Given the withdrawal of tariff incentives for the industrial sector starting in 2024, announced by the Ministry of Energy and Mining of the administration of former President Guillermo Lasso, there is “no compensatory measure” that the company can take to counter the impact, economists point out. However, with the arrival of the new government, they hope that it could be abolished, because they predict that, if it is kept, it could make production “more expensive” and even affect employment.

The state portfolio, then headed by Fernando Santos Alvite, ordered on November 17 the Agency for the Regulation and Control of Energy and Non-Renewable Natural Resources to “continue to abolish tariff incentives for the industrial sector, which began to be applied from January 2018, and consisted of mainly from the decrease in the value of the exchange rate between 10:00 PM and 8:00 AM.

The government abolishes subsidies for industrial sector electricity for large consumers

The Executive President of the National Chamber of Aquaculture (CNA), José Antonio Camposano, is very determined to indicate that there is no alternative that they can resort to in order to have no impact and predicts what could happen.

“The price of goods that are processed at night will increase in price, there is no measure that could counteract the impact of the increase in the price of energy, that production will become more expensive to the extent that, in a percentage that corresponds to the price of energy”, he says.

In this context, he indicates that stocks in the case of frozen products such as broccoli, shrimp, fish products or perishable products that have to be in cold rooms at night had a lower cost, but now the cost of these stocks will be superior, “that’s why we said: that is a blow to the company’s cost structure.”

And in case the companies take some measure – he says – it would be to abolish that shift and assign staff to day shifts if there is capacity or demand for those shifts, because there is no compensatory measure.

For the president of the National Chamber of Fisheries (CNP), Bruno Leone, it is a “very bad measure” taken by the previous administration, and even more so when the government was a week away from leaving. “This is an additional impact on the already affected competitiveness of all production sectors,” he claims.

Leone comments that dollarized Ecuador “became an extremely expensive country in every sense”, especially in production, because it is export-oriented and when it enters the international market it has to compete with other countries.

Business Committee: President Lasso assured in June that he is not thinking about abolishing the subsidy for night shifts in the industry, but we see that this has not been fulfilled

Camposano has a similar criterion, who points out that when working in foreign trade there is no excuse for not working 24/7 because the markets are also working.

There are three factors of production to consider that intervene in the production of a good, according to Leone, labor, raw materials and general costs of production, whether it is sold locally or exported.

Thus, for example, he says that the increase in the uniform basic salary was imposed without any criteria (during the government of Guillermo Lasso, the basic salary was increased by 25 dollars every year); In raw materials, although some tax rates have been lowered, he points out, there are still many goods that must be imported in order to be produced; while general costs include energy, fuel and security costs.

Camposano indicates that in shrimp processing, one of the links, in a production line, in a medium or large plant, 400 people can work in a night shift. There are more or less 45 packing plants in Ecuador under this program.

The shrimp sector has created between 10,000 and 15,000 jobs between 2019 and 2022. “The sector has increased work capacity, especially in packaging plants, on the one hand because of incentives (rates), and on the other hand because during the pandemic, the sector faced the need to create products with greater added value,” he claims.

Leone and Camposano hope that the new government will be able to abolish this measure. “We will have to sit down with the new authorities and see if they can reconsider this guy’s measure. Every dollar added to the cost structure of exporting companies is ultimately detrimental to the source of employment,” says Leone.

Shrimp farmers and industrialists react to the end of electricity subsidies, classifying it as a ‘coup by the outgoing government’ and an ‘attack on the industry’

In addition, Camposano points out that it is important for the new administration to generate something additional, which in his opinion was mandated by the outgoing Government, a transparent policy for determining the prices of electricity and fuel. “We consulted it, we asked for it and there’s just complete secrecy on the part of Petroecuador, the Ministry of Energy, it’s not really known.”

He also points out that in that sector they are aware that the new government has a deadline of 15 months and that it cannot be asked to solve 100 percent of the country’s problems, because in addition there are structural problems, among which is insecurity, to which the president must concentrate”, but when actions are taken in this field, he believes that “it is important for the president to look inside Ecuador”.

Camposano comments by way of background that the tariff incentives for the industrial sector were a win-win because “the state started charging for energy demand that it didn’t even have, the other part was simply for us to sit idly by. This clarification is important because what we were already doing at night is considered to have been done and the price of energy has been reduced without compensation.”