Following a period of economic uncertainty Ecuador is now ready to face the international markets. Unfortunately, investors are currently risk averse and too busy with other concerns to take notice. Which is a shame. But in the meantime, it gives the Ecuadorians time to strengthen the local investment community.
Ecuador offers a small but open equity market to international investors. There are two exchanges, in Quito and Guayaquil, with a 1997 market capitalization of $2 million and $2.5 million respectively. Although the majority of the market is fixed income, equity trading is increasing, and the proposed privatizations will boost the market further.
Local investors have been expanding their equity portfolios. Private investment funds, similar to mutual funds, dominate the market. Privately managed pension funds remain small, since contributions to them are in addition to state pension contributions. A referendum on privatizing the pension system failed last year (58% voted against it). However given the weakness of the present system, insiders believe the privatization will be reviewed again soon. The additional capital would improve the liquidity of the market.
The ECU index, created by the Quito Exchange in 1997 (with a base figure of 1993 = 1,000) is made up of 10 stocks.