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Cablegate: A Revolving Door in Ecuador's Economic Ministries

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DE RUEHQT #1758/01 2182042
ZNR UUUUU ZZH
O 062042Z AUG 07
FM AMEMBASSY QUITO
TO RUEHC/SECSTATE WASHDC IMMEDIATE 7494
INFO RUEHBO/AMEMBASSY BOGOTA PRIORITY 6784
RUEHCV/AMEMBASSY CARACAS PRIORITY 2620
RUEHLP/AMEMBASSY LA PAZ AUG 0664
RUEHPE/AMEMBASSY LIMA PRIORITY 1808
RUEHGL/AMCONSUL GUAYAQUIL PRIORITY 2607
RUEATRS/DEPT OF TREASURY WASHDC PRIORITY

UNCLAS QUITO 001758

SIPDIS

SENSITIVE
SIPDIS

TREASURY FOR MMALLOY AND MEWENS

E.O. 12958: N/A
TAGS: ECON PGOV PINR EC
SUBJECT: A REVOLVING DOOR IN ECUADOR'S ECONOMIC MINISTRIES

REFTEL: QUITO 1182

1. (U) In the past month, the Correa administration has implemented
a number of high-level changes in Ecuador's economic ministries.
The country now has new ministers of Electricity, Petroleum and
Mining, Transportation, and Economy and Finance.

Ministers Leave to Run for Constituent Assembly
--------------------------------------------- --

2. (SBU) Two ministers, Transportation Minister Trajano Andrade and
Energy Minister Alberto Acosta, left office to run as
representatives of President Correa's movement for the Constituent
Assembly (elections for the Assembly will be held September 30).
Following their departures, the Transportation and Energy Ministries
were run temporarily by acting Ministers. On July 9, Hector
Villagran became the new Minister of Transportation. Villagran is
favorably inclined towards the United States and appears eager to
work with the USG on bilateral issues (his mother is the long-term
director of the U.S.-Ecuadorian binational cultural center in
Guayaquil, a private institution originally founded with USG
assistance that remains closely engaged with the U.S. Consulate
General).

Energy Ministry Splits to Focus on Electricity Issues
--------------------------------------------- -------

3. (SBU) On July 10 the Energy Ministry split in two, creating the
Ministry of Electricity and Renewable Energy and the Ministry of
Petroleum and Mining, to focus more attention on problems in the
electricity sector. These include lack of investment, inadequate
supply, inefficiency in the state-run distributors, and collection
and payment problems. Alecksey Mosquera, former Under Secretary of
Electricity in the Energy Ministry, was named the new Minister of
Electricity. Mosquera is a technician with extensive experience in
the sector, and proposes some major changes to streamline the sector
and make it more efficient (whether these changes would result in
enhanced collection, payment, and investment is unclear).

4. (SBU) Galo Chiriboga was appointed as the new Petroleum Minister
on July 23. Chiriboga, briefly head of state oil company
Petroecuador during the previous administration after a longer stint
as Labor Minister (and also a few weeks as Minister of Government),
is well-regarded by industry as a calm, reasonable interlocutor who
realizes the importance of foreign investment in the petroleum
sector. Although he has vowed to renegotiate contracts with foreign
oil companies, this has been Correa's position since the beginning
of the administration and is also consistent with the policies of
the previous administration.

Controversies Finally Shake Up Economy Ministry
--------------------------------------------- --

5. (SBU) After a long-running series of major missteps related to
Economy Minister Patino's possible involvement in market
manipulation (reftel), and his controversial statements about the
illegitimacy of foreign debt, he was transferred July 25 to head up
the newly-created Ministry of the Coast. Correa created this
Ministry in an attempt to consolidate power in coastal Ecuador,
where his popularity is rivaled by that of Guayaquil Mayor Nebot.
Correa has strongly supported Patino throughout the scandals, but he
had become a liability at the Finance Ministry and had never engaged
the Ministry's technical policy issues. This new post offers a
face-saving switch, and also positions Patino to act as a constant
thorn in Nebot's side.

6. (SBU) Fausto Ortiz, former Vice Minister of Finance, replaced
Patino as Minister of Economy and Finance. Ortiz's appointment was
favorably viewed by the market; while he has not articulated his own
views on debt restructuring since working for the Correa
administration, he is seen as someone who will take a more moderate
and pragmatic approach than Patino. For example, he illustrated to
USG officials how the government could meet its pledge to reduce the
debt burden on the budget primarily by lengthening domestic debt
maturities. He is considered to be more technically competent than
Patino, and some say he was already running the Ministry "behind the
scenes" while Patino was in charge. However, like Patino, he is
seen by some as tainted (although to a much lesser extent) because
his inconsistent statements and actions on debt payments early in
the administration raise questions about possible market
manipulation. Ortiz reportedly enjoys a personal connection to
Correa by virtue of a friendship dating back to university days.

COMMENT
-------

7. (SBU) During the Palacio administration, Ecuador experienced
chronic instability in its ministries. The Correa administration,
with an election mandate that Palacio lacked, as well as better
defined economic views, could have brought more stability in senior
economic positions. Instead, there has been a major reshuffling at
the top of most of economic ministries after only six months. To
date, most commentators see the government as ineffective in
implementing its economic programs. This turnover may, in the short
run, further disrupt implementation of economic programs. The
longer term implications are hard to judge, since the newly
appointed ministers, for the most part, appear to be more pragmatic
and technically experienced than their predecessors, but few doubt
that major decisions will continue to be made personally by Correa
himself.

BIOGRAPHICAL NOTES
------------------

8. (SBU) BIO NOTES:

RICARDO PATINO AROCA
Minister of the Coast

Ricardo Patino's move from Minister of Economy (January-July 2007)
to the head of the newly-created Ministry of the Coast is seen by
many as a demotion. As Minister of Economy, Patino was involved in
several turbulent developments. His statements implying Ecuador
might not honor its international debt obligations roiled the
financial markets, although Ecuador subsequently has paid its debt
on time. Later, he was seen in a video (surreptitiously filmed at
his request) making comments that seemed to imply (but not confirm)
manipulation of the debt market, for which he was censured by
Congress.

Prior to becoming Minister of Economy, Patino was the national
political director for Alianza PAIS, President Correa's political
movement. He also worked with Correa when Correa was Minister of
Economy in 2005, first as his Chief of Staff and then as the Vice
Minister of Economy. In 1999 Patino helped establish the Ecuador
branch of Jubilee 2000, an international NGO calling for forgiveness
of developing country debt.

Patino was the coordinator of the Technical Advisory Committee of
Ecuador's Inter-ministerial Employment Commission, and a consultant
for the International Labor Organization. He taught at the
Department of Economics of the University of Guayaquil and the
Superior Polytechnic School of Litoral. Patino has a B.A. in
economics from the Autonomous Metropolitan University of Iztalapa,
Mexico, and a M.A in Development Economics from the International
University of Andaluca, Spain. Before studying in Mexico, Patino
was enrolled at the Agrarian Reform Institute in Nicaragua in the
1980s. Patino was born in 1954 in Guayaquil. He is married to
Miriam Alcivar, and they have a 22 year-old daughter, Maria Isabel.

FAUSTO ORTIZ DE LA CADENA
Minister of Economy and Finance

Fausto Ortiz is seen as more pragmatic on debt issues than his
predecessor Ricardo Patino, who frequently criticized Ecuador's
international debt obligations. Ortiz served under Patino as Vice
Minister of Finance from January to July 2007, and some believe
that, in practice, he actually ran the Ministry during that time.
During his stint as Vice Minister, Ortiz was best known for first
announcing that Ecuador would not make a large international debt
payment coming due, and then two days later announcing that Ecuador
would make the payment on time. Ortiz also worked in the Ministry
of Economy during the Palacio administration as Under Secretary of
Public Credit and as Treasurer.

Ortiz is from Guayaquil and held positions as university professor
at Casa Grande, Catholic University of Guayaquil and the Polytechnic
University of the Litoral. Ortiz was the manager of economic and
trade studies at the Chamber of Commerce in Guayaquil. He also
advised the private sector on finance, loan structure, and the
development of Ecuador's stock exchange. Ortiz has a B.A. in
Economics from the Catholic University of Guayaquil (1989), and a
M.A. in Business Economics from INCAE, Costa Rica (1992). During his
years in college, he was President of the Students Federation of
Catholic University and the Faculty of Economics, Business
administration and Accounting. Ortiz understands English but is not
comfortable speaking it.
ALECSKEY MOSQUERA
Minister of Electricity and Renewable Energy

Mosquera served as the Under Secretary of Electricity in the
Ministry of Energy and Mines in the Correa administration until he
was appointed Minister of Electricity when the Ministry was split in
two (as the government sought increased focus on the problems in the
electricity sector). As part of the change and to increase the
Electricity Ministry's control over the sector, he was also
appointed head of the National Council for Electricity (CONELEC),
Ecuador's electricity regulator.

Mosquera has extensive technical experience in the electricity
sector, and appears bright and ready to make changes. According to
his official bio, Mosquera led the Commission for the Promotion of
Investment in Electricity Generation and was Coordinator for the
Inter-institutional Electric Sector Commission for the creation of
the National Emergency Plan for 2005-2007. He also worked in
CONELEC previously, covering financial analysis of the electricity
sector. Mosquera has a Masters degree in Business Administration
and Mechanical Engineering from the Polytechnic School of Quito. He
graduated Cum Laude in both degrees.

GALO CHIRIBOGA
Minister of Petroleum and Mines

Galo Chiriboga held three senior positions in the Palacio
administration: President of Petroecuador from July 2006 to January
2007, Minister of Labor (2006), and Minister of Government (2005).
Chiriboga has described himself as a "modern leftist," although his
relationship with unions soured over a minimum wage dispute in
January 2006. He was perceived as one of the more pragmatic,
results-oriented members of the Palacio administration. Chiriboga
was part of the Quito Assembly that opposed former President
Gutierrez and helped bring about his ouster.

Chiriboga was president of the American Association of Jurists from
1998-2003. He was legal advisor to CEOSL, the largest union
confederation, since 1984. Chiriboga also held positions as
alternate magistrate to the Constitutional Tribunal (1999-2003),
Director of Filanbanco Bank (March 2001), and Pichincha police
intendant (1980-1983).

Chiriboga received a law degree from the Catholic University of
Quito. He also has a M.A. in Administration and a Doctorate in Law.
He has post-graduate specializations from Ecuador, Colombia, Spain
and France on financial, securities and stock exchange law, labor
law, human rights and contracts. He has published several works on
human rights, worker rights, and ethics.

HECTOR VILLAGRAN CEPEDA
Minister of Public Works and Transportation

Villagran will preside over development of Ecuador's transportation
infrastructure, including supervision of airports, seaports and the
road and rail systems. Villagran is perceived as favorable towards
the United States. He was formerly President of the Ecuadorian
Railroad Corporation, when he informally inquired about U.S. support
to help improve Ecuador's railway system. He previously served as
General Manager of a World Bank-funded "International Trade and
Integration" program at the Ministry of International Commerce,
Industries, and Fishing, and Special Assistant to Vice President
Pedro Aguayo Cubillo (in the 1998 interim presidency of Fabian
Ernesto Alarcon Rivera). Villagran also held positions as Editor of
El Financiero magazine, National Representative of the Bolivar
Program, Legal Director at the Superintendency of Companies, and law
associate at the Villagran Lara & Villagran Cepeda law firm.

A Guayaquil native, Villagran studied law at the Law Department of
the University of Guayaquil and holds a business degree from Florida
International University.
BROWN

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