Good or Bad Buy? The Ecuador Stock Market

This week on the Ecuador Insider’s Newsletter I showed you how you can profit investing in the Ecuador Stock Market.

The Ecuador stock market is still in diapers compared to what you may be used to in the States or Europe. But, it is an interesting alternative none the less.

Most families in the States have the financial advisor, invest in IRAs, bonds, mutual funds, and even stocks. In Ecuador, it’s not like that.

Many people in less affluent nations have much fewer investment options than we do in the States, and are often fearful of investing money in things like a stock market.

Instead, they put their money in things like real estate, businesses and even cars, so that, primarily, so they don’t spend it.

But, although most are unaware, there actually is a local stock market that does offer some interesting investment options.

Requirements for investors

Have money. It doesn’t matter if you a foreigner or not, doesn’t matter if you bank in Ecuador or not. You can invest by simply showing your passport in a broker house.

How to get started

First, you need to go to a broker, like the one in the investment department of the Banco Promerica on the corner of Amazonas and Colon in Quito. Walk into the bank and ask for the investing department (Say, “quiero invertir en la bolsa.”).

They can then explain your options and place a buy order for you for the stock of your choice. At the time of research a few months back they charged 1% commission plus a .09% stock exchange fee. The minimums usually start around $1000 but can be negotiated.

The buy order is then manually taken to the stock exchange where someone has to find a seller at the price you are willing to pay per share. For example, if a stock is trading at $4.50 a share, you could place a buy order at $4.30 and see if anyone out there is willing to sell at that price. Your buy (or sell) order will be valid for 5 days, if there are no takers, it gets nullified and you have to place another.

Stocks in Ecuador pay dividends and can also appreciate in sales price, similar to the earning methods of the stocks on the DOW.

Two of the most recognized and successful stocks on the Ecuador market are those of Supermaxi (La Favorita Corp.), and the National Beer Company (Cerveceria) of Ecuador. These companies have very little (to no) real competition in Ecuador, are very liquid with good cash flows, and have proven to pay out good dividends and value to their stock holders over time (anywhere from 5-30% annum more or less).

Also on the exchange are other large Ecuadorian companies, like several local banks, but their stock prices relatively stay flat and are a safer, more stable play.

A great place to see actual stock market prices, trends and stock figures, is the official site (in Spanish) of the market, bolsadequito.com.

Other investment options

Besides investing directly in stocks, there are other options.

One interesting option for some are buying “Obligaciones” or commercial papers on the stock exchange of specific companies who commit to giving you a set return on your investment. These work similar to CDs, and are set for 1,2, or 3 years on average and pay between 5-10% in set increments upon purchase.

My personal favorite is the CDs the local banks sell. You can start by buying one for 30 days at around a 4% annual interest clip. Obviously, with these, the longer you commit your money for, the higher % interest you will receive. Inquire about these options in your local Ecuadorian bank.

One option some don’t recommend is investing in local Ecuador government bonds, because they are paying around a low 3% and are very risky (think of the Ecuador Government like that friend of yours who always asked for money and never paid you back).

Investing in the Ecuador stock market is not for the faint at heart but can be heaps of fun. Buyer beware!

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2 Responses to “Good or Bad Buy? The Ecuador Stock Market”

  1. John P. says:

    I think I read you say when somebody obtains an investment Visa, the investment property is assigned to the Visa, and if you were to sell the property, then you would have to requalify for the visa.

    The thing I don’t get is how do they know if you sell the stock shares at some point. I wonder if there is some periodic review process of visa holders, whereby you have to prove you still own the investment that qualified with.

  2. admin says:

    Good question. One positive thing is that Ecuador is not that organized to do those sort of reviews. But its still best to do some homework. Dom

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