The scenario for 2023/24 is modeled after those from 82/83 and 97/98.
In all three cases, the state lives on oil, but it does not replace the reserves that are being consumed. The state-owned company has no funds to invest and is blocked from private investment.
1) In 1982/83, the authorities claimed that the 1978 Constitution prohibited foreign investment in oil. In 1997/98, private oil companies were not authorized to build pipelines to remove their crude oil. In 2023, the state does not open oil exploration and keeps the mining cadastre closed, the Constitutional Court authorizes consultations to cancel the only oil operation in development and disturbs investments in mining.
2) The world economy enters a crisis, which accelerates the drop in oil prices. In 82/83 the US raised interest rates drastically, the global economy slowed and Ecuadorian crude fell from $129 per barrel in 1980 to $83 in 1983 (all prices in equivalent values today). In 1997, a financial crisis broke out in Asia, the price of Ecuadorian oil fell to 17 dollars. In 2023, with the rise of international interest rates, national oil fell to $62.
3) The international crisis pushes the country into a moratorium on borrowing. In 1982/1983 Ecuador, like the rest of Latin America (except Colombia, due to the marijuana boom), fell into a moratorium and renegotiated the debt. In 1997-1998. Brazil suffered a financial crisis, Ecuador had a vacation and renegotiated its debt. In 2023, as in 82/83, raising the interest rate makes external debt servicing more expensive to unsustainable levels. Country risk underscores that creditors fear that Ecuador will not be able to meet its debt obligations in 2025 and that a new moratorium will be imposed.
4) El Niño hits a weakened economy. In 82/83 and 97/98 Ecuador was hit by two of the most destructive El Niño phenomena in history. In 2023, the arrival of this event is announced and it is feared that it will be of similar proportions.
5) Exchange measures are taken. In 1983, Hurtado ordered the secretization of private dollar debts to avoid chain bankruptcy. In 1999, Mahuad embraced dollarization to stop the inflationary spiral. In 2023, the three candidates talk about solving the economic problems with Ecuadorian deposits that banks and cooperatives have in the Central Bank. Meaningless size could lead to dedollarization.
6) The dynamics of oil continues. In 1984, Febres-Cordero ignored the alleged unconstitutionality and reopened the country to oil investment. In 2000, Noboa approved a new pipeline against strong opposition from the global environmental movement that predicted the destruction of the Mindo area. The oil pipeline was buried, Mindo was not affected and oil production ceased in 2003.
If history repeats itself, the government elected in 2025 (not the one in 2023) would open the country to oil and mining investment (the Constitutional Court would no longer stand for the recalcitrant environment) and a new phase of prosperity would be inaugurated.
Karl Marx, mocking Louis Bonaparte’s coup after his famous uncle, declared that history repeats itself twice, the first time as a tragedy and the second time as a farce.
And the third time? as nonsense (OR)
Source: Eluniverso
Mario Twitchell is an accomplished author and journalist, known for his insightful and thought-provoking writing on a wide range of topics including general and opinion. He currently works as a writer at 247 news agency, where he has established himself as a respected voice in the industry.
