LATAM e-News – August 2017
Interview: Enrique Ponce De León Román
Enrique Ponce De León Román
Minister of Tourism of Ecuador
1- What major opportunities is Ecuador offering for the development of hotel products?
Ecuador is one of the destinations with the greatest tourist potential in the planet. The country has everything: natural treasures for contemplation or adrenaline adventures, historical and architectural highlights, an exquisite and exotic gastronomy as well as an impressive ethnic and cultural wealth. Likewise, the transformation in several fields such as telecommunications, safety, energy development, roads and logistics also make the country the ideal destination for investments. That is why in less than 100 days of administration we have already met and received important investment groups, especially European, who are analyzing to enter the Ecuadorian market.
The many opportunities that Ecuador offers for the development of hotel products include tax incentives, legal safety, low costs of labor and construction materials among other general benefits. Our country is also a competitive destination and a great showcase for the development of hotel brands.
2- What are the available tax benefits and financing options for those entering the hotel business?
One of the state’s policies is to turn tourism into the main source of non-oil revenues. Currently this activity is in the third position. We understand the importance of attracting tourist investment, which is also one of our basic administration drivers, so we are discussing and working to analyze new benefits. However, at present there are already attractive incentives, which I explain below:
General Investment Incentives
• Income Tax (IR) exemption for 5 years for new companies in prioritized sectors (outside Quito or Guayaquil).
• Exemption of the 5-year Income Tax advance for new companies.
• 10% reduction of the Income Tax rate on the amount reinvested in productive assets.
• Double deduction of the cost of annual depreciation of fixed, new and productive assets for 5 years (within Quito or Guayaquil).
• Additional deduction of 100% of the expenses incurred for the calculation of Income Tax for acquisition of eco-efficient assets.
• Additional 100% deduction for the calculation of the Income tax of wages, social benefits by generation of new employment in Depressed Areas for 5 years.
Incentives for Financing
For investments in fixed-term deposits and fixed-income instruments, over one year:
• Non-payment of income tax on income.
• Non-payment of the Foreign Currency Exit Tax (ISD) on transfers, both capital and yield.
For external financing operations of financial or non-financial institutions, for a term over 1 year:
• IR (interest) is not withheld.
• ISD (interest and capital) is not paid.
• Exoneration of IR for 10 years, from the first year operation, to Public-Private partnerships.
• Exemption from ISD (5%) on imports, service payments, financing and dividend payments.
• No Fees and VAT for the importation of products related to the development of the project.
Law of Solidarity
Law created in 2016 for the reconstruction and reactivation of the areas affected by the earthquake of April 16, 2016. The benefits for investments in those zones are:
• Exoneration for 5 years of IR to productive investments and up to 10 years in the tourism sector.
• Exemption of IR to financial institutions in the years 2017-2018, on the income attributable to credits granted to affected areas.
Signing of Investment Contracts
The investment contract is an optional agreement that the entrepreneur may request from the Ecuadorian State to secure its investment. The investment agreement recognizes investments of up to 15 years with a capital of one million dollars, with the possibility of extending it for one occasion, for the same period.
• Provides up to 30 years of tax stability
• Total or partial reduction of the payment of fees for the importation of goods classified as capital goods.
PUBLIC BANKING FINANCING
Likewise, there are important financing options, not only for hoteliers, but for tourism activities in general through the public bank: Corporación Financiera Nacional (CFN) and BanEcuador, which I explain below:
National Financial Corporation
Credits for the following tourist activities:
• Accommodation (not less than 2 stars)
• Food and Beverages (not less than 2 stars)
• Touristic transportation (according to ANT regulations)
Amount: USD. 50,000 to 25,000,000
Term: up to 15 years
Rate: 10% working capital, 6.7% fixed assets
Guarantees: 125% of the requested amount
Credits for all tourist activities.
Amount: USD 500 to 500,000
Term: up to 15 years
Rate: from 11.67% to 15% for working capital and fixed assets
Guarantees: 125% of the requested amount
3- How is the country´s strategy to attract foreign direct investment and to position Ecuador as a tourist destination developed?
The National Government (and therefore the Ministry of Tourism) is determined to turn Ecuador into a real tourist power. That is why the Secretary of State to which I represent, has set three basic administration drivers: to promote internal tourism, to increase the flow of foreign tourists seeking the 1×1 goal and to attract and generate new tourist investments.
Attracting foreign investment and generating new local investments are some of our priorities, so we are updating and developing a guide for tourism investments in Ecuador, showing a portfolio of opportunities. This information, which will detail all the relevant information including incentives, will help to present the country to potential investors through the Commercial Offices of Ecuador abroad, in investment events, prospecting visits, publications in specialized media, among others.
We know it is important to increase demand to attract new investments and that is what our other two basic administration drivers are based on. As for internal tourism, we are launching the Great Tourism Fair of Ecuador, the first event of the kind in the country’s history, in which all Ecuadorians will be invited to travel and re-fall in love with their country, through this project, which is the result of working together with the industry to showcase Ecuador, and offer experiences in various destinations, at the lowest prices, never seen before, with multiple options and financing opportunities. We are 16 million Ecuadorians, that is, 16 million tourists in love with their own country, who become the main promoters and tourist ambassadors. This is part of the strategy.
With regard to international promotion, we firmly believe that we must take a definitive leap to become a tourist power. That is why our goal is 1×1, for every inhabitant in the country we must have a foreign tourist visiting our country. It is a very ambitious goal, but we will achieve it. The magic words are: dialogue, team work, strategic alliances, such as the one we signed recently with Amadeus, which will allow us to know the profiles of tourists and potential visitors much better for smart promotion of our country, which only means investing resources in such a way that results can be measurable. This is responsibility and it is what is demanding a destination with as much potential as ours.
This is only one of the fields, because several promotion projects are being developed, including various fields of the Ecuador experience, such as gastronomy or the already implemented Film Commission, which promotes the country as a living stage and destination for filming.
4- How does the tourism investment team work and how can one access to assistance?
The tourism investment team provides assistance during the process of establishing the investment in Ecuador in the following areas: process of signing investment contracts, process of obtaining financing from public banks, support and streamlining of processes required at the governmental level for the establishment of the investment, contact with investors of similar profile to allow business development, information about investment opportunities in the tourism sector, access to government information and tourism statistics, coordination of prospecting visits to projects and / or tourism investment opportunities, information on benefits and incentives to investment.
We have already done this with various investment groups, which, in some cases, have also been received directly by the President of the Republic, Lenín Moreno.
You can request assistance from the team through the website (investecuadortourism.com) or by email (email@example.com) or by phone (+593 2 3999333 ext. 1254, 1518).
5- There are several regions showing high potential for development of tourism investment. What are the cities or segments representing an opportunity, other than capital or major cities?
Ecuador is the country of the four worlds, a microcosm of senses and life-transforming experiences. We have the Pacific Coast, Andes, Amazon and Galapagos, so there are multiple options and destinations to meet all the most demanding travel expectations.
The big cities already have their supply and demand very well identified and their development goes hand in hand with their own environment.
Throughout the country, there are many natural attractions that can and should be developed for tourism. There it is necessary to complement it with hotel infrastructure, to strengthen tourism development.
In addition, we emphasize that the trend in terms of tourism mobility is the development of rural and community tourism, which seeks the sustainability of resources over time and valuation of our cultural identity.
6- What are the targeted markets to attract tourists to the country and how do you see the growth of investments and industry projects for the next years?
As mentioned above, as a result of our strategic alliance with Amadeus, the main worldwide platform for ticket booking, we will obtain important data that will allow us to discover and target new markets with a smart promotion. At present, targeted markets are:
Target Regional Markets: Colombia, Peru, Argentina, Chile, Panama, Mexico
Rest of Targeted Markets: United States, Germany, Canada, United Kingdom
Maintenance Markets: Spain, France, Italy
Opportunity markets: China, Brazil, Australia, Japan
Regarding investment and projects growth, we can assure that world-class brands and hotel groups with presence in several continents are approaching and analyzing investments in Ecuador. Both the President of the Republic and I have held meetings with important investment groups, who want to invest in the country, taking advantage of our tourism potential.
7- How do you see tourism in Ecuador?
Ecuador´s tourism industry continues to grow. From January to July 2017, the number of foreign visitors increased by 9.3%, reaching 914,477 foreign visitors. On the other hand, foreign exchange earnings for the First Quarter of 2017 exceeded USD 399.5 million, an increase of 1.6% over the same period last year.
But this is not enough and we are not satisfied. Our country has an impressive tourist potential, as I mentioned in previous questions and that is why we want to change Ecuador´s tourism history and take the leap that finally lead us to become a true tourist power. That is why we have set the 1×1 goal, to take firmer and stronger steps toward that goal.
8- What are the sustainable tourism initiatives encouraged by the Ministry of Tourism?
The Ministry of Tourism is developing proposals that consider sustainable tourism in three dimensions: economic, socio-cultural and environmental. These are aligned with the Sustainable Development Objectives and the National Development Plan 2017-2021 and I will mention two of them:
1. Process of Certification of Sustainable Destination. Compliance parameters are evaluated in various areas to grant certification. The aspects considered are: infrastructure, land planning, service providers, fundamentals of sustainable supply, criteria for product design, communication for sustainability, customer service, sales policies, reservations and cancellations and promotion and marketing.
2. Tourism for everybody. Together with the Consejo Nacional para la Igualdad de Discapacidades (Conadis) and the Federación Nacional de Ecuatorianos con Discapacidad Física National (FENEDIF) we develop workshops to ensure excellent care and customer service for people with disabilities, as well as the adaptation of attractions and destinations. This in order to work for a fully accessible destination.
Enrique Ponce De León Román was born in Quito on July 9, 1965. From 2009 until his appointment as Minister of Tourism of Ecuador (first public position he held), he served as general director of one of the main hotel chains in the countr: Hotels Decameron Ecuador SA.
He has a long career as a lawyer and university professor. He holds postgraduate studies at the universities of Salamanca (Spain) and Harvard (United States) and served as a consultant on projects to strengthen the judicial system.
Degree in Legal Sciences, Lawyer and Juris Doctor – Pontificia Universidad Católica del Ecuador. Higher Specialization in Tax Law – University of Salamanca.
To know more about Ministry of Tourism of Ecuador, visit: turismo.gob.ec