Detour Ecuador: Starting a business

While not in the original plans when visiting Ecuador, a $2.00 bus trip from Quito transported us to the cloud forest town of MIndo.  Mindo can best be described as small “beach-like” town, in the middle of the beautiful cloud-forest of the Andean foothills, typically inhabited by vacationers and “hippies”.  Mindo is best known as Bird Watching Central for South America.  Mindo is ideal for the person looking for a very laid back atmosphere or for someone looking for opportunity.

As is the case with most of Ecuador, opportunity is abound.  Property is cheap, the community is friendly, food is cheap & fresh and all sorts of basic services are not reliable.  Great for an enterprising person.

In Mindo, I was able to sit down and speak to a business owner getting the rundown on opening a business in Ecuador.  One of the great features of a underdeveloped country or one that has had years of political strife, is the very inefficient government  machinery.  A trait which can play in your favour.

Here is the process, as described to me, of how a local business owner opened a business.

In Ecuador, an enterprise cannot be issued a business license UNLESS they have been in operation for at least 3 months.  You are reading this correctly.

A [food] business requires a Fire Inspection permit, but cannot be issued one until receiving a Business license, but the business must be in business for at least 3 months before qualifying for a business license.  By the way that 3 months is very much just a suggestion.

In this case, the business needs a food inspection permit as well.  However, a [food] business cannot receive a food permit until they are acquire a Fire Inspection permit which cannot be obtained without a business license, which cannot be had until the business has been in operation for at least 3 months.

Best of all…..if this wasn’t all ready great, is the fact you can prolong this process into infinity by simply going to anyone of the above mentioned departments, make them aware of your intentions to operate a business.  Said department will provide you with a document acknowledging your visit.  Should your business be visited by an official seeking the necessary documentation for a business, simply provide them proof you are involved in the “process” and the necessary departments have been visited.

If government must exist, let it be an inefficient one.

a glass of scotch

 

 

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7 responses to “Detour Ecuador: Starting a business

  1. For the record, since Correa came to power, this “ease of starting a business” ranking has consistently fallen EVERY year. The good news (sarcasm!) is that at 165 out of 188 measurable countries … it can’t fall much further! This government’s policy (especially over the last few years) is completely gutting the small to medium enterprise sector in this country. As time goes by, I will look forward to hearing your updates regarding just how much fun you’re having with the “inefficient” bureaucracy (and how you’ve been able to “take advantage” of it). 🙂

    http://www.doingbusiness.org/data/exploreeconomies/ecuador/

    • All of what you say is very true….While I did not go into it in the post, I should have prefaced my comments by stating, because of the absolutely terrible policy implemented by Correa, I would never attempt to operate a business in a larger city center. However, someone interested in a business in Mindo or any other small community is best served by the inefficient government in place.

    • Hello! I think the title is missleading. A few clarifications: Mindo es part of El Cantón Los Bancos, therefore it is that municipality wo gives gives the permits, not national institutions or the central governement. Your note could be complimented if you talk to somebody at the local government. Regards

      • Yes, I made the mistake of not clarifying that these items are process by local municipalities. This is fortunate for all involved. Only when government gets out of the way can small business survive. I would not recommend doing business in the larger centers of Ecuador. There you will most likely have to deal with even more government, but corrupt government.

        Please be clear, I thoroughly enjoyed Ecuador and am considering making it my home. And one of the reasons why, pertains to the poor management of government departments. For the less motivated government officials are, the more likely they are not to bother me.

  2. Did you actually visit the “Los Bancos Municipality” (Mindo belongs to Los Bancos City) to confirm if the process actually works as the business owner described?

    In case you are not aware, all of the permits you mentioned in your blog have to be issued by the Municipality and the Central Government isn’t involved.

    I believe your title “Detour Ecuador: Starting a business” is unfair with my country when all you present is a single example, in one very small town (2500 people).

    • Hello and thank you for your comments. While you may consider my comments to be negative, I see them as very much positive. If the local municipalities acted as those in Quito, life would grind to a halt and Ecuador would experience even more torment then it does now. There is no doubt the Correa policies are wrong and misguided. All the social programs and spending exist only because of borrowed money. And as your President is finding out, there is a limit to how much he can borrow. Socialism is promoted to the masses as a way to get back at the ‘rich’…. Socialism in its many forms always leads to a far worse existence for everyone else, but enriches only a small few.

      AS for my details. I spoke to a ‘local’ and an expat business owner in Mindo who both gave similar examples. I have been provided similar stories in other communities but could not really verify them. My point is Efficient government is the worst thing that can happen to a country……Ecuadorians are entrepreneurial by nature and out of necessity. For that I respect them very much. It is your leaders who I have no time for.

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