The economies of both Colombia and Ecuador face significant headwinds as oil prices remain depressed and the coronavirus spreads through the region.
Colombian crude oil exports have rebounded so far this year, after averaging 582,000 barrels per day in 2019. Meanwhile, imports of light sweet US crude – which are used for refining – have remained consistent in January and February.
A rise in US crude into Colombia in recent weeks could be a signal of higher Colombian oil flows to domestic refineries, although this apparent trend will be upended as the country goes into quarantine to fight the pandemic. It is more likely that crude is redirected away from refineries – as domestic product demand drops – and to the export market instead.
The collapse in oil prices so far this year will impact Colombia’s finances as oil represents a key source of revenue for the country. Additionally, investment in the oil industry will also likely be significantly reduced as companies announce budget cuts. Ecopetrol, for its part, slashed its investment budget by $1.2 billion this year as a consequence of the crisis.
Ecuador, for its part, has seen slightly lower crude oil exports in the first two months of the year compared to the same period last year and the 2019 average, reducing revenues and piling further problems onto an already struggling economy. The collapse in crude prices has severely hit the South American country as oil, just like in Colombia, represents a major source of revenue for the national coffers.
The former OPEC member, meanwhile, is dealing with paying back its international debt as the government tries to tackle the spread of the pandemic across its territory. Despite being one of the smallest countries in the region, Ecuador has registered more than 1,800 cases of the coronavirus so far. In response, the government is seeking $2 billion from international institutions to deal with the spread of the disease. A further debt burden for Ecuador will only weigh on the country’s economy going forward.