VZCZCXYZ0001
OO RUEHWEB

DE RUEHQT #0400/01 0521424
ZNR UUUUU ZZH
O 211424Z FEB 07
FM AMEMBASSY QUITO
TO RUEHC/SECSTATE WASHDC IMMEDIATE 6356
INFO RUEHBO/AMEMBASSY BOGOTA 6445
RUEHCV/AMEMBASSY CARACAS 2375
RUEHLP/AMEMBASSY LA PAZ FEB LIMA 1415
RUEHGL/AMCONSUL GUAYAQUIL 1906

UNCLAS QUITO 000400 
 
SIPDIS 
 
SENSITIVE 
SIPDIS 
 
DEPT FOR WHA/AND 
USTR FOR BENNETT HARMAN 
 
E.O. 12958: N/A 
TAGS: ECON EINV ETRD EFIN EAID PREL EC
SUBJECT:  Ambassador's Meeting with Minister of Industries 
 
 
¶1.  (SBU) Summary.  In his meeting with the Ambassador, Minister of 
Industries Sagasti said that his priorities are promoting investment 
and competitiveness, he's the government's bridge to the private 
sector, and that his ministry is close to reaching agreement with 
the Foreign Ministry on reallocating trade responsibilities.  He 
also suggested that the GOE may want to explore options to strength 
bilateral trade relations once the Correa administration is more 
established.  End summary. 
 
¶2.  (SBU) The Ambassador met with Minister of Industries Raul 
Sagasti on February 13.  Sagasti opened the meeting by noting the 
challenges of setting up a new government.  He said that changing 
governments is always challenging, but the transition for the Correa 
government is doubly challenging since it also trying to make major 
policy changes as well. 
 
Restructuring Trade Responsibilities 
------------------------------------ 
 
¶3.  (SBU) Sagasti said that the Ministry of Industries and Ministry 
of Foreign Relations had largely agreed how to divide trade 
responsibilities given President Correa's decision that foreign 
trade matters will be managed by the Foreign Ministry.  Issues that 
relate to negotiating and compliance with international trade 
agreements would fall to the foreign ministry, while more technical 
issues (e.g., licensing, standards) would remain with the Ministry 
of Industries.  The ministries were still discussing some matters, 
such as who would have authority over CORPEI, Ecuador's trade and 
investment promotion council.  Sagasti said that almost all Ministry 
of Industries staff would remain, with the exception of about four 
technical staffers. 
 
Promoting Investment and Competitiveness 
---------------------------------------- 
 
¶4.  (SBU) Sagasti said that the priorities for his down-sized 
ministry are promoting investment and competitiveness.  He said that 
investment has always been part of the ministry's mandate, but had 
received insufficient emphasis until now.  He added that he will 
look to create an environment that will attract both domestic and 
international investment (but did not specify any specific 
measures).  Sagasti said that the government also intends to enhance 
Ecuador's competitiveness, and that President Correa wants to 
preside over the Competitiveness Council.  Within his ministry, he 
has renamed the Under Secretary for Industry as the Under Secretary 
for Competitiveness. 
 
¶5.  (SBU) Sagasti responded enthusiastically when the Ambassador 
mentioned USAID's success in supporting a leather industry cluster 
in Cuenca.  He said that he hired Esteban Vega, a former employee of 
a USAID contractor, as Under Secretary for Competitiveness, and 
given the success of the USAID project, intends to replicate it as a 
model for supporting other industry clusters in Ecuador. 
 
Interlocutor with the Private Sector 
------------------------------------ 
 
¶6.  (SBU) Sagasti said that President Correa asked him to be the 
government's bridge to the "productive" sector, and he has begun to 
meet with the leading Ecuadorian business chambers to explain the 
government's policies.  When the Ambassador inquired whether his 
objectives were to "calm" the business sector, Sagasti concurred. 
He said that he informed the business chambers that the government 
has focused on small and medium enterprises because they had 
received the least attention from the government, while large 
business has always been able to call on the government and will 
continue to have access through him. 
 
Microfinance and Shortcomings of the Banking Sector 
--------------------------------------------- ------ 
 
¶7.  (SBU) Sagasti said that the government is developing plans to 
provide subsidized credit to underserved rural areas.  He said that 
subsidized credit would not be provided to urban areas to avoid 
displacing successful urban market-based microcredit programs.  He 
also complained that current financing from the banking sector is 
focused on consumer goods, and that the banks have failed to provide 
medium-term financing for businesses.  He said that the government 
will look to also fill that void using its development banks. 
 
Trade Relations with the U.S. 
----------------------------- 
 
¶8.  (SBU) Sagasti said that further extension of the Andean Trade 
Preference Act is important for Ecuador, and that the GOE would urge 
its renewal and has hired U.S. lobbyists. 
 
¶9.  (SBU) Noting that the U.S. is Ecuador's principal export market, 
Sagasti suggested that after the government has had time to settle 
into office he hoped that the U.S. and Ecuador could talk about some 
form of strengthening bilateral trade relations. 
 
Bio Notes 
--------- 
 
¶10.  (SBU) Raul Sagasti is a businessman from Riobamba, although he 
has spent most his adult life in Quito.  He served for over 23 years 
as president of the steel company Industria Acero de los Andes. 
Previously he had worked in the state petroleum company when it was 
known as CEPE.  He later established an oil service company, Coper 
Pet - S Kinner, which he called "my company," in contrast to the 
steel company where he worked as president. 
 
Comment 
------- 
 
¶11.  (SBU) One of the few businessmen in the cabinet, Sagasti does 
not appear to have particularly strong ideological views (in 
contrast to many others on Correa's economic team), although he was 
relatively critical of the banking sector.  He was matter-of-fact in 
discussing his priorities, although he did not give many indications 
of how he intends to achieve his objectives.  We noted with interest 
his statement that Correa asked him to be the government's liaison 
with the private sector, since our impression to date is that the 
government is relatively uninterested in reaching out to or hearing 
the views of the business elite. 
 
¶12.  (SBU) We believe that Sagasti's comment about  discussion of 
trade arrangements reflects his own thinking and not that of the 
Correa government, although we have the impression that members of 
Correa's team would be interested in exploring measures such as 
regular consultations on trade matters, once the government is more 
established.