The $200k fu*k up in Ecuador


Today is the 4th installment in the series “Starting a business in Ecuador”.

“Damn, that sucks for that guy.” I said, standing across from a mentor of mine, an older Ecuadorian friend.

“Yep, it does.” He responded in Spanish.

We were in the street looking at a sparkly new hotel finished to the tee, but vacant and empty.

The location was great in the northern part of Guayaquil. The building was nice. They must have invested somewhere around $150-200k just in the construction.

And they could have done very well.

Yet why was the place vacant?

They couldnt get their permit.

You see, in Ecuador, before you start any street-side business that will require a sign, you will need to get a permit from the local Municipality called a “permiso de funcionamiento”.

After you determine your funding source, decide on your legal business type, and get your RUC, the next step in Ecuador when starting a new business should be to get your permit from the municipal.

Most foreigners think there are no zoning laws in Ecuador, actually there are, they just may be looser than what you’re used to in your home country.

Without a permit, yes, they can shut you down.

But…

I’ve seen that on the coast of Ecuador and in the countryside all over the country it is much easier to get business permits and not as necessary as in the big cities like Quito or Guayaquil. But its still a good idea.

The permit is granted based on the tax ID number of the property (predio), so if you’re renting a place that had a previous business similar to the one you want you might already be good.

Specifically in the bigger cities, if the property is zoned residential, like the beautiful, yet vacant building I was standing in front of in Guayaquil, it could be VERY difficult to get business permits for certain businesses.

In this case, someone invested heavily in the building I was standing in front of without securing the proper permit ahead of time. Now due to being zoned residential, it was too late.

To figure out what a property is zoned for request the USO DEL SUELO of the property before you invest heavily.

Now, the use of the property or USO DEL SUELO can be changed, but it can be tedious and expensive to do so.

Money talks in Ecuador, in these cases a good lawyer with contacts just might be worth their weight in gold.

I’ve seen that if zoned correctly, most permits can be very cheap (often under $100) and usually take around 2 months to get approved.

No big deal.

The Municipal is the first place you should start. When applying for their permit they will tell you based on your business type what other permits are necessary. For instance, for a hospitality business you’ll need to pass inspections by the fire department and the environmental board besides getting the Municipal permit.

You would also need to get registered in the Ministry of Tourism, but this isn’t as urgent as the Municipal permit.

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