Ambassador's Meeting with Minister of Industries

UNCLAS QUITO 000400

SIPDIS

SENSITIVE
SIPDIS

DEPT FOR WHA/AND
USTR FOR BENNETT HARMAN

E.O. 12958: N/A
TAGS: ECON EINV ETRD EFIN EAID PREL EC
SUBJECT: Ambassador's Meeting with Minister of Industries



1. (SBU) Summary. In his meeting with the Ambassador, Minister of
Industries Sagasti said that his priorities are promoting investment
and competitiveness, he's the government's bridge to the private
sector, and that his ministry is close to reaching agreement with
the Foreign Ministry on reallocating trade responsibilities. He
also suggested that the GOE may want to explore options to strength
bilateral trade relations once the Correa administration is more
established. End summary.


2. (SBU) The Ambassador met with Minister of Industries Raul
Sagasti on February 13. Sagasti opened the meeting by noting the
challenges of setting up a new government. He said that changing
governments is always challenging, but the transition for the Correa
government is doubly challenging since it also trying to make major
policy changes as well.

Restructuring Trade Responsibilities
--------------


3. (SBU) Sagasti said that the Ministry of Industries and Ministry
of Foreign Relations had largely agreed how to divide trade
responsibilities given President Correa's decision that foreign
trade matters will be managed by the Foreign Ministry. Issues that
relate to negotiating and compliance with international trade
agreements would fall to the foreign ministry, while more technical
issues (e.g., licensing, standards) would remain with the Ministry
of Industries. The ministries were still discussing some matters,
such as who would have authority over CORPEI, Ecuador's trade and
investment promotion council. Sagasti said that almost all Ministry
of Industries staff would remain, with the exception of about four
technical staffers.

Promoting Investment and Competitiveness
--------------


4. (SBU) Sagasti said that the priorities for his down-sized
ministry are promoting investment and competitiveness. He said that
investment has always been part of the ministry's mandate, but had
received insufficient emphasis until now. He added that he will
look to create an environment that will attract both domestic and
international investment (but did not specify any specific
measures). Sagasti said that the government also intends to enhance
Ecuador's competitiveness, and that President Correa wants to
preside over the Competitiveness Council. Within his ministry, he
has renamed the Under Secretary for Industry as the Under Secretary
for Competitiveness.


5. (SBU) Sagasti responded enthusiastically when the Ambassador
mentioned USAID's success in supporting a leather industry cluster
in Cuenca. He said that he hired Esteban Vega, a former employee of
a USAID contractor, as Under Secretary for Competitiveness, and
given the success of the USAID project, intends to replicate it as a
model for supporting other industry clusters in Ecuador.

Interlocutor with the Private Sector
--------------


6. (SBU) Sagasti said that President Correa asked him to be the
government's bridge to the "productive" sector, and he has begun to
meet with the leading Ecuadorian business chambers to explain the
government's policies. When the Ambassador inquired whether his
objectives were to "calm" the business sector, Sagasti concurred.
He said that he informed the business chambers that the government
has focused on small and medium enterprises because they had
received the least attention from the government, while large
business has always been able to call on the government and will
continue to have access through him.

Microfinance and Shortcomings of the Banking Sector
-------------- --------------


7. (SBU) Sagasti said that the government is developing plans to
provide subsidized credit to underserved rural areas. He said that
subsidized credit would not be provided to urban areas to avoid
displacing successful urban market-based microcredit programs. He
also complained that current financing from the banking sector is
focused on consumer goods, and that the banks have failed to provide
medium-term financing for businesses. He said that the government
will look to also fill that void using its development banks.

Trade Relations with the U.S.
--------------


8. (SBU) Sagasti said that further extension of the Andean Trade
Preference Act is important for Ecuador, and that the GOE would urge
its renewal and has hired U.S. lobbyists.


9. (SBU) Noting that the U.S. is Ecuador's principal export market,
Sagasti suggested that after the government has had time to settle
into office he hoped that the U.S. and Ecuador could talk about some
form of strengthening bilateral trade relations.

Bio Notes
--------------


10. (SBU) Raul Sagasti is a businessman from Riobamba, although he
has spent most his adult life in Quito. He served for over 23 years
as president of the steel company Industria Acero de los Andes.
Previously he had worked in the state petroleum company when it was
known as CEPE. He later established an oil service company, Coper
Pet - S Kinner, which he called "my company," in contrast to the
steel company where he worked as president.

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


11. (SBU) One of the few businessmen in the cabinet, Sagasti does
not appear to have particularly strong ideological views (in
contrast to many others on Correa's economic team),although he was
relatively critical of the banking sector. He was matter-of-fact in
discussing his priorities, although he did not give many indications
of how he intends to achieve his objectives. We noted with interest
his statement that Correa asked him to be the government's liaison
with the private sector, since our impression to date is that the
government is relatively uninterested in reaching out to or hearing
the views of the business elite.


12. (SBU) We believe that Sagasti's comment about discussion of
trade arrangements reflects his own thinking and not that of the
Correa government, although we have the impression that members of
Correa's team would be interested in exploring measures such as
regular consultations on trade matters, once the government is more
established.