VZCZCXYZ0000
RR RUEHWEB

DE RUEHQT #1061/01 3581546
ZNY CCCCC ZZH
R 241546Z DEC 09
FM AMEMBASSY QUITO
TO RUEHC/SECSTATE WASHDC 0599
INFO RHMFISS/FAA NATIONAL HQ WASHINGTON DC
RUCPDOC/DEPT OF COMMERCE WASHINGTON DC
RUEHQT/AMEMBASSY QUITO

C O N F I D E N T I A L QUITO 001061 
 
NOFORN 
SIPDIS 
 
E.O. 12958: DECL: CLASSIFIED FOR TRANSMISSION ONLY--DECLASSIFY ON 
RECEIPT 
TAGS: EAIR EFIN ECON PREL IDB EXIM OPIC EC
SUBJECT: Progress on Finalizing Agreement on the New Quito Airport 
 
CLASSIFIED BY: Heather Hodges, Ambassador, State; REASON: 1.4(B), (D) 
 
¶1.      (SBU)  Summary:  Although numerous hurdles remain, 
negotiations between Quiport, the private consortium building the 
new Quito International Airport, the project lenders (including 
OPIC and Ex-Im), and the Mayor of Quito led to a release of funds 
on December 7 for continued construction of the airport, and 
created a framework for finalizing a "Strategic Alliance Agreement" 
to govern relations between the Municipality and Quiport.  The 
Ambassador met with Quito Mayor Augusto Barrera December 17 to 
discuss progress and to explore where the Embassy could offer 
further assistance.  As a defensive measure, the lenders intend to 
file for international arbitration on/about December 21, although 
they will also file an immediate stay to their case.  There is a 
January 29 deadline to show significant progress across a range of 
issues.  End Summary. 
 
 
 
First construction funds released since Constitutional Court's July 
23 ruling 
 
 
 
¶2.      (SBU) Representatives of the four lenders for the new Quito 
airport project, the Overseas Private Investment Corporation 
(OPIC), the U.S. Export-Import Bank (Ex-Im), the Inter-American 
Development Bank (IDB), and Export Development Canada (EDC), 
visited Quito for meetings with the Municipality and Mayor Barrera 
November 19-20 and December 8-9.  Representatives from  Quiport, 
the private consortium of four companies (Aecon and Airport 
Development Corporation, both of Canada, Andrade Gutierrez of 
Brazil, and Houston Airport Systems Development Corporation of the 
U.S.) which has the concession for the new Quito airport, also 
attended.  During these meetings the lenders and the Municipality 
reached agreement on a series of difficult issues that had plagued 
the airport negotiations since the July 23 Ecuadorian 
Constitutional Court ruling that airport fees were government 
property.  On November 20 the sides tentatively agreed that the 
future agreement between the Municipality and Quiport, called a 
"Strategic Alliance Agreement" (SAA) would include: 1) 
international arbitration via the World Bank's Convention on the 
Settlement of Investment Disputes (ICSID), despite Ecuador's 
announcement June 6 that it was leaving the convention; 2) that the 
Investor Protection Agreement would remain in force (ref A); 3) a 
clear calculation for how money collected at the airport would be 
disbursed; and, 4) that the municipality would receive a larger 
share of the profits from airport operations.  Following the 
November meetings the lenders agreed to disburse, on December 7, 
approximately $21 million in new construction funding.  This 
disbursement ensured airport construction would continue and was a 
major goal of Mayor Barrera (ref B). 
 
 
 
¶3.      (SBU) The lenders returned for additional meetings with the 
Municipality December 8 and 9 to discuss and begin drafting a brief 
to the Constitutional Court requesting the Court bless the new SAA 
reached between the Mayor and the lenders.  A difficult issue 
remains the flow of airport funds.  Although a trust agreement, 
controlled by the Municipality, has been agreed for the old 
airport, plans are for the funds at the new airport to flow 
directly to Quiport.  While the court brief will present an 
argument as to why this should be legal, the Court will need to 
find an accommodation with its previous ruling. 
 
 
 
Mayor meets with American and Canadian Ambassadors to discuss 
challenges 
 
¶4.      (SBU) On December 17, Mayor Barrera met separately with the 
Ambassador and Canadian Ambassador Shisko to discuss progress on 
negotiations and the Mayor's difficulties with the proposed SAA. 
Barerra was confident that the majority of outstanding issues 
discussed in his previous meeting with the Ambassador (ref B) were 
close to being resolved: outstanding permits and certifications, 
such as necessary environmental permits, would soon be issued; 
construction was ongoing and 70% complete; and a new financial 
framework, increasing the municipal share of airport profits, had 
reached the "pre-agreement" stage.  Barrera stressed, however, that 
there were numerous outstanding issues in the planned SAA beyond 
his control.  Issues related to the State Prosecutor, the State 
Comptroller General, and the National Assembly, for example, 
required action by independent central government actors.  He 
requested the Ambassadors intercede with the lenders to encourage 
them to adopt a more flexible stance in regard to their demands, 
and also for the first time agreed that perhaps it would be useful 
 
for the Ambassadors to speak directly with members of the central 
government. 
 
 
 
Comment 
 
 
 
¶5.      (SBU) The release of funds for construction, and the 
tentative agreements between the Mayor and the lenders, provided 
additional breathing room for the parties to negotiate. 
Nonetheless, the lenders have indicated they plan to file for ICSID 
arbitration on/about December 21.  This filing is essentially a 
placeholder, designed to preserve their right to ICSID arbitration, 
and the lenders plan to immediately file a stay of their case as 
well.  Nevertheless, given Ecuadoran President Correa's visceral 
dislike of ICSID, it will be interesting to see if the lenders' 
action provokes a central government response.  The lenders have 
also set a January 29 deadline for the Constitutional Court to make 
a decision, and for the GoE to satisfy the terms of the SAA. 
Realistically, this deadline, like others encountered so far, will 
likely prove flexible so long as the sides continue to make genuine 
progress. 
HODGES