The challenge for Ecuador: the controversial elimination of fuel subsidies

In the midst of a scenario marked by controversy and social resistance, the Government of Daniel Noboa in Ecuador has taken a decisive step by announcing the elimination of the subsidy for Extra fuel, a measure that will come into effect at the end of June. This decision, which puts an end to one of the most widely used fuels in the country, is not new in the Ecuadorian political scene, as previous governments like those of Lenin Moreno and Guillermo Lasso failed in their attempts to remove subsidies, triggering violent protests that paralyzed the economy. In an attempt to avoid confrontations and crisis situations, the Noboa government has sought to negotiate with the sectors most affected by this measure, particularly with transportation workers. Compensation has been agreed upon to mitigate the impact of the subsidy elimination, with the hope of avoiding mass protests and an excessive increase in transportation fares. However, the reaction from social and labor organizations has not been delayed, expressing their opposition to the measure on the streets of Quito, although for the moment with limited reception. The goal of eliminating the Extra fuel subsidy is to generate savings of around 600 million dollars per year, a significant amount that the government intends to use to balance the fiscal budget, improve energy infrastructure, or allocate to social programs. Despite these promises, critical sectors point out that budgets in these areas have not seen a significant increase, generating uncertainty among the population about the real destination of these funds. The implementation of the measure will be carried out in phases, starting with an increase in the price of Extra fuel by 26 cents per gallon, which will bring the final price to 2.72 dollars. Subsequently, a system will be established that will allow adjustments in the price based on international variations in oil and fuel, ensuring that the value remains below the regional average. Additionally, around 100 million dollars will be allocated to compensate for the increase to urban and rural transport drivers, as part of the agreements reached with transportation workers. This measure adds to other economic adjustment actions implemented by the Noboa government, such as the increase in VAT on basic basket products in April. These decisions are part of the commitments made with the International Monetary Fund, which has granted a 4 billion dollar loan to Ecuador. So far, 1 billion dollars have been transferred, mostly to pay domestic and foreign debt, in an attempt to stabilize the country's economy. The reduction of subsidies for Extra fuel represents a milestone in Ecuador's economic policy, which for decades has relied on these subsidies to maintain price stability and social stability. However, social resistance and criticism towards the Noboa government highlight the challenges and tensions that the country faces on its path towards a more sustainable and equitable economy. The future of Ecuador will depend largely on the government's ability to manage these changes effectively, ensuring that the impact of the measures does not disproportionately affect the most vulnerable sectors of society.