Quito is on the up n up
Ecuador’s biggest city is no longer just a stop over, it’s South America’s rising capital presenting its new government, plus zero taxes for international startups
A more business focused way of looking at a city felt just interesting to me…
Flying into Quito, the first thing that I notice is how much more spread out this city is, than I had imagined. A mountainous, high altitude sprawl that feels quintessentially South American, but with a right dose of newness. We cruise from the brand new airport, that might be small but is fresh and easy to maneuver, towards the old town. In fact, this old town section of Quito has an idyllic historic center, protected by UNESCO since 1978, with churches, convents and public structures that have recently been meticulously reconditioned.
From the rooftop of the 16th-century domed Metropolitan cathedral right on the old town square, the city scape is awe-inspiring. Not only is a winged aluminum Virgin Mary (Loma El Panecillo) peering down at me from a hilltop, but there are volcanoes and glorious mountains in the distance, greenery visible from the largest South American urban park that’s right nearby, and a giant neo-Gothic church (The Basilica of the National Vow) that winks from across town.
Quito, with roughly 2,644,145 calling it home, as Ecuador’s capital city, feels the direct impact of actions from a central government. Being the home for the house of congress, presidential palace, and actually, the epicenter of all government decisions and policies, the first impact is directly seen and felt right here in Quito. In the past, one of Quito’s biggest international players were the oil companies (like Andes Petroleum and Haliburton) - but with bigger ideals, and a surfeit of young entrepreneurs, the city is in a happy flux. And now with a new government, it is preparing to receive the world. Including happy travelers like me interested in more than just the obvious travel things - but also the economics and how the city functions.
Some of the city’s most impressive developments are already mostly done, but as you walk down the old town’s historic streets, building sites and cranes are everywhere. For instance, the job-creating underground metro opened recently, and the amazing cross city cable car system. Not to mention a gorgeous new Design Hotel, Carlota, and a brand new luxury boutique property, Illa Experience Hotel, both in restored old buildings now beautifully and respectfully modernized for the 21st century traveler.
With such sentiment it’s very noticeable that there is a careful restoration of all of the city’s various heritage sites, and that - to me – shows they’re serious about everything.
“Political and economic stability was never Ecuador's strength over the past decades,” says Quito restaurateur Jan Niedrau, who’s restaurant Zazu is a Relais & Châteaux member. “Governments were frequently thrown over by the people, corruption has been an issue for a long and devastating economic crisis has struck the country.”
But as Niedrau points out, Ecuadorians simply got used to this instability. “Quite frequently you will hear people comment that Ecuador in this sense is 'like a cork swimming on water. The waves will rock and shake it, but it will always float’,” he smiles.
That long road to growth
And so the road to real growth, and the future may just be a little winding. The official estimate for Ecuador's GDP was $195 billion at the end of 2022 in purchasing power partity terms. The reduced oil output here, along with perhaps a few more planned austerity measures (to reduce the debt burden) is what’s impacting overall economic activity. And according to the World Bank, the nation’s high dependence on external borrowing, paired with not having their own currency, is what could potentially jeopardize long-term financial stability. And then there is the current impeachment trial of the current head of state.
But that isn’t exactly doom and gloom. From 2017, Ecuador joined the EU’s trade pact with Colombia and Peru, agreeing to eliminate high tariffs and tackle technical barriers to trade. According to the Council of the European Union, it “includes commitments on the enforcement of labor and environmental standards, as well as rapid and effective dispute settlement procedures.”
Producing finished goods – quality over quantity
“Historically, Ecuador is known as a supplier of cheap raw materials - particularly agricultural products (bananas, roses, cacao, and shrimp being the biggest) in addition to oil,” says Jerry Toth, co-founder of To’ak, a high end chocolate company based in Quito. “This type of economy generally presents a country with a very low ceiling of economic development. The government recognizes this, and for the last five years has started to encourage Ecuadorian businesses to steer their focus towards ‘finished goods,’ particularly from raw materials that are produced in-country. This isn't the kind of thing a country can change overnight, and Ecuador still has a long way to go.”
“Ecuador would sell its premium cacao at bulk prices (with low margins) to chocolate makers in countries like Switzerland and the US, who used their ‘specialized’ skills to produce the ‘finished good’ of chocolate, which obviously commands higher margins,” shares Toth. “To'ak took fine dark chocolate to a whole new stratosphere. It launched a $260 bar of dark chocolate that single-handedly established a new precedent for luxury in the realm of chocolate.”
Leading with Biodiversity
Ecuador, although relatively small, has some of the world’s most biodiverse areas – from the Amazon rainforest, the Andean mountains to the Galapagos Islands. According to their Tourism agency, it is home to 18% of the world’s bird species and orchids, 10% of the world’s amphibians, and 8% of the world’s mammals. But, like the rest of the world, this is under threat from oil exploration, old methods of agriculture and, of course, mining. Canopy Bridge, a non-profit network based in Quito, aims to help. They are connecting indigenous farmers with buyers from the city, and run many educational programs promoting better environmental considerations.
Silicon Andes, and an array of start ups
Quito is also the brain of what some may call the Silicon Andes. One of the driving factors of this initiative, by the government, has been the public Yachay Tech University, with a campus just outside the city, to establish a hub for technological innovation and knowledge intensive businesses. The university is supposed to collaborate with public and private research institutions with a $400m annual budget. Although they have had some negative press, overall the university looks like it’s finally growing up with the right leadership.
But there is so much more going on beyond this one education experiment. In the past year, the emergence of food and beverage startups are most evident, particularly in terms of craft beer and, of course, chocolate. Now there are many dozens of different Ecuadorian beer brands, all of which are small and local, but as Toth points out “legitimately good.”
“Quito has always been important to me for many reasons, the first of which is the fact that I’m from here. Secondly, I was the mayor of Quito, so I’ve really gotten to know it well,” says businessman and ecologist Roque Sevilla, who was mayor of the city from 1998-2000. “For Quito the area of digitalization is gaining momentum and, once that it goes into full force, it will help facilitate companies and businesses here, in a big way.” It also helps that the Internet and mobile connectivity are amongst the fastest on the continent, according to cell phone provider Movistar.
Patricio Alarcon, the President of the Chamber of Commerce, touts that he thinks the city has a fairly developed entrepreneurial ecosystem, with coworking spaces, innovation spaces, and incubators throughout. “IMPAQTO (a coworking community) is one of the most developed spaces; renting out part of their infrastructure to companies such as Spain’s vehicle hire company, Cabify,” he adds.
In fact, Startupranking.com has a list of 50 startups all based in Quito with e-learning Cuestionarix and Evaluar.com as their highest ranking (with their own metric of startup importance on the internet and its social influence). So it’s no wonder that I can find activities like a startup weekend (https://www.facebook.com/StartupUIO), an Annual weeklong tech gathering (https://www.facebook.com/campuspartyecuador) plus the support and motivation of business initiatives like Kruger Corporation (https://www.krugercorporation.com/) with their lab for startups and incubators filling up the city’s calendar for the year.
Improving the old way of bureaucracy
In the "Ease of Doing Business Index", Ecuador currently ranks #118 out of 190 countries - one slot behind Argentina and four ahead of Uganda. But this is an improvement from just five years ago, when it was ranked #139. “In 2006 before the start of former President Correa’s government I remember having to wait in lines for hours on end and always have to hire a – tramitador – middleman for even the smallest paper work, the efficiency was that this person was a friend or partner of the person behind the desk at public offices, this position today does not exist, most paperwork can be done online or quickly without having to pay anyone for these services, “ says Marcel Perkins, owner of the Illa Experience. “You can incorporate a company in a few days and be up and running with your business ideas quickly. Trademarks can be registered easily, there are several mediation and arbitrage chambers to help solve conflicts and in general business goes smoothly.”
Tourism beyond the Galapagos
“In the tourism industry we have seen leaps and bounds improvement of infrastructure, from being a pothole ridden country that would break and destroy the sturdiest 4x4 vehicles, Ecuador today has some of the best roads in South America,” adds Perkins, who also owns Latin Trails, a local tour operator.
And now, as witnessed firsthand, Quito’s international airport has also changed from being a risky landing area amidst city buildings and neighborhoods into a mega airport outside of the city. And so, many airlines feel comfortable to use this as a hub – recently welcoming Jetblue, United Airlines, Air Europa and from last summer Condor started to deliver direct flights from Frankfurt.
And so what does the future look like?
“In terms of sentiment, in recent years a sense of pride has grown in the younger population. New graduates are happy to study gastronomy, tourism guides, hoteliering, arts and music, yet all related to rescuing Ecuador’s heritage,” says Perkins. The result is the rise of many restaurants offering haute cuisine and international fusion with local ingredients, interesting music venues with local artists, micro breweries with andean brews combining local grains, new types of city tours that involve experiences way beyond mere sightseeing, opening of interesting and these eclectic boutique hotels.
“The city of Quito has become a metropolitan capital with cosmopolitan views that includes all modern lifestyles; the city is inclusive to minorities and with Ecuador’s no visa policy it has become home to citizens from several nationalities from around the globe,” adds Perkins.
The talk on the street is the need for crowdsourcing, and perhaps a tax free area near the airport for the logistics industry, and the need for pedestrianizing the old town for visitors - all good ideas for the very near future. “With a solid business idea and a great amount of passion put into it, you will find little places in the world with such limited competition,” says Niedrau.
So why now?
Juan Fernando Molina, an executive at auto player Corporation Maresa, thinks the “green field opportunities in services and technology is what makes Quito so special. “International companies that partner with local knowledge will have a competitive advantage,” he shares.
“I believe that one of the main advantages of the city is its size, which allows you to do a great high quality business networking,” says Gonzalo Chiriboga, president of the Republica del Cacao. “Many multinational corporations now use Quito as a pilot market for their new developments and new product launches due to its unique consumer habits that allow you to understand the possible success or failure in different markets.”