VZCZCXYZ0004
OO RUEHWEB

DE RUEHQT #2008 2481412
ZNR UUUUU ZZH
O 051412Z SEP 07
FM AMEMBASSY QUITO
TO RUEHC/SECSTATE WASHDC IMMEDIATE 7658
INFO RUEHBO/AMEMBASSY BOGOTA PRIORITY 6863
RUEHCV/AMEMBASSY CARACAS PRIORITY 2666
RUEHLP/AMEMBASSY LA PAZ SEP 0705
RUEHPE/AMEMBASSY LIMA PRIORITY 1892
RUEHGL/AMCONSUL GUAYAQUIL PRIORITY 2746
RUEATRS/DEPT OF TREASURY WASHDC PRIORITY

UNCLAS QUITO 002008 
 
SIPDIS 
 
SENSITIVE 
SIPDIS 
 
TREASURY FOR MMALLOY AND MEWENS 
 
E.O. 12958: N/A 
TAGS: ECON ETRD EINV EC
SUBJECT: ECUADOR ECON WEEKLY: ATPA; 2008 BUDGET; NEW LAWYERS IN OXY 
CASE 
 
 
¶1.  (U) The following is a weekly economic update for Ecuador that 
reports notable developments that are not reported by individual 
cables. 
 
PRESIDENT CORREA ON ATPA RENEWAL 
-------------------------------- 
 
¶2.  (SBU) During his weekly radio address on August 25 President 
Correa reiterated some of his previously used discourse on the 
Andean Trade Preference Act (ATPA).  He asserted that Ecuador is 
entitled to ATPA benefits in exchange for fighting drug trafficking 
and suggested that if the ATPA program is not extended, the GOE 
could compensate exporters for the $50 million in trade benefits 
they would lose each year (the ATPA program is due to expire in 
February 2008).  Correa repeated rhetoric he has used before, saying 
that ATPA benefits are not "alms," and that Ecuador "would not get 
down on its knees to beg" for renewal -- a reference to the ATPA 
lobbying campaign by the Ecuadorian public and private sector in May 
and June. 
 
¶3.  (SBU) The Ecuadorian business community immediately responded to 
Correa's comments by urging the government to define a positive 
trade agenda with Ecuador's largest trading partner.  The Foreign 
Minister was quick to assert that the GOE was in fact interested in 
some form of long-term trade agreement with the U.S., and planned to 
pursue a dialogue along those lines.  Commentators were critical of 
the suggestion that the GOE could compensate exporters for the loss 
of ATPA benefits.  President of the Ecuadorian Business Committee, 
Patricio Donoso, claimed it would make the export sector less 
competitive.  Trade researcher and former GOE trade official Manuel 
Chiriboga noted that compensation could be challenged as an illegal 
export subsidy under the WTO and be subject to U.S. fair trade 
rules.  The Embassy took the opportunity to remind private and 
government contacts that lobbying is an accepted procedure in a 
democracy and enables the parties to exchange valuable information. 
 
 
2008 BUDGET 
----------- 
 
¶4.  (U) The Ministry of Economy and Finance submitted its proposed 
2008 budget to Congress on September 1.  Congress will have until 
the end of November to approve the budget.  Proposed expenditures 
would total $10.36 billion, while the projected deficit would be 
$855 million.  The government focused on the budget's increased 
allocation for social spending and its plan to reduce debt servicing 
from 25% of the budget in 2007 to 20% in 2008.  Economy Minister 
Fausto Ortiz defended the budget deficit as manageable (less than 2% 
of GDP) and said it would be used to stimulate demand in the face of 
falling consumption and private investment.  The GOE plans to cover 
much of the deficit with financing from the Andean Development 
Corporation (CAF) and the Interamerican Development Bank (IDB). 
Jaime Carrera of the NGO Fiscal Policy Observatory criticized the 
budgeted 13% increase in current expenditures and 23% increase in 
salaries. 
 
ECUADOR HIRES NY LAW FIRM IN OXY CASE 
------------------------------------- 
 
¶5.  (U) The GOE hired New York law firm LeBoeuf, Lamb, Greene & 
MacRae from among three companies bidding to represent it in the 
Occidental Petroleum arbitration case.  LeBoeuf has prior experience 
in energy sector cases and United Nations Commission on 
International Trade Law (UNCITRAL) arbitrations.  LeBoeuf's legal 
team will be led by partners Eric Schwartz and Derek C. Smith, who 
both have extensive experience in international disputes. Schwartz 
was formerly Secretary General of the Court of International 
Arbitration of the International Chamber of Commerce.  Ecuador's 
$5.9 million contract with LeBoeuf is valid while the arbitration 
process continues, an estimated two to three years. 
 
JEWELL