Cablegate: Ecuador Econ Weekly: Telecommunication Company and Mining

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PP RUEHWEB

DE RUEHQT #2509 3231204
ZNR UUUUU ZZH
P 191204Z NOV 07
FM AMEMBASSY QUITO
TO RUEHC/SECSTATE WASHDC PRIORITY 8065
INFO RUEHBO/AMEMBASSY BOGOTA 7085
RUEHCV/AMEMBASSY CARACAS 2752
RUEHLP/AMEMBASSY LA PAZ NOV LIMA 2119
RUEHGL/AMCONSUL GUAYAQUIL 3032
RUEATRS/DEPT OF TREASURY WASHDC

UNCLAS QUITO 002509

SIPDIS

SENSITIVE
SIPDIS

TREASURY FOR MEWENS

E.O. 12958: N/A
TAGS: ECON ETRD EINV EC
SUBJECT: ECUADOR ECON WEEKLY: TELECOMMUNICATION COMPANY AND MINING
SECTOR CONCESSIONS; MORE TARIFF REVISIONS

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

GOE Analyzes Porta Cellular Concession
--------------------------------------

2. (SBU) On November 6, the Superintendency of Telecommunications
(Suptel) sanctioned the cellular company Porta (the largest provider
with 64% of the market, and owned by Mexico's Telmex) for service
interruption, saying the move could end up in the termination of its
concession. This is the latest fine in a series of several charged
to Porta over the last few months for alleged service deficiencies.
The National Telecommunications Secretariat (SENATEL) will make a
decision on whether or not to renew the concession on November 30.
While the outcome is still unclear, the head of SENATEL told the
Embassy privately that it does not see a viable alternative service
provider to Porta. Industry sources say the recent controversy
surrounding Porta's service provision is largely related to GOE
efforts to get the company to pay millions of dollars in back taxes
that it allegedly owes (Porta has paid significantly less in taxes
than has its smaller rival Movistar, owned by Telefonica of Spain).

Tariffs Increase on 259 more products
---------------------------------------

3. (U) During the second of two planned rounds of tariff increases,
the Council on Foreign Trade and Investments (COMEXI) approved new
tariffs on 259 tariff lines on November 4. The affected products
include textiles, metal work, dishware, tobacco products and linens.
These tariff revisions are part of the GOE's larger reform efforts.
More detailed analysis will be provided Septel.

GOE Wants to Renegotiate Mining Concessions
-------------------------------------------

4. (U) On November 7, President Correa and the Ministry of
Petroleum and Mines announced their intention to renegotiate current
mining company contracts before authorizing new mining concessions.
This decision was made based on a GOE study that showed Ecuador has
a large mining potential (USD 217.6 billion) and current
concessionaries are not producing anywhere near this potential.
Galo Chiriboga, the Minister of Petroleum and Mines, mentioned that
the GOE is considering the creation of a state company to develop
several mining projects such as limestone extraction operations.

5. (U) The renegotiation process would be similar to oil companies'
contract renegotiations, said Minister Chiriboga, where companies
must share at least 50% of extraordinary revenues with the state.
Based upon the type of mining project, the percentage to go to the
state could be higher. The GOE is also considering reimposing
mining royalties, which were suspended in 2002. According to
Chiriboga, concessions would also have to fulfill stricter
environmental requirements. For example, mining activities would be
prohibited near water reservoirs and national parks. President
Correa said that mining law reforms will be debated in the
Constituency Assembly. He also added that "Ecuador will no longer
accept mining explorations that do not benefit the State, or that
[negatively] affect communities."

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