¿Por qué creo que nos encaminamos hacia una Gran Recesión o Depresión?
- colapso del consumo
- colapso de viajes y turismo (10 % del PIB)
- colapso de ciertos sectores (aerolíneas, cruceros, hoteles, restaurantes, otros servicios; producción de aviones y barcos; sector metalúrgico).
- colapso de los precios del petróleo, camarón, cobre, banano y otras materias primas.
- colapso de ciertos productores de petróleo y gas de alto costo (por ejemplo, productores de esquisto en EEUU)
- problemas en cadenas de valor y logística
- aumento del desempleo
- aumento del gasto de salud
- licencias médicas y pérdida de días laborables
- aumento de la tasa de mortalidad
- efecto de todo lo anterior sobre sistema financiero (en aprietos sectores que representan al menos 25 % del PIB).
Por lo anterior, creo que el efecto sobre el mercado de valores todavía no termina de sentirse (habrá una caída de 30-40 %)
Si se refleja en la caída del rendimiento de bonos en países avanzados (tasas negativas o menores a 1 % para bonos de 10 y hasta 30 años). Esto significa que los compradores de bonos creen que habrá un largo período de estancamiento económico con baja inflación o deflación).
Friday, March 13, 2020
Tuesday, March 10, 2020
Coronavirus y recesión
Pienso que la reacción del mercado de valores a la crisis del coronavirus es aún insuficiente. Los mercados de valores estaban muy por encima del “price/equity ratio” histórico (el doble, más o menos). Esto debido al estímulo monetario de los últimos 11 años.
Ahora se viene lo que probablemente será una recesión fuerte y prolongada. Las acciones deberían caer un 30-40 % (han caído 16 % hasta hoy).
El mercado de bonos, con rendimientos ínfimos (y negativos en términos reales) si refleja ese pronóstico.
Hay sectores devastados por esta crisis de #coronavirus:
▪️aerolíneas
▪️cruceros
▪️hoteles
▪️restaurantes
▪️turismo en general
▪️petróleo
▪️cobre
▪️commodities en general
▪️producción de aviones y barcos
▪️acero y hierro
Todos estos sectores sumados llevarán sin duda a una recesión.
Ahora se viene lo que probablemente será una recesión fuerte y prolongada. Las acciones deberían caer un 30-40 % (han caído 16 % hasta hoy).
El mercado de bonos, con rendimientos ínfimos (y negativos en términos reales) si refleja ese pronóstico.
Hay sectores devastados por esta crisis de #coronavirus:
▪️aerolíneas
▪️cruceros
▪️hoteles
▪️restaurantes
▪️turismo en general
▪️petróleo
▪️cobre
▪️commodities en general
▪️producción de aviones y barcos
▪️acero y hierro
Todos estos sectores sumados llevarán sin duda a una recesión.
Monday, March 2, 2020
Coronavirus, oil prices and Ecuador's risk premium
By Luis Fierro Carrion (*)
The World Health Organization has warned that the COVID-19 coronavirus could lead to a worldwide pandemic.
The number of cases of coronavirus has increased exponentially, and according to Harvard University epidemiologist Marc Lipsitch, it could spread to between 40% and 70% of humanity by the end of the year. The incubation period lasts up to 14 days, and many asymptomatic people spread their disease before it is detected.
Despite the quarantine of millions of citizens in China, the epidemic has spread to South Korea, Japan, Iran, Italy, the United States and dozens of other countries (the first cases in South America have already been detected, including 6 in Ecuador by March 2).
If the mortality rate remains as high as in the first cases (1% - 3%), and a pandemic is unleashed, it could reach a death toll not seen since the 1918 "Spanish flu" pandemic (by comparison, annual seasonal influenza has a mortality rate of 0.1%, mainly affecting infants and the elderly with other health problems).
The Chinese economy, which has grown at rates above 6% annually since 1990, is collapsing, and forecasts of the global GDP growth rate have already been lowered; a recession could break out. Foreign trade, international travel and tourism are particularly affected sectors. Stock exchanges fell by 14% at the end of February.
A direct impact of the slowdown in the Chinese economy has been the fall in the price of oil and other commodities (palm oil, corn, soybeans, copper, etc.). The price of WTI crude oil has fallen 23% since the beginning of January, and has fallen below $ 50 per barrel (and below the estimated price for the 2020 Ecuadorian budget, of $ 51.30 per barrel).
The fall in oil has, in turn, influenced the steep increase of the so-called “country risk premium” (the investors' perception of Ecuador's ability to pay the external debt). This is the differential in the yield of Ecuadorian bonds in the secondary market with respect to the rate of the 10 year U.S. Treasury bonds. This index, which reached a level of 5069 basis points (50.69%) in December 2008 (when Correa declared a unilateral moratorium unilaterally not due to an inability to pay), had dropped to 446 in February 2018. After the indigenous strike, it increased to 1418, in January it went back to around 800, and at the end of February it shot up again to 1450.
It did not help that the Moody's rating agency has lowered its credit rating of Ecuador’s external debt to Caa1, considered “a poor position with a very high risk”. In its analysis of the fiscal and economic situation of the country, one of the negative factors mentioned was the inability to generate a social and parliamentary consensus on the economic measures required to deal with the fiscal downturn. Several political sectors are privileging their electoral expectations over the urgent need to recover the fiscal balance.
It should be remembered that the Correa Government did not make an economic adjustment when the price of oil began to fall in 2014, opting for aggressive indebtedness, which left a legacy of public debt of $ 60 billion (including external and internal debt, as well as other obligations). The public debt reached USD 58,560 million in January 2020, equivalent to 53.4% of GDP. Apart from that, according to the Ministry of Economy, there are “Other Obligations of the State”, which total USD 5,941 million.
The Government has cut public investment, aggravating the country's economic stagnation. But it has failed to significantly reduce current spending, which portends a fiscal deficit of 3.1% of GDP. At least USD 6665 million in financing will be required in 2020, including USD 2000 million expected from concessions and sale of public assets.
With the expected disbursements of the IMF and multilateral banks, and other non-orthodox measures (issuance of Treasury Certificates, arrears of payments) the 2020 financing gap is expected to be closed; but Moody’s and other economic agents are concerned that external debt amortizations will increase significantly from 2022, and the economic reforms necessary to achieve an economic recovery are not being adopted; The possible return of economic populism is also worrying.
(*) Translated and updated (to March 2, 2020) version of my column in Diario "El Universo" of Ecuador
https://www.eluniverso.com/opinion/2020/03/02/nota/7762857/coronavirus-petroleo-riesgo-pais
The World Health Organization has warned that the COVID-19 coronavirus could lead to a worldwide pandemic.
The number of cases of coronavirus has increased exponentially, and according to Harvard University epidemiologist Marc Lipsitch, it could spread to between 40% and 70% of humanity by the end of the year. The incubation period lasts up to 14 days, and many asymptomatic people spread their disease before it is detected.
Despite the quarantine of millions of citizens in China, the epidemic has spread to South Korea, Japan, Iran, Italy, the United States and dozens of other countries (the first cases in South America have already been detected, including 6 in Ecuador by March 2).
If the mortality rate remains as high as in the first cases (1% - 3%), and a pandemic is unleashed, it could reach a death toll not seen since the 1918 "Spanish flu" pandemic (by comparison, annual seasonal influenza has a mortality rate of 0.1%, mainly affecting infants and the elderly with other health problems).
The Chinese economy, which has grown at rates above 6% annually since 1990, is collapsing, and forecasts of the global GDP growth rate have already been lowered; a recession could break out. Foreign trade, international travel and tourism are particularly affected sectors. Stock exchanges fell by 14% at the end of February.
A direct impact of the slowdown in the Chinese economy has been the fall in the price of oil and other commodities (palm oil, corn, soybeans, copper, etc.). The price of WTI crude oil has fallen 23% since the beginning of January, and has fallen below $ 50 per barrel (and below the estimated price for the 2020 Ecuadorian budget, of $ 51.30 per barrel).
The fall in oil has, in turn, influenced the steep increase of the so-called “country risk premium” (the investors' perception of Ecuador's ability to pay the external debt). This is the differential in the yield of Ecuadorian bonds in the secondary market with respect to the rate of the 10 year U.S. Treasury bonds. This index, which reached a level of 5069 basis points (50.69%) in December 2008 (when Correa declared a unilateral moratorium unilaterally not due to an inability to pay), had dropped to 446 in February 2018. After the indigenous strike, it increased to 1418, in January it went back to around 800, and at the end of February it shot up again to 1450.
It did not help that the Moody's rating agency has lowered its credit rating of Ecuador’s external debt to Caa1, considered “a poor position with a very high risk”. In its analysis of the fiscal and economic situation of the country, one of the negative factors mentioned was the inability to generate a social and parliamentary consensus on the economic measures required to deal with the fiscal downturn. Several political sectors are privileging their electoral expectations over the urgent need to recover the fiscal balance.
It should be remembered that the Correa Government did not make an economic adjustment when the price of oil began to fall in 2014, opting for aggressive indebtedness, which left a legacy of public debt of $ 60 billion (including external and internal debt, as well as other obligations). The public debt reached USD 58,560 million in January 2020, equivalent to 53.4% of GDP. Apart from that, according to the Ministry of Economy, there are “Other Obligations of the State”, which total USD 5,941 million.
The Government has cut public investment, aggravating the country's economic stagnation. But it has failed to significantly reduce current spending, which portends a fiscal deficit of 3.1% of GDP. At least USD 6665 million in financing will be required in 2020, including USD 2000 million expected from concessions and sale of public assets.
With the expected disbursements of the IMF and multilateral banks, and other non-orthodox measures (issuance of Treasury Certificates, arrears of payments) the 2020 financing gap is expected to be closed; but Moody’s and other economic agents are concerned that external debt amortizations will increase significantly from 2022, and the economic reforms necessary to achieve an economic recovery are not being adopted; The possible return of economic populism is also worrying.
(*) Translated and updated (to March 2, 2020) version of my column in Diario "El Universo" of Ecuador
https://www.eluniverso.com/opinion/2020/03/02/nota/7762857/coronavirus-petroleo-riesgo-pais
Coronavirus, petróleo y riesgo país
Mi columna del 2 de marzo en el Diario "El Universo"
- OMS advierte sobre una posible pandemia mundial del coronavirus COVID-19
- La economía china y mundial sufren un impacto
- Caen precios de petróleo y otras materias primas
- Se dispara el “riesgo país” del Ecuador
https://twitter.com/Luis_Fierro_Eco/status/1234355798865850368?s=20
- OMS advierte sobre una posible pandemia mundial del coronavirus COVID-19
- La economía china y mundial sufren un impacto
- Caen precios de petróleo y otras materias primas
- Se dispara el “riesgo país” del Ecuador
https://twitter.com/Luis_Fierro_Eco/status/1234355798865850368?s=20
Thursday, February 6, 2020
Ecuador and climate change
Ecuador and climate change
By Luis Fierro Carrion (@Luis_Fierro_Eco)
(English translation of the article published in "El Universo" on February 6, 2020)
The average global temperature registered in 2019 its second highest level in history, barely tenths of a grade below the record set in 2016. The last five years and the last decade have also been the hottest since records are kept.
Global warming is due to the increase in greenhouse gases (GHG) in the atmosphere, in particular carbon dioxide (CO2) and methane gas. The level of CO2 in the atmosphere has increased from 350 parts per million in 1990 to 411 in 2019.
The increase in GHG emissions is mainly due to the use of fossil fuels (oil, gas, coal, etc.), and to a lesser extent to deforestation, agricultural and industrial activities.
We have already reached an increase of 1.1 degrees Celsius with respect to the pre-industrial average temperature, and in the Paris Agreement the countries of the world promised to restrict the temperature increase to 1.5 degrees, or at most to 2 degrees.
However, in accordance with the commitments assumed by the countries (through the “Nationally Determined Contributions” or NDC), an increase of at least 3 degrees C is projected until the year 2100.
With the temperature increase that has already occurred, we have begun to suffer catastrophic effects:
- Massive fires in Australia, Brazil, Bolivia, the United States and other countries.
- Rise of the sea levels (due to the melting of the ice at the poles and Greenland). This already threatens several countries and regions that are a few meters above sea level, such as Kiribati, Maldives, Marshall Islands, Tuvalu, Vanuatu, Bangladesh or the states of Florida and Louisiana in the United States.
- Fluctuations in the rain, which causes droughts in some regions and floods in others.
- Melting glaciers and snow-capped mountains.
- Intensification of hurricanes and tropical cyclones.
- Increase of epidemics of tropical diseases (dengue, Zika, malaria, etc.).
- Expansion of invasive species and extinction of endemic species.
Although Ecuador generates only 0.11% of global emissions (less than its participation in the global population or GDP), in the Paris Agreement all countries expressed their commitment to reduce their GHG emissions.
In Ecuador's climate plan proposal (NDC), there was no commitment for an absolute emission reduction, only sector programs and policies, such as the increase in renewable energy generation or reforestation plans (despite which Ecuador is currently the country in Latin America that deforests the most, as a percentage).
Before the last presidential elections, I published, as part of an initiative of Grupo FARO and Ecuador Decide, “Promote Sustainable and Low-Emission Development, with Greater Resilience to Climate Change” (Grupo FARO, Quito, 2017).
In this document I proposed public policies to address the problem, such as:
- Ratification of the Paris Agreement (the current government did it).
- Reduction or elimination of fossil fuel subsidies (partially achieved in the governments of Correa and Moreno).
- Promote solar, wind, geothermal, tidal and small hydroelectric energy (large hydroelectric plants emit methane gas from their dams, especially in tropical areas).
- Promote greater energy efficiency.
- Provide incentives for electric vehicles and mass public transport (metro, tramways and electric buses).
- Promote actions to adapt to climate change, including more resilient infrastructure.
- Improve the management of solid waste, including the capture of methane gas for electricity generation.
- Constitute an investment fund to face climate change, which channels national and international resources (a small fund has been set up to replace the National Environmental Fund that former President Correa eliminated).
There are concessional, and even non-refundable, funds available to deal with climate change. The Inter-American Development Bank (IDB), CAF, the World Bank, the Green Climate Fund, the French Development Agency (AFD), the German Development Bank (KfW) and the European Investment Bank, among others, finance mitigation and adaptation programs and projects, and there are initiatives to channel these resources towards decentralized autonomous governments and the private sector. Banco Pichincha issued the first Green Bond in Ecuador, in 2019, with the support of IDB Invest, the International Finance Corporation (IFC) and Proparco (the private sector branch of AFD).
Original article in Spanish: https://www.eluniverso.com/opinion/2020/02/03/nota/7721430/ecuador-cambio-climatico
The graph shows the temperature anomalies in 2014-2018. Higher than normal temperatures are shown in red, and lower than normal temperatures are shown in blue.
By Luis Fierro Carrion (@Luis_Fierro_Eco)
(English translation of the article published in "El Universo" on February 6, 2020)
The average global temperature registered in 2019 its second highest level in history, barely tenths of a grade below the record set in 2016. The last five years and the last decade have also been the hottest since records are kept.
Global warming is due to the increase in greenhouse gases (GHG) in the atmosphere, in particular carbon dioxide (CO2) and methane gas. The level of CO2 in the atmosphere has increased from 350 parts per million in 1990 to 411 in 2019.
The increase in GHG emissions is mainly due to the use of fossil fuels (oil, gas, coal, etc.), and to a lesser extent to deforestation, agricultural and industrial activities.
We have already reached an increase of 1.1 degrees Celsius with respect to the pre-industrial average temperature, and in the Paris Agreement the countries of the world promised to restrict the temperature increase to 1.5 degrees, or at most to 2 degrees.
However, in accordance with the commitments assumed by the countries (through the “Nationally Determined Contributions” or NDC), an increase of at least 3 degrees C is projected until the year 2100.
With the temperature increase that has already occurred, we have begun to suffer catastrophic effects:
- Massive fires in Australia, Brazil, Bolivia, the United States and other countries.
- Rise of the sea levels (due to the melting of the ice at the poles and Greenland). This already threatens several countries and regions that are a few meters above sea level, such as Kiribati, Maldives, Marshall Islands, Tuvalu, Vanuatu, Bangladesh or the states of Florida and Louisiana in the United States.
- Fluctuations in the rain, which causes droughts in some regions and floods in others.
- Melting glaciers and snow-capped mountains.
- Intensification of hurricanes and tropical cyclones.
- Increase of epidemics of tropical diseases (dengue, Zika, malaria, etc.).
- Expansion of invasive species and extinction of endemic species.
Although Ecuador generates only 0.11% of global emissions (less than its participation in the global population or GDP), in the Paris Agreement all countries expressed their commitment to reduce their GHG emissions.
In Ecuador's climate plan proposal (NDC), there was no commitment for an absolute emission reduction, only sector programs and policies, such as the increase in renewable energy generation or reforestation plans (despite which Ecuador is currently the country in Latin America that deforests the most, as a percentage).
Before the last presidential elections, I published, as part of an initiative of Grupo FARO and Ecuador Decide, “Promote Sustainable and Low-Emission Development, with Greater Resilience to Climate Change” (Grupo FARO, Quito, 2017).
In this document I proposed public policies to address the problem, such as:
- Ratification of the Paris Agreement (the current government did it).
- Reduction or elimination of fossil fuel subsidies (partially achieved in the governments of Correa and Moreno).
- Promote solar, wind, geothermal, tidal and small hydroelectric energy (large hydroelectric plants emit methane gas from their dams, especially in tropical areas).
- Promote greater energy efficiency.
- Provide incentives for electric vehicles and mass public transport (metro, tramways and electric buses).
- Promote actions to adapt to climate change, including more resilient infrastructure.
- Improve the management of solid waste, including the capture of methane gas for electricity generation.
- Constitute an investment fund to face climate change, which channels national and international resources (a small fund has been set up to replace the National Environmental Fund that former President Correa eliminated).
There are concessional, and even non-refundable, funds available to deal with climate change. The Inter-American Development Bank (IDB), CAF, the World Bank, the Green Climate Fund, the French Development Agency (AFD), the German Development Bank (KfW) and the European Investment Bank, among others, finance mitigation and adaptation programs and projects, and there are initiatives to channel these resources towards decentralized autonomous governments and the private sector. Banco Pichincha issued the first Green Bond in Ecuador, in 2019, with the support of IDB Invest, the International Finance Corporation (IFC) and Proparco (the private sector branch of AFD).
Original article in Spanish: https://www.eluniverso.com/opinion/2020/02/03/nota/7721430/ecuador-cambio-climatico
The graph shows the temperature anomalies in 2014-2018. Higher than normal temperatures are shown in red, and lower than normal temperatures are shown in blue.
Monday, February 3, 2020
El Ecuador y el Cambio Climático
El #Ecuador y el cambio climático | @eluniversocom
Mi segunda columna para el Diario “El Universo”.
El país puede obtener recursos concesionales y no-reembolsables para reducir las emisiones de gases de efecto invernadero y para la adaptación.
Se debe impulsar:
- energía renovable
- eficiencia energética
- reforestación
- transporte eléctrico masivo
- mejorar el manejo de residuos
- infraestructura más resiliente
- fortalecer su plan climático para reducir emisiones
- otras políticas de mitigación y adaptación
https://twitter.com/luis_fierro_eco/status/1224303548441251840?s=21
Mi segunda columna para el Diario “El Universo”.
El país puede obtener recursos concesionales y no-reembolsables para reducir las emisiones de gases de efecto invernadero y para la adaptación.
Se debe impulsar:
- energía renovable
- eficiencia energética
- reforestación
- transporte eléctrico masivo
- mejorar el manejo de residuos
- infraestructura más resiliente
- fortalecer su plan climático para reducir emisiones
- otras políticas de mitigación y adaptación
https://twitter.com/luis_fierro_eco/status/1224303548441251840?s=21
Monday, January 20, 2020
Las partículas contaminantes NO causan el cambio climático
Es preocupante el nivel de ignorancia sobre el cambio climático que revela el gráfico presentado en el programa “Políticamente Correcto” sobre el tema.
- se titula “Calentamiento Global en el Ecuador”, pero no trata sobre gases de efecto invernadero, sino sobre partículas contaminantes.
- Dice que 6 ciudades son las más contaminadas, pero se fundamenta en una base de datos que solo incluye a 9 ciudades, y que EXCLUYE a Guayaquil, Durán, Esmeraldas, Shushufindi, etc.
- dice que “sobrepasaron los niveles mundiales”, sin realmente especificar a que “niveles mundiales” se refiere. El nivel de partículas en la atmósfera es MUCHO PEOR en países como China, India, Egipto, o incluso Chile.
https://twitter.com/claudiaroura/status/1218933241362690048?s=21
- se titula “Calentamiento Global en el Ecuador”, pero no trata sobre gases de efecto invernadero, sino sobre partículas contaminantes.
- Dice que 6 ciudades son las más contaminadas, pero se fundamenta en una base de datos que solo incluye a 9 ciudades, y que EXCLUYE a Guayaquil, Durán, Esmeraldas, Shushufindi, etc.
- dice que “sobrepasaron los niveles mundiales”, sin realmente especificar a que “niveles mundiales” se refiere. El nivel de partículas en la atmósfera es MUCHO PEOR en países como China, India, Egipto, o incluso Chile.
https://twitter.com/claudiaroura/status/1218933241362690048?s=21
Wednesday, January 8, 2020
A prosperous 2020?
Luis Fierro Carrión (*)
@Luis_Fierro_Eco
Ecuador's per capita income fell by 2% in 2019, and will fall again by 1.3% in 2020, according to the projections of the International Monetary Fund (IMF). GDP per capita has been contracting in real terms since 2014, with a cumulative fall of 7.3%.
As a result, the poverty rate, which had dropped from 36.7% in 2007 to 21.5% in 2017, has begun to rise again, reaching 23.2% in 2018. Unemployment is rising, from 3.8% in 2014 to a projected 4.8% in 2020. Most worrying is that the adequate employment rate has been reduced from 45.5% in 2014 to 38.5% in 2019.
This economic contraction and social deterioration is generating frustration and political instability, as evidenced in the October protests against the elimination of gasoline subsidies.
The main reason for this economic contraction is the fall in international oil prices. The average price of Ecuadorian crude fell from $ 84 per barrel in 2014 to $ 35 per barrel in 2016, and projected values of $54- $56 in 2019-2020.
However, the need for economic adjustment was exacerbated by its delay. Instead of immediately reducing public spending (which had reached 44% of GDP in 2014), the Correa government began to incur massive public deficits, reaching 8.2% of GDP in 2016. Public debt (internal and external), which stood at 27.1% of GDP in 2014, quickly doubled, reaching 44.6% of GDP in 2017, and a projected level of 50.1% of GDP in 2020.
The indebtedness included the issuance of international bonds, at high interest rates (compared to our neighbors, Colombia and Peru); indebtedness with China, also with onerous rates, and sometimes tied to projects of Chinese companies; oil presale, with Asian companies; “pawning” part of the gold reserve; use of the reserves of the Central Bank of Ecuador (BCE), through the issuance of internal bonds and the delivery of 'assets' to the BCE; use of IESS reserves, through the issuance of internal bonds; taking of the pensions of some institutions; and the suspension of the 40% contribution of the State to the social security pensions. Several of these forms of indebtedness were unconstitutional or illegal.
By the time Correa handed Lenin Moreno the supposed 'served table', the BCE’s net international reserves (NIR) were negative at -3,293 million dollars (that is, there was a gap in the reserves, which could affect financial stability).
The calamitous fiscal and financial situation in the country led the Government to seek an adjustment program with the IMF. In exchange for financing in soft terms of the IMF for $ 4200 million, and multilateral banks for $ 6000 million, Ecuador promised to reduce its fiscal deficit, recover the NIR, and adopt structural reforms.
The initial goal was to improve the fiscal situation by 5% of GDP (improvement of about $ 5400 million), and a recovery of the NIR (to positive levels). More recently, the Fund reduced the fiscal consolidation target to 3.9% of GDP. Fiscal goals have been achieved, but only thanks to a severe contraction of public investment. The public wage bill has not been reduced, although a reduction of 0.3% of GDP is anticipated in 2020. It will be essential to reduce fuel subsidies, which will be attempted through better targeting.
An economic recovery could be achieved by:
-An increase in the price or volume of oil exports.
-Expansion of mining production (gold began to be exported from a concession).
-Increase in the prices of raw materials (which seems unlikely, given the recessive trends in some countries).
-Increased private investment (which is hindered by high labor costs in Ecuador, compared to Colombia and Peru; legal uncertainty; and bureaucratic obstacles for entrepreneurship in Ecuador). A labor reform that creates incentives to generate employment would be welcome, as well as reforms that facilitate the creation of companies.
-Expansion of energy efficiency, greater generation of renewable energy, greater use of public transport (for which there is international concessional financing).
-Increase in productivity, as well as greater value added of exports.
(*) Translation of opinion column published on January 6, 2020 in Diario “El Universo” of Ecuador
https://www.eluniverso.com/opinion/2020/01/06/nota/7677411/prospero-2020
@Luis_Fierro_Eco
Ecuador's per capita income fell by 2% in 2019, and will fall again by 1.3% in 2020, according to the projections of the International Monetary Fund (IMF). GDP per capita has been contracting in real terms since 2014, with a cumulative fall of 7.3%.
As a result, the poverty rate, which had dropped from 36.7% in 2007 to 21.5% in 2017, has begun to rise again, reaching 23.2% in 2018. Unemployment is rising, from 3.8% in 2014 to a projected 4.8% in 2020. Most worrying is that the adequate employment rate has been reduced from 45.5% in 2014 to 38.5% in 2019.
This economic contraction and social deterioration is generating frustration and political instability, as evidenced in the October protests against the elimination of gasoline subsidies.
The main reason for this economic contraction is the fall in international oil prices. The average price of Ecuadorian crude fell from $ 84 per barrel in 2014 to $ 35 per barrel in 2016, and projected values of $54- $56 in 2019-2020.
However, the need for economic adjustment was exacerbated by its delay. Instead of immediately reducing public spending (which had reached 44% of GDP in 2014), the Correa government began to incur massive public deficits, reaching 8.2% of GDP in 2016. Public debt (internal and external), which stood at 27.1% of GDP in 2014, quickly doubled, reaching 44.6% of GDP in 2017, and a projected level of 50.1% of GDP in 2020.
The indebtedness included the issuance of international bonds, at high interest rates (compared to our neighbors, Colombia and Peru); indebtedness with China, also with onerous rates, and sometimes tied to projects of Chinese companies; oil presale, with Asian companies; “pawning” part of the gold reserve; use of the reserves of the Central Bank of Ecuador (BCE), through the issuance of internal bonds and the delivery of 'assets' to the BCE; use of IESS reserves, through the issuance of internal bonds; taking of the pensions of some institutions; and the suspension of the 40% contribution of the State to the social security pensions. Several of these forms of indebtedness were unconstitutional or illegal.
By the time Correa handed Lenin Moreno the supposed 'served table', the BCE’s net international reserves (NIR) were negative at -3,293 million dollars (that is, there was a gap in the reserves, which could affect financial stability).
The calamitous fiscal and financial situation in the country led the Government to seek an adjustment program with the IMF. In exchange for financing in soft terms of the IMF for $ 4200 million, and multilateral banks for $ 6000 million, Ecuador promised to reduce its fiscal deficit, recover the NIR, and adopt structural reforms.
The initial goal was to improve the fiscal situation by 5% of GDP (improvement of about $ 5400 million), and a recovery of the NIR (to positive levels). More recently, the Fund reduced the fiscal consolidation target to 3.9% of GDP. Fiscal goals have been achieved, but only thanks to a severe contraction of public investment. The public wage bill has not been reduced, although a reduction of 0.3% of GDP is anticipated in 2020. It will be essential to reduce fuel subsidies, which will be attempted through better targeting.
An economic recovery could be achieved by:
-An increase in the price or volume of oil exports.
-Expansion of mining production (gold began to be exported from a concession).
-Increase in the prices of raw materials (which seems unlikely, given the recessive trends in some countries).
-Increased private investment (which is hindered by high labor costs in Ecuador, compared to Colombia and Peru; legal uncertainty; and bureaucratic obstacles for entrepreneurship in Ecuador). A labor reform that creates incentives to generate employment would be welcome, as well as reforms that facilitate the creation of companies.
-Expansion of energy efficiency, greater generation of renewable energy, greater use of public transport (for which there is international concessional financing).
-Increase in productivity, as well as greater value added of exports.
(*) Translation of opinion column published on January 6, 2020 in Diario “El Universo” of Ecuador
https://www.eluniverso.com/opinion/2020/01/06/nota/7677411/prospero-2020
Monday, January 6, 2020
¿Un próspero 2020? Mi columna inaugural en el Diario “El Universo” de Ecuador
¿Un próspero 2020? | Columnistas | Opinión | El Universo
Mi columna inaugural en el Diario “El Universo” de Ecuador.
El ingreso por habitante del Ecuador cayó en 2 % en 2019, y volverá a caer en 1,3 % en 2020, según las proyecciones del Fondo Monetario Internacional (FMI). El PIB per cápita viene contrayéndose en términos reales desde el año 2014, con una caída acumulada del 7,3 %.
https://www.eluniverso.com/opinion/2020/01/06/nota/7677411/prospero-2020?device=mobile
El Universo
Mi columna inaugural en el Diario “El Universo” de Ecuador.
El ingreso por habitante del Ecuador cayó en 2 % en 2019, y volverá a caer en 1,3 % en 2020, según las proyecciones del Fondo Monetario Internacional (FMI). El PIB per cápita viene contrayéndose en términos reales desde el año 2014, con una caída acumulada del 7,3 %.
https://www.eluniverso.com/opinion/2020/01/06/nota/7677411/prospero-2020?device=mobile
El Universo
Tuesday, December 31, 2019
Mis artículos de blog más leídos en el 2019 / Top blog posts of 2019
Mis artículos de blog más leídos en el 2019 / My top blog posts in 2019
# 6 - Un paquete económico equitativo, equilibrado y pro-ambiental
# 5 - El ajuste fiscal es consecuencia del desajuste 2014-17
https://economicsandinvestment.blogspot.com/2019/07/el-ajuste-fiscal-es-consecuencia-del.html
# 4 - Interesantes artículos sobre 40 años de democracia en Ecuador, crecimiento económico e instituciones
https://economicsandinvestment.blogspot.com/2019/08/interesantes-articulos-sobre-40-anos-de.html
# 3 - Impacto de la eliminación del subsidio a la gasolina extra y el diésel
https://economicsandinvestment.blogspot.com/2019/10/impacto-de-la-eliminacion-del-subsidio.html
# 2 - La recesión que se viene (y ya llegó a 20 países)
https://economicsandinvestment.blogspot.com/2019/06/la-recesion-que-se-viene-y-ya-llego-20.html
And the top blog post of 2019::
# 1 - Ni desdolarización ni prosperidad. Programa de Ajuste del Ecuador con el FMI
https://economicsandinvestment.blogspot.com/2019/04/ni-desdolarizacion-ni-prosperidad.html
The top blog post in English was:
Is there still no place like home?
https://economicsandinvestment.blogspot.com/2019/06/is-there-still-no-place-like-home.html
(I guess I should be translating more).
Happy New Year! Feliz Año Nuevo!
# 6 - Un paquete económico equitativo, equilibrado y pro-ambiental
# 5 - El ajuste fiscal es consecuencia del desajuste 2014-17
https://economicsandinvestment.blogspot.com/2019/07/el-ajuste-fiscal-es-consecuencia-del.html
# 4 - Interesantes artículos sobre 40 años de democracia en Ecuador, crecimiento económico e instituciones
https://economicsandinvestment.blogspot.com/2019/08/interesantes-articulos-sobre-40-anos-de.html
# 3 - Impacto de la eliminación del subsidio a la gasolina extra y el diésel
https://economicsandinvestment.blogspot.com/2019/10/impacto-de-la-eliminacion-del-subsidio.html
# 2 - La recesión que se viene (y ya llegó a 20 países)
https://economicsandinvestment.blogspot.com/2019/06/la-recesion-que-se-viene-y-ya-llego-20.html
And the top blog post of 2019::
https://economicsandinvestment.blogspot.com/2019/04/ni-desdolarizacion-ni-prosperidad.html
The top blog post in English was:
Is there still no place like home?
https://economicsandinvestment.blogspot.com/2019/06/is-there-still-no-place-like-home.html
(I guess I should be translating more).
Happy New Year! Feliz Año Nuevo!
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