 | 2007 | 2006 |
Overall Score: | 43 | -- |
Regional Ranking: | 8th (tied) | -- |
Ecuador – new to this Annual Scorecard – ranks above Peru and ties with Argentina despite minimal VC/PE activity. A favorable tax environment is a positive incentive for local exposure, but basic education is needed for policymakers, entrepreneurs and new fund managers to begin to address broader issues of governance, shareholder rights, perceived corruption and a weak judicial system.
Strengths: Ecuador’s overall tax environment is favorable for VC/PE: funds and trusts are not taxed on investments; capital gains and dividends are similarly untaxed. Some tax incentives exist for infrastructure investments. Ecuador also earned high marks in strong creditors’ rights and use of international accounting standards. Registration is simple, with no reserve requirements or exchange controls. And though Ecuador has to date just one pension fund – state-owned for public employees – it can make equity investments with only minimal restrictions, as can insurers.
Challenges: The Corporacion Andina de Fomento (CAF) and other agencies have recently undertaken training and technical assistance for Ecuadorian firms in the area of minority shareholder rights. However, compliance is voluntary and not yet widespread. Intellectual property rights are poorly protected, capital markets are not developed and the banking system is ill-prepared for group investment funds. Most notably, Ecuador earned the lowest possible score for strength of judicial system as well as perceived corruption.
| Score | Change |
| Overall score | 43 | |
| Laws on VC/PE fund formation and operation | 2 | |
| Tax treatment of VC/PE funds & investments | 3 | |
| Protection of minority shareholder rights | 1 | |
| Restrictions on institutional investors investing in VC/PE | 2 | |
| Protection of intellectual property rights | 1 | |
| Bankruptcy procedures/creditors' rights/partner liability | 3 | |
| Capital markets development and feasibility of exits | 1 | |
| Registration/reserve requirements on inward investments | 3 | |
| Corporate governance requirements | 1 | |
| Strength of the judicial system | 0 | |
| Perceived corruption | 0 | |
| Quality of local accounting/use of international standards | 4 | |
Indicators are scored from 0-4 where 4=best score.
Overall score ranges from 0-100 where 100=best score. |
