Explosions heard in Cuenca as Sangay volcano erupts; High oil prices benefit treasury, ex-finance minister says; European wines gain market share

Aug 1, 2022 | 6 comments

The Sangay volcano erupted late Saturday night and the accompanying explosions could be heard in large portion of central and southern Ecuador, including Cuenca. On Sunday, Ecuador’s Geophysical Institute said the eruption was in the “small to moderate” range but said activity could intensify.

The Sangay volcano during a 2018 eruption.

The institute said that that areas to the west and southwest of the volcano should expect light ashfall and parts of Guayas Province reported light accumulations on Sunday.

Volcanolgist Silvia Vallejo said that the institute recorded 180 explosions as well as dozens of small earthquakes preceding the eruption. “At this point, the eruption is small but there is steady upward trend of magna in the central chamber. This is consistent with other recent eruptions and we continue to watch the activity for further development.”

She added that ashfall could affect agricultural land west of the volcano and said Risk Management officials have been updated on the situation.

Early Monday, the Cuenca risk management office said it was monitoring the situation and would issue an alert if the wind direction changes. “We have, so far, experienced no reports of ash in the canton but if wind direction turns south this could change,” the office said on social media. In 2017 and 2018, Sangay eruptions sent ash clouds over Cuenca.

Sangay is locted 137 kilometers northeast of Cuenca in Morona Santiago Province.

High oil prices benefiting treasury, ex-finance minister say
Former Minister of Finance Fausto Ortiz says that Ecuador is receiving a “substantial net benefit” from higher oil prices despite an increase in gasoline and diesel subsidies. “There has been talk by some people that the subsidies added as a result of the Conaie strike are taking money from other budget areas and this is not the case,” he says. “The government is bringing in far more revenue as a result of higher per barrel prices than it will spend on the subsidies.”

Ortiz adds that negotiations of the country’s oil-debt to China appear to be going well, which will allow the treasury to bring in addition money. “China seems agreeable to making changes that will allow Ecuador to have more oil to sell on the spot market and I understand there will be an announcement on the matter within the coming weeks.”

On Monday morning, the international price of oil averaged $101.34. Ecuador’s 2022 budget is based on a price of $55.

Ortiz expressed doubt about the effectiveness of the targeted fuel pricing current being discussed in talks between the government and Conaie. “It appears that some version of targeting will be agreed to but I worry that its adoption will be be difficult,”he says. “It will require are large deal of bureaucracy, which could lead to corruption. In principle, I don’t oppose it but I don’t see how it will effectively function.”

European wines gain Ecuador market share
Sales of European wines in Ecuador have grown exponentially since 2017 when a free trade agreement with the European Union took effect. Importers report that European labels amounted to 16 percent of all sales through the first half of 2022, up from less than two percent in 2016, before the trade agreement took effect.

According to importers, sales by Corporación Favorita, owners of Supermaxi and Super Aki supermarkets, amounted to almost 40 percent of all European wine sales. Favorita says that 19 percent of all its wine sales are of European brands. “Our customers appreciate the European wines, particularly those from France, Germany and Italy, and the percentage of wine sales from Europe is growing rapidly.” The company says that sparkling wines are the largest selling variety.

Favorita says that Chilean and Argentinian wines are the biggest sellers, amounting to almost 70 percent of sales.

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