The Government of the President of Ecuador, Daniel Noboacontemplate save at least between 450 and 550 million dollars with the targeting and segmentation plan for fuel subsidies which he hopes to present in the coming days and weeks.
The Minister of Energy and Mines, Andrea Arroboassured in statements to the Ecuavisa channel that this figure would be “a very strong respite for the State” and it would be a reference only to extra gasoline, 85 octane, which is the most consumed in the country.
Attempts by previous governments to eliminate or reduce fuel subsidies have led to strong protests led by the indigenous movement, as occurred in October 2019 against the president Lenin Moreno (2017-2021) and in June 2022 against the president Guillermo Lasso (2021-2023).
Since June 2022, the price of Extra and Eco País gasoline (both 85 octane) is frozen at $2.40 per gallon (3.78 liters), while that of diesel is set at $1.75 per gallon. which in 2023 meant an expense for the State in subsidies of about 3.2 billion dollars, according to figures from the Ministry of Economy and Finance.
Progressive system
Arrobo explained that This targeting of subsidies must be a progressive mechanism and with a band system that takes into account the type and cylinder capacity of the vehicle, the activities to which it is directed and the income and assets of the owner..
Regarding the productive and industrial sector, Arrobo stressed that “There are certain sectors that require elimination with a compensation scheme, because the idea is not to affect or distort the market, especially the country’s productive sector”.
«We have been working on this with (the Ministry of) Finance and multilateral support. We have had advice from the IDB (Inter-American Development Bank) and the UNDP (United Nations Development Programme),” Arrobo noted.
The head of the Energy and Mines portfolio recalled that subsidies were already eliminated from the shrimp sector last year, and that compensation in that sector will focus on electrifying itto reduce its dependence on fossil fuels.
Compensations
For the fishing sector, Arrobo indicated that “they are industries that need to be compensated in another way,” and with a scheme that allows digitalizing the delivery and marketing of fuels.
With this, they will seek to reduce smuggling that can be a source of financing for organized crime gangs, which the Noboa Government has declared as terrorist groups and non-state belligerent actors in an “internal armed conflict.”
In that sense, the minister also stressed that The focus will also be on border areasespecially after the Ecuadorian Executive has complied with the ruling of the Court of Justice of the Andean Community (TJCA) to offer international transport the same price as local carriers.
Arrobo commented that this week he will work together with Noboa in the development of this subsidy targeting plan, while outlining a second plan that contemplates the attraction of investments to improve the country’s refining capacity and thus reduce the import of derivatives that are not produced in Ecuador.
The minister pointed out that the Government must think of various mechanisms to financially support the “internal armed conflict” declared to organized crime, which has become one of the country’s main threats, with drug trafficking as its main activity. EFE
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