Changes in the mining industry: Ecuador’s new law on economic efficiency and job creation

The National Assembly approved the Organic Law for Economic Efficiency and Job Creation (Ley Orgánica de Eficiencia Económica y Generación de Empleo) on December 19th, 2023, marking significant changes in Ecuadorian legislation, especially in the mining industry.

 

Among the most remarkable changes in the mining and oil extraction industry is the prohibition of the Public-Private Partnership regime, according to Article 3.

 

Article 22 amends Article 97 of the Internal Tax Regime Law (Ley de Régimen Tributario interno), establishing that mining companies must self-withhold up to 10% of the gross amount of each transaction as income tax, with this withholding constituting a tax credit.

 

Article 35 modifies the destination of resources generated by Contract Mining Agreements. Now, 45% goes to provincial Autonomous Decentralized Governments (GAD, by its initials in Spanish), 35% goes to municipal GADs, and 20% goes to rural parish GADs in the project’s area of influence.

 

Additionally, Article 36 removes the obligation of GADs to use the Central Bank, delegating direct allocations of resources to the Ministry of Economy. Finally, Article 37 describes the direct delivery of mining royalties by the Ministry of Economy to provincial, municipal, and parish GADs, following the same percentage distribution mentioned in Article 40.

 

These changes aim to achieve more efficient resource management and greater involvement of GADs in sustainable local development projects.