1. Ecuador : a smart investment option! 1

2. An Ethical Economy Through innovative and clear regulations that encourage efficient business operations, our Government bolsters the rights of our society and the environment, ensures respect for nature, the workers and our society as a whole. An ethical management of our economy is at the center of ECUADOR’S development. 2

3. ActionsResults Production and Investment Tax Amendments Constitutional Assembly Labor Reform Incentives and a clear framework for investment Fiscal stability Modern institutional framework Stable labor relations Accomplished Reforms by the State 3

4. Development Model and the Role of the State The Production Code sets out a new and modern legal framework that encourages private investment. The code specifically highlights the Government's model for economic development and transformation of our production matrix Monetary policy based on dollarization. General incentives for private investment to make ECUADOR more competitive. Plus additional incentives in specific sectors with high potential to serve internal and external markets and to shift the productive matrix from the export of raw materials to that of value added products. To consult the list of sectors go to www.mcpec.gob.ec 4

5. Protection for Private Investment Legal incentives Agreed arbitration Investment contracts Low Risk Investment Production and Investment Code, with all these instruments, protects private investment. 5

6. An Intelligent Investment - 8 Strategic Reasons for Investing 1.Growing, stable economy. 2. Clear legal framework, that gives incentives to investors 3. Dollarized economy. 4. Human talent and social investment. 5. Strategic geographical location. 6. Air, land and sea access to international markets 7. Efficient infrastructure and logistics 8. The country with the highest biodiversity per square kilometer 6

7. Incentives for Private Investment 7

8. Current Incentives INCENTIVES Exemption from income tax on dividends and profits earned and paid out to companies (except tax havens) or non-resident individuals in Ecuador. Exemption of earnings from the occasional disposal of real estate, shares or stakeholders. Exemption of capital earnings, profits, benefits or returns distributed by investment funds, severance funds and commercial trust funds. Exemption of returns on fixed-term deposits of one year or more. Additional deduction for net increase in annual employment. Deduction of payments for the international commercial leasing of capital goods. Reduction of 10 percentage points in the rate of income tax on amounts reinvested in equipment and machinery. Accelerated depreciation, on request, of goods with a useful life of no less than 5 years. Zero tariff on electricity encourage investment stimulate the capital market and access to housing avoid the double payment of income tax Foster savings Foster higher employment Foster production Foster investment Exemption Foster investment Income tax Corporate Income Tax Income tax Corporate Income Tax VAT GOALS TAX AFFECTED Income tax 8

9. New General Incentives for Investments Income tax rate reduction: from 25% to 22%. Starting in 2011, 1% each year. Exemption from the minimum income tax calculation: incremental expenses for new employment or salary increases, acquisition of new assets for productivity and technology improvements, cleaner production and all the incentives in this code. For new companies: exemption from the minimum tax payment for the first 5 years. Exemption from Capital Outflow Tax for payments sent overseas on foreign loans, with a term of over one year and a rate not higher than that authorized by the Ecuadorian Central Bank. 9

10. General Incentives for Investments Additional deductions for the calculation of income tax as mechanisms to encourage improvements in productivity, innovation and eco-efficient production. Benefits for selling stock to workers, such as the deferment of income tax for companies Those established for Special Economic Development Zones [ZEDE, in Spanish], providing they meet the qualifying criteria. 10

11. Incentives for New Investment in Priority Sectors Total exemption from income tax and advance payment thereof, for 5 years, for new investments made in priority sectors of the economy. Fresh and processed food MetalworkingPetrochemical Tourism Import Substitution Sectors and others with export potential can be found in our website www.mcpec.gob.ec PharmaceuticalRenewable energy Logistics services Biotechnology and applied software Forestry and agroforestry chain, and resulting manufactured products 11

12. Incentives for Micro and Small Enterprises and the Grass-roots Mutually Supportive Economy (EPS for its initials in Spanish) Preferential access to public procurement. Public investment in programs to increase their productivity and export capacities. Access to preferential interest rates and customized credit schemes in public financing 12

13. Incentives for micro and small companies National Public Guarantee Fund to secure operations for private financing Financial Instruments to facilitate access of micro and small companies to capital markets. Public and private investments aiming to improve productivity, level of innovation, quality, and export promotion. 13

14. Incentives for medium size companies Extra deductions from income tax, for expenditure and investments in the following items: Technical training (up to 1% of the annual wage and salary expenses). Expenditures on improving the company's productivity (up to 1% of turnover). Expenditures on international promotion of the company and its products (up to 50% of the promotion and advertising expenses). 14

15. Incentives for reducing the cost of credit The compulsory Income Tax- withholding is eliminated for interest payments and repayments of international loans. This benefit does not apply to loans from organizations domiciled in tax havens. Reduction in costs due to the elimination of the Capital Outflow Tax on financing. 15

16. Incentives for green production An additional deduction from Income Tax of 100% of the expense of purchasing machinery and equipment for cleaner production, and for the implementation of renewable energy systems (solar, wind or similar), or for the mitigation of environmental impact. 16

17. Incentives for Investment in Depressed Areas Companies making investments in depressed areas may take advantage of an additional 100% deduction from income tax of new hiring costs on new jobs created in the area, for the first 5 years. A “depressed area” will be defined by such indicators as lower human, economic and social development. 17

18. Incentives for ZEDE (Special Economic Development Zones) A further reduction of 5 percentage points on income tax, on a permanent basis (17%) until contract expiration, for managers and operators of ZEDE, Zero VAT rate for the import of goods. Foreign goods will not be subject to the payment of tariffs while they remain in ZEDE zones. Managers and operators will have tax credit on the VAT paid on their local purchases of services, supplies and raw materials used in their production processes. Exemption from the Capital Outflow Tax for the payment of imports and for payments sent overseas caused by foreign financing. 18

19. Incentives for companies selling their stock to employees and others Companies choosing to open up their capital structure and to sell shares to their workers, will have the following benefits: 1.Deferred payment of income tax for 5 years. 2.Companies opting for a loan to finance the shares’ purchase will be exempt from income tax interest. 19

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