2024-09-23 07:57:34
In a recent interview, Fausto Ortiz, former Minister of Economy and Finance, shared his perspective on the elimination of subsidies for Extra and Eco gasoline, as well as other issues relevant to the national economy. Below is a summary of the highlights of the interview.
Ortiz explained that eliminating the subsidies on Extra and Eco gasoline could save the State between 500 and 600 million dollars annually. However, he clarified that the economic impact would not be so significant due to the current consumption of these gasolines in the country, which amounts to approximately 1.19 billion dollars annually. With an increase of 25 cents per gallon, the estimated savings would be about 300 million dollars a year. This saving would be reduced if the price of crude oil remains stable or decreases, and considering that part of the savings could be allocated to Petroecuador for operational needs.
During the interview, Ortiz mentioned that the government could start with a 26 cent increase and gradually increase it. He also highlighted that savings expectations in the second half of the year would be between 150 and 200 million dollars, as long as it is not necessary to allocate funds to Petroecuador for improvements in oil production.
Ortiz also referred to the possibility of increasing the ethanol blend in Eco gasoline. According to Gustavo Heiner, president of an association of ethanol producers, increasing this percentage could generate significant savings and create thousands of jobs in the agricultural sector. Ortiz agreed that this initiative could be beneficial, but pointed out that the government’s lack of financial resources complicates the implementation of these projects.
The former minister explained that the increase in fuel prices should be gradual to avoid a significant negative impact on the population. He indicated that in previous years, considerable increases in the price of gasoline did not cause high inflation rates, which suggests that a well-managed increase could be viable.
As for the destination of the additional funds from the elimination of subsidies, Ortiz emphasized that these should be used to reduce the fiscal deficit and finance social programs temporarily. He warned that permanent expenses should not be financed with non-permanent income, such as that from the oil sector, and suggested that any increase in the human development bonus should be carefully planned.
Budget Execution
Finally, Ortiz commented on the government’s budget execution, noting that execution in current expenditure was at 38%, while investment in public works and capital was at only 13%. This indicates a low level of investment in infrastructure projects, which can negatively affect economic growth.
By: Ecuador Live