New transparency guidelines for royalties and profits in strategic sectors

The Ministry of Energy and Mines has issued Agreement No. MEM-MEM-2025-0025-AM, published on July 17, 2025, establishing the “Guidelines for transparency and traceability of royalties, surpluses, profits and compensation generated by the execution of projects in the hydrocarbons, electricity, and mining sectors”.

This regulatory instrument creates a new reporting obligation for all companies in strategic sectors, with the aim of monitoring the economic resources allocated to territorial development and communities.

1. Regulatory Context and Purpose of the Agreement

The Agreement seeks to make operative and monitor existing obligations under Ecuadorian law, including:

• Mining Law:Stipulates that 60% of royalties will be allocated to social investment and productive development projects.
• Organic Law on Public Electricity Services (LOSPEE):Allocates 30% of the surplus from public generators and 12% of the profits from private and mixed generators to territorial development projects.
• Hydrocarbons Law:Establishes that 12% of profits from hydrocarbon activities will be paid to the State and to Decentralized Autonomous Governments (GADs) for social investment projects.
• Organic Law for Planning in the Special Amazon Territory:Creates the Amazon Common Fund, which is directly fed by percentages of royalties, profits, and surpluses generated in that territory.

2. Key Obligations for Companies in the Sector

• Obligated Parties: The regulation is mandatory for public and private companies and joint ventures in the hydrocarbons, mining, and electricity sectors.
• Reporting Frequency: Companies must submit a report on a quarterly basis.
• Report Content:The report must set out, at a minimum, the following information:
  • The phase of the project or activity.
  • The amount of investment made.
  • The amount allocated for the distribution of royalties, surplus, profits, and compensation.

Lastly, a database will be created to centralize information, and the development of a technological tool for its management is being considered.

Please contact our partners for more information:

• Jaime Zaldumbide (jzaldumbide@pbplaw.com)
• Sebastián Cortez (scortez@pbplaw.com)
• María Isabel Aillón (maillon@pbplaw.com)