FINANCE MINISTER ORTIZ QUITS, REPLACED BY WILMA

C O N F I D E N T I A L QUITO 000617

SIPDIS

E.O. 12958: DECL: 07/08/2018
TAGS: EFIN ECON PGOV EC
SUBJECT: FINANCE MINISTER ORTIZ QUITS, REPLACED BY WILMA
SALGADO

REF: A. QUITO 616

B. 07 QUITO 1758

C. 07 QUITO 1995

Classified By: Classified by DCM Jefferson Brown. Reason: 1.4 B and D.


1. (U) Summary. Finance Minister Ortiz quit July 7 after
refusing to approve the confiscation of assets from the
owners of a bank that failed in 1999. President Correa
immediately replaced him with Wilma Salgado, an economic
professor who had been serving in the Andean Parliament and
had been General Manager of the Deposit Guarantee Agency in
2003-2004. End summary.


2. (U) Finance Minister Fausto Ortiz quit after he refused
to sign documents for the government to seize assets of
former Filanbanco owners and officials to cover losses from
the 1999 collapse of the bank, which at the time was
Ecuador's largest bank (see reftel a for more details on the
asset seizures). Ortiz's resignation took place late the
evening of July 7. No additional information has been
provided on Ortiz's opposition to the asset seizure.

Steady Leadership
--------------


3. (C) Ortiz provided steady leadership at the Ministry of
Finance after he replaced Ricardo Patino, President Correa's
first Finance Minister, in July 2007 (reftel b). In
contrast to Patino, who raised doubts about the GOE's
willingness to service its international debt, Ortiz told the
Ambassador that his biggest challenge after taking the job
was to lower the political profile of debt (reftel c),which
he succeeded in doing. He initially focused his efforts on
managing the federal budget, which was made easier by strong
revenues thanks to high oil prices. He and his ministry kept
a low profile on most other economic issues, although he
worked to strengthen the GOE's ties to Inter-American
Development Bank (IDB) and, with less success, the World Bank
and International Monetary Fund (IMF). After initially
ceding the Ministry's macroeconomic policymaking role to
Coordinating Minister for Economic Policy Pedro Paez, Ortiz
began to rebuild that side of his Ministry and play a more
active role on non-fiscal economic issues.

Wilma Salgado, New Finance Minister
--------------


4. (U) President Correa immediately named Wilma Salgado as
the new Finance Minister, and she was sworn in on July 8.
Salgado had been serving as an Ecuadorian representative to
the Andean Parliament since 2007, a position she had to give
up become Finance Minister.


5. (U) Salgado served as General Manager of the Deposit
Guarantee Agency (AGD),Ecuador's bank deposit insurance
agency, from March 2003 to March 2004, under the Gutierrez
administration. In that position, she was responsible for
attempting to recover assets from banks that closed during
the 1999 banking crisis. After leaving the AGD she was
subject to a criminal investigation for her management of the
AGD, as were other former AGD managers, in her case for
alleged corruption in hiring AGD personnel. On July 4, the
Constituent Assembly approved an amnesty protecting her and
two other AGD managers from criminal charges stemming from
their management of the AGD on the presumption that the
charges were politically motivated (the amnesty also covered
a number of other individuals, including former president
Gustavo Noboa, who was charged with corruption in a bond
issuance).


5. (C) Ivonne Baki, the current President of Andean
Parliament and former Ecuadorian Ambassador to the U.S. and
former Minister of Commerce with a pro-market orientation,
told the DCM that Salgado would be a good Finance Minister.

International Debt Commission
--------------


6. (C) One challenge that Salgado will soon face is the
upcoming report by a commission appointed by President Correa
to review Ecuador's external debt. The Ministry of Finance's
representative on the commission is former minister Patino,
although Ortiz reportedly instructed Patino to give him
several options in the report and not simply recommend
default (reftel c). In Ortiz's absence, it remains to be
seen if Salgado can exercise any moderating influence on the
commission. An article published by Salgado in 2002 argued

that Ecuador's debt at the time was not sustainable and
hindered Ecuador's ability to address social problems, but
Salgado was restrained in her recommended actions (IMF
flexibility, debt swaps, etc). According to the article, she

was a member of Jubilee 2000, an organization that argues the
international debt burden for developing countries is
unsustainable (Patino is the founder of the Ecuador chapter
of Jubilee 2000).

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


7. (U) Salgado is an economist by training, with a doctorate
in economics from the Autonomous National University in
Mexico, a masters in financial systems and development from
Sorbonne, and a bachelors in economics from the Catholic
University in Quito. Prior to her position at the AGD, she
was an economics professor in the masters program for the
Simon Bolivar Andean University in Quito. She also worked in
the Central Bank, Ministry of Finance, as an economic
consultant, and as economic advisor in Congress. She was
born October 20, 1952 in Pifo, a small town on the outskirts
of Quito. According to her bio, she is fluent in French and
can read English.


8. (C) Comment: Ortiz was well regarded for his steady
leadership at the Ministry of Finance, particularly for his
ability to defuse the debt repayment issue after Patino's
tempestuous statements on debt. We had assumed he would, if
necessary, play a moderating influence on the upcoming
international debt report. We also suspect he was a
moderating voice in the economic policy debate within the
GOE, and had had reasonably good access and influence with
Correa. We do not yet know what kind of relationship Salgado
has with Correa or the likely resulting dynamics of her
integration into the senior economic team.
Jewell