ECUADOR Law and Practice Contributed by: Roque Bernardo Bustamante and Claudia Bustamante, Flor Bustamante Pizarro & Hurtado
4.2 Tax Incentives for Mining Investors and Projects There are no material incentives, since the rule that the government benefit be greater than the company benefit is a Constitutional concept that does not admit any exemptions. On large-scale mining projects, it is necessary to execute a contract before entering produc - tion. In that contract, stabilisation clauses may be possible, provided that the aforementioned benefit rule is maintained. 4.3 Transfer Tax and Capital Gains on the Sale of Mining Projects The general tax regime provides for capital gains of up to 10% on the transfer of mining conces - sions’ rights or shares, except when the local project represents less than 20% of the value of the total transaction. 5. Mining Investment and Finance 5.1 Attracting Investment for Mining Ecuador had a boom in the attraction of mining investment in 2016 and 2017. This was due to several factors, including: • exploration potential; • that, at that time, it was possible to apply for new mining concessions directly from the government; and • political and community opposition being manageable. While the exploration potential remains, the other two factors are not so clear: it is uncertain when it will be possible to apply for new min - ing concessions and how judges and courts are going to rule on Constitutional actions aiming to block mining projects.
5.2 Foreign Investment Restrictions and Approvals in the Exploration and Mining Sectors There are no restrictions on foreign investments. Foreign and Ecuadorian capital and companies receive the same treatment. 5.3 International Treaties Related to Exploration and Mining Ecuador has resigned from most of the treaties it had signed for protection of investments from other countries, called bilateral investment trea - ties (BITs). The protection of investments can only be achieved from local judges and courts or, eventually, through clauses on the exploitation contract before the production period or a pro - tection of investments agreement with the Minis - try of Production aiming to achieve international arbitration for disputes between the parties. 5.4 Sources of Finance for Exploration, Development and Mining Exploration, development and mining have been financed from different sources in Ecua - dor, depending on the type of company behind the projects. Most of the junior mid-sized com - panies seek capital in foreign stock exchanges and finance their activities with loans by finding a major as a partner. The few majors that have arrived have their own resources. 5.5 Role of Domestic and International Securities Markets in the Financing of Exploration, Development and Mining The domestic securities market has not been a player in the financing of exploration, develop - ment and mining in Ecuador. Most of its financ - ing comes from abroad.
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