VZCZCXYZ0007
OO RUEHWEB

DE RUEHQT #2019 2492016
ZNR UUUUU ZZH
O 062016Z SEP 07
FM AMEMBASSY QUITO
TO RUEHC/SECSTATE WASHDC IMMEDIATE 7665
INFO RUEHBO/AMEMBASSY BOGOTA PRIORITY 6864
RUEHCV/AMEMBASSY CARACAS PRIORITY 2667
RUEHLP/AMEMBASSY LA PAZ SEP 0706
RUEHPE/AMEMBASSY LIMA PRIORITY 1893
RUEHGL/AMCONSUL GUAYAQUIL PRIORITY 2751
RUEATRS/DEPT OF TREASURY WASHDC PRIORITY

UNCLAS QUITO 002019 
 
SIPDIS 
 
SENSITIVE 
SIPDIS 
 
TREASURY FOR MMALLOY AND MEWENS 
 
E.O. 12958: N/A 
TAGS: ECON ETRD EC
SUBJECT: GOE TO LOWER TARIFFS ON INPUTS, RAW MATERIALS, CAPITAL 
GOODS 
 
REFTEL: Quito 1794 
 
¶1.  (SBU) Summary: The GOE intends to reduce tariffs on inputs, raw 
materials, and capital goods to increase production and 
competitiveness and control rising prices.  Tariffs on 1,957 
products will fall from 5-20 percent to 0-5 percent.  The private 
sector has praised the plan but fear it could be accompanied by 
increased tariffs on imported manufactured goods.  End Summary. 
 
¶2.  (U) As part of a new economic policy to increase production and 
competitiveness in the industrial and agricultural/fishery sectors 
(and counter rising prices), the GOE presented a proposal August 21 
to cut tariffs on inputs, raw materials, and capital goods to 
COMEXI, a joint public sector/private sector trade committee. 
COMEXI approved the proposal after the GOE agreed to reduce a few 
more tariff lines at the request of the private sector.  Tariffs on 
1,957 products will be reduced from 5-20 percent to 0-5 percent.  To 
implement the proposal, President Correa must issue an executive 
decree, which is expected within several weeks. 
 
¶3.  (U) The tariff reductions cover a wide range of products and are 
expected to benefit numerous sectors, including textiles, 
agriculture and fisheries, automotive, food and beverage, and white 
goods.  The cuts that have generated the most attention are those 
for wheat and wheat flour (tariffs on these products will drop from 
20 percent to zero for six months as part of an effort to maintain 
bread prices in the face of rapidly rising international wheat 
prices, reftel). 
 
¶4.  (SBU) Comment:  The GOE's plan to reduce tariffs and further 
open Ecuador's economy is a positive, market-oriented development. 
However, according to the Executive Director of the Guayaquil 
Chamber of Commerce, Teodoro Maldonado, the GOE told COMEXI that the 
cuts would be accompanied by increased tariffs on some manufactured 
goods to protect Ecuadorian industry.  To date, the GOE has not 
indicated what tariff lines it might increase.  This type of 
protectionist measure, if implemented, would reflect a strain of 
thinking in the GOE that government intervention will help promote 
local production.  Maldonado reported that his chamber would resist 
any tariff increase, but did not know how other parts of the private 
sector might react.  End Comment. 
 
JEWELL