VZCZCXYZ0007
RR RUEHWEB

DE RUEHQT #0059 0271557
ZNR UUUUU ZZH
R 271557Z JAN 09
FM AMEMBASSY QUITO
TO RUEHC/SECSTATE WASHDC 9937
INFO RUEHBO/AMEMBASSY BOGOTA 7937
RUEHCV/AMEMBASSY CARACAS 3360
RUEHLP/AMEMBASSY LA PAZ JAN LIMA 3003
RUEHGL/AMCONSUL GUAYAQUIL 4060
RUEATRS/DEPT OF TREASURY WASHDC
RUEHRC/USDA FAS WASHDC 0618
RUCPDOC/DEPT OF COMMERCE WASHDC

UNCLAS QUITO 000059 
 
SENSITIVE 
SIPDIS 
 
DEPARTMENT PASS TO EXIM AND OPIC 
 
E.O. 12958: N/A 
TAGS: EFIN ECON EAIR EINV ECIN EC
SUBJECT: LENDERS RECEIVE ASSURANCES THAT QUITO AIRPORT PROJECT WILL 
NOT BE AFFECTED BY ECUADOR'S NEW CONSTITUTION 
 
REFTEL:  A 08 QUITO 942 
  B 07 QUITO 2571 
 
¶1.  (SBU) SUMMARY: In December 2008, representatives of key lenders 
(including OPIC and Exim Bank) for the new Quito airport received 
assurances from the GOE's Ministry of Industries, and Quito's Mayor, 
that Ecuador's new constitution would not adversely affect the 
project.  The lenders' representatives are monitoring Ecuador's 
deteriorating economic situation and the GOE's decision to default 
on part of its commercial debt.  In January 2009 the Office of the 
Comptroller General of Ecuador issued a report criticizing certain 
aspects of the airport project and ordering the relevant public 
officials to renegotiate terms.  This report is currently being 
analyzed by the key lenders to the project. END SUMMARY. 
 
¶2. (SBU) In October, 2008 Ecuador approved a new constitution that 
decreed that the federal government would have responsibility for 
the country's airports (reftel A).  This provision is similar to 
that in the previous constitution, and under the prior constitution 
the federal government had devolved responsibility to municipal 
governments.  However, the provision in the new constitution 
prompted a GOE review of the municipal-controlled entities that have 
controlled Ecuador's two largest airports (in Quito and Guayaquil) 
and the role of federal entities. 
 
¶3.  (SBU) Representatives of the major lenders to the new Quito 
airport (OPIC, Exim, InterAmerican Development Bank, and Export 
Development Bank of Canada) met with representatives from the 
Ministry of Industries and Competitiveness, the Director General for 
Civil Aviation, Quito Mayor Paco Moncayo, and the Executive 
Committee of CORPAQ (the city-owned entity with responsibility for 
the airport) to discuss the impact of the new constitution on the 
legal structure for the new Quito airport.  The GOE representatives, 
Mayor Moncayo, and the CORPAQ officials all gave verbal assurances 
that the new constitution would in no way create problems regarding 
the legal regime for the airport project.  The lenders requested 
that all parties follow up with letters providing written assurances 
along the same lines.  A letter was drafted by the four lending 
agencies and sent on December 22, 2008.  No reply had been received 
as of mid-January.  An additional disbursement is scheduled for 
early February, 2009, which might be affected if assurances are not 
provided on a timely basis. 
 
¶4.  (SBU) In January 2009 the Office of the Comptroller General of 
Ecuador issued a report criticizing certain aspects of the airport 
project and ordering the relevant public officials to renegotiate 
terms.  The authority of the Comptroller General to insist on 
changing contractual terms is unclear, and Quiport has already 
indicated that it will not agree to any change in terms that will 
adversely affect its ability to perform its obligations.  The 
Comptroller General report is currently being analyzed by the key 
lenders to the project.  This report was not discussed with GOE 
officials during the lenders' December visit to Quito. 
 
¶5. (SBU)  In conversations with Embassy officials, the USG lenders 
stated that they were following economic developments in Ecuador 
closely, including Ecuador's default on part of its commercial debt, 
the Comptroller General report, and possible economic deterioration. 
 They said that these were issues that they would take into 
consideration, but they would not necessarily preclude continued 
disbursements for the airport project, given the provisions that are 
established in the loan contracts. 
 
¶6.  (SBU) Apart from the legal developments potentially affecting 
the loan contracts noted above, the Quito airport project continues 
to move forward in the face a number of logistical and political 
challenges, which will be reported septel. 
 
Hodges