Ecuador Case
Max Warren
Ecuador Case
February 6th, 2012
What’s The Problem? Currently in Ecuador there is a massive oil business that is having trouble being regulated. In a country of 14 million people it employs 12,000 and just recently bought out the big oil companies in order to control the entire petroleum market. Texaco and Gulf oil were bought out due to turbulent relationships with the government. However, Ecuador has little government regulations and resources that would allow them to properly handle the business. They currently have many conflicts facing them and in 2001 a new pipeline was put in for oil only furthering the expansion of the industry. Many foreign oil companies have trouble with the tax laws in Ecuador. They tax the companies roughly 100 million dollars by interpreting the law in a different manner. These companies have spent many days in court trying to fight these large tax amounts but to no avail. The contracts they have with the companies are very loosely enforced and interpreted. Also the old pipeline is in very poor condition and companies are afraid of leakage and breakdowns that would greatly affect their business. The interest of the Ecuadorian government are being upheld rather than the companies. They charge ridiculous amounts of taxes, and end up taking about the same amount of profits without doing any work. The companies had to build the second pipeline at their own expense and yet Ecuador gets a certain amount of taxes and is allowed to use it when they need to transport their crude oil. To me it is obvious that the companies should dominate. Yes some taxes should be involved but Ecuador is benefiting just as much as the companies are and they are not even helping them. They do not pay for construction or maintenance of the pipeline but charge ridiculous amounts of taxes. The government is acting as an individualistic nation when they need to become a collectivism government in order to improve the nation as a whole. The
Ecuador Case
February 6th, 2012
What’s The Problem? Currently in Ecuador there is a massive oil business that is having trouble being regulated. In a country of 14 million people it employs 12,000 and just recently bought out the big oil companies in order to control the entire petroleum market. Texaco and Gulf oil were bought out due to turbulent relationships with the government. However, Ecuador has little government regulations and resources that would allow them to properly handle the business. They currently have many conflicts facing them and in 2001 a new pipeline was put in for oil only furthering the expansion of the industry. Many foreign oil companies have trouble with the tax laws in Ecuador. They tax the companies roughly 100 million dollars by interpreting the law in a different manner. These companies have spent many days in court trying to fight these large tax amounts but to no avail. The contracts they have with the companies are very loosely enforced and interpreted. Also the old pipeline is in very poor condition and companies are afraid of leakage and breakdowns that would greatly affect their business. The interest of the Ecuadorian government are being upheld rather than the companies. They charge ridiculous amounts of taxes, and end up taking about the same amount of profits without doing any work. The companies had to build the second pipeline at their own expense and yet Ecuador gets a certain amount of taxes and is allowed to use it when they need to transport their crude oil. To me it is obvious that the companies should dominate. Yes some taxes should be involved but Ecuador is benefiting just as much as the companies are and they are not even helping them. They do not pay for construction or maintenance of the pipeline but charge ridiculous amounts of taxes. The government is acting as an individualistic nation when they need to become a collectivism government in order to improve the nation as a whole. The
Cited: "Dealing With Government In Emerging Market: The Heavy Crude Oil Pipeline (OCP) In Ecuador." (2004): 1-11. Thunderbird. Web. Hill, Charles W. L. Global Business Today. Boston: McGraw-Hill Irwin, 2008. Print.