ICA raises alarm over Ecuador’s new law affecting cooperatives
BRUSSELS, July 21, 2025 — The International Cooperative Alliance [ ICA ] has issued a formal declaration expressing deep concern over a recent legal development in Ecuador that could significantly impact the country’s savings and credit cooperatives.
In a resolution adopted unanimously at its General Assembly on July 2, 2025, the ICA criticised the Eleventh Transitory Provision of Ecuador’s new Organic Law on Public Integrity, which was passed by the National Assembly on June 24, 2025, and published in the Official Gazette two days later.
The controversial provision mandates the conversion of certain savings and credit cooperatives into commercial companies, a move the ICA says lacks legal and economic justification and threatens the autonomy and democratic governance of cooperatives in Ecuador.
“Cooperatives in Ecuador operate independently of the state. This provision undermines their identity and contradicts the principles enshrined in the Constitution of Ecuador,” the ICA said in its statement published on July 18, 2024.
Cooperative sector’s vital role in Ecuador
Ecuador’s cooperative sector is a cornerstone of the national economy, with over 6 million members and representing around 30 percent of the country’s financial system assets. These cooperatives play a key role in promoting financial inclusion, supporting local development, and reducing poverty.
The ICA warned that compelling cooperatives to become companies is inconsistent with Ecuador’s constitutional recognition of economic pluralism, particularly Articles 283, 309, 311, and 321, which explicitly safeguard cooperative enterprise.
“This development contravenes the Fourth Cooperative Principle—Autonomy and Independence—and may hinder members’ ability to democratically shape the future of their institutions,” the ICA noted.
Clash with international commitments
The ICA also pointed out that the measure conflicts with international standards, particularly the ILO’s Recommendation 193 on the Promotion of Cooperatives, which Ecuador endorsed alongside 144 other nations.
This recommendation encourages governments to legislate in consultation with cooperatives and to ensure regulations are tailored to the unique nature of cooperative businesses.
The ICA’s concerns echo points raised in its 2020 Legal Framework Analysis, which noted the lack of strong legal protections for cooperative autonomy in Ecuador.
International Support for cooperative integrity
The ICA’s declaration referenced the European Union’s Economic and Social Committee, which has called for the protection of institutional diversity in financial systems. The European Systemic Risk Board [ESRB] has similarly stressed the importance of preserving a variety of financial models to reduce systemic risk.
The International Cooperative Banking Association [ICBA], in its cross-country study on regulation and sustainability, has also emphasised the need for proportional regulation of cooperative banks to ensure their continued viability.
“Applying a one-size-fits-all regulatory approach would undermine the resilience of cooperative financial institutions, which are vital for sectors like agriculture and SMEs,” the ICBA report warned.
Call for dialogue and legal reform
The ICA has offered its technical expertise to the Ecuadorian government and legislative authorities, proposing dialogue to help craft a balanced legal framework that respects cooperative identity while ensuring transparency and financial oversight.
“We remain confident that the Government of Ecuador will uphold its constitutional and international obligations and continue to support a cooperative sector that is crucial to the country’s social and economic fabric,” the declaration concluded.
The declaration was signed by ICA President Ariel Guarco and Director General Jeroen Douglas, and endorsed by legal experts Prof. Hagen Henry [Chairperson, ICA Cooperative Law Committee – Global] and Prof. Dante Cracogna [Chairperson, ICA Cooperative Law Committee – Americas].
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