VZCZCXYZ0000
RR RUEHWEB

DE RUEHQT #0901/01 2992205
ZNY CCCCC ZZH
R 262205Z OCT 09
FM AMEMBASSY QUITO
TO RUEHC/SECSTATE WASHDC 0253
INFO RUCPDOC/DEPT OF COMMERCE WASHINGTON DC
RUEAIIA/CIA WASHINGTON DC
RUEATRS/DEPT OF TREASURY WASHINGTON DC
RUEHBO/AMEMBASSY BOGOTA
RUEHBR/AMEMBASSY BRASILIA 0055
RUEHCV/AMEMBASSY CARACAS 0079
RUEHGL/AMCONSUL GUAYAQUIL
RUEHLP/AMEMBASSY LA PAZ OCT LIMA 0093

C O N F I D E N T I A L QUITO 000901 
 
NOFORN 
SIPDIS 
DEPARTMENT OF STATE PLEASE PASS TO OPIC AND EX-IM BANK 
 
E.O. 12958: DECL: 2019/10/26 
TAGS: EAIR EFIN PREL ECON BR IDB OPIC EXIM
SUBJECT: AMBASSADOR AND MAYOR BARRERA DISCUSS AIRPORT IN FIRST 
MEETING 
 
REF: 09 QUITO 871; 09 QUITO 817; 09 QUITO 857 
 
CLASSIFIED BY: Chritton, DCM, DOS, Exec; REASON: 1.4(D) 
 
------------ 
 
Summary 
 
------------ 
 
 
 
¶1.  (SBU) Summary: The new Mayor of Quito, Augusto Barrera, was 
eager to discuss the airport renegotiation process in his first 
meeting with the Ambassador on October 16.  After a friendly 
discussion about potential cultural and education exchange 
programs, Barrera launched into a detailed and structured review of 
the state of airport renegotiations. He appeared content with the 
outcome of the October 14-15 meetings between his office and 
Quiport (the consortium building the airport), Corpaq (the 
quasi-public municipal entity that manages the concession) and 
project lenders OPIC, Ex-Im Bank, the Inter-American Development 
Bank (IDB), and Export Development Canada (EDC).  Barrera said 
that, as long as the renegotiation process continued, he would be 
protected from the Constitutional Court's July 23 ruling.  (This 
stems from the Constitutional Court's September 29 ruling, which 
clarified its earlier ruling and basically allowed the status quo 
to continue during the renegotiation process.)  He expected the 
lenders to ratify the protocol soon and was focused on bringing the 
renegotiations to an end in a way that would be successful for all 
parties. End Summary 
 
 
 
--------------------------------------------- ------------- 
 
Top Priority: Continuing Airport Construction 
 
--------------------------------------------- ------------- 
 
 
 
¶2.  (SBU) Barrer's priority was that the lenders continue to fund 
the construction of the new airport throughout the renegotiation 
process. He commented that since the municipality had not taken 
control of airport fees from Quiport, the lenders should have the 
confidence to continue funding new airport construction. Barrera 
has consistently stated in the media that maintaining construction 
activities at the new airport, which employs approximately 2,000 
people, is a precondition for continuing negotiations.  During the 
meeting with the Ambassador, he clearly linked the ability of 
Quiport (and the lenders by extension) to collect airport fees with 
the lenders' obligation to continue paying for construction. 
 
 
 
NOTE: In reality, there is no link between the two in the project 
contract. End note. 
 
 
 
--------------------------- 
 
ADDITIONAL ISSUES 
 
--------------------------- 
 
 
 
¶3.  (SBU) Airport Tariffs: Barrera stated that he realized that per 
the airport concession contract airport tariffs were the property 
of the consortium (Quiport) and the lenders. However, this 
obviously conflicted with the Constitutional Court's (CC) July 23 
ruling that such fees were public property. Therefore, Barrera said 
that during the October 15 meeting his office proposed the use of a 
trust for airport fees. Barrera noted that this issue remains the 
most problematic in the negotiations.  He also pointed out that 
 
 
many airlines had stopped paying airport fees because they were 
unsure whether to pay Quiport or the government. 
 
 
 
NOTE: Barrera's statement about a trust points to a likely sticking 
point for any renegotiated contract, which is who will control the 
airport fees. The CC September 29 proclamation gives the Mayor's 
office the flexibility to keep fees in Quiport's possession during 
the renegotiation process, but a more permanent arrangement must be 
found. End note. 
 
 
 
¶4. (SBU)  Guarantees: Barrera stated that he realized that changing 
or renegotiating the concession contract would mean changing the 
protections afforded the lenders by the initial agreement. He 
acknowledged that the lenders required that their original 
protections be maintained in any future agreement, and said he 
would have to look for a way to maintain the lenders' protections 
in any renegotiated concessions contract. 
 
 
 
¶5. (SBU) A Bigger Cut for the City: Barrera said the city needed a 
bigger share of the airport profits. He explained that under the 
current concession contract the municipality receives only US$1.5 
million a year from Quiport.  Barrera noted that when the 
negotiations started a few months ago the lenders were surprised to 
learn how little the Municipality received from the concession. 
 
 
 
¶6. (C) The New Airport is Not Licensed: Barrera claimed that 
licensing of the new airport with the Director General of Civil 
Aviation (DGAC) remained incomplete. He also expressed concern that 
technical reviews necessary to meet European and North American 
regulations for flight safety for Boeing and Airbus aircraft still 
needed to be conducted. The Ambassador offered Embassy assistance 
in making contact with the appropriate USG agencies, if the various 
involved parties agreed to pursue this idea further. 
 
 
 
NOTE: DGAC licensing has received much press in recent months, with 
various representatives of the GOE stating that the DGAC has not 
signed off on the new airport. Barrera admitted to the Ambassador 
that inspections had been done by the DGAC, but that communications 
between the DGAC and the municipality had been "bad." The Mayor 
added that regardless of the history, the new airport must be DGAC 
compliant and meet regulations of other relevant authorities like 
the FAA. Barrera did not indicate who would be responsible for 
obtaining the required licensing. Quiport President Philippe Baril 
told Econoff that the new airport building and runway were the 
property of the municipality and therefore the Mayor would be 
responsible for the DGAC licensing, but that Quiport would work 
with the relevant national and international authorities (such as 
the FAA and ICAO) to meet flight safety and other regulations.  End 
note. 
 
 
 
¶7. (C)  No Customs nor Air Force Facilities: Barrera complained 
that the new airport project does not include necessary space for 
the Ecuadorian Air Force and customs. Construction of these 
facilities would cost US$18 million. Barrera alleged that Quiport 
refuses to build these facilities, but the airport cannot function 
without them and the municipality does not have the money to pay 
for them. 
 
 
 
NOTE: Quiport President Baril told emboffs that the new airport 
building includes customs counters and some office space, as does 
the cargo building. According to Baril, GoE Customs is asking for 
shower rooms and other additional space not included in the 
contract. Baril also commented that, during the October 14-15 
 
 
meetings, Barrera had said that construction of the air force 
facilities would be the responsibility of the central government. 
End note. 
 
 
 
¶8. (SBU) Access Roads Will Take 2.5 Years: Barrera told the 
Ambassador that the existing airport road takes 40 minutes, without 
traffic, to reach the airport. He said that the two options for the 
necessary access road, both of which he would support, are: a 13 km 
direct airport access road originating from northern Quito (and 
funded by the Andean Development Corporation (CAF)) , or an 
alternative 16 km road.  Both are in the tender stages. Barrera 
said either option would take about 2.5 years to build.  Challenges 
include the lack of access roads from Quito suburbs Tumbaco and 
Cumbaya, and technically difficult bridges. 
 
 
 
NOTE: In a subsequent radio interview Barrera said the new roads 
would be finished in two years. Contacts at the Canadian Embassy 
have estimated 30 to 32 months to complete the CAF-funded access 
road.  End note. 
 
 
 
¶9. (SBU)  The Airport is eight months Behind Schedule: Barrera told 
the Ambassador that the new airport construction was now eight 
months behind schedule, inferring that the delay in finishing the 
airport would decrease the gap between a finished airport and roads 
to reach it.  Barrera explained that the lenders had not disbursed 
on the May/June or June/July invoices for construction costs 
(totaling about US$30 million). He argued that this failure to 
disburse was unfair and not a result of the CC's July 23 ruling, 
since this happened after the fact. 
 
 
 
NOTE: Per the lenders' Investment Protection Agreement with the 
GOE, the July 23 CC ruling constituted a "political act" allowing 
the lenders to stop the disbursement of construction funds for the 
new airport. Econoffs understand that the lenders have not released 
funds for July, August and September construction invoices. 
However, the project's guarantor, the Canadian Commercial 
Corporation (CCC) and Quiport construction companies remained 
responsible for continuing construction activities for 60 days plus 
a 30 day closing down period after the last disbursement of 
construction funds by the lenders. After the July 23 CC ruling, the 
lenders exercised control over all funds and made payments as 
necessary to continue current airport operations. End note. 
 
 
 
------------- 
 
Comment 
 
------------- 
 
 
 
¶10. (SBU) Barrera came across as very well-informed and 
clear-thinking on the airport issue.  He did not make any 
incendiary comments or play the blame-game, and seemed intent on 
sending the message that he was in control of his side of the 
negotiations, was eager to find a mutually acceptable solution that 
is a win-win for both sides, understood the lenders' concerns and 
priorities, and was investing all his "political capital" and 
reputation in reaching an agreement that gets the airport built 
under the current (albeit modified) contractual arrangement.  He 
has equally moderated his public comments, so as not to antagonize 
his negotiating partners.  He seemed fully open to collaborating 
with the USG and Embassy.  Whether Barrera can deliver on the key 
issue of ensuring the appropriate guarantees for the lenders is 
still an open question, but he seems committed to the successful 
conclusion of this process, and he has a lot to lose politically if 
it falls apart. 
HODGES