Oil In Ecuador - Extended Essay
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Transcript of Oil In Ecuador - Extended Essay
Table of Contents
Introduction ..........................................................................................................................2
Background ..........................................................................................................................2
Figure 1: Location of Ecuador .............................................................................................4
Figure 2: Location of the OCP pipeline...............................................................................4
The Problems with Oil .........................................................................................................5
Figure 3: Percent of Population living in Poverty 1998......................................................8
Figure 4: Foreign Direct Investment in Ecuador .................................................................9
Figure 5: Evolution of Oil and Non-Oil Exports ...............................................................12
Figure 6: Oil Production, Refinery Capacity and Net Exports in Ecuador.......................13
Figure 7: Trends in Oil Price.............................................................................................15
Figure 8: Trends in Price of Oil, Ecuador Specific...........................................................15
Figure 9: Economic Breakdown by Industry - Ecuador....................................................18
Conclusion.........................................................................................................................20
References..........................................................................................................................21
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Introduction
Oil is one of the modern world’s most prized resources. It has the potential to
give its governing body great wealth and power if handled correctly. This paper addresses
the question of whether or not the discovery of oil in Ecuador was beneficial for the
people of the nation. Unfortunately the discovery and exploitation of oil in Ecuador has
fueled corrupt governance, environmental and cultural degradation as well as climbing
debt. Oil money enabled the government to take out loans which contributed to a culture
of debt and poverty. Indigenous people lost large areas of land which contributed to a
cultural decline. Unhappy citizens protested in the streets. Attempts at improving
infrastructure and reshaping the economy failed and brought forth insurmountable levels
of foreign debt. The oil industry has not been beneficial to Ecuador because poor
governance has caused any benefits to be overshadowed by the negative social,
environmental and financial consequences. The value in this investigation will come from
research in three main areas. The first is a look into issues surrounding globalization and
the effect of a global economy on a developing nation. Then this study will act to dispel
common notions that oil is the solution to all economic problems and those issues in
developing nations can be solved solely by an increase in capital. Finally the feasibility of
an economy that relies solely on the production of raw materials specific to a single
product will be discussed.
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Background
The Oriente region of Ecuador is the easternmost area of land which is the
nation’s main oil extraction land. The Oriente is part of the Amazon Rainforest and
contains part of the Amazon River basin. This area is considered to be one of the world’s
ten major biodiversity hot spots (Wood & Porro, 2002). Before oil extraction began, the
area was mostly inhabited by indigenous people who lived untouched by modern society
(Amazon Watch, 2006). The search for oil in the Amazon began in 1921. In 1967 the first
oil field opened near Lago Agrio (Roos & Van Renterghem, 1997). In current times, oil is
piped from the Oriente across the Andes to the Esmeraldas where it is exported or
refined. There are two major pipelines to do this job, the trans-Ecuadorian (SOTE) and
the Oleoducto de Crudos Pesados (OCP). The trans-Ecuadorian pipeline began shipping
oil in 1971, and the OCP followed in 2003. Initially the majority of oil extraction was
controlled by Texaco, Standard Oil Company, Shell and a few other foreign enterprises
(Roos & Van Renterghem, 1997, p. 49). By law in Ecuador people own the land that they
live on, but the government has control over the resources underneath the ground and are
able to manipulate them however they see fit. It was not long before the entire Amazon
region was deemed an “oil extraction area.” (Roos & Van Renterghem, 1997) In 1971
Ecuador came under military rule (Gerlach, 2003). The government created a state-run
petroleum company: Corporación Estatal Petrolera Ecuatoriana (CEPE) also known as
the Ecuadorian State Oil Corporation (Roos, 1997). Democracy was restored when Borja
became president in 1989 and the CEPE was restructured and given a new name:
Petroecuador (Roos & Van Renterghem, 1997).
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Figure 1. Location of Ecuador
Note. From Sheppard Software. Blank map of South America. Retrieved January 11, 2009 from <http://www.sheppardsoftware.com/southamericaweb/blankmap.htm>
Figure 2. Location of the OCP pipeline
Note. From Goodland, Robert. Ecuador: Oleoducto de Crudos Pesados (OCP) (heavy crude oil pipeline) Independent compliance assessment of OCP with the World Bank’s environmental and social policies. (2002) Retrieved on January 11, 2009 from <http://www.amazonwatch.org/amazon/EC/ocp/reports/ocp_asses_report_0209.pdf>
The Problems with Oil
4
Ecuador
Colombia
Peru
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During the 1960s and 1970s Texaco developed the Lago Agrio and Shushufindi
oil fields while also helping to build the trans-Ecuadorian pipeline (Whitten, 2003). As
oil was a newly discovered resource in Ecuador, oil extraction and processing had begun
before the necessary regulations surrounding its exploitation had been created. Lack of
environmental law for oil extraction allowed oil companies, primarily Chevron Texaco
and CEPE to exploit oil with few laws to protect surrounding areas and people. Water
contamination became a large problem. Numerous heavy metals and other harmful
substances are brought to the surface during exploratory drilling (Whitten, 2003). Waste
pits were used in an attempt to dispose of the dangerous materials. Unfortunately, the
waste pits in Ecuador were often unlined so any substances could easily seep out of the
pits and contaminate the surrounding area (Brooke, 1994). Waste pits were legal in most
countries at the time (Chevron U.S.A. 2008) but pits in Ecuador were not well
maintained, leading one to believe that this practice would not have been legal elsewhere.
Furthermore, even if waste pits were kept to legal standards, oil extraction has still caused
environmental damage that had never before been encountered in Ecuador. At present,
most international regulations state that drillers must re-inject these waste products deep
into the earth (Brooke, 1994). Without a doubt, the introduction of new industrial
materials that contaminated the natural state of the Ecuadorian landscape is a negative
effect of oil production in the nation.
The degradation of natural habitat will cause negative effects for all who need the
natural resources for survival. Industrialization of the Amazon has caused numerous
animal species to die out. River dwellers, crocodiles, water birds, and fish populations
have all been greatly reduced (Amazon Watch, 2006). In the forest areas rodents, turkeys,
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boar and monkeys have fled due to the increase in noise, light, and loss of habitat from
the construction of processing plants (Amazon Watch, 2006). This can only foretell the
negative effects on the people who use these same rivers for drinking and bathing. Some
of the affected indigenous groups are the Cayapa, Secoya, Huaorani, Oriente Quichua,
Cofàn and Shuar (Gerlach, 2003). The Cofàn, Kichwa and Shuar Indians argue that their
populations have decreased, although this fact is a largely debated topic. Speculation
about the reliability of sources and methods used to measure indigenous populations
bring conflict to this issue. However, there have been studies that link cancer rates with
people living in areas of oil extraction. Skin diseases, abortions and respiratory problems
were also found to be prevalent in people living in these areas (Goodland, 2002). The loss
of culture, if not population, can be measured qualitatively and is evident in the Amazon
region of Ecuador.
The lack of evidence supporting the decreasing Cofàn population does not
disguise the fact that the people noticed rashes from bathing in the contaminated water
near their residence. They had to avoid drinking the water and could no longer bathe in
their traditional fashion (Tayler, 2005). As Gerlach describes in Indians, Oil and Politics
(2003) the Cofànes found that vast tracts of their land were turned into roads and
extraction sites. The government, fearing conflict between natives and the oil company,
placed the indigenous people into villages. Village life did not follow native traditions
and at school Christianity was taught instead of indigenous values and culture. Modern
farming replaced traditional methods as there was no longer enough land to continue old
practices. The loss of native culture is a definite negative effect of the oil industry in
Ecuador.
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The Cofanes are the most notable case of indigenous rebellions against large oil
companies. They filed a law suit against Chevron Texaco, an oil company that began oil
production in Ecuador. In the Chevron Texaco and Cofàn court case, Texaco argues that
they can not be at fault because regulations surrounding the dumping of waste did not
exist at the time of the alleged infraction (Chevron U.S.A. Inc. 2008). This court case was
very controversial as both sides accused the other of skewing results of tests and the case
was tried in both Ecuador and the Untied States after allegations of unfair trials (Chevron
U.S.A. 2008). Since indigenous people did not traditionally have the resources available
to them to make statements against the government, there is reason to believe that the
Cofànes’ situation was dire. The fact that an indigenous group asserted their rights in this
specific situation can be considered a positive effect of the oil industry. It is, however,
overshadowed by the reason behind the act of protest: that indigenous culture was
destroyed.
Indigenous people have not seen any improvement in their lives within the last
thirty years (BBC News, 2002). This is unnerving especially because it is these people
specifically who suffered the most from the expansion of oil and who face the most
severe forms of poverty, as can be seen in Figure 3. In 1988 the wealthiest 10 percent of
the population held 47 percent of the income while the poorest 20 percent held only 2.55
percent of the nation’s income. This trend became more severe in 1993 when the
wealthiest 10 percent held 54.7 percent of the income and the poorest 20 percent held
only 1.68 percent (Gerlach, 2003). Yet again, indigenous people protested against the
government on the topic of oil. Protesters blocked almost sixty oil wells and five
refineries on one occasion. Their aim was to have more oil revenues spent on investments
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in their communities rather than to pay off external debt. (BBC News, 2002). It is clear
that in many cases oil has not brought improved the quality of life for citizens, only civil
unrest.
Figure 3. Percent of Population living in Poverty 1998 % of population living in poverty
% of population living in extreme poverty
National 62.5 26.9Indigenous 86.9 55.6Non-Indigenous
61.1 25.2
Note. From Georgetown University (2006). Indigenous peoples, democracy and political participation / pueblos indígenas, democracia y participación política. Retrieved January 11, 2009 from <http://pdba.georgetown.edu/IndigenousPeoples/demographics.html>
As can be seen in Figure 4, foreign investment in Ecuador has drastically
increased since the discovery of oil. Kunkel reported in 2003 that ninety percent of
foreign investment goes to the oil industry. However the foreign companies that are
invested in Ecuador are doing little to benefit the people of the nation. Money gained by
multinational corporations (MNC) does not help the growing poverty in the nation. The
bulk of the profits go overseas to the already wealthy people. This phenomenon only
contributes to a larger worldwide gap between the rich and the poor.
Figure 4. Foreign Direct Investment in Ecuador
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ECUADOR: Inversión Extranjera Directa
0
200
400
600
800
1000
1200
1400
1980
1981
1982
1983
1984
1985
1986
1987
1988
1989
1990
1991
1992
1993
1994
1995
1996
1997
1998
1999
2000
2001m
illon
es d
e U
SD d
ólar
es
Note. From World Trade Organization (2005). Trade policy review report by Ecuador. Retrieved January 12, 2009 from <www.sice.oas.org/ctyindex/ECU/WTO/ENGLISH/WTTPRG148_e.doc>
By 2003 the trans-Ecuadorian pipeline had broken more than thirty times spilling
more than 16.8 million gallons of crude oil into the Amazon basin. (Roos & Van
Renterghem, 1997) This oil was never cleaned up. The most serious of all spills occurred
in March 1987 when an earthquake left the trans-Ecuadorian line out of commission for
over five months (Gerlach, 2003). This oil spill destroyed nearby lakes and rivers and
delayed export of oil. One can assume that an oil spill of this magnitude will have a
lasting effect on living creatures in the area. People who rely on nearby streams for water
will no longer have that essential resource. This event also points out the fragility of
Ecuador’s economy. Since the nation’s financial well being essentially relies on the
export of oil, any pipeline leaks have dramatic impacts on the economy.
Construction of the OCP pipeline has been controversial since its very conception.
Frequent oil spills from the preexisting Trans-Ecuadorian pipeline made citizens hesitant
to allow the pipeline to cross their land. On a worldwide scale, this pipeline follows a
path through seven national parks and protected areas, splitting the Mido Nambillo Cloud
Forest in half (Foley & Jermyn, 2006). Environmental destruction was inevitable as the
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forest must be cleared to construct the pipelines, but almost no attempt to assess the
environmental impact of the new pipeline has been made by the government (Amazon
Watch, 2006). The addition of a new pipeline causes imbalance to the fragile ecosystems
in areas with high biodiversity. Moreover, any environmental degradation resulting from
the pipeline reduces the amount of natural landscape which harms any tourism in the
area. Not only does the OCP pipeline allow the government to rely on greater income
from oil, it destroys some aspects of the tourism industry, which could have provided a
much needed facet of a diverse economy.
Yet another problem was revealed after construction of the line had begun.
Construction was suspended because of environmental management plan violations,
proof that the construction of this line had serious negative effects on its surroundings.
(Amazon Watch, 2006) The pipeline did not meet the minimal World Bank
environmental standards. This is an extremely serious problem if one considers the
number of national parks the pipeline runs through and the level of biodiversity of the
area. The cost was almost $200 million over budget and the government was forced to
take out a loan. (Amazon Watch, 2006) This decision could have major consequences
especially considering that in 2001 Ecuador had the highest per capita debt in South
America (Amazon Watch, 2001). On May 17, 2001 two indigenous coalitions, the
Confederation of Indigenous Nationalities of Ecuador (CONAIE) and the National
Federation of Indigenous Afro-Ecuatorianos and Peasants, Ecuador (FENOCIN) worked
together to oppose the construction of the OCP. (Goodland, 2002) Upon completion the
pipeline had a capacity of 450,000 bpd, however only 180,000 bpd is currently being
shipped. (Kunkel, 2003) Bill Kunkel, a reporter on the status of the OCP in Ecuador has
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said “[the OCP] may face serious difficulty unless ways are found to diffuse the sore
spots: restore damaged countryside and heal the rift with indigenous peoples and
environmentalists.” (2003, ¶ 22)
Traditionally Ecuador has been a producer of a single export which accounted for
the majority of the nation’s Gross Domestic Product (GDP). The discovery of oil has
only enabled this type of economy to remain prevalent. Two major export changes within
the twentieth century alone are one indicator of the unstable nature of this type of
economy. The main export changed from cocoa to bananas and finally to oil. This type of
economy continues to go through cycles of boom and bust. Ecuador experienced an oil
“boom” in the mid 1960s and somewhat of a “bust” beginning in the 1980s (Handelsman,
2000). When oil has finally run dry in Ecuador the government will be forced to
restructure the economy for a third time since the early 1900s. Hopefully this time the
economy will be structured for long term stability, something that has escaped the nation
in recent years. Figure 6 shows that the amount of oil extracted is far more than is refined
in Ecuador. Figure 5 shows that when oil is not exported, the economy has the ability to
gain income from other sources. Perhaps an increase in the refinery capacities would be a
step towards economic independence through diversification in future years.
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Figure 5. Evolution of Oil and Non-Oil Exports
Exportaciones Petroleras y No Petroleras
550.00
1,050.00
1,550.00
2,050.00
2,550.00
3,050.00
3,550.00
4,050.00
1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004
Millo
nes d
e d
óla
res F
OB
Exportaciones Petroleras Exportaciones No Petroleras
Note. From World Trade Organization (2005). Trade policy review report by Ecuador. Retrieved January 12, 2009 from <www.sice.oas.org/ctyindex/ECU/WTO/ENGLISH/WTTPRG148_e.doc>
Figure 6. Oil Production, Refinery Capacity and Net Exports in Ecuador1980 1981 1982 1983 1984 1985 1986 1987 1988 1989
12
Mill
ions
of
dolla
rs f
.o.b
.
Oil and non-oil exports
Oil exports Non-oil exports
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Total Oil Production (thousand barrels per day Rounded to nearest thousand)
207 214 214 240 261 284 295 175 303 281
Refinery Capacity (thousand barrels per day)
86 87 90 79 84 82 88 88 122 123
Net Exports (Production-Consumption) (thousand barrels per day)
123 126 119 155 178 198 203 85 210 190
GDP (based on PPP per capita GDP)
2606. 17
2877.85
3072.54
3022.39
3182.64
3337.00
3429.09
3232.07
3604.98
3664.36
1990 1991 1992 1993 1994 1995 1996 1997 1998 1999Total Oil Production (thousand barrels per day Rounded to nearest thousand)
286 301 324 349 370 396 398 389 377 374
Refinery Capacity (thousand barrels per day)
145 142 142 147 148 148 148 148 168 176
Net Exports (Production-Consumption) (thousand barrels per day)
189 197 205 237 250 272 268 254 239 246
GDP (based on PPP per capita GDP)
3830.36
4072.84
4220.96
4308.46
4508.42
4583.43
4685.09
4857.02
4916.83
4584.67
2000 2001 2002 2003 2004 2005 2006 2007Total Oil Production (thousand barrels per day Rounded to nearest thousand)
396 413 393 411 529 533 536 512
Refinery Capacity (thousand barrels per day)
176 176 176 176 176 176 176 176
Net Exports (Production-Consumption) (thousand barrels per day)
266 273 251 265 377 378 376 -
GDP (based on PPP per capita GDP)
4726.45
5303.39 - - - - - -
Notes for Figure 6. Dashes indicate that data was not available.
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Adapted from: EconStats (2008). Ecuador. Retrieved January 11, 2009 from <http://www.econstats.com/weo/CECU.htm> and Energy Information Administration (2008). Ecuador energy profile energy data series. Retrieved January 12, 2009 from <http://tonto.eia.doe.gov/country/country_time_series.cfm?fips=EC>
When an economy relies so heavily on the international price of a good, their
government and people lose some level of control over their economic success. Volatile
world market prices dictate the economic success of the Ecuadorian nation. Figures 7 and
8 show the dramatic changes in oil price starting in the early 1990’s. One can see the
obvious fluctuations in these years that were not as noticeably detrimental to the
economy of Ecuador. The Ecuadorian government can not dictate any changes that may
occur. (Gerlach, 2008) Fluctuations in price can not be controlled in any real way by the
government. It would be far more beneficial to support a variety of income sources in
order to achieve economic stability. A successful long term goal was not necessary when
oil was discovered as the cash flow was sufficient to support the extravagant spending
needs of the politicians and keep unhappy protesters at bay. The success of oil acted as a
cover for inefficiencies in the overall economic plan for the nation. Unfortunately for the
people of Ecuador the government during the oil boom was not one that consistently kept
the best interests of the citizens in mind.
Figure 7. Trends in Oil Price
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Note. From Energy Information Administration (2008). Annual oil market chronology. Retrieved January 11, 2009 from <http://www.eia.doe.gov/cabs/AOMC/Overview.html>Figure 8. Trends in Price of Oil, Ecuador Specific
Note. From Energy Information Administration (2009). Petroleum navigator. Retrieved January 11, 2009 from <http://tonto.eia.doe.gov/dnav/pet/hist/wepcecoriw.htm>
Petroecuador, the state run oil enterprise, has few regulations. The government
allows for environmental regulations to be broken in order to hold revenue (Gerlach,
2003). Furthermore, all of the Amazon area including Indian Territory and national parks
has been designated oil extraction region (Roos & Van Renterghem, 1999). The amount
of oil extracted exemplifies the current economic ideologies in Ecuador. Between 1980
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and 1985 the price of crude oil fell (Gerlach, 2003). To combat falling prices, the
Ecuadorian government increased production of oil by almost 1/3. This act was in direct
conflict with the Organization of the Petroleum Exporting Countries (OPEC), and
Ecuador was forced to leave the organization (Roos & Van Renterghem, 1997). The
drastic measures taken to protect the oil industry clearly demonstrate Ecuador’s reliance
on this single product. By 1990 1.5 billion barrels of oil had been extracted, this was
believed to be about half of the nation’s oil reserves (Roos & Van Renterghem, 1997).
The speed at which the oil was extracted shows little planning by the government. If the
economy relied so heavily on the export of this single product, and it was believed that
half of the reserves were extracted, it would not be in the best interests of the nation to
increase the rate of extraction. Data from Figure 6 shows that there was a definite
increase in the oil extraction rate at this time.
In the early 1970s, when oil was first exported, Ecuador’s political situation was
not ideal for correctly handling the excess money that was available. In 1972 Guillermo
Rodriguez Lara led a coup d’état which overthrew the previous dictator. The army
decided that politicians were unable to spend Ecuadorian money with the best interests of
the people in mind, so the nation was ruled by the military. Lara was overthrown in 1979
when he lost public support due to lack of public spending of oil revenue (Gerlach,
2003). During military rule the state’s share of oil profits increased and this money
financed military operations. From 1972 to 2000 45% of Ecuador’s oil revenue went to
the armed forces (Gerlach, 2003). This outrageous spending was not legislatively
approved; however poor government structure and corruption allowed this to go
unnoticed (Gerlach, 2003). The corrupt political situation in Ecuador caused the increase
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in capital made through the oil industry to be spent on resources that did not affect the
quality of life of the citizens. As previously seen in Figure 3 the poverty rate in Ecuador
was extremely high, the money made from the oil industry should have helped those
living in poverty, rather than to fund an industry that inflicts pain and suffering.
The less than stable government seemed to have too much control over the
economic outlook of the nation. Prospective oil income allowed leaders to take large
loans to finance import substitution. Between 1972 and 1982 public expenditures
increased 12 percent annually (Gerlach, 2003). Public service jobs were created and the
government provided subsidies for a variety of goods. State owned industrial companies
were established in hopes of building a strong industrial sector (Roos & Van Renterghem,
1997). High tariffs contributed to the import substitution philosophy, providing less
competition so that local businesses could flourish. Tax collection dwindled, and citizens
became accustomed to living tax free (The World Bank, 1991). Even the oil industry
could not obtain the capital necessary to run this type of economy. Large loans needed to
be taken out in order to cover the costs of financing modernization and import
substitution (Gerlach, 2003). With oil reserves backing the loans, Ecuador had no
problem receiving large sums of money. Unfortunately the industrial sector Ecuador was
hoping to build never materialized (Roos & Van Renterghem, 1997). Figure 9 shows that
in fact, the industrial sector of the economy in Ecuador has shown little improvement
over the past twenty years.
Figure 9. Economic Breakdown by Industry - Ecuador
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Note. From The World Bank Group (2008). Ecuador at a glance. Retrieved January 12, 2009 from <http://devdata.worldbank.org/AAG/ecu_aag.pdf>
The government relied on loans to continue growth until the 1980s when the price
of oil began to fall. The levels of corrupt government were known internationally and
high levels of state involvement in the economy paired with the high tariffs made
Ecuador undesirable among foreign investors (Gerlach, 2003). At the same time,
modernization and globalization made the international market much more competitive.
Ecuador went into recession, interest rates rose as did inflation and foreign debt
continued to grow. Between 1982 and 1988 per capita GDP decreased 17 percent (The
World Bank, 1991). There were numerous nationwide strikes as the government could
no longer satisfy the conflicting needs of the citizens with their excesses. The falling
price of oil had made loan repayment almost impossible. The lack of capital made it
impossible to keep up with the quickly industrializing world. Ecuador could not be
competitive on the world market, nor could they improve the quality of their goods.
Poverty became more common. Agencies such as the International Monetary Fund,
World Bank, Inter-American Development Bank, Andean Development Corporation, and
the Paris Club all pressured Ecuador to reduce its spending (Gerlach, 2003).
The International Monetary Fund (IMF) supports the exploitation of oil in
Ecuador. This type of income creates revenue in the short term, the type necessary for the
repayment of loans that Ecuador had taken out to finance previous economic problems
and corrupt rulers (Roos & Van Renterghem, 1997). Up to eighty percent of the earnings
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form the oil in the newly developed OCP pipeline will be used to pay back loans to the
IMF (Amazon Watch, 2006). Ecuador was forced to ask for balance-of-payments support
from the IMF on multiple occasions. The IMF has built a repayment plan that supports oil
exploitation and cutting government spending on social services (Roos & Van
Renterghem, 2003). Other reductions in spending include selling off of costly or
inefficient state enterprises and reducing subsidies on gas, transportation, electricity and
food. Education and health care subsidies will also be reduced as the IMF does not see
these practices as being sustainable for the Ecuadorian government. Thousands of state
sector jobs were lost and twenty thousand government employees were fired (Roos &
Van Renterghem, 2003). The government had to begin collecting taxes again.
Opposition has been met from unions, indigenous groups and nationalists
(Kunkel, 2003). The loss of subsidies on consumer goods such as food and gasoline
would have had a dramatic impact on the lives of poverty stricken citizens of the nation,
especially with the influx of state sector workers who had been recently laid off.
Numerous people protested the increase in domestic fuel prices. The protesters were such
a strong force that the government called a state of emergency in January of 2001 (BBC
News, 2001). In their 1975 report (p.1, ¶ 1), the General Secretariat of the Organization
of American States had stated “The long run benefit to Ecuador from the oil industry will
depend in large measure upon how the profits from the oil production are used.” Today it
is clear that the government did not make wise choices with the use of their oil money
and as a result the Ecuadorian nation has suffered.
Conclusion
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This study has concluded that the discovery of oil in the Oriente region of
Ecuador enabled inefficient government and economic systems to exist. The government
was unprepared to handle the new level of wealth that oil brought to the nation. While
Ecuador was lacking environmental regulations, foreign businesses took advantage of the
indigenous people and the landscape causing damage to the biodiversity of the area. The
government increased spending and incurred huge debts, but was unable to control the
falling price of oil on the world market. Significant aspects of Ecuadorian culture were
lost due the industrialization of the Amazon region and a subsequent decline in
indigenous populations. Citizens lost their jobs and fell into poverty; protests broke out
in the streets. The overall effect of oil on Ecuador was not positive during the time frame
studied. Since oil has only become a major industry in Ecuador within the last forty
years, one would expect that the next twenty years will be a decisive time for the future
of the nation. If attempts to stabilize the declining economy are effective and the demand
for oil increases, the results of a similar study made in the near future could yield
dramatically different results. Moreover, as more studies surrounding the effects of living
in an oil extraction region are undertaken, the largely debated topics in this study such as
the effects of oil on drinking water and the decline of indigenous populations will have
conclusive evidence to support or contradict the arguments made in this paper.
References
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Amazon Watch (2000-2006). Ecuador Amazon oil expansion and the OCP pipeline.
Retrieved August 14, 2008 from
<http://www.amazonwatch.org/amazon/EC/ocp/index.php?page_number=99>
Amazon Watch (2001). The new heavy crude pipeline in Ecuador. Retrieved January 11,
2009 from <http://www.regenwald.org/pdf/OCP_English.Web.pdf>
Brooke, James (1994, March 22). Pollution of water tied to oil in Ecuador. The New
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<http://query.nytimes.com/gst/fullpage.html?res=9907E0D9153CF931A15750C0
A962958260&fta=y>
BBC News (2001, February 8). Accord follows Ecuador fuel protests. Retrieved August
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BBC News (2002, February 26) Protest threat to Ecuador oil. Retrieved August 13, 2008
from <http://news.bbc.co.uk/2/hi/business/1843051.stm>
Chevron U.S.A. Inc. (2004-2008) Environmental and health claims. Retrieved on August
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<http://www.texaco.com/sitelets/ecuador/en/responsetoclaims/default.aspx>
Chevron U.S.A. Inc. (2004-2008) Produced water is not toxic waste. Retrieved on
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August 14, 2008 from
<http://www.texaco.com/sitelets/ecuador/en/responsetoclaims/default.aspx>
Daniels, Amy S. (2002). Countries of the world Ecuador. Milwaukee, Wisconsin: Gareth
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