Decrees will not solve the problem
Unexpectedly, a few days ago, President Noboa issued Executive Decree 444, which contains a complicated reform to the methodology of setting prices for derivatives. The discontent of the public in May, when gasoline prices rose and scarcity was widespread, probably cautioned the president and his new Minister of Energy, Juan Carlos Blum. Gasoline ecopais has had an average price of $3.31 per gallon in the last month, and gasoline super has been sold at an average of $5.85 per gallon — approximately $2/gallon above the price of regular gasoline in Texas of similar quality. The new methodology will work if there is a sustained and significant drop in international prices and could lower the price by up to 5 cents per gallon for gasoline, while technically, the formula does not increase subsidies.
The above change is a short-term political strategy that might be fair in a context of falling global prices, which could develop if Iraq increases production as announced. But the problem of derivatives, as well as the problem of declining production, cannot be solved by means of decrees. In April, when global oil prices peaked, Ecuador exported crude oil at $89 per barrel but imported fuel at $180 per barrel.
In the past few last years, oil production, transportation and refining have all suffered from serious natural disasters in the Amazon region and in Esmeraldas. However, nothing explains or justifies the inaction and lack of strategy on the part of the government in correcting the deficiencies that have turned President Noboa’s promise in his 2023 presidential plan to reach 550,000 barrels of daily production into the offer of a political amateur, at the very least.
The solution is an aggressive plan to attract serious investors both for the camps on the Amazon and for the construction of a new refinery to replace the close-to-scrap installations now in Esmeraldas. For this lack of action, Ecuadorians share some responsibility as they have voted against improving the legal securities for international investment.
On the other hand, President Noboa always surprises with his political decisions. Elections for local authorities are near, and the times do not allow for improvisation. For mayor of Guayaquil, he has chosen Cynthia Viteri, a well-known political figure, as his ally, and he has increased his personal presence in Manabi, which is hostile political territory. According to experts on domestic politics, in Ecuador, sectional electoral positioning reveals more than who eventually wins and controls a municipality or town. They allow us to identify the relative weight of each territory in the national vote, as well as individual leadership and possible alliances — all of which will be relevant to help predict the presidential outcome in 2029.
According to the Strategic Bureau, the “jewels of the crown” are Manabi, which represents 9.83% of the vote, Pichincha (18.5%), and Guayas (24.6%), each with a different distribution of political capital for each candidate. Thus, Noboa’s electoral strategy for November seems reasonable.
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