The economy has struggled with finding fiscal balance since the early 2000’s when the government switched from a national currency to the USD. In the 90’s the government came into a windfall of commodities, especially oil, and the administration at that time ballooned the State with spending on government jobs with little directed towards infrastructure. Those actions lead to massive government spending and debt causing hyper-inflation in the currency. To fix this they adopted the USD which provides stability but also locks the country into debt issues because they can not print more money during recessions or borrow money because of the massive debt piled up. Local banks and institutions seek outside cash dollar infusions.
Cost of Living
The cost of living in Ecuador is fairly low based on American standards but is often more expensive than other Central or South American countries. Because Ecuador uses the USD the general infrastructure throughout the country is well maintained and high quality. Labor is very cheap here with the average hourly rate at $2.50/hr. This wide effects across the economy that depress the costs for construction, maintenance and labor. The low hourly wage makes it ideal for constructing large scale projects and allows for the purchase of affordable land. The economy has also produced highly resilient localized supply chains. Locals need to produce their own goods and services and offer them to the immediate region as it is too costly to have long, complex supply chains for most producers.
Housing availability
Based on our current research with real estate agents and the expat communities local housing is in short supply. For expats with standard western quality expectations housing is almost non-existent. The average Ecuadorian household does not have running hot water and many locals live in small houses with large families. There is very low inventory of houses that have more than 2 bedrooms and include on-demand hot water.
Finding a 4 bedroom family home that is comparable to western standards is practically impossible, with relatively no housing available for that market segment. There are currently two new waves of expats moving into the region, the newly crypto-rich and those who see the global society is on the brink of collapse. These two waves of immigrants are converging in the Loja/Vilcabamba region but with no housing inventory available to meet their needs people are settling for long-term hotel rentals and less than adequate housing rentals. There are very few hotels that meet western standards.
The several families staying at Madre Tierra have expressed very strong interest in our development plan. They have mentioned that they would buy a home immediately if it were on the market and would like to know when our homes will be available.
Incentive Programs
Ecuador is looking to encourage as much foreign investment as possible because it can not print its own money and relies on USD to operate its economy. This reliance does mitigate against large scale inflation because of the reserve currency status of the USD. It also increases the difficulty to stimulate their own economy locally. In order to create stimulus, Ecuador has introduced tax exemptions and incentive programs. Some of these programs are related to the environment and how to support and protect the natural resources of the land. Companies and projects that demonstrate environmentally sustainable or enhancing business activates can access these incentives to further fund their operations.
Cohere is actively creating relationships with government officials to demonstrate our beneficial impact on the environment in order to take advantage of these incentive programs.
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