending on the project, the requirements for authorizations are contained in the Unique Environmental Information System (SUIA), some of the most common requirements are:

a) Certificate of intersection that determines whether or not the project intersects with the National System of Protected Areas, National Forest Heritage and intangible areas.

b) Guidelines of Good Environmental Practices.

c) Environmental Management Plan.

d) Environmental Impact Studies (EIA).

e) Insurances or financial guarantees must be presented to cover environmental responsibilities.

f) Environmental Management Plan for the cessation of activities.


In case the environmental principles and regulations are not followed, companies can face the following sanctions and penalties:

Order of suspension of the activity due to nonconformities to the environmental management plan or to the environmental norms when they affect the environment.

Cancellation of the environmental permit for major non-conformities that imply non-compliance with the environmental management plan, repeated twice, without the corrective measures having been adopted within the established time limits.

The actions to determine responsibility for environmental damages, as well as to prosecute and punish them are not subject to statute of limitations.

3.10 Bilateral treaties

Under Lenin Moreno’s presidency, the Ecuadorian government has taken a 180-degree turn from the previous government in relation to BITs. The Ministry of Foreign Affairs and Human Mobility presented in 2018 a new model of bilateral investment agreements that, unlike the previous treaties aim to offer that combines legal security with structured dialogue mechanisms between the parties. These bilateral investment agreements (CBI), aims to attract productive investment, while eliminating the flexibility of the BITs -which caused millionaire losses to Ecuador (as per the previous government views)- and balancing the rights and obligations between the State and investors in order to protect the general interests of the country.

In relation to the previous BITs, the new CBI agreements abandon the model that only provided rights for investors and restore the country’s ability to regulate for the benefit of the public interest. In the same way, it was incorporated as efficient alternatives of dispute resolution mechanisms that provided legal security to the investors.

Currently Ecuador is negotiating and signing new bilateral investment and other treaties in order to reestablish their position under the global community, due to the fact that most of it previous BIT were denounced by the previous government.

Current Investment Opportunities

General incentives to investment in Ecuador

The Investment Law1 and COPCI2 benefits are directed to those investments that meet the criteria of new productive investments in prioritized sectors3 of the economy. The differences in requirements to enter into an investment contract with the state, depend on whether the target business is small (just on requirement) or a large business, which shall meet at least two of the required conditions.

There is also a difference in benefits depending on the location the new investment will be made. New investments located on the cities of Quito and Guayaquil are limited to 8 years of tax benefits, while new investments located outside these cities are entitled to 12 years of tax benefits, and new investments located in borders with Colombia or Peru can have up to 15 years of tax incentives.

The benefits, if granted, will be contained in an investment contract that must be signed with the Ecuadorian state. There could be, concurrent applicable benefits from other laws but those benefits will not be included in the investment contract, as those are specific form other laws, in the fields of tourisms, mining, aviation, marine etc.

The fundamental benefits of the investment law are:

a) Income tax reduction for existing companies from 25% to 15% and exceptionally (as per the fulfillment of further requirements) reduction to 0% income tax. For new companies the exception could be 100% of income tax.

b) Currency Remittance Tax (“ISD”) exception for the payment of imported machinery and raw materials.

c) Tax stability for up to 15 years of the current applicable income tax rate. This provision does not provide stability for municipal, customs nor VAT Taxes.

d) Temporary exception of custom tariff may also be granted for specific projects.

e) International or domestic arbitration is available for investors.

The aforementioned incentives, especially in relation to the income tax exemption may be extended for a longer period depending on the economic sector and the location of the investment project:

20  New  Basic industries  Border 
20  New  Tourism  Manabí and Esmeraldas Provinces 
15  New  Basic industries  All Provinces 
15  New  Industrial, agro-industrial and agro-associative  Border 
15  New  Prioritized  Manabí and Esmeraldas Provinces 
12  New  Prioritized  Outside Quito and Guayaquil 
8  New  Prioritized  Within Quito and Guayaquil 

Investment Contracts

In the last year, Ecuador’s state policy has been directed to attract foreign investment to the country and hence nowadays the country presents great opportunities for investors. The Constitution establishes equal conditions and non-discriminatory treatment for both, local and foreign investors, with regards to the administration, operation, expansion and transfer of their investments, granting them the same protection and security for their activities in Ecuadorian territory.

Therefore, any local or international investor, in order to apply to an investment contract must comply with the following general requirements:

a) A new productive investment4 in prioritized sector, basic industry, strategic sectors or in commercial activities that generates added value.

b) The investment to be made should at least be of US$1,000,000.00.

c) Increase the total number of employees in at least 3% of its current average payroll.

d) Economic Transparency

Since the promulgation of the Investment Law and its Regulation (in December 2018), the Ecuadorian government has signed 29 investment contracts, 38 applications are waiting for approvals, which means an investment of US $ 1.363.195.731,535 by the end of 2019.

Paz Horowitz Contributors:

María del Mar Heredia

María Elisa Holmes

Agustín Acosta Cárdenas