Spanish – Comparisons are often abhorrent, but sometimes, they are necessary. Despite the effects of the pandemic on the economies of Latin America, Ecuador shows encouraging numbers that contrast with those of the former oil power that was expanding its 21st -century socialism throughout the region in the time of the late Hugo Chávez.
Venezuela stopped influencing Ecuadorian policies since President Lenín Moreno broke with his predecessor, Rafael Correa, and decided to take his own course. The positive results are already visible. The stable oil industry and the historical rebound of international reserves prove it. Meanwhile, Venezuela continues in free fall in both aspects.
The Central Bank of Ecuador informed this Monday that the international reserves reached a historical record of 7377 million dollars on December 23, according to information disclosed by EFE. This is the highest level reached in the last 20 years since the beginning of the dollarization.
Ecuador’s reserves stood at 5347 million USD before the country received the second disbursement from the International Monetary Fund (IMF) under the Extended Service Agreement, amounting to 2030 million USD.
Venezuela: international reserves and oil production hit rock bottom
Ecuador, this small country of some 17 million inhabitants, exceeds the international reserves of Venezuela, which has almost twice the population and boasts the largest oil reserves in the world. During the 2009 oil bonanza, the country had over 43 billion dollars in international reserves. On December 23, the Central Bank of Venezuela (BCV) was counting its 6320 million dollars. That oil bonanza of the past is over.
Besides the drastic drop in oil prices, the deterioration of the Venezuelan industry -a product of abandonment and corruption- has generated the greatest production collapse in the history of the country, which has historically depended on the export of crude oil for more than 90% of its economy.
The numbers are alarming. According to the most recent report of the Organization of Petroleum Exporting Countries (OPEC), Venezuelan production closed in the third quarter of 2020 with an average of 362,000 barrels per day, reaching in November a slight increase to 407,000 barrels. These are the lowest figures in the country, which produced more than 3,120,000 barrels per day in 1998, the year before Chávez took power.
The challenges of the Ecuadorian oil industry
The Ecuadorian oil industry ended up displacing the Venezuelan one, something unthinkable a few years ago. According to Ecuador’s Agency for the Regulation and Control of Energy and Non-Renewable Natural Resources, daily crude oil production stood at 515,161 barrels on December 1, representing 104.76% of the estimated production, calculated at 491,772 barrels per day.
Nonetheless, this is not the best result for the Ecuadorian oil industry. Official figures indicate that between January and November 2020, production fell by 11.6% compared to the same period last year. The average number of barrels per day fell from 530,751 during the first 11 months of 2019 to 469,115 in the year of the pandemic.
However, production is already showing signs of recovery. In November, Ecuador once again surpassed the 500,000 barrel threshold, and the negative difference with respect to last year was reduced to 6.5% that month.
To escape OPEC’s production cuts, Ecuador officially left the organization on January 1st of this year. In 2019, the Andean country exceeded the maximum quota of 508,000 barrels set by OPEC, which was understood as a necessary excess, given the economic difficulties the nation was going through. However, the goal set by Lenín Moreno’s government is to reach 700,000 barrels per day.
The best among the worst
While 2020 has not been a good year for any economy in the region, Ecuador has demonstrated the ability to withstand the onslaught of the pandemic. The Economic Commission for Latin America and the Caribbean (ECLAC) estimates that the Ecuadorian economy will shrink by -9% in 2020, a figure lower than that of countries such as Venezuela (-30%), Peru (-12.9%), Panama (-11%), and Argentina (-10.5%).
With the largest international reserves in the last two decades and an oil production that is beginning to show signs of recovery, Ecuador can bet on a strategy that will allow it to increase the volume of crude oil extracted -now that it must not comply with maximum production quotas- and thus return to the path of growth.