VZCZCXYZ0001
OO RUEHWEB

DE RUEHQT #1395/01 1582022
ZNR UUUUU ZZH
O 072022Z JUN 06
FM AMEMBASSY QUITO
TO RUEHC/SECSTATE WASHDC IMMEDIATE 4530
INFO RUEHBO/AMEMBASSY BOGOTA 5668
RUEHCV/AMEMBASSY CARACAS 1774
RUEHLP/AMEMBASSY LA PAZ JUN LIMA 0639
RUEHGL/AMCONSUL GUAYAQUIL 0595
RHMFISS/CDR USSOUTHCOM MIAMI FL
RUCPDOC/DEPT OF COMMERCE WASHDC
RUEATRS/DEPT OF TREASURY WASHDC

UNCLAS QUITO 001395 
 
SIPDIS 
 
SENSITIVE 
SIPDIS 
 
PASS TO USTR FOR BENNETT HARMAN 
 
E.O. 12958: N/A 
TAGS: ETRD EINV ENRG SNAR ECON PREL EC
SUBJECT: AMBASSADOR VISITS MACHALA AND EL ORO PROVINCE 
 
 
¶1. (U) Summary.  In a trip to the southern border province of 
El Oro, the Ambassador visited U.S. company Machala Power's 
gas platform and electricity generation facilities and heard 
about their plight in trying to collect nearly $50 million in 
unpaid bills from GOE-related entities.  She inaugurated a 
port inspection facility funded by the Narcotics Affairs 
Section (NAS) and met with the Mayor of Machala, the Machala 
AmCham Chapter and the Governor of the Province of El Oro. 
End Summary. 
 
Machala Power 
------------- 
 
¶2. (U) Machala Power operates a gas platform off the coast of 
Ecuador.  While capable of producing much more natural gas, 
Machala has been inhibited from doing so because local 
electricity distributors have failed to pay nearly $50 
million in past due bills.  The outstanding debts date to 
2003 and Machala has filed a request for international 
arbitration to collect the unpaid amounts.  Ironically, no 
one in the GOE disputes the amounts owed Machala Power.  The 
GOE simply claims that it does not have the money to pay 
Machala Power.  We and Machala Power have tried to work with 
the GOE for several years to resolve the impasse. 
 
¶3. (U) Machala Power is only operating two of the eight gas 
wells on its gas platform.  With additional investment at its 
electric generation plant it could double its power output. 
However, its headquarters in Texas will not permit any more 
investment until progress is made on the arrearages.  Machala 
GM John Tomich told the Ambassador that if it could recover 
the back payments and get assured future payments, it would 
invest an additional $125 million in Ecuador.  This 
investment would allow Ecuador to reduce its imports of lower 
efficiency and less environmentally friendly diesel fuels by 
$100-200 million dollars per year. 
 
¶4. (U) Tomich said that he explained the benefits to the GOE 
and that the Energy Ministry, GOE electricity regulators and 
the Ministry of Economy agree that Machala should be paid and 
that Machala's further investment would be a good option for 
Ecuador.  Such sympathy does not, however, pay the bills and 
Machala has been forced to seek arbitration.  Procurador 
General (U.S. Solicitor General equivalent) Jose Maria Borja 
has offered to help, but only if Machala drops its 
arbitration.  The Ambassador said that she would continue to 
push Machala Power's case with GOE authorities. 
 
Machala Port Inspection Inauguration 
------------------------------------ 
 
¶5. (U) The Ambassador inaugurated June 1 a new port 
inspection station at the port facilities in the city of 
Machala.  The port is largely used for exporting bananas, but 
the banana containers have been used for drug shipments.  The 
NAS funded inspection station is a modern facility with 
kennels for the dogs that are used to detect drug and other 
illicit shipments through the ports. 
 
¶6. (SBU) The Ambassador took advantage of the inauguration 
opportunity to demonstrate again, the strong and broad 
commitment that the USG has to Ecuador.  The broad, extensive 
and positive press coverage the Ambassador received helped 
balance the negative press climate on bilateral issues that 
has prevailed in the wake of the GOE seizure of Occidental 
Petroleum's assets. 
 
Meetings with Local Officials 
----------------------------- 
 
¶7. (SBU)  Machala Mayor Carlos Falquez Batallas made the most 
of the Ambassador's visit to his office.  He gathered all the 
local press he could find and touted his civil works projects 
for the city of Machala.  Not content with holding court in 
his office, the Mayor then escorted the Ambassador around the 
city square outside his office, where little girls dressed as 
princesses and other citizens enthusiastically approached 
their "beloved" mayor.  Nearly everyone the Ambassador spoke 
with before and after the visit acknowledged that the current 
mayor had done much more than most to beautify the city.  The 
Social Christian Party (PSC) mayor models himself on 
successful PSC Guayaquil Mayor Jaime Nebot.  While Falquez 
seems to spend nearly as much on self-promotion as he does on 
the city, there is no denying that he is getting some results. 
 
¶8. (SBU) President Palacio's recently (February 2006) 
appointed Governor of El Oro Province Jofre Roldan Izquierdo 
is neither a self-promoter nor an effective governor.  The 
high school math teacher turned governor appeared to have no 
real plan for the province.  As an appointed official, Roldan 
will be replaced by the new president of Ecuador, when she or 
he takes office on January 15, 2007. 
 
Ambassador's Meeting with the AmCham 
------------------------------------ 
 
¶9. (U) The Ambassador met with nearly a dozen members of the 
Machala chapter of the Ecuadorian-American Chamber of 
Commerce (AmCham).  Every one of them lamented the decisions 
of the Palacio Administration to pass the hydrocarbon law and 
seize Occidental Petroleum's assets.  However, they had no 
ideas about what they could do to improve or change the 
situation and were hoping that the USG or the new 
administration would make things better. 
 
Comment 
------- 
 
¶10. (SBU) The reaction of the AmCham is typical of the 
passive, almost fatalistic attitudes that the Ambassador 
found in Machala.  When she visited community projects that 
were sponsored by Machala Power, she was greeted with a 
complaint that not enough was being done by the government 
for the community.  Neither the local, provincial or national 
governments were doing anything to help these impoverished 
communities.  Thus, they looked to foreign companies and the 
USG for help, and hoped that maybe their next government will 
be better. 
JEWELL