VZCZCXYZ0017
OO RUEHWEB

DE RUEHQT #2413 3021841
ZNR UUUUU ZZH
O 291841Z OCT 07
FM AMEMBASSY QUITO
TO RUEHC/SECSTATE WASHDC IMMEDIATE 7980
INFO RUEHBO/AMEMBASSY BOGOTA PRIORITY 7007
RUEHCV/AMEMBASSY CARACAS PRIORITY 2727
RUEHLP/AMEMBASSY LA PAZ OCT 0768
RUEHPE/AMEMBASSY LIMA PRIORITY 2039
RUEHGL/AMCONSUL GUAYAQUIL PRIORITY 2970
RUEATRS/DEPT OF TREASURY WASHDC PRIORITY

UNCLAS QUITO 002413 
 
SIPDIS 
 
SENSITIVE 
SIPDIS 
 
E.O. 12958: N/A 
TAGS: ECON ETRD EINV EC
SUBJECT: ECUADOR ECON WEEKLY: IMPORT TARIFFS INCREASE; RETURN TO 
OPEC, BANK SUPER LOSES VETO, TAX EVASION 
 
REF: a) QUITO 1969, b) Quito 999 
 
¶1.  (U) The following is a weekly economic update for Ecuador that 
reports notable developments that are not reported by individual 
cables. 
 
Import Tariffs to Increase 
-------------------------- 
¶2. (U) On October 24, Ecuador's Council on Foreign Trade and 
Investment (Comexi) approved a proposal to increase tariffs on 567 
industrial goods and agricultural products.  The proposal is part of 
the second phase of a tariff reform program initiated in August 
(reftel a); the first phase involved reducing tariffs on raw 
materials and inputs. According to Genaro Baldeon, Under Secretary 
for Commerce and Investment in the Ministry of Industry and 
Competitiveness, Secretary of Comexi, and author of the tariff 
proposal, the proposal's objective is to protect national production 
and increase fiscal collection by $654 million per year.  Products 
that will be subject to higher tariffs include clothing, jewelry, 
farm products (i.e. meat, vegetables, fruit, coffee, cacao, tobacco 
and flowers), and "special consumption" goods such as cell phones 
and videogames.  According to the GOE, the increased tariff rates 
are below WTO bound rates.  Private sector members of Comexi opposed 
some of the tariff increases, notably for cellular phones, but the 
government members of the commission approved the proposal in its 
entirety. 
 
Ecuador to Return to OPEC 
------------------------- 
 
¶3. (SBU) On October 14 the GOE sent a letter to the OPEC 
Secretariat, stating Ecuador's intention to return to the 
 
SIPDIS 
Organization of Petroleum Exporting Countries (OPEC).  Diego Stacey, 
Under Secretary in the Ministry of Foreign Relations, commented that 
Ecuador wants to participate in the November 2007 OPEC Summit in 
Saudi Arabia.  However, Ecuador faces a debt to OPEC of $5.7 billion 
left over from when it withdrew from the organization in 1992 (at 
the time, Ecuador's Energy Minister Andres Vivas announced that 
Ecuador was leaving the organization but would remain an associate). 
 The GOE claims it received a response granting Ecuador's request to 
attend the summit on October 23. 
 
Superintendent of Banks Loses Veto Authority 
-------------------------------------------- 
 
¶4. (SBU) In August, President Correa presented a complaint to the 
Constitutional Court stating that the Superintendent of Banks' 
ability to veto Banking Board decisions was unconstitutional.  On 
October 1, the Constitutional Court resolved unanimously to 
eliminate the Superintendent's veto authority.  The Court indicated 
that this decision would avoid granting the Superintendent excessive 
power.  (Current Superintendent of Banks Vergara was appointed by 
Congress, and Correa has accused him of being incompetent and 
favoring banking interests over state interests on several 
occasions.  Correa appointees make up three out of the five Banking 
Board members (reftel b) and Correa evidently chaffed at the idea 
that the Vegara could block Board decisions). 
 
Income Tax Evasion 
------------------ 
 
¶5. (SBU) The El Comercio newspaper reported data from Ecuador's 
Internal Revenue Service (SRI) October 15 showing that only 44% of 
the 54,375 companies in Ecuador pay income taxes.  According to SRI 
statistics, tax evasion is estimated to be almost $3 billion.  In 
2007, SRI expects to collect only $1.6 billion in income taxes.  It 
noted that many important company conglomerates declare losses - for 
example, the 17 most important business conglomerates in the country 
own 674 companies, but only 41% of those companies pay taxes. 
 
JEWELL