Latin America Advisor

Energy Advisor

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Will Fuel Subsidy Cuts Take a Toll on Ecuador’s Noboa?

The government of Ecuadorean President Daniel Noboa announced last month that it was cutting costly fuel subsidies. // File Photo: Ecuadorean Government.

Ecuador’s government announced on June 18 that it was reducing longstanding fuel subsidies, which led to a nearly 11 percent increase in the price of gasoline. Previous governments attempted but failed to reduce government-funded fuel subsidies following massive protests. Why have fuel subsidies been an important policy target for successive Ecuadorean administrations, and what motivates President Daniel Noboa to reduce them now? How will this policy affect Noboa’s popularity ahead of next year’s presidential election?

Alberto Acosta Burneo, editor of Weekly Analysis in Guayaquil: “Fuel subsidies in Ecuador began in the 1970s when the country became a petroleum producer. However, these subsidies do not primarily benefit the lower-income population; more than half goes to the wealthiest quintile. In 2024, $3.1 billion was budgeted for subsidies (2.5 percent of GDP). However, the government, in agreement with the IMF, decided to reduce this subsidy, initially focusing on gasoline, with a budget of $631 million (0.5 percent of GDP). Previous attempts to reduce these subsidies have failed due to popular opposition, risking governmental stability. The new policy is implemented in two phases: an initial increase and a price band allowing adjustments according to the international price. This flexibility represents…”

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A sister publication of the Inter-American Dialogue’s daily Latin America Advisor, the weekly Energy Advisor captures fresh analysis from business leaders and government officials on the most important developments in oil and gas, biofuels, the power sector, renewables, new technologies, and the policy debates shaping the future of energy in the Western Hemisphere and beyond. To subscribe or for more information, contact Gene Kuleta, editor of the Advisor, at gkuleta@thedialogue.org.


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