With an economic restructuring in the works, Ecuador is positioning itself to ride the tensions between the US and China to an economic rebound in 2025.
While many of its Latin American neighbors are benefiting from post-pandemic tailwinds -- including surging commodity prices and a nearshoring boom driven by the US -- Ecuador continues to struggle. Political instability, energy shortages, and a surge in urban violence have undermined investor confidence, leading to a 2% contraction in GDP last year -- the worst performance in the region.
Even more troubling, foreign direct investment (FDI) has collapsed. According to Statista, FDI fell more than 83% from its 2018 peak of $1.39 billion by 2024. The declines have accelerated in recent years, with a 46% year-over-year plunge in 2023 followed by a 51% drop in 2024, bringing foreign investment to its lowest level since 2010. After years of underperformance, however, signs are emerging that the country may finally be poised for a turnaround.
Moreover, in February the government secured a free trade deal with Canada, expected to provide a further boost to its resource-rich mining sector.
The recent Chinese and Canadian deals point to a revival for Ecuador's traditionally strong energy and mining industries. Through PPPs, Noboa aims to inject around $11 billion into the economy over the next several years to address historically deficient energy and road lines. Boosted by the Sinopec deal, the government now projects as much as $42 billion in investment from foreign oil companies over the next five years.
In mining, meanwhile, a trio of major projects -- Curipamba, La Plata, and Loma Larga -- are poised to move into the exploitation phase, representing roughly $1 billion in near-term capital inflows. If momentum holds, mining could become the country's third largest export category this year, with the potential to generate more than $4 billion annually.
Other non-manufactured exports, such as bananas, shrimp, and flowers, are also projected to post a rebound in 2025, buoyed by solid demand in US and European markets, despite global headwinds. Other sectors with "great potential," Godoy says, include agriculture, tourism, commerce, and environmental protection.
Produbanco's Godoy also highlights the importance of the country's resilient banking sector for the broader rebound.
"There are at least three factors that currently define [the banking sector's] position to support the economic recovery: strong profitability metrics, controlled credit risk, and available local and international funding," he says. Despite last year's GDP contraction, "productive credit recorded an annual growth of 9.8% at the end of 2024, with an upward trend, i.e., an annual growth rate of 15.4% at the end of May 2025."
Given the anticipated multi-sector rebound, Ecuador is now expected to secure a $3 billion trade surplus this year, improving the country's substantial current account deficit and opening the door for further debt issuance and IMF support.
Even with seemingly improving economic conditions, a sustained change may still hinge on deeper improvements in the country's business framework and infrastructure.
"Compared to leading regional peers like Mexico and Costa Rica, which combine efficient logistics, reliable infrastructure, skilled labor, and regulatory transparency with strong integration into global value chains, Ecuador still has progress to make," Barisauskas argues.
According to Ecuador's Secretariat for Public-Private Investments, a massive $72 billion is needed through 2030 to improve the currently lagging transportation, energy, telecommunications, water, and sanitation infrastructure. The figure represents roughly 59% of the country's GDP as of last year. Transportation and energy are the areas requiring the most extensive new investment, according to the secretariat, at $23 billion and $21 billion, respectively.
"Ecuador must upgrade its logistics and transport infrastructure, streamline regulations, and leverage the trust that comes from its dollarized system to compete," Barisauskas warns.
A rebound in FDI will also depend on support from local investors, Godoy adds.
"How can we convince an international investor to invest in Ecuador if local residents themselves are not allocating resources for the generation and implementation of investment projects?" he says. "We need more local entrepreneurs, more diversification."