With crippling oil prices affecting its economic growth, Ecuador’s government knew it needed to explore new avenues. Its mining sector had historically failed to attract and sustain private investment, so the country needed to reignite activity.
Wood Mackenzie was brought on to help the country seize the opportunity and successfully diversify its economy.
Hear from Javier Córdova, Ecuador's Mining Minister, on how the project has changed the fortunes of the country.
Faced with Ecuador’s challenge, our consultants provided the following:
- Diagnosis and economic plan of the Ecuadorian mining industry
- Comparative study of the successful experiences of other jurisdictions
- Strategic plans, including defining development goals and optimal minerals for the country
- Technical plans
Once these were underway, our team was able to work with the Ecuadorian government to develop a mining master plan that prioritised bidding rounds by metal and by region, including detailed implementation and maintenance procedures.
The team also helped the government establish more favorable conditions, including incentives such as the fiscal stability agreement, VAT reimbursements and options for companies to recover investments before taxes. In total, 12 key tax and legal reforms were implemented to better align Ecuador’s regulations with the business models of mining companies.
Wood Mackenzie has helped us, in a very important way, to understand the industry, to understand that we need to be competitive — not only in the region but in the world — in order to attract investment.
Javier Córdova, Ecuador's Mining Minister
Based on our recommendations, Ecuador has become a mining investment destination. So far, the country has seen a 200% increase in direct foreign investment, jumping from an average of less than US$45 million per year to more than US$250 million per year currently, with an expectation of nearly US$1 billion per year for the next four years.
Over 200 new mining concessions were granted in the first year, accompanied by investment commitments of nearly US$500 million in the first four. And in the last two years, 28 internationally renowned mining companies have established entities in Ecuador to pursue investment opportunities.
Stock prices of Ecuador-focused mining companies have significantly outperformed the TSXV over the past two years, and the Ecuadorian government has been able to maintain a tax burden slightly higher than the regional average.