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C O N F I D E N T I A L QUITO 000256 
 
SIPDIS 
 
E.O. 12958: DECL 04/15/2019 
TAGS: EFIN ETRD ECON EC
SUBJECT: AMBASSADOR'S MEETING WITH FINANCE MINISTER VITERI 
 
REFTEL A:  Quito 188 
   B:  Quito 60 
 
Classified by:  Ambassador Heather Hodg...



id: 202261
date: 4/14/2009 16:24
refid: 09QUITO256
origin: Embassy Quito
classification: CONFIDENTIAL
destination: 09QUITO188|09QUITO60
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RUEATRS/DEPT OF TREASURY WASHDC


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

C O N F I D E N T I A L QUITO 000256 
 
SIPDIS 
 
E.O. 12958: DECL 04/15/2019 
TAGS: EFIN ETRD ECON EC
SUBJECT: AMBASSADOR'S MEETING WITH FINANCE MINISTER VITERI 
 
REFTEL A:  Quito 188 
   B:  Quito 60 
 
Classified by:  Ambassador Heather Hodges, Reasons 1.4 (b) and (d). 
 
¶1.  (C) Summary:  The Ambassador made an introductory call on Finance 
Minister Elsa Viteri on April 8.  Viteri justified Ecuador's debt 
default and planned restructuring, supported Ecuador's balance of 
payment safeguard trade measures and mentioned the possibility of 
further measures, and expressed optimism about the domestic economic 
situation.  She noted that Ecuador did not plan to leave the CAN over 
Ecuador's trade measures dispute except as a last resort.  End 
Summary. 
 
¶2.  (C) On April 8, the Ambassador met with Finance Minister Elsa 
Viteri, accompanied by DCM and Econoff.  The tone of the meeting was 
cordial.  Viteri, who had been Vice Minister of Finance under former 
Ministers Salgado and Ortiz, is considered close to President Rafael 
Correa, with whom she studied economics at the Catholic University of 
Guayaquil. 
 
Debt Default and Restructuring 
------------------------------ 
 
¶3.  (C) Minister Viteri said that Ecuador's default on its commercial 
debt was a "completely sovereign decision" (Ecuador defaulted on its 
Global 2012 and 2030 commercial bond issuances in November 2008 and 
March, respectively).  She asserted that the debt on which the 
government defaulted had been used for schemes that did not support 
development, and therefore paying the debt was "not logical."  She 
stated that the GOE had its own development plan, and asked 
rhetorically why Ecuador had to answer to people (debt holders) who 
didn't know the country's situation. 
 
¶4. (C) Viteri stressed the GOE's desire to be transparent in the 
restructuring process, and the government plan to unveil its 
restructuring proposal on April 20.  She noted that the GOE wanted to 
find a solution to resolve the debt situation to the satisfaction of 
all (with the caveat "considering the economic crisis worldwide"). 
She complained of the difficulty Ecuador will have negotiating with 
debt holders who she believes are mainly a number of funds, rather 
than individuals. 
 
Trade Measures and Balance of Payments Situation 
--------------------------------------------- --- 
 
¶5.  (C) When asked if Ecuador would lift its tariff surcharges (a 
balance of payments safeguard - ref B) if oil prices recovered 
sufficiently, Viteri responded that the two were distinct items.  She 
claimed that neighboring country currencies had devalued 
significantly over the past year and caused Ecuador to be at an 
extreme disadvantage since it lacks monetary policy.  Viteri hinted 
that Ecuador might implement additional measures, although she did 
not specify what those might be.  She said that Ecuador did not want 
to harm anyone but just wanted to "take care of its problems." 
 
¶6.  (C) Note:  The Andean Community (CAN) secretariat issued a 
resolution on March 27 stating that while Ecuador can apply the 
surcharges and quotas to its CAN partners because of the BOP crisis, 
it could not apply MFN tariffs as well.  President Correa said that 
Ecuador was open to dialogue but that if the CAN exerted pressure on 
Ecuador he would withdraw Ecuador from the CAN.  End Note.  Viteri 
noted that the GOE was developing a response to the CAN that would 
work for everyone, and said that leaving the CAN would be a last 
resort. 
 
Optimism on the Economy 
----------------------- 
 
¶7.  (C) Viteri was optimistic about Ecuador's economic situation. 
She said she was "very happy" with the development of the fiscal 
sector, noting that the economic crisis in many other countries was 
much worse than in Ecuador.  She claimed that the Ecuadorian public 
was tranquilo" (calm) because the people understood this.  She was 
glad that Ecuador's petroleum prices were rising.  She believed 
Ecuador would reach a growth rate that would be "better than the 
Latin American average by the end of the year."  She claimed that 
Ecuador had "no problem" getting financing, in spite of the debt 
default. 
 
Comment: 
-------- 
 
¶8.  (C) Viteri reflected the government's line on debt, balance of 
payments, and the economy, invoking sovereignty and a 
victim-mentality along with assertions that it wants to be a 
responsible player, although on terms that it defines.  It will be 
interesting to see which of these tendencies prevail when the 
government unveils its debt restructuring proposal and defends its 
trade surcharges at the WTO.  Viteri's assurances that the economy 
and fiscal management were doing well went further than Minister 
Borja (ref A), who also asserted that the economy was sound but 
acknowledged that the government needed to make some adjustments. 
 
HODGES 

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