Green Light for the ITT

ECUADOR - In Brief 18 Sep 2013 by Magdalena Barreiro

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The Commission of Bio-Diversity of the National Assembly approved last night the request from President Correa to declare the ITT oil camp of economic priority.  This approval virtually gives the government green light to exploit the oil camps of Tambococha, Tiputini and Ishpingo located in the Yasuni –an area protected for its bio-diversity and home of the “non-contacted” tribes. According to official figures, the ITT could provide up to $22 billion in oil revenues which is the net present value of an estimated $2.3 billion per year for around 20 years in gross revenues from which around 70% will translate into exports.   The government of Rafael Correa has received a total of $54.5 b in net oil revenues since 2007 which represent 12% of GDP on average.  These new revenues from ITT will be less than 2% of GDP if growth remains at a 3% per year.  Thus, without complementary measures such as reducing the amount of oil subsidies which currently sum $3.4 billion, sacrificing the Yasuni for additional oil revenues will not be worth it.  President Correa has promised to eliminate the subsidy on natural gas once the new “energy matrix” starts to operate when the large hydroelectric projects start to operate in 2015.  This will reduce total subsidies in $260 million per year.  The government is also planning to reduce the subsidy on gasoline which could cut another $500 million of fiscal expenditures. In the end, Patricio Rivera former Minister of Finance and current Minister of Economic policy declared what is at the core of everyone’s concern:  Ecuador needs every penny of fresh dollars to sustain dollarization in the long run.