R 061735Z MAR 09
FM AMCONSUL GUAYAQUIL
TO SECSTATE WASHDC 9743
INFO AMEMBASSY QUITO 
AMEMBASSY BOGOTA 
AMEMBASSY LIMA 
AMEMBASSY CARACAS 
AMEMBASSY LA PAZ 
AMEMBASSY BEIJING 
AMCONSUL HONG KONG

C O N F I D E N T I A L GUAYAQUIL 000052 
 
 
E.O. 12958: DECL: 12/10/2018 
TAGS: EINV ETRD PGOV ECON EC
SUBJECT:  ANOTHER ONE BITES THE DUST:  HUTCHISON PORT 
HOLDINGS ABANDONS MANTA CONCESSION 
 
REFTEL:  a) Guayaquil 0008  b) 2006 Quito 2226...



id: 195745
date: 3/6/2009 17:35
refid: 09GUAYAQUIL52
origin: Consulate Guayaquil
classification: CONFIDENTIAL
destination: 06QUITO2226|09GUAYAQUIL8
header:
R 061735Z MAR 09
FM AMCONSUL GUAYAQUIL
TO SECSTATE WASHDC 9743
INFO AMEMBASSY QUITO 
AMEMBASSY BOGOTA 
AMEMBASSY LIMA 
AMEMBASSY CARACAS 
AMEMBASSY LA PAZ 
AMEMBASSY BEIJING 
AMCONSUL HONG KONG 


----------------- header ends ----------------

C O N F I D E N T I A L GUAYAQUIL 000052 
 
 
E.O. 12958: DECL: 12/10/2018 
TAGS: EINV ETRD PGOV ECON EC
SUBJECT:  ANOTHER ONE BITES THE DUST:  HUTCHISON PORT 
HOLDINGS ABANDONS MANTA CONCESSION 
 
REFTEL:  a) Guayaquil 0008  b) 2006 Quito 2226 
 
Classified by Doug Griffiths, Consul General.  For Reason 
1.4 (b and d) 
 
 
¶1. (C) Summary.  Hong Kong-based Hutchison Port Holdings, 
which won the concession to operate the Port of Manta in 
February 2007, terminated its presence in Ecuador on 
February 27.  The departure capped six weeks of turmoil 
over the concession?s future, after President Rafael 
Correa threatened during one of his January 9 weekly 
radio addresses to expel the company from Ecuador. 
Allegedly, in response to the unilateral changes to the 
concession terms imposed by Correa, Hutchison announced 
that it would abandon the country.    The Government of 
Ecuador and Manta Port Authority officials then insisted 
that the concession remained valid and scrambled to find 
a way keep Hutchison in Manta.  Hutchison?s managing 
director told us that the change in the global economic 
environment, and the mercurial, anti-market behavior of 
the Ecuadorian Government made the concession no longer 
viable.  The Port of Manta is now being administered by 
the Port Authority of Manta until new investors can be 
found.  A prominent Manta lawyer summed it up best when 
he told us, "Correa over-reached"  End summary. 
 
¶2. (U) The Port of Manta is the only deep-water port in 
Ecuador.  At other ports, larger vessels have to navigate 
estuaries leading from the ocean into the port.  Manta 
also hosts the most important seafood and fishing fleet 
in Ecuador, with a fleet of 600 to 1000 fishing boats. 
Known as the tuna capital of the Eastern Pacific, 450 
metric tons of tuna are processed and packed every day in 
Manta.  In 2006 the government launched a tender for a 
30-year concession to operate the Port of Manta, and 
transform it into a multi-modal transportation hub, 
serving the Andean region, and even Brazil via an 
ambitious road and river development scheme.  Hong Kong 
based Hutchison Port Holdings (HPH), the world?s largest 
port operator, was the only company to bid on the 
concession (ref b). 
 
¶3. (SBU) HPH planned to position Manta as the primary 
port for Ecuador and a redistribution center for other 
destinations.  However, with the dramatic reduction in 
Pacific Ocean trade, HPH was unable to court shipping 
lines to the Port of Manta.  In addition, HPH was 
frustrated that the Government of Ecuador failed to make 
good on its promised $55 million investment to improve 
the poor road network linking Manta to the rest of 
Ecuador.  Indeed, HPH told us in late September 2008 that 
it was only processing an average of two container ships 
a week, down from seven per week when it took over the 
concession.  Faced with the weak demand, HPH limited its 
infrastructure investments in the concession. 
 
¶4. (C) During his January 9 weekly radio address, 
President Correa threatened to expel HPH from Manta due 
to delays in modernizing the port (Reftel).  The 
President announced changes to the concession agreement 
that would limit the Government of Ecuador?s 
contribution.  In response, HPH announced that it would 
abandon the concession due to the unilateral 
modifications to the concession.  A flurry of 
negotiations followed, where representatives of the 
Government of Ecuador and the Manta Port Authority tried 
to convince HPH to remain in Ecuador.  The President of 
the Manta Port Authority, Lucia de Genna, told the Consul 
General last week that the President?s threats were a 
negotiating tactic to get the concession to speed up 
investment at the port.   However, HPH saw it as a way 
out of what was looking to be an expensive and 
unprofitable endeavor.  While HPH representatives 
negotiated with the GOE throughout February, General 
Manager Paul Gallie spent much of the month in hiding 
outside of Ecuador.  He insisted to ConGen poloff that 
HPH was calling Correa?s bluff because Correa thought he 
could control the company?s operation of the concession. 
While Gallie spent much of last year telling us that HPH 
could work with the Correa government, his analysis has 
now changed dramatically.  He said that the President?s 
mercurial behavior threatened the business climate, and 
he called Correa a "dictator" who wanted all 
international companies to leave Ecuador. 
 
¶5. (SBU) On February 27, Gallie formally announced that 
HPH was withdrawing from Manta, and made severance 
payments to all employees.   On the same day, on his 
Saturday radio broadcast Correa bid farewell to HPH with 
a sarcastic ?have a nice trip? (in Spanish, "que se vaya 
bonita," which could also mean "good riddance").   Correa 
called Gallie "an irresponsible drunk who will never be 
allowed to enter Ecuadorian port authorities again." 
Correa mocked Gallie as "the typical gringo who thinks 
that we are a colony."  (Gallie is a British citizen.) 
The Ecuadorian press reported that the 270 former HPH 
employees have been paid the legal severance packages. 
The new administrators have reportedly kept on about 100 
of the employees.   Helive Angulo, manager of the Port 
Authority stated, "We are operating and we are freeing 
ourselves of the suffocating bureaucracy (of HPH) that 
used to consume a large part of the earnings." 
 
¶6.  (C) Comment.  Hutchison is the second major foreign 
company to leave Ecuador in the past year, following 
Odebrecht SA, a Brazilian engineering firm.  President 
Correa may have overstepped his game when he threatened 
to expel HPH in January, not really believing that the 
company would abandon the concession.  Indeed, the 
President has used similar public bullying techniques to 
negotiate better terms with multinational firms such as 
cell-phone operator Porta, and several European oil 
companies.  In the case of Odebrecht, Correa expelled the 
company even though Odebrecht was prepared to make a 
number of concessions to stay.  However, Hutchison is not 
the first company to pull out because of changed 
commercial opportunity, bullying and the unpredictable 
investment regime:  three  U.S. oil companies with 
relatively small investments in Ecuador have departed or 
are trying to sell their holdings (City Oriente, Murphy 
Petroleum, and Burlington/ConocoPhillips).  Manta 
business contacts are distraught that with the upcoming 
closure of the U.S. Forward Operating Location, another 
major source of well-paying jobs is drying up.  End 
comment. 
 
Griffiths 

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