Where Ecuador's mining sector is headed in 2025

Ecuador's mining sector is concerned about legal and regulatory stability, including taxation, and consultation laws, but encouraging examples regarding the latter issue suggest that 2025 could bring positive changes.

A bill to abolish the VAT refund for the mining sector is currently debated in parliament.

Moreover, community participation is another sticking point, and laws on prior and on environmental consultations are urgently needed to improve clarity and certainty, according to the participants of a panel at the ENAEP 2024 Mining Meeting hosted by Seminarium Corporation in Quito.

“The issue of consultations is something we have been dealing with for 26 years. Unfortunately, to date we don’t have clear rules on how these processes, directly related to the social license, should be carried out,” Juan Francisco Guerrero, expert in constitutional law and partner at the Durini & Guerrero law firm, said.

"However, recent experiences have shown that it is possible for the State to comply with the consultations, even though there are no specific laws to carry out the processes with absolute certainty," he added.

Environmental consultation allows communities to express opinions and make proposals, and is mandatory for the environmental licenses needed to start mine construction, while prior consultation relates to engagement with indigenous communities in areas where extraction of non-renewable resources is planned.

Communities do not have a veto, however.

The panel highlighted the environmental consultations for the US$248mn Curipamba silver and US$91mn La Plata gold projects as processes that can conclude successfully, despite the opposition of some groups. In 2023, violent protests erupted against the projects, followed by legal measures.

But adhering to the guidelines of the constitutional court, the environment ministry concluded the consultation for Curipamba, and operators Silvercorp and Salazar Resources are aiming to start construction next year.

La Plata's environmental consultation is set to finish in the coming weeks.

Guerrero said that both cases show that consultations can be carried out in line with international standards and that projects can be defended from legal attacks by those who seek to use the courts as a battlefield.

Investment

José Luis Vittor, partner at law firm Womble Bond Dickinson, emphasized that transparency and legal certainty are key to attract investments, as foreign investors should feel that they have the same rights as locals and that their property is being respected.

It is crucial that local regulations are being observed because ignoring them would lead foreign investors to doubt the effectiveness of rules, Vittor said.

Meanwhile, Javier Robalino, managing partner at the Robalino Abogados law firm, said the sustainability of an investment is determined by the quality of investors. Ecuador should seek long-term investors who have greater social awareness and higher standards, which is why legal certainty is crucial.

Being a risky country, many foreign investors expect high returns in the short term, which is a great challenge that Ecuador faces, said Robalino.

Minerals are Ecuador's fourth largest export, reaching US$2.41bn between January and September, according to official figures. Tax revenues from the mining sector totaled around US$705mn.

In 2023, mining exports totaled US$3.3bn and a higher value was expected for this year, but an energy crisis that forces the government to cut power for up to 14 hours a day and a recent freeze in issuing export licenses caused problems. Deputy mining minister Rebeca Illescas told reporters at the event that a drop of 20% could be expected.

The Mirador copper and the Fruta del Norte gold mines are Ecuador's only large-scale operations, but more projects are in the pipeline.

The most advanced are Curipamba, La Plata, Loma Larga (gold), Mirador Norte (copper), Cascabel (copper), Cangrejos (gold) and Warintza (copper), involving combined investments of over US$10bn.