Large commercial shrimp farms will an end to fuel subsidies that heave helped them grow to Ecuador’s second largest industry.
Shrimp farms that are not artisanal, or that do not belong to the small industry, will no longer receive a diesel fuel subsidy. On the morning of December 1, 2022, President Guillermo Lasso signed a decree eliminating diesel subsidies to large shrimp farms. The measure will go into effect on December 2, 2022.
The elimination of the subsidy for large shrimp farms was a demand from the indigenous movements that promoted the 18-day national strike in June 2022 which left more than $1.115 billion in losses for Ecuador.
Decree 614 signed by President Guillermo Lasso establishes the elimination of the diesel fuel subsidy in the shrimp sector for farms whose footprint is larger than 30 productive hectares.
In the decree, Lasso established that only small shrimp farms will be able to benefit from the easel fuel subsidy, which sets the price at $1.56. Those that exceed the 30 hectares must assume the costs without a subsidy.
These costs will be defined, says the decree, by each player in the marketing chain. To calculate the costs of diesel for this sector, market conditions, applicable taxes, and fuel quality must be considered.
In a tweet, President Guillermo Lasso explained that eliminating the subsidy for this sector will have a broad economic benefit for the country. In his statement, Lasso explained that according to information that has been reported in the Internal Revenue Service (SRI), the cost of fuel for large shrimp farms “represents less than 2% of their total costs.”
For this reason, the statement says, eliminating the subsidy for this segment of the shrimp industry “will generate savings of approximately $160 million per year.” According to President Lasso, the $160 million that will be saved each year will be used for “social investment.”
However, it was not specified to which ministries, projects, or plans the funds will go or how they will be distributed.
“Fuel subsidies are for the poor”
On his Twitter account, President Guillermo Lasso announced the elimination of the subsidies with a statement that bore a title in capital letters saying, “Subsidies are for the poor.”
In the statement, the President said that the elimination of the diesel fuel subsidy for shrimp farms of more than 30 hectares is done because the “subsidies must exclusively benefit the poor.” The document also explained that the decision to eliminate this subsidy “is an ethical, responsible and socially focused decision.”
“Every penny of this subsidy eliminated from the large shrimp sector will now go directly to social assistance, directly to medicines, books, food kits,” Lasso said.
According to the government, the targeting of subsidies is important to be able to “reallocate resources towards priority and vulnerable groups,” but it did not specify which ones.
That said, there are rumors in the Assembly that this has more to do with the demands made by Conaie’s leader Leonidas Iza during this year’s national strike, and less to do with Lasso’s desire to help the poor. One correista member said, “Lasso would never take the lead on helping the poor, only the rich.”
Shrimp farmer reactions
Even though the government says that the measure will be beneficial for the country, the shrimp sector certainly does not agree. In a press conference, José Antonio Camposano, Executive President of the National Aquaculture Chamber, rejected the government’s decision.
Camposano said that the elimination of the diesel subsidy “will increase its production costs by 16 cents per pound.” That, Camposano explained, could affect the industry’s competitiveness and could put “more vulnerable producers at risk of bankruptcy.”
According to Camposano, the government’s decision will affect 82% of the national shrimp area, which generates approximately 275,000 jobs. He also explained that the elimination of subsidies was taken at “the worst possible moment and without having been previously discussed to implement compensatory measures.”
Camposano also insisted that the private sector has had to assume additional costs to cover deficiencies in the public sector, such as increased levels of insecurity. He claimed that insecurity costs the shrimp sector $80 million a year, due to the hiring of private security, equipment, custody of shrimp trucks, etc.
So far, neither the Ministry of Production nor the central government have responded to these criticisms of the shrimp sector.
Shrimp is the main non-oil export product in the country and is one of the fastest growing productive sectors in Ecuador.
According to statistics from the National Chamber of Aquaculture, in 2021, Ecuador collected $5.323 billion from shrimp exports. In 2022, it is estimated that the figure could be even higher.
Figures from the Chamber say that in the first nine months of 2022, shrimp exports grew by about 54% compared to the same period in 2021. At that rate, shrimp exports could add up to $7 billion by the end of 2022.