VZCZCXYZ0006
PP RUEHWEB

DE RUEHQT #2539/01 3251957
ZNR UUUUU ZZH
P 211957Z NOV 07
FM AMEMBASSY QUITO
TO RUEHC/SECSTATE WASHDC PRIORITY 8089
INFO RUEHBO/AMEMBASSY BOGOTA 7116
RUEHCV/AMEMBASSY CARACAS 2771
RUEHLP/AMEMBASSY LA PAZ NOV LIMA 2150
RUEHGL/AMCONSUL GUAYAQUIL 3057

UNCLAS QUITO 002539 
 
SIPDIS 
 
SENSITIVE 
SIPDIS 
 
E.O. 12958: N/A 
TAGS: ECON EINV ETRD ELAB EPET PGOV EC
SUBJECT:  DAS McMullen's Meetings with U.S. and Ecuadorian Business 
Representatives 
 
Ref.  Quito 2491 
 
¶1.  (SBU) Summary.  WHA DAS Chris McMullen met, separately, with 
representatives of the U.S. and Guayaquil 
business communities.  With the notable exception of City Oriente, 
which is facing the prospect of having its 
petroleum contract cancelled, the U.S. business representatives were 
guardedly optimistic.  They are concerned about 
business uncertainty and possible measures that could be implemented by 
the upcoming Constituent Assembly.  However, 
 they reported that their businesses are doing reasonably well, and 
that they can work 
with some members of the government. 
  In contrast, the Guayaquil business representatives were more 
pessimistic, concerned that the Constituent Assembly 
 will 
 be anti-business and predicting economic deterioration in 2009.  End 
summary. 
 
U.S. Business Community Guardedly Upbeat... 
 
¶2.  (SBU) In Quito, DAS McMullen met with members of the U.S. business 
community on November 13.  Robert Moss, AmCham President and owner of a 
corporate software company, opened the discussion by noting the 
uncertainty generated by 
President Correa's economic policies and possible changes in the 
upcoming Constituent Assembly. 
When the discussion returned to him a second time, Moss took a more 
upbeat approach, emphasizing that many on Correa's economic team are 
relatively capable and pragmatic.  He noted his hope that after the 
Correa administration implements a number of economic changes, the 
economic environment will become more stable and predictable. 
 
¶3.  (SBU) Moss joined in with another member of the group in agreeing 
that economic decision-making is significantly 
\better in Ecuador than in Venezuela, saying that GOE officials are 
much more practical and reasonable than 
Venezuelan economic officials, whom Moss called mere opportunists, 
looking out for their own interests. 
 
¶4.  (SBU) Jeff Sheedy, who owns textile, construction, and steel 
companies, said that his companies are doing well. 
He is now able to sell to the GOE, which he had not previously been 
able to do because of widespread corruption. 
He said demand for steel is strong because of increased 
government-financed construction projects.  He allowed that new private 
sector construction projects are slowing because of uncertainty and 
difficulty obtaining financing, 
 but added that there are still a number of ongoing construction 
projects. 
 
¶5.  (SBU) Sheedy said his principal concern is that the Constituent 
Assembly will likely tighten labor rules, 
including the ability to hire temporary workers.  He acknowledged that 
some employers have abused temporary worker provisions, but complained 
that the government, rather than prosecuting the violators, would 
likely scrap temporary 
worker provisions altogether.  He said that he would join a group of 
business representatives meeting the following day 
with a Constituent Assembly delegate from Correa's PAIS movement to 
urge at least some flexibility in hiring temporary workers for seasonal 
surges. 
 
¶6.  (SBU) In response to a question, Sheedy said that large Ecuadorian 
business chambers have lost their credibility 
and do not have access to the Correa administration.  However, he said, 
the GOE sees industry-specific associations as natural interlocutors 
and those associations find a ready audience with the GOE. 
 
¶7.  (SBU) Dean Rule, local manager for Hill's Floral, a U.S. flower 
company with operations in Ecuador, focused on the benefits of the 
Andean Trade Preferences Act, arguing that ATPA should be extended 
because it is doing what it was 
intended to do:  creating jobs to diminish the attraction of 
narcotrafficking.  He said that he had recently 
returned from a 
region in Colombia where employees in the flower industry make more 
than those working in coca production. 
 
¶8.  (SBU) Jeff Cadena, General Manager for General Motors Ecuador, 
said 
that GM has the largest share of the Ecuadorian automotive market. 
Indeed, GM has a larger market share in Ecuador than any other 
country, 
and therefore Ecuador is an important market for GM even though the 
economy is relatively small.  He said that GM's sales have grown over 
the 
 
past year, although in recent months sales have slowed because 
consumers have had difficulty obtaining financing as the 
banking sector tightened its loan criteria because of growing 
financial 
sector uncertainty. 
 
...Except for City Oriente's Possible Contract Cancellation 
 
¶9.  (SBU) Kyle Ford, manager of City Oriente, a small petroleum 
operator, reviewed in a matter-of-fact way the likelihood that the 
government could initiate caducity, or contract cancellation, because 
of City Oriente's decision not to pay 50 percent of extraordinary 
revenues as required under a 2006 law (more details in reftel). 
Ford said that he is generally an optimist, but that he thought it 
would be difficult for 
City Oriente to avoid caducity, and therefore he is now focusing on 
City Oriente's arbitration case against the GOE. 
(Note:  On November 19, the tribunal ruled in favor of City Oriente's 
petition and issued a decision 
 on provisional measures prohibiting the GOE from implementing 
caducity 
or other actions that could affect the status 
quo.) 
 
Guayaquil-based Economic Analyst Predicts 2009 Downturn 
 
¶10.  (SBU) McMullen met with members of the Guayaquil business 
community on November 15.  According to Walter Spurrier, editor of 
Weekly Analysis and Guayaquil-based economic analyst, Correa's 
"Marxist" economic policies will likely lead to economic deterioration 
in 2009.  While high oil prices and a weak dollar will keep Ecuador's 
economy afloat for the next year, Spurrier believes that declining oil 
production and economic instability following an eventual shift away 
from the dollar could mean trouble in the long term.  "Given the 
political instability, foreign oil companies will not 
put good money after bad," he said.  "Production will continue to 
drop."  Spurrier added that "de-dollarization of the economy has to be 
high on Correa's list given his nationalistic leanings." 
 
Constituent Assembly Unlikely to be Business Friendly 
¶11. (SBU) Representatives of Guayaquil's politically influential 
Chambers of Commerce and Industry expressed 
 concern about the perceived "anti-business" leanings of the 
Constituent Assembly.  According to Chamber of Industry 
President Miguel Pena, the Constituent Assembly is much less receptive 
to the business community's 
input than Congress was.  "Correa will try to push legislation through 
the Assembly to bypass Congress, 
which was much more pro-business because so many representatives had 
their own companies," he explained. 
Pena opined that the Assembly will likely raise taxes to pay for 
Correa's 
expensive social programs.  He, like Spurrier, worried that the Correa 
administration was scaring off foreign investors.  "His penchant for 
making seemingly capricious decisions is driving away foreign 
investment in 
industrial sectors that need imported equipment," Pena said. 
 
¶12.  (SBU) Comment.  The economic and business environment in Ecuador 
remains uncertain, which alone can hamper business investment, as the 
Correa administration mixes tough rhetoric with a combination of 
pragmatic and unhelpful business decisions.  So the mixed messages 
from 
the U.S. and Ecuadorian business communities are understandable. 
The Guayaquil business community for the most part has viewed the 
Correa administration from a highly 
negative perspective and has largely been excluded by the government. 
Conversely, the U.S. business community has tried to work with the 
Correa administration when possible, hence itQs more nuanced message 
to 
DAS McMullen. 
 
¶13.  (U) DAS McMullen cleared this message.