Ecuador backpedals on austerity, fuel price hike

Ecuador's government agreed to revoke an austerity decree featuring the removal of fuel subsidies following almost two weeks of violent protests.

The decision by President Lenin Moreno to repeal Decree 883 marked a victory for an indigenous-led uprising against the measures. But the government maintains that new measures must be hammered out to tackle economic distortions and wipe out rampant fuel smuggling caused by the price subsidies.

A new commission between the government and its opponents is working with UN mediation on a compromise proposal. The reform package had been part of an austerity agreement between the government and the IMF.

The protests that erupted on 4 October forced state-owned PetroEcuador to declare force majeure on crude exports and slashed national crude production by more than half to around 240,000 b/d. It is unclear how quickly the industry will be able to restore operations. State-owned PetroAmazonas, which accounts for around 80pc of production, has been most affected. But foreign companies including Chinese state-owned Andes Petroleum and Chile's state-owned Enap have also been affected.

The agreement to repeal the measures and negotiate to establish new reforms was reached at peace talks yesterday between the government and powerful indigenous federation Conaie.

"A solution for peace and for the country. The government will substitute decree 883 for a new one with mechanisms to focus resources on those who most need them. Peace is restored and Correa's coup and impunity have been stopped." Moreno said on Twitter, referring to his predecessor Rafael Correa whom he blames along with Venezuelan President Nicolas Maduro for instigating the unrest so as to topple him.

Maduro congratulated Ecuadoreans for their "historic victory" over the austerity measures.

Conaie cautiously welcomed the repeal of the decree, but said the matter would not be closed until a new deal is reached. The group's demand to live stream the proceedings of the new commission was rejected by the UN.