1. MONTREAL, DECEMBER 3, 2015

2. Today’s agenda 1.About PRO ECUADOR 2.Legal framework for investment 3.Examples of projects 4.Questions

3. 1.- ABOUT PROECUADOR

4. ABOUT PRO ECUADOR PRO ECUADOR is the Ecuadorian Agency of Trade and Investment Promotion. Created in 2012 with the main goal of giving the country a stronger presence in foreign markets.

5. ABOUT PRO ECUADOR PRO ECUADOR has a wide network of 6 local offices and 30 international offices located around the world. In Canada we are present in Toronto and in Montreal

6. OUR SERVICES 1.Link your company with top-notch Ecuadorian exporters 2.Organize trade and investment missions (from and to Ecuador) 3.Provide logistic support in visits to Ecuador (organize agenda, support of local team in transportation, translation, etc.) 4. Organize events (match-making, visit to facilities, etc.)

7. 2.- LEGAL FRAMEWORK

8. In Ecuador, the Foreign Direct Investment is primarily regulated by: 1.Ecuadorian Constitution 2.Organic Code or Production, Commerce and Investment (COPCI) 3.Tax Regimen 4.Public-Private Partnership Regimen

9. 2.1.- CONSTITUTION ART. 285 of the Constitution: "... The fiscal policy objectives, among others, are the creation of incentives for investment in different sectors of the economy and the encouragement for the production of goods and services socially desirable and environmentally responsible”

10. 2.2.- The Organic Code of Production, Commerce and Investment (COPCI) THE LEGAL FRAMEWORK TO PROMOTE NEW INVESTMENT WITH TAX INCENTIVES

11. 2.2.1.- General Incentives 3% reduction of Income Tax for all types of companies (Income Tax rate 22%); Exemption of the Currency Outflow Tax for loan payments (capital & interests) granted by financial institutions located abroad; Exemption of the prepaid income tax for 5 years, applied only for new companies; New investments that aims to increase employment, improve wages, acquire assets, improve productivity and innovate are exempt from prepaid Income Tax

12. 2.2.1.- General incentives REINVESTMENT IN PRODUCTIVE ASSETS Reduction of 10% in the rate of Income Tax on the amount reinvested in Productive Assets Main conditions: Purchase of new machinery and equipment Acquisition of infrastructure for agricultural production, forestry, livestock and floriculture Investment on research and technology to improve productivity Investment that generates employment

13. 2.2.2.- Prioritized sectors Metalworking Petrochemicals Tourism PharmaceuticalsRenewable Energy Biotechnology and applied software Fresh, frozen and processed foods Forestry value chain and its processed goods Logistics services for international trade

14. 2.2.2.- Prioritized sectors for substitution of imports Basic chemicals Pesticides and products for agricultural use Soaps, detergents, perfumes and toilet preparations Radio, TVs and cell phones Chemicals products Ceramic products Textiles Leather and footwear Domestic Appliances Cement production

15. 2.2.3.- Incentives for prioritized sectors For new companies, located outside the urban areas of Quito and Guayaquil: Exemption of Income Tax for 5 years from the moment first income is generated. For new companies that are located inside the urban areas of Quito and Guayaquil, and for companies established prior to December 2010: An additional 100% deduction of depreciation costs for fixed and productive assets for a period of 5 years, beginning at first productive use of asset. 1 1 2 2

16. 2.2.3.- Incentives for prioritized sectors Taxpayers whose economic activity is exclusively related to the development of software or technology projects, and with a stage of development longer than one year. Taxpayers whose economic activity is exclusively related to agricultural production, projects in forestry and agroforestry with a growing stage of over one year (will be exempt during the tax periods where no taxable income is generated). WHO IS EXEMPT FROM PAYING THE PREPAID INCOME TAX?

17. 2.2.3.- Incentives for prioritized sectors BASIC INDUSTRIES Exemption from Income Tax for 10 years, beginning on the first year that income attributable to new investment is generated. If the investment is made in towns, townships located in the Ecuadorian border (with Colombia or Peru), exemption from income tax will be for a period of 12 years. Copper Aluminum Steel Industry ShipyardsCellulose Petrochemical

18. 2.2.4.- Specific incentives for development of new economic zones Known as Special Economic Development Zones (ZEDES) Authorized by the National Government, as a customs destination in especially determined spaces within the national territory, for setting up new investment. ZEDES’ destination takes into account conditions such as environmental preservation, potential of each site, road infrastructure, basic services, etc. The purposes can be for transfer of technology and innovation, execution of industrial diversification and develop of logistical services. Conditions of a ZEDE

19. 2.2.4.- Specific incentives within Special Economic Development Zones 1.Income Tax of 17% 2.Exemption from customs tariffs on foreign goods entering these areas 3.0% VAT on imported goods, to be used exclusively within the authorized zone 4.Tax credit for VAT paid on local purchases. 5.No payment of Currency Outflow Tax (5%), for imports of productive goods. ZEDE Eloy Alfaro Location: Manabí Petrochemical, Industry and Logistics ZEDE Yachay Location: Imbabura Technology, Logistics and Industry ZEDE ELOY ALFARO

20. TRAINING IMPROVED PRODUCTIVITY AND BUSINESS DEVELOPMENT PROMOTION Travel expenses, lodging and commercial promotion for access to international markets, such as business conferences, participation in international fairs. 2.2.5.- Incentives for small and medium enterprises (SMEs) 100% of expenses related to the following items may be deducted from Income Tax: Technical training for research, development and technological innovation. Technical assistance and market analysis of competitiveness; assistive technology process design, product, adaptation and implementation of processes, packaging design, development of specialized software..

21. 2.2.6.- Environmental incentives There are tax incentives for: Acquisition of machinery, equipment and technologies for the implementation of cleaner production mechanisms, power generation from renewable sources (solar, wind, etc.) or systems that reduce the negative environmental impact of production activity and emission of greenhouse gases.

22. 2.2.7.- Incentives for depressed areas INCENTIVE FOR COMPANIES INVESTING IN DEPRESSED AREAS Income Tax payment in depressed areas will receive an additional 5 year - 100% deduction for the cost of wages, salaries, social benefits and for costs related to the generation of new employment. Methodology to determine a depressed area: Economic variables Social Variables Capacities of the areas

23. 2.2.8.- Investment contract Upon the investor’s initiative, investment contracts may be signed. The investment contract shall not be interpreted as authorization for development of activities in strategic sectors, in which other specific habilitating titles defined by sector laws, are required, such as contacts, permits, authorizations, concessions, etc. The existing of an investment contract shall not limit regulation and control from the State through its appropriate entities. given to investment, under the scope of this Code and its Regulation.

24. 2.2.8.- Investment contract 1.It is Optional: To gain access to tax incentives, it is not necessary to sign the Investment Agreement or contract. 2.Sector: All companies that develop productive activities. 1.Terms: up to 15 years, renewable for the initial period approved. 2.Dispute Resolution: International Arbitration in case of foreign investors. 3.New investment: minimum USD 250,000 the first year. 1 million for the entire project.

25. 2.2.8.- Types of Investment Contract CHARACTERISTICSPRODUCTIVE SECTORS LARGE-SCALE MINING AND BASIC INDUSTRIES OTHER SECTORS STABILITY Applicable only on tax incentives established on the COPCI Includes Income Tax, Currency Outflow Tax, VAT and other direct national taxes INCOME TAX22% 25% MINIMUM INVESTMENT AMOUNT US$1.000.000US$100.000.000 REQUIREMENTS Submit request, to be approved by a Council Must have Sectorial Ministry report and approval from Tax Policy Committee 12 3

26. 2.2.8.- Process for signing the investment contract First contact with the investor – Presentation of the project Sending the Investment Kit Delivering requested documentation regarding the investment project Validating the delivered documentation Preparing the technical report for the Sectorial Production Council Approval of the project by the Sectorial Production Council Signing the Contract Drafting the contract Investor’s approval Signing the contract 30 days 60 days 30 days

27. 2.2.8.- Signed investment contracts 44 investment contracts had been signed, for a total of USD 4.5 billions

28. 2.3.- Public - Private Partnership

29. Scope of application The Regulations of the Public-Private Partnerships Regimen, extend the possibility for the private sector to finance public projects. Private initiatives can refer to any project: 1.Strategic sectors (energy, telecommunications, logistics, mining, oil, etc.) 2.Public services (hospitals, schools, etc.) or any other service. 3.Public infrastructure: Low cost social housing, urban development (ports, airports, etc.) 4.Productive activities in Research and Development 5.Projects that are a priority to the Government

30. Art. 5: The Public-Private Regimen guarantees independence within Ecuador’s legal system. Therefore, the content of the regime cannot be affected by changes in other laws. Art. 5: The Public-Private Regimen guarantees independence within Ecuador’s legal system. Therefore, the content of the regime cannot be affected by changes in other laws. Legal stability

31. Art. 8: If the situation warrants, the Executive branch of government may issue a decree to facilitates processes in order for an investment to be realized in a reduced period of time Process facilitation

32. Objectives Attract domestic and foreign investment for the implementation of public projects. Facilitate internal financing through the stock market Public-private Partnership = Promotion of Productive Financing + Foreign Investment

33. Incentives to investors Stability on tax regime.Project to be exempt from income tax for 10 years. Payments of dividends and interests due to external financing (period > 1 year and % < from Central Bank of Ecuador) are exempt from Currency Outflow Tax VAT compensation for cost reduction (not applicable in natural resources i.e. oil) Exemption from customs tariff and other taxes, such as the transfer of ownership.

34. ECUADORIAN GOVERNMENT Guarantees legal framework stability Develops adequate policies and infrastructure Invests when necessary LOCAL PRIVATE COMPANY Possible joint ventures Facilitates relationships within the local market Invest when necessary FOREIGN PRIVATE COMPANY Provides know how, technology and best practices Brings experience for new commercial agreements Attracts foreign investment Foreign partners/investors will benefit from the involvement of the Ecuadorian Government and other local players TRIPARTITE MODEL FOR PARTNERSHIP Ecuador is currently searching for foreign partners to actively participate in the development of its basic industries The management model is negotiable and may vary depending on stakeholder’s participation.

35. 3.- INVESTMENT PROJECTS

36. Oil Refinery of the Pacific RDP´s project Project Details The project site covers an area of approximately 700ha, and the Pacific refinery will have an ultimate crude processing capacity of 300,000bpd. The refinery is intended to cut domestic fuel costs for Ecuador. Investment: USD $12 BILLION

37. Road Networks Logistic and Transportation infrastructure Guayaquil Quito Machala Tulcán Esmeraldas Santo Domingo Latacunga Ambato Riobamba Cuenca Loja Manta Portoviejo Nueva Loja Ibarra Babahoyo Huaquillas COLOMBIA PERÚ Corredores logísticos consolidados Corredores logísticos con potencial de consolidación Eje Estructurante nacional Guayaquil Quito Machala Tulcán Esmeraldas Santo Domingo Latacunga Ambato Riobamba Cuenca Loja Manta Portoviejo Nueva Loja Quevedo Ibarra Babahoyo Huaquillas Providencia Puerto Morona LMacará Routes Distance Km. Investment USD. MM Highway road Puerto Bolívar -Puerto Morona 600364 Manta – Manaos Norte Via Manta –Latacunga – Quito - Tarapoa 1.0001.700 Manta Manaos Sur Vía Manta – Latacunga –Ambato – Baños - Puyo-Tena - Tarapoa 1.0551.752 TOTAL2.6553.516 According to the Ministry of Transport and Public Works, Ecuador has a transportation infrastructure of 43,197 km of roads, this being the main means of communication in the country.

38. Financing On November 26 th, the Ministry of Production and the Vice-President of Ecuador, held a presentation called “Ecuador, a Republic of Opportunities”. Some Important points: There are line of credits already approved with the World Bank (500M), for private sector looking for projects in Ecuador 200M available from the Inter-American Development Bank

39. THANK YOU 4.- QUESTIONS

40. CONTACT US PRO ECUADOR CANADA Address: 130 Adelaide St. West, Suite 2101, Toronto ON M5H 3P5 Phone: 647-352-5511 Fax: 647-352-5512 E-mail: toronto@proecuador.gob.ectoronto@proecuador.gob.ec