Ecuador


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Ecuador's economy is highly dependent on the extractive industries, which made up 20 percent of gross domestic product in 2011 and 58 percent of exports. Recent reforms to the Hydrocarbon Law required foreign companies to renegotiate their arrangements with the government. Fourteen companies have signed new contracts; others left the country, resulting in a drop in output. Nevertheless, Ecuador remains the fifth-largest petroleum producer in Central and South America.


Ecuador's Performance on the Resource Governance Index

Ecuador received a "partial" score of 58, ranking 18th out of 58 countries. Poor performance on the Enabling Environment component contrasted with a much higher Institutional & Legal Setting score.

Rank
(out of 58)
Score
(out of 100)
18 Composite Score 58
19 Institutional & Legal Setting 70
Freedom of information law 100
Comprehensive sector legislation 100
EITI participation 0
Independent licensing process 83
Environmental and social impact assessments required 50
Clarity in revenue collection 100
Comprehensive public sector balance 0
SOC financial reports required 100
Fund rules defined in law N/A
Subnational transfer rules defined in law 100
16 Reporting Practices 64
Licensing process 83
Contracts 67
Environmental and social impact assessments 17
Exploration data 50
Production volumes 100
Production value 67
Primary sources of revenue 33
Secondary sources of revenue 22
Subsidies 0
Operating company names 100
Comprehensive SOC reports 50
SOC production data 95
SOC revenue data 60
SOC quasi fiscal activities 0
SOC board of directors 100
Fund rules N/A
Comprehensive fund reports N/A
Subnational transfer rules 100
Comprehensive subnational transfer reports 100
Subnational reporting of transfers 100
19 Safeguards & Quality Controls 65
Checks on licensing process 56
Checks on budgetary process 44
Quality of government reports 83
Government disclosure of conflicts of interest 100
Quality of SOC reports 67
SOC reports audited 50
SOC use of international accounting standards 100
SOC disclosure of conflicts of interest 0
Quality of fund reports N/A
Fund reports audited N/A
Government follows fund rules N/A
Checks on fund spending N/A
Fund disclosure of conflicts of interest N/A
Quality of subnational transfer reports 50
Government follows subnational transfer rules 100
36 Enabling Environment 28
Corruption (TI Corruption Perceptions Index & WGI control of corruption) 28
Open Budget (IBP Index) 30
Accountability & democracy (EIU Democracy Index & WGI voice and accountability) 43
Government effectiveness (WGI) 29
Rule of law (WGI) 12
Satisfactory Weak
Partial Failing
To explore all data and compare
scores, use the RGI Data Tool.

Institutional & Legal Setting (Rank: 19th/58, Score: 70/100) learn more

Ecuador earned a "satisfactory" score of 70. A strong legislative framework and clear revenue collection policies were balanced by gaps in the disclosure of environmental impact assessments and the lack of key budget figures.

Under the newly revised Hydrocarbon Law, extractive rights are granted through a bidding process in which the national oil companies are given priority. Foreign companies sign service contracts, giving the government the oil they produce in exchange for a fixed fee per barrel. Under this system, the government keeps windfall profits but is vulnerable to fluctuations in oil prices.

The Internal Revenues Agency collects taxes from oil companies. Other payments are collected by the Finance Ministry or by state-owned companies. Oil revenues are deposited in the Central Bank.

The Organic Law of Transparency and Access to Public Information includes provisions specific to the extractive sector and guarantees access to industry information.

Reporting Practices (Rank: 16th/58, Score: 64/100) learn more

Ecuador publishes only limited data on most aspects of the extractive sector and received a "partial" score of 64.

The Hydrocarbons Secretariat provides comprehensive information before the bidding process begins and the details of winning bids, but does not publish full contracts or key fiscal terms, such as tax rates. Recent contracts can be found on the website of the Non-Renewable Resources Ministry, and past production sharing contracts are available online from Petroecuador, a national oil company.

The Finance Ministry publishes information on oil prices, export values, royalty-like payments, and company income taxes. The Non-Renewable Resources Ministry published 2009 figures on production volumes, prices, export values, investments, and operating companies. The Hydrocarbons Secretariat issues annual figures for production volumes, prices, exports, company-by-company production, and production stream values. The Central Bank publishes monthly data on oil production and exports. No agency produces information on oil reserves, subsidies, special taxes, or fees.

Safeguards & Quality Controls (Rank: 19th/58, Score: 65/100) learn more

Ecuador's "partial" score of 65 reflects a lack of comprehensive oversight of the extractive sector and insufficient audit requirements.

National law limits the discretion of licensing authorities, though certain provisions allow state-owned oil companies to enter into operating agreements with companies not selected through a competitive process. Licensing decisions can be appealed, but are not reviewed by the legislature.

The Comptroller General audits state accounts and reports annually to the National Assembly. However, lawmakers' scrutiny of oil revenues is not rigorous and audit reports are not publicly available.

Enabling Environment (Rank: 36th/58, Score: 28/100) learn more

Ecuador scored particularly poorly on measurements of the rule of law, leading to a "failing" score of 28.


State-Owned Companies (Rank: 19th/45, Score: 62/100) learn more

Petroecuador and Petroamazonas manage all aspects of the oil industry. Petroecuador is active in both the upstream and downstream sectors, while Petroamazonas operates just one field. The government is considering merging the companies. Both publish detailed reports on operations and payments to the state as required by the Transparency and Access to Information Law. The companies are audited, but audit reports are not made public.

Subnational Transfers (Rank: 5th/30, Score: 92/100) learn more

Oil revenues are distributed through transfers to decentralized autonomous governments, deposits to the Ecodevelopment Fund for the Amazon region, or as "labor participation" payments for local workers. The Ecodevelopment Fund channels 1 percent of oil export revenues from the Amazon region back to local governments, which must use the money for investment. Labor participation funds must be invested in social or developmental projects.

The Finance Ministry publishes the rules for revenue transfers, but it does not include revenue-sharing formulas. The ministry provides data on the transfers, as do local governments.

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