AMBASSADOR'S MEETING WITH MINISTER OF ECONOMY

C O N F I D E N T I A L QUITO 000290 SIPDIS SIPDIS PASS TREASURY FOR S. GOOCH E.O. 12958: DECL: 02/02/2017 TAGS: EFIN EAID ECON EC SUBJECT: AMBASSADOR'S MEETING WITH MINISTER OF ECONOMY PATINO REF: QUITO 169 Classified By: AMBASSADOR LINDA JEWELL. REASONS: 1.4 B AND D ¶1. (C) Summary. In a friendly, courteous meeting with the Ambassador, Minister of Economy Patino said that he has a close working relationship with President Correa, congratulated himself on the ease with which he prepared his first budget, allowed that he does not know what Ecuador will do about debt but asserted some debt is illegitimate and will not be paid, and spoke critically of the international financial institutions. He also welcomed the opportunity to work with the USG on microfinance and supporting small business. End summary. ¶2. (C) The Ambassador met with Minister of Economy and Finance Ricardo Patino on February 1. He opened the meeting by saying that Ecuador needs change, and that "we are transformers." When asked about the challenges of working with a president who is also an economist and former Minister of Economy, Patino replied the President's understanding of the issues helps him. He also said that he and his president share a common vision, in contrast to the rocky relationship his predecessors had with former President Palacio (who went through five Economy Ministers in under two years). Budget -------------- ¶3. (C) Patino said that the budget he had just presented to Congress reduced expenditure from the previous year. Doing that was easy and just required common sense. The government has clearly identified its priorities ) social programs and supporting production ) and from there it was easy to open space for priorities by reducing spending for other sectors. Debt -------------- ¶4. (C) The Ambassador noted that everyone was anxious to know what the Correa administration will do on debt. Patino replied, with a laugh, "I don't know." He went on to say that Ecuador cannot pay all of its debt, and that debt servicing is equivalent to 45 percent of current income, which is excessive. He added that some of Ecuador's debt is illegitimate, and that the GOE is investigating its debt. Patino spoke passionately about the burden that debt has placed on Ecuador and how some lenders are still encouraging Ecuador to borrow, but asserted that Ecuador needs to reduce its reliance on debt and draw on its own resources. International Financial Institutions -------------- ¶5. (C) As part of his discourse on Ecuador's debt, Patino spoke critically of the international financial institutions (IFIs). He said that the IFIs have a policy of forcing debt on developing countries, which reduces the countries' sovereignty. He said that Ecuador would pay off its debt to the IMF, and continue to provide the IMF information "each year," but criticized the Letters of Intent that Ecuador had signed with the IMF. He said that many former Ministers of Economy went on to work for the IFIs, but he was not a "good student" and would not follow in their footsteps. Cooperation on Microfinance and Production -------------- ¶6. (U) The Ambassador said that the U.S. is prepared to work with the Government of Ecuador when our interests coincide, and added USAID has projects that support microfinance and small producers. She noted that current microfinance programs have been successful and that it is important that they remain sustainable. She also noted that most current microfinance programs are focused on the urban areas, and the rural areas remain a problem. ¶7. (U) Patino thanked the Ambassador for her offer of help, and said that the government is developing a microfinance program through the national development bank which will be largely focused on rural areas. He acknowledged that there are numerous NGO-supported microcredit programs, which he welcomed but said need to be implemented more rationally, otherwise they might become concentrated in a few provinces. Patino was particularly interested when the Ambassador mentioned USAID support to match up leather producers with U.S. purchasers and asked for more information on the project. ¶8. (U Patino said that his Ministry has just established a new Under Secretariat for Solidarity, headed by U/S Diego Landaso, to oversee the Ministry's work on microcredit and production support. USAID will follow up with Landaso and share information on its microcredit and production projects. Bio Notes -------------- ¶9. (SBU) Patino said that he often works from 7 am to 1 am, and that on the day he met the Ambassador he had woken up at 3 am to address a backlog of work that had accumulated while he focused on preparing the budget. He is from Guayaquil, but his wife has joined him in Quito. His one daughter is studying in Argentina. He said that he is always happy, and that his mother is a saint. His father left his family, so was not around "to set a bad example." He has four full siblings, plus four more half siblings that his father had with another woman. Comment -------------- ¶10. (C) Patino, like all the Cabinet members the Ambassador has met, greeted the Ambassador warmly and was looking to establish a good rapport. He was relaxed throughout the meeting, even when criticizing Ecuador's debt burden and speaking poorly of the IFIs. He portrayed himself at ease in his position and his relationship with Correa. Throughout the 30-minute conversation he frequently commented on how pleased and comfortable he is to be Minister of Economy. He variously said that he is content, patient, and happy, and that "fear" is not part of his dictionary. ¶11. (C) His comments during the meeting reaffirmed what is already evident from his public statements: that he has strong, negative views about Ecuador's debt burden and the role of IFIs. However, in at least this one meeting, and in contrast to his first meeting with investment bankers (reftel),he gave the impression of a person who might bring a degree of moderation to his dealings with the international banking community. Patino also gave the impression of someone who may react emotionally to challenging developments. He has already given a number of mixed signals on how the GOE will deal with its debt, and we suspect that that uncertainty will continue. JEWELL