INVESTMENT INVESTMENT OPORTUNITIESOPORTUNITIES

ECUADOR

INVESTMENT LAWS AND REGULATIONS

INVESTMENT LAWS AND REGULATIONS•Constitutional PrinciplesConstitutional Principles Promote a new trade and investment regime between States on the basis of justice, solidarity, complementarily (…) Deny the possibility that dispute resolution with foreign companies becomes a conflict between Governments.

•ProductionProduction, Commerce and Investments Act, Commerce and Investments ActEstablishes a legal regime which all foreign and domestic commerce agents must abide.

PRINCIPLES, RIGHTS AND GUARANTEESNon Discrimination: Foreign Investors have the same rights and obligations as national investors.

Transfers. Investors have the right to transfer overseas the complete or partial amounts gained through their commercial activities, if and when all fiscal obligations are met.

Rule of Law. Possibility of subscribing investment contracts which can lead to international arbitration.

Taxation Stability. Long term applicable taxes when a new investment is presented.

Rule of Law. Possibility of subscribing investment contracts which can lead to international arbitration.

No Seizures. Investments shall no be seized, expropriated or nationalized, directly or indirectly, with the exception of those cases which respond to public interest and only when the required legal procedures have been taken into account (…) non discrimination as well as fair and equal treatment must be observed.

Financing. Liberty to access the national financial system and stock market in order to obtain the necessary resources for the short, medium and long term development of investment projects.

INVESTMENT PROTECTION

1. Foreign investors and investments will benefit from protection under the rule of law.

2. They shall receive the same legal treatment as Ecuadorian investors within the national territory.

3. Investors rights are recognized. 3. Investors rights are recognized. 4. Investment Contracts can be signed. 4. Investment Contracts can be signed.

INVESTMENT PROTECTION

INVESTORS RIGHTS

INVESTORS RIGHTS

• To produce and commercialize all licit goods and services.

• To access to all administrative procedures in order to control speculative behaviors. • To import and export goods• To transfer overseas all dividends

obtained periodically.

• To produce and commercialize all licit goods and services.

• To access to all administrative procedures in order to control speculative behaviors. • To import and export goods• To transfer overseas all dividends

obtained periodically.

INVESTMENT PROTECTION

MECHANISM:

Arbitral Clauses may be enacted in order Arbitral Clauses may be enacted in order to resolve controversies between the to resolve controversies between the

State and the private investor.State and the private investor.

Arbitral Clauses may be enacted in order Arbitral Clauses may be enacted in order to resolve controversies between the to resolve controversies between the

State and the private investor.State and the private investor.

APPLICATION OF INCENTIVES (GENERAL, BY SECTOR & SPECIFIC)

• Gradual corporate income tax reduction (from 25 to 22%)• New enterprises receive a 5 year tax cut.• No tax applicable for foreign money transfers. • Expenditure tax cuts on all investments for productivity, innovation and eco - efficiency. • ZEDES:

• Additional 5% tax reduction • Exemption of VAT for imported goods • Exemption of ISD payment of credits and for

purchase of raw materials, production goods and services.

• Fiscal credit for VAT paid on purchase of raw materials, production goods and services

• Gradual corporate income tax reduction (from 25 to 22%)• New enterprises receive a 5 year tax cut.• No tax applicable for foreign money transfers. • Expenditure tax cuts on all investments for productivity, innovation and eco - efficiency. • ZEDES:

• Additional 5% tax reduction • Exemption of VAT for imported goods • Exemption of ISD payment of credits and for

purchase of raw materials, production goods and services.

• Fiscal credit for VAT paid on purchase of raw materials, production goods and services

GENERAL GENERAL

Tax Incentives Application

d. Production of fresh, freezed or industrialized goods.

e. Forest industry, Agro-forest chain & its productsf. Metal mechanics;d. Petrochemicals;e. Pharmaceutical;f. Tourism;g. Renewable Energies;h. Logistical Services;i. Biotechnologies and software; j. Defined areas for import substitution.

d. Production of fresh, freezed or industrialized goods.

e. Forest industry, Agro-forest chain & its productsf. Metal mechanics;d. Petrochemicals;e. Pharmaceutical;f. Tourism;g. Renewable Energies;h. Logistical Services;i. Biotechnologies and software; j. Defined areas for import substitution.

Sectors Sectors

Tax Incentives Application

In addition to “general” and “sector” incentives: all investments undergone in under developed areas shall receive a 100% tax deduction on all new workers for a 5 year time frame.

In addition to “general” and “sector” incentives: all investments undergone in under developed areas shall receive a 100% tax deduction on all new workers for a 5 year time frame.

SPECIFICSPECIFIC

SPECIAL ECONOMICAL DEVELOPMENT AREAS (ZEDES)

Geographical areas within the national territory which take into consideration infrastructure conditions, the environment and electricity, water and telecommunications access.

Shall be designated for:Shall be designated for:1.- Technological transfer and innovation; 1.- Technological transfer and innovation; 2- Diversify the industrial production frame.2- Diversify the industrial production frame.3.- Logistical services.3.- Logistical services.

SPECIAL ECONOMICAL DEVELOPMENT AREAS (ZEDES)

•Impact of technological transfer on local and regional production. Increments on add value exports in prioritized areas.

•Source for public, private and mixed capital investments.• Amount of the investment in accordance to the projects undertaken.• Projects aligned with the national strategy for productive transformation.

THE MAJOR TRANSFORMATIONS IN INVESTMENT REQUIRED FOR ECUADOR

The main objective of the Government of Economist Rafael Correa is to build infrastructure works to attend the demands of 14 million Ecuadorians, to exploit strategic areas in the country to generate resources that will benefit the entire population, as well as the acquisition of resources that will allow developing these and other works.

To achieve this objective we have The National Plan for Good Living which seeks the development of Ecuador, through effective planning processes, with particular emphasis on execution and integral management of strategic sectors.

Ecuador offers a stable regulatory framework.

The Ecuadorian Government has as priority in public and private, national and foreign sectors.

The new legal framework includes: National Assembly, Constitution, Public Companies Law, Public Procurement Law, Production Code, Planning and Public Finance Code, Mining Law, New Hydrocarbon Law

Objectives: ACHIEVE self sufficiency in electric generation, by-Products refining, access to information technology, and management of water resources.

TO BE PRODUCTIVE, with quality in electric services and telecommunications; extraction of hydrocarbons and minerals, and water resource development.

TO BE INCLUSIVE, in the provision of public services accessible to all people.

Goals: Develop infrastructure, Employment generation, Technology transfer, Consolidating investments in strategic sectors, improving systemic competitiveness

ECUADOR STRATEGIC SECTORS

Chinese Companies Investment in Ecuador

Oil & MiningTONGLING Acquired two projects in 652 miners Cooper MM USD to the Canadian company ECSA.Estimated Investment $2, 000 million USD to 2014.

PETRO ORIENTAL, operates blocks 14 and 17,has invested since 2006 until 2009 - 200MM USD. This company produces 12.812 barrel per day .

Chinese Companies Investment in Ecuador

ANDES PETROLEUM, operates Tarapoa field , has invested since 2006 until 2009 – 392 MM USD. This company produces 36.025 barrel per day .

SINOPEC (Lease Petroleum Rigs);and others.

Signed Contract Agreements With Ecuador

Coca Codo Sinclair Hydroelectri c.China Eximbank Financing of USD 1.682 million.Sinohydro built and equipped by 2000 millio n USD.

Construction and equipment of the Sopladora Hydroelectric for 700 million USD.

Construction and equipment of the Sopladora Hydroelectric for 700 million USD.

CHINA Strategic partner of Ecuador

Chinese construction companies Gezhouba and Sinohydro will build two of the largest infrastructure projects in the history of Ecuador: Sopladora and Coca Codo Sinclair. The budgets for the construction of hydroelectric plants are USD 700 million and USD1.700 million for Sopladora and Coca Codo Sinclair, respectively.

The implementation of these projects will generate savings of $ 3 million per day approximately, supplying the thermal energy. They will cover 37% of the power and 35% of the energy demand in Ecuador

Why to Invest in Ecuadorian Projects?

Opportunity for Chinese Companies to develop and execute projects without the requirement to participate in a long bid process, when the offerings include financing on favorable terms.

Growth and profitability for Chinese Companies.

Chinese Banks need to allocate their economical resources in order to increase their profits and diversify your portfolio.

(CDB, EXIMBANK, BANK OF CHINA, ICBC) support the financing for the Ecuadorian strategic projects.

SINOSURE support.

INVESTMENT PROJECTS IN ECUADOR

Pacific Refinery Airport and Port of Manta Cement Factory Cocoa Processing Plant Mine silicon, polysilicon Solar panels factory, microchips,

ceramics. Glass plant Milk Processing Plant Manufactures of metal bridges Auto assembly plant Factory of TV's and decoders

MANTA

Why to Invest in Ecuadorian Electricity Projects?

Opportunity for Chinese companies to build infrastructure projects overseas.

Priority projects that allow us to decrease the generation cost.

Significant economic saving to the State by reducing the fuel imports diesel ) and export the fuel refinery .

Change on the energetic matrix through the use of clean technology reducing CO2 emissions.

Minimum risk of electric black out. Energetic sovereignty.

Why To Invest In Ecuadorian Water Projects?

Risk Reduction caused by drought and floods.

To protect the life of the population. More hectares available for irrigation to

be used in the agriculture sector (alimentary Sovereignty and exportation)

Savings to the State and population through disaster prevention.

Opportunity for Chinese companies to build infrastructure projects overseas.

Why Invest In Ecuadorian Mining Projects? High potential for prospecting

(Unexplored country) Current concessions represent only

4.31% of the country surface. 96.83% are in exploration phase and

3.17% in exploitation High Probabilities of success KINROSS : Most important world wide

gold discovery in the last 10 years Adequate business conditions Negotiation contracts underway

(KINROSS, ECSA, IMC and IAMGOLD)

Legal framework New incentives Guarantees of investment through

contracts Adequate infrastructure and geographic

location

Why Invest In Ecuadorian oil projects (Pacific Refinery)?

Only high conversion refinery of crude oil in South America’s Pacific Coast.

Strategic location for receiving raw material and world wide distribution.

Ecuadorian Oil by-products captive market.

Highly unsatisfied demand of Oil derivatives in the region.

Placement of total excess of electrical generation in National market.

Highly profitable investment sector. New Oilfields development (South-

East)

Ecuadorian New Cement Projects

Millions of tons per year

AMAZONAS

ISIMANSHI

CHIMBORAZO NL

AMAZONAS 0.75

ISIMANSHI 0.5

CHIMBORAZO NEW LINE

1

26

Aditional Needs for 2011

1 million tons for:

1.1.600 Km of concrete roads2.800.000 houses3.1 electrical power dam

Aditional Needs for 2011

1 million tons for:

1.1.600 Km of concrete roads2.800.000 houses3.1 electrical power dam

Ecuadorian New Cement Projects

Share Holders Shares

Private Partner 51%

Social Security 22%

State entity (EPCE) 17%

Employees 5%

Communities 5%

MANTA MEGA PROJECT

Total Overhaul

Flight Coverage: Domestic and International

Location: Manta, Manabí Province

The project consists of developing a modern passenger terminal building with an approximate surface area of 4.466m2; with a technical block of 254m2 construction; a SCI hangar of 3.780m2; and 6.425m2 for vehicle parking, runway extension to reach 3700 mts., cargo terminal and training centre.

FUTURE RUNWAY DIMENSIONS:

3700m x 46m

REFERENTIAL AMOUNT:

US$40.000.000,00

EXECUTION TIME: 18 months

MANTA AIRPORT MEGAPROJECTThe following is required to execute this Mega Project: Significant Passenger and Export-Import cargo to

and from Asia. Investors under the strategic alliance figure,

capable of complying with domestic and international airline requirements.

Creation of Pilot Training School for Latin America.

Ample experience in executing development projects for the aviation sector.

Extensively trained in operation and marketing of airports. Know-how in transfer-airport management (HUB).

CHARACTERISTICS OF THE STRATEGIC PARTNER