MFA MEETING ON BILATERAL DIALOGUE WITH ECUADOR

UNCLAS QUITO 000696

SENSITIVE

SIPDIS

AID for AA/LAC Jose Cardenas
State pass USTR for Bennett Harman
NSC for John Herrmann and Bob King
Commerce for Lisa Martilotta
USDA for Amy Slusher
Treasury for Office of the Americas Luyen Tran

E.O. 12958: N/A
TAGS: ETRD EINV ECON PREL EC
SUBJECT: MFA MEETING ON BILATERAL DIALOGUE WITH ECUADOR


1. (SBU) Summary: USG and Ecuadorian officials met July 18 to
discuss potential agenda items for a Bilateral Dialogue between
Ecuador and the United States. The Dialogue would address issues of
interest to both sides, proposing information exchange, cooperation,
and technical assistance in areas such as the financial sector,
customs, SPS, sustainable development, combating narcotrafficking
and money laundering, trafficking in persons, and consular
notification, among others. In many of these areas, excellent
cooperation already exists between the USG and GOE. The proposed
dialogue facilitates frank discussion of our investment and SPS
issues with the Foreign Ministry and creates a new mechanism for
promoting our interests, and Post looks forward to developing it
further. This cable reports on both the meeting and current USG
efforts on proposed agenda items. End Summary.


2. (U) On July 18, WHA/EPSC Director Matt Rooney and Embassy
officials met with MFA officials to discuss an Ecuadorian agenda
proposal for a bilateral policy dialogue between the U.S. and
Ecuador. The concept of the dialogue, which originated in a
conversation between Deputy Secretary Negroponte and Ecuadorian
President Correa in May 2007, is to serve as a forum to address
issues of interest to both sides and to highlight the value to
Ecuador of positive engagement with the U.S. Ecuadorian Under
Secretaries for Bilateral Relations, Economic and Commercial
Affairs, and Consular Services participated in the meeting, along
with members of their staff.


3. (U) The meeting was productive and its tone positive. The
Ecuadorians were clearly well-prepared, were able to explain agenda
items proposed by other ministries, and were knowledgeable about
much of the cooperation between our two governments. They
emphasized their desire for dialogue. Both sides agreed that we
already have excellent cooperation in a number of areas and that the
dialogue should build on, but also emphasize, the breadth and range
of our cooperation.


4. (U) The group addressed items in the draft agenda in order,
going over each of the four pillars of the agenda: I) Measures to
Promote Human Development and Poverty Reduction, II) Facilitation of
Trade and Investment, III) Cooperation and Technical Assistance, and
IV) Immigration Issues.

Measures to Promote Human Development and Poverty Reduction
-------------- --------------


5. (U) Much of this pillar focused on support for Plan Ecuador
(Ecuador's development plan for the Northern Border region),
Ecuador's National Development Plan, and small and medium sized
enterprises (SMEs). Ecuador and the U.S. (largely USAID and USDA)
have solid cooperation in these areas and much of the assistance is
to SMEs. USDA's Foreign Agricultural Service (FAS) provided over
$1.2 million in assistance to the Northern Border provinces for
various agricultural projects from 2000 to 2007, benefiting over
8,400 people in the area. USAID has three programs that support
Ecuador's Development Plan, and other programs that directly support
three out of five components of Plan Ecuador - territorial
development (including infrastructure); solidarity economy (job
generating and income increasing productive activities); and
strengthening of local government. The Ecuadorian side, clearly
aware of many of these programs, thanked USAID for their work in
these areas, while recalling that our bilateral assistance has been
sharply cut over the past five years and expressing the hope that it
might be restored.


6. (U) In support of the Northern Border and Plan Ecuador goals,
USAID trained 1,000 farmers on agricultural and post-harvest best
practices and modern techniques in FY 2007 and created 5,676 new
jobs. Cacao yields increased from 3 to 18 100-pound bags per
hectare, and coffee yields jumped from 2 to 12 100-pound bags per
hectare. Productivity increases and product quality improvements,
plus efforts to link farmers to end-markets have contributed to
increasing family incomes by 51% in just one year. Participant
farmers now export nearly 100% of their cacao, coffee, and broccoli.
In FY 2007, USAID also supported programs to strengthen 23
municipal governments, and in five of these cities, municipal tax
revenues increased 68% in just one year. Finally, USAID financed
the construction of 14 bridges, 20 water systems, and 9 sewerage
systems benefiting over 50,000 people.


7. (U) USDA/FAS in Ecuador funded a Food for Progress project from
2004 to 2007 that conducted over 700 farmer field schools and
trained approximately 18,500 farmers in integrated crop management.
The program also created 47 farmer associations and provided support
for cocoa quality and post harvest equipment. The project promoted
linkages between farmer's associations and national and
international cocoa buyers to shorten the marketing chain and
increase farmer incomes.


8. (U) For SMEs, in 2008 and 2009 USAID is developing integrated
value chains in at least 17 provinces of the country where more than
6,000 permanent jobs will be created in the next 2 years, through
support to small producers. USAID's Credit Guarantee Program will
generate $13 million in loans benefiting 2,000 small producers in FY
2008 and 2009. USDA's PL 480 food aid program provided micro-loans
to 200 dairy and cheese producers from dairy associations in
Ecuador. These micro loans were used to buy dairy cattle to improve
herds in Carchi, with a project investment of $210,000. The
Department of Commerce's Foreign Commercial Service (FCS) promotes
and facilitates the attendance of SMEs to DOC trade shows in the
U.S. From 2007 to June 2008, more than 609 Ecuadorian entrepreneurs
traveled to trade shows in the U.S. promoted by FCS.


9. (U) The Ecuadorians raised ATPA extension as key for human
development and poverty reduction. The U.S. side stressed that ATPA
renewal is a decision of Congress, and as such the executive branch
of the USG is not able to address it. The Ecuadorians also
indicated their interest in learning how the U.S. Small Business
Administration (SBA),operates and noted an SBA program with Mexico
that they might be interested in emulating. (Note: According to the
GOE, the current second in command of the SBA is
Ecuadorian-American).


10. (U) The Ecuadorians were also interested in learning about
other facets of the U.S. financial system. Specifically, they asked
us to provide them with information about the strengths and
weaknesses of implementing the Community Reinvestment Act (where
U.S. banks are expected to reinvest in reviving inner city
neighborhoods),creating sustainable municipal finance programs,
facilitating remittances and their investment in productive
activities, and sharing our experience with Social Security and
financial regulators like Fannie Mae and Freddie Mac. They also
cited a U.S. program with Mexico collaborating with the Fed for
remittances transfers as a potential area for information exchange,
and interest in cooperation between the SEC and the Ecuadorian stock
market.

Facilitation of Trade and Investment
--------------


11. (U) The Ecuadorians raised areas where they felt they could
benefit from information exchange and technical assistance to
improve competitiveness and facilitate trade, their key requests in
this section. They noted that they want a law on competition policy
and have been working on a draft, but are facing technical problems.
The U.S. side explained that USAID has provided assistance on
drafting a law in the past and is willing to help again (note:
USAID could bring Andean experts to discuss the Colombian and
Peruvian experiences applying competition policy). USAID is also
helping to improve competitiveness in Ecuador by supporting the
creation of business opportunities through twelve productive
clusters including leather goods, Panama hats, dairy products,
cocoa, apparel, horticulture, and eco-tourism. The projects provide
support in reaching new markets and developing export capacities.
In addition, USAID is supporting the creation of private sector
councils in different provinces to promote national consensus on
pro-market policies and at the central government level, creation of
a national investment promotion agency and a national sectoral
development agency. Organic production is another competitiveness
topic in this section; USAID plans to provide assistance to cacao
and coffee farmers in order to obtain organic certifications.
Similar assistance will be provided to tourism operators to obtain
sustainable management certification.


12. (U) The Ecuadorians flagged the U.S. requirement for 100%
container scanning as a challenge and requested technical assistance
and possibly a need for additional time to comply. The U.S. side
noted that some assistance could be available. The Ecuadorians
would also like to improve their customs services, and mentioned a
number of areas where technical assistance could help, including
fighting contraband. We expressed our desire to cooperate with them
in these areas. Department of Homeland Security (DHS)'s Customs and
Border Protection advisors assist and train Ecuadorian
anti-narcotics police in drug interdiction at land borders,
international airports and seaports. They also provide support and
training to Ecuadorian Customs on contraband interdiction. DHS's
Immigration and Customs Enforcement Office (ICE) is working to
establish a Trade Transparency Unit (TTU) with Ecuadorian Customs.
The TTU will modernize their established information systems, in
regards to US imports and exports, and assist them in their fight
against customs corruption/transparency.


13. (U) The U.S. and Ecuador have significant cooperation on many
SPS issues. We mentioned access to the Ecuadorian market for U.S.
beef as an important SPS interest on the U.S. side. U.S. beef is
denied entry to Ecuador due to restrictions implemented in 2001 as a
result of a U.S. outbreak of mad cow disease. However, in 2007 the
International Organization for Animal Health declared the U.S. a low
risk country. The Ecuadorians agreed to investigate the issue
further. USDA's Animal and Plant Health Inspection Service (APHIS)
works with the GOE on a number of pre-clearance programs that ensure
Ecuadorian agricultural products are safe to enter the U.S.; one
example is mangoes. The GOE expressed its strong desire to improve
its official sanitary system (SESA). USDA is assisting with
restructuring Ecuador's SPS system, providing direct assistance to
the GOE and the Coordinating Ministry for Production to find
solutions to management issues within Ecuador's current sanitary
system. USDA also supports the Foot and Mouth Disease Eradication
Program in Ecuador, providing support since 2000 for supplying
vaccination equipment, publicity, and training for producers and
vaccinators, among others.


14. (U) The group discussed expansion of air transportation as
another possible area of cooperation (U.S. carriers would like
better routes and a more stable flight regime). The Ecuadorians
cited technical issues, but agreed limited expansion might be
possible.


15. (SBU) Regarding investment, the U.S. side signaled concern with
investment disputes between U.S. companies and the GOE. We stressed
that the key was for the GOE to follow investment-friendly policies
that would prompt major U.S. interests like Chevron, Oxy and others
to reconsider their approach to key Washington decisionmakers
regarding their disputes.

Cooperation and Technical Assistance
--------------


16. (U) In discussing sustainable development, the Ecuadorians
noted their need to retain discussion of their Yasuni Model, whereby
the international community would compensate Ecuador for refraining
from producing oil in the environmentally sensitive ITT fields, as
an agenda point, even though they understand the U.S. is unlikely to
participate. The Ecuadorians explained that clean development
included biofuels, an area that is getting new focus and is part of
the GOE's 10 "star sectors" targeted for investment and development
this year.


17. (U) The Ecuadorians offered the USG participants a summary of
the GOE's 10 strategic sectors for development. Since USAID
consultants had developed this strategy for them, it was comforting
to see the sense of ownership that the GOE showed in echoing this
back to us. Both sides highlighted their interest in working
together in this sector.


18. (U) In other areas related to sustainable development, USAID
provides extensive support to Ecuador. Its programs provide
assistance for the Waorani and Kichua Indigenous communities to
control their territories, to preserve natural resources and to
maintain their cultures. USAID's Watershed Management Program
preserves watersheds in selected areas and conserves biodiversity.
The Ecuadorian Sustainable Tourism Alliance works with the tourism
industry in order to develop sustainable tourism value chains, and
USAID's Parks Recovery program seeks to repair the physical
infrastructure and environmental quality of selected parks and
protected areas.


19. (U) The lead GOE interlocutor, Amb. Carlos Jativa, stated his
interest in exploring other types of development assistance that the
U.S. could offer. The Ecuadorians would like to learn more about how
Ecuador could qualify for MCC (the Millenium Challenge Corporation)
support, noting that the current government has a strong record on
combating corruption. They also reiterated their interest in TFCA
(Tropical Forests Conservation Act) debt relief, although they
appear to understand the program and the barriers to their
benefiting from it. They also expressed interest in learning more
about seized asset funds (from property owned by drug lords) and
whether the proceeds from the sale in the U.S. of these seized
assets could be shared with Ecuador to fight narcotrafficking and
for development.


20. (U) They also want to add risk management for natural disasters
as an area of cooperation. USAID has already been implementing long
standing programs that deal not only with risk management, but
disaster preparation, preparedness and response. In the first six
months of 2008, the USG, principally through USAID and MILGROUP,
provided over $1 million in assistance to flood victims.


21. (U) Cooperation in the judicial area (including extradition),
money laundering, and in fighting narcotrafficking is excellent.
The USG facilitates communication between the Ecuadorians and the
U.S. Department of Justice in extradition cases, and provided
important assistance in the Isaias Brothers case. USAID contributed
to a larger effort by authorities in the Ecuadorian city of Cuenca
to ensure that prisoners are not incarcerated without being
sentenced. In November 2007, the Ecuadorian Supreme Court decided
to adopt Cuenca's successful pre-trial approach nationwide. USAID
also promoted public defense for the most vulnerable groups in
Ecuador. In FY 2007, 1,463 indigent persons, including poor women,
received legal defense services and another 1,623 were provided
legal counsel in eight cities. In FY 2007, the GOE selected four of
these USAID supported legal clinics to provide public defense
services under a new initiative to provide legal services to
prisoners.


22. (U) The Embassy's Narcotics Affairs Section (NAS),part of the
State Department, also works to strengthen Ecuador's institutional
capacity to control drug trafficking through police and judicial
training, training on money laundering, and assistance with border
and coastal control. NAS works with the Ecuadorian police, military
and judiciary to combat narcotrafficking, providing assistance of
more than $8M in 2007. NAS also provides equipment and technical
assistance to Ecuador's Financial Intelligence Unit to effectively
identify suspicious financial transactions, and supports training
and security upgrades for the Fiscalia's money laundering office so
that it will be able to effectively prosecute money laundering
cases. DHS officers provide training on detecting and interdicting
bulk cash smuggling to the GOE.


23. (U) The USG also provides intellectual property rights (IPR)
training through the U.S. Patent and Trademark Office to Ecuadorian
IPR and customs officials, and prosecutors. Over 15 participants
attended these training programs in 2008. USAID's Andean Regional
Trade Capacity Building Program helps strengthen the Ecuadorian
Intellectual Property Rights Institute (IEPI) by assisting to
digitalize all files and map the different processes and functions
for more efficient operations.

Immigration Issues
--------------

24. (U) Immigration is an important issue for the Ecuadorians given
President Correa's strong interest in the topic, and migration is
part of the Association Agreement the Andean countries are
negotiating with the EU. However, the U.S. side emphasized that a
number of immigration issues are problematic for us (just as they
are for the EU). The Ecuadorians expressed interest in information
exchange, and in learning more about consular notification. DHS
officers are working with the GOE to establish an Electronic Travel
Document System that would allow for a shorter detention period for
Ecuadorian Nationals detained by U.S. Customs. The State
Department's Bureau of Consular Affairs is developing activities to
raise awareness of consular notification and access to federal,
state, and local law enforcement, and corrections and criminal
justice officials, through distribution of over 1,000,000 pieces of
consular notification and access instructional material to these
agencies, and publication of several articles on consular
notification and access.


25. (U) The Ecuadorians would also like to work on promoting the
developmental impact of remittances. The U.S. side noted that this
goal was among the benchmarks agreed at the 2004 Special Summit of
the Americas and described the remittance programs at the community
level that the United States had undertaken. USAID has partnered
with the World Council of Credit Unions to facilitate remittance
transfers among credit unions. Its programs promoted remittances in
New York and New Jersey and implemented remittances services from
Spain and Italy. USAID programs facilitated the transfer of nearly
70,000 remittances totaling $24 million in the period 2006-2007.


26. (U) On trafficking in persons (TIP),there is already excellent
cooperation between the U.S. and Ecuador, and USAID has a number of
projects in this area. USAID provided assistance to the Ministry of
Government for the implementation of Ecuador's National Plan to
Combat TIP. In FY 2007, USAID supported the alliance of 32 civil
society organizations in the city of Cuenca to develop an Action
Plan to combat trafficking, and supported a similar development in
the Amazon province of Napo, among other programs. DHS/ICE works
with the GOE on TIP cases, as well as providing equipment and
training to DINAPEN (the Administration for the Protection of
Adolescents and Children). The State Department's G/TIP office has
also provided assistance, most recently to a program to assist
victims in Chimborazo Province. All of this support has helped
Ecuador move from Tier 3 to Tier 2 of the State Department TIP
Report in 2007 and stay there in 2008.

Next Steps
--------------


27. (U) The U.S. side agreed to send back a counter-proposal to the
GOE, based on the discussion in the meeting. Following that, both
sides would like to launch the dialogue formally in October, if
possible.

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


28. (SBU) It became clear during the course of the conversation
that the GOE proposal was driven by a desire to help us highlight
the positive value of our bilateral relationship with Ecuador.
Speaking informally over lunch, Ambassador Jativa told us that they
understood they had a "credibility" problem in Washington and
intended to mount a concerted effort to overcome it. They clearly
see the proposed dialogue as an element in this strategy. The
dialogue creates a mechanism for the GOE to demonstrate to the
Ecuadorian public the value of our bilateral cooperation, in spite
of Correa's rhetoric. The obvious, tangible benefits of our
relationship with the GOE will be highlighted, in contrast to its
relationships with some less constructive partners. Finally, the
dialogue's positive atmosphere facilitates frank discussion of our
investment and SPS issues with the Foreign Ministry and creates a
new mechanism for promoting our interests; Post looks forward to
developing the dialogue initiative further.

GRIFFITHS