In Ecuador, the regulations that govern cooperatives, are contained in several legal entities, the main one being the Organic Law on Popular and Solidarity Economy – LOEPS (for its acronym in Spanish), issued through publication in the Official Register number 444 of May 10, 2011 and last reformed on October 23, 2018.
It is important to point out that the National Constitution, mentions in Article 319 that: "The service initiatives of the popular and solidarity financial sector, and of the micro, small and medium-sized productive units, will receive differentiated and preferential treatment from the State, in accordance with the extent to which they propel the development of popular and solidarity economy." Because of this constitutional precept, cooperatives, as part of the sector of the popular and solidarity economy, must receive preferential treatment compared to other organizations, which has helped cooperatives to seek their growth and development.
The first aspect highlighted is that the initiatives of the cooperatives that are part of the popular and solidarity economy, according to the National Constitution, must receive differentiated and preferential treatment from the State; however this has been partly fulfilled, as state support has been minimal for cooperative organizations.
There are also several contradictions within the Organic Law on Popular and Solidarity Economy and its regulation, and the Organic Monetary and Financial Code, the Resolutions and provisions of the Superintendence of Popular and Solidarity Economy and the Monetary and Financial Policy Board and other general norms, which considerably affect the cooperative sector.
Key recommendations for improvement
Several cooperatives and integration organisms have been working to improve the cooperative legal framework, especially in this latest year 2019, so that current limits in the norms are corrected and harmonized with the reality of the sector; the most important proposals obtained from the workshops and forums carried out in the country are the following:
• Work so that cooperatives have their own law, separating them from other social organizations that do not adhere to cooperative principles.
• Carry out a comprehensive reform to the Organic Law on Popular and Solidarity Economy and its regulation
• Achieve a different level of supervision for the savings and credit cooperatives in virtue of the nature of its business
• Establish under the law that cooperatives are businesses subject to private law, so that the State respects the decisions of its governing bodies, without threatening the current norms
It should be noted that cooperatives in Ecuador, based on regulation and subsequent supervision, have had a remarkable development; however, in recent years, this progress has been slowed down by instability and constant changes in the control entity and its authorities.
It is the duty of the state to ensure the motivation and respect of the constitutional precept of giving preference to the cooperative sector over other sectors that currently have more opportunities and support than the social economy itself.
The legal frameworks analysis is a tool developed under the ICA-EU Partnership #coops4dev. It is an overview of the national legal frameworks at the time of writing. The views expressed within are not necessarily those of the ICA, nor does a reference to any specific content constitute an explicit endorsement or recommendation by the ICA.