VZCZCXYZ0003
PP RUEHWEB

DE RUEHQT #0130/01 0422000
ZNR UUUUU ZZH
P 112000Z FEB 08
FM AMEMBASSY QUITO
TO RUEHC/SECSTATE WASHDC PRIORITY 8448
INFO RUEHBO/AMEMBASSY BOGOTA 7314
RUEHCV/AMEMBASSY CARACAS 2866
RUEHLP/AMEMBASSY LA PAZ FEB LIMA 2356
RUEHGL/AMCONSUL GUAYAQUIL 3268

UNCLAS QUITO 000130 
 
SIPDIS 
 
SIPDIS 
 
E.O. 12958: N/A 
TAGS: ETRD ECON EC
SUBJECT: Ecuadorian Exports Drop to U.S., Largely Due to Shifts in 
Petroleum Sales 
 
¶1.  Summary.  Ecuadorian exports to the U.S. declined significantly 
in 2007 relative to 2006.  Most of the decline was due to a drop in 
petroleum sales to the U.S., and to a lesser extent bananas.  Some 
smaller export categories actually saw a jump in sales to the U.S. 
Global Ecuadorian exports increased in 2007, with shift in exports 
to other regions offsetting the decline in sales to the U.S.  End 
Summary. 
 
Exports to U.S. Fall, Crude Oil Drives Decline 
--------------------------------------------- - 
 
¶2.  The Central Bank of Ecuador (BCE) calculates that exports to the 
U.S. between January and December of 2006 were worth $6.791 billion, 
compared to $5.950 billion in the same period in 2007.  This 
represents a 12 percent decrease in 2007, reversing a recent trend: 
since 2001 Ecuadorian exports to the U.S. had averaged a 31 percent 
annual increase. 
 
¶3.  According to the BCE, crude oil exports to the U.S. fell $672 
million and overall exports to the U.S. decreased $841.3 million. 
Crude oil accounted for 80 percent of the export decline to the 
U.S. 
 
¶4.  According to U.S. International Trade Commission (ITC) data 
(Jan-Nov), exports to the U.S. of Ecuador's second-most important 
export, bananas, fell 8.5 percent.  However, ITC data show that 
exports to the U.S in other key products increased, including: 
tuna, 138 percent; cocoa, 103 percent; wood, 12 percent; and edible 
vegetables, 29 percent. 
 
¶5.  Data on fresh cut flowers and roses exports are mixed. Local 
media reports suggest that flower exports to the U.S. declined in 
2007 by $16 million, while U.S. ITC data show a 2.8 percent 
increase. 
 
Increased Exports to Other Nations Offset U.S. Decline 
--------------------------------------------- --------- 
 
¶6.  The downturn in exports to its principal export market (43 
percent of Ecuadorian exports went to the U.S. in 2007) was 
accompanied by a strong upswing in Ecuadorian exports throughout the 
world.  Despite the decrease in sales to the U.S., total Ecuadorian 
exports grew 8.4 percent in 2007.  (This and following data are from 
the BCE.) 
 
¶7.  Total exports to the U.S. decreased $841.3 million, while total 
exports to the world increased $1.12 billion.  Thus, there was 
re-distribution of $1.96 billion of exports from Ecuador's principal 
export market, the U.S., to other markets and regions. 
 
¶8.  Four major regions received export increases that account for 
the redistribution of Ecuadorian exports:  Latin American 
Association of Integration (Argentina, Brazil, Chile, Mexico), 
$728.7 million; Andean Community (Bolivia, Peru, Colombia, 
Venezuela), $556.8 million; Europe - $375.3 million; Central 
America, $186.7 million.  These four increases add up to $1.85 
billion.  As the overall redistribution was $1.96 billion, these 
four regions account for 94 percent of redistributed total exports. 
 
Crude Oil 
--------- 
 
¶9.  Crude oil exports to the U.S. declined $672 million and to China 
declined $165 million, while total crude oil exports increased $494 
million.  Therefore, there was a $1.33 billion re-distribution of 
crude oil exports away from the U.S. and China. 
 
¶10.  Crude oil export redistribution was spread amongst numerous 
countries:  Peru, $427 million; Netherland Antilles $333 million; 
Venezuela, $116 million; Chile, $91 million; Nicaragua, $76 million; 
Bahamas, $66 million; India, $49 million; El Salvador, $46 million; 
Canada, $44; and South Korea, $40 million.  Adding the increases up 
yields $1.28 million - which accounts for 96 percent of the $1.33 
billion redistribution. 
 
¶11.  Comment:  One factor that led to the shift in Ecuadorian crude 
exports is its crude-for-derivatives swap that it has with 
Venezuela.  However, Venezuela remains a relatively small 
destination for Ecuadorian crude, with much of the shift taking 
place to other Latin American markets.  One contact at the Central 
Bank attributed the shift to price differences in the various 
markets. 
 
¶12.  Comment, continued.  While the GOE has the expressed policy 
goal of creating a more balanced and diversified export market, the 
2007 trends appear to be the result of market factors rather than 
policy.  Ecuador is a dollarized economy, so with a weakening dollar 
its terms of trade have improved with Europe and elsewhere compared 
to the U.S.  Local flower producers have told us that Ecuadorian 
exporters have increased their sales to Europe, particularly Russia, 
which pays a large premium over the U.S. market, which they maintain 
is saturated.  They also report that uncertainty about renewal of 
Andean Trade Preference Act (ATPA) benefits has marginally cramped 
their sales to U.S., but the market forces they mentioned are more 
significant. 
 
JEWELL