Ecuador

Activity rebounds, but challenges persist

Ecuador’s economy is expected to recover moderately in 2025, following a sharp contraction in 2024 driven by severe power outages, lower oil output, and insecurity. The downturn resulted in broad-based declines across agriculture, industry and services, but early 2025 data point to a swift rebound. GDP expanded over 3% YoY in the first quarter of 2025, led by household consumption (62% of GDP in 2023), supported by low inflation, real wage gains and a gradual normalisation of electricity supply. Non-oil exports, including shrimp, cacao and bananas, have remained strong, benefiting from improved river conditions, high prices and resilient external demand. Industrial activity showed initial signs of improvement, while gross fixed capital formation (21% of GDP in 2023) began to rebound, aided by expanding credit and tax incentives under Article 60/90, which provides income tax exemptions for new productive investments. Nonetheless, investment remains constrained by insecurity and political fragmentation. Public spending (15% of GDP in 2023) continues to be shaped by high security and debt servicing costs, partially offset by the VAT increase and fuel subsidy cuts. Meanwhile, the decline in international oil prices has eroded fiscal and external revenues, thereby adding pressure to an already tight budget.

In 2026, growth is expected to gain further momentum, supported by the normalisation of hydroelectric output – improved weather conditions permitting – and a more stable political environment following the 2025 elections. Household consumption is projected to remain the primary growth engine, bolstered by subdued inflation, real wage gains and gradual improvements in the employment sector. Investment activity is expected to strengthen, particularly in the mining, construction and energy sectors, aided by expanded access to credit and efforts to reduce regulatory bottlenecks. Public infrastructure spending may also pick up, especially in energy and transport, as the government seeks to address bottlenecks exposed during the 2024 energy crisis. However, oil production is likely to remain subdued due to ongoing issues at the ITT field and persistent underinvestment, though a partial recovery in global prices could support external revenues and ease some fiscal pressures.

Fiscal outlook remains fragile despite IMF support and planned consolidation

The fiscal deficit is expected to widen in 2025, as lower oil prices, the phase-out of temporary tax measures and elevated spending on security and debt servicing weigh on public accounts. Monthly oil revenues have fallen well below official projections that have been impacted by both reduced production, following the ITT shutdown, and weaker global prices. Although the VAT hike and subsidy cuts have provided some short-term relief, they have not fully compensated for the loss in hydrocarbon-related income. With the elections over and President Noboa securing a working majority, fiscal consolidation is expected to regain momentum in the second half of the year, but execution risks remain high. In 2026, the deficit is projected to narrow moderately, supported by a rebound in domestic activity and renewed efforts to control current expenditures. The IMF’s four-year Extended Fund Facility, signed in April 2024, remains a critical pillar of the government’s strategy. While Ecuador has already received USD 1.5 billion under the agreement, further disbursements have been delayed amid fiscal slippage and administrative bottlenecks. The programme has unlocked additional multilateral support and guided fiscal policy, but progress has been uneven. In the absence of market access, financing needs will continue to be met through multilateral and domestic sources, while public debt — 56% of which was held externally and 44% held domestically at end-2024 — is set to rise in 2025 before stabilising in 2026.

The current account surplus is expected to narrow in 2025, as lower oil prices and pinched production reduce export earnings, while imports rise in line with the recovery in domestic demand. Exports are also being buffeted by the new US trade policy. From April 2025, a 10% US baseline tariff has applied to most Ecuadorian exports, including banana, cocoa and shrimp. The services deficit (2.6% of GDP in 2024) should remain wide, reflecting subdued tourism inflows amid persistent insecurity. The primary income deficit (1.5% of GDP), driven by profit repatriation by foreign companies, is projected to remain broadly stable. Meanwhile, the secondary income surplus—largely composed of expatriate remittances (3.9% of GDP in 2024)—will continue to support the external balance. Despite the hardening of US immigration policy under the Trump administration since January 2025, including a surge in deportations and the new federal tax on remittances, no clear inflection has been observed. On the contrary, remittance inflows have remained resilient, with a marked uptick in early 2025 as migrants sought to send funds in advance of potential restrictions. As at June 2025, international reserves stood at USD 8.4 billion, covering 3.2 months of imports. In 2026, the surplus is set to narrow further as import growth accelerates with stronger investment and consumption. Oil prices are expected to erode further, which, combined with structural production restrictions, will continue to limit export revenues. Remittances and the income balance should remain relatively stable, helping cushion external vulnerabilities. With foreign direct investment likely to recover only marginally amid ongoing institutional weaknesses, the IMF programme will continue to be a key factor in securing multilateral external financing and maintaining international reserves at a sustainable level.

Noboa begins full term with legislative control

President Daniel Noboa, from the Acción Democrática Nacional (ADN), was sworn in for a full four-year term in May 2025 after his re-election. He first took office in November 2023 after winning the snap election triggered by former President Guillermo Lasso’s dissolution of the National Assembly through the constitutional mechanism known as muerte cruzada, a move that allowed Lasso to avoid impeachment. Like his predecessor, Noboa initially governed with a minority in the legislature and was heavily challenged when proposing reforms. However, following the Spring 2025 vote, he secured a working majority in the new Assembly by forming alliances with independents, the Social Christian Party (PSC), and breakaway members from Pachakutik and RC-RETO. This allowed his coalition to take control of all key leadership positions, including the Assembly presidency and the Legislative Administration Council. Despite this stronger institutional position, governability is fragile and relies on ongoing negotiations with loosely-aligned allies. The administration continues to face severe public security threats related to drug trafficking, fiscal pressures due to rising debt servicing and weak oil revenues, and limited external buffers. Although the April 2024 referendum confirmed strong public backing for Noboa’s security policies, widespread rejection of proposals related to labour and international arbitration highlighted resistance to his broader reform agenda.

In the wake of his re-election, President Daniel Noboa has sought to align Ecuador's foreign policy more closely with that of the Trump administration, prioritising cooperation on security, trade and migration. He has deepened ties with the US government by proposing bilateral security initiatives, expressing openness to a US military presence in Ecuador and requesting that Ecuadorian drug gangs be designated as terrorist organisations. In trade policy, he imposed steep tariffs on Mexican imports in early 2025, a move widely interpreted as mirroring Trump-era protectionism. Migration has also become a central issue, with the US deporting thousands of Ecuadorians back home amid tightening immigration controls, prompting Noboa to pursue new bilateral arrangements to manage the flow. While these steps have strengthened Ecuador's alignment with the US, they risk further straining relations with left-leaning neighbours and increasing the country’s exposure to shifts in US domestic politics. Last, the fallout from the April 2024 storming of the Mexican embassy in Quito, which led to a diplomatic rupture with Mexico and condemnation from several regional governments, remains unresolved and continues to isolate Ecuador diplomatically in Latin America.

Payment

Cheques are still a frequently used means of payment for commercial transactions in Ecuador. Nevertheless, the use of cheques is declining, due to a growing preference for electronic payments for transactions of all values.

Credit transfers are used for both high-value and low-value payment transactions. High-value and urgent inter-bank transfers are usually cleared via the Banco Central Ecuatoriano (BCE). Inter-bank transfers can include capital, money and foreign exchange market transactions, as well as public sector and commercial payments. Transfer instructions can be submitted via paper-based instructions or through online systems such as?SWIFT.

Cash is frequently used, particularly for low-value transactions.

Debt Collection

Amicable phase

Amicable negotiations are a crucial step in successful debt collection management. These negotiations are highly detailed and cover aspects including the number of instalments, write-offs, guarantees, collateral, grace periods and interest.

Legal proceedings

Ecuador’s judicial system comprises courts, administrative bodies, autonomous bodies and subsidiary bodies. The jurisdictional bodies responsible for administering justice are the National Court, regional courts, law courts, law tribunals and Justice of the Peace courts.

The Judicial Council is the governing body responsible for the administration, supervision and discipline of the judicial function. The judicial system also encompasses subsidiary bodies, such as notaries, auction services, foreclosure services, legal custodians and other bodies, as determined by law.

The Código Orgánico General de Procesos (COGEP), a new legal code in force since May 2017, should help to speed up procedures.

Under the new legal code, trials can be in the form of Executive Judgments or Ordinary Judgments.

Executive Proceedings

Executive proceedings are initiated by filing a written complaint with the Court. Supporting documents (such as the pagaré or letra de cambio) should be attached to the claim. Cases are assigned to a judge who then has 45 working days to decide whether the claim is complete. The judge then hands down precautionary measures within the following 90 days. The judge orders a single audience 120 days later, during which he delivers a sentence.

Ordinary Proceedings

Ordinary proceedings are initiated by filing a written complaint with the Court. The case is then assigned to a judge who has 60 working days to decide whether the claim is complete. The judge then issues a writ ordering the serving of the written complaint to the debtor. The debtor has 90 days to respond with a written defence. The judge then orders a single audience during which he will deliver a sentence.

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Enforcement of a Legal Decision

A domestic judgment becomes final and enforceable after any appeals have been exhausted. The judge of the court of first instance is responsible for enforcing judgments and issues a writ of execution ordering the relevant party to comply with the judgment within five working days. If the order is not complied with within the five-day period, the judge orders the seizure of the debtor’s assets in order for them to be auctioned off.

The Ecuadorian Civil Procedure Code sets out the requirements for the enforcement of foreign judgments, in accordance with the appropriate treaties, international conventions and Ecuadorian law. The approval procedure begins with a phase of knowledge gathering (for ordinary trials) that is performed in the defendant’s domicile court before admitting the execution. Ecuador has signed and ratified a number of international treaties for the recognition and enforcement of foreign judgments, including the Inter-American Convention on Extraterritorial Validity of Foreign Judgments and Arbitral Awards.

Insolvency Proceedings

There are two phases in Ecuador’s insolvency proceedings:

CONCILIATORY PHASE

The objective of this phase is to ensure that the debtor company can continue to operate, by putting into place signed agreements with all of its recognised creditors.

BANKRUPTCY

Bankruptcy proceedings entail the sale of the debtor company and its assets, with profits from the said sales being used to pay its debts to creditors.

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Last updated: July 2025