ECUADOR ECON WEEKLY: Oil Contract Renegotiations; Limits on

UNCLAS QUITO 000220 SIPDIS SENSITIVE SIPDIS TREASURY FOR MEWENS E.O. 12958: N/A TAGS: ECON EPET EFIN EINV SENV EC SUBJECT: ECUADOR ECON WEEKLY: Oil Contract Renegotiations; Limits on Credit Risk Agency; Pipeline Repaired REF: A) 07 QUITO 999, B) QUITO 210 ¶1. (U) The following is a weekly economic update for Ecuador that reports notable developments that are not reported by individual cables. Oil Contract Negotiations Inching Forward -------------- ¶2. (SBU) On February 26, the Ministry of Petroleum and Mines reported that it will soon close a deal on eight of fourteen petroleum contracts with the four oil companies that hold production sharing agreements: Perenco (France),Repsol YPF (Spain),Andes Petroleum (China) and Petrobras (Brazil). But other reports indicate this announcement may be premature, and some challenges still remain. Rene Ortiz, President of the Hydrocarbon Industry Association of Ecuador, said negotiations are hindered by the fact that the GOE does not accept the World Bank's International Centre for Settlement of Investment Disputes (ICSID). This comment was echoed by the manager for City Oriente, which is also involved in contract renegotiations (septel),who said that in the most recent meeting he attended with the foreign oil companies, all asserted that having strong arbitration provisions is important. Two options for companies interested in restructuring their contracts are service contracts or signing a new production sharing contract which would reset the reference price and terms of the windfall income tax (discussed in more detail in septel). Limits on National Risk Bureau Listings -------------- ¶3. (U) On February 26, the National Banking Board (Junta Bancaria) announced that the National Risk Bureau of the Superintendency of Banks would no longer include the names of co-guarantors in its credit listing data base, or provide information on borrowers without their prior consent. Previously, this national institution provided information on co-guarantors from commercial lenders to private credit bureaus; it will continue to do this with regard to borrowers, but not with regard to co-signers. ¶4. (SBU) Comment: President Correa attended the morning session of the notionally autonomous Banking Board and pressed for action against the Risk Bureau. Correa's participation in the Banking Board meetings (see also reftel a) is undermining the autonomous, technical nature of the Board. However, we understand that initially Correa called for closing the National Risk Bureau, and after resistance from some members, the Board settled on the more limited course of action. According to one report, the Correa Administration's opposition to the Risk Bureau was prompted by a senior GOE official who was listed as a co-guarantor of a defaulted loan. While preferable to closing the risk bureau, the new policy limits its effectiveness and will likely reduce the range of borrowers that banks are willing to accept. Oil Pipeline Resumes Operation -------------- ¶5. (U) On February 28, a landslide damaged Ecuador's principal oil pipeline (reftel b). The pipeline was repaired on March 2 and pumping resumed the following day. BROWN