Ecuador’s economy is primarily based on agriculture, tourism, natural resources and fishing. Oil has traditionally been a major economic contributor and one of the country’s primary exports, alongside shrimp, cocoa and bananas.
The mining sector has been slow to develop, in spite of the fact the country is viewed as having considerable mineral wealth, with gold, silver, copper, lithium and rare earths just some of the minerals present. To highlight this, large-scale mining is relatively new to Ecuador – with only two major projects in production – a milestone which was only reached in 2019. Various factors have contributed to this slow growth, including an influential anti-mining movement, slow bureaucratic processes, permitting delays and legal challenges.
Change however may be coming. Several large projects have recently been issued with their environmental licences and two major exploitation agreements have been signed. In August 2021 the Ecuadorian government also issued Presidential Decree No. 151 which laid out the action plan for the development of the mining sector. The plan included the need for the State to generate policies which promote development of the sector and increase foreign investment, whilst also ensuring legal certainty, effective consultation processes, environmental protection, transparency and a reduction in illegal mining, amongst other things.
Whilst it is positive to hear of this progress, legal risk in the jurisdiction remains high and investors will need to focus on their ability to negotiate a comprehensive exploitation contract and address the ability of the State to interfere in their projects if they are to achieve successful outcomes in the country. A switch in government could prove fatal if the pro-mining sentiment is not present and companies will need to protect themselves from such changes over the life of their projects.
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