Indigenous leaders and environmentalists are celebrating Ecuador’s successful referendums that have prohibited oil drilling in a segment of the Amazon rainforest and mining activities in a forest outside Quito. Despite concerns raised by oil and mining groups regarding substantial revenue losses, these measures garnered substantial support.
The vote to halt oil development in a portion of the Yasuni Amazon Rainforest reserve received nearly 59% approval, with nearly all votes tallied. Moreover, 68% of the electorate endorsed the ban on mining in the Choco Andino forest near Quito.
The Yasuni vote has profound implications for state-owned oil company Petroecuador, mandating the cessation of production in the 43-ITT block within a year. Experts anticipate that this action will result in a reduction of approximately 12% in Ecuador’s daily crude oil output of 480,000 barrels.
Petroecuador has pledged compliance with the voters’ decision and acknowledged that the “yes” vote could entail a $13.8 billion income loss for Ecuador over the next two decades.
However, the Yasuni ban is predicted to result in a 1.9% decrease in projected economic growth between 2022 and 2026, as projected by the central bank.
Though two other Petroecuador blocks in the region remain unaffected, Indigenous leaders and environmental groups emphasized the preservation of the Yasuni’s unparalleled biodiversity and the protection of communities in voluntary isolation.
“Message to investors”
The victory resonates beyond the polls, sending a message to investors, particularly major U.S. banks and asset managers, that unbridled resource extraction practices face greater scrutiny. This sentiment reflects the shifting paradigm, as advocated by Kevin Koenig from the advocacy group Amazon Watch.
Nonetheless, the prohibition may not solely result in lost income but could also trigger indemnity payments to affected companies. Presidential candidate Luisa Gonzalez raised concerns over potential indemnifications, estimated at $15 billion, while highlighting the country’s existing financial constraints in addressing essential areas such as healthcare and education.
The Yasuni’s ecological richness is undeniable, with a single hectare hosting 650 tree species and numerous animal species, as noted by the environment ministry.
Despite the economic arguments presented by oil and mining associations, emphasizing the industry’s role in bolstering the economy, the referendums’ outcome underscores a commitment to environmental preservation. However, critics argue that bans might inadvertently lead to illegal mining and deforestation.
The referendum in Quito will nullify six gold concessions, potentially influencing the investment landscape. Maria Eulalia Silva, head of Ecuador’s Chamber of Mining, expressed concerns over the impact on investment certainty and foreign investment, given the recent outcomes. The chamber contends that nationwide opposition to mining is obstructing nearly $1 billion in potential investment over the next two years.
With mining being the country’s fourth-largest income source last year, amounting to $2.8 billion and trailing behind oil, bananas, and shrimp sales, the referendums’ effects extend beyond environmental considerations, stirring economic deliberations and investment decisions.