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Just about 14 years ago I worked here as a development business bureaucrat. At that time, I gathered some ideas about Ecuadorians, their idiosyncracies, the reasons behind the lack of the country’s “development.” The pace of things moves slowly here, there’s not lot of dynamic professionalism or interest in finding out how to do things better, faster, more efficiently. It’s hard to get people in the local bureaucracies (municipalities, ministries, etc.) or private workplace to move ahead on much of anything unless the boss or “patron” orders something done.

Most people I worked (and work with now) wait for things to happen, to be ordered to make things happen, rather than taking initiative to do things; it seems they are this way for fear that they might do something wrong, be rebuked by a superior, lose face. Saving face and avoiding any type of conflict, no matter how low level, seems to me to be quite typical here. To give an example, if you tell someone to sweep half a room, that’s exactly what they’ll do. If the other half is becoming increasingly dirty, but they’re not told to sweep it, it will remain unswept, forever.

Now that I’ve been attempting to do business here for almost a year, it’s become apparent that public bureaucracy, absurd laws, and business as usual has the country tied in knots and makes forward progress nearly impossible. You’ve probably figured that out already if you’ve read the blog. But here are some specific examples.

The “registro sanitario” or sanitary registry

If you’re in the food business, this is a real nightmare. Though the more I have learned about, the more it seems that you can really get away without ever getting it, even for exporting. Though everyone seems to have a different answer on this topic, I do know several companies that do export without it.

Free Trade

While there are some drawbacks to the free trade agreements the US seeks, like the complex agricultural subsidies in the US that allow our agricultural products to compete unfairly with those of smaller countries, protectionist trade policies nonetheless seem utterly stupid to me, because they directly affect the ability to produce at the lowest cost. And they thus limit consumer choice and the availability of goods at the lowest cost. Add to this protectionist schemes like the “sanitary registry” discussed above and frequently in other parts of my blog, and it adds up to a drown-yourself-in-quicksand scheme.

Because of high tariffs, Ecuador is limiting the availability of many goods and services by pricing them entirely out of the marketplace, or making certain goods and services affordable only to very wealthy sectors of the population-and often this small market is not large enough to justify the cost of bringing in a product or service. Ecuador’s high tariffs reduces the ability of local businesses to provide affordable goods and services that may not only be convenient, desirable, increase efficiency in other sectors of the economy, and have a multiplier effect on the economy, but more importantly, make money for locals, offer business opportunities, and create employment.

In my specific case, the food industry, it’s next to impossible to introduce a new product for mass consumption without paying a number of exorbitantly high costs. While such a structure is great for those who can afford to pay those costs, it severely limits that ability of new entrants into the market. With all the costs involved to launch a new food product, it’s like launching a new drug in the US…the sanitary registry, the health permit, etc.

The country’s import policy is still based on the imnport substitution theory, that by protecting local industry from competitve imports through high tarifss, local industry will somehow prosper. But the reality is that local industry simply continues to produce mediocre to shoddy products as there is no competition or incentive for improvement. And there are very few small producers of specialty items because the local market alone is not big enough to support such producers even if they existed. Few specialty items are imported either because of high duties, making scarcity of many items an everyday occurrence.

Tax Laws

The tax system here is based on the US tax system, or at least they tried to base it on the US system. Big mistake. Not even Maria, who’s native language is Spanish and has spent years dealing with bureaucratese, can understand even the simplest tax form. No two people will give you the same interpretation of the same question about tax issues-just like nearly everything in the country.

And I don’t understand the logic behind some of the penalties. If you fail to give a receipt, the Tax Service will shut you down for a few days. I can understand a fine, but shutting you down? Perhaps no one thought that this means reduced sales, and thus reduced revenue, for the tax service. Most laws seem to be written with an aim towards punishing wrongdoing, rather than encouraging good business practices and compliance with the law. That is, there are no incentives for good performance, just penalties for non-compliance.

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Welcome to Destination Ecuador!

Welcome to Destination Ecuador! My family and I have been living in Ecuador for the last four and a half years. We’ve dealt with the worst kinds of red-tape, searched out or ended up making hard-to-find ingredients ourselves, imported equipment for making chocolate confections, learned the import-export business...Continue >>

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