SUPPORT | July 12, 2018

Promoting laws that support entrepreneurship and innovation in Ecuador

Photo Credit: Flickr | AEI

New concepts and trends such as shared economies, exponential technological growth and industry disruptions are changing the way the world is doing business. If Ecuador hopes to support this type of new business growth, it must put policies in place that support early-stage and established entrepreneurs.

Currently, Ecuador does not have a specific law tailored towards fostering entrepreneurship and innovation. The central government has made several attempts to create laws which include topics regarding incentives that promote productivity for big industries and traditional ones. But these attempts typically ignore the need for support for non-traditional entrepreneurial ventures which are starting up, innovating and seeking new ways of acquiring capital. 

This is why the Alliance for Entrepreneurship and Innovation (AEI) has created a legislative project that brings together the most important variables that help startups and companies acquire funding. Specifically, AEI focuses on: startups seeking funding in their first stages, those businesses pivoting their business models, innovating and adding technology to their businesses, entering new markets, creating new employment opportunities, and increasing efficiency to create successful companies at scale.

Since 2013, AEI has been proposing public policies that support economic development for entrepreneurship and innovation ecosystems in Ecuador. This policy work is a result of the synergies created among different stakholders in the public, private and academic sectors, which have collaborated to improve the policy framework for startups in the country.

The AEI law project has four main pillars: Entrepreneurship (BDS), Innovation, Funding and Regulation. Under these four pillars, some of the main ideas for the project include:

  • Tax incentives for incubators and accelerators that help startups scale up
  • Developing programs for small and medium size companies
  • Tax incentives to increase the amount of investment in innovation, research and development.
  • Easing the bureaucratic burden small-business owners currently shoulder
  • Access to funding for the development of entrepreneurship, with financing for entrepreneurship programs such as grants and matching funds for early-stage startups and venture capitals
  • Easing the bankruptcy process to promote reorganization of businesses with heavy debt burdens that hinder business growth

Since the legislative project's inception, several major achievements have been made. Those achievements include:

  • In October 2017, the AEI project was introduced to the Minister of Industry, Minister of External Affairs and National Assembly representatives in the Ecuadorian government
  • At the beginning of 2018, the AEI project was handed to the Presidents of two commissions at the National Assembly: The Commission on Economic Development and the Commission on Tax and Economic Administration
  • AEI designated several public and private social influencers as Entrepreneurship and Innovation Law Ambassadors, and is now running a strong campaign to increase support and awareness for the project, with the hope of making it a key discussion point in this year’s National Assembly
  • The Ministry of Industry is taking steps to make the AEI project a top priority for the President of Ecuador
  • Following technical discussions with government representatives in the executive and legislative branches, three articles covering entrepreneurship and innovation have been added to Urgent Economy bill currently under review by the President of Ecuador. The articles include:
     
    • Limited responsibility for investors
    • Tax compensation for RISE providers
    • Reduction for income-share sales tax

Natalia es la Subdirectora de la Corporación para el Emprendimiento y la Innovación del Ecuador, organización que promueve el desarrollo del… About the author