As President Rafael Correa's Revolución Ciudadana (Citizen Revolution) continues, the leftist head-of-state continues to stake his claim on the Andean nation's future. In May 2011, Correa launched a public referendum asking for popular approval of a package of ten amendments that will increase the President's influence over the courts and media, a move one lawyer believes will further deteriorate market confidence if passed by congress....
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As President Rafael Correa's Revolución Ciudadana (Citizen Revolution) continues, the leftist head-of-state continues to stake his claim on the Andean nation's future. In May 2011, Correa launched a public referendum asking for popular approval of a package of ten amendments that will increase the President's influence over the courts and media, a move one lawyer believes will further deteriorate market confidence if passed by congress. "Ecuador is going through very interesting times," says one attorney.
Not surprisingly, legal changes to several key industries are keeping Ecuadorian lawyers busy. "We need to devote a very significant amount of time to review and understand the new laws, and to provide our clients with an explanation," notes one lawyer in reference to new competition, hydrocarbon, and telecommunication legislation passed during the last couple of years. Another talking point is the government's decision to renegotiate all of its oil contracts from production-sharing to service contacts -the latter being less profitable for private companies. It is a move that may be repeated with the mining industry and has a significant impact on the type of work being done in the market.
Although most of the new legislation has been aimed at increasing the government's involvement in the economy, some of it has filled gaps in the legal framework. "In certain cases it is very clear that the country missed legislation," says a partner, highlighting the newly formed competition law as an example. "But on the other hand, you could see the government not believing in the private sector. For example, you have a new law on government enterprises -you have a big impulse for creating and developing government-run entities that will be competing against private actors."
New tax laws passed near the end of 2009 and the creation of state-owned businesses in multiple industries have stung investor confidence. Some in the legal community blame these government-run enterprises and the general left-leaning stewardship of the economy for damaging certain markets. "The politics have been scaring off foreign investment in certain types of transactions," one attorney concludes. There is also a feeling that Ecuador is losing ground to its neighbours: "A trend in Ecuador against foreign investment has caused companies to shift funds to Peru, Colombia, and Chile," says one partner.
Yet, even in times of uncertainty and changing business practices, the economy has remained relatively stable since Ecuador started using the US dollar as its base currency in 2000. Businesses that have chosen to ride out the new legal changes are doing very well: "No one understands that in times of chaos there are opportunities," notes one lawyer.
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