Ecuador's Oil Bust Draws Parallels To 1990s Financial Crisis
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People in Ecuador are worried they're about to relive the bad times from the 1990s. Back then, oil prices were at a record low and an El Nino weather system did a lot of damage to the country's coast. Now a powerful El Nino is again forming off the coast of South America, and Ecuador's oil-dependent economy is faltering. NPR's Kirk Siegler reports.
KIRK SIEGLER, BYLINE: To get to the heart of Ecuador's oil-dependent economy, I traveled deep into the Amazon jumble where you'll find the seedy boomtown of Lago Agrio. Walk these oppressively hot and humid streets and people will give you an earful about how bad things are right now.
ALFONZO ONA: (Speaking Spanish).
SIEGLER: Alfonzo Ona is sitting on a curb on break from his shift as an electrician for the state-owned oil company Petro Amazonas. He's resting in the shade - has the sleeves of his Denim Company uniform rolled up as far as they'll go.
ONA: (Speaking Spanish).
SIEGLER: "We're hearing rumors of mass layoffs," he says. A few months ago, his company laid off 300 people. Ona was spared, but he doesn't really have a backup plan if the cuts come again, and he's nervous.
ONA: (Speaking Spanish).
SIEGLER: "It all depends on the world's economy, but I don't think things will change for a while," he says. After a year of record-low oil prices, Ecuador's government has lost close to 50 percent of its revenue. Here in Lago Agrio, or Bitter Lake, as this area was nicknamed by its first Texaco oil workers, the gritty shops and hotels are struggling to stay open. The president of the Chamber of Commerce, Hernan Macas, says most businesses rely on contracts from the state-owned oil companies, and their bills have been going unpaid for months.
HERNAN MACAS: (Speaking Spanish).
SIEGLER: "We're demanding the government pay its debts to our small business here," he says. For Ecuadorians, all of this anxiety over the future is particularly distressing because until recently, things were pretty good here. Ecuador was a beacon of stability compared to some of its other oil-rich neighbors like Venezuela. Billions were spent on new airports, schools, hospitals and an impressive new highway system crisscrossing the Andes. Analysts now say the one thing Ecuador forgot to do was save money for the bust.
HUMBERTO MATA: We're basically living through a hangover.
SIEGLER: Humberto Mata is a businessman who also runs a healthcare non-profit in the port city of Guayaquil that's seeing its government funding dry up.
MATA: We've had this huge, gigantic influx of money that we weren't expecting. We spend it all - we loved it. But now we're living through the thin period. So now we have to shrink quickly.
SIEGLER: And there are other major problems that Ecuador has little if any control over. One is the so-called Godzilla El Nino that's forming off the coast of South America. Gonzalo Ortiz, a former secretary general of the country, remembers the last major El Nino in 1997 in which 275 inches of rain fell on parts of the country in just over a year. He ran an economics magazine at the time.
GONZALO ORTIZ: Last time, thousands of hectares of banana and coffee and cocoa - there are other exports of Ecuador - were destroyed by rain and floodings.
SIEGLER: Causing close to a billion dollars of damage to the country's farms. Ortiz worries this year could be worse because it's not clear whether farmers have done enough to prepare. Oh, and incase all of this isn't enough to cause alarm, the El Nino, the rock-bottom oil prices, looming, like, literally looming over all of this is a gigantic volcano that began spewing ash in August. The 19,300 foot Cotopaxi Volcano is in the news every day here. Scientists say it's overdue for an eruption, it's just that no one knows when or how big it could be. Kirk Siegler, NPR News. Transcript provided by NPR, Copyright NPR.