VZCZCXYZ0013
PP RUEHWEB

DE RUEHQT #0505/01 1611513
ZNR UUUUU ZZH
P 091513Z JUN 08
FM AMEMBASSY QUITO
TO RUEHC/SECSTATE WASHDC PRIORITY 8992
INFO RUEHBO/AMEMBASSY BOGOTA 7591
RUEHBU/AMEMBASSY BUENOS AIRES 0767
RUEHCV/AMEMBASSY CARACAS 3060
RUEHLP/AMEMBASSY LA PAZ JUN LIMA 2639
RUEHGL/AMCONSUL GUAYAQUIL 3600

UNCLAS QUITO 000505 
 
SENSITIVE 
SIPDIS 
 
E.O. 12958: N/A 
TAGS: ECON EINV EFIN EC
SUBJECT:  Shooting the Messenger:  Correa Blasts Central Bank for 
Disappointing Economic Data 
 
Ref.  Quito 374 
 
¶1.  (U) Summary.  President Correa harshly criticized the Central 
Bank's calculation of economic growth and foreign direct investment, 
adding that he was bringing an Argentine mission to review the data 
and threatened to fire Central Bank staff if there are errors. 
Finance Minister Ortiz subsequently clarified that the GOE would 
work with experts from the Andean Development Corporation (CAF), 
ECLAC, and Argentina to review Ecuador's economic data methodology. 
End summary. 
 
Correa Criticizes Central Bank Experts 
-------------------------------------- 
 
¶2.  (U) On June 1, in his Saturday radio address, President Correa 
criticized the Central Bank for its economic data.  He first 
criticized the Central Bank for its foreign direct investment (FDI) 
data, asking how there could have been a net outflow in the fourth 
quarter of 2007.  (Note:  Per the Central Bank, there was a net 
outflow of $295 million in that quarter, reducing total net FDI for 
2007 to a disappointing $178 million - reftel.)  He then criticized 
its GDP calculations, noting that one sector (agriculture) 
experienced a significant adjustment as the Central Bank updated its 
data.  (Note:  He made no mention of overall growth rates.)  He then 
said that "we have hired an Argentine mission" to review the data, 
and if the data "are not true" the Central Bank technicians "would 
be fired." 
 
¶3.  (SBU) Correa's announcement sparked concern among Ecuadorian 
analysts that the GOE would alter politically inconvenient economic 
data.  There was already concern prior to Correa's blast, since the 
Central Bank is over two months late in releasing 2007 fourth 
quarter GDP data, and attributed the delay to recalculation of base 
year data.  The reference to an Argentine mission only heightened 
the concern, since the Government of Argentina is believed to be 
manipulating its inflation data. 
 
¶4.  (U) That same week Central Bank FDI data, which had previously 
been available on its website, were removed from the website, 
although net FDI flows were still published in balance of payment 
data that remained on the website. 
 
Finance Minister Milder, Announces Revised Growth Calculations 
----------------------------------------- 
 
¶5.  (U) On June 4, Finance Minister Ortiz announced that Ecuador 
would bring three sets of experts to help the GOE review its 
economic data.  According to Ortiz, the Andean Development 
Corporation (CAF) would assist the Ministry of Finance develop its 
own data analysis capacity, the Economic Commission for Latin 
America and Caribbean (ECLAC) was invited by the Central Bank, and 
an unnamed Argentine technician would participate in the process. 
 
¶6.  (U) Ortiz also announced the revised Central Bank GDP growth 
estimate for 2007, 1.9%, and its forecast for 2008 (3.1%).  These 
are down from the Central Bank's previous estimates, which had been 
2.65% for 2007 and 4.25% for 2008.  The revised 2007 growth estimate 
is comparable to the IMF's calculation of 1.8%.  (As of June 6, the 
updated GDP data had not been posted on the Central Bank's 
website.) 
 
Inflation Data on the Sidelines 
------------------------------- 
 
¶7.  (U) Also on June 4, Byron Villacis, the head of the National 
Institute for Statistics and Census (INEC), which calculates the 
inflation rate, said that there were no immediate plans to change 
the inflation methodology.  But he added that the current 
methodology heavily weighs goods purchased by the upper and middle 
class.  He said that the next survey to establish the consumer 
basket, which probably would take place in 2009, would reflect the 
"reality of consumption in Ecuador, but with a technical and 
transparent process." 
 
¶8.  (U) On June 5, INEC released the latest inflation data, which 
climbed to 9.29% on an annual basis, up from 8.18% the month 
before. 
 
Comment 
------- 
 
¶9.  (SBU) Correa's harsh criticism of the Central Bank in large 
measure appears to be a political ploy to undermine the credibility 
of disappointing economic data before the release of the GDP 
statistics.  It's possible that the GOE may fiddle with the economic 
 
data, which post will monitor, but drawing on CAF and ECLAC 
assistance suggests that the GOE may take a more pragmatic approach 
than Correa's initial rhetoric would imply. 
 
JEWELL