Productive investments recover after the first year of the pandemic and grow by 25%, but the amount is insufficient to accelerate the economy

There are different types of investments, so they have a varied classification. Some are more measures than others in the national economy.

The so-called productive investments are more followed in the national accounts, because they leave wealth and prosperity with a greater scope, since above all they generate employment through the development of new businesses or the opening of more lines in which they were already, which drives productivity and economic activity.

This type of investment occurs when the money is used to acquire productive or tangible assets, such as equipment, property (for example, a house or apartment) or raw materials.

At the business level, the purpose is that the utility or profit is generated from the production of other goods and services.

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Productive investment fell in the first year of the pandemic (2020), but recovered in 2021, according to official figures and forecasts by the Central Bank of Ecuador.

The country has historically not attracted this type of investment, which includes capital that comes from abroad, compared to the rest of the nations in the region, says the analyst and editor of the economic publication Weekly AnalysisAlberto Acosta Burneo.

“Ecuador is a country that has failed to generate respect for property rights, or stability in its economic policies. So, we have permanently had cases of uncertainty about changing the rules of the game, expropriations, nationalizations. All of this means that it is not an attractive environment to invest in, because there is a weakness in property rights, which is an underlying issue in the lack of investment”, indicates Acosta.

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Financing also comes from profits or savings obtained in a business already established within Ecuador. During the first year of the COVID-19 pandemic, there was a drop in total productive investments, which fell from $26,908 million to $21,068.7 million from 2019 to 2020, a reduction of 21.7%.

Private productive investments fell more than public ones. The latter had already been on the decline since 2015, with decreased state income due to the reduction in oil prices, a raw material from the sale of which most of the financing of the national budget is obtained, after taxes, says Acosta, who He adds that the latter can vary when the value of crude oil is on the rise.

“The public is not a sustainable source of investment, since it varies according to the cost of a barrel of crude oil. This should be a complement, but the country does not understand it that way. The one that should be promoted is the one that does not depend on oil prices, which is the private one, the one that cannot finally be promoted,” says Acosta.

However, private productive investments had been increasing after falling in 2013 and 2014 and were surpassed by public ones.

The forecasts of the Central Bank of Ecuador indicate that during 2021 there was a recovery of private companies almost to the level they had in 2019, before the pandemic.

In total, these investments, including public and private, totaled $26,335.8 million in 2021, 25% more than in 2020.

And it is expected, according to the predictions of the International Monetary Fund (IMF), that during this year they will reach $ 28,266.5 million, a quarter (25.6%) of the national gross domestic product (GDP) forecast for 2022, which is the final monetary value of the production of goods and services for the year.

Therein lies their importance, says Acosta, since they play a fundamental role in economic development. “The point is that, at the end of the day, the increase is still insufficient to accelerate economic growth; picks up, improves, but not enough. It is necessary to accelerate much more and generate more jobs; that is achieved with profound changes to generate that respect for property rights”.

The current government proposed an investment law to the National Assembly in order to encourage them, according to the Guillermo Lasso regime, but the plenary session denied and filed the bill last Thursday, March 24.

“What happened this week is a demonstration of the feeling that exists at the national level of mistrust towards investment: it is thought that the investor comes to take something; It’s like he comes to collect and take away the riches of the country, when in reality what it does is generate wealth that did not exist. There is a mistrust, and that makes the environment in Ecuador not attractive to attract investment; the rules are not competitive compared to other countries that do realize the importance of investment to generate employment and accelerate economic growth,” says Acosta.

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Uncertainty also hangs over the investments made by ordinary citizens in the digital age, through credit and debit cards, with the use of digital platforms and applications.

Alfredo Velasco, director of Digital Users, reviewed the Executive’s proposal, which was denied and shelved this week by the National Assembly, and found no specific rules to help develop these tools used on the Internet.

There are applications for the purchase of cryptocurrencies or those that monitor the behavior of shares in the stock markets and give advice on what to invest in and how to do it. One of them is Forex, a global and decentralized market in which currencies are traded..

“I even thought that in the investment law because it said about digital transformation, a great title, there would be something to facilitate this type of investment, but nothing. Here in Ecuador you cannot even deposit a Paypal check (an electronic payment method in which the virtual wallet is loaded with money through the cards). We are in the stone age regarding match of the digital financial services that are offered from abroad”, indicates Velasco.

The option is to consume the entire balance online. Velasco says that two months ago a friend asked him to give him the cost of a service in cash so that he could pay for it electronically and thus use the cash he had in his Paypal account.

This is an e-commerce web payment service that has been maintained for decades, since before the rise of social networks and the development of the digital age, he emphasizes.

Complaints about unforeseen events to buy cryptocurrencies through national cards continue on Twitter, adds Velasco, who monitors this social network. “They complain that they cannot buy with national cards, which the banks have blocked from making this type of purchase. You can only do it with the international ones”.

Some of these alerts occurred in October 2021.

Cryptocurrencies are used in investments in Ecuador, but the only legal tender in the country is the dollar and there is talk of a laundering tool

Investments are governed by various factors, such as profitability, which is what is finally earned; the risk, what can be lost; liquidity, the ability to convert a certain investment into money; and the term, which is the time when some benefit is achieved. (I)