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HOW THINGS HAVE CHANGED
Effective September of the year 2000, United States dollars became the official currency of Ecuador. Assuming you have dollars, there is no need to exchange money. Coins from the United States are in circulation, additionally, Ecuador is set to release its own coins representing fractional amounts in dollars.
From what I've heard from Ecuador, the changeover to dollars has been completed successfully. Prices are going up. For a long time, Ecuador's constant currency devaluations made it a terrific value for travelers. These days unfortunetly seem to be coming to a close. However, Ecuador should experience well needed economic stability and price levels that are fair for both buyers and sellers.
Personal Banking in Ecuador -
Glossary of Ecuadorian Banking Terms
Starting a Business in Ecuador
Ecuadorian currency was previously known as the sucre and looked like this. U.S. dollars have officially replaced sucres at the rate of 25,000 sucres to the dollar.
Ecuador has over 30 banks, in addition to savings and loan cooperatives and mutual societies authorized by the Superintendent of Banks. Ecuador's banks have underwent significant changes and crises over the past two years. Although these crises (which included a tax on bank transactions, freezing of accounts, and bank failures) are now in the past, many Ecuadorians have a lingering distrust of banks. Indeed, chulqueros, or persons making illegal loans and offering to hold savings, do a brisk business amongst Ecuadorians of modest means.
Depositors at legitimate banks and institutions authorized by the Superintendent of Banks are guaranteed against bank failure - although in the cases in which this has happened depositors have been paid only after another bank takes over the failed institution or its assets are sold. Finding a bank to do business with is easy. Banks advertise in newspapers and handle customers in much the same way as banks do in other countries. As of a 1996 decision by the Superintendency of Banks, interest rates cannot be published in newspaper advertisements. However, banks are required to post savings and lending rates conspicuously in each branch. The Quito newspaper El Comercio publishes every Tuesday an economic supplement called Martes Economico, which has a table listing all bank interest rates.
ATM cards are widely used in Ecuador. Most machines are on Master Card's MAESTRO network. Foreign ATM cards will sometimes work -- though I suggest that you try yours during normal banking hours, so that in the not-unlikely chance that your card is eaten by the machine, you can at least get it bank with a minimum of trouble.
All Ecuadorian accounts have been switched to dollars. Interest rates can be expected to be based on prevailing interest rates in the U.S., plus a margin for "country risk" which may increase or decrease depending on Ecuador's political economic outlook.
The following is a glossary of banking terms used in Ecuador. I have included annotations to further explain each term - for example, special requirements to open a checking account.
· Cuenta Corriente
A checking account. As of 1995, checking account in Ecuador earn interest. Fees and costs vary widely. To open a checking account one must provide the names of 2-6 commercial and character references. A bad check carries a fine of 5% of the checks amount.
· Hipoteca
A mortgage. Much less common in Ecuador than in other countries due to endemically high interest rates.
· Intres Compuesta
Compounded interest. Be warned that although banks readily promote their annual compounded interest yields, it is fictitious figure based on the improbable reinvesting of all credited interest at that same rate for an entire year. This is not the same as the "Annual Percentage Yield" in the United States. If you request that interest on a certificate of deposit be held until the account matures, for instance, you will not receive the compounded rate, only simple interest.
· Intres Simple
Simple interest.
· Libreta de Ahorros
Savings account.
· Póliza de Acumulacion
A certificate of deposit. These are deposit accounts that a bank accepts for a fixed period of time (usually 30 days to 1 year) at a fixed interest rate. Upon establishing the account, you should immediately receive a statement showing the interest rate, amount on deposit, and amount the certificate will be worth on maturity. Some banks offer the option of crediting interest earned in a savings account each month - a very wise idea, because you will otherwise not receive any compounded interest on this money. In Ecuador a certificate of deposit may be sold by the owner on the stock market.
· Tasa Activa
The interest rate paid for any type of loan operation.
· Tasa Pasiva
The interest rate paid for any type of savings account.
Opportunities may abound for doing business in Ecuador, but establishing a company is not a simple matter. Below are the steps to legally form a company in Ecuador. The process can be expected to take two months or so and requires the services of a lawyer.
Note there are three types of companies recognized under Ecuadorian law. A Sociedad Anonima is the equivalent of a corporation and can sell shares in itself to the public which can be freely transferred. A Compañía Anónima is similar to a partnership, and transferring ownership in it is more restricted. Lastly, business can technically exist without forming a company by operating under the name of its owner. Banks will, on a de facto basis, permit accounts to be opened by the owner in the name of the business. Other types of registration may be required depending on the type of business - hotel and restaurants, for example, require registration with the Corporacion Ecuatoriana de Turismo (CETUR). In Quito and Guayaquil, many types of storefront business require a patente municipal, or city permission to operate.
All businesses must have a Registro Unico de Contribuientes (RUC) number, which is granted by the Ministry of Finances to facilitate tax collection. Corporate income tax rates are currently 25%.
related to Ecuador.
The approximate cost of this process at least US$800, including lawyer's fees. Moreover, a company in operation must complete certain tax and legal paperwork throughout the year. This paperwork is estimated to take 498 hours annually to complete for an individually-owned small company.
(Source: Fernandez, Hernando Ecuador: La Pequeña Industria y Su Entorno, page 59, Quito, Ecuador 1990: Instituto de Investigaciones Socio-Economicas y Tecnologicas.)
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Page updated November 11, 2000. Updated information on personal banking in Ecuador and U.S. dollars becoming official currency. Copyright 1998. Reprints by permission only.
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