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Cablegate: Ecuador Econ Weekly: Oil Contract Renegotiations; Limits On

VZCZCXYZ2844
RR RUEHWEB

DE RUEHQT #0220 0651514
ZNR UUUUU ZZH
R 051514Z MAR 08
FM AMEMBASSY QUITO
TO RUEHC/SECSTATE WASHDC 8586
INFO RUEHBO/AMEMBASSY BOGOTA 7401
RUEHCV/AMEMBASSY CARACAS 2928
RUEHLP/AMEMBASSY LA PAZ MAR LIMA 2447
RUEHGL/AMCONSUL GUAYAQUIL 3369
RUEATRS/DEPT OF TREASURY WASHDC

UNCLAS QUITO 000220

SIPDIS

SENSITIVE
SIPDIS

TREASURY FOR MEWENS

E.O. 12958: N/A
TAGS: ECON EPET EFIN EINV SENV EC
SUBJECT: ECUADOR ECON WEEKLY: Oil Contract Renegotiations; Limits on
Credit Risk Agency; Pipeline Repaired

REF: A) 07 QUITO 999, B) QUITO 210

1. (U) The following is a weekly economic update for Ecuador that
reports notable developments that are not reported by individual
cables.

Oil Contract Negotiations Inching Forward
-----------------------------------------

2. (SBU) On February 26, the Ministry of Petroleum and Mines
reported that it will soon close a deal on eight of fourteen
petroleum contracts with the four oil companies that hold production
sharing agreements: Perenco (France), Repsol YPF (Spain), Andes
Petroleum (China) and Petrobras (Brazil). But other reports
indicate this announcement may be premature, and some challenges
still remain. Rene Ortiz, President of the Hydrocarbon Industry
Association of Ecuador, said negotiations are hindered by the fact
that the GOE does not accept the World Bank's International Centre
for Settlement of Investment Disputes (ICSID). This comment was
echoed by the manager for City Oriente, which is also involved in
contract renegotiations (septel), who said that in the most recent
meeting he attended with the foreign oil companies, all asserted
that having strong arbitration provisions is important. Two options
for companies interested in restructuring their contracts are
service contracts or signing a new production sharing contract which
would reset the reference price and terms of the windfall income tax
(discussed in more detail in septel).

Limits on National Risk Bureau Listings
---------------------------------------

3. (U) On February 26, the National Banking Board (Junta Bancaria)
announced that the National Risk Bureau of the Superintendency of
Banks would no longer include the names of co-guarantors in its
credit listing data base, or provide information on borrowers
without their prior consent. Previously, this national institution
provided information on co-guarantors from commercial lenders to
private credit bureaus; it will continue to do this with regard to
borrowers, but not with regard to co-signers.

4. (SBU) Comment: President Correa attended the morning session of
the notionally autonomous Banking Board and pressed for action
against the Risk Bureau. Correa's participation in the Banking
Board meetings (see also reftel a) is undermining the autonomous,
technical nature of the Board. However, we understand that
initially Correa called for closing the National Risk Bureau, and
after resistance from some members, the Board settled on the more
limited course of action. According to one report, the Correa
Administration's opposition to the Risk Bureau was prompted by a
senior GOE official who was listed as a co-guarantor of a defaulted
loan. While preferable to closing the risk bureau, the new policy
limits its effectiveness and will likely reduce the range of
borrowers that banks are willing to accept.

Oil Pipeline Resumes Operation
------------------------------

5. (U) On February 28, a landslide damaged Ecuador's principal oil
pipeline (reftel b). The pipeline was repaired on March 2 and
pumping resumed the following day.

BROWN

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