April 21 (Bloomberg) -- Ecuador’s finance and energy ministers resigned yesterday, clearing the way for President Rafael Correa to announce cabinet changes that may boost support for proposals to grab a bigger share of mining and oil profits.
Finance Minister Maria Elsa Viteri’s offer to quit was accepted by the president, said an official in Quito who asked not be identified because he isn’t authorized to speak publicly. Non-Renewable Natural Resources Minister Germanico Pinto, who is the current president of the Organization of Petroleum Exporting Countries, resigned too, said an official at his ministry. Telephone calls to the president’s press office after normal business hours yesterday went unanswered.
Correa, faced with falling oil production and exports, is seeking to improve relations with members of his ruling party and hasten the approval of new oil and mining contracts. Ecuador has defaulted on $3.2 billion in international bonds since Viteri took office in September 2008.
“The departure of Minister Viteri shouldn’t be seen as the harbinger of a more conventional and orthodox policy approach,” Alberto Ramos, an economist at Goldman Sachs Group Inc. in New York, said yesterday in an e-mailed note to clients. “Macro policy is and will continue to be ultimately defined by President Correa.”
Viteri may be replaced by Patricio Rivera, an official at the National Planning Secretary, or Carlos Marx Carrasco, the head of Ecuador’s tax agency, the official said.
No OPEC Impact
The departure of Pinto is unlikely to have an impact on policies at OPEC, which pumps about 40 percent of the world’s crude oil, according to Anthony Nunan, an assistant general manager for risk management at Mitsubishi Corp. in Tokyo.
“I don’t think it will be that big of a deal,” Nunan said by phone today. “OPEC already has a secretary and what has OPEC been doing except continuing to say they will maintain quotas? It won’t mean that Ecuador will resign and they are a minor member anyway.”
Ecuador produced 470,000 barrels of oil a day in March, according to Bloomberg data, the smallest among the group’s 12 members and about 1.6 percent of the OPEC total.
The South American nation’s oil production fell 5.8 percent to 13.1 million barrels in February from 13.9 million in the same month last year, according to central bank data. Output from private companies fell 11 percent in the same period, the central bank said.
Correa is trying to boost revenue by changing tax laws and increasing its oil and mining assets to plug an estimated $4.2 billion deficit this year. Before leaving, Viteri said the government would also tap the social security institute, use windfall oil taxes and multilateral loans to finance the budget.
Investors should underweight Ecuador bonds as the economy’s fundamentals are deteriorating because of a decline in oil production and exports, Barclays Plc said April 19. The yield on Ecuador’s 9.375 percent bonds maturing in 2015 has risen 69 basis points, or 0.69 percentage point, in the past three months to 11.01 percent, according to JPMorgan Chase & Co. The price was unchanged yesterday.
Ecuador’s economy grew 0.36 percent last year after the price of oil, the nation’s biggest export, slumped and a drought cut energy production leading to power outages. The Finance Ministry estimates gross domestic product will climb 6.8 percent this year, compared with a 0.5 percent increase forecast by Credit Suisse. Ecuador’s consumer prices rose 0.16 percent in March from the previous month and increased 3.35 percent from a year earlier, the National Statistics and Census Institute said on April 7.
Since taking office in 2007, Correa’s ruling party rewrote the constitution to give the state greater control over the economy, including oil production and mining, and stripped the central bank of its autonomy. The new constitution also replaced the country’s Congress with a new national assembly.
Correa, a 47-year-old former economics professor, has seized company-owned assets ranging from airports to television stations, including the 2008 seizure of Construtora Norberto Odebrecht SA assets worth more than $1 billion after a contract dispute with the Brazilian construction company. He said this week he would ask Congress for greater powers to seize assets of oil companies who didn’t agree to change current production sharing contracts for service contracts.
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