NORTH AMERICAN ECONOMIC DYNAMICS IN ECUADOR: AN ANALYSIS OF FDI FROM THE APEC BLOC (2012–2022)

ABSTRACT

This paper analyzes the flow of Foreign Direct Investment (FDI) from the North American axis of the Asia-Pacific Economic Cooperation (APEC) forum, comprising Canada, the United States, and Mexico, into Ecuador between 2012 and 2022. The analytical framework is based on international business theories and statistical evidence, providing an explanation of why investment from these firms tends toward internalization and full control of assets to safeguard competitive advantages. Methodologically, a case study approach is employed, utilizing a documentary basis and processing official data from the Central Bank of Ecuador to quantify and understand the relevance of these trading partners. The results reveal a marked trend among Anglo-Saxon countries and a shared leadership that defines the structure of FDI within the Ecuadorian market.

АННОТАЦИЯ

В данной работе анализируется поток прямых иностранных инвестиций (ПИИ), поступающих из североамериканского региона форума Азиатско-Тихоокеанского экономического сотрудничества (АТЭС), в состав которого входят Канада, США и Мексика, в Эквадор в период с 2012 по 2022 год. Аналитическая база исследования основывается на теориях международного бизнеса и статистических данных, что позволяет объяснить, почему инвестиции этих компаний имеют тенденцию к интернализации и полному контролю над активами в целях сохранения своих конкурентных преимуществ. С точки зрения методологии используется тематическое исследование (case study) на документальной основе с обработкой официальных данных Центрального банка Эквадора для количественной оценки и понимания значимости данных торговых партнеров. Результаты выявляют выраженную тенденцию среди англосаксонских стран и разделяемое лидерство, определяющее структуру ПИИ на эквадорском рынке.

Keywords: FDI, APEC, Ecuador, United States, Canada, Mexico.

Ключевые слова: ПИИ, АТЭС, Эквадор, США, Канада, Мексика

1. Introduction

This paper examines the dynamics of Foreign Direct Investment (FDI) from the North American axis of the Asia-Pacific Economic Cooperation (APEC) forum, comprising Canada, the United States of America, and Mexico, within the Ecuadorian economy during the 2012–2022 period. Within a context of globalized markets and regional integration, gaining an insight into capital flows is essential to understanding the commercial relationship between Ecuador and the North American bloc.

To address this subject, the analytical framework of this research is grounded in several of the most influential theories of international business as well as statistical evidence.

This theoretical and empirical framework allows us to reveal why, in the face of asymmetries and barriers within the Ecuadorian environment, firms from the North American axis opt for models of full control over their assets to safeguard their competitive advantages.

Regarding the methodology, a case study of Ecuador is conducted, utilizing a documentary basis and processing official data collected from the Central Bank of Ecuador. This research seeks not only to quantify investment but also to understand the relevance of the partners involved.

The document contains key elements such as: a review of the literature on FDI, an explanation of the applied methodology, the analysis and discussion of the results obtained regarding the North American axis of APEC, and the final conclusions.

2. Theoretical Framework

The decision to invest in a foreign country is a strategic response to overcoming environmental failures, such as information asymmetries and restrictive regulations (Kindleberger, 1969; Calvet, 1981). Firms opt for Foreign Direct Investment (FDI) to maintain managerial control, thereby internalizing operations and protecting their competitive advantages against local instability and regulatory barriers (Caves, 1971; Rugman, 1981).

Furthermore, these entities seek security for their strategic assets and aim to mitigate the risks of opportunistic behavior by internalizing activities. This approach allows them to adapt to the host country’s conditions while effectively safeguarding their corporate interests (Williamson, 1981).

3. Methodology: Case Study

This research is developed under a case study framework, focusing on the analysis of FDI flows received by Ecuador. The objective is to identify the capital reception dynamics originating from the APEC bloc during the 2012–2022 period.

For this analysis, the sample was delimited using a purposive selection criterion, defining the United States, Canada, and Mexico as the units of analysis. This selection allows for a specific evaluation of capital behavior from the North American axis of APEC, processing official figures to determine the volume and concentration of these investments within the national economy during the selected timeframe.

The procedure consisted of compiling and organizing statistical records obtained from the Central Bank of Ecuador databases. Through this data processing, the study seeks to establish the relevance of these three trading partners within the country's investment landscape during the years under analysis.

4. Results

This section presents the processed statistical information regarding the flow of capital from the United States, Canada, and Mexico into Ecuador during the 2012–2022 period.

4.1. Evolution of capital flows by origin

Table 1 presents a detailed examination of FDI flows, measured in billions of dollars, from the North American APEC economies into Ecuador during the 2012–2022 period, allowing for a comparison of each issuer's participation within the Ecuadorian market.

Figure 1. FDI from North American APEC Economies to Ecuador: 2012-2022

Note. Prepared by the author based on data from the Central Bank of Ecuador.

The behavior of FDI from the United States, Canada, and Mexico exhibits asymmetrical investment dynamics throughout the analyzed decade. As observed in Table 1, the capital flow is not uniform, presenting marked fluctuations among the three countries.

In the case of the United States (blue bars), it is identified as the most strategic and stable partner of the North American axis, maintaining constant positive flows throughout nearly the entire period, with a notable peak in 2015 ($187.693 billion). This trading partner reported its lowest figure in 2014, reaching only $13.559 billion.

Conversely, Canada (green bars) represents the most volatile partner in the Ecuadorian market. Between 2018 and 2020, Canadian FDI experienced remarkable growth, reaching its historical maximum during the COVID-19 pandemic year with $318.823 billion. However, database records also identify this country as having the most significant divestment processes, with a drastic drop in 2022 that brought the flow down to -$315.884 billion.

Mexico (orange bars), the only country in the North American axis that is also part of Latin America, shows a decreasing trend across the historical series. Following a relevant presence in 2012 and 2013, reaching $91.031 billion, its participation was significantly reduced in subsequent years, remaining at marginal levels for most of the analyzed period, with brief recoveries in 2018 and 2022.

4.2. Capital concentration within the North American axis

The annual analysis conducted enables the visualization of FDI peaks and troughs, from which three categories of partners can be inferred: the United States as the partner with the most consistent capital flow; Canada as the partner with the highest FDI peaks, yet exhibiting the greatest economic vulnerability; and Mexico as an important partner, though to a lesser extent than its peers.

In examining annual behavior, it is imperative to assess the representation of these economies within the Ecuadorian market. The following data reflect the significance of this geographical bloc within the national balance of payments throughout the decade under study.

Consequently, to provide statistical support for these categories, the distribution of accumulated capital is presented below. As detailed in Table 2 and illustrated in Figure 1, the sum of these individual capitals consolidates an investment structure that demonstrates the hegemony of these northern partners.

Table 2.

Accumulated FDI Share by Economy (2012-2022)

Note. Prepared by the author based on data from the Central Bank of Ecuador.

The analysis derived from Table 2 reveals that the North American axis has injected nearly two billion dollars into the Ecuadorian economy over the decade within the study period. The figure for the United States, exceeding $800 million, confirms its status as the most influential partner in terms of gross volume. However, there is a minimal difference of only $19 million compared to its neighbor, Canada, suggesting that Ecuador has developed a shared dependency on these two nations.

To complement the analysis of nominal values, Figure 1 presents the distribution of FDI from a market share perspective. This visual analysis allows for the determination of the degree of dependency of the Ecuadorian economy on each partner.

By converting these amounts into percentages, the structure of weights and counterweights defining the economic relationship with Ecuador becomes evident. The following section presents the percentage representation of each country within the northern axis over the cumulative decade.

Figure 2. The following analysis explores the Percentage Share of the North American APEC Axis in Ecuador (2012-2022)

Note. Prepared by the author based on data from the Central Bank of Ecuador.

Based on the statistical pie chart in Figure 1, the most striking conclusion is that the United States (42%) and Canada (41%) maintained nearly identical market shares in Ecuador, a dynamic that can be defined as a duopoly.

Visually, the chart is divided into two dominant halves, allowing for the inference that no absolute leader exists; rather, there is a shared leadership. Together, the Anglo-Saxon countries of the North American axis dominate 83% of the flow, demonstrating Ecuador’s extremely high dependency on this pair of nations.

Conversely, Mexico’s participation (17%), while smaller in comparative terms, proves to be strategic. Its presence acts as a balancing factor that prevents total reliance on Anglo-Saxon capital flows and consolidates a Latin American identity within APEC-sourced investments.

Thus, Mexico positions itself not only as a complementary investor but as the necessary bridge for diversifying the origin of capital within this geographical axis.

5. Discussion

The analysis of FDI from the APEC North American axis, when contrasted with the proposed theoretical framework, allows for an interpretation of investor behavior not merely as a capital flow, but as a mechanism for protection and control.

The statistical evidence presented suggests that the flow originating from the APEC North American axis does not behave as "hot money" or speculative capital.

The analyzed data correspond to Foreign Direct Investment (FDI), which implies a commitment to permanence and the creation of physical assets within Ecuadorian territory. This dynamic is supported by two theoretical pillars applied to the findings:

First, FDI seeks an anchoring of assets and the control of competitive advantages. Since FDI represents 100% of the analyzed flows from the three APEC member countries, it is understood that economies such as the United States (42%) and Canada (41%) do not merely transfer capital; they install machinery, plants, and offices. According to Caves (1971), the decision to establish operations in a foreign country responds to the need to control competitive advantages, particularly to protect technologies and prevent misappropriation by third parties in the local market.

This reflects a preference for FDI to maintain control and safeguard strategic assets as opposed to exporting. Second, the mitigation of market failures and opportunistic risk. Within the international business climate, Ecuador is perceived as having information asymmetries and regulatory risks—factors that Kindleberger (1969) identifies as environmental failures. Given this situation, Kindleberger suggests that when a firm invests amounts such as the $800.2 million recorded for the United States, it avoids outsourcing or simple contracts with local partners due to the fear of opportunistic behavior.

In this same vein, Williamson (1981) and Rugman (1981) propose the creation of wholly-owned subsidiaries (internalization) as a strategic response to ensure that capital investment is not speculative, but rather capital that internalizes functions to survive and compete in the host environment—thereby maintaining the operation of firm assets under total control.

6. Conclusions. Following the study of the 2012–2022 period, the following final conclusions are established:

1. There is a clear dominance by the Anglo-Saxon axis (duopoly), in which 83% of FDI originates from the United States and Canada. This reflects Ecuador’s high level of dependency on these two nations and leaves the country vulnerable to shifts in their respective policy frameworks.
2. The figures clearly demonstrate that the United States does not hold sole dominance in FDI; rather, Canada has succeeded in matching the ten-year cumulative FDI share. This places them in a state of strategic parity, consolidating both as equally critical partners for national development.
3. Within the North American axis, Mexico holds a 17% share, positioning it as a lower-tier investor compared to the Anglo-Saxon duopoly. Its investment represents nearly one-fifth of the total FDI, establishing it as an alternative investment option for Ecuador with distinct economic cycles.

References:

1. Calvet, A. (1981). A Synthesis of Foreign Direct Investment Theories and Theories of the Multinational Firm. Journal of International Business Studies, 12(1), 43–59. http://www.jstor.org/stable/154418
2. Caves, R. (1971). International Corporations: The Industrial Economics of Foreign Investment. Economica, 38(149), 1–27. https://doi.org/10.2307/2551748
3. Banco Central Del Ecuador (n.a). Inversión Extranjera Directa. Directa Por País De Origen.  https://www.bce.fin.ec/index.php/component/k2/item/298-inversi%C3%B3n-extranjera-directa 
4. Kindleberger, C. P. (1969). American Business Abroad: Six Lectures on Direct Investment.
5. Rugman, A. M. (1981). Inside the multinationals: The economics of internal markets. Columbia University Press.
6. Williamson, O. E. (1981). The modern corporation: origins, evolution, attributes. Journal of Economic Literature, 19(4), 1537-1568.