ECUADOR: CHINESE DIPLOMAT ON CORREA'S TRIP TO CHINA

S E C R E T SECTION 01 OF 03 QUITO 002616

SIPDIS

SIPDIS

E.O. 12958: DECL: TEN YEARS
TAGS: PREL ETRD EAIR EPET MARR EC CN
SUBJECT: ECUADOR: CHINESE DIPLOMAT ON CORREA'S TRIP TO CHINA

REF: QUITO 2556

Classified By: Charge d'Affaires Jefferson Brown for Reasons 1.4 (b&d).


1. (S) Summary. Political and Economic officers met with two
diplomats from the Chinese Embassy in Quito on December 3 to
discuss President Correa's visit to China on November 20-25,

2007. The GOE sent a large delegation to China and signed 14
agreements to promote cooperation in energy, education,
healthcare, science and sports. According to the Chinese
diplomats, the agreements were long on intent and short on
substance. They expressed doubts on the likelihood of a
Chinese concession to manage the Manta commercial airport,
calling press coverage in Ecuador overstated, while
expressing cautious interest in Chinese involvement in
construction of a Manta-Manaus road/riverine transportation
link. End Summary.

Correa's Trip to China
--------------


2. (U) President Correa's trip to Asia included a brief stop
in Riyadh for the OPEC summit on November 19, six days in
China on November 19-25, and two days in Jakarta to discuss
commercial cooperation on November 26-27. The six-day visit
to China represents the most time Correa has spent in any one
country on an official visit as president. Correa spent
three days and four nights in Beijing, one day in Xian and
one day in Shanghai. A large delegation of cabinet-level
ministers accompanied the President, including Rafael Paredes
(as Acting Foreign Minister),Caroline Chang (Minister of
Health),Fausto Ortiz (Minister of Economy and Finance),Galo
Chiriboga (Minister of Mines and Petroleum),Maria Isabel
Salvador (Minister of Tourism),Hector Villagran (Minister of
Sports),Julia Ortega (Secretary General of Communication),
Carlos Pareja (President of Petroecuador),and Leonardo
Vicuna (President of the GOE development bank Banco del
Estado).


3. (C) While in Beijing, Correa met with Chinese President
Jintao HU at the Great Hall of the People, with legislator
Banguo WU, and with Changchun LI, a member of the 17th
(current) Politburo Standing Committee of the Communist Party
of China (CPC). (Note: Changchun LI is regarded as the
propaganda chief of the CPC, and is the fifth ranked member
of the CPC).


4. (C) The Ecuadorians signed 14 bilateral agreements to
promote economic cooperation in mining, hydrocarbons,
education, healthcare, science and sports. According to
Chinese Embassy Quito Economic and Commercial Section First
Secretary Ming Wei CHENG, the agreements were long on intent

SIPDIS
and short on substance. Cheng said that Correa spoke at the
Chinese Academy of Social Sciences in Beijing on "Socialism
of the 21st Century." He also mentioned that Correa attended
the opening ceremony of a China-Ecuador Tourist and Trade
event and an exhibition of Ecuadorian contemporary art in
Beijing. In Xian, Correa met with the China National
Petroleum Corporation (PetroChina or CNPC) and the China
Petroleum and Chemical Corporation (Sinopec) to discuss
upgrading drilling facilities and improving refinery
efficiency, as well as possible participation in the
yet-to-be built oil refinery in Manabi. He said that CNPC
had already signed a contract to provide services to
PetroEcuador valued at more than USD 19 million. In
Shanghai, Correa visited the Museum of Urban Planning and
Shanghai Fair 2010, and met with telecommunications companies
ZTE and Alcatel.

Manta - More Hype than Hoped?
--------------


5. (S) The Ecuadorian press has heavily covered Correa's
interest in making Manta the gateway to Asia (see reftel).
According to Cheng, President Correa expressed strong
interest during his visit in Chinese investment in Manta.
Cheng commented, however, that he didn't consider it likely
that China would pursue administration of the commercial

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airport in Manta. He said that China lacked the expertise in
concessionary airport management, and that his government was
not interested in any long-term concessionary agreement.
Chinese economic assistant Zhen Xin "Linda" LIN added that
the rumor about the Chinese having participated in the
construction of 49 airports was not accurate. Cheng
commented that he also didn't see any Chinese interest in
expansion of the commercial airport to make it more
"international."


6. (S) Cheng said that the development of a transnational
road/riverine connection linking Manta and Manaus was a
stronger likelihood for Chinese investment. He said that
this project was a better fit for Chinese investment -- less
technical and requiring fewer Chinese personnel. Cheng
cautioned, however, that such a venture would be logistically
difficult, very expensive, and long-term, and that the
benefits touted by the press have been overstated. He also
said that he was unaware of any discussions between the
Chinese and Brazilians on this issue.

Politics and Economics
--------------


7. (S) Cheng commented that he viewed Correa's political
strategy as focused on his efforts to consolidate power in
the central government, and that Manta was a prime example of
such a strategy. Cheng said that Correa's motive behind
supporting Manta was to create competition for Guayaquil, and
thereby weaken Guayaquil Mayor Nebot's opposition as well as
Ecuador's economic dependency on Guayaquil. He views the
addition of the two provinces as a political move by Correa
to weaken political opposition.


8. (S) Cheng opined that doing business had become more
challenging under the Correa administration. He cited as an
example that the Ecuadorian Foreign Ministry was reviewing
every MOU or LOA signed with China in order to protect its
sovereignty and commercial interests, saying that he thought
that the MFA was doing this with all countries. He added
that Ecuador had become more protectionist in regard to
imports of Chinese textiles, ceramics and shoes.


9. (S) Cheng said that CNPC and Sinopec had indeed agreed to
pay 99% of extraordinary revenues per the presidential decree
implemented in October 2007. He said that the Chinese had
attempted to negotiate a unilateral exception but were
unsuccessful and understood that an exception for China would
open the door for difficulty with other multinationals. He
said that a task group that included Sinopec, CNPC and the
MFA was formed in Beijing to discuss the issue. This group
decided that agreement to share extraordinary revenues with
the state was appropriate, but Cheng warned that this might
or might not be a permanent decision. (Comment: All other
foreign oil companies have told us that the 99% decree would
make their operations unprofitable and that they were
attempting to negotiate alternative arrangements that would
be more acceptable. We suspect that this might also be the
case for the Chinese petroleum companies operating in
Ecuador.)


10. (U) Ecuador has received USD 1.8 billion of investment
from China to date, making it the leading recipient of
Chinese investment in Latin America. Ecuador's main exports
to China are agricultural products, wood, metal and fish.
The biggest single commodity is banana. China's exports to
Ecuador include textiles and garments, toys, shoes and
televisions.


11. (C) Biographical Comment. During the meeting, Cheng and
his wife Lin were casual and friendly and appeared
comfortable in expressing their views. Cheng is a career
diplomat, is the second in the Chinese Embassy's economic and
commercial section, has been in Quito for two years, and has
at least another year left in his tour. He is traveling back
to China on personal leave in February for one month, then
returning to Quito. Cheng and Lin are in their early fifties
and have adult children who do not live in Ecuador. End

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Comment.
JEWELL