The consequences of COVID-19, the lower investment in mining and the government transition would be factors that affected the results of 2021.
The Foreign direct investment (FDI) as of the third quarter of 2021 registers a significant drop compared to 2020 (the year of the pandemic) and also when compared to 2019. This is a bad result, which does not reflect the openness policies that the Government has shown in its first months in office. One of the initiatives has been the realization of the Ecuador Open for Business, last November, already in the fourth quarter of the year.
It is that according to the figures of the Central Bank of Ecuador, in the first three quarters of the year, Ecuador registered $493 million, a figure lower than the $985.5 million obtained in the same period of 2020. In 2019, in the first three quarters, an investment of $642 million had been reached. If only the result of the third quarter of the mentioned years is compared, it is found that in 2019 there was an investment of $152.1 million; in 2020 it was $531.1 million and in 2021 it reached just $131.4 million.
On the subject the Secretariat of Investments of the Ministry of Production explains that although the National Government “takes steps internally and externally to improve the national investment climate, based on a focus on legal certainty and the implementation of strategies that encourage the promotion, attraction and maintenance of investments, Most world economies have been seriously affected by the impact of the health crisis caused by COVID-19″.
The entity maintained that the effect of the health crisis is not immediately evident in the results of the flow of foreign direct investment, since the projects are subject to a year-on-year disbursement schedule. It is also necessary to consider that the 2021 has been a year of transition for the Government, a situation that usually affects investment and reinvestment decisions domestic and foreign private capital.
He also points out that the sharp drop occurs because a very good period for foreign investment is being compared, such as 2020 (despite the impact of the pandemic), in which the third largest flow of foreign direct investment was generated since 2011. Only the third quarter of 2020 was the largest flow of foreign investment received during the third quarters of the 2016-2020 period with a 40% share of the total amount.
from what is known, In 2020, FDI grew thanks to the investment recorded, especially in the mining area. However, this year there has been no similar behavior.
The Mining Chamber He commented that if the FDI figures of the exploitation account of mines and quarries are analyzed during the years 2018, 2019 and 2020, much of that investment came from Canada. This allows us to conclude that there is a strong correlation between FDI in this account and the construction phase of Fruta del Norte, operated by the Canadian company Lundin Gold.
The construction phase of large-scale projects are characterized by being investment intensive, says the Chamber and explains that, for example, to build Fruta del Norte, more than $900 million were invested.
On the other hand, 2021 was the first year of full production for Fruta del Norte, so The benefits of this mine are no longer focused on investment, but on other items such as exports, royalties, taxes, etc. Hence the reduction in FDI.
“This demonstrates the importance of more mining projects moving towards the construction stage, because it will bring more benefits in investment for the country”. It should be noted that a mining project that is under construction also increases its generation of direct and indirect employment, dynamizes – even more – the productive chain, stimulates entrepreneurship and local purchase, tax collection, etc.”, said the Chamber.
In any case, The Investment Secretariat explained that in 2021, 17 foreign investment agreements have already been signed for $695.9 million and additionally eight more agreements for $654.5 million are approved and ready to be signed.
The Secretariat indicated that the implementation of investment projects is gradual and depends on the nature of each one. In the case of projects corresponding to investment contracts approved and signed as of the fourth quarter of 2021. (I)
Paul is a talented author and journalist with a passion for entertainment and general news. He currently works as a writer at the 247 News Agency, where he has established herself as a respected voice in the industry.
