We recently received the following question from a reader about Ecuador Banks:
I am wondering if you can tell me your opinion on Ecuadorian banks. I am planning to visit Ecuador, possibly Cotacachi, in the next couple of months, and in that time I would be interested in opening a bank account with one of the Ecuadorian banks. So, I would like to know what do you think:
-about Ecuadorian banks in general (any specific bank name that you would recommend)
-looking for the bank with safe deposit box services(how safe)
-what do you think about current problems with USA dollars and connection with Ecuadorian/American dollar and what would you except what will happen with Ecuadorian economy and banks if USA dollar loses more value.
We bank with Banco Pichincha, which is a large private bank. It is larger in terms of market share (about 33%) than the next two banks,ProduBank and Banco Del Pacifico, put together. It is the only bank that has a branch in Cotacachi, so that makes it easy.
Pichincha also has a branch in Miami so it works well for wire transfers. People wire money from their bank to the Miami branch, which is a domestic transfer. The Miami branch then makes an inner bank transfer to the Quito bank, and it is then deposited in our account. The fees are low for this type of transfer and the money is transferred quickly, usually within two days.
I have not heard anything negative so far about the safety of Ecuador banks. Of course, the world’s banks are all connected, and who knows what will happen if the banking system melts down.
We have a well connected friend in Guayaquil, whose nephew who head of a large U.S. bank’s South American division. This person says that in the international banking community, Ecuador banks get very high marks, especially for liquidity. They are considered a good credit risk.
There is some talk on the Yahoo Ecuador-expats bulletin board that there have been problems wiring money from the U.S. This bears watching, but so far our clients have not had any problems.
You cannot open a bank account here unless you have Ecuadorian residency. Previously, we had some success in getting bank accounts for clients who purchase property even if they didn’t have their residency visa yet, due to our personal banking relationship with Pichincha.
However, last week, we visited our friend, the bank manager in Otavalo and he told me the bank had changed the rules so no accounts without a residency permit–period.
The branch here does not have a safety deposit box system, but the larger branches in Ibarra do. Regarding the safety of that, again, who knows what happens if there is a crash?
Regarding your last question about the impact of a fluctuating dollar, if I knew the answers to those questions, I would be a very wealthy man. We were fortunate to get our money out of Euros about a week before the Euro started dropping.
Ecuador is on the U.S. dollar system. In this moment, the dollar is very strong. Ecuador gets nearly half of its foreign exchange from sale of oil, and due to falling oil prices, the country is not doing as well as before on exports. The good thing, however, is that even if the dollar tanks again, the world will still need oil, and Ecuador can sell that oil using whatever exchange mechanism is available.
We are seeing some food inflation here, but not a great deal except for food stuff imported from the U.S., such as supermarket products. I feel much more confident about food here because most of the food we eat is grown within a few hundred miles of Cotacachi.
Much of it is grown locally by indigenous farmers. Ecuador offers a wide variety of consumer goods, and they tend to follow the pricing of the world market. I just bought a Panasonic microwave oven for a client today at a price lower than that quoted on the Panasonic website, which surprised me.
We have also purchased land and intend to create gardens to grow our own food. We have good water, so crops can be grown year around. To me, that feels very secure!
My general impression right now is that Ecuador banks are safer than in the U.S., because Ecuador banks do not have exposure to the mortgage debacle. There are actually very few home mortgages in Ecuador, and they are tough to get.
Minimum rates are typically 25% down and 10 – 12% interest, for people with good credit. Most people actually own their own homes, and with very low taxes, there is no pressure on home owners!
As I mentioned earlier, the world economic system is connected, so who knows what will happen. I didn’t hear of anyone, except perhaps Weiss’s Money and Markets, who predicted the recent increased strength in the dollar, and they only did that about two weeks before it happened. At the same time, their gold writer was recommending gold as a strong buy. We see what’s happening with that now.