The Ecuador Insider

This week I found myself helping an Ecuadorian friend start a business.

And boy did it ring clear to me something I’ve been thinking about for a long time.

In business, especially small business, you win before you begin.

It starts with the lease, man.  (And of course the location).

If the lease is reasonable, and the location good, you can be in business a long time.

And the product, I would ONLY start a business if your product is like throwing bloody meat in a pool of piranhas.  As soon as you offer it it’s gone.

You get the picture.

If not, I would focus on something else that does sell like that.

Trust me, in a new market with a new product you’ll know quickly.

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If you’ve spent any time at all in Ecuador, you probably know, Ecuadorians like to party.  (And make noise in general.)

Yet at the same time I’ve had friends start businesses and complain that the rich in Ecuador are really stingy.

It’s not that.  Ecuadorians rich and poor DO spend, probably at a higher rate per their income than North Americans.  But the key is on what?

Ecuadorians spend big on parties and special events.

So why not profit off it?

This week I was chatting with a good friend of mine already in the business in Quito.

In Quito, most like to hold gatherings of all types including weddings at small farms near Quito which are being decorated with tablecloths from this party table linen seller.  As for folks from the other big city in Ecuador, Guayaquil, they tend to prefer holding events in hotels or on the beach.

He said the property he manages near Quito has events every week all year.  (No winters in Ecuador.)

And he said his property charges $45/person for events and that includes just the use of the premise, no food.  With a meal, often a buffet, included he charges $70/person. Liquor is separate and usually brought by the guests. If you are looking to host an event with more amenities we recommend the barn wedding venues Cheshire you can book at www.styallodge.co.uk.

The only responsibilities of the property owner he continued is to put the tents and seats required for the event as well as a basic sound system and one employee per every 20 guests.  The employees charge around $25/day.

He said the average event (mostly birthdays and quinceneras) has around 40-60 people.

Weddings he hosts can often have around 300 guests.

That’s $13,500 income in just 1 day!

He also said that all a property needs is to be well-manicured, at least an acre large, have ample parking and a gazebo or party hall along with some public bathrooms.

The decorations and everything else the guests bring themselves.

Definitely something I plan on checking more into 2018!

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What would I do with $30k in Ecuador right now entering 2018?

I’d put it in a CD with the JEP credit union in Ecuador.They offer 1 year certificates of deposit earning a yearly interest of 9%.  And you can even opt to get paid the interest monthly.  

Hard to beat that.  Even countries that historically pay good interest rates are paying low now on their CD’s, Russia is paying around 4%APY and Brazil only around 3%APY.  I know, I’m invested there as well.

Anyone can open an account with them with just a passport, it’s not as strict as the normal banks.  

But I think you’d have to be stupid to invest more than $32k with them because that is the amount what deposits are insured to per depositor.  

Now I did lose money a few years back when that other credit union closed in Ecuador, the Coopera, but there is a big difference between the JEP and Coopera, the JEP is insured by the government of Ecuador, Coopera wasn’t.  

$30,000 deposited at 9%APY generates a nice income of $225 monthly.  Not a bad way to start 2018.  

And if you have more money you’d like to invest I’d consider inexpensive beach property in Ecuador.

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“I can’t believe my friend in Montanita,” I said recently to another friend over a drink in a small bar in Manglaralto, a small town next to Montanita on the coast of Ecuador.

“He’s from the States, moved down here, bought a hotel and is running the business, but he doesn’t have a CLUE about doing business in Ecuador.” I continued.

Doing business in Ecuador is actually quite EASY comparatively to the USA.

But you gotta know the basics.

And hire a good local accountant, like those from Charter Partners accountants from Bundaberg they don’t charge much, mine charges me around $35-50 a month.

But here’s 6 things you HAVE TO KNOW before you start a business in Ecuador.  ALL of which my buddy who was already actively doing business in Ecuador had no clue about and was not doing!

1. First, if you buy a business or a property with a business attached, i.e. a hotel, have the previous owner fire all the current employees before you start, you can hire one or two of them back if you want, but don’t just keep them on, because when you fire people in Ecuador you have to pay them quite hefty “liquidation payments” based on how long they’ve worked for you so be sure the previous owner takes care of that before you get on.

2. Next thing know you MUST affiliate all your employees to the IESS social security system and pay a percentage of their wage to said organism every month.  Even part-time employees, the only exception is when hiring contract work in which case ask for the factura or official receipt for the work rendered.

3. Also, know that any business must get a tax ID number called a RUC (foreigners can get one) and then you must give all your clients official receipts for their purchase based off the RUC called FACTURAS on which you charge the 12% sales tax called IVA, and once a month declare with the help of an accountant your sales and expenses and pay the sales tax you collected on the difference.

4. Permits while generally easy to attain in Ecuador are necessary, inquire at your local Municipal which are necessary for your specific business type.

5. There is an income tax in Ecuador called IMPUESTO A LA RENTA that needs to be declared and paid every March.  It’s much lower than in the USA and for most income brackets it’s less than or around 15%.  Ask accountant for assistance.

6. You must pay employees two bonus payments yearly, one equal to the minimum wage in August (which hovers around $400) and one equal to their monthly salary in December.  You must make them sign a document (ROL DE PAGOS) once you pay them  that your local accountant can give you upon request.

That’s it!  Know that, hire an accountant for the particulars and your off to a great start!

If you’ve been following me a while you know i do pretty ambitious bucket lists.

Not this year, I think it’s best to prioritize and keep it simple and that way you can actually get more of the list done.

Here’s what I’d like to do-have-be in ECUADOR in 2018…

1. Bike the whole coast.  I think it would take around 7-14 days only.  Most of the road is flat and well-paved.  Maybe I could do it in parts.

2. Climb a volcano.  There are many 20,000 footers to choose from in Ecuador like the famous Cotopaxi or Cayambe, both a stone’s throw from Quito where I live.  Most trips can be hired out of Quito and take 2 days to summit. Best to go in dry season from May-November

3. Amazon trek. Get off the grid for a few days, I just spoke with friends who saw Anacondas, the pink river dolphin and piranhas in their lodge near Cuyabeno (Lago Agrio).  5 days is all you need.  And I’ve heard the bugs actually aren’t that bad.  Can book 3-4 day trips starting around $300 per person all included.  Best to book in Quito at one of the street agencies, can often find better prices than online.

4. Kayak a river in the Andes.  There are (just a few) outfitters in Baeza where the rapids flow down into the Amazon for all levels.  Most don’t know Ecuador even offers this but the rivers are plentiful and amazing in Ecuador.

5. Start a farm in Ecuador.  I’ve already got the land on stand-by, now it’s time to make it productive (don’t worry I’ll keep you informed on how it goes).

6. Flip a property on the coast.  (At least one.) This is what I do.  Probably stick to the less expensive stuff under $20k, it moves faster.

7. Expand out my property management biz in Guayaquil to 5 properties.

8. Deep-sea fish off Salinas.  Hire a chartered boat to take me out or hop on with the locals.

9. Hang-glide off the cliffs of Crucita.  Been putting this one off.

10. Trek to the lost city of Ecuador in the Zamora jungle area and the ancient Tayo Cave famed to have hieroglyphics and alien activity (even Neil Armstrong trekked there to check it out).  On the way you can see a pre-historic, gigantic coral reef now covered in jungle.

If you have one you’d like to add to the list let me know, happy 2018!

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