Ecuador looks cautiously at high oil prices

Quito, Feb 6 (EFE).- Ecuador, which has in the sale of crude oil one of the main sources of income for its economy, is looking with caution at the rise in the price of a barrel of WTI oil above 90 dollars in the international market, due to first time since 2014. The Vice Minister of Finance, Bernardo Orellana, considers that the current situation should be approached “with tweezers” because, although the rise in the price of a barrel is “good news” for the country, “we should not trust” . He recalled that in past years spending increased when oil was high, and “what always happens is that after the ‘oil boom’ there are debt crises.” For this reason, “we must be very responsible with what is happening with oil” now, he warned on KCH FM radio, stressing that the rise in price obviously favors the economy of Ecuador, which based its state budget for 2022 on a average of 59.2 dollars per barrel of crude oil. PRE-SOLD CRUDE Although it is unknown how long the price of a barrel of oil will remain high, for economic analyst Alberto Acosta Burneo the current situation is “good news” for the country, since having prices above what was budgeted “is going to give additional breathing room to public finances”. “For this year, if this price remains stable, at the end of the day it will mean that the deficit will also be reduced much faster” than expected by the government, he said. The Ecuadorian Government calculates that this year’s fiscal deficit could be around 2.3 billion dollars (slightly more than 2% of GDP), a figure lower than that of 2021. According to the Ministry of Economy and Finance, the deficit of the general budget of the State last year it represented 3.5% of the Gross Domestic Product (GDP), “better than expected, thanks to oil prices, tax collection and efforts to control public spending.” Even with pre-sold oil, as is the case with China, the situation is beneficial because “the price is set based on the price at that time,” the analyst who highlighted the renegotiation with the Asian giant that Guillermo’s government has undertaken explained to Efe Lasso. Precisely this Saturday, the foreign minister assured that one of the main objectives of Lasso’s trip to China was to talk “transparently and directly” with his counterpart Xi Jinping about Ecuador’s debt and “the possible decoupling of oil from all financial instruments that exist”. “We have had an immediate acceptance to set up a work table between the two finance ministers to be able to address the objectives of both oxygenation in the quotas that the Chinese debt has for Ecuador, and on the other hand, these collaterals, these guarantees that oil has within those financial instruments,” he said. OTHER BENEFITS The conflict between Russia and Ukraine, the impact of the omicron on the world economy -less than feared-, “nervousness at the international level generates speculation about crude oil, and in the end for Ecuador it is a lucky issue because this is significant additional income,” added the analyst. As an example, he calculated that “if on average, in the year, the price is 10 dollars above what is budgeted, it is 400 million net that enter the budget”, while another part of the money goes to the Petroecuador Public company. But in addition to a higher income of money, the rise in the price of oil is for the analyst José Javier Orellana “a relief in the issue of country risk” because one of the largest income that Ecuador has comes from the sale of oil, he commented. to Eph. It can also improve the investment outlook because “it is not the same to go and ask for investment with an oil price of 50 dollars a barrel than with one of 90 dollars,” noted who sees in China a possible great investor in the oil area, a country in which Lasso presented a package of investment projects in different fields during his tour. EFE sm/ie

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