VZCZCXYZ0000
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DE RUEHQT #0178/01 0711456
ZNY CCCCC ZZH
O 121456Z MAR 09
FM AMEMBASSY QUITO
TO RUEHC/SECSTATE WASHDC IMMEDIATE 0166
INFO RUEHBJ/AMEMBASSY BEIJING 0426
RUEHBO/AMEMBASSY BOGOTA 8035
RUEHBR/AMEMBASSY BRASILIA 4106
RUEHCV/AMEMBASSY CARACAS 3454
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RHEFDIA/DIA WASHINGTON DC
RUEAIIA/CIA WASHDC
RHEFHLC/DEPT OF HOMELAND SECURITY WASHINGTON DC
RHMFISS/HQ USSOUTHCOM MIAMI FL
RHMFISS/CDR USSOUTHCOM MIAMI FL

C O N F I D E N T I A L QUITO 000178 
 
SIPDIS 
 
E.O. 12958: DECL: TWENTY YEARS 
TAGS: PREL EINV EAID ETRD ENRG SMIG CVIS EC CH
SUBJECT: HIGH-LEVEL CHINESE VISIT HIGHLIGHTS CLOSER TIES 
 
REF: A. GUAYAQUIL 52 
     ¶B. BEIJING 518 
     ¶C. ...



id: 196570
date: 3/12/2009 14:56
refid: 09QUITO178
origin: Embassy Quito
classification: CONFIDENTIAL
destination: 07QUITO683|07QUITO764|08QUITO1100|08QUITO1127|09BEIJING518|09GUAYAQUIL52|09QUITO15
header:
VZCZCXYZ0000
OO RUEHWEB

DE RUEHQT #0178/01 0711456
ZNY CCCCC ZZH
O 121456Z MAR 09
FM AMEMBASSY QUITO
TO RUEHC/SECSTATE WASHDC IMMEDIATE 0166
INFO RUEHBJ/AMEMBASSY BEIJING 0426
RUEHBO/AMEMBASSY BOGOTA 8035
RUEHBR/AMEMBASSY BRASILIA 4106
RUEHCV/AMEMBASSY CARACAS 3454
RUEHLP/AMEMBASSY LA PAZ MAR LIMA 3100
RUEHGZ/AMCONSUL GUANGZHOU 0031
RUEHGL/AMCONSUL GUAYAQUIL 4190
RUEHHK/AMCONSUL HONG KONG 0346
RUEHSH/AMCONSUL SHENYANG 0013
RHEFDIA/DIA WASHINGTON DC
RUEAIIA/CIA WASHDC
RHEFHLC/DEPT OF HOMELAND SECURITY WASHINGTON DC
RHMFISS/HQ USSOUTHCOM MIAMI FL
RHMFISS/CDR USSOUTHCOM MIAMI FL


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

C O N F I D E N T I A L QUITO 000178 
 
SIPDIS 
 
E.O. 12958: DECL: TWENTY YEARS 
TAGS: PREL EINV EAID ETRD ENRG SMIG CVIS EC CH
SUBJECT: HIGH-LEVEL CHINESE VISIT HIGHLIGHTS CLOSER TIES 
 
REF: A. GUAYAQUIL 52 
     ¶B. BEIJING 518 
     ¶C. QUITO 15 
     ¶D. 08 QUITO 1127 
     ¶E. 08 QUITO 1100 
     ¶F. 07 QUITO 764 
     ¶G. 07 QUITO 683 
 
Classified By: Ambassador Heather M. Hodges for Reasons 1.4 (b&d) 
 
¶1. (C) Summary:  The Ambassador met privately with Chinese 
Ambassador Cai Runguo on February 27 to discuss the February 
13 visit by Vice Prime Minister Hui Liangyu in Ecuador, as 
well as the Ecuador-China relationship more generally. 
Ambassador Cai downplayed the importance of the visit, and 
was generally reluctant to disclose sensitive information. 
Nonetheless, Hui's visit was the highest-level official visit 
in recent memory, and followed visits by Politbureau Standing 
Committee member Li Changchun in March 2007, President 
Correa's trip to China in November 2007, and recent 
negotiations for increased Chinese investment in Ecuador. 
Ambassador Cai confirmed that the new travel document policy 
for Chinese tourists coming to Ecuador has been fully 
implemented and suggested that Chinese migration has slowed. 
End Summary. 
 
HIGH-LEVEL VISIT BRINGS PROMISES OF FINANCING 
 
¶2. (U) Vice Prime Minister Hui Liangyu and Vice Foreign 
Minister Song Tao met with President Correa, Vice President 
Moreno and Foreign Minister Falconi on February 13 in Quito. 
Hui and Song stopped in Quito and then the Galapagos as part 
of a February 7-19 trip to Argentina, Ecuador, Barbados, and 
the Bahamas.  Ambassador Cai said that the Chinese signed 
four agreements with the GOE, that included a 30 million 
Chinese Yuan (CNY) (USD 4.43 million) grant of economic and 
technical assistance, a CNY 20 million (USD 2.92 million) 
no-interest line of credit to the GOE, a donation of one 
mammogram machine and two other x-ray machines, and an 
agreement to invest USD $18 million in the Quitumbe Terminal 
(construction of a bus station in the south of Quito, delayed 
for approximately three years). 
 
¶3. (SBU) Hui announced during his visit that the Chinese 
government is interested in financing large infrastructure 
projects in Ecuador, and mentioned the construction project 
of a new refinery on the coast of Manabi province (Ref G). 
However, Ambassador Cai told the Ambassador that the two 
governments specifically discussed Chinese investment in the 
Coca-Codo-Sinclaire (CCS) hydroelectric project, and did not 
mention any other potential project negotiations.  The CCS 
project, located in Napo province, will generate an estimated 
1,500 megawatts of electricity, making it the largest 
infrastructure project in the country.  Ambassador Cai had 
announced publicly on February 25 that the Chinese Ex-Im Bank 
was ready to offer up to $1.7 billion to finance the project, 
or 85% of the total cost ($2 billion), but that the "process 
of negotiation of conditions had just started, and will 
include guarantees, interest rates and payment of the 
credit."  Cai told the Ambassador that two Chinese companies, 
as well as an Iranian company (Farab) and an Italian company 
(Impregilo), had expressed interest in the project, but no 
commitments had been made.  However, during a ceremony on 
March 3, sponsored by Coca-Codo-Sinclaire, and in the 
presence of the Coordinating Minister of Strategic Sections 
Galo Borja, only two companies presented their bids, both 
Chinese -- Sinohydro-Andes Joint Venture and Sino-Ecuador. 
 
VISIT NOT SIGNIFICANT? 
 
¶4. (U) Vice Prime Minister Hui said during his visit that 
bilateral relations, established in 1980, had improved after 
President Correa's November 2007 visit to Beijing, and that 
"both sides are satisfied with the development of the 
bilateral ties because the two countries do not have 
political pressures and conflicts of interest." 
¶5. (C) The visit by Vice Prime Minister Hui is the 
highest-level official visit by China to Ecuador in the last 
ten years.  However, Ambassador Cai described the agreements 
as "insignificant" and that the total value of the 
cooperation was fairly small.  He even described the trip by 
Hui as less politically significant than the two-day visit in 
March 2007 by Li Changchun, Senior Member of the Standing 
Committee of the Polit Bureau of the Communist Party, who 
stopped in Ecuador as part of a tour through Latin America. 
Also, Chinese Vice President Xi Jinping separately visited 
Mexico, Jamaica, Colombia, Venezuela and Brazil on February 
8-22, 2009. 
 
INCREASED TRADE 
 
¶6. (C) Despite Ambassador Cai's downplaying of the visit, 
Ecuador's economic ties to China are growing fast.  According 
to the Ecuadorian Central Bank, Chinese bilateral trade 
volume with Ecuador increased to a record $1.85 billion in 
2008, up from $1.06 billion in 2007, or approximately by 75%. 
 However, while Ecuador increased its imports by 
approximately $441 million (still mostly electronics, steel, 
vehicles and machinery), Ecuadorian exports to China went up 
by approximately $346 million, primarly in crude oil.  In 
fact, crude oil now represents 88% of Ecuador's exports to 
China.  The trade balance continues to favor China heavily. 
Ecuadorian Vice President Moreno said during the visit that 
"Ecuador plans to diversify the exports of its bananas, 
flowers, cacao and other products to China on favorable 
conditions."  Ambassador Cai complained privately to the 
Ambassador that the GOE continues to push the sale of bananas 
to China, but that China already has sufficient supply from 
Taiwan and the Philippines.  Conversely, Ecuadorian trade 
officials privately complain about the sharp increase in 
imports from China, with several officials noting that 
rigorous certification requirements and a trade safeguard 
were necessary in large measure because of imports from 
China.  Moreno also announced during Minister Hui's visit 
that Ecuadorian trade offices will soon be established in the 
Chinese cities of Shanghai and Guangzhou to further expand 
trade. 
 
¶7. (C) The Chinese MFA website states that as of November 
2007, Ecuador was the home of more Chinese investment than 
any other Latin American country.  Cai noted that copper and 
crude oil were better investment options for China.  He said 
that two Chinese companies pursued mine exploration and 
exploitation in Ecuador, and that Andes Petroleum (a joint 
venture between the two Chinese petroleum companies, China 
National Petroleum Corp. and China Petroleum and Chemical 
Corp, or Sinopec) was looking at its investment (it is not 
clear what Cai meant by this).  Andes Petroleum signed a 
one-year transitory contract in August 2008, the first of the 
foreign oil companies to sign a new contract after the GOE, 
first under the Palacio Administration, and now under the 
Correa Administration, imposed a heavy windfall oil income 
surcharge, in part to force the companies to renegotiate 
contracts that were more favorable to the government (Ref F). 
 (Andes, interestingly, lost heavily when the GOE seized the 
assets of U.S. oil company Occidental Petroleum, since it had 
bought a 40% share of Oxy's block shortly before the assets 
were seized.) 
 
TOURIST TRAVEL DOCUMENT FULLY IMPLEMENTED 
 
¶8. (C) Ambassador Cai confirmed that the GOE has implemented 
its tourist travel document policy (Refs D and E) since mid 
December 2008, and that there has been a slowing of Chinese 
migration into Ecuador.  Indeed, statistics from the 
Ecuadorian Immigration Police show that during the period of 
December 10, 2008 through January 22, 2009, 675 Chinese have 
entered Ecuador while 1,184 Chinese nationals exited. 
However, it is not clear whether the slowing of migration 
into Ecuador was due to China's refusal to allow any Chinese 
national to depart for Ecuador without a visa during the mid 
weeks of December 2008, or whether the new document policy is 
having some effect.  Even if the policy has worked to slow 
the flow of migration, it won't be long before the Chinese 
smugglers learn how to duplicate the travel document. 
 
¶9. (SBU) The flow of Chinese nationals to the U.S., however, 
has not subsided.  DHS/ICE Quito is notified almost on a 
weekly basis regarding Chinese nationals coming from Ecuador 
who were intercepted in Panama or another Central American 
country traveling with Japanese or Korean passports.  The 
receiving country's immigration authorities return the 
migrants to Ecuador and notifies the Ecuadorian National 
Police (ENP) at either Guayaquil or Quito airport.  According 
to the ENP, the migrants cannot be prosecuted as they did not 
use the fraudulent passports to gain entry into Ecuador.  The 
Panamanians also cannot prosecute since the Chinese do not 
apply for admission into Panama and are merely transiting to 
another country. 
 
¶10. (C) When asked if the Chinese Embassy has information 
that could be useful in seizing human smuggling or 
counterfeit operators, the Chinese Ambassador said that they 
have information, but that "it is not official."  The Embassy 
will follow up on a working level with our Chinese 
counterparts to see if some sort of cooperative effort or 
operation against the smugglers and/or counterfeiters might 
be possible. 
 
NO INTEREST IN MANTA 
 
¶11. (C) The Ambassador inquired about Chinese interest in 
Manta, either in investment or administration of the airport. 
 Ambassador Cai replied that President Correa had expressed 
interest in Chinese investment to convert the Manta airport 
and its facilities into an international airport.  However, 
he said that the number of passengers and flights into and 
out of Manta would never warrant classifying the airport as 
"international."  He added that there were no Chinese 
companies interested in investing in Manta, nor was the 
Chinese government interested in pursuing any agreement on 
the Manta airport.  The Ambassador explained that during 
Embassy discussions with the GOE regarding the withdrawal of 
the Forward Operating Location from Manta, the Ecuadorian Air 
Force was surprised to learn the extent to which the USG paid 
for the operations and maintenance at the airport. 
 
¶12. (C) Ambassador Cai noted that a representative from Hong 
Kong based Hutchison-Whampoa came from Panama to discuss the 
concessionary agreement upgrading the port of Manta with the 
GOE.  The Hutchinson representative privately had told Cai 
that Hutchison would leave, but thereafter met with Correa. 
On February 27, Hutchison made an official announcement that 
it would leave Ecuador (Ref A).  During his February 28 
Saturday morning address, President Correa mentioned his 
prior meeting with Hutchison's representative mocking him as 
a "typical gringo (Note: the representative is actually 
British) who thinks that we (Ecuador) are a colony."  Correa 
was particularly angry with the CEO's prior public comment 
that it was not possible for anyone to invest $500 million 
during an international economic crisis.  Correa said that 
"if Hutchison is not able to fulfill its obligations, it 
should leave."  Hutchison was to invest $578 million over 30 
years, with the hope of transforming Manta into one of South 
America's largest ports and China's gateway to the Americas. 
 
NO MONEY FOR RADARS 
 
¶13. (C) Ambassador Cai said that the latest in Ecuador's 
negotiation to purchase surveillance radars from the China 
Electronics Technology Corporation (CETC) for its northern 
border region was that the "Ecuadorian Air Force (FAE) does 
not have sufficient funds to purchase the radars," and added 
that the GOE had refused an offer of financing. 
Interestingly, the deputy FAE commander told Embassy 
officials in November 2008 that the FAE had allocated $21 
million from the 2008 budget for the radars, that the FAE 
needed to commit the funds before the end of the year, and 
that the remaining funds to complete the radar purchase would 
come out of the 2009 and 2010 budgets.  CETC entered into the 
bidding process after the original bid submission deadline 
with an offer to sell two long-range, two mid-range, and two 
short-range surveillance radars for $50 million, 
under-bidding Northrup Grumman and other bidders by $20 
million.  President Correa authorized the purchase of the 
radars on March 6, providing the FAE the funds necessary for 
a first payment.  However, the local Northrup Grumman 
representative privately told the Embassy that the bid was 
declared vacant and that a commission will be formed by the 
Defense Ministry to determine next steps.  He confirmed press 
reports that the transaction was halted because the CETC 
radars did not meet the specification requirements. 
 
COMMENT 
 
¶14. (C) Whatever Ambassador Cai's reasons for downplaying the 
visit by Vice Premier Hui, the visit was apparently 
productive. China's investmQt in Ecuador and the rapidly 
increasing bilateral trade makes the relationship an 
important one for Ecuador.  As an example, President Correa 
included the Chinese Ambassador in a December 30,2008, New 
Year's luncheon for ambassadors of six countries he referred 
to as a new "strategic alliance" (Ref C).  The GOE often 
refers to China as a source of investment, as it has done 
repeatedly in regard to the Manta airport and Manta-Manaus 
link. Chinese businesses have faced some of the same 
tribulations that investors from other countries have faced, 
be it investment losses or barriers to their exports to 
Ecuador. Ambassador Cai privately admitted that the GOE often 
requests assistance from the GOC, but said that the GOE's 
public claims of Chinese assistance are often false. 
HODGES 

=======================CABLE ENDS============================