Ecuador

Ecuador

Legal framework

 

It aims to evaluate whether the national legislation in place supports or hampers the development of cooperatives, and is therefore “cooperative friendly” or not, and the degree to which it may be considered so, also in comparison to the legislation in force in other countries of the ICA region, or at the supranational level.

In addition, the research aims to provide recommendations for eventual renewal of the legal frameworks in place in order to understand what changes in the current legislation would be necessary to improve its degree of “cooperative friendliness”, which is to say, to make the legislation more favourable to cooperatives, also in consideration of their specific identity. This webpage presents a snapshot of the legal framework analysis results for Ecuador.

 

 

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.

 

Cooperative Friendliness

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

 

Conclusions

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.

 

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