Archive for the ‘Lateinamerika’ Category

NICARAGUA: GOVERNMENT STILL CONTROLS EXXON FUEL DEPOT

Wednesday, June 1st, 2011
ID
07MANAGUA2016
SUBJECT
NICARAGUA: GOVERNMENT STILL CONTROLS EXXON FUEL
DATE
2007-08-31 00:06:00
CLASSIFICATION
CONFIDENTIAL
ORIGIN
Embassy Managua
TEXT
C O N F I D E N T I A L MANAGUA 002016 

SIPDIS

SIPDIS

DEPT FOR EEB/ESC, EEB/BTA, WHA/EPSC, WHA/CEN
SAN JOSE FOR CS/JMCCARTHY
DEPT PLEASE PASS TO USTR AND OPIC

E.O. 12958: DECL: 08/29/2017
TAGS: EINV EPET ETRD NU
SUBJECT: NICARAGUA: GOVERNMENT STILL CONTROLS EXXON FUEL
DEPOT

REF: A. MANAGUA 1952
¶B. MANAGUA 1789
¶C. MANAGUA 640
¶D. MANAGUA 788

Classified By: Ambassador Paul Trivelli, Reason: E.O. 12958 1.4 (b) and
(d)

¶1. (C) Summary: Ten days after the government seized one of Esso/Nicaragua’s fuel depots at the Port of Corinto, it refuses to return the facility to Esso without preconditions. The government wants Esso to honor third party contracts involving the use of the depot; for safety and liability reasons, this is a non starter for Exxon. The implementation of a “peace plan” remains on the table, waiting for Energy Minister Rappaccioli to return from Brazil. Theoretically, Exxon is willing to purchase fuel from Petronic, the state-owned holding company, but will only negotiate a deal after the depot is returned. In return, Exxon wants government harassment, in the form of tax liens and accusations of nonpayment, to stop. While the stalemate continues, Petronic controls Esso’s facility. Petronic has already offloaded fuel from one Venezuelan vessel and is preparing to do the same with another. We believe that the government’s driving motivation for its treatment of Esso is an overwhelming desire to siphon ALBA funding from the sale of Venezuelan petroleum to Nicaragua to fund inter alia the creation of 17,000 citizens’ councils. End Summary.

¶2. (C) As reported in Ref A, the Government of Nicaragua seized one of Esso/Nicaragua’s fuel storage facilities at the Port of Corinto on August 17. The pretext for the seizure was a lien for the nonpayment of taxes, placed on the property by the Director General of Customs Roberto Zepeda. Zepeda charged that Exxon had failed to pay the value added tax on imported petroleum product.

¶3. (C) The issue first surfaced more than a year ago when the government noticed that Exxon had not filed the proper paperwork for an exemption from the value added tax. Industry insiders tell us that this is fairly common, as ships frequently arrive and are offloaded before all the paperwork is finished. Instead of seeking an administrative solution to an administrative problem, the government parlayed a paperwork glitch into something much grander to suit its purposes. Customs insists that Esso/Nicaragua owed as much as $3 million in unpaid value added tax.

¶4. (C) What makes the claim verifiably specious is that Nicaraguan law clearly exempts petroleum products from most normal taxes, including the value added tax. For this reason, no mechanism exists for Exxon to collect value added taxes along the supply chain. Instead, the industry essentially operates under its own tax regime, centered on the energy consumption tax. As the major supplier of refined products to Nicaragua, Exxon helps collect this tax from other fuel distributors on behalf of the government.

“We Pay Our Taxes”
——————

¶5. (C) At no time has Exxon accepted publicly or privately that the government’s charges of tax evasion are correct. Exxon spokesmen Alfredo Fernandez-Sivori and Milton Chavez have publicly stated Esso/Nicaragua has always paid its taxes and is a good corporate citizen, investing in Nicaragua to reliably and safely supply fuel to the country and importing technology. Indeed, as a high profile foreign investor and a major taxpayer, Esso/Nicaragua has long come under regular scrutiny by local tax authorities. Former Director General for Taxation Roger Arteaga was quoted in the press as having said that, in his experience, Esso/Nicaragua was meticulous about paying its taxes.

“I’d Like a Fuel Depot, Judge”
——————————

¶6. (C) As the demandeur, Director General for Customs Zepeda has the right to go to a judge in a district where an Esso/Nicaragua asset resides and demand that a tax lien be placed on it. Zepeda chose an out-of-commission Esso fuel depot called Corinto I.

¶7. (C) Nicaraguan law clearly states that custody of a
property subject to a lien “will be awarded to the owner of the property,” but this did not stop the Sandinista (FSLN) judge from Chinandega, Judge Socorro Toruno, from enlisting the assistance of armed local police to forcefully remove Esso/Nicaragua personnel from Corinto I and awarding custody of the depot to Zepeda. The mission all took place with clockwork precision shortly after close of business on Friday, August 17.

¶8. (C) Zepeda immediately used his ill-gotten authority to request Petronic to prepare Esso’s tanks to receive fuel from a Venezuelan vessel that had arrived in port the day before. The last Venezuelan vessel to call paid demurrage of $400,000, and the GON appeared determined that such a delay was not going to happen again.

Our Friends at Petronic
———————–

¶9. (C) Petronic is a state-owned holding company whose primary responsibility is to oversee a long-term contract with Glencore (SWISS) for the supply and distribution of petroleum products. In April, two months after Evo Morales nationalized Glencore’s mining assets in Bolivia, the Nicaraguan government tried to nullify its ten-year contract with Glencore in its eighth year, arguing that the government official who signed the contract was not authorized to do so. This charge soon devolved into negotiations with Glencore, the outcome of which is unclear. However, Glencore is now onboard with the idea of receiving Venezuelan product through Petronic.

¶10. (C) The local IMF Representative informs us that as a result of IMF negotiations restricting rapid growth in foreign debt, the Sandinista Government will no long siphon funds from the purchase of Petroleos de Venezuela (PDVSA) products through a discount financing scheme as reported in Ref B. Rather, 25% of the proceeds of a sale to Petronic will be deposited into a fund supporting a development bank and 25% into an ALBA Fund. To make this work, real companies with refining or distributive capacity like Exxon have to buy the fuel from Petronic.

Chico and the Man
—————–

¶11. (C) The President of Petronic is Francisco “Chico” Lopez, who despite some reports that he has resigned, apparently still functions as the Treasurer of the FSLN, whose headquarters serve as President Ortega’s official residence and office. As an accounting master with nimble fingers massaging the financial heart of the FSLN, Chico Lopez appears to be just the guy Ortega wants to manage his ALBA funds.

¶12. (C) We note that in a public scandal last April, Amcit Armel Gonzalez implicated Chico Lopez and FSLN Director for Organization Lenin Cerna in a $4.5 million extortion attempt involving a tourism development in the Department of Tola (Ref C). Although Gonzalez recorded the conversations on audio tape verified by experts, Gonzalez has been accused of creating false evidence.

Hard Day’s Night
—————-

¶13. (C) With free run of Corinto I as provided by Judge Toruno, Chico Lopez sprung into action. Within hours, local contractors showed up to perform welding and other metal work on Esso’s tanks to prepare Corinto I to accept 18,000 barrels of Venezuelan diesel, i.e., what remained of Venezuela’s 120,000 barrel shipment. The contractors welded all night. Reportedly, 40,000 barrels of diesel and 20,000 barrels of gasoline were offloaded to a depot managed by Glencore, and 30,000 barrels of diesel were offloaded to a depot managed by the Nicaraguan Port Authority.

¶14. (C) While contractors continued to weld, President Ortega appointed Minister of Energy Emilio Rappaccioli to act as point person for the government in talks with Exxon. Business Federation (COSEP) President Erwin Kruger offered his good offices to broker a deal, and helped Exxon reps to initiate discussions with Rappaccioli on August 21. (Ref D).

“What Do You Really Want?”
————————–

¶15. (C) Exxon soon discovered that the issue was not unpaid taxes. Rappaccioli freely admitted in private conversations and then publicly to the press that the government launched tax cases against Exxon to pressure the company into accepting Venezuelan product ) a bit like the government had pressured Glencore into accepting Venezuelan product last April. Exxon rep Augustin Fuentes (protect) told us that Rappaccioli also broached the possibility of organizing a buyout of Exxon’s refinery. While Rappaccioli had hinted at this possibility before, Fuentes paid closer attention this time.

¶16. (C) Talks with Rappaccioli continued through the week while other parts of the government tried to apply increasing pressure on Exxon. At one point, the government filed twelve claims of tax evasion within five hours. Exxon reps calculated that the government’s tax claims totaled $57 million, the approximate book value of Esso/Nicaragua’s refinery located near Managua.

Misdirection
————

¶17. (C) One of these claims of tax evasion involved the supposed nonpayment of corporate income tax over ten years. Director General of Taxation Walter Porras publicly stated that a company like Exxon should be paying the same income tax that everyone else pays. Under its investment agreement with the government, however, Exxon pays 25%. The general corporate tax rate has since been raised to 30%, but the law allows agreed rates to remain valid. At another point, Attorney General Estrada questioned whether an investment agreement signed by Arnoldo Aleman’s famously corrupt Director General for Taxation Byron Jerez should be honored. Exxon reps inform us Jerez did not sign the agreement, which dates back to Violeta Chamorro’s government, not Aleman’s.

All The News That Is Fit To Print
———————————

¶18. (C) Throughout, headlines raged and talk shows chatted storms. Minister of Finance Alberto Guevara, Director General of Taxes Walter Porras, and an assortment of Sandinista party hacks and diputados continued to rant that Exxon owed taxes — all kinds of taxes. Managua Mayor Marenco claimed that the city’s gasoline stations owed Managua $90 million for unpaid municipal business licenses over the last 10 years — the case just happens to be pending a decision in the Supreme Court. But the propaganda effort did not seem to carry much weight with the press. In front page headlines, La Prensa called the seizure “blackmail” and El Nuevo Diario questioned the ramifications of Exxon delaying its next shipment of fuel. Through it all, Ortega refused to comment much more than to say that that “the case is in the courts.” Exxon spokesmen kept repeating that the assertion that Exxon had failed to pay its taxes was patently false.

¶19. (C) At an August 23rd signing ceremony for a U.S. Trade Development Agency grant to develop a modern ports law, the Ambassador emphasized the importance of the rule of law, of trade and investment to growth and development, and what the United States is doing to help Nicaragua take advantage of CAFTA. He also mentioned how the Exxon case was detracting from the image that Nicaragua was a good place to invest. In comments to the press after the event, the Ambassador stressed the importance of the rule of law, respect for private property, and the need for the government to return Corinto I to Exxon. He continued to encourage both sides to sit down to settle their differences. The Port Authority held the signing ceremony at the hotel owned by Foreign Minister Samuel Santos and Chief Economic Advisor Bayardo Arce, neither of whom bothered to show. Santos was on the agenda, but sent his Vice Minister for Development who nervously mouthed a few words he had scribbled on a quarter piece of paper.

The Peace Plan
————–

¶20. (C) By August 25, it looked as if Rappaccioli and Exxon
had agreed to an orchestrated exchange of letters in a deal that read like an Israeli-Palestinian peace plan. The basics of the deal were pretty much the way Exxon had mapped it out a week before.

¶21. (C) In the first phase, Exxon would regain control of Corinto I as the result of the Director General of Taxation Zepeda’s request to Chinandega Judge Toruno to replace Zepeda with Esso/Nicaragua’s Corinto plant supervisor.

¶22. (C) In the second phase, Exxon would deliver a letter stating its intention to sell/rent the seven small tanks located in Corinto I, or to use them to receive Petronic product. Exxon also would deliver a letter committing to the purchase of 400,000 barrels of crude oil per month from Petronic, about 60% of refinery needs. Presumably, Petronic would source the oil from PDVSA at market prices and sell it to Exxon. Exxon would transport the crude on its own ships, something that Exxon had wanted to do all along because PDVSA is unreliable. In return, the government would commit to jointly reviewing all tax cases that it had thrown at Esso/Nicaragua, with a view to resolving any legitimate claims and dismissing the rest.

¶23. (C) In the third phase, negotiations on the commitments that each side had stated in their letters would take place, in parallel. Exxon’s goal is to extract itself from the government’s onerous tax cases and restore a good operating environment for its business. The government’s goal is to siphon off ALBA funds from the sale of Venezuelan petroleum.

The Conductor Taps His Baton, But No Orchestra
——————————————— –

¶24. (C) On August 27, Judge Toruno showed up at Corinto with an order to reinstate Esso/Nicaragua as the custodian of Corinto I. In a cooperative manner, Petronic and Esso/Nicaragua inspected the depot to make sure that its facilities had not been damaged, and to verify volumes of Venezuelan fuel. Exxon reps told us that there had been a few diesel spills. Before the transfer could proceed, Toruno asserted that the reinstatement of Esso/Nicaragua as custodian would be conditioned on Petronic’s continued control of the seven tanks filled with Venezuelan product.

¶25. (C) Exxon refused to allow its Esso/Nicaragua Corinto supervisor to sign the order. The deal broke down. Compounding the situation, Energy Minister Rappaccioli had had flown to Brazil on August 26. He was therefore unavailable to shepherd implementation of a deal he had brokered, leaving Vice Minister Lorena Lanza behind to answer the phone.

¶26. (C) On August 29, Judge Toruno unilaterally issued a revised order transferring custodianship to Esso/Nicaragua, but obligating Esso/Nicaragua to honor Petronic operations on its property. Exxon again rejected the order and refused to take control of Corinto I until all non-Esso personnel had vacated the premises. Exxon also refused to take responsibility for, or to honor, Petronic contracts that involved Petronic’s continued use of Corinto I. Exxon reps explained that their refusal is a matter of law, safety, and ultimately corporate liability. On August 30, Exxon spokesman Milton Chavez stood up at a press conference in front of a long list operational requirements that Exxon follows for safety and liability reasons, and are presumably ignored by the Petronic usurpers.

¶27. (C) Exxon continues to pursue a mutually acceptable solution with the government while it explores legal recourse. Exxon wants to replace the tax lien on Corinto I with a bank guaranty; such a guaranty would remove any claim that the government may have on Corinto I. On August 29, Chavez and others met with Vice President Jaime Morales Carazo, who in an impromptu press conference that followed, offered some support, saying that he thought that the asset should be returned to Esso.

Exxon’s Immediate Concern
————————-

¶28. (C) Of immediate concern to Exxon has been the safety and security of both its fuel depots at the port, Corinto I and Corinto II. Former Esso/Nicaragua General Manager Augustin
Fuentes explains that these tanks have been in disuse, some for considerable time, and are “not suitable for service” of the kind that Petronic is using them. They require constant vigilance, he said. Some of the tanks have been used recently to store lubricants, but not fuel. One Corinto I tank is larger, capable of storing 30,000 barrels of diesel, and still in use. It was in fact full with Exxon product when Petronic took management control of Corinto I. Moreover, Esso/Nicaragua’s fire fighting equipment for both Corinto I and II is located in Corinto I. This has caused Exxon to halt all operations at Corinto II for safety reasons.

At the Break of Dawn
——————–

¶29. (C) In the early morning ours of August 30, another Venezuelan vessel crept into the Port of Corinto with another 120,000 barrels of fuel. Petronic still controls Corinto I and is again preparing to offload Venezuelan fuel.

Comment
——-

¶30. (C) We strongly suspect that the Sandinista rush to received Venezuelan fuel is tied to FSLN financing needs, inter alia, the creation of 17,000 peoples’ councils, an initiative recently launched by President Ortega. Each Venezuelan ship offloded by Petronic translates directly into $5 million for the GON, given current ALBA financing terms. The level of interagency coordination demonstrated by the government’s assault on Exxon and pressure on Glencore reflects direction from the highest levels of Government and the FSLN, which, in this case, work out of the same office.

TRIVELLI

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SWISS REACTION TO CALL FOR FREEZING NON-HUMANITARIAN ASSISTANCE TO NICARAGUA FOLLOWING FRAUDULENT ELECTIONS

Wednesday, June 1st, 2011
ID
08BERN655
SUBJECT
SWISS REACTION TO CALL FOR FREEZING
DATE
2008-12-23 16:30:00
CLASSIFICATION
CONFIDENTIAL
ORIGIN
Embassy Bern
TEXT
C O N F I D E N T I A L BERN 000655 

SIPDIS

DEPT FOR WHA/CEN (A.KRAAIMOORE) AND EUR/CE (Y.SAINT-ANDRE)

E.O. 12958: DECL: 12/23/2018
TAGS: EAID PGOV PREL NU SZ
SUBJECT: SWISS REACTION TO CALL FOR FREEZING NON-HUMANITARIAN ASSISTANCE TO NICARAGUA FOLLOWING FRAUDULENT ELECTIONS

REF: SECSTATE 132044

Classified By: Acting POL/E Counselor Chris Buck; reasons 1.4(b) and (d
).

¶1. (SBU) Poloff shared reftel talking points with Nora Kronig, Regional Coordinator for Central and South America at the SWISS Federal Department of Foreign Affairs (EDA), and Mathias Domenig, South American Desk Officer for EDA, on December 22. In response to the USG call to freeze non-humanitarian assistance to Nicaragua following the fraudulent municipal elections of November 9, Kronig said that Switzerland had been concerned about the elections and that the GON should have allowed international observers to monitor them. She added that, because Switzerland now holds the rotating presidency of the Donors Group of Nicaragua, the GOS had sought dialogue with the GON regarding this issue. She did not offer results of this attempt for dialogue.

¶2. (SBU) Kronig stated that the allocation of SWISS budget support to foreign countries, including Nicaragua, was decided at the Federal Council (Executive Cabinet) level, and that policy recommendations in this regard were prepared by the EDA in collaboration with the SWISS State Secretariat for Economic Affairs (SECO).

¶3. (C) Given the high-level at which budget support decisions are made, Kronig was therefore unable to give a definitive answer regarding whether the GOS would freeze non-humanitarian assistance to Nicaragua. Off the record, however, Kronig said that she saw this step as unlikely, noting that the GOS prefers to address such problems through direct dialogue with the recipient country. Kronig added that the SWISS Agency for Development and Cooperation (SDC) also has a program focused on Nicaragua, and that she did not personally think that assistance would be halted by SDC either.

¶4. (U) Kronig said that she would advise poloff of the coordinated GOS response to reftel demarche once available, noting that she would not likely have an answer before January 2009. CARTER

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Die Schweiz schützt einen mutmasslichen Kriegsverbrecher

Tuesday, May 3rd, 2011

Die Schweiz hat einen ehemaligen General aus Sri Lanka als Diplomaten akkreditiert. Dabei wusste Bern, dass der Armeechef höchst umstritten ist – ihm werden Kriegsverbrechen vorgeworfen. Jetzt fordern Nichtregierungsorganisationen seine Absetzung. von Christian Bütikofer

Mit dem Sieg im Mai 2009 der Armee Sri Lankas über die aufständischen Tamil Tigers (LTTE) im Norden des Landes nahm der 26-jährige bewaffnete Konflikt ein blutiges Ende.

Die meisten LTTE-Generäle wurden getötet, die Tamilen verloren ihren Unabhängigkeitskampf. Für die siegreichen Generäle der Armee aber brachen gute Zeiten an. Dazu gehört auch Nanayakkara Agarage Jagath Chulanaga Dias, kurz Jagath Dias genannt. Er startete eine neue glanzvolle Karriere.

Dias wurde wenige Monate nach Kriegsende im Herbst 2009 nach Europa geschickt und darf sich seither Diplomat nennen.

Heute lebt er in Berlin, ist als stellvertretender Botschafter der sri-lankischen Regierung für Deutschland, die Schweiz und den Vatikan akkreditiert. Mit dem Diplomatenstatus ist er unantastbar.

40’000 Zivilisten starben in wenigen Wochen

Die diplomatische Immunität erhielt er in der Schweiz, obwohl auch für Aussenstehende schnell klar weden musste, dass sich Dias gegen schwerste Vorwürfe verteidigen muss.

Jetzt fordern die Nichtregierungsorganisationen Trial (Genf), ECCHR (Berlin) und die Gesellschaft für bedrohte Völker (Bern), dass die Schweizer Regierung Dias sofort als persona non grata erklärt – er also hier nicht mehr als Diplomat mit den inhärenten Privilegien fungieren kann.

In einem 26 Seiten dicken Dossier trugen die NGOs diverse Vorfälle zusammen, die sie als Kriegsverbrechen taxieren und Dias anlasten.

Denn er war Generalmajor der sri-lankischen Armee zur Zeit der Schlussoffensive gegen die Tamil Tigers, bei der laut einem UNO-Rapport in der Schlussoffensive des Konflikts um die 40’000 Zivilisten ermordet wurden. Dazu gehörten der gezielte Granatenbeschuss von zivilien Schutzzonen sowie Krankenhäusern und religiösen Stätten. Journalisten wurden eingeschüchtert, Kritiker verschwanden in weissen Lieferwagen und wurden nie wieder gesehen.

Auch das UNO-Gebäude und Unterkünfte des Roten Kreuzes bombardierte die sri-lankische Armee, obwohl sie über deren Standort nachweislich ganz genau Bescheid wusste.

Die LTTE machte sich gemäss dem UNO-Rapport ebenso schwerster Verbrechen schuldig. So rekutierten sie etwa Minderjährige als Soldaten, hinderten die Flüchtlinge am Verlassen der Kampfzone, nutzten sie als menschliche Schilde und führten jahrelang Selbstmordattentate durch.

Die meisten LTTE-Verantwortlichen sind tot, wurden in den letzten Tagen erschossen, zum Teil nachdem sie in Gefangenschaft gefoltert wurden. Die Verantwortlichen der Regierungsarmee aber lassen sich als Helden feiern, bekommen Häuser für ihre Taten, geniessen obersten politischen Schutz.

Vorwürfe waren längst bekannt

Gegenüber dem ARD-Nachrichtenmagazin Fakt meinte ECCHR-Jurist Andreas Schilling: «Wenn man Schutzzonen einrichtet für Zivilisten, wo man die Zivilbevölkerung explizit auffordert, dorthin zu gehen, weil sie dort sicher sind, und dann diese Zonen unter Beschuss nimmt, dann ist das einer der schlimmsten Tatbestände, den man im humanitären Völkerrecht erfüllen kann.»

Beim Eidgenössischen Departement für Auswärtige Angelegenheiten (EDA) wusste man seit längerer Zeit von den Vorwürfen – passiert ist bisher nichts.

Den NGOs beschied man, zuerst wolle man einen unabhängigen Report der UNO abwarten.

EDA behält sich Schritte vor

EDA-Pressesprecher Georg Farago sagte gegenüber az: «Die Schweiz kennt die Vorwürfe gegen ein Mitglied der diplomatischen Vertretung Sri Lankas bei der Schweiz, die sich in Berlin befindet. Die Schweiz prüft gegenwärtig die Situation und behält sich allfällige Schritte vor.» Weiter meinte Farago: «Die Schweiz hatte die srilankischen Behörden konsequent dazu aufgerufen, ihre Verantwortung wahrzunehmen und Verstösse gegen das humanitäre Völkerrecht und die Menschenrechte zu untersuchen und die Täter vor Gericht zu stellen.»

Der UNO-Report ist seit Ende März erstellt. Im Bericht werden auf 214 Seiten verschiedene Kriegsverbrechen der Regierungstruppen und der Tamil Tigers detailliert festgehalten. In Sri Lanka führte er zu empörten Voten der Regierung.

Der Bürgerkrieg in Sri Lanka gehörte zu einem der blutigsten Konflikte der Welt. Dabei wurden auch extralegale Hinrichtungen durchgeführt. Solche Exekutionen durch die sri-lankische Armee wurden durch Videoaufnahmen dokumentiert und von der australischen Presse veröffentlicht.

EDA-Pressesprecher Farago bestätigte, dass man den Bericht der UNO-Expertengruppe zur Verantwortlichkeit («accountability») der Konfliktparteien im Nachgang des bewaffneten Konflikts in Sri Lanka von 2009 begrüsse. Er solle als Grundlage für eine unabhängige Aufarbeitung der Geschehnisse dienen.

Auch in der Schweiz aktiv

Klar ist, dass Jagath Dias mehrere Male in der Schweiz weilte und laut Informationen der az Kontakt zu Medienvertretern suchte. Ihm soll es darum gegangen sein, einen neu gegründeten Verein der tamilischen Diaspora in der Schweiz zu «beobachten» und ihn hier bei der Presse unmöglich zu machen.

Wie durch einen Zufall erschienen wenig später in grossen Schweizer Tageszeitungen Berichte über einen «dubiosen» Verein, in dem angeblich terroristisch vernetzte Tamilen das Sagen hätten.

Auf eine Anfrage reagierte die sri-lankische Botschaft in Deutschland bis zum Publikationsdatum nicht.

© az Aargauer Zeitung 2011; 03.05.2011

CORREA PROMOTES LOCAL PHARMACEUTICAL PRODUCTION

Monday, May 2nd, 2011
ID 09QUITO998
SUBJECT CORREA PROMOTES LOCAL PHARMACEUTICAL PRODUCTION
DATE 2009-10-13 20:08:00
CLASSIFICATION UNCLASSIFIED//FOR OFFICIAL USE ONLY
ORIGIN Embassy Quito
TEXT UNCLAS QUITO 000998
SENSITIVE SIPDIS DEPT PLEASE PASS TO USTR FOR BENNETT HARMAN DEPT FOR WHA/AND AND EB/TPP/IPE
E.O. 12958: N/A TAGS: ETRD KIPR EIND ECSUBJECT: CORREA PROMOTES LOCAL PHARMACEUTICAL PRODUCTION

¶1. SENSITIVE BUT UNCLASSIFIED

¶2. (SBU) Summary. The head of Ecuador’s Intellectual Property Institute (IEPI) denies the GoE intends to annul all pharmaceutical patents, as public statements by President Correa on September 26 suggested. However, the government is undertaking a review of pharmaceutical patents to consider issuance of compulsory licenses. According to IEPI, the GoE plans to follow the legal process established in the WTO Trade Related Intellectual Property Rights Agreement (TRIPS) and Ecuador’s national Intellectual Property Law. U.S. NGO Essential Action is providing legal advice to the GoE regarding compulsory licensing. Separately, the GoE is instituting a two-tier system for government tenders for medicines, relegating foreign suppliers to the second tier. End Summary.

¶3. (SBU) On October 1 and 8, Embassy staff met with local representatives of U.S. pharmaceutical companies Pfizer, Merck Sharp and Dohme, Schering-Plough, and Wyeth to discuss statements made by President Correa during his weekly address on September 26. During his address, Correa announced plans to establish a public tender system for medicines that prioritizes local production, and to eliminate pharmaceutical patents.

¶4. (U) Under the new public tender process, only national pharmaceutical suppliers will be able to participate in an initial bidding round. Should the government be unable to fulfill all of its requirements through the initial bid, a second round will be held in which foreign suppliers will be able to participate. This new system will be a significant blow to U.S. pharmaceutical companies, for whom sales to the public sector account for a significant portion of domestic sector sales, in some cases counting for close to 20 percent of local sales. In announcing the change, President Correa said he was responding to requests for support from local industry, which he said currently supplies only 22 % in volume and 13% in value of medicines sold in the domestic market. Note, Ecuador is not a signatory to the WTO Agreement on Government Procurement.

¶5. (SBU) Also troubling was President Correa’s statement that he planned to eliminate all “obligatory patents” within a week. Correa said Ecuadorian law and international treaties allow Ecuador to repeal patents for human health concerns, adding that all medicines that can be produced and copied in Ecuador should be domestically produced. These statements were consistent with a vision Correa espoused in July: “Intellectual property is a mechanism for development for the people. This is our vision of intellectual property. It is not a mechanism to enrich the pharmaceutical or agrochemical companies.”

¶6. (SBU) In an October 7 meeting, the president of Ecuador’s Intellectual Property Rights Institute, Andres Ycaza, sought to reassure SCO and ECONOFF that the GoE was not planning to annul all pharmaceutical patents. Ycaza said he had been surprised by Correa’s statements as well, having received notice of them while attending a World Intellectual Property Organization meeting in Geneva. However, Ycaza said the GoE was conducting a review of all pharmaceutical patents and does plan to issue compulsory licenses to address problems of access to medicine, specifically referring to cancer and HIV/AIDS treatments. In response to points raised by SCO and Econoff that compulsory licensing typically is used for emergency situations, permitted for only a specific time period and pursued only after negotiations with patent holders, Ycaza emphasized the GoE’s intent to conduct the process in a manner consistent with Ecuador’s legal obligations under the WTO TRIPS Agreement and Ecuador’s Intellectual Property Law. He also mentioned that Ecuador would be justified in issuing compulsory licenses due to reasons of “public interest.” Ycaza noted the need to provide access to medicines that are prohibitively expensive, mentioning a cancer drug that costs $6,000 per injection as an example.

¶7. (SBU) While departing IEPI’s offices, Embassy staff met Peter Maybarduk, a representative of U.S. NGO Essential Action, who is providing legal counsel to IEPI on compulsory licensing as part of the NGO’s Access to Medicines program. For its part, U.S. industry is trying, through well placed contacts, to get a better idea of President Correa’s core objectives. Once it is clearer whether the President’s interests principally relate to access to medicine or promotion of domestic industry, the companies intend to try to develop a positive agenda they can present to the President as a way of opening the door to a more collaborative relationship. Embassy plans to consult with the Missions of other international pharmaceutical companies (French, British, SWISS, German, Swedish) and to continue seeking better definition of GoE intentions through meetings at the Coordination Ministry for Production and the Ministry of Health. At this point, Embassy interaction with the GoE on the issue remains one of seeking information.

¶8. (SBU) Comment. Ycaza’s focus on IPR is relatively narrow. Although he may believe the GoE’s plans are motivated purely by an interest in providing better access to medicine, compulsory licensing coupled with the government’s new discriminatory public tender process, President Correa’s close personal relationship to certain local pharmaceutical producers and his rhetoric suggest that Correa’s more fundamental agenda is promotion of the domestic pharmaceutical industry. This would be consistent with the emphasis Correa has been placing on national production across industry lines (petroleum sector as an example) in the name of Ecuadorian sovereignty. HODGES

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ENVIRONMENT MINISTER CONFRONTS ILLEGAL LOGGERS AMID RUMORS OF HER OUSTER

Monday, May 2nd, 2011
ID 05QUITO2288
SUBJECT ENVIRONMENT MINISTER CONFRONTS ILLEGAL LOGGERS
DATE 2005-10-07 16:04:00
CLASSIFICATION UNCLASSIFIED
ORIGIN Embassy Quito
TEXT UNCLAS SECTION 01 OF 02 QUITO 002288
SIPDIS
DEPT PASS TO USAID
E.O. 12958: N/A TAGS: SENV EAID ECON PGOV ECSUBJECT: ENVIRONMENT MINISTER CONFRONTS ILLEGAL LOGGERS AMID RUMORS OF HER OUSTER
REF: QUITO 1828

¶1. Summary: Minister of Environment Anita Alban took to the forest on October 1st to investigate illegal logging. The inspection, which revealed criminal activities, has yet to generate any concrete judicial response. Alban’s decision to confront loggers takes place amid rumors that she will be removed from office. MOE workers on strike over forestry management in the Ministry have further complicated the political landscape for Alban. End Summary.

UNFAMILIAR TERRITORY ——————–

¶2. Responding to complaints of illegal logging from the Indigenous Awa Federation (FCAE), Minister Alban traveled to Awa territory in northern Ecuador on October 1 to conduct an inspection. Alban was accompanied by a USAID specialist, ministry personnel, and a journalist. Consistent with FCAE claims, Alban’s team discovered what appeared to be several illegal logging operations. While some of the operations were run by independent groups, others were associated with known timber companies. Although no one was arrested at that time, National Forestry Director German Espinoza ordered the loggers to stop operations. Although they claim to have no affiliation with the logging operations discovered by the Minister’s group, the timber company SETRAFOR has agreed to conduct follow-up meetings with FCAE on October 11 to establish more concrete agreements between the two and to clarify land title disputes.

¶3. Alban’s inspection took many by surprise. Although Alban said deforestation was one of her main concerns when she became Minister in April 2005, she had heretofore done nothing to address what is the second highest rate of deforestation among South American countries. Alban’s inaction is not restricted to forestry issues. She has been absent and weak on a number of high-profile environmental issues, most notably with respect to the Galapagos (reftel).

¶4. Inattention to deforestation preceded Alban. Indeed, this type of active engagement against illegal logging has not been seen in the Ministry since 2003. Prior to 2003, the SWISS company SGS provided independent and effective monitoring of logging activities under a contract with the Ministry of Environment. Logging interests managed to have SGS’s contract ruled unconstitutional by courts in 2003. Without SGS monitoring, illegal logging is rampant and the Ministry of Environment has been unable (and apparently unwilling) to stop it. That Alban’s team did not follow up the October 1st investigation with any immediate legal action may suggest more of the same.

MOE STRIKE CONTINUES ——————–

¶5. An ongoing strike at the Ministry of Environment no doubt has motivated Minister Alban. Ministry staff, who initiated the strike on September 22nd, have been voicing their displeasure over the Ministry’s forest management. Publicly, they claim that they want greater control over forestry programs. However, Ministry staff acknowledged to Econoff that a segment of striking employees also are interested in keeping tax money and jobs. As the strike has progressed, calls for Alban to resign have grown. Not all MOE staff are on board with the strikers’ demands, and many continue to do their work. Nonetheless, the employees association has been successful in garnering press and pressuring Minister Alban to act.

¶6. To address the strikers’ concerns, Minister Alban also has developed a proposal on forestry management that striking employees are reviewing. The proposal, known as the National System of Forestry Control and Wildlife Trafficking, allocates $350,000 to be utilized by both existing staff and contractors. Unfortunately, program funds will last only 6 months. Together with the illegal logging inspection, the new forest management proposal represents Alban’s effort to satisfy the demands of striking staff and portray herself as an active and effective Minister.

ALBAN’S DAYS NUMBERED? ———————-

¶7. Minister Alban’s recent actions suggest she is worried about keeping her job. Indeed, the calls for her to resign are resonating outside of the MOE and continue to grow. More worrisome for Alban, politicians within the PSC also have an eye on her Ministry. Congressman Alfredo Serrano, who represents the Galapagos and has business interests there, reportedly wants Alban replaced with someone more to his liking. MOE Sub-minister Alfredo Carrasco’s name has been mentioned as a possible replacement. Carrasco’s evasive responses to questions surrounding the strike and calls for Alban’s removal suggest he is mulling over his options. Nothing specific appears in the works as of yet.

COMMENT ——-

¶8. The arrival of a new Minister could lead to changes in the Governorship of the Galapagos and the Directorship of the Galapagos National Park (GNP). Politicization of the GNP during the last 2-plus years triggered violent demonstrations in the islands and had damaging effects on the GNP’s monitoring and enforcement abilities. Whether driven by striking MOE staff or Ecuadorian political interests, the removal of Minister Alban may well cause more institutional and social instability.

JEWELL

HEADER This record is a partial extract of the original cable. The full text of the original cable is not available. 

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ECUADOR’S NEW ENVIRONMENTAL MINISTER MORE POLITICAL THAN ENVIRONMENTAL

Monday, May 2nd, 2011
ID
05QUITO592
SUBJECT
ECUADOR,S NEW ENVIRONMENTAL MINISTER MORE
DATE
2005-03-15 18:06:00
CLASSIFICATION
UNCLASSIFIED
ORIGIN
Embassy Quito
TEXT
UNCLAS SECTION 01 OF 03 QUITO 000592 

SIPDIS

E.O. 12958: N/A TAGS: EAID ECON EFIS ETRD PGOV PREL EC SEVNSUBJECT: ECUADOR,S NEW ENVIRONMENTAL MINISTER MORE POLITICAL THAN ENVIRONMENTAL

REF: QUITO 0540

¶1. (SBU) Summary. President Gutierrez named Juan Carlos Camacho as the new Minister of the Environment on February 24, replacing the beleaguered Fabian Valdivieso. Camacho has no real environmental experience and was given the position to assuage the block of independent congressmen who hold the balance in Congress. Camacho is a political operator who is working for fishing interests in the Galapagos in order to secure their vote for the President. He has also promised to take action on renewing the contract of a SWISS firm that was monitoring illegal logging in Ecuador. At two different meetings (Reftel), President Gutierrez called for a balanced, sustainable solution to the Galapagos crisis. While we are optimistic about the President,s words, we are wary of Camacho,s alliances with the fishing sector. End Summary.

————– Bio Says A Lot ————–

¶2. (U) Juan Carlos Camacho is more than anything a politician. He was twice a congressional representative for Bolivar province ) first for the Concentracion de Fuerzas Populares (CFP) from 1988 to 1990, and then for the Izquierda Democratica (ID), from 1992 to 1994. During his second term, he left the ID and became an independent.

¶3. (U) In October 1994, then-legislators Simon Bustamante and Rafael Cuesta accused Camacho of being &the briefcase man8 for the independents, implying that he was dispersing the cash used to buy the votes of independent congressmen. Camacho denies these allegations.

¶4. (U) Camacho has no environmental experience except that, as he put it in a post-nomination interview, he &has planted trees with his own hands8 and &has a clear notion of what clean air is.8

————————– Courtesy Call Reveals More ————————–

¶5. (U) The DCM and USAID Director paid a courtesy call to Camacho on March 8. The DCM congratulated Camacho on his new position and said the Embassy stood ready to help him conquer some of the many difficult problems he will confront. Galapagos was the Embassy,s top environmental concern and we were encouraged by the President,s recent attention to the Galapagos crisis and call for a 30-day plan to resolve it (Reftel). The DCM delivered our baseline message to Camacho -) that the Galapagos crisis is Ecuador,s to solve and that the international community wants to help Ecuador achieve its goals. The DCM also urged Camacho to quickly address park management instability, monitoring and enforcement in the marine reserve, income-generating alternatives for fishermen and illegal immigration.

¶6. (U) Camacho said he understood the need for action in the Galapagos and that he would take action, unlike his predecessor, who he admitted did not like to make decisions. Camacho would like to reform the Galapagos Special Law in order to stabilize and depoliticize the Galapagos National Park (GNP) Directorship. He rejected the DCM,s suggestion (as per the UNDP/IDB/USAID consultants hired to analyze this problem) that it could be done by presidential decree. Camacho admitted that there is a lot of politics surrounding the Galapagos, suggesting that he too was involved. He said he would meet with the Ministers of Tourism and Government soon, to reach a unified position on the Galapagos. He also said that violent demonstrations in the Galapagos need to stop. They damage the image of the islands and serve no one.

¶7. (U) The USAID Director noted the USG,s $10 million investment in the Galapagos. He also agreed with Camacho that dialogue is important among the players, and to that end the fishing sector needs to rejoin the Junta de Manejo Participativo (JMP – a Galapagos planning and advisory board comprised of the conservation, tourism, government and fishing sector representatives). The fishing sector walked away from the JMP years ago citing conservation as the exclusive goal of the body. Camacho accepted the invitation from the USAID Director for a full briefing on USAID programs.

¶8. (SBU) The USAID Director also raised concern about the GOE,s failure to renew its contract with the SWISS firm SGS. SGS was given a contract in 1999 to monitor illegal logging in Ecuador. In 2003, bowing to pressure from powerful logging interest, the offices of SGS were closed and its contract allowed to expire. The parties resolved outstanding legal problems and the GOE agreed to renew SGS,s contract. However, the GOE now claims it lacks the finances to renew the contract. Though, we believe the problem is more the lack of political will than finances.

¶9. (U) The DCM emphasized the extensive international interest in the Galapagos. The Ambassador has been there on numerous occasions; several US Senators (notably Dodd and McCain) have been there, as has former President Jimmy Carter. The previous Minister of the Environment had visited the Carter Center to lay the groundwork for an international forum. We stood ready to work with Camacho in that regard, the DCM added.

—————————————- Meeting with Donors Confirms Our Opinion —————————————-

¶10. (U) Acting on the President,s orders (Reftel), Camacho convoked a meeting of donors. He started the meeting by saying that we must avoid any future strikes in the Galapagos, but added that the fishermen in the Galapagos have threatened to demonstrate if the sea cucumber season remains closed this month (March) without a viable income-generating alternative for them. The fishermen are pushing for long-line fishing as the desired alternative, otherwise come March 20 they will take to the streets.

¶11. (U) The Spanish representative spoke eloquently about the problems in the Galapagos ) institutional instability, the need for sustainable development, illegal immigration ) but said that harvesting sea cucumbers and long-line fishing were certainly not the answer. The other donors said that they wholeheartedly agreed with this assessment and noted that the March 20 strike date left little time for finding a lasting solution. The Interamerican Development Bank (IDB) representative suggested that the GOE put the artesenal fish processing centers they funded, which are fully constructed, into production. This could be done quickly and the products could be sold to tourists. Others tossed out medium-term ideas for fishing alternatives. One idea was to auction fishing permits to sport-fishing operators for tourists. The permits would be limited in number, but tradeable. Others spoke of raising park entrance fees and putting the proceeds in a fund to establish fishermen in other occupations. The donors suggested that we get all the players together (to include fishing and tourism sector representatives) to brainstorm and agree on specific measures.

¶12. (U) Though he listened, Camacho made no commitments, emphasizing that he is still in the learning process. He added that his predecessor did not leave good files on the Galapagos and that there was no one to advise him. He requested that Fundacion Natura and the Charles Darwin Foundation comment on fishing alternative proposals presented to the President during his trip to the Galapagos.

¶13. (U) Despite his professed steep learning curve, Camacho was prepared enough to present a proposal. As the meeting ended, he circulated his own proposed presidential decree that would require all tourists who visit the Galapagos to spend at least one night on land, would open the marine reserve to sport fishing, and (in an apparent jab at tourism magnate Roque Sevilla) would prohibit the use of submarines, or any kind of submersible naval vessel in the marine reserve (Sevilla wants to offer submarine tours in the Galapagos).

——- Comment ——-

¶14. (SBU) The appointment of Camacho portends of further political expediency in the Galapagos. Camacho is aligned with the independent vote, and is rumored to owe his appointment to (former PSC) Independent diputado San Martin, who led the effort to dismantle the forestry control system. He and Vinicio Andrade, the pro-fishing diputado from the Galapagos, whose vote the President has courted, have also laid out a clear agenda in support of fishing interests in the Galapagos.

¶15. (SBU) Camacho,s proposed presidential decree lacks balance, feasibility and ultimately will only minimally benefit fishermen. Our task will be to educate and guide Camacho toward more sustainable alternatives. The President,s recent focus on Galapagos and public pronouncements give us cause for hope, but we need to see concrete actions. The Ambassador will also sign a joint communiqu to the MFA asking that the SGS issue be resolved as soon as possible, as the treatment SGS received does not bode well for other environmental NGOs operating in Ecuador.

KENNEY

HEADER
This record is a partial extract of the original cable. The full text of the original cable is not available. 

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NEW MINISTER OF ENVIRONMENT ACKNOWLEDGES ENVIRONMENTAL CONCERNS

Monday, May 2nd, 2011
ID
05QUITO1265
SUBJECT
NEW MINISTER OF ENVIRONMENT ACKNOWLEDGES
DATE
2005-06-02 19:07:00
CLASSIFICATION
UNCLASSIFIED
ORIGIN
Embassy Quito
TEXT
UNCLAS SECTION 01 OF 02 QUITO 001265

SIPDIS

E.O. 12958: N/A TAGS: EAID ECON EFIS ETRD PGOV PREL SENV ECSUBJECT: NEW MINISTER OF ENVIRONMENT ACKNOWLEDGES ENVIRONMENTAL CONCERNS

REF: A. QUITO 983 ¶B. 04 QUITO 2704

¶1. Summary. In a courtesy call with the new Minister of the Environment, Anita Alban Mora, Embassy and USAID officials presented Galapagos and illegal logging as the Mission,s two top environmental priorities. Alban agreed that these issues were serious and said she planned to deal with them, welcoming cooperation with us and the donor community. She accepted a USAID invitation for a briefing on their programs, planned to meet with the donor community as soon as feasible, and commented that she would go to the Galapagos soon to begin working issues there. She also noted that she would try to implement the independent and transparent process for selecting directors of the Galapagos National Park (GNP) that the donor community and we have pushed for months. We congratulated her on her choice of interim GNP Director, Washington Tapia, a figure well and favorably known to us. End Summary.

Young and Nervous —————–

¶2. At 37, Anita Alban is by far the youngest of Palacio,s cabinet. Her reputation preceded her into this position (Reftel A), indicating that she is likely neither qualified nor capable of handling ministerial-level responsibilities. She is also thought to owe this position to Lourdes Luque, a former Minister of the Environment, Palacio-family associate, and Guayaquil political figure. She was very nervous at the beginning of the meeting but relaxed towards the end, realizing that we had not come to lambaste her but to offer support.

¶3. Alban came alone to the meeting. We first laid out our top concerns – Galapagos and illegal logging. We then congratulated her on her choice of Washington Tapia as interim director of the GNP. First, she said, Galapagos is also a priority for her. She commented that she would seek to implement the transparent and independent process for selecting GNP Directors, as formulated by USAID/UNDP/IDB funded consultants (Reftel B). This would go a long way towards depoliticizing the park, our short-term Galapagos goal. She also explained that income-generating alternatives for fishermen were a medium-term goal. She has contacted FOMIN about establishing some sort of credit system to help move fishermen into tourism and other sustainable activities.

¶4. Illegal logging was also of concern to her. We commented that Ecuador is only second to Brazil in its rate of deforestation. She understood and nodded when we suggested that independent third party monitoring is probably the answer. We discussed the SGS case, a SWISS company who had the contract with GOE to do independent monitoring of illegal logging. SGS was so effective that logging interests managed to have their contract nullified by the courts in 2003. There has been no effective monitoring of illegal logging since. Alban, to our surprise and in contrast to the position taken by other GOE officials, commented that the SGS contract was still valid. She said she was meeting with SGS later that day.

Meet the Family —————

¶5. We encouraged her to become involved with the donor community in order to work on issues. USAID offered to brief her on their programs and she accepted the invitation. She also said she hoped to engage the international community as soon as possible in order to establish environmental priorities.

Conservation Wins the Trifecta in Galapagos ——————————————-

¶6. There are three appointed positions in the Galapagos of exceptional prominence and importance to conservation efforts – the Director of GNP, the Head of INGALA (Instituto Nacional de Galapagos), and the Governor of Galapagos province.

¶7. Washington Tapia was named interim director of GNP by Alban. Wacho, as he is known, is a very technically qualified director who is well and favorably known to us. He participated in our IV program and we have very good relations with him.

¶8. Carlos Carrion, brother of former GNP Interim Director Victor Carrion, is also a good choice for Head of INGALA. While some have found him eager to please everyone with whom he meets, he is environmentally oriented and will likely support conservation efforts in the Galapagos.

¶9. Finally, Grace Unda was selected to be Governor of Galapagos province. She was previously a virtually unknown figure in the Galapagos, working as the Provincial Coordinator for Vive la Democracia. We recognized her commitment to democracy and honesty early on and nominated her to participate in our IV program before she became governor. This should establish a good working relationship with her now that she is governor.

Comment ——-

¶10. While not yet seasoned, Alban seems to be making the right choices. Our fear is that her benefactor and political interlocutors will start demanding anti-conservation decisions from her. Our hope is to bring her into our fold far enough to educate her and help her resist such difficult political demands.

Kenney

HEADER
This record is a partial extract of the original cable. The full text of the original cable is not available.

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ECUADOR’S 2009 INVESTMENT CLIMATE STATEMENT

Monday, May 2nd, 2011
ID 09QUITO36
SUBJECT ECUADOR’S 2009 INVESTMENT CLIMATE STATEMENT
DATE 2009-01-20 21:09:00
CLASSIFICATION UNCLASSIFIED
ORIGIN Embassy Quito
TEXT UNCLAS QUITO 000036
SIPDIS
DEPARTMENT FOR EB/IFD/OIA USTR FOR BHARMAN, MCARRILLO
E.O. 12958: N/A TAGS: EINV ETRD KTDB OPIC USTR ECSUBJECT: ECUADOR’S 2009 INVESTMENT CLIMATE STATEMENT
REFTEL: 08 STATE 123907
¶1. In response to State 123907, Embassy Quito reports the following update for its 2009 Investment Climate Statement. This update has also been sent to EB/IFD/OIA (J. Nathaniel Hatcher) by email. 

Openness to Foreign Investment

Ecuador can be a difficult place in which to do business, although it is relatively open to foreign investment. There are restrictions or limitations on private investment in many sectors that apply equally to domestic and foreign investors. As a member of the Andean Pact, Andean Decisions 291 and 292 of 1991 nominally govern Ecuador’s foreign investment policy. Implementing regulations issued in January 1993 and a 1997 law to promote foreign investment sought to liberalize the investment regime. Additional legislation to facilitate private sector investment in the telecommunications and mining sectors was passed in 2000 and has led to increased foreign investment in the former, though foreign companies have been frustrated by commercial disputes. A 2006 hydrocarbons law imposed new conditions in the petroleum sector that have been problematic for many companies, complicated by a 2007 decree that imposed additional restrictions. A 2008 mining mandate stalled mining activity, and a new Mining Law is expected in early 2009. Negotiations for a free trade agreement between the United State and Ecuador, which would have included investment provisions, stopped in April 2006. The current Government of Ecuador has not expressed interest in restarting negotiations.
Inconsistent enforcement of contracts is one of the main concerns of foreign investors in Ecuador. Government officials and private Ecuadorian businesses have used regulatory schemes and questionable legal maneuvers to hinder foreign company operations in the country. Companies have sometimes been confronted with requirements of additional payments not negotiated in original agreements; receiving full and timely payments due can be another recurring problem. Business disputes with U.S. companies can become politicized, especially in sensitive areas such as the energy sector. Several commercial disputes involving U.S. companies, mostly linked to the energy sector, are currently under international arbitration.
Under current regulations, foreign investors receive the same rights of entry as Ecuadorian private investors. Foreign investment with up to 100% foreign equity is allowed without prior authorization or screening in most sectors of the Ecuadorian economy currently open to domestic private investment. Foreign investors must register their investments with the Central Bank for statistical purposes. Ecuadorian law requires private companies to distribute 15% of pre-tax profits to their employees each year. Many companies, mostly domestic, use legal loopholes to circumvent this requirement.
Prior authorization is required for license and franchise transactions. No limits exist on the amount of royalties that may be remitted. All license and franchise agreements must be registered with the Ecuadorian Intellectual Property Institute (IEPI). In September 1997, the Ecuadorian Congress repealed the law for the protection of representatives, agents and dealers of foreign enterprises, which had imposed discriminatory restrictions on foreign companies in their dealings with their Ecuadorian agents. However, dealers whose relationships predated the repeal may continue to take action under the law. There is no legal discrimination against foreign investors at the time their investments are made. Foreign investors may participate in government-financed research programs. According to a new constitution adopted in October 2008, the Government will promote both local and foreign investment, but local investment will take priority; foreign investment should respond to national priorities as defined by the National Development Plan. The Government of Ecuador has not defined how these provisions will be implemented.
Although the scope for private sector participation has been expanded in recent years, foreign investors, and often domestic investors as well, still operate with limitations in certain sectors of the economy:

Petroleum:

All subsurface resources belong to the state. Ecuador permits investment by foreign oil companies. Foreign oil companies previously engaged in exploration and development activities were under risk-service contracts with Petroecuador. With limited exceptions, investments in the oil sector now use production-sharing contracts that give private investors the right to share in finds. However, the current Government of Ecuador has recently indicated interest in reverting to risk-service contracts; negotiations are taking place to transition to these contracts. Foreign participation is not permitted in Petroecuador’s extensive oil fields.
Ecuador has been unable to increase private investment in the petroleum sector in recent years, in part because of unfavorable economic terms, legal uncertainties, GOE tax policies, environmental liability concerns, and a lack of a coherent energy policy. State-owned Petroecuador’s production increased slightly in 2008 through November, compared to the same period in 2007.
High profile legal cases brought by and against foreign oil companies have also dampened foreign investor interest. In 2005, President Palacio issued a decree requiring that all petroleum exploration and production contracts be renegotiated. In 2006 the Government of Ecuador made this decree law by amending its hydrocarbons law, unilaterally modifying the terms of oil production sharing contracts. In 2007, President Correa issued a decree increasing the State’s share of extraordinary petroleum revenues under the 2006 amendment to 99%. On December 28, 2007, a new tax law was passed which sets the State’s share of extraordinary petroleum revenues at 70% for contracts signed after the law goes into effect. Foreign oil companies in Ecuador argued that operations would not to be feasible under this scenario. In December 2006, April 2008, and June 2008, three U.S. companies initiated international arbitration proceedings based on the changes (while continuing to pursue negotiated solutions), as did other foreign oil companies. One of the U.S. companies reached agreement with the GOE to buy out its contract in August 2008 and has since left the country. The Government of Ecuador has initiated negotiations with the remaining foreign companies to renegotiate their contracts. Private companies, including foreign ones, can participate in domestic fuel distribution, refining and transport activities. However, fuel prices are controlled by the central government. Ecuador has insufficient refining capacity to meet domestic demand for refined products and must import many oil derivatives.

Mining:

The mining sector is open to foreign investment, and foreigners have the same access to mining concessions as domestic investors. Foreign investors are prohibited from obtaining mining rights in zones adjacent to international boundaries without the permission of the President and the approval of the National Security Council of the Armed Forces (COSENA). Legislation and regulations were enacted (in 2000 and 2001) to encourage additional investment in the sector by eliminating government royalties, reducing the payment of surface rights per hectare, approving mining titles valid for all mining processes for 30 years, and streamlining the concession process. However, the validity of mining concessions under the 2000 law was called into question when the Ministry of Energy and Mines unexpectedly canceled some concessions in 2003. Investment in mining continues to be modest by Andean standards. Although rising commodity prices have led to an increase in mining investment in Ecuador in recent years, problems with local communities opposed to mining operations have caused periodic shutdowns. The Government of Ecuador has also temporarily suspended operating permissions for some concessions due to conflicts with communities. The mining mandate of April 2008 revoked over 4,000 mining concessions and suspended mining activity for six months. Major mining activity had not resumed as of January 2009. The Government of Ecuador has proposed a new mining law that was being reviewed by the legislative assembly in January 2009.

Fishing:

Foreign investment in domestic fishing operations is subject to approval by the National Fishery Development Council based on a favorable report from the National Fishing Institute. Extractive fishing by foreign companies is permitted provided that the catch is processed in Ecuador. The local sea cucumber population has been nearly eliminated, but shrimp, tuna and other fish products are harvested by national and foreign flag vessels and are major exports for Ecuador.

Electricity:

Amendments to the 1996 Electrical Sector Law adopted by the Ecuadorian Congress in 1998 authorized greater private participation in the electrical sector, but did not permit private firms to obtain majority control over any distribution, generation or transmission firms controlled by the state (the vast majority). Additional reform legislation passed in 2000 authorized private firms to purchase up to 51% of shares of government-owned electric distribution, transmission, and generation companies.
Electricity generators, including U.S. companies, face chronic problems in collecting accounts receivables from government-owned power distributors, which often operate at a loss. In 2007 the Government of Ecuador created a new Ministry of Electricity and Renewable Energy to focus more attention on the sector. A new electricity mandate issued in July 2008 establishes a single electricity tariff for distributors and consolidates the 19 state distributors into one. However, the mandate has not yet been implemented.
U.S. firms in this sector had been pursuing international arbitration; one won its arbitration and was paid an arbitral award in December 2008, and another reached a negotiated settlement with the government of Ecuador.

Telecommunications:

Basic telecommunications had traditionally been reserved for the state, but a 2002 law liberalized the sector. Two private groups with foreign participation were granted concessions in 1993 to develop cellular telephone systems. A third, state-owned company was granted a cellular concession in 2003. In 2004, US company BellSouth sold its assets in Ecuador to the Spanish company Telefonica. Satellite and paging services are also in private hands.
In 1998, Emetel, the former state telephone monopoly, was split into two corporations (Andinatel in the highlands and Pacifictel in the coastal region). Pacifictel has faced severe management challenges and has been the focus of several scandals. In September 2008, the National Telecommunications Council CONATEL approved the merger of Andinatel and Pacifictel, which are currently in the process of forming the Corporacisn Nacional de Telecomunicaciones. Detailed regulatory processes and delayed state company payments to the private sector continue to hinder foreign investors.

Media:

Foreign companies are prohibited from owning more that 25% equity in broadcast stations. Foreigners are not permitted to obtain broadcast concessions.

Strategic Sectors:

Other “strategic enterprises” are reserved for the state, including national security industries, in which the military often acts as a joint venture partner with private industry.
Conversion and Transfer Policies

In 2000, Ecuador adopted the U.S. dollar as its official currency. Since Ecuador adopted the dollar, inflation rates have declined from a high of near 100% to single digits. The rate of inflation from October 2007 to October 2008 was 9.85%.
Foreign investors may remit 100% of net profits and capital. Investors may also freely repatriate the proceeds from liquidation of their investments. There are no current limitations on outflows of funds for debt service, capital gains, returns on intellectual property, or imported inputs, other than the 2008 tax on capital outflows. There is also no significant delay for remitting investment returns such as dividends, return on capital, interest and principal on private foreign debt, lease payments, royalties and management fees through normal legal channels.
Ecuadorians may also export capital, and there are substantial Ecuadorian financial holdings in the United States and other offshore banking centers. In December 2007, the Government of Ecuador passed a broad tax reform package, which included establishing a 0.5% tax on capital outflows. Transfers for imports, dividends on foreign investment, interest and principal payments on external debt registered with the Central Bank, and insurance premiums are exempt. In December 2008, the tax on capital outflows was increased to 1% and the exemptions were eliminated.

Expropriation and Compensation

Expropriation is provided for in Ecuadorian law with appropriate compensation. In cases of expropriation, the individual has the right to petition a judge to establish an appropriate price for expropriated holdings. The Agrarian Development Law restricts the grounds for expropriation of agricultural land and makes land cases subject to regular courts. It can be difficult to enforce property and concession rights, particularly in the agriculture, mining and petroleum, commercial and residential real estate sectors. In some cases, Ecuador’s judicial system has failed to provide adequate protection from unlawful expropriations or provide investors and lenders with prompt, adequate and effective compensation for expropriated property. Property, whether land or mobile assets jointly owned by several persons or companies, can be seized by Ecuadorian courts through judgments or seizure orders. U.S. citizens have had their assets seized because of judgments against their Ecuadorian partner in cases having no connection with the U.S. investor. Resolution and compensation typically require many years and significant legal costs.
Under Ecuador’s bilateral investment treaty (BIT) with the United States, expropriation can only be carried out for a public purpose, in a nondiscriminatory manner, and upon payment of prompt, adequate and effective compensation. In 2004, a U.S. company won a $75 million international arbitration award against the Government of Ecuador. In March 2008, the government of Ecuador paid the award. In 2006, Ecuador’s Solicitor General (Procurador General) initiated an investigation of the same company for allegedly transferring assets to another foreign company without obtaining the required government authorization. The government of Ecuador nullified the company’s contract and seized the company’s considerable assets in Ecuador. The U.S. company has initiated arbitration proceedings under the BIT; the government of Ecuador is participating in the proceedings. In September 2008, the arbitral panel ruled that it had jurisdiction over the case.
A number of U.S. companies operating in Ecuador, notably in regulated sectors such as petroleum and electricity, have filed for international arbitration resulting from investment disputes. Investors in more lightly regulated sectors have fewer disputes. In July, 2007, the World Bank’s ICSID ruled against one U.S. electricity company’s arbitration claim on jurisdictional grounds. The company has filed for an annulment of the ruling. In August 2008, another U.S. electricity company received a favorable arbitral award in its claim against the government of Ecuador. Two other companies reached negotiated agreements with the GOE regarding their arbitration claims in 2008.
The 2008 Constitution establishes that the State would manage land use and access to lands, while recognizing and guaranteeing the right to private property, “which should fulfill social and environmental functions.” As of January, 2008, implementing laws to clarify this provision have not been issued.

Dispute Settlement

Systemic weakness and susceptibility to political or economic pressures in the rule of law constitute the most important problem faced by U.S. companies investing in or trading with Ecuador. The Ecuadorian judicial system is hampered by processing delays, unpredictable judgments in civil and commercial cases, inconsistent rulings, and limited access to the courts. Criminal complaints and arrest warrants against foreign company officials have been used to pressure companies involved in commercial disputes. There have been cases in which foreign company officials have been prevented by the courts from leaving Ecuador due to pending claims against the company. Ecuadorians involved in business disputes can sometimes arrange for their opponents, including foreigners, to be jailed pending resolution of the dispute.
The courts are often susceptible to outside pressure and bribes. Neither Congressional oversight nor internal judicial branch mechanisms have shown a consistent capacity to effectively investigate and discipline allegedly corrupt judges. Despite efforts to depoliticize and modernize the court system, the resource-starved judiciary continues to operate slowly and inefficiently. There are over 55,000 laws and regulations in force. Many of these are conflicting, which contributes to unpredictable and sometimes contradictory judicial decisions. Enforcement of contract rights, equal treatment under the law, IPR protection, and unpredictable regulatory regimes are major concerns for foreign investors.
A number of foreign and local investors have had agricultural land seized by squatter groups over the years. The Embassy is aware of one instance in 2007 where an effort by squatters to seize land was blocked by local authorities. Squatter groups also tried to seize land after Ecuador’s new constitution was approved in late 2008; the government condemned those actions. The Embassy has not received any recent complaints about land being seized by squatters. In the past, the agrarian reform authorities often legally recognized squatter claims in the agricultural sector, with minimal or no compensation paid. Current agrarian law makes legalization of such seizures difficult and guarantees cash payment of the market value of the expropriated property.
Some local and foreign mining companies have had their concessions occupied by informal miners, who have subsequently sought a share of the concessions. Government entities, especially the state oil, telephone, and electricity companies, have violated their contracts with domestic and foreign private firms.
The U.S. – Ecuadorian BIT provides for binding international arbitration of disputes with the Government at the investor’s option. Ecuador is a member of the International Center for the Settlement of Investment Disputes (ICSID). In November 2007, the Government of Ecuador sent a letter to ICSID stating that it would no longer submit to ICSID jurisdiction for mining and petroleum matters, introducing additional uncertainty to the investment climate in the natural resources sectors. In early 2005, Ecuador modified the Arbitration and Mediation Law to prohibit international arbitration if the “national interest” could be affected. This modification appears to conflict with the terms of the BIT and, at a minimum, creates confusion among investors regarding their right to arbitration.
Ecuador’s new constitution recognizes local or regional arbitration centers, or other forums as agreed to by the parties, and could limit arbitration options for investors, but these provisions have not been implemented. The new constitution also includes provisions which could limit the availability of international arbitration in new Ecuadorian investment treaties. These provisions do not appear to apply to existing treaties.

Performance Requirements and Incentives

There are no performance requirements associated with foreign investment in Ecuador. Except for “strategic” sectors described earlier, foreign investors are not required to have local equity participation. Visa and residence requirements do not inhibit foreign investment.
Under the Andean Community Common Automotive Policy, Ecuador, Venezuela and Colombia impose local content requirements on automobiles assembled in country in order to qualify for reduced duties on imports. The WTO Agreement on Trade-Related Investment Measures (TRIMS) prohibits such requirements. The local content requirement for passenger vehicles was 32 percent in 1997. It was raised to 33 percent for 1998, and was then lowered to 24 percent for 2000. Under the TRIMS Agreement, the three countries were obliged to eliminate local content requirements by 2000. However, in December 1999 the Andean Automotive Policy Council determined that it would not eliminate the local content requirement as it had initially indicated, but instead decided to increase it gradually to 35 percent by the year 2009. This revised automotive policy may be inconsistent with Ecuador’s WTO obligations under the TRIMS Agreement.
Ecuador is a beneficiary of the Andean Trade Preferences and Drug Eradication Act (ATPA). The primary goal of this program is to promote export diversification and to provide sustainable alternatives to drug-crop production in the Andean region. ATPA created Ecuador’s cut-flower boom, and also provided for duty-free exports of wood products, plywood, jewelry, and fruits and vegetables. The Andean Trade Preferences and Drug Eradication Act, which expanded the ATPA, provides Ecuador with duty-free access to the U.S. market in a number of new export categories in which Ecuador is competitive, including textiles, leather products, and pouched tuna.
The ATPA and its trade benefits have been extended until December 31, 2009.

Right to Private Ownership and Establishment

Foreign and domestic private entities can own business enterprises and engage in almost all forms of business activity. Private entities can compete freely with the public sector in most areas, although in some cases the Government has clearly favored state-owned enterprises in awarding its business. In August 2008, Ecuador’s Constituent Assembly passed a new public contracting law, which calls for priority for locally produced products and services in public purchases, although foreign suppliers can compete for the contracts. The government has not yet defined how it will establish priority for Ecuadorian suppliers. The law eliminates the former requirement to obtain approval from the Attorney General and the Controller prior to being awarded a government contract, and creates a National Institute of Public Contracting to oversee transparency and timeliness of the contracting process.

Protection of Property Rights

There have been numerous instances where the judicial system has not adequately protected property owners’ rights. U.S. investors in real estate should exercise caution when considering a land purchase in Ecuador.
Ecuador’s intellectual property regime is governed by the “Law on Intellectual Property” adopted in 1998. The law provides criminal and administrative relief to right holders. Ecuador has ratified the Berne Convention for the protection of literary and artistic works, the Geneva Phonogram Convention, and the Patent Cooperation Treaty. Ecuador is also bound by the Andean Community Decisions 345, 351, and 486. Decision 486 improves intellectual property protection by expanding the definition of patent ability and strengthening data exclusivity. In April 2001, the U.S. Trade Representative (USTR) removed Ecuador from its Special 301 Watch List to reflect improvements in Ecuador’s intellectual property regime. However, weakened enforcement (particularly in the area of pharmaceuticals) led to Ecuador’s re-listing in 2003. At the end of 2008, Ecuador was still listed on the Watch List. Ecuador made a public commitment to apply the WTO TRIPS agreement from the date of its accession to the WTO.
In 2004, the Andean Community confirmed the legality of a Colombian decree reinforcing data exclusivity rules and intellectual property rights. This decision removed key conflicts between Andean Community rules and Ecuador’s WTO commitments, theoretically reinforcing the legal protections for intellectual property rights. However, Ecuador continues to issue sanitary registrations to illegal copies of patented products, and at times has relied on test data that the original producing company maintains is protected by data confidentiality.
Enforcement against intellectual property infringement remains a serious problem in Ecuador. The national police and the customs authority are responsible for carrying out IPR enforcement orders, but it has sometimes been difficult to have court orders enforced. There is a widespread local trade in pirated audio and video recordings, computer software and counterfeit activity regarding brand name apparel. On the other hand, local registration of unauthorized copies of well-known trademarks has been reduced.

Patents

The IPR law extends patent protection for 20 years from the date of filing. Patenting of pharmaceutical products is permitted. Provisions for compulsory licensing are limited. In infringement cases, the burden of proof lies with the alleged infringer. The law also provides patent protection for new drugs. Although Andean Community Decision 486, issued in late 2000, represents a significant improvement over Decision 344, it still does not provide adequate protection for “second use” patents.
Producers of branded pharmaceuticals are concerned that the “Law on Generic Drugs”, which was passed in 2000, enshrines discrimination against branded pharmaceuticals into law. The law mandates that Government entities buy only generic drugs. The law also lowers drugstore gross profit margins on branded medicines to 20%, while maintaining the margins for generic drugs at 25%. Under the law, drugstores are also required to devote a certain percentage of shelf space to generic pharmaceuticals. The GOE has proposed to further reduce allowable profit margins on pharmaceutical sales, but no final action has been taken in that regard.

Copyrights

Printed and recorded works are in theory protected under the IPR law for the life of the author plus 70 years. Computer programs and software are also protected. However, pirated CDs and DVDs are readily available on many street corners and even in shopping malls. The Government of Ecuador, through the IEPI’s Strategic Plan against Piracy, has committed to take action to reduce the levels of copyright piracy, including though implementation and enforcement of its 1998 Copyright Law. However, weak copyright enforcement remains a significant problem, especially concerning sound recordings, computer software and motion pictures. Sellers of pirated goods sell their illegal wares with little fear of prosecution. The Government of Ecuador has not taken action to clarify that Article 78 of the 1999 Law on Higher Education does not permit software copyright infringement by educational institutions.

Trademarks

Trademark registration is permitted for renewable 10-year periods, but registration may be canceled if the mark is not used in the Andean region for a period of three years. The IPR law provides protections for well-known trademarks. A trademark registration cannot be cancelled without the consent of the trademark owner.

Other Protection

The IPR law provides protection for industrial designs and extends protection to industrial secrets and geographical indicators. Semiconductor chip layouts are protected. Plant varieties and other biotechnology products are also, in theory, protected.

Registrations and Enforcement

The Ecuadorian Intellectual Property Institute (known by its Spanish acronym IEPI) was established in January 1999 to handle patent, trademark and copyright registrations on the Ecuadorian Government’s behalf. IPR enforcement has improved although piracy remains. The Ecuadorian National Police and Customs are responsible for carrying out IPR enforcement orders. IEPI has had to reduce funding and staffing for enforcement. However, the enforcement office was reorganized in 2007 in an effort to strengthen enforcement, and funds have been designated to train the staff in enforcement. IEPI has embarked on an initiative to enhance intellectual property awareness in children and young adults by providing educational materials on the protection of intellectual property to several hundred schools.
IEPI and Ecuadorian Customs have increased enforcement actions in their areas of competence where they can act without a formal complaint by the right-holder, through administrative sanctions imposed by IEPI or interception of counterfeit goods by Customs.

Transparency of Regulatory System Return to top

Ecuador’s regulatory system is not transparent. There are no antitrust laws and industry is fairly concentrated. The Government of Ecuador has indicated that it is preparing a competition law, but has not made it available for public review.
The Superintendent of Banks and Insurance (SBI) regulates financial and insurance institutions. The 2008 Constitution calls for the creation of new regulatory agencies for the informal financial sectors. The new Constitution also mandates that each financial institution have an ombudsman office. The regulatory authorities that were formerly autonomous now fall directly under the Executive. Under a law, approved by the legislative assembly in December 2008 but not finalized as of January 2009 because of partial vetoes, the Executive Branch would seek to improve coordination of the financial regulatory agencies by having both the Central Bank and the SBI as members of the new corporations that will manage a new liquidity fund, deposit insurance agency and resolution system. The National Council of Radio Broadcasting and Television (known by its Spanish acronym CONARTEL) regulates broadcasters. The Superintendent of Telecommunications regulates fixed-line and wireless communication services. The Superintendent of Companies regulates all other firms and, via the National Securities Council, the stock markets.
Policies, regulations and standards, particularly in regards to agricultural trade, often are not based on scientific principles and discriminate between local and imported products. Political appointees in the Ministries of Agriculture and Health control imports of agricultural goods, and customs procedures are cumbersome. Ecuadorian regulators provide little or no opportunity for public comment on newly proposed laws and regulations, particularly those related to food safety, sanitary and phytosanitary and other trade-related matters. Ecuador does not comply with the WTO notification requirement.
In addition, ministries, parastatals, and regional and municipal governments all impose their own requirements and regulations on commercial activity. In the World Economic Forum’s 2008 Competitiveness Index, Ecuador ranked 104 out of 134 countries surveyed.

Efficient Capital Markets and Portfolio Investment

The 1993 Capital Markets Law set up a modern regulatory structure, opened stock market trading to banks and other firms, and encouraged the development of mutual funds. However, Ecuadorian capital markets remain underdeveloped. Most large industrial groups are privately held, and are financed largely through debt or retained earnings. The bulk of activity on the country’s two small stock exchanges currently involves trading in short-term commercial paper, bank obligations, and government debt. Regional rivalries complicate efforts to develop a truly efficient capital market in Ecuador’s small market.
Most stock trades involve shares in a handful of banks and companies. Bank credit on market terms is available and improving; rates have been decreasing. The private sector has access primarily to short-term bank credit; approximately 70% of the loan portfolio has a maturity of less than one year and approximately 60% of the resources are demand deposits. Most of Ecuador’s blue-chip firms maintain external credit lines or other forms of foreign financing.

 

In July 2007, Congress approved a law to establish a new methodology to calculate interest rate ceilings for bank loans and eliminate non-interest commissions. The GOE has introduced new legislation (currently under discussion), modifying the methodology and giving authority to the Central Bank to set the rates. The financial sector continued to grow in 2008. Deposits increased by 28.44% from November 2007 through November 2008, while the total outstanding loan portfolio increased by 27%, during the same time period.

Political Violence

Ecuador does not have a tradition of widespread political violence or guerrilla activity. Crime is a serious concern, especially in the larger cities.
Student, labor union and indigenous protests against government policies are a regular feature of political life in Ecuador. While disruptive, especially to transportation, violence is usually limited and localized. Protesters often block city streets and rural highways, and public transportation tends to be disrupted during these incidents. Protestors also occasionally burn tires, throw Molotov cocktails, engage in destruction of property and detonate small improvised explosive devices during demonstrations, but fatalities as a result of protests have been rare. Pamphlet bombs are sometimes used to disseminate political literature. Popular protests in 1997, 2000 and 2005 contributed to the removal of three elected presidents before the end of their terms. Some communities have successfully used protests and strikes to obtain promises of increased government spending on social benefits and infrastructure. Some indigenous communities opposed to development have protested to block access by petroleum and mining companies. It is against the law for foreigners to engage in political activity that starts or promotes civil wars or international conflicts. In 2008, there were at least two incidents where protestors complained of possible excess force used by the police to disperse protests against government officials.
Kidnappings have occurred and foreigners have been targeted. The political violence present in neighboring Colombia can have a spillover effect in northern Ecuador. Since 1998, at least 10 U.S. citizens have been kidnapped. The U.S. Embassy in Quito advises against travel to the northern border of Ecuador – to include the provinces of Sucumbios, Orellana and Carchi and parts of Esmeraldas Province. However, kidnappings are more often economically than politically motivated. In October 2000, kidnappers seized several foreign oil workers in Eastern Ecuador. After murdering one of their American hostages in January 2001, they released the other victims upon receipt of a ransom payment.
Violent crime has significantly increased in 2007 and 2008, with American citizens being victims of crimes, to include, but not limited to, homicides, armed assaults, robberies, sexual assaults, and home invasions.
Businesses continue to report being extorted for protection money. Security on the northern border with Colombia, where the majority of Ecuador’s oil deposits are located, is particularly tenuous. The area is used as a transshipment point for precursor chemicals used in illegal drug protection as well as arms and supplies for Colombian insurgent groups and narco-traffickers. The Ecuadorian military and government agencies are increasing efforts to promote development and provide security in this area.

Corruption

Corruption is a serious problem in Ecuador. Transparency International consistently ranks Ecuador near the bottom among countries it surveys in the region. Ecuador ranked 151 out of 180 countries surveyed for Transparency International’s Corruption Perceptions Index 2008 and received a score of 2 out of 10 (10-highly clean, 0-highly corrupt). In the Western Hemisphere, only Venezuela and Haiti received lower scores than Ecuador.
Ecuador has laws and regulations to combat official corruption, but they are inadequately enforced. Illicit payments for official favors and theft of public funds take place frequently. Dispute settlement procedures are complicated by the lack of transparency and inefficiency in the judicial system. In addition, local authorities often demand “gratuities” to issue necessary permits.
Offering or accepting bribes is illegal and punishable by imprisonment for up to five years. The Controller General of the Nation is responsible for the oversight of public funds and there are frequent investigations and occasional prosecutions for irregularities. These investigations can be politically motivated. Autonomous agencies are subject to little effective oversight. Government officials and candidates for office often make an issue of corruption, but there is little follow through. Politically motivated corruption scandals are a feature of Ecuadorian political life, but even high-profile cases often become stalled after they are remanded to lengthy and often inconclusive judicial proceedings.
Ecuador is not a signatory to the OECD Convention on Combating Bribery, nor has Ecuador complied with the main requirements of the OAS Inter-American Convention Against Corruption. The 2008 Constitution created the Transparency and Social Control branch of government, tasked with preventing and combating corruption, among other things.
The 2008 Latin American Public Opinion Project (LAPOP) found that Ecuadorians rated 6th in Latin America in both the frequency with which they were victimized by corruption, and their perception of the prevalence of corruption.

Bilateral Investment Agreements

The U.S. – Ecuadorian Bilateral Investment Treaty (BIT) provides for national treatment, unrestricted remittances and transfers, prompt, adequate and effective compensation for expropriation, and binding international arbitration of disputes. However, in early 2005, Ecuador modified the Arbitration and Mediation Law in an attempt to prohibit international arbitration if the “national interest” could be affected; the current government has also sent mixed signals with respect to allowing for at least some types of international arbitration in future energy sector contracts, and has indicated it may seek to review arbitration provisions of existing BITs. The 2008 Constitution could limit future international arbitration options.
OPIC and Other Investment Insurance Programs Ecuador has had an Investment Guarantee Agreement with the Overseas Private Investment Corporation (OPIC) since 1986. Ecuador has signed and ratified the Multilateral Investment Guarantee Agreement (MIGA).

Labor

Ecuador’s population was 13.5 million in 2006, according to census data. Semiskilled workers are relatively abundant at low wages, although widespread emigration over the past few years has led to shortages of skilled workers in some parts of the country. Minimum compensation levels are set by the Ministry of Labor according to the job and industry and can be adjusted by Congress. The minimum compensation package was about $170 per month in 2007. In 2007, Ecuador’s Central Bank estimated the average unemployment rate at 9%. However, the national underemployment rate is estimated at over 50%. Ecuador’s economic woes have contributed to high levels of emigration in recent years. An estimated 1,000,000 people, or 17.2% of Ecuador’s labor force, emigrated between 1999 and 2005, principally to Spain and the U.S.
The public education system is tuition-free, and attendance is mandatory from ages six to 15. In practice, however, schools often require parents to pay for education-related expenses such as to cover children’s books, school’s utility bills, and transportation costs. Many children drop out before age 15, and in rural areas only about one-third complete sixth grade. The government is striving to create better programs for the rural and urban poor, especially in technical and occupational training. However, government funding for such training has not kept up with demand. In recent years, it also has been successful in reducing illiteracy. Enrollment in primary schools has been increasing at an annual rate of 4.4% — faster than the population growth rate. According to the current constitution, the central government must allocate at least 30% of its revenue to education; in practice, however, it allots a much smaller percentage. Public universities have an open admissions policy. In recent years, however, large increases in the student population, budget difficulties, and politicization of parts of the university system have led to a decline in academic standards.
A weak public university system produces a surplus of semi-qualified graduates in the professions. Trained financial professionals and engineers can be difficult to attract and many graduates require additional training to reach international standards. There are relatively few R&D and high technology investments in Ecuador, limited mostly to agricultural research, with a small amount of government activity as well as that of some foreign firms. Little post-graduate education exists in Ecuador, and scientists and medical professionals are nearly all foreign-trained. At this point, none of the Ecuadorian universities offer doctorate programs beyond limited offerings in social sciences at two institutions. Masters-level degrees are widely offered, but relatively few are of international competitive levels of quality. Upper-level Ecuadorian business managers have frequently been educated abroad, most often in the United States.
Cumbersome labor regulations apply equally to both foreign and domestic firms and tend to inhibit investment and foster evasion. Legal changes to modernize the country’s Labor Code were passed by Congress in 2000 as part of omnibus economic reform legislation. However, the Constitutional Tribunal declared virtually all of the changes unconstitutional. In 2006, the Labor Ministry worked with an ILO representative to draft a revised Labor Code to better comply with ILO standards. The Labor Code provides for a 40-hour work week, 15 calendar days of annual paid vacation, restrictions and sanctions for those who employ child labor, general protection of worker health and safety, minimum wages and bonuses, maternity leave, and employer-provided benefits. By law, companies must distribute 15% of pre-tax profits to their employees.
The 2008 Constitution bans child labor, favors workers with disabilities, and reduces allowed strikes in the public sector. Provisions that virtually eliminate hourly labor contracts and labor contracts through third parties are aimed at employers avoiding benefits for full-time employees, but reduce flexibility in the labor market.
Most workers in the private and parastatal sectors have the constitutional right to form trade unions and local law allows for unionization of any company with more than 30 employees. Less than 10% of the urban work force, mostly skilled workers in medium- to large-sized enterprises or state industries, is officially organized. Private employers are required to engage in collective bargaining with recognized unions. The Labor Code provides for resolution of conflicts through a tripartite arbitration and conciliation board process. The Code also prohibits discrimination against union members and requires that employers provide space for union activities.
The International Labor Organization and prominent NGOs believe international labor standards are not respected in Ecuador. Workers fired for organizing a labor union are entitled to financial indemnization, but the law does not mandate reinstatement.
Except for public servants and workers in some parastatals, workers by law have the right to strike. Legally striking employees are entitled to full pay and benefits and may occupy the premises under police protection, although there are restrictions on solidarity strikes. Most public sector employees are technically prevented from joining unions, but most are members of a labor organization and most labor actions are in fact illegal strikes by public employees. Although trade union political influence has declined in recent years, the Unified Workers Front (FUT), the teachers’ union (UNE), and other labor groups occasionally attempt to stage national strikes to protest the modernization process and economic reform measures. From January through November 2006, the number of strikes and local conflicts decreased approximately 36% from those in the same period in 2005, according to national police records.
With assistance from the ILO, Ecuador has been taking steps to eliminate child labor, which is still common in many industries. As of August 2007, the Department of Labor had issued 100 citations to companies in violation of the Child Labor Law. These actions were a direct result of Ecuador hiring 29 full-time child labor inspectors and six support staff in 2006 tasked with conducting unannounced inspections. The Department of Labor is expected to hire additional inspectors.
Economic realities leave families more than ready to send their boys, and sometimes girls, out to work, even if it means pulling them out of school and placing them in fields, mines or factories where they are exposed to hazardous conditions for little or no pay. The International Labor Organization estimated that 69,000 children ages 10 to 14, and an additional 325,000 young people ages 15 to 19, were working in agriculture in 1999, the year of Ecuador’s most serious economic crisis in recent decades. Anecdotal evidence indicates that these figures have dropped since 1999, aided substantially by the economic recovery and more recently by the hiring of additional child labor inspectors in 2006. However, labor advocates in Ecuador assert that only a significant increase in wages will keep families from sending their children to work in the fields. The ILO’s most recent child labor data dates from 2001.
The National Statistics Institute records that there were more than 50,000 under age workers in 2007, or 9% of the total labor force. Of this total, 63% were under fifteen years old and 70% were working in agriculture.

Foreign-Trade Zones/Free Ports

A free trade zone law was passed in 1991 in order to promote exports, foreign investment and employment. The law provides for the import of raw materials and machinery free of duty and tax; the export of finished and semi-processed goods free of duty and tax; and tax exemptions for business activities in the government-established zones. Foreign investments in free trade zones are exempt from future restrictions on capital repatriation. Free trade zones may be used for industrial or commercial activities. Companies establishing operations in free trade zones are required to pay a fee equal to 2% of their investment to the National Council of Free Trade Zones. However, persuading Ecuador’s tax authority to respect the tax benefits conferred by the free trade zone law is burdensome and time consuming. As a consequence, free trade zones are few and largely unimportant to the economy. Free trade zones have been established in Esmeraldas, Manabi and Pichincha provinces, and a zone is planned for the site of the new Quito airport. A maquila (in-bond processing) law has been in effect since 1990. The majority of maquila operations in Ecuador are in the textile and fish-processing sectors.

Foreign Direct Investment Statistics

Foreign investment in Ecuador remains concentrated in the oil sector. The construction of the Trans-Andean Heavy Oil Pipeline (OCP), completed in October 2003, accounted for much of this investment. This massive construction project carried out by a consortium of five foreign oil producers resulted in inward investment of $3.5 billion, including direct project investment of $1.4 billion. Subsequent investment in oil production to fill the OCP has not materialized due to lack of a GOE oil sector development policy, the contract nullification and seizure of assets belonging to a major U.S. oil company, and Ecuador’s demand that all oil contracts be renegotiated. Foreign direct investment (FDI) outside the oil sector remains modest and is focused on mining, financial services, food processing, the chemical and pharmaceutical industries, and machinery and vehicle manufacturing. Overall net FDI flows totaled approximately $193 million in 2007.
The United States is the major source of foreign investment capital. The petroleum sector accounted for the lion’s share of this inflow.
The largest foreign investors in Ecuador are petroleum companies engaged in exploration and production, including gas company Noble Energy (U.S.), Andes Petroleum and CNPC International (Chinese), YPF/Repsol (Spain), AGIP (Italy), Perenco (France) and Petrobras (Brazil). U.S. oil service company Baker Hughes is also present. U.S. firms Duke Energy and Noble Energy subsidiary Machala Power are active in the electrical sector. Exxon Mobil (U.S.) and Shell (Holland/UK) distribute fuels at service stations across the country. U.S. citizens have also invested in the textile and agricultural sectors (flowers, fruit and vegetables).
American firms active in the manufacturing sector include: General Motors, which holds an interest in two automotive assembly plants, Philip Morris (cigarettes) and Bristol-Myers Squibb (medications), Among third country investors, General Tire (Germany) manufactures tires, Holderbank (SWITZERLAND) produces cement, Akzo Nobel (Netherlands) makes fibers and textiles, Borden (Netherlands) manufactures chemicals, and Eternit (SWITZERLAND) fabricates construction materials.
There are several American pharmaceutical companies operating in Ecuador, including: Schering Plough, Bristol-Myers Squibb, Merck Sharp & Dohme, Wyeth Consumer Healthcare, Abbott, Janssen Pharmaceutical, Eli Lilly, and Pfizer. Baxter has seven renal units in the country. U.S. firms Colgate-Palmolive and Kimberly Clark manufacture toiletries and cleaning products. Also present are: 3M (consumer goods), Proctor & Gamble (personal care products), Kellogg’s (cereal). British SAB Miller owns the major brewery. Nestle (SWITZERLAND) and Kraft (U.S.) are leading food product manufacturers, while a number of other foreign firms have invested in processing facilities for non-traditional vegetables and fruits. Continental Flour (U.S.) and Seaboard Flour (U.S.) have closed some of their operations and consolidated operations by entering joint-venture agreements with local companies. Continental, along with several other U.S. firms, is a major investor in shrimp farming. Standard Fruit/Dole (U.S.), Chiquita Banana, and Del Monte are involved in the banana industry from production to marketing and shipping. Several U.S. franchise chains are now operating in Ecuador, including Tricon (Pizza Hut/Kentucky Fried Chicken/Taco Bell), Burger King, McDonalds, Tony Romas, TGI Friday, Papa John’s, Chili’s, Romano Maccaroni, Domino’s Pizza, Heel Quick, Swisher, Gymboree, Fast Track Kids, and New Horizons. Citibank (U.S.) and Lloyd’s (U.K.), have commercial banking operations, while Helm Bank (U.S.) has a representation office in Ecuador. U.S. airlines Delta, Continental, and American, as well as hardware and software (IBM, Xerox, Microsoft),insurance (ACE, Pan-American Life, BMI, AIG), consumer goods (3M), personal care products (Proctor & Gamble), cereal (Kellogg’s), and advertising (McCann Erickson) companies are also active.
Net Flows of Foreign Direct Investment (In Millions of Dollars)

Investment Statistics Table (million of $)

2003 2004 2005 2006 2007

Net flow of FDI 871.51 836.94 493.41 270.72 193.29 FDI Net flow/GDP (%) 3.04% 2.56% 1.33% 0.65% 0.42%

FDI net flow (by Country of origin): 2003 2004 2005 2006 2007

Cayman Islands 438.22 31.58 -1.64 -9.59 -356.62 US -47.33 78.54 -77.20 -159.79 108.72

Bahamas 78.59 113.71 28.33 -17.43 -111.73

Panama 85.10 93.54 76.20 66.72 78.33

France 70.21 14.77 -755 8.43 77.52

Brazil 4.89 188.53 288.06 368.91 75.85

Spain 3.33 631 2.68 6.87 72.23

China 19.69 -7.68 -19.91 11.94 59.79

By Sector Destination:
2003 2004 2005 2006 2007

Oil/Mining 148.55 385.37 198.35 -116.62 -122.05

Manufacturing 78.98 114.93 75.42 90.16 94.57

Commerce 78.14 103.15 72.46 32.30 77.80 $

Transport and Communications 439.10 73.70 17.50 83.32 -52.50

Agriculture 49.91 72.91 23.93 47.31 24.12

Services 71.06 39.95 73.83 89.36 116.76

Construction 3.49 39.22 7.43 8.45 32.94

Others 2.28 7.70 24.49 36.43 21.64

Notes:

All figures are listed in millions of dollars unless otherwise noted. Data is from the Central Bank of Ecuador. The Central Bank has changed the methodology used to calculate FDI, and now only publishes net flows.

Source: Central Bank of Ecuador

Web Resources

Ministry of Foreign Trade – Foreign Trade & Investment Council www.comexi.gov.ec
Central Bank of Ecuador – Foreign Investment Department www.bce.fin.ec
Superintendence of Companies www.supercias.gov.ec

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SWISS AMB ON FARC AND ELN PEACE PROCESS

Friday, April 29th, 2011
ID
06BOGOTA224
SUBJECT
SWISS AMB ON FARC AND ELN PEACE PROCESS
DATE
2006-01-11 21:09:00
CLASSIFICATION
CONFIDENTIAL
ORIGIN
Embassy Bogota
TEXT
id: 49555
date: 1/11/2006 21:20
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C O N F I D E N T I A L BOGOTA 000224

SIPDIS

SIPDIS

E.O. 12958: DECL: 01/11/2016
TAGS: PHUM PREL PTER CO
SUBJECT: SWISS AMB ON FARC AND ELN PEACE PROCESS

REF: A) BOGOTA 65 B) 05 BOGOTA 12031

Classified By: Ambassador William B. Wood, Reasons: 1.4 (b) and (d)

¶1. (C) Summary. Swiss Ambassador Kupfer expressed disappointment on January 6 with the FARC’s rejection of the Swiss-led international commission proposal for a humanitarian exchange between the GOC and the FARC. He reported that, despite the setback, international commission members (one from France, Spain and SWITZERLAND) would meet again with the FARC in Colombia in early 2006 to continue discussions on the same proposal. Kupfer said coordinating the commission was going along fine for now but the French continued to do as they pleased. He cited the January 3 announcement that French Foreign Minister Douste-Blazy would travel to Colombia to discuss efforts to release Colombian-French Ingrid Betancourt. Kupfer said this was news to both the Swiss and Spanish. He also said GOC Peace Commissioner Restrepo was a challenge to deal with and that, unlike past humanitarian exchange initiatives, the Catholic Church had little involvement in this one. Kupfer represented SWITZERLAND, one of the three accompanying countries, at the GOC-ELN exploratory talks last month in Havana. He said round two later in January would focus on an agenda for future talks, and that the roles of the five civil society guarantors and the three countries would have to be re-defined. He predicted the GOC will want less involvement; the ELN more. He said Norway and the ELN pressed for moving the talks to Europe. According to Kupfer, the ELN is looking to challenge its placement on the EU terrorist list and wants to explore funding opportunities in Europe. In the end, both the ELN and GOC agreed to keep the talks in Havana for now. Kupfer underscored that, while the Swiss were happy to go along with that, they would support moving the talks to Europe if they advanced sufficiently, to enhance their legitimacy. The ELN’s placement on the EU terrorist list would prove no obstacle to SWITZERLAND if the circumstances were right. End Summary.

——————————
HUMANITARIAN EXCHANGE PROPOSAL
——————————

¶2. (C) On January 6, polcouns met with Swiss Ambassador Thomas Kupfer to discuss FARC rejection of an humanitarian prisoner exchange proposal (ref a), put forward by the recently assembled “international commission” with representatives from France, SWITZERLAND, and Spain. Kupfer expressed disappointment with the FARC reaction, which he characterized as a “clear and categorical no.” He said it was difficult to find anything positive in the FARC’s Dec. 29 communiqu, and complained that the FARC’s leaders were playing politics. First they complained they did not have the details of the proposal (which Kupfer said they received weeks earlier on December 15 along with the GOC), and then they complained they were not accorded sufficient respect when it was presented (i.e. by email). Kupfer insisted that the proposal was a good one. “They were stupid to reject it because they will only have to back down later,” he said.

¶3. (C) Despite the setback and low chance of success, Kupfer said the GOC and the FARC leadership had agreed to another meeting in Colombia “at the technical level” between
international commission members and the FARC early in 2006, perhaps in January. He noted that “difficulties with organizational details” still needed to be resolved, including the FARC’s insistence that the GOC not know where or when the meeting would take place. Kupfer stressed that the FARC’s attitude was unrealistic and that they had to show more transparency. He said upcoming discussions would be based on the proposal already rejected by the FARC.

———————–
IMPACT ON U.S. HOSTAGES
———————–
¶4. (C) Even if both parties finally agreed to discuss the possibility of a humanitarian exchange, Kupfer said the challenges would be overwhelming. FARC negotiators have added the return of Simon Trinidad and Sonia (both extradited to the U.S.) as critical to any deal. Kupfer speculated that the FARC would probably try holding back one or more Americans in any exchange, something the GOC had refused to consider. And finally, said Kupfer, the FARC still had not decided which FARC prisoners held by the GOC could be part of any humanitarian exchange.

——————————————— ———–
DEALING WITH THE FRENCH, THE GOC; THE ROLE OF THE CHURCH
——————————————— ———–

¶5. (C) According to Kupfer, SWITZERLAND has the coordinating lead among the three countries on commission initiatives but reining in the French continues to be a challenge. “The French generally do what they want,” he said. The latest surprise was the January 3 announcement out of Paris that Foreign Minister Philippe Douste-Blazy would visit Colombia soon to discuss efforts to release Ingrid Betancourt. Kupfer complained that Douste-Blazy would presumably not come without a new bilateral initiative, something neither the Swiss nor Spanish knew anything about. The only bright spot, said Kupfer, was that Spain planned to be much more engaged in the process.

¶6. (C) Kupfer acknowledged that dealing with the GOC, in particular with Peace Commissioner Restrepo, continued to be a challenge. Restrepo’s attitude and style were difficult. He was too forthright and stubborn, unwilling to take advice. While everyone was more or less in agreement on the role of the international commission, Kupfer was convinced Restrepo would seek to limit its involvement when “it could be the most useful.” Kupfer concluded that Restrepo had little experience in dealing with international community facilitators and this would complicate matters in any future negotiation.

¶7. (C) Kupfer noted with surprise that, unlike past initiatives, the Catholic Church was minimally involved with the initiative of the international commission. He surmised that relations between Church negotiator Monsignor Castro and the presidential palace, in particular Restrepo, were not good. At the same time, he acknowledged that the Church remained skeptical the FARC would agree to anything while Uribe is president, an argument strengthened by the FARC’s most recent communiqu (ref b).

—————————
GOC-ELN ENCOUNTER IN HAVANA
—————————

¶8. (C) Kupfer, who attended the December talks in Havana, was more optimistic about exploratory discussions between the GOC and the ELN, which will resume later this month. Restrepo will meet with the ELN’s Francisco Galan on January 11 to prepare for a second round of talks. Kupfer said all the goals were achieved during the first round: a dialogue was launched, confidence building began, and a follow-on meeting was set. Both parties “prudently” avoided trying to create problems for the other. Round two will still be “exploratory” and tackle the agenda for future talks. He noted that in Havana the ELN commander Antonio Garcia at first appeared distant and uninformed about the reality of present day Colombia, but is now thoroughly engaged in the process. Kupfer reported that Galan was more confident than in previous encounters and exhibited less need to take cues from Garcia. Kupfer said Evo Morales’ election victory in Bolivia gave the ELN negotiating team a psychological boost as well.

¶9. (C) Kupfer underscored that the five guarantors were crucial in getting both parties to Havana but their function at the negotiating table would now need to be re-defined into a supporting role. Kupfer predicted that this would be a problem as the five want to continue as major players. What was important now, said Kupfer, was a real facilitator in the process.

¶10. (C) Regarding the three “accompanying” countries (Norway, Spain and SWITZERLAND), Kupfer said their role, too, would have to be clarified, both on the political side as well as on the logistics/accompaniment/facilitation side. The GOC’s approach so far has been, “we’re glad you’re here and we’ll call you if we need you.” Kupfer said Norway in particular took considerable umbrage at this. The ELN, on the other hand, wanted the three countries more involved as the process develops.

¶11. (C) Kupfer also reported some discussion of Brazil joining as an accompanying country but no decision was taken. He stressed that the minimal role played by Cuba and Venezuela, the former as host and the latter as facilitator for Garcia’s travel, was also helpful. It is better to have them involved this way than sabotaging the process from the outside, he said.

¶12. (C) According to Kupfer, Norway pressed hard for a European venue for the second round; SWITZERLAND and Spain did not. The ELN supported Norway, preferring to travel to Europe for political and financial reasons. Kupfer said the ELN complained several times about their terrorist designation status and wanted a European venue to challenge it. The ELN also made clear that Europe contained opportunities for future funding needs. In the end, the ELN agreed to keep the talks in Cuba, as did the GOC. Kupfer underscored that, while Bern was happy to go along with the Cuban venue for now, they would support moving o Europe if the talks advanced sufficiently, to enhance legitimacy and chances for success. The EU designation of the ELN as a terrorist group would prove no obstacle to SWITZERLAND.

——-
COMMENT
——-

¶13. (C) For now, U.S. redlines are covered, in particular with the FARC initiative, as the GOC continues to insist that all American hostages be part of any exchange. However, we will continue to monitor both processes closely as France and SWITZERLAND in particular, may begin pressing the GOC to make further concessions to keep the initiative with the FARC alive. We agree with the pessimistic assessment of the Catholic Church that the odds for a humanitarian exchange between the GOC and the FARC remain low.

WOOD

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DAS SHAPIRO MEETS WITH FATHER DARIO ECHEVERRI

Friday, April 29th, 2011
ID 04BOGOTA13139
SUBJECT DAS SHAPIRO MEETS WITH FATHER DARIO ECHEVERRI
DATE 2004-11-02 18:06:00
CLASSIFICATION CONFIDENTIAL
ORIGIN Embassy Bogota
TEXT id: 22386
date: 11/2/2004 18:31
refid: 04BOGOTA13139
origin: Embassy Bogota
classification: CONFIDENTIAL
destination:
header:
This record is a partial extract of the original cable. The full text of the original cable is not available. 

—————– header ends —————-

C O N F I D E N T I A L SECTION 01 OF 02 BOGOTA 013139

SIPDIS

E.O. 12958: DECL: 12/28/2014
TAGS: PTER PHUM PINR PREL PGOV CO ELN
SUBJECT: DAS SHAPIRO MEETS WITH FATHER DARIO ECHEVERRI

Classified By: Ambassador William B. Wood for reasons
1.4 (b) and (d)

¶1. (U) December 15, 2004, 11:15-12:15 a.m., Espicopal
Conference, Bogota

¶2. (U) Participants:

U.S.
—-

DAS Charles Shapiro
Ambassador William B. Wood
Jeff DeLaurentis, POLCOUNS
David Henifin, Deputy Director for Andean Affairs
Sarah LaGier, POL (notetaker)

Colombia
——–

Father Dario Echeverri, Secretary General of the National
Conciliation Commission (CCN)

——-
Summary
——-

¶3. (C) Father Echeverri was optimistic that a meeting between the ELN and Mexican Government would create the right conditions for the launching of a formal peace process between the ELN and the GOC. However, he said two major obstacles remained: (1) the FARC’s control over the ELN; and (2) the ELN’s belief that the Uribe administration was not committed to social and political reform. Echeverri believed that the FARC was not serious about a peace process with the Uribe government, but said the Catholic Church would keep pressing for a humanitarian exchange and eventually a peace process. He asserted that the best way to weaken the illegal armed groups was to have an effective reinsertion program, but expressed concern that the GOC’s program was weak and poorly funded. Echeverri acknowledged that the FARC and the Chavez administration have long-standing ties. End Summary.

¶4. (C) As Secretary General of National Conciliation Commission (CNN), Father Echeverri is authorized by the GOC to reach out to the illegal armed groups, particularly the FARC, to try start formal peace talks.

——————————-
ELN: Possible Meeting in Mexico
——————————-

¶5. (C) Echeverri was hopeful that the proposed meeting between the ELN Central Command (COCE) and Mexican facilitator Ambassador Andres Valencia would help set conditions for a formal peace process. He praised Valencia’s efforts and said the ELN was likely to accept the conditions of the proposal, including suspending all violent activity while the meeting took place. He said the ELN was seeking to gain political recognition. However, two obstacles to formal negotiations remain:

– The ELN is dependent on the FARC financially and militarily. The FARC would control any ELN peace process with the Uribe administration. The COCE does not have sufficient power over the group’s combatant fronts to implement a peace process.

– The ELN does not view the Uribe Administration as serious about meeting its demands for social reform. Although Uribe has said he is not opposed to holding a national assembly, the ELN would not be satisfied with a one-time forum but rather wants concrete political concessions. Echeverri said that he believed the Uribe administration should allocate as many resources to social programs as it does to the armed forces.

¶6. (C) Echeverri agreed that the ELN is no longer a military threat but warned against discounting it altogether. The December 13 capture of an ELN field commander powerful in Valle del Cauca Department was a serious blow to the group. He asserted that the ELN, nonetheless, has a significant social base in parts of Arauca, Narino, Santander, and Valle del Cauca Departments. He noted that the group is not as deeply involved in drug trafficking as the FARC or the paramilitaries. He hoped the group would eventually be held accountable for numerous kidnappings, including the 2002 kidnapping of a 12 year-old boy whom they continue to hold for ransom. He also expressed concern that ELN units could be absorbed into either the FARC or paramilitary groups.
———————————
FARC: Not Yet Serious About Peace
———————————

¶7. (C) In October, Echeverri met with the SWISS government to coordinate efforts to facilitate a humanitarian exchange. The SWISS have been authorized by the Uribe  administration to reach out to the FARC to orchestrate an exchange. Echeverri hoped that an exchange would be a first step toward an eventual peace process. He pulled Shapiro aside at the end of the meeting to assure him that he is putting exactly the same priority on the three U.S. hostages as on the Colombian hostages. He stressed that the FARC was not serious about holding negotiations with the Uribe administration in part because the country’s widespread poverty provides the FARC with easy recruits, and Plan Patriota, in Echeverri’s view, was not hurting the FARC. For example, Echeverri claimed that FARC Secretariat member Mono Jojoy recently met with journalists in the middle of a Plan Patriota area of operations with minimal security.

¶8. (C) Echeverri noted that the FARC was undergoing a leadership change, which he does not fully understand yet. He believes Secretariat member Raul Reyes may be sick and
losing influence, while Secretariat member Alfonso Cano and subordinate Pablo Catatumbo are gaining power. Echeverri has received invitations from both Reyes and Catatumbo to meet to discuss conditions for the humanitarian exchange. He implied that there were some divergences among the FARC leaders that could possibly be exploited.

————————
Reinsertion Program Weak
————————

¶9. (C) Echeverri asserted that the best way to weaken the illegal armed groups was to offer the rank and file a better life as civilians. He expressed concern that the government’s reinsertion program for deserters and the demobilizing paramilitaries was not effective. Without adequate funding to train and employ the deserters, they would return to a life of crime and violence.

———————–
Venezuelan Ties to FARC
———————–

¶10. (C) Echeverri acknowledged that the FARC have long-standing ties to Venezuela and President Chavez. He is aware of at least one meeting between FARC Secretariat member Raul Reyes on December 26, 2003 in the Petare municipality in Caracas with GOV officials. Echeverri noted that when Venezuela hosted meetings between the GOC and the FARC in the 1990s, the FARC negotiators clearly were on friendly terms with the GOV officials. Colombian Ambassador to Venezuela Enrique Vargas Ramirez is a member of the CCN, and Echeverri hopes Vargas can take advantage of GOV-FARC ties to reach out to the FARC through Venezuelan channels.

¶11. (U) DAS Shapiro cleared on this cable.
WOOD

=======================CABLE ENDS============================

HEADER This record is a partial extract of the original cable. The full text of the original cable is not available. 

XTAGS: XTAGPTER, XTAGPHUM, XTAGPINR, XTAGPREL, XTAGPGOV, XTAGCO, XTAGELN 04BOGOTA13139

TAGS PTER PHUM PINR PREL PGOV CO ELN
ADDED 2011-04-29 00:12:00
STAMP 2011-04-30 15:26:07
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http://www.wikileaks.ch/cable/2004/11/04BOGOTA13139.html