The increase in value added tax (VAT) from 12 to 15 percent “will have no effect” on fuels, but they believe that it should be a temporary measure. According to the president of the National Chamber of Distributors of Petroleum Products of Ecuador (Camddepa), Ivo Rosero, to bring funds to the fiscal coffers, in addition to VAT, it is a good time to abolish subsidies for gasoline, because now the price is close to the unsubsidized cost, but it must go gradually.

The government has proposed an increase in VAT from 12% to 15% and VAT is paid on gasoline, what would the prices be?

For example, if a person deposits $20 today and it increases from 12% to 15%, the VAT will be approximately 60 cents higher and no one will stop depositing $20 for 60 cents more.

In the case of a supplement, with the new tax applied, it would be $2.46 per gallon, with 12% the cost is $2.40. Super would rise to $3.69 (currently $3.56) and diesel to $1.79 (currently $1.75).

We believe that it should be a temporary measure, at least for a year, but by no means permanent. We support this measure. We think there will be no impact from a fuel consumption standpoint, as fuel tends to be inelastic in demand. But there are two main elements in which the Government must take very drastic actions, which the previous leaders did not take.

What drastic actions are these?

Before the government of Rafael Correa, the spending on the bureaucracy was 2000 million dollars, today we are almost at 10000 million dollars, 8000 million more on the salaries of the bureaucracy, that is more than double the total subsidies which were 3000 million dollars last year. Those two elements bring a lot of work.

Why do they say it’s a good time to end fuel subsidies?

As the price of oil has fallen in recent months, the last three months have been a downward trend, today the subsidy for extra gasoline is 24 lipa, and for eco 85 29 lipa, so we are very close to the price without the subsidy. and it is a good time to at least eliminate subsidies by liberalizing prices like super gasoline or as it is in other countries of the world.

What happens to diesel?

Diesel is different, it currently has a subsidy of $1.18 per gallon and all measures must always be taken to phase in both diesel and gasoline. We have always recommended this so that what already happened in October 2019, when the measure for juiceday after day the supplement was raised from $1.48 to $2.45 and there was a social outbreak, the government almost fell, they had to change that measure and start applying gradualism which worked for quite a long time, growing at a rate of 10 cents a month for extra and five cents for diesel.

We are ready to support the Government, because the subsidy cancellation mechanism must be targeted in order to avoid a social outage.

The PSC proposes directing fuel subsidies to deal with the economic situation

How can targeting be implemented?

We have clear proposals that are applicable and immediately applicable, because as conceived the peace act is destined to fail in targeting and that is why we insist that they allow us to participate, because we are the main actors in the commercialization of this product, because We are interested in making it a success, since resources will come from there to fix our situation because we have already frozen the margin in cents for 21 years…

What suggestion do you have?

Our proposal for debit cards, for example, issued by Banco del Pacífico, where the value agreed with the target parties, with social organizations, is credited monthly, because it is a solution of immediate application and zero cost to the Government. We have provided alternative solutions, which can generate up to $300 million for the Government immediately, with a scheme we call blending, which is fuel blending. For example, we could instantly get a 90 octane super for $3 or less….

Did you manage to meet with the authorities of the new government?

We have sent letters since the first day President Daniel Noboa took office to meet with him, as one of our proposals was on the verge of a presidential decision, but we have not received a response. We also sent letters to the Minister of Finance (Juan Carlos Vega), the Minister of Energy (Andrea Arroba) and the Director Agency for Regulation and Control for Energy and Non-Renewable Natural Resources (Kathya Delgado) for urgent meetings to discuss the targeting and our situation, but we have not received any responses.