Ecuadorians are expected to vote in favor of referendums to order the closing of a major oil field and restrict gold and copper mining, potentially leaving the government with a large hole in its budget. The initiatives are taking place alongside a presidential race that was thrown into chaos last week when one of the leading candidates was assassinated while campaigning.
One referendum will ask all voters whether to allow oil production in the northeast corner of Yasuní National Park in the Amazon region to continue. State-controlled Petroecuador produces about 55,000 barrels per day at the field, equivalent to about 15% of its total crude output.
The other referendum will ask voters in the Quito metropolitan area whether authorities should stop granting permits in a 480-square-mile expanse known as the Andean Choco northwest of the capital. The area is thought to contain large gold and copper deposits, but is also home to wildlife such as toucans and spectacled bears.
The referendums will be an important signal to foreign companies of Ecuador’s appetite to tap its vast mineral wealth. Oil is the nation’s biggest export earner, and mining is the fourth biggest, but many voters are worried about environmental damage.
Shutting down oil production at the field in question will cost the government an estimated $1.25 billion in annual fiscal losses, equivalent to about 1% of gross domestic product, according to an estimate by Petroecuador.
“The bottom line is that the loss on the oil production referendum would further complicate budget management for the next administration,” said Siobhan Morden, director of Latin American Fixed Income Strategy for Santander. “It would reaffirm the difficulty of medium term debt payments beyond 2025.”
A survey published Aug. 12 by Comunicaliza found that 35% of voters want to halt oil drilling in the park, while 25% think it should continue. Another 25% are undecided, while others intend to register a blank vote.
In the mining referendum, about 61% of those surveyed want to block mining in the area, while 19% want it to proceed. Despite a history of informal mining in the Choco area and the promise of jobs for poor rural communities, the ban has a lot of support from mainly city-dwelling voters concerned by the alleged impact on water quality.
Greater Scrutiny
The Aug. 9 murder of presidential candidate Fernando Villavicencio has upended the general election, but Alvaro Marchante, CEO of Comunicaliza, says there’s not much sign that it’s impacting the separate referendum questions. Recent polling shows opponents of oil and mining gaining momentum, but this is more to do with their success at campaigning, Marchante said, in response to written questions.
The votes are being held amid greater scrutiny of social and environmental impacts of extractive industries. Neighboring Colombia has banned new oil exploration since President Gustavo Petro took office last year.
Ecuador has long been on the radar of global mining heavyweights such as BHP Group and Rio Tinto Group, and already has one major copper open pit and an underground gold mine.
“Communities here are divided,” said Marcia Dután, 45, who ekes out a living making brown sugar from cane near the town of Pacto, a two-hour drive from central Quito. “Since the parish was founded, people here have been miners.”
Dután said she’s unhappy that the capital’s two million voters, rather than local people, will decide the question.
Major Projects
In a nationwide referendum in February 2018, voters banned mining from nature preserves and urban areas. While industry supporters hoped this would set a precedent in favor of mining elsewhere in the nation, activists leveraged the decision to pursue local bans. In the previous election in 2021, more than 80% of voters in Cuenca voted to prohibit new projects.
To be sure, a ban on new permits wouldn’t impact a dozen existing exploration projects in the Choco area. Still, a top court recently agreed with Indigenous and environmental groups to suspend consent procedures set by President Guillermo Lasso. That risks at least delaying construction of several major projects elsewhere in Ecuador.