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ANALYTICA INVESTMENTS WEEKLYREPORT@ANALYTICAINVESTMENTS.COM

Ramiro Crespo Chairman of the Editorial Board

WWW.ANALYTICA.COM.EC

ECONOMIC INDICATORS

ECUADOR WEEKLY REPORT®

Ecuadorian Global Bonds (April 20, 2012)

For the week of April 16 – April 20, 2012 Conscience at the Pump Perhaps one can live a life in which one can avoid climate-changing emissions, but unless one succeeds at giving up both plastics and leather

BID

ASK

Global 2012

33.00

48.31

Global 2015

102.06

104.25

Global 2030

28.13

32.13

BCE International Reserves

Inflation

In million US$

altogether and walks barefoot to get around, a life

August 2011

4124.62

3.62%

untouched in some way by the oil industry is, at

October 2011

4548.59

15.81%

Dec 2011

2957.62

-34.98%

Feb 2012

3375.54

14.13%

13 April 2012

3379.44

0.12%

least for the foreseeable future, impossible. Beyond the gasoline at the pump, more than hundreds of thousands

products

in

industries

not

just

in

transportation and chemicals but also clothing and pharmaceuticals and even food all contain at least

0.90%

Accumulated

2.26%

Year on Year

6.12%

Banks – Short and long term Deposits In million US$ December 2012

10593.3

6.18%

trace elements of oil, including the vanillin in vanilla

January 2012

10511.3

-0.77%

ice cream. This presents a clear dilemma for

February 2012

10870.4

3.42%

March 2012

11068.6

1.82%

5 April 2012

11059.2

-0.08%

anyone sensitive to the issue of climate change.

March 2012

Worse still, much of the world’s oil is produced in or near

biological

hotspots,

offshore

on

the

Ecuadorian Oil Export Prices (US$ per barrel)

continental shelf or in tropical forests. Unsurprisingly, conflicts

between

local

companies

have

Indigenous

communities

ethnic

erupted

in

have

groups many suffered

and areas. the

contamination and destruction of their homelands, while the benefits have gone elsewhere.

120

$102.25 $108.81

90

environmentalists

$100.24

$103.18

$86.41

$104.58

$103.30 $102.25

WTI

$97.10

Oriente

80

60

and

$97.21

$99.62

global issue over the past two decades. Under shareholders

$101.36

$98.57

100

70

of

$106.22

110

Environmental awareness has become a major scrutiny

$113.30

Napo

October

November

December

January

February

20-Apr


– some of them in fact the same individuals –

owned

private oil companies have improved standards,

production.

Petroamazonas

to

potentially

certify

and regulators, too, have rolled out environmental

Unlike the far broader ISO standards, which

protection laws worldwide. This has led companies

attest to quality of an entire company, Equitable

to stop some of the most egregious pollution. Even

Origin’s

Petroecuador says that it now re-injects 100% of its

operations down to individual fields, reflecting the

formation water – heavily contaminated water

vast differences between production techniques

extracted along with oil from underground deposits.

possible and required to extract crude oil from

But standards vary, as does the quality of oversight.

different terrains. To rule out conflicts of interest,

Around 2005, Chilean state oil company ENAP

third party auditors will control compliance with

foolishly argued that it didn’t have to clean up oil

the standard. While oil is a commodity traded in

spilled

1997

vast quantities, this will limit certification to a

environmental law went into effect. Chevron,

certain number of a given company’s barrels at

meanwhile, faces a potentially huge cleanup bill

least initially, say 30,000 barrels a day out of a

from closed operations it didn’t carry out but

total 150,000.

in

Tierra

del

Fuego

before

the

EO100

standard

endorse

individual

inherited in Ecuador when it bought Texaco in 2000.

To tap financial market interest, Equitable

And BP, which spent years polishing up its image,

Origin aims to make the EO100 certificates

suffered a global blow to its image and to its

tradeable,

bottom line because of the Gulf of Mexico oil spill,

economic benefit from potentially more costly

caused by cutting corners in the first place.

production that might otherwise reduce the

A US-based company with a high proportion of

allowing

companies

to

reap

an

bottom line. EO100 will also allow, similar to Fair

Latin American – mostly Ecuadorian – staffers has

Trade

developed a concept to address the lack of a

companies to use a logo to brand cleanly and

global standard for clean and responsible oil

responsibly produced products. This will also

production. One of its board members is Michael

mean that the company promises not to permit

Conroy, who has worked on similar standards for

companies involved in human rights violations or

“fair-trade” products, including Ecuadorian roses.

other crimes to use it. Companies will also have to

Beyond

the

set aside funds for the funding of environmental

company, Equitable Origin, has negotiated with

cleanups when deposits become exhausted and

some of the harshest critics of the industry, including

closed down at the end of a project’s lifetime.

Acción

technical

Ecológica,

minimum

an

standards,

Ecuadorian

or

the

Forest

Stewardship

Council,

non-

This approach would also offer an alternative

governmental organization. This has led it to

to the controversial Ishpingo-Tambococha-Tiputini

establish social responsibility standards, including

scheme (EWR588), which has been extended

both environmental protection and safeguarding of

through this election year. The scheme currently

indigenous cultures. It is currently working with state-

aims to keep the ITT field’s nearly billion barrels of


crude underground in exchange for domestic and

claims that they were being seized without

particularly international compensation. Ecuador

compensation. Police sealed them off almost 12

wants $3.6 billion over a decade for the field, while

hours before they were even notified. Court cases

spending

will likely result from the way the closing was

a

similar

amount

annually

on

fuel

subsidies that contribute to the heating up of the atmosphere. Actual contributions however have

handled. Populist President Rafael Correa spent all of his

only more or less been able to match the amount

studies

spent so far on the campaign to promote the

graduating from Guayaquil’s Santiago Catholic

scheme, a bit more than $1 million. To the chagrin

University (UCSG) before getting his master’s

of environmentalists, Petroamazonas has begun

degree and PHD overseas in Belgium and the US,

developing oil Block 31 adjacent to the ITT field,

respectively. A former economics professor at the

deep inside Yasuní national park.

private San Francisco University in Quito, also

in

private

Ecuadorian

universities,

sending his own children to the private French Closing Time

school

La

Condamine

in

Quito,

he

has

continuously railed against the private system. His Police swooped in to seal 14 universities after

own Guayaquil alma mater was so bad that he

midnight, April 14, closing them mid-Semester “for

“cried out of anger” when he was studying for his

lack of academic quality,” as seals on their doors

master’s degree in Louvain-la-Neuve and that he

and entrances said. More than 38,000 students

had had an UCSG professor who sold chickens in

faced closed doors in the morning. The private

the morning and taught classes in the evening, he

institutions were shuttered after an evaluation

said in late 2008. UCSG Rector Michel Doumet a

process starting in 2008. René Ramírez, head of the

week later apologized to Ecuadorians for having

government higher education office, in appalling

allowed Correa to graduate.

Spanish said “the universities won’t reopen but

Still, many university professors themselves

rather a process of definitive suspension is being

agree that a flood of new private universities in

initiated, which will take a year until everything is

the first few years after the introduction of the

left in order.” Officials said the night-time measure

dollar, in many cases, failed to provide quality

went ahead to avoid any attempt by university

education. The number of universities swelled to

owners to remove any assets from the facilities. Yet

more than 70. In June 2008, the constitutional

amid generalized charges of “fraud” by Ramírez

assembly had already closed the Universida

and others, no-one has actually been charged with

Cooperativa

any crime. Instead, the universities appear to be

comprehensive review, the evaluation council

facing

un-

analyzed 68 universities, applying what it calls a

academic use of the word “suspension,” which the

“method of profit analysis, diffuse logic, and

evaluation council also used, attempts to head off

conglomerate analysis.” Indicators analyzed, in

expropriation.

Perhaps

Ramírez's

de

Colombia.

In

its

more


mixed English and Spanish, included the number of female professors and the ratio of professors to students, student participation in the running of the universities

and

professors

salaries,

among

numerous other measurable criteria. The evaluation was headed by Guillaume Long, who has a PHD from the University of London but no experience in academic reform. Nor did the other five members of the council, although all have doctorates. Ironically, some 10,000 students in their senior year will

be

allowed

to graduate

at

the

closed

universities once temporary administrators take control. Contingency plans aim to place the remaining students at other universities that remain open.


Boletín Journal OIL & POWER 188