Correa in Ecuador Raisin No Better Than Chavez In Venezuela

Yesterday we talked about the difficult situation being experienced by the Venezuelan economy in the dollar is the main threat to Chavez, an economy that serious mistakes in economic policy of his government, was highly dependent on its oil exports, while suffering the effects on their production system distortion in relative prices (domestic and exchange rate). Today is the turn of Ecuador, a friendly country of Venezuela, nor is having the best, given its high dependence on oil exports. For Ecuador, oil exports account for 40% of them. The collapse of oil prices has been great concern not only the Ecuadorian government but also to investors who have increased the perceived vulnerability of the Ecuadorian economy. It The strong decline in crude oil prices has significantly deteriorated fiscal accounts Ecuador. Ecuador, currently receives less than U.S. $ 50 for its oil, while its budget is structured around a barrel of U.S. $ 80 dollars, according to analysis by the consulting IDEAglobal. To make matters worse for Ecuador, the country decided to rejoin OPEC in October last year after 15 years of participation almost unnoticed, which obliges him to accept the reduction in production as it was agreed at the last meeting of the organization. According to the site "The Trade? the oil consultant said Hector Paz y Miño on reducing oil production by OPEC ready: "Be subject to OPEC quotas does not benefit us because the country has two problems: low prices and low production.

At this stage we should worry that further lower the production?.

Beyond the concern for Peace and Minho, the Ecuadorian Minister of Economic Policy Coordination, Pedro Páez, was calm to the situation and was quoted by the Venezuelan site "2001? said: "We made a number of scenarios and we believe in the predictability of the evolution of the international crisis, with the mattresses are sufficient to avoid reaching higher. In addition, there are several mechanisms that help cope with calmer market fluctuations? But the collapse in oil prices was not the only bad news received by the Ecuadorian economy in recent months. Is that the strong devaluation produced in various Latin American currencies represents a blow to the trade balance which will be affected by the loss of competitiveness. Is that 36.6% of Ecuadorian exports are destined for Latin American countries, while 46.5% of Ecuador's imports come from Latin American countries. The fragility of the Ecuadorian economy is reflected in the jump hit the country risk, which is above 2950 points and the level of risk is highest country in the region. It is worth remembering that in January 2007, when Rafael Correa became president of Ecuador, the country risk rose to 827 basis points. It is for this level of country risk, according to data released by the Central Bank of Ecuador, the market value of the Global bond debt is at a third of its value. This sharp rise, while responding in part to investors' preference for safer assets is explained in greater proportion to the policies and statements of Rafael Correa, who said that if you lack money will not pay the debt: "If there is a very serious crisis and falling oil prices much, first, I insist, we will review the payment of foreign debt? said in a radio interview in the city of Cuenca.

Obviously, the market could not sit still at such a demonstration of sincerity. The situation of the Ecuadorian economy is undoubtedly quite complex. To make matters worse, you have to deal with a high level of inflation which now stands at 9.97%, which although does not seem, when compared with the actual inflation rate in Venezuela and the real in Argentina, dollarization of the Ecuadorian economy implies a sharp deterioration in their competitiveness with similar rate of growth in prices. But the problem of the Ecuadorian economy is not limited to the current economic problems particularly related to oil prices, but they go further and concerning the constraints of its economy and its close structure of production, among other things as important as this. Ecuador should get away from the bad influences of Chavez and begin working to eliminate the rigidities of the economy in order to strengthen not have to suffer before adverse shocks like the one currently living. And paradoxically, although both Correa and Chavez showing happy with the collapse of the developed economies caused by this crisis, I imagine that will be waiting while his speedy recovery so as to achieve reconstruction of the value of a barrel of oil, at least to avoid a crisis situation and to think seriously about a change of its economic policy. We will meet again tomorrow, Horacio Pozzo