FINANCIAL ALTERNATIVES IN ECUADOR
Public Securities, Corporate Bonds and Commercial Paper
As in the United States, there is the New York Stock Exchange (NYSE), National Association of Securities Dealers Automated Quotation (NASDAQ) and the American Stock Exchange (AMEX), here in Ecuador the market of securities is made up of two important stock exchanges. Thus, through the strategic participation of the Quito Stock Exchange (BVQ) and the Guayaquil Stock Exchange (BVG), the market of securities in Ecuador has evolved in an efficient way.
At the end of 2019, the amounts traded on the stock market represented 10.4% of GDP (Gross Domestic Product) of Ecuador. Indicator below several Latin American countries. However, considering that it is a relatively young market, it is on a hopeful path of consolidation and development. As can be seen in the attached graph, at the end of 2019, the stock market registered 11,797 million dollars in negotiated amounts, which represented growth of 57.8% compared to the previous year.
Private companies have placed a total of 4,559 million dollars in the stock market, which is 23.5% more than in 2018. As can be seen in the attached table, renowned companies with an impressive level of sales are using the stock market as a financing alternative. In this way, an important change can be observed in the preferences of companies to obtain financing.
The stock market is an excellent investment alternative since it offers different instruments from companies with higher returns than those offered by the traditional financial system. Currently, there are accounts receivable factoring closing with returns of around 9%.
All companies that issue securities in the stock market have to make their information public. Thus, investors have the information to execute smart investments.
Despite the terrible impact of COVID-19 on the Ecuadorian economy, the stock market is growing amid this crisis. Between January and April 2020, operations represent 4,174 million dollars, 5.12% more than in the previous period. At a time when businesses need liquidity, accounts receivable factoring and commercial paper have become a necessity for many companies. The isolation and paralysis of productive activities has hit the economic system. So the resilience of the stock market is impressive.
The entity that issues the securities market regulations is the Junta de Política y Regulación Monetaria y Financiera which is the financial policy and regulation board in Ecuador. Is also responsible for issuing the regulation in the monetary, credit, exchange, financial and insurance.
Superintendencia de Compañías, Valores y Seguros is the supervisory agent for the stock market in Ecuador. This entity exercises the surveillance, audit, intervention, control and supervision of the stock market for which it will be governed by the provisions of the law of stock market.
In Ecuador, the U.S. dollar is recognized as domestic currency. For this reason, Ecuador becomes an attractive investment destination. Below are the most important advantages.
1.Investment with less risk: The dollar allows international companies to see the country as an attractive destination for investments, because there is no exchange risk and there is low inflation.
2.Long-term credit: With a strong currency, financial institutions have more incentive to lend over the long term, because they know that the value of money will remain stable.
3.Government cannot print currency: The government cannot print money in excessive quantities. Therefore, the expense is controlled, and this does not allow hyperinflation.