THE MIXED SYSTEMS COLOMBIA AND ECUADOR (SPANISH VERSION)
| Jurisdiction | Derecho Internacional |
(Mar 1999)
THE MIXED SYSTEMS COLOMBIA AND ECUADOR (SPANISH VERSION)
| GENERAL INFORMATION: | ECUADOR* |
| PROVEN RESERVES: | 4,100,547,262** |
| DAILY PRODUCTION: | 386,0001 |
| PETROPRODUCCION's OUTPUT: | 268,000 b/d |
| CONTRACTORS' OUTPUT: | 118,000 b/d |
| POTENTIAL PRODUCTION: | 700,0002 |
| INTERNAL CONSUMPTION: | 158,000 b/d |
| EXPORTABLE BALANCE: | 228,000 b/d |
| TRANSPORT CAPACITY: | SOTE: 325,000—28°; OTA: 50,400—28.9° |
| CURRENT DAILY CAPACITY: | SOTE: 340,000—24.5°; OTA: 50,000—28° |
| AVERAGE PRICE 1998: | US$ 9.34 per barrel (up to 30-11-98) |
INTRODUCTION
The new Constitution of Ecuador, in force since August, 1998, confirms that non-renewable natural resources are the inalienable and
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imprescribable property of the State. These goods can be exploited in function of national interests, either by public, private or mixed enterprises. (Art. 247).
The State guaranties national and foreign investment under equal conditions, as well as the development of economic activities through the existence of a legal order and institutions that promote, develop and generate confidence. Public and private entrepreneurial activities shall be afforded the same legal treatment (Art. 244).
The State allows the exploitation of its hydrocarbon resources by the private sector, even though the State may perform this directly, through Petroecuador, as has traditionally been the case during the last quarter of a century. In the case of minerals, it establishes that they are the inalienable and imprescribable property of the State, exploited in function of national interests by public, private or mixed companies, pursuant to the Law (Art. 247).
In contracts that the State enters with investors, it can grant special guaranties and securities, so that the agreements may not be modified by laws or other provisions of any nature that could affect its contracting provision (Art. 271). The State shall guaranty national or foreign capitals that are invested in the production, specially destined for domestic consumption and for export. The Law may grant special treatments to public and private investment in less developed zones or in national interest activities (Art. 249).
Although these concepts could imply a certain degree of advancement in Ecuadorian legislation regarding electricity, telecommunications and social security, which are beyond the concept of the strategic areas of the Ecuadorian economy, exploration and exploitation of hydrocarbons, as non-renewable resource, since they are the inalienable property of the State, can not be privatized, but can be granted in concessions. However, transport, refining and storage, can be privatized, as well as any other down stream activities.
It is also necessary to consider the critical financial situation of Petroecuador, which since 1992, as a result of the application of the Law of Budgets of the State, the Ministry of Finance took over the control of Petroecuador's income, leaving it without the basic cash
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flow required to meet its expenses and contractual obligations. From that time on, the annual budget for Petroecuador is approved by the Ministry of Finance, which also has to cover the needs of the fiscal budget of the Government and Municipalities.
The fiscal crisis, which also affects Government bureaus, has brought about changes in the Hydrocarbon Laws, to allow Petroecuador to associate with private oil companies interested in operating the main oil fields of the State oil producer, Petroproducción, which would require private investment in excess of two billion U.S. Dollars.
It would have been ideal if the new Constitution allowed the State to sell Government properties, and with the incomes thus generated, have a healthier fiscal economy to be able to take care of the reconstruction of the areas affected by the El Niño Event, without having to incur in additional foreign loans to cover the effects of the above mentioned event, knowing that foreign debt produces: (1) budget deficit (an expected 500 million dollars for 1999); (2) inflation (Ecuador now has the highest inflation in Latin America, 50%); (3) monetary devaluation (more than 100% in ten years); (4) high bank interest rates (ranging now levels higher than 100%); distortions of the financial system (some banks with cash flow problems); bankruptcy of private and public enterprises (which have lost the cash flow generated by the Government oil, mining, electricity business and the like). The final consequence of above effects reduces the growth of the gross national product, which in 1998 was less than 1%, while population increased in more than 3%.
To attempt to apply a formula adequate for all Latin American countries, as if its countries were countries of the first world, leads us to ponder the thoughts of the late Venezuelan-Spanish philosopher, Juan David García Bacca, who when faced with a political and economic crisis in Venezuela, said: "To speak about our countries we must wait for 200 years to go by, because, compared with European countries that have already lived one millennium, we are still young nations. However, in Europe, there are still countries that have not been able to achieve their full development. In the meantime, we are still experimenting with social-economic models, through which we must necessarily transit in order to find out our full maturity".
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Regarding the oil sector, the new Constitution presents two novel aspects, which in my view are unpractical, as is the case of the oil companies which are under the obligation of "consulting" with Indian communities regarding the exploration and exploitation plans to be implemented (Art.84), which is the competence of the National Bureau of Hydrocarbons, pursuant to Art. 11 of the pertinent law. Here we find a dichotomy, that consists in the fact that the oil company negotiates a contract with the State, is committed to implementing exploration, development and production plans, which upon being executed, the State transfers the competence of Government authorities in favor of private individuals, grouped in Indian communities, whose rules of the game, diametrically differ with the rules determined in both the Hydrocarbon Laws and the contract provisions.
The second novelty appears in Art. 191. Which provides competence to the Indian communities to carry out functions of justice, applying their own norms and procedures for the solution of internal conflicts, in accordance with their customs or common law. Like the vast majority of Latin American countries, Ecuador's legislation frame is based upon the so called "Roman Civil Law", meaning the same system of jurisprudence (Black's Law Dictionary), to which is applicable a civilist nation, and therefore, its law is a written one, as opposed to common law that is not written and on which the Anglo-Saxon countries are based upon.
The above constitutional provisions, which should...
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