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Living in the Gray Zone: Electricity and Tax Ambiguity in Ecuador

As I sit here in the dim glow of my laptop’s screen, typing away in the darkness, I’m reminded once again of the unique challenges of living in Ecuador. The country’s recent struggle with electricity shortages has become a frustratingly familiar part of daily life, casting a literal shadow over our routines and productivity. But amidst the flickering lights and uncertain power supply, there is a deeper narrative of resilience and adaptation in the face of adversity.

Electricity Woes

Ecuador’s heavy reliance on hydrogenated electricity makes it particularly vulnerable to fluctuations in rainfall, a vulnerability exacerbated by the recent El Niño / La Niña phenomenon and the looming specter of climate change. As rain patterns become increasingly unpredictable, the country’s power grid becomes unstable, with rolling blackouts becoming an all-too-common occurrence.

The root causes of these blackouts extend beyond the weather and climate; exposing some deeper issues of governance and infrastructure. Government mismanagement, and whispers of corruption and sabotage, have only served to exacerbate an already precarious situation. 

Electricity retailers, such as CentroSur in Cuenca, are left with mandates to decrease electricity supply. This leads to “scheduled” rolling blackouts. How many hours of the day you’ll be without power will come down to which part of the city you reside. However, the schedules are really best used as a guide as to what may happen, with residents shouldering the uncertainty. 

To mitigate the impact of these blackouts, many residents have turned to Uninterruptible Power Supplies (UPS) as a lifeline in times of darkness. These devices provide backup power to essential devices such as routers and modems. Apartment buildings constructed in the last 15 years often include backup generators, powering common items such as elevators, and private apartments. YapaTree Properties rental team has experienced a recent increase in demand for such apartments

However, the ripple effects of these blackouts extend far beyond mere inconvenience. Supermarkets struggle to process payments as credit card systems falter, while broken water pipes serve as a stark reminder of the interconnectedness of our infrastructure. In a city where even the most mundane tasks are tinged with uncertainty, adaptability becomes not just a virtue but a necessity.

Tax Ambiguity: Navigating the Gray Zone

In addition to grappling with electricity woes, expats in Ecuador can also find themselves struggling to make heads and tails of their tax obligations. The question of whether expats are required to pay taxes on their worldwide income, including pensions, has long been a source of confusion.

The lack of clarity from the Ecuadorian tax authority (SRI) has only served to fuel the flames of uncertainty, leading to conflicting interpretations and unnecessary panic among expat communities. 

Living with this ambiguity can be unsettling for expats, particularly for those accustomed to the certainty and predictability of their home countries’ tax systems. Yet, it is precisely this ambiguity that defines life in Ecuador’s “gray zone,” where shades of uncertainty blur the lines between black and white.

Personal Reflections

As an expat living and working in Cuenca, I’ve learned to embrace the unpredictability of life in the “gray zone.” Despite the challenges posed by electricity shortages and tax ambiguity, there is a certain resilience that comes from learning to navigate these uncertainties. But, like any other muscle, it needs to be developed over time. 

I’ve come to rely on our family network of accountants to help navigate Ecuador’s tax laws, ensuring compliance while minimizing the risk of running afoul of the authorities. However, our situation is different from most expats, as our main income (buying and selling properties) is derived from within Ecuador.

Living in Ecuador isn’t without its frustrations. The flickering lights of a power outage and the murky waters of tax ambiguity represent today’s uncertainty. I don’t know what tomorrow’s uncertainty will be, but accepting it is part of my process of dealing with it. 

I’d be very grateful to hear experiences from fellow residents on how you’re coping with the current round of uncertainties in the comments below. Together, let us navigate the “gray zone” with courage and resilience, knowing that it is our ability to adapt to the uncertainty that ultimately defines our success in Ecuador.

Further reading:

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2 Responses

  1. Good article, Jason, thanks. I completely agree that the culture of Cuenca, and more generally Ecuador and South America, requires a flexible mentality that does not seek to nail down every single detail of human life with enforced bureaucratic mechanisms. That was part of the attraction for moving here! Carry on.

  2. As an Ecuadorian I can tell you we’ve learned to be resilient. It’s extremely sad to see that after years of corruption and blatant theft the consequences are here. It doesn’t matter if you like it or not, if you love the country or not, it matters how can you adapt. It hurts but that’s who the Ecuadorian is, we complain but we keep working.

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