Port Handling Equipment in Ecuador: A Strategic Reference, 2007
ICON Group International, July 2007, Pages: 213
How to Strategically Evaluate Ecuador
Perhaps the most efficient way of evaluating Ecuador is to consider key dimensions which themselves are composites of multiple factors. Composite portfolio approaches have long been used by strategic planners. The biggest challenge in this approach is to choose the appropriate factors that are the most relevant to international planning. The two measures of greatest relevance to port handling equipment are “latent demand” and “market accessibility”. The figure below summarizes the key dimensions and recommendations of such an approach. Using these two composites, one can prioritize all countries of the world. Countries of high latent demand and high relative accessibility (e.g. easier entry for one firm compared to other firms) are given highest priority. The figure below shows two different scenarios. Accessibility is defined as a firm’s ease of entering or supplying from or to a market (the “supply side”), and latent demand is an indicator of the potential in serving from or to the market (the “demand side”).
Framework for Prioritizing Countries
Demand/Market Potential Driven Firm
Relative Accessibility
Accessibility/Supply Averse Firm
In the top figure, the firm is driven by market potential, whereas the bottom figure represents a firm that is driven by costs or by an aversion to difficult markets. This report treats the reader as coming from a “generic firm” approaching the global market - neither a market-driven nor a cost-driven company. Planners must therefore augment this report with their own company-specific factors that might change the priorities (e.g. a Canadian firm may have higher accessibility in Canada than a German firm).
Latent Demand and Accessibility in Ecuador
This report provides a detailed overview of factors driving latent demand and accessibility for port handling equipment in Ecuador. Latent demand is largely driven by economic fundamentals specific to port handling equipment. This topic is discussed in Chapter 2 using work carried out in Ecuador on behalf of American firms and authored by the United States government (typically commercial attachés or similar persons in local offices of the U.S. Department of State). I have included a number of edits to clarify the information provided. Latent demand only represents half of the picture. Chapter 2 also deals with micro-accessibility for port handling equipment in Ecuador. I use the term “micro” since the discussion is focused specifically on port handling equipment.
Chapter 3 is also a stand-alone report that I have authored. It covers proxy pro-forma financial indicators of firms operating in Ecuador. I use the word “proxy” because the provided figures only cover a “what if” scenario, based on actual operating results for firms in Ecuador. The numbers are only indicative of an average firm whose primary activity is in Ecuador. It covers a vertical analysis of the maximum likelihood balance sheet, income statement, and financial ratios of firms operating in Ecuador. It does so for a particular Standard Industrial Classification (SIC) code. That code covers “marine cargo handling”, as defined in Chapter 3. Again, while “marine cargo handling” does not exactly equate to “port handling equipment”, it nevertheless gives an indicator of how Ecuador compares to other countries for a proxy adjacent category along various dimensions.
Chapter 4 deals with macro-accessibility and covers factors that go beyond port handling equipment. A country may at first sight appear to be attractive due to a high latent demand, but it is often less attractive when one considers at the macro level how easy it might be to serve that entire potential and/or general business risks. While accessibility will always vary from one company to another for a given country, the following domains are typically considered when evaluating macro-accessibility in Ecuador:
Openness to Trade in Ecuador
Openness to Direct Investment in Ecuador
Local Marketing and Entry Strategy Alternatives
Local Human Resources
Local Risks
Across these domains, a number of not-so-obvious factors can affect accessibility and risk. These are covered in the Chapter 4, which is a general overview of investment and business conditions in Ecuador. Chapter 4 is also presented from the perspective of an American firm, though is equally applicable to most firms entering Ecuador. This chapter is also authored by local offices of the U.S. government, as is Chapter 2. Likewise, I have included a number of edits to clarify the provided information as it relates to the general strategic framework mentioned earlier.
1 INTRODUCTION & METHODOLOGY 1
1.1 What Does This Report Cover? 1
1.2 How to Strategically Evaluate Ecuador 1
1.3 Latent Demand and Accessibility in Ecuador 3
2 PORT HANDLING EQUIPMENT IN ECUADOR 5
2.1 Latent Demand and Accessibility: Background 5
2.2 Latent Demand: Market Composition 5
2.3 Market Data 6
2.4 Latent Demand: Leading Segments 9
2.5 Key Suppliers 9
2.6 Prospective Buyers 10
2.7 Accessibility: Market Entry 11
2.8 Market Issues and Obstacles 11
2.9 Accessibility: Trade Events 12
2.10 Key Contacts 12
3 FINANCIAL INDICATORS: MARINE CARGO HANDLING 14
3.1 Overview 14
3.1.1 Financial Returns and Gaps in Ecuador 15
3.1.2 Labor Productivity Gaps in Ecuador 18
3.1.3 Limitations and Extensions 18
3.2 Financial Returns in Ecuador: Asset Structure Ratios 19
3.2.1 Overview 19
3.2.2 Assets - Definitions of Terms 19
3.2.3 Asset Structure: Outlook 21
3.2.4 Large Variances: Assets 22
3.2.5 Key Percentiles and Rankings 25
3.3 Financial Returns in Ecuador: Liability Structure Ratios 38
3.3.1 Overview 38
3.3.2 Liabilities and Equity - Definitions of Terms 38
3.3.3 Liability Structure: Outlook 40
3.3.4 Large Variances: Liabilities 41
3.3.5 Key Percentiles and Rankings 44
3.4 Financial Returns in Ecuador: Income Structure Ratios 55
3.4.1 Overview 55
3.4.2 Income Statements - Definitions of Terms 55
3.4.3 Income Structure: Outlook 57
3.4.4 Large Variances: Income 58
3.4.5 Key Percentiles and Rankings 61
3.5 Financial Returns in Ecuador: Profitability Ratios 74
3.5.1 Overview 74
3.5.2 Ratios - Definitions of Terms 74
3.5.3 Ratio Structure: Outlook 76
3.5.4 Large Variances: Ratios 77
3.5.5 Key Percentiles and Rankings 80
3.6 Productivity in Ecuador: Asset-Labor Ratios 95
3.6.1 Overview 95
3.6.2 Asset to Labor: Outlook 96
3.6.3 Asset to Labor: International Gaps 97
3.6.4 Key Percentiles and Rankings 100
3.7 Productivity in Ecuador: Liability-Labor Ratios 113
3.7.1 Overview 113
3.7.2 Liability to Labor: Outlook 113
3.7.3 Liability and Equity to Labor: International Gaps 114
3.7.4 Key Percentiles and Rankings 117
3.8 Productivity in Ecuador: Income-Labor Ratios 128
3.8.1 Overview 128
3.8.2 Income to Labor: Outlook 128
3.8.3 Income to Labor: Gaps 129
3.8.4 Key Percentiles and Rankings 132
4 MACRO-ACCESSIBILITY IN ECUADOR 145
4.1 Executive Summary 145
4.2 Economic Fundamentals and Dynamics 146
4.2.1 Government Intervention Risks 146
4.2.2 Industrial Policy 146
4.2.3 Infrastructure Development 147
4.3 Political Risks 148
4.3.1 Economic Relationship with the United States 148
4.3.2 The Political System 149
4.4 Marketing Strategies 150
4.4.1 Distribution Channel Options 150
4.4.2 Distribution Channel Options 151
4.4.3 Agents and Distributors 151
4.4.4 Franchising Activities 151
4.4.5 Direct Marketing Options 152
4.4.6 Joint Ventures and Licensing Options 152
4.4.7 Creating a Sales Office 153
4.4.8 Selling Strategies 154
4.4.9 Advertising Options 154
4.4.10 Pricing Issues 154
4.4.11 Public Sector Marketing 155
4.4.12 Intellectual Property Risks 155
4.4.13 Hiring Local Counsel 156
4.5 Import and Export Regulation Risks 156
4.5.1 Adherence to Free Trade Agreements 156
4.5.2 Trade Barrier Risks 156
4.5.3 Restrictions on Imports 157
4.5.4 Controls on Exports 157
4.5.5 Import Tariffs and License Requirements 158
4.5.6 Licenses Required for Imports 158
4.5.7 Customs Regulations and Contact Information 159
4.5.8 Entering Temporary Imports 159
4.5.9 Additional Trade Issues 160
4.5.10 Government Procurement 161
4.5.11 Local Standards 161
4.5.12 Warranty and Non-Warranty Repairs 162
4.5.13 Free Trade Zone Options 162
4.6 Investment Climate 162
4.6.1 Openness to Foreign Investment 162
4.6.2 Conversion and Transfer Policies 164
4.6.3 Expropriation and Compensation 164
4.6.4 Dispute Settlement 164
4.6.5 Performance Requirements and Incentives 165
4.6.6 Right to Private Ownership and Establishment 165
4.6.7 Protection of Property Rights 166
4.6.8 Transparency of the Regulatory System 167
4.6.9 Capital Market Risks 167
4.6.10 Political Violence 167
4.6.11 Corruption 168
4.6.12 Bilateral Investment Agreements 168
4.6.13 OPIC and Other Investment Insurance 168
4.6.14 Labor 168
4.6.15 Free Trade Zones and Free Ports 169
4.7 Trade and Project Financing 169
4.7.1 The Banking System 169
4.7.2 Foreign Exchange Control Risks 170
4.7.3 General Financing Availability 170
4.7.4 Types of Available Export Financing and Insurance 171
4.7.5 Financing Export Strategies 171
4.7.6 Multilateral Financing 171
4.7.7 Banks with Correspondent Banking Arrangements 173
4.8 Travel Risks 173
4.8.1 Local Business Practices 173
4.8.2 Travel Issues 173
4.8.3 Country Data 178
4.9 Key Contacts 179
4.9.1 Ecuadorian Government Contacts 179
4.9.2 Chambers of Commerce 184
4.9.3 Trade and Industry Associations 190
4.9.4 Auditing and Consulting Firms 192
4.9.5 Credit Report Firms 193
4.9.6 Commercial Banks 193
4.9.7 Multilateral Financing 194
4.9.8 U.s. Embassy Trade Personnel 194
4.9.9 Contacts in Washington D.C. 195
4.9.10 U.S.-Based Ecuadorian Contacts 196
4.9.11 U.S.-Based Multipliers 197
4.9.12 Advertising Agencies 198
4.9.13 Business Journals 199
4.9.14 Newspapers 199
4.9.15 Key Agricultural Business Contacts 200
5 DISCLAIMERS, WARRANTEES, AND USER AGREEMENT PROVISIONS 204
5.1 Disclaimers & Safe Harbor 204
5.2 Icon Group International, Inc. User Agreement Provisions 205
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