Geert Bekaert and Campbell R. Harvey's

Chronology of Economic, Political and Financial Events in Emerging Markets

Ecuador

Date

Major Political and Economic Events

8000

Banking crises (early 1980s): implemetation of exchange program (domestic for foreign debt) to bail out banking system.^a2

850117

New regulations were issued for investment by foreign oil companies contracting with the State to explore for, and develop production of hydrocarbons.^{a3(first entry)}

850228

The regulations with regard to reinvestment of profits from foreign investments were modified.^a3

850328

The value of inward foreign investment in the form of goods should be certified by the Societe Generale de Surveillance.^a3

8600

Interest rate was liberalized. Mehrez and Kaufmann Liberalization date. ^a1

870209

The procedure for the Central Bank's debt-equity swaps was modified.^a3

870729

The regulations governing foreign participation in direct investment were amended as: (1) 49% in banks, financial and insurance companies, and in certain commercial sectors; (2) no limits or prior authorization requirements for agro-industry, agriculture, and manufacturing, while mining and fishing are to be governed by their own specific laws; and (3) prohibition in communications, internal transport, public services, advertising, and in sectors adequately served by domestic enterprises. The establishment of branches of foreign enterprises would be authorized subject to the requirement of a minimum operating capital of S/.50 million.^a3

870813

The Central Bank's debt-equity swap scheme was temporarily suspended.^a3

870903

Foreign enterprises operating in Ecuador will have to obtain authorization from the Ministry of Industry, Commerce, Integration, and Fisheries for participation in domestic companies if their share exceeds 10% of capital.^a3

880831

New regulations governing FDI and foreign loans were issued.^a3

910531

The restrictions on private sector imports and exports of gold and on domestic sales were eliminated. Exporters, importers and traders, however, are required to register their transactions with the Central bank.^a3

9300

The introduction of the Insider Trading Laws.^a4

930407

The period during which foreign credits contracted by the private sector were required to be registered at the Central Bank was extended from 30 days to 45 days after disbursement of the loan.^a3

931229

The income tax rate on foreign companies was lowered to 25% from 36%. All other gains would be subject to a tax rate of 33%.^a3

940125

The commission of 0.25% applied to public sector foreign loan disbursements was abolished.^a3

940901

ADR effective date. (Company=LA CEMENTO NACIONAL, C.A. - 144A, Exchange=PORTAL )^a11

960605

The process for approving public sector external loans was amended to exclude prior approval by the Planning Office (CONADE). However, public sector enterprises were required to present to the Monetary Board more stringent financial statements to ensure that the entities can service the debt in a timely manner. The regulatory framework for registering private sector capital inflows was widened to include all types of extended credits. Furthermore, private agents were also required to register changes in repayment schedules, including rollovers of credit.^a3

9800

In the first quarter, heavy rains caused by El Nino disrupted fruit and vegetable cultivation and adversely affected the country's business and infrastructure.

9803

The government announced a need for $2 billion in spending over the next 10 years to repair the damage caused by El Nino. The sucre devalued 7.5%.

9800

In the second quarter, oil prices at 12-year lows pressured the country's fiscal and trade deficits.

9807

Jamil Mahuad won the presidential election. He introduced an economic austerity package, sparking violent protests from labor unions and indigenous groups.

9800

The Congress approved a 1% financial transaction tax to replace the moribund income tax scheme.

9812

Worries of a banking crisis increased.

9902

The Ecuadorian central bank abolished the crawling peg exchange rate system, allowing the currency to float freely, but then froze bank accounts to avoid bank runs. The banking sector freezing provoked mass protests throughout the Andean nation.

990211

(Provisions specific to commercial banks and other credit institutions) The open foreign exchange position limit equivalent to 20% of technical capital was eliminated.^a3

9904

IMF delayed a $400 million aid package. Bad loans increased 95% year-to-year. The cost of rebuilding the troubled financial sector was valued at 15% to 20% of GDP. Previous central bank president and board resigned in protest of the government's failure in addressing the banking crisis.

9900

In the third quarter, the country became the first to default on its Brady Bond debt and had the largest debt service ratio of any Latin American country.

9907

A nationwide banking audit recommended closing five of 31 banks.

9910

The country defaulted for the second time on $500 million in Eurobond debt. The president and the Congress failed to reach agreement on a 2000 budget. The government took over 15 of 40 banks.

20000127

(Provisions specific to commercial banks and other credit institutions) The reserve requirements for dollar-denominated and sucre-denominated accounts were unified at 9%.^a3

200001

The currency fell 20% for the first week. The president called a state of national emergency, and announced the change in Ecuador's monetary base from the sucre to the U.S. dollar. People came out into the streets because of the precipitous drop in wages. Mahuad was driven out of office and Vice President Gustavo Naboa assumed power with the support of the military.

200002

The Congress approved dollarization, privatization of state-owned power and telephone companies, and an amendment allowing private companies to build a US$600 million oil pipeline.

200000

In the second quarter, the IMF agreed to loan US$304 million to Ecuador conditional on 4% budget deficit and 1% GDP growth. Inflation rose to 10% and unemployment near 15%, leading to strong protests against price hikes.

200006

The Petroecuador privatization was cancelled and the privatization of electricity companies was delayed.

200007

The government announced an increase in salaries. The government's debt burden, estimated to be 93% of GDP, was reduced through a swap of Ecuador's defaulted sovereign debt with 12- and 30-year notes.

200009

Inflation fell to 3.7%, and the prime lending rate was down from 50% in January to 15.9%.

200010

Congress approved the sale of up to 51% of 18 electricity companies. Partial privatization of Petroecuador was approved and compulsory military entitlements to oil revenues were curtailed.

200102

The government announced sharp hikes in gasoline and cooking gas prices. But intense protests compelled the government to withdraw these steps soon after. IMF reached a tentative agreement with Ecuador preparing for the fist IMF payments in six months from a $300 million loan program.

200103

Congress rejected President Gustavo Noboa's proposal to increase revenues by an increase in value-added tax (VAT). S&P downgraded Ecuador's rating.

200104

Congress and the president agreed on the structure of an internal revenue service and social security reform, launching the VAT increase. Equities skyrocketed.

200107

The government shut down the country's largest state-owned bank because of severe liquidity problems, leaving depositors with devalued accounts and frozen assets.

200110

Economy Minister Jorge Gallardo resigned.

200112

Oil prices declined sharply.

20020200

Protests by indigenous peoples bring the country's oil production to a near standstill. The protesters demand that more of Ecuador's oil revenue should be invested in their communities.

20020411

Government Suspends Electricity Privatizations due to a lack of interested buyers.

20020425

Congress approved the Fiscal Discipline bill, setting limits on fiscal spending

20020500

Andean Business Forum Opens, aiming to consolidate and develop commercial relations among businesspeople in the region, explore new development strategies and improve links between importers and exporters in the Andean region. ^b1

20020800

Court Orders Imprisonment of Former Finance Minister for corruption

20020800

The Inter-American Development Bank (IDB) will give two loans to Ecuador worth a total of US$60m.

20021100

Leftist and former coup leader Lucio Gutierrez wins presidential elections. He takes office in January 2003.

20030321

The Managing Board of the IMF approved a US$204m credit line on 21 March, marking the end of a negotiating process lasting over a year. ^b1

20030600

Ecuadorian Government Eliminates Import Taxes on Production Inputs and Capital Goods

20030800

Former president Gustavo Noboa, who faced corruption charges, goes into exile in the Dominican Republic. ^b6

20030800

After months of tension, the partnership between President Gutierrez and Pachakutik has finally collapsed.

20040121

Struggling president Lucio Gutiérrez gathered scant support and faced strong protests as Ecuadorians remembered the military coup that ousted their former leader, Jamil Mahuad.

20040300

Ecuadorian President Lucio Gutiérrez has ordered active members of the armed forces - who also work within public institutions - to resign their posts in public office, following the congressional rejection of aspects of the president's constitutional reform programme related to the country's military. ^b1

20040400

Jail crisis: Hundreds of people are held hostage by prisoners demanding better conditions, shorter sentences. Police regain control after 10 days.

20040622

President Lucio Gutiérrez yesterday authorized the Finance Ministry to issue some US$1.035bn in external debt this year, with the publication of an executive decree. ^b1

Year

Regulations on Foreign Investors

1998

Restrictions: Foreign investors are free to invest in any industry except for those involved in oil exploration and production. Domestic and foreign investors are treated equally. Foreign investments and credits must be registered with the Central Bank for statistical purposes. Private ownership in not allowed in oil, minerals and electricity.

Taxation: No dividends or capital-gains tax.^a6

1999

Restrictions: No change.

Taxation: No capital-gains taxes until 2001.^a7

2000

Restrictions: Foreign investors may remit 100% of net profits and capital without restriction.  Investors may also repatriate the proceeds from liquidation of their investments freely.

2001

Restrictions: Government royalties in the mining sector were eliminated to encourage additional investment.

Taxation: No capital gain tax. Corporate tax rate is 25%.

2002

Restrictions: Telecommunication sector is opened to foreign investors.

Taxation: No change.

2003

Restrictions: 1. Foreign investment with up to 100% foreign equity is allowed without prior authorization or screening in most sectors of the Ecuadorian economy currently open to domestic private investment. 2. Foreign investors must register their investments with the Central Bank for statistical purposes. 

Taxation: no change. ^b1