Logistic Supply Center in Ecuador

Project Overview

The Logistic Supply Center is a distribution HUB located in a strategic area within the Metropolitan District of Quito, near the country’s main highways. It focusses on the concentration and distribution of all perishable and nonperishable products, within and outside the city, encompassing the highland region of Ecuador, reaching even the Galapagos Islands.

It seeks to supply a population of 3.5 million by the year 2040. This project is necessary to decongest the city from its current location, and should be complemented by two additional logistics platforms at district level, supplying the northern, eastern and southern areas of the capital.

It intends to guarantee an equitable and sustainable urban development, incorporating concepts and technologies that form part of the Climate Change and Resilience Action Plan, such as energy efficiency (renewable), responsible consumption of resources, smart agricultural investment plans, air quality improvement, increase in rural and urban green areas and trees , rainwater management and selective waste collection. This project will generate transformations in infrastructure, urban image, operation and management, fostering the commercial and cultural exchange of the city. It proposes a participative management model that includes commitments of different stakeholders, development and monitoring of indicators, financial viability and highlights cultural memory.

Sectors

• Energy
• Roads & Bridges
• Transport & Mobility
• Urban Infill & Public Space
• Waste Management
• Water & Sanitation
• Others (Economical: Supply chain for Supplies and commercialization)

Objectives

The project seeks to improve the supply and marketing system within the Metropolitan District of Quito, through storage, preparation and distribution of products, considering the projected growth for the city during the next 30 years. The Logistic Supply Centre will unify and centralize the exhaustive supply chain and marketing management, at the outskirts of the city, facilitating the control and efficiency of marketing processes, optimizing transport flows and accessibility. It will improve the city´s life quality in the near future.

Progress Tracker

Phases

• Phase 1
  

  Feasibility project update. July 2021 - February 2022
  a. Offer and demand information.
  b. Technical feasibility;
  c. Economic feasibility;
  d. Commercial feasibility;
  e. Legal and political feasibility;
  f. Time feasibility

• Phase 2
  

  Municipal Ordinance review: February 2022 - April 2022
  a. Review of the existing ordinance in coordination with the Secretary of Territory, Habitat and Housing (technical meetings)
  b. Directory approval.
  c. Municipal Council approval.

• Phase 3
  

  Conformation of an executing unit: June 2022
  A minimum multidisciplinary technical staff would be required. However, additional support personnel can be determined once the feasibility stage is updated: Coordinator; Urban planner; Lawyer; Economist/financial analyst; Sociologist; Geographical Engineer; Engineer; Civil engineer; Architects (2)

• Phase 4
  

  Identification of Sources for Project Finance: May 2021 July 2022
  a. Developed Project
  b. Presentation to Investors
  c. Public-private negotiations

• Phase 5
  

  Management model: February – April 2022
  Public and private investors model development through participatory processes, including the following stakeholders: local government, private investors, merchants, transportation carriers, civil society, professional unions, or other stakeholders that can be identified in the process.

• Phase 6
  

  Socialization process with stakeholders: May 2021 – Dec 2024
  The executing unit will determine the most appropriate socialization method for this type of project, that should include group and coordination meetings, field visits, business models, identification of stakeholders related to the project with active participation. To this date, meetings with municipal institutions, that have the competence for the development of this type of project, are being held.
  
  The following stakeholders have been initially identified:
  a. The Metropolitan Public Company for Habitat and Housing in Quito (EPMHV), as the project leader, in charge of generating sustainable habitat and integral development of urban and rural areas, within the Metropolitan District of Quito.
  b. District Trade Coordination Agency (ACDC), in charge of coordinating and executing policies and competencies related to trade management within the Metropolitan District of Quito.
  c. Metropolitan Public Company of the Wholesale Market (MMQ-EP), municipal institution responsible for the execution of administrative support processes for the operation of collection systems, commercialization and permanent supply of agro-ecological products in the Metropolitan District of Quito.
  d. Secretary of Territory, Habitat and Housing, whose function is to define territorial policies and strategies to be applied within the Metropolitan District of Quito, based on integral and sustainable criteria.
  e. Wholesale merchants, who distribute perishable and non-perishable items in the market.
  f. Transport carriers, who transport the merchandise.
  g. Other Institutions: Environment Secretary, Metropolitan Public Cleaning and Waste Company of Quito (EMASEO), Metropolitan Public Company for Integral Solid Waste Management (EMGIRS), Secretariat of Security and Governance, Quito Electric Company, Metropolitan Public Company of Water and Sanitation of Quito.
  h. Public and private control entities.

• Phase 7
  

  Definitive architecture and engineering studies: February 2022 The Secretary of Territory, Habitat and Housing, indicates that this project could be developed, at the PUAE-ZEDE-QUITO (Special Development Zone in Tababela), of Municipal property.
  
  a. Spaces and areas based on new requirements update, according to an integral and participatory process.
  b. Land information (land use and management plans 2021).
  c. Topography plans and soil studies.
  d. Architectural Design update.
  e. Engineering studies update (Structural, Hydro sanitary, Electrical, Electronic, Mechanical, Environmental protection), including sustainable studies (solar panels, recycling programs).
  f. Project Budget update.
  g. Municipal Project approval.
  h. Construction permits.

• Phase 8
  

  Construction process: January 2023 - Dec 2025

• Phase 9
  

  Operation: January 2024
  The operation plan must determine the most appropriate public, private or public-private business model within the management model to be developed, and will have the following components as its minimum requirements:
  a. Logistics
  b. Operating regulations (Includes certified organic products)
  c. Direct and indirect cost services
  d. Existing Merchandise

ESG Impact

The project targets to function interchangeably with sustainable, socially responsible, and mission-related investing:

Economic Development
The project proposes an increase in qualified labour force, increase in wages, micro financing, and significant mobilization of resources that contribute to SDG1. Ordinance updates in relation to employment laws and safety. This will positively impact the local public, as it will improve and optimize local services, management and transportation of merchandise. It intends to increase a fair distribution of benefits. It will also increase investments and tourism. This will generate complementary services and allow an orderly, efficient and modern exchange of products both locally and nationally.

Social Impact
It will contribute with SDG10 by promoting the social, economic and political inclusion of all, ensuring equal opportunities and equal rights to economic resources, adopting social protection policies, improving the regulation and monitoring of global financial markets and institutions. It will include training, gender equality (as 70% of the commercial spots owners are women at the actual wholesale market in Quito), poverty reduction, due to equal rights to economic resources and employment.

Governance
It intends to attract new investments and visitors, through creating confidence, by managing political risks through multi-stakeholder collaborative partnerships. Ethical solutions through the responsibility of various supply chains, strengthen long-term relationships and legitimate requirements of all stakeholders. It must consider the three dimensions of sustainability by economic, environmental and social solutions. It also prioritizes resources.

Environmental
The new building will be focused in reducing waste impacts, in relation to environmental laws and regulations, as well as enhancing technology for sustainable natural resources (energy and water).

Beneficiaries

Direct Beneficiaries
– Wholesale merchants: 12.500 (total within de Metropolitan District of Quito-DMQ). The District Trade Coordination Agency suggests relocation of aprox. 360 merchants (2.8%).
– Largest private national and international companies in Ecuador: 485. The total sales revenue is aprox. 15.5 billion dollars, with an average profit of 7.2 million in each of the first 126 companies.

Indirect Beneficiaries (Projections based on the 2010 Ecuadorian census)
– Final Consumers: According to the studies developed in 2015, 65 markets in the DMQ attract 1.2 million people per week, thus representing 48% of the projected population in 2015.
– DMQ Inhabitants by 2021: 2.8 million
– Neighbouring Cantons:
Cayambe: 110.045, Mejía: 111.236, Pedro Moncayo: 44.420, Rumiñahui: 118.843, San Miguel de los Bancos: 31.628, Pedro Vicente Maldonado: 17.656, Puerto Quito: 25.385.
– Galapagos Islands: 33.000
– Country: 17 million

Support

Technical Support Required

In the first quarter of 2021 the Metropolitan Public Company of Habitat and Housing of Quito (EPMHV) has restarted efforts in developing this project, in order to update the project and make it a reality. It has led meetings with various Municipal Institutions in Quito, such as the Secretary of Territory, Habitat and Housing, the District Trade Coordination Agency, the Metropolitan Public Company of Wholesale Market of Quito, and Non-Refundable Financing Banks. The consultancy developed in 2015 is a starting point, and its study update is necessary to finance the project. The technical steps are the following:

a. Feasibility project update: The consultancy carried out in 2015, “Feasibility studies and definitive design for a New Wholesale Centre for Supplies and Commercialization of Goods for the Metropolitan District of Quito.” needs to be updated, in relation to the estimation of supply and demand, the definition of the location of the project, and the Architectural and engineering designs. The functionality of the building must be reviewed, due to the time lapse of 6 years, changes in requirements, needs and growth of the city, immigration, pandemia, etc. Developing the project in the ZEDE-Quito location, as a strategic investment project, requires updates in plans and designs. This location is considered optimal due to its closeness to the airport and main highways, thus mobilizing goods more efficiently.
b. Municipal Ordinance ZEDE Quito Review: The Metropolitan Ordinance, Special Urban Architectural Project No. 001 of 9th may 2019, must be reviewed according to the new regulations set by the Land Use and Land Management Plan – (PUGS in Spanish), that will be approved and published during the last quarter of 2021 by the Municipal council. These new land management regulations will allow the development of this project in this location. However other location alternatives can be considered through evaluation studies and multifactor analysis if necessary. c. Creation of an executing unit: It is needed for the project implementation, that include experienced professionals in project management.
d. Identification of Financial Sources for the Project: It is important to search mechanisms such as strategic alliances, or internal and external investment credits, that include private-public financing.
e. Management model: It is necesary to develop project management and operation models through participatory processes. It is necessary to update trade policies and regulations, promoting the development of supply centers. It contributes to the decongestion of urban centers, provision of services and infrastructure, supporting a controlled economic growth.
f. Socialization process with stakeholders: Permanent socialization processes with all stakeholders is very important.
g. Definitive architecture and engineering studies update: The new location of the project, in the ZEDE-Quito, implies new topographic and soils studies, an adjustment in spaces needed, architectural and engineering designs.
h. Construction process: Pre-contractual and contractual phases must be carried out with the updated definitve studies and the municipal approved project.
i. Operation: An update in the project´s operating costs is needed, since only an estimate of construction costs exists. Operating costs must include: Security costs, Basic services, cleaning, insurance, maintenance, reinvestment.

Stakeholders

Governmental Buy-in

Investment in security and project management will be evaluated, according to the study and management model update.

Other Forms of Governmental Support

There may be reduction in tax payments, according to the Organic Law that ""Promotes Production, Investments attraction, Employment generation and stability, and Fiscal balance”, Official Registration Supplement No. 309, August 21st 2018, indicated as follows:

- EXONERATION OF INCOME TAX: In the ZEDE-QUITO location, there is an income tax exemption for 10 years, starting from the generation of operating income.
- EXONERATION OF CURRENCY OUTPUT TAX: New productive investments through investment contracts, will have the right to exoneration from Currency Output Tax on payments made abroad for the following products: Import of capital goods and raw materials, distributed dividends by national or foreign companies domiciled in Ecuador. For external financing, the benefit is maintained according to the general regime.
- REINVESTMENT OF PROFITS: Abroad payments for the distribution of dividends are exempted from Currency Output Tax, provided that 50% of the company's profits are reinvested. These dividends will be free of Income tax. This applies as long as the company reports its shareholding structure. The company must increase its capital.
- INCENTIVE APPLICATION RULES: The investment must start within the first 24 months. At the end of the period, the President of Ecuador may extend it for further 24 months or cancel the incentive. All exemption periods start with the first income that the company generates attributable to the new investment. For existing companies, the exemption will be proportional to the new investment. The mere transfer of assets between related parties is not considered a new investment. For investments from tax havens, the benefit applies as long as their corporate information is revealed.
- SPECIAL ECONOMIC DEVELOPMENT ZONE (ZEDE): Exemption from income tax and its down payment for 10 years starting with operating incomes. Additional reduction of 10 points in Income Tax, is applicable for another period of 10 years.
- PUBLIC-PRIVATE PARTNERSHIPS: For PPP projects trusts might be created, for resource collection and management, coming from activities within those projects.
- INVESTMENT CONTRACTS: Arbitration is mandatory in investment contracts above USD 10 million. Arbitration rules may be followed: UNCITRAL Rules - ICC Rules - ICAC Rules (Inter-American Convention on International Commercial Arbitration).

National Ministries Involved

Ministerio de Agricultura y Ganadería – Ministry of Agriculture and Livestock
Ministerio de Economía y Finanzas – Ministry of Economy and Finance
Ministerio de Ambiente - Ministry of the Environment, Water and Ecological Transition

SubNational Ministries Involved

a. Metropolitan Public Company of Habitat and Housing
b. Secretary of Territory, Habitat and Housing
c. District Trade Coordination Agency
d. Metropolitan Public Company of Wholesale Market of Quito

Other Entities Involved

N/A

Licenses and Permits

No, it does not have the permits and licenses yet to operate. Once the studies are updated, the corresponding permit application will be made, including the Single Metropolitan License for Economic Activities (LUAES) and patent payments for people who have permanent economic activities in the Metropolitan District of Quito.

Updates

Supporting Documents

No supporting documents included.