The recent Yasuni referendum in Ecuador has sparked a crucial debate about the future of the country’s oil industry. This consultation marked a decisive step in Ecuador’s history, highlighting the persistent tension between the oil industry and environmentalists.
Yasuni-ITT: The conflict between the oil industry and environmental protection in Ecuador
Oil production from Yasuni Park, in particular “Block 43”, comprising the Ishpingo, Tambococha and Tiputini (ITT) fields, currently accounts for 12% of Ecuador’s oil production. Yet the population voted overwhelmingly, at 58.95%, in favor of halting oil production in Yasuni-ITT.
Ecuador’s oil-dependent economy is under increasing environmental pressure from environmental groups and indigenous communities. The recent Yasuni referendum was the culmination of many years of struggle between the oil industry and environmentalists. However, these claims are not new.
Texaco in Ecuador: The quest for environmental justice
As early as 1993, fourteen associations formed the Amazon Defense Front, representing 30,000 victims of the activities of Texaco, an American company that operated Ecuador’s oil fields between 1964 and 1992. The environmental damage caused by Texaco is alarming, with 2 million hectares of forest contaminated by 64 million liters of spilled crude oil, 880 leaking oil waste pits, and 60 billion liters of contaminated water discharged into rivers. Added to this are the serious consequences for local populations, such as cancers, illnesses linked to water pollution, and the violation of human rights.
This environmental movement also led to the recognition of a “right to nature” in Ecuador’s new Constitution in 2008. It also gave rise to the Yasunidos group, the environmental group calling for national consultation on the fate of oil development in the heart of the Yasuni reserve, home to indigenous peoples such as the Waorani.
The delicate dance between the Amazon jungle and oil resources
At the heart of South America, Ecuador, named after the equatorial line that crosses it, offers an opulent biodiversity, despite its relatively modest size compared to France. In addition to its pristine beaches and snow-capped Andean peaks, this country is home to a precious part of the Amazon, geographically referred to as the “Oriente”. This region is a nugget of biological diversity, attested to by eminent scientists such as Alexander von Humboldt and Charles Darwin.
And yet, alongside this wealth of biodiversity, Ecuador is also rich in hydrocarbons. The heart of Oriente is home to the country’s largest oil reserves, making Ecuador South America’s fifth-largest oil producer. Its economy is largely based on these fossil resources, in particular oil and natural gas, as well as on mining, fishing, tourism and banana cultivation, among others.
However, this economic dependence on oil presents complex challenges. The closure of the Yasuni-ITT oilfield will have a direct impact on the country’s revenues, highlighting the delicate equation between environmental preservation and economic stability.
Ecuador’s economic and political challenges in 2023
The hydrocarbon industry plays a significant role in the Ecuadorian economy, contributing 32% of total foreign sales. Despite Ecuador’s exit from OPEC, stable international oil prices have maintained this source of revenue, generating a current account surplus forecast for 2023. However, rising global borrowing costs and environmental pressures have slowed investment in the oil sector, with potential long-term consequences for production and revenues.
President Guillermo Lasso has faced governance challenges, notably due to protests over rising fuel prices. The introduction of a differentiated fuel price mechanism to target subsidies on the most vulnerable populations reflects the complexity of the country’s political and social situation. Environmental concerns linked to the oil industry also remain a source of concern, with suspensions of mining concessions and worries about long-term oil production.
The environmentalists’ referendum victory: a game-changer
Ecuador is faced with a thorny dilemma that reflects the crucial challenges of our time: the preservation of its exceptional biodiversity or the temptation of oil exploitation, the mainstay of its economy. The August 20 referendum crystallized this dilemma. The victory of the “yes” vote marked a major turning point, bringing a halt to oil exploitation in the country’s iconic Yasuni Park, but the decision could also influence other oil-producing countries in South America, such as Brazil.
Ecuador’s dependence on hydrocarbons is therefore a complex and nuanced reality. Although the oil sector makes a significant contribution to exports and government revenues, environmental, social and political challenges continue to weigh heavily on its future. The country’s ability to maintain stable governance and adapt to the changing realities of the global hydrocarbon market will be key to ensuring a sustainable economic recovery in 2023 and beyond.
Yasuni: A precedent for South America in the battle between oil and biodiversity
The example of Yasuni Park is not limited to Ecuador. It could inspire similar initiatives in South America, home to the planet’s green lung. This region abounds in precious hydrocarbon reserves, notably Venezuela, which holds the world’s largest oil reserves, accounting for 18% of the global total. Despite this wealth, Brazil is Latin America’s leading producer.
Nevertheless, the preservation of biodiversity and the fight against climate change often take second place to oil production. Ecuador’s historic decision could influence its neighbors. It could also provoke reflection within the Brazilian giant, a member of the BRICS, which is seeking to preserve its growing economy.
What’s more, this decision could be paralleled by that of Colombia’s new president, Gustavo Petro, who chose to halt oil exports, despite the fact that they accounted for 40% of all exports and 12% of government revenues.