VZCZCXYZ2844
RR RUEHWEB

DE RUEHQT #0220 0651514
ZNR UUUUU ZZH
R 051514Z MAR 08
FM AMEMBASSY QUITO
TO RUEHC/SECSTATE WASHDC 8586
INFO RUEHBO/AMEMBASSY BOGOTA 7401
RUEHCV/AMEMBASSY CARACAS 2928
RUEHLP/AMEMBASSY LA PAZ MAR LIMA 2447
RUEHGL/AMCONSUL GUAYAQUIL 3369
RUEATRS/DEPT OF TREASURY WASHDC

UNCLAS QUITO 000220 
 
SIPDIS 
 
SENSITIVE 
SIPDIS 
 
TREASURY FOR MEWENS 
 
E.O. 12958: N/A 
TAGS: ECON EPET EFIN EINV SENV EC
SUBJECT: ECUADOR ECON WEEKLY: Oil Contract Renegotiations; Limits on 
Credit Risk Agency; Pipeline Repaired 
 
REF: A) 07 QUITO 999, B) QUITO 210 
 
¶1.  (U) The following is a weekly economic update for Ecuador that 
reports notable developments that are not reported by individual 
cables. 
 
Oil Contract Negotiations Inching Forward 
----------------------------------------- 
 
¶2. (SBU) On February 26, the Ministry of Petroleum and Mines 
reported that it will soon close a deal on eight of fourteen 
petroleum contracts with the four oil companies that hold production 
sharing agreements:  Perenco (France), Repsol YPF (Spain), Andes 
Petroleum (China) and Petrobras (Brazil).  But other reports 
indicate this announcement may be premature, and some challenges 
still remain.  Rene Ortiz, President of the Hydrocarbon Industry 
Association of Ecuador, said negotiations are hindered by the fact 
that the GOE does not accept the World Bank's International Centre 
for Settlement of Investment Disputes (ICSID).  This comment was 
echoed by the manager for City Oriente, which is also involved in 
contract renegotiations (septel), who said that in the most recent 
meeting he attended with the foreign oil companies, all asserted 
that having strong arbitration provisions is important.  Two options 
for companies interested in restructuring their contracts are 
service contracts or signing a new production sharing contract which 
would reset the reference price and terms of the windfall income tax 
(discussed in more detail in septel). 
 
Limits on National Risk Bureau Listings 
--------------------------------------- 
 
¶3. (U) On February 26, the National Banking Board (Junta Bancaria) 
announced that the National Risk Bureau of the Superintendency of 
Banks would no longer include the names of co-guarantors in its 
credit listing data base, or provide information on borrowers 
without their prior consent.  Previously, this national institution 
provided information on co-guarantors from commercial lenders to 
private credit bureaus; it will continue to do this with regard to 
borrowers, but not with regard to co-signers. 
 
¶4.  (SBU) Comment:  President Correa attended the morning session of 
the notionally autonomous Banking Board and pressed for action 
against the Risk Bureau.  Correa's participation in the Banking 
Board meetings (see also reftel a) is undermining the autonomous, 
technical nature of the Board.  However, we understand that 
initially Correa called for closing the National Risk Bureau, and 
after resistance from some members, the Board settled on the more 
limited course of action.  According to one report, the Correa 
Administration's opposition to the Risk Bureau was prompted by a 
senior GOE official who was listed as a co-guarantor of a defaulted 
loan.  While preferable to closing the risk bureau, the new policy 
limits its effectiveness and will likely reduce the range of 
borrowers that banks are willing to accept. 
 
Oil Pipeline Resumes Operation 
------------------------------ 
 
¶5.  (U) On February 28, a landslide damaged Ecuador's principal oil 
pipeline (reftel b).  The pipeline was repaired on March 2 and 
pumping resumed the following day. 
 
BROWN