Ecuador earthquake shakes economy
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This is a digitised version of an article from The Cayman Compass's print archive. Occasionally, the digitisation process introduces transcription errors, or other problems.
See the article in its original context from March 1987.
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Landslides blocked rivers and caused widespread flooding. Reports indicate that the worst-hit parts lie around Baeza, a town 80 kilometres east of Quito, and then around the valleys of the rivers and Aguarico, close to the volcano Reventador.
About 40 kilometres of the Transecuadorian pipeline, which transports Ecuador's oil production, virtually disappeared, together with the road. A pumping station, El Salado, along the route was destroyed. A bridge which carried the pipeline across the river Aguarico collapsed.
The actual oil installations, 80 kilometres further east in the flatter parts of Napo province, apparently escaped.
Oil accounts for over 60 per cent of Ecuador's export earnings. Before the earthquake, Ecuador was producing 260,000 barrels a day, of which almost half was used domestically. of the remaining 140,000 barrels a day, about half was exported to the US, with the rest directed towards Far Eastern markets.
Oil accounted for 60 per cent of export earnings: at the OPEC fixed price for Ecuador's Oriente crude, the earthquake has cost the country nealry $2.5 million a day.
Repairs to the pipeline could take up to five months and cost $150 million, according to deputy oil minister Fernando Santos. As a temporary measure, there is a plan to construct a spur pipeline from the Shushufindi and Lago Agrio fields, to Colombia's southernmost Transandean pipeline. The Colombian pipeline was itself only recently reopened after being damaged in a landslide. Ecuadorian crude could then be transported to the Colombian Pacific port of Tumaco, and from there by tanker to an Ecuadorian refinery at Esmeraldas. But this could only supply a maximum of 50,000 barrels a day, all of which would be for domestic needs.
Ecuador has appealed to its partners in the Organisation of Petroleum Exporting Countries (OPEC) for assistance - an ironic twist of fate as the country has rarely been a model member of the organisation.
Oil production has been running at 40,000 (b/d) over the country's OPEC quota, and a large body of opinion, notably within the present administration, has been opposed to OPEC membership since in world terms the country is a marginal oil producer. Venezuela has said it will supply five million barrels of crude and crude products but again this will be only for domestic consumption. Venezuela is also considering supplying oil to Ecuador's foreign customers.
Ecuador has a total debt of some $8.2 billion, and even before the earthquake was $83 million in arrears on interest payments. Now the Government has announced a suspension of all debt payments for the rest of the year. A degree of national unity in the face of the disaster will provide at least a temporary respite to the political tensions which have dogged the market-oriented administration of President Febres Cordero.
Mounting constitutional and judicial differences with the opposition-dominated Congress, an attempted rebellion by retired air force general Vargas Pazzos, and the President's own kidnapping, gave rise to serious doubts over whether Febres Cordero could complete his term of office.
The Febres presidency will probably now run its term, with elections due in January. But with an already depressed economy due to lower oil prices, the financial consequences of a near half-year of suspended oil exports pose formidable problems for the incoming administration. (GEMINI NEWS)
