Will it finally work this time? In Ecuador, we have been heavily addicted to state-subsidized fuel for over 50 years: gasoline, diesel, natural gas, electricity. Every year, it costs the state treasury between USD 2 and 3 billion. But, as is often the case with subsidies, they are also eagerly being abused: a significant portion of the fuel ends up in illegal mining, drug smuggling, or is smuggled to neighboring countries. One border province with Peru is particularly notorious, with diesel consumption per car at over four times the national average!
In response, many governments have attempted to reduce or abolish these subsidies in recent decades, but without much success. The latest attempts, in 2019 and 2022, both resulted in prolonged and violent protests. The 2022 protests, in particular, will remain fresh in the memory of the flower sector, with many nurseries even forced to shut down. In both events, the government ultimately had to withdraw the measures.
‘Better luck next time,’ the present government of President Noboa must have thought. With a well-thought-out compensation plan for the transport sector, and capitalizing on his popularity, he too is now trying to get rid of the accursed subsidy. As a result, the price of gasoline has already been raised very subtly and unnoticedly in recent months. However, the main hurdle to overcome was 13 September, when the entire diesel subsidy was abolished in a single day. This raised diesel prices from EUR 0.41 to EUR 0.63 per litre, a 54% increase!
