The Government of Daniel Noboa announced the elimination of the subsidy for one of the most used fuels in the country, a measure that will come into force at the end of June. The elimination of subsidies has always been an unpopular decision that previous governments, such as those of Lenin Moreno and Guillermo Lasso, tried to implement without success. Their attempts unleashed harsh social mobilizations that degenerated into a climate of violence in the streets, with deaths and injuries. They had to back down at the negotiating tables to avoid a paralysis of the economy. With these premises, Noboa called prior meetings with some groups of transporters, those most affected by the measure, and negotiated compensation to avoid demonstrations or an increase in transport fares.
In Ecuador, essentially three types of fuel are used with different prices depending on their quality: diesel, Super and Extra or Ecopaís. Moreno managed to free the price of Super gasoline, which is the one with the highest octane on the market and the one consumed by the population with the highest purchasing power. He found it impossible to touch the other two. However, in the latest agreement with the International Monetary Fund (IMF), the Government offered to eliminate the Extra fuel subsidy. This measure would save around 600 million dollars a year, an amount with which the Government seeks to balance the fiscal coffers, although it also ensures that it can be used to improve energy infrastructure or social spending. Budgets in those areas, however, have not increased.
A week ago, social and union organizations protested in Quito against this measure, although for the moment with very little reception. Only 250 merchants and activists toured the capital amid shouts against Noboa and the IMF. The Government’s proposal is to eliminate the subsidy in phases. The first consists of increasing the value of Extra fuel by 26 cents per gallon; That is, the final price will be $2.72 and will be applied from the last week of June. In the second phase, a system will be established by which fuel prices may rise by a maximum of 5%, depending on the variation in the international price of oil and fuel. “With the increase in gasoline, the value will continue to be well below the average of other countries in the region,” said Ana Cristina Avilés, vice minister of Economy. Of the 600 million dollars that the country will stop spending on the subsidy, around 100 million will be used to compensate the increase for drivers of taxis, tricycles or three-wheeled motorcycles and vans who work in urban and rural areas of the country. . The Minister of Energy assured that it is part of the agreement reached with the transporters, who must register their request to receive the money directly into a bank account.
After the measure comes into force, only subsidies for diesel will remain active, the fuel used by mass transportation, goods and industry and which indirectly affects product prices. The subsidy for the gas cylinder used by most of the population will not be touched either. These are the most sensitive subsidies that all governments have faced for five decades, when they were established by the military dictatorship that was experiencing the first oil boom. June 26, 1972 was marked in the history of the country, when the regime organized a pompous ceremony at the Ministry of Defense in Quito to receive the first barrel of oil that was extracted from the bowels of the Amazon. In a military vehicle and on a cushion, the wooden barrel was transported in the middle of a parade organized in its honor, with students dressed in civic uniforms, girls throwing their clubs in the air, workers holding banners and soldiers who marched along the streets of the capital to the Temple of the Homeland, in the same place where the remains of the nation’s heroes are. In this way, a new period began in the economic and social model of Ecuador, which has not managed to change or adapt to a more sustainable one.
The cut in subsidies is one of the economic adjustment measures that Noboa has applied in seven months of Government. The first cut was, in April, the increase of two percentage points in VAT on several products in the basic basket. In this way, he intends to comply with the agreements reached with the IMF, which granted a loan of 4,000 million dollars. The international organization has already transferred the first 1 billion, which will largely be used to pay internal and external debt.
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