This article from Financial Times looks at the way Ecuador and Venezuela have responded to their loss of oil income. FT mostly praises Ecuador.
Ecuador ... where oil generates about half of exporters (sic) and a quarter of government revenues, “has reacted quickly to adjust its fiscal plans as prices have fallen” says LatAm Confidential. The price of Ecuadorean crude, which like Venezuela's trades at a discount because of its lower quality, has more than halved to some $40 from above $95 a year ago. But Correa, an economist trained in Belgium and the US, made a difficult adjustment last month, slicing his country's budget by 4 per cent to about $35bn. Ecuador secured $7.5bn from China to help maintain public spending and bridge a deficit that is still set to grow this year between $8.8bn and $10.5bn – up from last year's estimates of $5.5bn. The government also announced a tax reform that could raise some $200m a year ...
Venezuela, not so much:
Embattled Venezuela is more exposed to lower oil prices. Last year, crude accounted for 96 per cent of exports and about half of the government's revenues. As the socialist administration had already cut imports, LatAm Confidential says, “the government initially responded to the oil price falls by looking to cover declining revenues with foreign borrowing.”
But despite vague announcements of $20bn in investments and financing after a trip to China in January, it is unclear how much President Nicolás Maduro really secured from Venezuela's main lender.
The average price of Venezuelan crude last year was almost $98 a barrel; it now trades at $49. With its supply of dollars imploding, the government has once again tinkered with its Byzantine foreign exchange system, a move that for LatAm Confidential “will have limited effect”. The government has also raised some $2.8bn through its US-based refining company, Citgo, and accepted $1.9bn from the Dominican Republic to wipe out a $4bn debt for oil sales under the PetroCaribe agreement. That has, for now, warded off the spectre of debt default, which LatAm Confidential nevertheless believes is possible in the second half of the year.
