Ecuador brightens

by | Aug 30, 2001 | Archives

My contacts and outside sources continue to tell me the same things about Ecuador.

The country has a long way to go, but everything continues to look brighter.

A recent article in the Wall Street Journal confirms this when it saysthat “While recession appears to have Latin America's three biggesteconomies against the ropes, analysts are optimistic that the region'smiddleweights can avoid an economic slump.

Ecuador, the smallest country in the Andes, should post the highestgrowth, thanks not just to a new oil pipeline and more crude exports, butalso to the adoption of the U.S. dollar.

Michael Gavin, head of Latin America economics at UBS, said that after ayear of the greenback as its legal tender, inflation has sharplymoderated, capital is flowing back into the country and Ecuadoreans arespending again. He predicts the country will grow 5.4% this year,exceeding the International Monetary Fund's 4% to 4.5% target. Thatgrowth, he noted, follows Ecuador's 1999 debt default and economiccollapse, which spilled into 2000, implying a low base against which tomeasure this year's growth.

Recently Ecuador real estate broker Mark Burris ( sentme an article from Business News America which says:

“Increased sales in Ecuador and other Andean Group countries could reversethe downward spiral faced by companies in Peru's forged-steel sub-sector,according to Luis Botto, managing director of Metales Andinos, who wasquoted in Lima business daily Gestion.Metales Andinos is looking at opening a commercial office in Ecuador andbidding for contracts in the country's oil industry, Botto said.”

Plus an excellent article from Petroleum World shows that one of Ecuador'sworst problems, its continual border dispute with Peru is really over asthese tow countries now cooperate. Here is what the article said:

“Peru-Ecuador : Oil pipeline launches regional energy integration.

The first shipment of oil from Ecuador's Amazon jungle to the Pacific coastin Peru marks the beginning of energy integration between the twocountries, a process that will ultimately include Colombia and Brazil.

Some 5,000 barrels of crude produced in the Ecuadorian province of Orellanawere transported by barge along the Napo, Amazonas and Maranon rivers tothe oil pipeline in northern Peru connecting the Amazon region to thePacific coast.

The energy integration process launched this week between Peru and Ecuadorwill soon be extended to Brazil and Colombia, and is to cover natural gasand hydroelectric production as well.

Peru and Ecuador signed an agreement four years ago for economic andinfrastructural integration, including the future interconnection ofpipelines and of the two countries' electrical energy systems.

This bilateral accord forms part of a peace treaty signed by Lima and Quitoin 1998 in Brasilia that put an end to more than a century of bordertensions and armed clashes, the last of which occurred in 1995 – resolvedthanks to mediation by the international community.

The Peruvian oil pipeline will allow Ecuador's petroleum output to make itsway over the Andes mountains, the main obstacle for reaching foreignmarkets via the ports on the Pacific coast.

Ecuadorian crude had been a prisoner of geography until now because thecosts of transporting the fuel by river routes to Brazil made it unprofitable.

In the first stage of the project Ecuador's oil will reach the pipeline bybarge shipments until a conduit is built.

The 856-km pipeline in northern Peru climbs the Andes and crossing at thePorcuya pass at 2,400 meters above sea level, ending up at Bayovar bay.

The pipeline has the capacity to transport 250,000 barrels of crude a day.It was completed in 1977 when it was believed that the Peruvian Amazon heldgreater oil wealth than it really does. The system currently operates at 40percent capacity.

Peru records an average daily output of 95,000 barrels of crude, whileconsumption surpasses 135,000 barrels, obligating the country to importfrom nearby Ecuador, Colombia or Venezuela.

Energy ministers Jaime Quijandria, of Peru, Pablo Tern, of Ecuador, andRamiro Valencia, of Colombia, met earlier this week in Lima to discuss theenergy integration process of the three nations.

Quijandria reported at the end of their discussions that the initiative toconnect the Peruvian and Ecuadorian pipelines is in the feasibility studyphase.

He assured that “as long as Peru does not have the petroleum production tofill the pipeline's capacity, it would be made available to Ecuador tocover the full capacity.”

Tern, for his part, said Ecuador proposes to speed up pipeline constructionto connect with Peru and that the state-run entity Petroecuador plans totransport some 150,000 barrels of crude per day via the Peruvian pipeline,equivalent to 60 percent of its productive capacity.

As far as electrical integration, Quijandria explained that Peru has a50-percent surplus in output, generated primarily by hydroelectricinstallations, prompting Lima to negotiate powerline connections withColombia and Ecuador.

The Peruvian minister added that these talks would include Brazil as wellin the coming months.

Ecuador lacks emergency electrical generating capacity, while Colombia hasa surplus of electricity, but most of it is generated by the relativelycostly diesel- or gas-fired power plants.

Representatives from the electricity regulating bodies in each of the threecountries are to meet Sept. 15 to determine what legal frameworks mightneed modification to allow the cross-border connections.

In parallel, technicians from Ecuador and Peru are gathering to draw up theoperational map of the electrical energy linkage between the two countries.”

There have been few times when the opportunity is ripe for business inEcuador. This is why I am combining my three courses, Publishing Made EZ,Ecuador Business Made EZ and International business Made EZ into one coursethis October and November. I hope to see you there.

Until next message, good global business and investing!”