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Capital Markets

Over the last 19 years, the value of the market capitalization of listed companies in Ecuador has increased from $690 million in 1992 to $6.10 billion in June 2012, and […]

Over the last 19 years, the value of the market capitalization of listed companies in Ecuador has increased from $690 million in 1992 to $6.10 billion in June 2012, and the average rate of the growth of stock market cap from 2010 to 2011 was 31.73%, according to data published by Standard & Poor’s. Despite such positive trends, the country still lacks a stock market “culture” among its population, and many people are reluctant to invest in financial markets or use its tools, simply because they lack the knowledge to do so.

When it comes to the financial markets, Ecuador has a number of peculiarities. Although it is a rather small market, the country has two different stock exchanges, known locally as the Bolsa de Valores de Quito (BVQ) and the Bolsa de Valores de Guayaquil (BVG), both of which were established in 1969. Ecuindex, the price index and market prices of Ecuador, is one of the main national indicators, as it adequately reflects the development of the national stock market as a whole; when the stock prices of publicly traded companies rise or fall, Ecuindex is there to display the movement of the market as a whole.

The first law regarding the securities market was passed in May 1994, a time when both BVQ and BVG became non-profit civil corporations by law. Four years later, a new law was passed establishing the main regulatory bodies and policy makers for the stock market, which clearly contributed to the positive development of the capital markets in the country. In Ecuador, the main institutions responsible for regulating the securities market are the National Securities Council and the Superintendency of Companies. According to the Securities Market Act, the former is the governing body responsible for establishing the general policy of the stock market, while the latter is responsible for implementing the policies set forth and regulate the activities carried out within the stock market. The two active stock exchanges in the country, through the power of self-regulation, can dictate the rules of general application to all participants and to exercise control over their members, imposing sanctions within the scope of their competence. The types of securities can be fixed or variable. The fixed-income securities are those documents through which the investor receives a known quantity in each period or grants the right to receive fixed interest in the terms of bonds, certificates of deposit, and the like. Meanwhile, equity securities are those that include a right of ownership over the assets of a company, which generate an uncertain cash flow and will depend on the performance of the company and the benefits. According to official figures from June 2012, the exchange trading of securities had reached $1.88 billion. In 2011, this figure increased to $3.77 billion, with about 70% sourced from private players and the remaining 30% from the public sector.


The BVQ’s principle index is Ecuindex, but there are two others being used in Quito. IVQ is the statistical measure of monetary value and the IRRF provides an index for bond performance. Currently, the BVQ has 32 listed companies and 38 brokers, all authorized by the Superintendency of Companies.

The total trading volume by June 2012 was $0.89 billion, with $0.64 billion from the private sector and $0.25 billion sourced from the public sector. In this regard, the three most traded companies in the BVQ in the last three years were La Favorita ($11.97 million by June 2012, $30.49 million in 2011, $45.59 million in 2010, and $30.7 million in 2009), Holcim ($2.5 million by June 2012, $4.34 million in 2011, $2.13 million in 2010, and $412.23 million in 2009), and Produbanco ($29.56 million by June 2012, $0.69 million in 2011, $2.75 million in 2010, and $2.10 million in 2009).

The average annual growth rate of the stock exchange from 2001 to 2011 was 10%, and BVQ has been regionally known to tackle the challenges of money laundering by developing its own back office system, SICAV. Patricio Peña, Chairman of the Board of the BVQ, told TBY that “the system directly processes reports that the operators are obliged to make to the financial analysis unit, which is in charge of supervising preventative practices for money laundering at the national level.” Peña also added that they are in negotiations with various South American markets to export such a successful tool in the fight against money laundering.


The BVG currently has 26 listed companies and 20 brokers. The main index is the BVG, which shows the evolution of a representative basket of stock and is a selection according to the trading volume and market capitalization of the companies. Some of the most relevant members are La Favorita, San Carlos, Holcim Ecuador, National Brewery, Banco de Guayaquil, Inversancarlos, Green Hill Forest, and Pichincha Bank. Another index is the IRECU-BVG, a national index that is adjusted for movements of capital and the delivery of cash dividends. A third is the IPECU-BVG, an index of the Ecuadorean stock market prices, reflecting its evolution and adjustments to the movements of capital. The average annual growth rate of the BVG from 2001 to 2011 was 8%, and the total volume traded by June 2012 totaled $0.99 billion—$1.97 billion in 2011, $2.70 billion in 2010, and $3.64 billion in 2009.


Since January 2012, the BVQ and the BVG have begun unifying their trading systems with the Unique Interconnected Trading System (SIUB). A third company, owned equally (50%) by both stock exchanges, is currently administering this new trading system. This initiative is part of a global project to unify both stock exchanges in the near future; the country expects that the unification of the stock exchange in Quito and Guayaquil will further develop the stock market and make it more efficient, enable Ecuador to compete with other markets in the region, and increase the overall number of issuers. At the same time, this project is part of the new Securities Act, which is expected to come into force in the near future and introduce key changes in the sector; the stock exchange will become a limited company (SA) and start paying taxes, rather than being a non-profit organization. The stock exchange will promote further corporate transparency, as well as transparency in market operations, as well as facilitate the access to data of listed companies. The new bill is aimed at strengthening the position of the country’s securities markets at the regional level, as well as further integrate them in the South American arena as part of the Latin American Integrated Market (MILA), which brings together the stock exchanges of Chile, Peru, and Colombia.


In 2012, the state is expected to make new bond issues, since it must cover the fiscal deficit with internal debt. In 2011, there was no issuance of government bonds, but the situation could play out differently in light of the need for liquidity. The government has a pilot plan to sell its debt, in what would be the first international sale since 2005, and will use the money to finance public works projects for the short and medium term. Ecuador’s bonds are rewarding investors with the best performance in Latin America, returning 15% in 2012, compared to the 9.9% returns from Latin American countries on average, according to JP Morgan Chase & Co.

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