Government allocates $ 572 million less to fuel subsidies than those calculated in 2021, according to the 2022 budget pro forma

Ecuador will allocate in 2022 $ 1,328 million in fuel subsidies in the country. It is a figure that represents $ 572 million less than what the Government had calculated to provide in subsidies in 2021 and whose figure amounted to $ 1.9 billion.

This is stated in the 2022 budget proforma delivered last Saturday to the Assembly and which will be dealt with in the Economic Regime Commission. According to the document, the subsidies in their entirety (which include fuel, bonds for vulnerable families and contributions to Social Security) will reach $ 5,123.17 million, so fuels have a weight of 26% of this item.

Thus, the Government significantly reduces fuel subsidies, although they continue being high the subsidies for diesel and for liquefied petroleum gas (LPG) or domestic gas. This year they are assigned $ 53 million for gasoline, $ 406 million for diesel and $ 768 for LPG. Comparing, in 2021 the Government calculated to spend in subsidies $ 320 million for gasoline, $ 721 million for diesel and $ 813 million for liquefied petroleum gas (LPG).

The regime had been applying a price band system that allowed it to gradually increase prices, but recently it made the decision to freeze prices, given the discomfort that the increase had generated in the citizens, the indigenous sector and in the transport sector.

In any case, the Government explains in the proforma that with In the current structure, subsidies do not reach those who need them most. For example, in the case of fuel, it is received by those who have high-end vehicles that could afford a real price of gasoline, The same occurs with the gas subsidy, in which “it is evident that a good part of this subsidy ends up in the most commercial sectors.” In this sense, indicates that it is necessary to continue targeting these so that they reach those who really need them.

The Government also argues that Ecuador to date is the fifth country in South America with the lowest fuel prices, but if we compare the cost of other goods and services with the same countries in the region, the country registers much higher prices. .

Oswaldo Erazo, executive director of the Chamber of Petroleum Derivatives Distributors (Camddepe), explained that there has been a change in the subsidy structure, which makes LPG the most subsidized fuel when previously the main subsidized fuel was diesel.

Erazo further considers that while fossil fuels are subsidized, This is against the environment. In Ecuador this has an aggravating factor, since the quality of fuel in the country is bad. For Erazo, the ideal would be that it is not subsidized and that there is a better quality. However, he assures that now is the time to start the debate on the transition to a post-oil economy, with the use of cleaner energies.

The issue of fuel subsidies has been in the global debate these days, especially as COP26 unfolds, a world summit in which countries discuss environmental issues and their possible solutions. In it, the virtual appearance of the dinosaur Frankie that has reproached countries for their foolishness in supporting climate change by subsidizing fossil fuels with billions of dollars has left a great reflection.

In any case, Ecuadorian President Guillermo Lasso indicated at the summit that Ecuador has a clear goal of reducing the 22.5% of emissions until 2025. He also explained that the most ambitious policy “is the process of building the national transition plan towards decarbonization of the economy by 2050 ″. Along these lines, it is intended to promote investment projects in electric mobility, renewable energies; sustainable agriculture, tourism, habitat and circular economy.

The Government pledged to reduce its methane gas emissions, within the framework of the global goal of reducing these emissions by 30% by 2030. Lasso announced that Ecuador joins the Global Commitment for Methane.

On this issue, the country has a great task. At the moment there are at least 447 associated gas lighters that burn in the Amazon. Eastern lighters have a percentage of 30% methane (natural gas) and 25% propane and butane (LPG). Further, in Bajo Alto a pure methane gas lighter burns for at least 2 million cubic feet per day, that is, a figure equivalent to 440,000 gallons of diesel per month in energy. In this case, transporters from El Oro have submitted a proposal to the Government to be able to take advantage of this pure gas in their operation. (I)

Social Security Subsidy is set at $ 2,254 million in proforma

In the 2022 proforma, which must be dealt with in the next few days by the Economic Regime Commission, in the next few days, the subsidies or contributions to the Social Security will reach $ 2,254.06 million. It is the largest subsidy, above fuel and social bonds. Of this amount, $ 1,583 million will go to the Ecuadorian Institute of Social Security (IESS), $ 573 million for the Armed Forces Social Security Institute (Issfa) and $ 136 million for the Police Social Security Institute (Isspol).

The items for Social Security, especially those that have to do with the IESS, are not reaching the entity on time.

From what is known, there is a large part of the 2021 payments that were not made. Additionally, in 2022, according to the financing plan, the Ministry of Economy and Finance has indicated that it could be paid at IESS about $ 1,000 million.

Meanwhile, subsidies for Social Development are in the order of $ 1,470.99 million, mainly destined to the Human Development Bonus and pension for the elderly.

Meanwhile, of the total $ 1,470.93 millions of subsidies for social development, $ 1,256.14 million go to bonds and $ 214.79 million to social assistance. Regarding the bonds, 47% will be allocated to the Human Development Bonus, 29% to the My Best Years and Older Adults pension, 9% to the Joaquín Gallegos Lara Bonus; 8% to the Lifetime Pension and the Pension for People with Disabilities.