The threat of nature
Experts from the European School of Political and Social Sciences (ESPOL) forecast there is a 75% probability that the severity of El Niño 2026 will reach the level of that of 1997-1998. In that event, losses amounted to 15% of GDP, affecting mainly productive sectors such as agriculture, livestock, fishing, industry, commerce and tourism, which lost $1.5 billion.
The same experts estimate possible losses between 9% and 12% of GDP for the current phenomenon under a mild scenario, while the most negative predictions place losses at 15% of GDP. Despite these gloomy perspectives, however, the Central Bank recently updated y/y growth for 2026 from 2.5% to 2.6%.
The fiscal context as of August 2026 seems favorable enough to cope with nature’s challenges given an overall deficit of $1004 million from January to August — less than half that of last year's. International reserves summed $12,596 million as of August, and treasury deposits $2,613 million thanks to recent international disbursements.
However, money is not the only asset necessary to respond to an emergency as severe as the above-mentioned. Capacity of execution and opportune decision-making are equally important, and the government has not measured up in these areas, especially in responding to the needs of the electricity sector and the challenges posed by the poor state of the refinery of Esmeraldas.
Once again, the severe drought affecting the region has already forced the government to request the assistance of private electricity generation, which is far from sufficient to cover the possible deficit of 1300 megawatts that might accumulate between September 2026 and March 2027. So far, the government has added only 120 megawatts of thermoelectric power to the system at a time when Colombia's dispatch of energy might also be insufficient given that country’s own dry season problems.
Ecuador continues to import close to 60% of derivatives at historically high prices. The average price of crude oil exports between January and July this year was $75.9 per barrel, and the average import price of derivatives was $94.93 — an average difference of $19/b. Therefore, the net change in international reserves from the oil sector in this period was just $270.9 million. On the other hand, the government decided to drop the price of eco gas and diesel by three cents, once again. In this scenario, subsidies on derivatives have risen from $19 million in revenue in January this year to a cost of $121 million by July — a cumulative cost of $1075 million between January and July.
On the political side, popular sentiment is mixed, depending on one's political orientation. Noboa has been praised for his actions in reducing organized crime and capturing major criminals, as well as for his achievements in the external sector. The visit by Secretary Marco Rubio is encouraging, and investment in the security sector is more than welcome. However, direct investment in strategic sectors is desperately needed, as well.
On the other hand, Noboa is also being strongly criticized for his political strategies and style, which have been seen as antidemocratic and authoritarian. We have not suffered from blackouts yet, but if the president is unable to prevent another disaster in the electricity sector such as the one we endured in 2024, the political balance during the next election could fall against him.
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