VZCZCXYZ0005
PP RUEHWEB

DE RUEHQT #0442/01 1371949
ZNR UUUUU ZZH
P 161949Z MAY 08
FM AMEMBASSY QUITO
TO SECSTATE WASHDC PRIORITY 8853

UNCLAS QUITO 000442 
 
SENSITIVE 
SIPDIS 
 
 
FOR WHA/AND JANINE KEIL; 
USTR BENNETT HARMAN; 
LAC/AA JOSE CARDENAS; LAC/SA JEFF BAKKEN; 
EGAT/EG MARY OTT; EGAT/EG DAVID JESSE; 
LAC/RSD KERRY BYRNES 
 
E.O. 12958: N/A 
TAGS: ECON EAID EINV PREL EC
SUBJECT:  CORREA ADOPTS USAID-DESIGNED PROGRAM TO PROMOTE ECUADOR'S 
COMPETITIVENESS AND INVESTMENT 
 
¶1. (SBU) Summary:  At the close of a two hour meeting with President 
Rafael Correa on May 9, Correa adopted USAID's proposed production 
and investment promotion program.  The program is market-driven, 
private sector oriented, and designed to improve Ecuador's 
competitiveness in world markets. At the end of the meeting, 
Production Minister Susana Cabeza de Vaca thanked USAID and told 
Correa that they could not have developed this strategy without 
USAID's help.  Correa also then thanked USAID and asked for our 
continued support for this effort.  Embassy welcomes this 
development as an indication of Correa's willingness to support 
pragmatic, market-based initiatives as well as his continued 
receptivity to U.S. development assistance.  Limited USAID funds may 
constrain our future ability to participate as fully as Correa and 
his team may want.  The next day Correa, in his national, weekly 
radio address, reconfirmed his adoption of this program. (END 
SUMMARY) 
 
¶2.  (SBU) Present at the meeting on May 9 were USAID Mission 
Director Alexandria Panehal, three USAID contractors, the 
Coordinating Minister of Production, Susana Cabeza de Vaca, the 
President's Chief of Staff and Communication Director, Vinicio 
Alvarado, the Planning Secretary (Coordinating Minister rank) Fander 
Falconi, and Ministry of Production staff.  Both Alvarado and 
Falconi are perceived as part of Correa's inner circle.  Susana 
Cabeza de Vaca was Correa's first supervisor at the University San 
Francisco of Quito and the two enjoy a long-standing and good 
personal and professional relationship. 
 
¶3. (SBU) The May 9 meeting was held in Correa's private, more 
informal office and the limited number of invitees facilitated an 
animated discussion. Correa at first seemed tired --not surprising, 
since he had been flying all the previous night.  But once he downed 
a cup of coffee, he perked up and was fully engaged in all aspects 
of the discussion.  Correa asked pointed questions, clearly 
understood the approach and its economic, organizational, and 
political implications.  The USAID-funded consultants, who briefed 
Correa on the initial design of this program in April, clearly 
commanded Correa's respect and confidence.  The meeting was 
periodically punctuated by good natured ribbing between Correa, the 
consultants, and Susana Cabeza de Vaca. 
 
4.(SBU)  There were five components to the USAID presentation: the 
methodology used to select key sectors to promote exports and 
investment; the top 10 productive sectors and Ecuador's 
competitiveness relative to other countries; a new organizational 
structure to implement this program; a proposed budget; and a 
communication strategy to market the program to domestic audiences. 
 
¶5. (SBU) Correa accepted the methodology that underlies the 
analysis. He initially took exception when the USAID consultants 
told him that indicators from the conservative think tank, Heritage 
Foundation, were used as part of their analysis.  But the 
consultants calmed Correa's criticisms by pointing out that the 
Heritage indicators actually ranked Ecuador higher than some of its 
competitors. 
 
¶6. (SBU) Correa also approved the 10 productive sectors proposed by 
USAID.  They are:  flowers, tourism, processed fruits and 
vegetables, transport and logistics, consulting and engineering 
services, biofuels, fish products, forestry, wood products, and 
aquaculture. 
 
¶7. (SBU) For each of these sectors, the USAID consultants 
highlighted Ecuador's relative competitive ranking against its 
primary competitors, such as Mexico, Peru, Colombia, Canada, and 
Brazil.  Factors such as external image, existing trade relations, 
macro and micro-economic policies, and the cost of doing business 
determined each country's ranking.  The analysis included a 
prioritized list of policy reforms and infrastructure improvements 
that the GOE should adopt in the short term in order to improve its 
competitiveness.  For example, to develop the wood products sector, 
the consultants told Correa that Ecuador was at a serious 
competitive disadvantage by not participating in permanent trade 
agreements with key trading partners, such as the US, EU, and 
regional partners, in contrast to Peru which has just approved an 
FTA with US. Their analysis also identified specific countries where 
Ecuador should market its exports.  When discussing the 
opportunities in the wood products sector, Correa and Alvarado were 
both engaged in the discussion about the opportunities for exporting 
to India and China and what opportunities existed for exporting 
bamboo and cane.  Similarly, when discussing biofuels, Correa and 
Alvarado discussed the potential for alliances with Brazil. 
 
¶8. (SBU) The third component was the internal organizational 
structure.  The 'Project Management Unit' would be housed in the 
 
Ministry of Production.  Key management staff include the Project 
Management Unit Manager, nine sector specific managers, and two 
cross-sectoral managers covering policy reform and infrastructure. 
Correa approved the structure and the staffing pattern.  He 
emphasized the need to hire the project unit manager right away, to 
delegate decision-making, and to measure and report on concrete 
results. 
 
¶9. (SBU) The fourth component was the budget.  The consultants 
estimated the GOE would need to fund the project management unit at 
$2.3 million/year for at least three years and the investment 
promotion unit, ProEcuador, at $1.7 million, for a total three-year 
GOE investment of $12 million.  No objections were raised. 
 
¶10. (SBU) Finally, the fifth component was the communication 
strategy.  In presenting this component, the USAID consultants were 
emphatic that Correa had to personally market this program, starting 
with his own cabinet. The consultants also emphasized that Correa 
needed to establish a partnership with the private sector or the 
program would fail. 
 
¶11. (SBU) On May 15 USAID consultants presented the program to the 
GOE Productive Cabinet.  25 Ministers and Agency heads attended, 
including the Ministers of Industry, Agriculture, Tourism, Energy, 
and the Coordinating Minister for Social Development (that 
supervises another five ministries).  Ideology played no part in the 
discussion.  Rather, their discussion focused on practical issues 
related to how to implement the program, additional ways to bring 
the private sector into the process, and reporting on results. Given 
the President's endorsement of the program, they are anxious for 
their marching orders. 
 
¶12. (SBU) In an ironic twist, both USAID-funded consultants happen 
to be Venezuelans.  One is a former McKenzie executive and the other 
was the former Venezuelan Investment Attraction Agency Chief. Correa 
was so impressed with the former McKenzie executive that he asked 
him during the meeting to move to Ecuador as the new project 
management unit manager. The consultant later told Panehal that 
after the meeting Correa jokingly told him that he was tempted to 
call Chavez and have the consultant deported, just so Correa would 
have him to head his project management unit. 
 
¶13. (SBU) At the conclusion of the meeting, Correa said he was happy 
to finally have a productive sector strategy for the country. He 
told Fander Falconi to make sure the program was included in the 
National Development Plan. 
 
¶14.  (SBU) In his radio address on May 10, Correa spent several 
minutes summarizing the results of our meeting with him, although he 
did not mention USAID.  He said 'We had another extremely important, 
very, very good meeting.'  He stated that the key elements of the 
productive strategy are to diversify products, add value, open new 
markets and maximize competitiveness.  Correa then went on to 
underscore his commitment to work with the private sector on this 
initiative 'in an integrated effort of the public and private 
sectors to transform the country.' 
 
¶15. (SBU) Comment: The meeting offered an inside view into Correa's 
very hands-on and engaged style of management, and an example of how 
all policy decisions run through him personally.  The USAID-designed 
program that Correa adopted links sector specific invesments with 
the need to finance complementary infrastructure and adopt 
macro-economic policies that clarify, especially for the private 
sector, Ecuador's economic direction.  This program gives Correa 
that road map.  And Correa is clearly the one in the driver's seat. 
 
JEWELL