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Ecuador introduces bill to scrap key oil funds
QUITO
Petroleumworld.com, Jan 15, 2008Ecuadorean President Rafael Correa has introduced a bill to close three saving funds and transfer their $1.5 billion in windfall oil revenues to the national budget, government officials said on Monday.
The funds are earmarked for specific spending and restricted from government control. Some Wall Street analysts worry such a move could erode the country's savings capacity and make it vulnerable to external shocks such as a drop in oil prices or a slowdown in the U.S. economy.
Finance Minister Fausto Ortiz later said the money will be used for capital spending and that those funds will be added to the 2008 budget approved last year.
"We can reform the budget ... we do it everyday," Ortiz told reporters, adding that the budget could increase to around $15 billion from the current $10.3 billion when those funds and costs of oil derivatives imports are included.
Oil products imports are usually part of the budget of state oil company, Petroecuador, but the government has transferred those costs to the national budget to improve transparency. Ecuador expects to import around $3 billion in derivatives this year.
The bill is expected to be easily approved by the government-controlled assembly, which has taken over powers from Congress and is rewriting the constitution.
Correa, a leftist former economy minister, has worried investors with legislation that will increase state control over the economy.
The assembly in December approved a broad-ranging tax reform bill that set duties on unproductive lands and that forces some companies to pay in advance part of their income tax.
The three oil funds are the FAC, or savings and contingency fund; CEREPS, or special account to reactivate social development and production; and FEISEH, or energy and hydrocarbons investment fund.
A fourth fund named FEP, or stabilization fund, receives funds from the CEREPS.
A copy if the legislation was not immediately available.
Story reporting by Alonso Soto; editing by Leslie Adler from Reuters
Reuters 14 01 08Copyright© 2007 Petroleumworld. All rights reserved.
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