As an alternative to the fall in Russian demand, this Andean country is developing business contacts to increase its exports of bananas, flowers, and other commodities to China.
On Tuesday, President Guillermo Lasso said that Ecuador could receive an additional revenue of US$1.5 billion this year from oil sales if current international market conditions continue.
This might happen despite the fact that the price of the "Ecuadorian Crude East" (CEO) is usually quoted at an average of US$10 less than the price of West Texas Intermediate (WTI). Due to this "punishment" from the market, for example, if the price of the WTI barrel is US$100, the price of the COE barrel is US$90.
Despite this price difference, the outlook for the global energy market is expected to benefit this Andean country, since the Lasso administration defined the 2022 budget with oil revenues calculated at an average of US$59 per barrel. According to current laws, the national government must share these extraordinary revenues with subnational governments and with the institutions of the Amazon region.
The macroeconomic benefits could be slightly lower given that US$350 million of windfall revenues are practically lost due to a pipeline rupture in 2021, an accident that reduced the oil production initially planned for FY2022.
Nevertheless, the right-wing president vowed to use the remaining funding to pay off the State's debt to the Ecuadorian Social Security Institute (IESS), which lacks adequate funding to care for the population's health.
On Tuesday, Lasso also admitted his concern about the effects that the Ukrainian conflict is having on exports of low value-added commodities such as roses, food, and seafood. He also fears the domestic effects of importing trends.
"The other face of the increase in oil prices is global inflation," Lasso said, explaining that the conflict is increasing the cost of agricultural inputs such as fertilizers and pesticides. As an alternative to the fall in Russian demand, Ecuador is developing business contacts to increase its exports of bananas, flowers and other commodities to China.