Tuesday, May 16, 2006

Ecuador Under Ripple Effect

Following the footsteps of Bolivia, the Ecuadorian government canceled an operating contract with Occidental, a U.S. oil company, and took over its assets. Ecuador argued that Occidental breached its contract by transferring part of its concession to Canadian company Encana Corporation (ECA). Occidental, which has invested over a billion dollars Ecuador, denies any wrongdoing and is considering its legal options.

Ecuador is living a period of political instability. The country is negotiating a free trade agreement with the U.S. but its prospects have been badly hurt by this recent move. It recently experienced two major oil industry strikes. Presidential elections are scheduled for October

High commodity prices and a political shift to the left are boosting a regional wave of nationalizations and protectionism. Uruguay could be the next country in joining this trend by revising some of its energy export prices.


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