Opportunity And Risk For Chinese Real Estate Investments In Ecuador

Most of the studies about relations between China and South American countries are about infrastructure financing and construction.In contrast,in this paper,the purpose is to analyze the opportunity and risk of the real estate market in Ecuador for Chinese investors.This research applies a mix of qualitative and quantitative methods for data collection.The strategy is to analyze cases of construction companies currently executing or financing construction projects in Ecuador.This will help understanding the current situation of Chinese companies in the market.In addition,the study analyzes macroeconomic factors of Ecuador.A comparison between the economies of both countries shows differences and similarities.In addition,the diversification effect is presented comparing the most important stock market indexes of both countries.A SWOT analysis describes the strengths,weaknesses,opportunities and threats of the market for Chinese companies.Finally,a case study of the company CRBC exposes a real estate investment of Chinese companies in Ecuador.Findings show that there are more than 38 big Chinese construction companies working in key construction projects in the Ecuadorian market.These companies are executing contracts for more than 10 billion dollars.According to the macroeconomic factors and the stock market indexes,the correlation of both economies is positive.This shows that both economies move more or less in the same direction along economic cycles.The main risk of investing in the Ecuadorian market are the strength of property rights and the political instability.The advantages are the good relation between the governments,the low maturity of the market and the low currency risk since the adoption of United States dollar as the national currency.Despite the risks that exists in the country,Chinese companies have shown a high toleration and experience hedge such risks.In summary,the results of this study show that real estate investments of Chinese companies in Ecuador can be feasible.The most promising segments are the tourism and hotel in commercial real estate,and the middle class housing.These two sectors represent the best growth prospects and the least risk.The case study of CRBC proves this fact,by showing the investment of this company in the purchase of a Hotel in the historical center of Quito.In addition,this company plans to invest 200 million in a future hotel development.A questionnaire is presented to show the reason that motivated CRBC to invest in real estate in Ecuador and how they see the market in the future.