Ecuador is in a crisis; the government has no money left! We’re experiencing the consequences of ten years of money wasting and excessive borrowing. Since last year, the government has been trying to reduce expenses through cuts in the state administration.
The salaries of more than 500 officials were reduced with a symbolical 5%. But the measure that’s drawing the most attention is the decision to abolish the current subsidies on petrol and diesel. It’s hard to believe, but our fuel prices hadn’t changed for 15 years!
Whatever the price of a barrel of crude oil, we always paid the equivalent of € 0.24 for a litre of diesel and € 0.33 or € 0.48 for ‘extra’ (octane rating 85) or ‘super’ (octane rating 90) petrol respectively. During the years of high oil prices, subsidies regularly exceeded 3 billion euros per year. ‘Provide the people with bread and circuses… and fuel subsidies!’ used to be the motto here.
In all fairness, the population has been placid since the fuel prices were frozen. Something that wasn’t always the case here. Every single president attempting to increase the prices was met with uprisings across the country involving strikes and road blockades. Motorists who tried to reach their destination nonetheless, were met by a layer of nails and pins on the road surface.
However, in the year 2019, everyone with a bit of common sense understands that those subsidies can no longer be maintained. The IMF also asked the Ecuadorian government to put an end to the practice. A step-by-step plan was introduced, starting with the price increase of ‘super’ in August 2018. Within no time of course, everyone switched to ‘extra’, which hadn’t seen a price increase yet.
By December, it was time for step 2, so the price of ‘extra’ went up as well and at that point, the protests began. School bus drivers and taxi drivers, in particular, started to complain. They managed to negotiate a very complicated compensation mechanism, which includes a new form of subsidy.
Step 3 – increase of the diesel prices – was going to be implemented on the 15th of January. But under the pressure of the transport and the public transport sectors, it has been decided to call this off.
And so it came to pass that once again, like so many times before, nothing has changed in this country. Private individuals pay slightly more now, when they fill up. But the end of all fuel subsidies? That’s probably going to take another 15 years.
Victor van Dijk,
Area manager South-America FleuraMetz