Identifier
Created
Classification
Origin
06QUITO1395
2006-06-07 20:22:00
UNCLASSIFIED//FOR OFFICIAL USE ONLY
Embassy Quito
Cable title:  

AMBASSADOR VISITS MACHALA AND EL ORO PROVINCE

Tags:  ETRD EINV ENRG SNAR ECON PREL EC 
pdf how-to read a cable
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FM AMEMBASSY QUITO
TO RUEHC/SECSTATE WASHDC IMMEDIATE 4530
INFO RUEHBO/AMEMBASSY BOGOTA 5668
RUEHCV/AMEMBASSY CARACAS 1774
RUEHLP/AMEMBASSY LA PAZ JUN LIMA 0639
RUEHGL/AMCONSUL GUAYAQUIL 0595
RHMFISS/CDR USSOUTHCOM MIAMI FL
RUCPDOC/DEPT OF COMMERCE WASHDC
RUEATRS/DEPT OF TREASURY WASHDC
UNCLAS QUITO 001395 

SIPDIS

SENSITIVE
SIPDIS

PASS TO USTR FOR BENNETT HARMAN

E.O. 12958: N/A
TAGS: ETRD EINV ENRG SNAR ECON PREL EC
SUBJECT: AMBASSADOR VISITS MACHALA AND EL ORO PROVINCE


UNCLAS QUITO 001395

SIPDIS

SENSITIVE
SIPDIS

PASS TO USTR FOR BENNETT HARMAN

E.O. 12958: N/A
TAGS: ETRD EINV ENRG SNAR ECON PREL EC
SUBJECT: AMBASSADOR VISITS MACHALA AND EL ORO PROVINCE



1. (U) Summary. In a trip to the southern border province of
El Oro, the Ambassador visited U.S. company Machala Power's
gas platform and electricity generation facilities and heard
about their plight in trying to collect nearly $50 million in
unpaid bills from GOE-related entities. She inaugurated a
port inspection facility funded by the Narcotics Affairs
Section (NAS) and met with the Mayor of Machala, the Machala
AmCham Chapter and the Governor of the Province of El Oro.
End Summary.

Machala Power
--------------


2. (U) Machala Power operates a gas platform off the coast of
Ecuador. While capable of producing much more natural gas,
Machala has been inhibited from doing so because local
electricity distributors have failed to pay nearly $50
million in past due bills. The outstanding debts date to
2003 and Machala has filed a request for international
arbitration to collect the unpaid amounts. Ironically, no
one in the GOE disputes the amounts owed Machala Power. The
GOE simply claims that it does not have the money to pay
Machala Power. We and Machala Power have tried to work with
the GOE for several years to resolve the impasse.


3. (U) Machala Power is only operating two of the eight gas
wells on its gas platform. With additional investment at its
electric generation plant it could double its power output.
However, its headquarters in Texas will not permit any more
investment until progress is made on the arrearages. Machala
GM John Tomich told the Ambassador that if it could recover
the back payments and get assured future payments, it would
invest an additional $125 million in Ecuador. This
investment would allow Ecuador to reduce its imports of lower
efficiency and less environmentally friendly diesel fuels by
$100-200 million dollars per year.


4. (U) Tomich said that he explained the benefits to the GOE
and that the Energy Ministry, GOE electricity regulators and
the Ministry of Economy agree that Machala should be paid and
that Machala's further investment would be a good option for

Ecuador. Such sympathy does not, however, pay the bills and
Machala has been forced to seek arbitration. Procurador
General (U.S. Solicitor General equivalent) Jose Maria Borja
has offered to help, but only if Machala drops its
arbitration. The Ambassador said that she would continue to
push Machala Power's case with GOE authorities.

Machala Port Inspection Inauguration
--------------


5. (U) The Ambassador inaugurated June 1 a new port
inspection station at the port facilities in the city of
Machala. The port is largely used for exporting bananas, but
the banana containers have been used for drug shipments. The
NAS funded inspection station is a modern facility with
kennels for the dogs that are used to detect drug and other
illicit shipments through the ports.


6. (SBU) The Ambassador took advantage of the inauguration
opportunity to demonstrate again, the strong and broad
commitment that the USG has to Ecuador. The broad, extensive
and positive press coverage the Ambassador received helped
balance the negative press climate on bilateral issues that
has prevailed in the wake of the GOE seizure of Occidental
Petroleum's assets.

Meetings with Local Officials
--------------


7. (SBU) Machala Mayor Carlos Falquez Batallas made the most
of the Ambassador's visit to his office. He gathered all the
local press he could find and touted his civil works projects
for the city of Machala. Not content with holding court in
his office, the Mayor then escorted the Ambassador around the
city square outside his office, where little girls dressed as
princesses and other citizens enthusiastically approached
their "beloved" mayor. Nearly everyone the Ambassador spoke
with before and after the visit acknowledged that the current
mayor had done much more than most to beautify the city. The
Social Christian Party (PSC) mayor models himself on
successful PSC Guayaquil Mayor Jaime Nebot. While Falquez
seems to spend nearly as much on self-promotion as he does on
the city, there is no denying that he is getting some results.


8. (SBU) President Palacio's recently (February 2006)
appointed Governor of El Oro Province Jofre Roldan Izquierdo
is neither a self-promoter nor an effective governor. The
high school math teacher turned governor appeared to have no
real plan for the province. As an appointed official, Roldan
will be replaced by the new president of Ecuador, when she or
he takes office on January 15, 2007.

Ambassador's Meeting with the AmCham
--------------


9. (U) The Ambassador met with nearly a dozen members of the
Machala chapter of the Ecuadorian-American Chamber of
Commerce (AmCham). Every one of them lamented the decisions
of the Palacio Administration to pass the hydrocarbon law and
seize Occidental Petroleum's assets. However, they had no
ideas about what they could do to improve or change the
situation and were hoping that the USG or the new
administration would make things better.

Comment
--------------


10. (SBU) The reaction of the AmCham is typical of the
passive, almost fatalistic attitudes that the Ambassador
found in Machala. When she visited community projects that
were sponsored by Machala Power, she was greeted with a
complaint that not enough was being done by the government
for the community. Neither the local, provincial or national
governments were doing anything to help these impoverished
communities. Thus, they looked to foreign companies and the
USG for help, and hoped that maybe their next government will
be better.
JEWELL