An equivalent of $9.68 billion in crude currently guarantees Ecuador’s $2 billion debt to China. The calculation is obtained by multiplying the 121 million barrels that Ecuador has pending delivery to two Chinese companies: Petrochina and Unipec, by a crude oil price of $80 (less than the current price). Thus the collateral is almost five times the debt related to oil.
According to information issued by Petroecuador before the National Assembly, as of November 2021, Ecuador has three current contracts which, when they were signed, accounted for a total of 494.8 million barrels for delivery. The two contracts with Petrochina were signed in 2011 and 2016 and will end in December and April 2024, respectively, and the third was signed with Unipec in 2014, and ends in December 2024. Currently the balance is 121 million barrels.
The issue of untying crude oil contracts with debt loans is one of the issues that the Government intends to negotiate in the coming months, through a dialogue table in which the Ministers of Economy of Ecuador and China will participate, according to President Guillermo Lasso announced it yesterday, upon his return from the Asian country.
In accordance with Jaime Carrera, from the Fiscal Policy Observatory (OPF), is precisely this type of guarantee that makes these loans so onerous for the country. On the other hand, these contracts have rates between 6.97% to 7.37%, while the price traded was at least $3.6 less than the market. “The Chinese won everywhere,” says Carrera.
This situation was ratified by President Guillermo Lasso yesterday, when he pointed out as Harmful to the interests of Ecuador are the contracts for the commercialization of crude oil with China. The total debt to China is $4,600 of which uUS$ 2,000 million are related to this type of contract from which Ecuadorian and international intermediaries benefited.
The government’s stance towards President Xi Jinping has been extend terms of the total debt, lower rates and, finally, decouple crude oil from those contracts where there are Ecuadorian and foreign intermediaries who have taken advantage of it.
Indeed, from what has been known in Ecuador, reports from Petroecuador, revealed before the Control Commission of the Assembly confirm that the damage to the marketing of crude oil in contracts with Asian companies has been $3.6 per barrel.
Additionally, the awarding of contracts that is not very transparent is contaminated by corruption schemes and bribery payments that have been revealed in US courts by Raymond Kohut, former Gunvor (Russian oil broker) strongman. Recently, this newspaper revealed how European banks that worked with intermediaries also participated in the intermediation plot.
Lasso said that his Government is going to act with transparency, and announced the delivery of information to the Prosecutor’s Office and the Attorney General’s Office.
According to Alberto Acosta Burneo, editor of Weekly Analysis, The visit made by President Lasso is positive, since an understanding agreement has been reached to negotiate the different issues: one of them is indebtedness. Acosta Burneo explains that during the Correísta government several mistakes were made regarding the debt.
The first was that having declared a debt moratorium, he was left with almost no financing options and had to “surrender body and soul to China”, with credits of high and onerous conditions, and short deadlines. This also generated a kind of monopsony, in which the buyer of crude oil, with excessive power, set its conditions that were detrimental to the country.
He said that now there is the possibility of correcting these errors, through these agreed dialogue tables.
According to Acosta Burneo It is a great step to have been able to place these issues on the table. For Ecuador, China is not only a debt issue, but trade and investment options in infrastructure and mining. China, in addition to its interest in this type of economic issues, seeks to cultivate a closeness with Ecuador and the region, due to geopolitical issues, he explained.
From 2009 to 2016, Petroecuador signed 13 crude oil marketing contracts with China and Thailand, of which eight were with Petrochina, three with Unipec and two with Petrothailand. In total, the delivery of $1.3 billion barrels was promised. (I)
Source: Eluniverso
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