Two financial operations, both through Petroecuador and the Bank of the Ecuadorian Institute for Social Insurance (Biess), show the great liquidity needs that the Government has to close the administration. And even more, the serious restrictions that will be imposed by the next one, who takes office in December.

Petroecuador manager Reinaldo Armijos announced the sale this week place with an advance payment, with characteristics similar to an oil forward, for $1.2 billion that commits crude oil until March 2024; while this newspaper learned from unofficial sources about an investment attempt by Biess to buy bonds for at least 1,000 million dollars. These Biess resources would be used to pay the state’s debt to Biess ($770 million), but the rest to pay 40%, and to pay other urgent needs.

Jaime Carrera, executive secretary of the Observatory for Fiscal Policy (OPF), explains that the fiscal coffers are currently dry. As of October 27, the treasury’s deposit account recorded 606 million dollars, but by the end of the month the item will be lower. For Carrera, there could even be problems with paying wages. In this sense, he indicated that the high deficit cannot be financed by buying bonds or engaging the oil of the future, but the deficit should be reduced.

Carrera explains that with the maneuver to be carried out with crude oil, there would be serious difficulties for the next Government if the said commercial operation took place with the advance payment that Armijos mentioned. Thus, the current government would receive 1.2 billion dollars with the first delivery of crude oil and in subsequent deliveries, while the new government would only deliver oil, but would not generate income. Regarding the business with Biessa, Carrera said that the entity that manages the IESS funds cannot continue to finance the Government, which does not respect even the 40 percent payments. In this way, Biess finances the state in two ways with bonds and through arrears of 40%. Biess cannot buy because it is insolvent and such an operation would force it to get rid of funds, which is not healthy for the institution. In any case, Carrera said he learned there was a conflict within Biesso and the purchase would not go through.

A new oil operation would also not be sustainable, according to initial market comments. It will be complex for any company to agree to give an advance for crude oil, without other types of guarantees. In addition, refineries have currently already purchased for the months of December to February.

Meanwhile, the Cordes report shows that as of September, the general government budget (PGE) has accumulated a deficit of $3.172 million, which is equivalent to 2.7% of GDP projected by the Central Bank ($119.573 million). Namely, three months before the end of the year, the result is already worse than what until recently the Minister of Finance Pablo Arosemena had forecast for the whole of 2023: between 2.3% and 2.5% of GDP. The deficit would be much more pronounced if it is taken into account that the last quarter usually records the biggest problems. The deficit for September 2023 shows a significant deterioration compared to last year when a surplus of 304 million dollars was realized, despite the fact that at the end of that year the result was a deficit of 1873 million dollars.

Cordes recalled that the Government’s budget suffered from the drop in oil revenues and taxes. In the case of oil revenues, they rose from $2,641 million in the first nine months of 2022 to $1,455 million in the same period this year, implying a 45% decline. Although oil prices have risen in recent weeks, the average value of exports from January to September 2023 is still lower than in the same period last year.

Taxes were also reduced. It should be noted that the decrease in PGE tax revenue could be greater in the coming months as a result of power outages and their impact on economic activity.

Added to this is the predictable fall in tax revenues – due to the reduction of the ISD rate to 2% from 1 January 2024, the latest changes in income tax and the abolition of property tax for companies. which SRI collected 348 million dollars by September. Added to all this is a new drop in oil production due to the closure of exploitation in Yasuní, and a possible increase in capital expenditures as a result of the El Niño phenomenon. In this context, it is important that the president-elect shows signs that he knows what the fiscal situation is and says what he intends to do to solve it, Cordes says.