For a country of 16 million people with a GDP under $100 billion, Ecuador spends a lot of time in the US crosshairs for inadequate IP protection. The country has been cited in the US government's Special 301 IP report every year for the past decade, alongside perennials like Russia and China.

Pharmaceutical access has been the sharpest point of conflict with the US, most recently due to Ecuador’s strong stance on compulsory licensing of medicines. But Ecuador’s pirate disc markets also appear regularly in USTR and industry reports. As the copyright industry group IIPA put it in its 2013 Special 301 submission, “The level of piracy in Ecuador worsened in 2012, and pirate music products are being massively sold in shopping malls without any control from police or local authorities.” The story hasn’t changed much since 2003, when the IIPA described “dramatic decreases in IPR enforcement.”

No one expects Ecuador to wage war on the pirate CD or DVD trade. As long as multinationals set prices for CDs, DVDs, and software at US and European levels, legal markets will be small and pirate markets large. In a country where the informal sector contributes over a third of GDP, street enforcement will be costly and unpopular.

But the US does expect the Ecuadorean government to buy into the premises of the US IP agenda by treating weak legal markets as an enforcement problem rather than a pricing problem—that is, Ecuador’s problem, not Hollywood’s. This produces a kabuki aspect to enforcement efforts in Ecuador (and in many middle- and low-income countries, according to this American Assembly piracy report), marked by high-profile but ineffective police campaigns, harsh but rarely applied penalties, and widespread, low-level graft as police and vendors negotiate the terms of day-to-day business.

The question for Ecuador and for many other poor countries, then, is how to break the relationship between poverty, piracy, and high prices. And on this front, Ecuadoreans have gotten creative. Since 2010, Ecuador has experimented with licensing models for DVDs that incorporate, rather than reject, the informal sector. Street vendors, local rightsholders, and the government have begun to work together to address the problems of affordable, legal access to media.

The film boom

The backdrop to these developments is the Ecuadorean government’s efforts to build a domestic film industry. As in other Latin American countries, Ecuador’s film market is tiny and dominated by Hollywood. Throughout the 1990s, only five domestic feature films were produced.

The Ecuadorean film boom began with a small community of breakout filmmakers in the early 2000s—Sebastián Cordero, Camilo Luzuriaga, and Tania Hermida—who began to find success in international festivals. Declining production costs were major enablers of this new work, driven by the adoption of Digital Video, and later, DSLR-based cameras. Víctor Arregui’s well-received Fuera de juego, for example, was recorded with a MiniDV camera on a budget of $4,000.

Then came the establishment of the National Film Council in 2007, which made production grants and co-production arrangements available to local filmmakers for the first time. These financial instruments jumpstarted a wave of new feature and documentary production. Between 2007 and 2012, over 150 films were produced (or co-produced) in Ecuador.

But production doesn’t mean that the movies get shown. Weak distribution is a chronic problem for the domestic industry; at last count, Ecuador had only 225 movie screens, which show almost exclusively Hollywood hits. Even with the much lower costs of Ecuadorean filmmaking, the local film community understands that the production boom needs a corresponding exhibition boom if it is to build audiences.

Here, too, the government has stepped into create markets. In June 2013, the National Assembly established domestic content quotas of 40 percent for the major television networks. As in other countries that have adopted quotas, the goal is not just to strengthen exhibition but also to shift investment from foreign licensing toward domestic production. The downside is that such policies can quickly become constraints. What Ecuadoreans want to watch and what they can produce to fill quota schedules may not always coincide.

But broadcasting is no longer the only distribution channel in Ecuador. Internet penetration is growing rapidly (the World Bank put the number at 35 percent in 2012), but for most Ecuadoreans, high-bandwidth connections are still tomorrow’s technology. Today, the more interesting experiment is the regularization and legalization of the ‘pirate’ vendor networks in the major cities—the other major distribution channel for audio-visual goods.

Here the major innovations are social and political rather than technological. Beginning in 2010, vendor associations began to license domestic movies directly from producers. Many have gone legal with respect to local content. Some have gone further to become investors in film production. These arrangements are still very much a work in progress and have not yet made inroads with the big foreign studios—the Sonys, Paramounts, and Disneys that dominate both legal and illegal markets in Ecuador.

The new deal

We interviewed Santiago Cevallos, chief director of copyright from the Ecuadorean Institute of Intellectual Property (IEPI), and Omaira Moscoso, founder of the Asociación de Comerciantes de Productos Audiovisuales (ASECOPAC), to learn more about the effort. Moscoso told us how the relationship between vendors and the police used to work in Guayaquil, Ecuador’s largest city:

It was pure show. At the end of the year, all the shops would be raided. But the day before [the police] would go to the owners and say: if you give me five thousand dollars, you can take away your CDs and DVDs beforehand. Trucks would arrive during the night, pack up the stock, and leave only old discs and boxes. The next day the police would show up with the mayors, TV cameras, and officials of the Ecuadorean Institute of Intellectual Property (all the money was distributed amongst them). They’d put out the old discs on the street, then they’d bring a tractor to roll over them.

As the National Film Council ramped up in 2010, the Correa government (and new IEPI leadership) began a crackdown on the vendor sector.

"In 2010, we initiated police actions in the two main cities of Ecuador: Quito and Guayaquil," Cevallos said. "The idea was to break with the status quo in which pirate merchants had acquired a patina of legality through recognition by the municipal tax authorities in these cities. Informal sales, i.e., the salesman with blankets on the street, aren’t the problem. The problem is formal sales in markets and shopping centers because their principal and only activity is the commercialization of unauthorized reproductions of works."

This legalization of the shops but not the trade was longstanding. Shops had municipal permits and paid taxes; many of them also sold legal discs. Moscoso was one of these ‘formal’ vendors. After spending 20 years as a filmmaker and television producer, she opened a film shop in 2008. "I realized that there was no place in town where you could find good movies, the movies that don't come from Hollywood," she said.

That was the start of El Coleccionista, one of an estimated 60,000 storefronts in Ecuador that sell copied movies. Soon, El Coleccionista became a place where intellectuals from Guayaquil sought films by Godard, Bresson, Jodorowski, and the like, which Moscoso copied from her personal collection.

"El Coleccionista made ​me realize that, as a state, we were really doing things the wrong way because we were denying people access to culture," she said.

As IEPI began to close shops in 2010, Moscoso started to organize ASECOPAC—an association of street vendors selling audiovisual goods—in an attempt to legalize the market.

The early days were not easy. One day in 2011, 50 police officers showed up at her store to confiscate pirated DVDs. "They wanted to give me a damn lesson," she said. After the raid, she and her husband, David Grijalva, along with other merchants began to develop draft legislation for the "legalization and regulation of the audiovisual market in Ecuador."

"We met with roughly 1,000 traders," she said. "They were already fed up with this situation. Most were saying, 'We want this to be over. We have no problem in paying intellectual property rights, but tell us: How do we pay? Where do we have to go to pay?' The IEPI could not answer these questions. This led me to develop this project."