ECUADOR'S BACHELET PARTY

C O N F I D E N T I A L QUITO 002011

SIPDIS

SIPDIS

DEPARTMENT PLEASE PASS TO USTR

E.O. 12958: DECL: 08/08/2016
TAGS: PGOV PREL ETRD ENRG EC
SUBJECT: ECUADOR'S BACHELET PARTY


Classified By: PolOff Acquania Gibbs for Reason 1.4(b&d)


1. (U) Summary: Chile's president, Michelle Bachelet, made
her inaugural visit to Ecuador August 7-8. She announced
several initiatives to deepen trade relations and offer
assistance to Ecuador's petroleum sector, while promoting a
well-received message of hope, democratic strengthening,
economic opportunity and social justice. While the
atmospherics of the visit were excellent and the substance of
the visit largely complements USG interests here, it remains
to be seen if Ecuador will be able follow Chile's example.
End Summary.


2. (U) Bachelet traveled to Ecuador with a delegation of
diplomats and members of parliament, including the
Chancellor, Minister of Mining and Energy, and Vice President
of the Chamber of Deputies. After a visit to the pediatric
unit at Eugenio Espejo Hospital, where she met with children
and Chilean volunteers who work at the hospital, Bachelet
paid homage to heroes from August 10, 1809 in a ceremony in
Independence Plaza.

Atmospherics Good
--------------


3. (U) In several well-received public speeches, Bachelet
highlighted historic ties between Ecuador and Chile, which
now include a combined military engineering contingent
working under UN auspices to help rebuild Haiti. Bachelet
also emphasized democratic strengthening, saying that
democracy's benefits must be made more tangible to people.
To achieve this requires national consensus among
politicians, business, and civil society to promote growth
and equity. She also emphasized the importance of using
economic policy to promote social goals. Speaking at the
inauguration of a development program sponsored by Ecuador's
Central Bank, she emphasized an open economy and regulated
financial markets as key to a successful development
strategy. On regional integration, she emphasized moving
from theory to practice. As a sidelight, she highlighted
other aspects of Ecuador's and Chile's bilateral relationship
such as the social security agreement allowing Chileans
working in Ecuador and Ecuadorians in Chile to collect social
security benefits from their respective countries. She also
thanked Ecuador for offering refuge to Chileans during
Chile's "difficult years."

Chile-Ecuador Trade Accord, Economic Ties Broadened
--------------


4. (U) In a private meeting with Ecuadorian President
Palacio, the leaders agreed to broaden the "Economic
Complementation Agreement", a trade accord between Ecuador
and Chile in effect since 1994. The initial agreement
contained numerous exemptions, but the expansion protocol
signed yesterday will enable freer trade and adds a
commercial dispute settlement mechanism, a clear judicial
framework to encourage the flow of investment, and a legal
framework for trade in services. Bachelet expressed hope
that this would lead to a "liberalizing commercial agreement"
(free trade agreement) between the two countries in the near
future.


5. (U) In a speech before the National Congress, Bachelet
highlighted the fact that trade between Chile and Ecuador
doubled from 2003 to 2005. She acknowledged receipt of a
formal invitation to become an associate member of the
Community of the Andean Nations (CAN),and noted that Chile
will respond affirmatively soon. Bachelet also announced
that Chile would support Ecuador's membership in the Asian
Pacific Economic Cooperation when the ten-year moratorium on
new members concludes in 2007.

Chilean Investment in Petroecuador
--------------

6. (U) Palacio and Bachelet also signed a strategic alliance
agreement between ENAP, Chile,s state-owned oil company, and
Petroecuador. ENAP will invest 37 million dollars into
Petroecuador's crude oil production in the Mauro Davalos
Cordero fields of the Amazonia region. The countries plan to
study the feasibility of ENAP refining Petroecuador's crude
oil, and Chile providing liquefied natural gas, gasoline, and
diesel to Petroecuador. Both companies also committed to
exchange experience and technical assistance in order to
develop other fields. They hope to produce 13,300 barrels
per day and eventually drill an additional six oil wells.


7. (C) Comment: In June, press reports appeared indicating
ENAP's interest in Block 15, formerly run by Occidental
Petroleum. In private conversation with the president of
Ecuador's hydrocarbons association, he mentioned that ENAP
could be interested in running Occidental's former Block 15
under this agreement, but that they are not technically
capable of managing the block. No evidence has appeared to
substantiate rumors of ENAP interest in Block 15. End
comment.

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

8. (C) Bachelet is a media star and heroine to most
Ecuadorians, and her messages on democracy, trade, regional
integration and social equity were perfectly pitched to local
nationalist sensitivities (e.g. in her litany of FTAs signed
or planned by Chile, the Chile-US FTA was not mentioned) and
will hopefully provoke new reflection here about Ecuador's
true interests. With the possible exception of her offer of
ENAP assistance to help Ecuador overcome its self-inflicted
damage to the petroleum sector, Bachelet's messages
complement USG policy interests in Ecuador. Her personal
credibility here, and Ecuador's historic ties to Chile, meant
that those messages were received far more warmly than to
which the US could ever hope to aspire. End comment.
BROWN