River Hills Resource

Ecuador is situated along the equator on the western coast of South America between Columbia and Peru. The country is divided into 22 distinct provinces totaling 271,000 square kilometers and has a population of approximately 13MM. The population is approximately 90% indigenous and Mestizo (mixed Indian and Spanish). The official language is Spanish, but indigenous languages are still spoken. Quito is the capital city.

During the 1990s, Ecuador made some market-oriented structural reforms, but incomplete implementation failed to create sustainable growth. It was not until 2000 that Ecuador began showing signs of structural change and growth. Since then, the country’s per capita income has been rising annually between 2.5% and 5.0%, while gross domestic product (“GDP”) has grown annually by a similar amount. Dollarization has led to a marked deceleration in inflation, falling from an annual rate of over 90% in 2000 to 2.7% in 2004.

The mining sector is governed by the Ministry of Energy and Mines. The purpose of the Ministry is to help set and enforce the legislated mining regulations. Before 1991, Ecuador lacked a firm system of laws by which to govern the mining sector. Since 1991, the mining laws have been modified and simplified. Ecuador’s current Mining Law is oriented towards stimulating growth in the mining sector, encouraging foreign investment and is one of the most liberal mining laws in all of South America.

In Ecuador, the mining industry represents only 1% of GDP and less than 1% of exports. By comparison, in Peru and Chile mining accounts for 30% and 50% of annual exports, respectively. Ecuador, Peru and Chile all share a similar general geology in the Andes, but it was, in large part, the confusing, prohibitive and arcane nature of the previous mining law that retarded this sector of the Ecuadorian economy.