Rebuilding after quake could cost Ecuador billions of dollars

President Correa comforting a resident in the town of Canoa, Ecuador, on Monday. People have taken to looting, taking things such as clothes, shoes, aluminium window frames and cables, in hopes of selling the materials. Economic growth forecasts are near
President Correa comforting a resident in the town of Canoa, Ecuador, on Monday. People have taken to looting, taking things such as clothes, shoes, aluminium window frames and cables, in hopes of selling the materials. Economic growth forecasts are near zero, with falling oil prices and, now, ruined roads and port delays affecting exports. PHOTO: REUTERS

It would take a huge toll on an economy already hit by plunging income from oil

PEDERNALES (Ecuador) • Touring a city ravaged by the earthquake that killed at least 413 people, Ecuadorean President Rafael Correa on Monday said rebuilding would cost billions of dollars and may inflict a "huge" toll on the fragile Opec nation's economy.

Two days after the 7.8-magnitude quake, traumatised survivors begged Mr Correa for water in the city of Portoviejo, while a soccer stadium in the beach town of Pedernales served as a makeshift relief centre and morgue.

Afraid of staying indoors, or with no home to go back to, families huddled in the streets while police and soldiers patrolled the area in a bid to control looting.

Seeing the devastation at first hand, a grim-face and visibly moved Mr Correa warned that Ecuador's biggest disaster in decades would take a big toll on the poor Andean country of 16 million people.

Relief workers were confronted with swathes of flattened homes, roads and bridges as they surveyed the destruction wrought by last Saturday night's quake, and the death toll was expected to rise.

FINANCIAL IMPACT

Whereas Chile's economy was rebounding strongly from the global financial crisis... Ecuador has been slowing sharply recently, as lower oil prices depress activity. But total damage to assets in dollar terms may be quite a bit lower than in Chile due to the smaller magnitude of the earthquake and the fact that Ecuador is a much poorer country.

MR MICHAEL HENDERSON, of Maplecroft risk consultancy, comparing the impact of Chile's 2010 quake with Ecuador's.

Fears of looting spread as, in Portoviejo, people stole clothes and shoes from wrecked buildings and police tried to control crowds. A former social security building was ransacked for aluminium window frames and cables by people hoping to sell the materials.

"Reconstruction will cost billions of dollars," said Mr Correa in Portoviejo, where survivors swarmed him, asking for aid. The economic impact "could be huge", he added.

Plunging income from oil, Ecuador's biggest earner, had already consigned economic growth forecasts to near zero this year, and exports of bananas, flowers, cocoa beans and fish could be slowed by ruined roads and port delays.

The energy industry, fortunately, escaped any serious damage, and the main refinery of Esmeraldas was due to start up again on Monday night and reach full capacity in a week.

Mr Michael Henderson, of risk consultancy Maplecroft, said Ecuador was less well equipped to recover than Chile, where a 2010 earthquake caused an estimated US$30 billion (S$40 billion) in damage.

"Chile's economy was rebounding strongly from the global financial crisis... Ecuador has been slowing sharply recently, as lower oil prices depress activity," he said. "But total damage to assets in dollar terms may be quite a bit lower than in Chile due to the smaller magnitude of the earthquake and the fact that Ecuador is a much poorer country."

To finance the costs of the emergency, some US$600 million in credit from multilateral lenders was immediately activated, the government said.

Ecuador also announced late on Monday that it had signed off on a credit line for US$2 billion from the China Development Bank to finance public investment.

China has been the largest financier of Ecuador since 2009, and the credit had been under negotiation before the quake.

The disaster may also push Mr Correa, a leftist, to seek help from the International Monetary Fund, consultancy Eurasia said. "Such dynamics increase the odds of Correa turning to an IMF programme for support, an option he has so far resisted, and the earthquake could provide him with political cover to do so," it said.

REUTERS

A version of this article appeared in the print edition of The Straits Times on April 20, 2016, with the headline 'Rebuilding after quake could cost Ecuador billions of dollars'. Print Edition | Subscribe