VZCZCXYZ0121
RR RUEHWEB

DE RUEHQT #0225/01 0662010
ZNR UUUUU ZZH
R 062010Z MAR 08
FM AMEMBASSY QUITO
TO RUEHC/SECSTATE WASHDC 8592
INFO RUEHBO/AMEMBASSY BOGOTA 7409
RUEHCV/AMEMBASSY CARACAS 2933
RUEHLP/AMEMBASSY LA PAZ MAR LIMA 2455
RUEHGL/AMCONSUL GUAYAQUIL 3375
RUEATRS/DEPT OF TREASURY WASHDC

UNCLAS QUITO 000225 
 
SIPDIS 
 
SENSITIVE 
SIPDIS 
 
TREASURY FOR MEWENS 
 
E.O. 12958: N/A 
TAGS: ECON EAGR EFIN EAID ELTN SENV SOCI EC
SUBJECT: ECONOMIC IMPACT OF RAINS AND FLOODING TOPS $125 MILLION 
 
REF: A) QUITO 160  B) QUITO 210 
 
¶1.  (U) Summary:  Following a month of heavy rains in 
Ecuador, agricultural losses due to extensive flooding now total 
nearly $91 million.  Repairing roads will likely cost more than $35 
million.  The Ecuadorian and U.S. weather services estimate the 
rains will continue through at least mid-March, which could add to 
the losses.  End summary. 
 
¶2.  (U) Rain fell nearly continuously throughout February in much of 
Ecuador, causing extensive coastal flooding and landslides in the 
Sierra, particularly in the southern highlands (reftel A). 
President Correa has declared a state of disaster in ten of 
Ecuador's 22 provinces (approximately 25% of the country), and the 
government is reviewing major infrastructure damage in at least 
fifteen provinces.  The rice crop has been particularly affected, 
with 28,000 hectares lost.  The Ministry of Transport and Public 
Works estimates that 1700 kilometers of roads have been damaged and 
six bridges have been destroyed, while clean-up efforts to move 
mudslides and sewage overflow have been difficult due to continuing 
rain. 
 
AGRICULTURE TAKES HITS ON THE COAST, ALSO IN SIERRA 
 
¶3.  (U) The Ministry of Agriculture estimates that over 100,000 
hectares of crops throughout Ecuador have been damaged or lost by 
the flooding, including rice, corn, bananas/plantain, coffee, sugar 
cane, soy and cacao along the coast.  Almost 69,000 hectares of 
shrimp and tilapia farms are a total loss.  In the highlands, beans, 
potatoes, tomatoes and peppers have been lost.  So far there is no 
shortfall of rice, and prices have remained stable.  The Ministry 
has said that most crops affected by the floods are for export and 
will not affect prices in the Ecuadorian market.  Still, the 
Ministry's Planning Director has warned that if the rain continues 
through March and another 10-15 thousand hectares are lost, it could 
cause a rice shortage, thereby affecting prices.  During the last 
week of February Agriculture Minister Walter Poveda announced 
contingency plans to import 40,000 tons of rice, possibly from the 
United States. 
 
¶4.  (U) The Government of Ecuador has announced it will channel $38 
million in funds through the Ministry to aid to small farmers (those 
cultivating less than 30 hectares), who have been hit the hardest. 
 
 
¶5.  (U) The USG has provided nearly $800 thousand of confirmed and 
pending USG disaster assistance, principally for the flooding, but 
also for a volcanic eruption (the Tungurahua volcano has been active 
since late December).  Press coverage has been positive, and 
informal requests for help from working level contacts have been 
numerous. 
 
CONCERN OVER AGRICULTURAL LOANS 
 
¶6.  (U) In early March the press reported that bank loans to the 
agricultural sector are worth over $600 million.  Banks are nervous 
based on their experience in 1998, when crops ruined by El Nino 
eventually caused default on agricultural loans, contributing to the 
banking crisis of 1999.  The Ministry of Agriculture is working with 
government-owned National Development Bank (Banco Nacional de 
Fomento) and the National Financial Corporation (Corporacion 
Financiera Nacional) to restructure loans to small producers, 
issuing credits at 5-7% interest based on a formula that reflects 
losses due to the flooding. 
 
ROAD INFRASTRUCTURE DAMAGE DIFFICULT TO ESTIMATE 
 
¶7.  (U) Already dealing with road damage due to eruptions of the 
Tungurahua volcano, the Ministry of Transport's Office of Highway 
Maintenance has inventoried damage to 43 highways (1700 km), 
particularly in rural areas, due either to flooding or, at higher 
elevations, to mudslides.    At least six bridges have been lost and 
the Ministry is currently making efforts to replace them with 
pre-fabricated steel panel bridges. 
 
¶8.  (U) The Ministry estimates it will need approximately $35 
million in coming weeks to continue with clean up efforts of 
collapsed roads and hillsides, sewer repair and the dredging of 
ditches.  The Ministry has expressed frustration at not being able 
to begin many repair efforts due to high water levels. 
 
¶9.  (U) In addition to the damaged roads, one landslide broke 
Petroecuador's primary petroleum pipeline (reftel B), but was 
quickly repaired. 
 
AN "ATYPICAL" LA NINA 
 
¶10.  (U) Carlos Lugo, Director of Ecuador's national weather 
service, INAMHI (Instituto Nacional de Meterologia en Hydrologia), 
calls Ecuador's current weather patterns "an atypical" La Nina, 
meaning that while La Nina (which happens when sea surface 
temperatures are lower than normal) has been active in the eastern 
Pacific since last fall, the current ferocity of continuous rain and 
cold temperatures is unlike what has been previously witnessed. 
 
¶11.  (U) In addition, the U.S. National Oceanic and Atmospheric 
Administration (NOAA) has told post that in recent weeks (February 
15 to March 1), ocean surface temperatures have been anomalously 
HIGH between the coast of Ecuador and the Galapagos Islands, 
creating unstable conditions that will likely result in heavy rains 
through at least mid-March.  NOAA expects these warm temperatures to 
continue for the near future. 
 
COMMENT 
 
¶12.  (SBU) The final cost of damage will depend on how long current 
weather patterns persist.  While rains abated in the last week of 
February, they have returned with a vengeance on the coast, with 
damaging floods in the southern coastal towns of Huaquillas and 
Machala, and the first street flooding of the year in Guayaquil.  If 
rains continue as forecasted, Ecuador is quite likely to need 
further assistance as flooding continues and public health 
implications become more serious. 
 
¶13.  (SBU) The agricultural losses and repair costs -- which may 
grow above current estimates -- are significant for an economy that 
was already growing slowly and has a number of other pressing 
investment needs.  We anticipate that the price of agricultural 
products -- rice, in particular -- may rise by the end of March. 
Post will continue to monitor the impact of the flooding on trade, 
employment and overall growth. 
 
BROWN