ECUADOR'S LEADING FAMILY BUSINESS GROUPS

C O N F I D E N T I A L QUITO 000731 SIPDIS E.O. 12958: DECL: 08/08/2018 TAGS: ECON EINV EFIN EIND EAGR PGOV EC SUBJECT: ECUADOR'S LEADING FAMILY BUSINESS GROUPS Classified By: Classified by Charge Doug Griffiths. Reason: 1.4 B and ¶D. ¶1. (U) Summary: This cable identifies Ecuador's leading family business groups, which dominate Ecuador's formal economy and own most of the important companies in the non-petroleum sector. End summary. Overview and observations -------------- ¶2. (SBU) This cable is a snap shot of the most important business groups in Ecuador, all of which are dominated by family members, who usually hold the highest positions at the different companies. The family corporate structure tends to limit the innovation, expansion and corporate governance of the groups. In some instances, the family leader will bring in strong outside officials to help run the company -- Isabel Noboa's Nobis group has a reputation for doing so -- but in many instances the family members make most of the decisions. A number of these groups have remained strong after the passing of the founding patriarch, although one academic said that most family groups begin to break down in the third generation. Most are not very transparent. ¶3. (SBU) As the name implies, these business groups include a number of companies. In some instances, the group is focused in a particular sector -- the Wrights remain focused in retail, and Bakker is focused on processed food. Most, however, have branched into apparently unrelated industries. The group structure, combined with Ecuador's relatively small size, means that there is a high degree of concentration in many sectors, but also competition in almost all sectors. Furthermore, the list below is not comprehensive, so there are additional smaller business groups that provide additional competition. An example of this is the supermarket business, which is dominated by the Wright and Czarniski groups mentioned below. However, the Santa Rosa group also competes in the supermarket business, particularly in middle-size cities, and Ecuadorians also shop in small local grocery stories and at markets. ¶4. (C) The concentrated nature of many of these businesses has created a business and political environment that puts a premium on protecting vested interests, which explains much of President Correa's antipathy towards the Ecuadorian business elite. As noted below, some of the leaders of the various groups have served in important political positions, raising questions about conflict of interest. Others have kept a lower political profile, but even so are politically attuned and influential on matters important to their business. However, some of that political access has diminished under the Correa administration, which has kept its distance from many business organizations and leaders, and with the closure of congress, whose members were often highly responsive to guidance from the private sector. ¶5. (SBU) The groups are listed below in approximate order of their importance, although such a ranking is partially subjective. The structure of many of these business groups is often opaque; there are sometimes cross holdings between groups; and Ecuadorian businesses often under report revenue, assets, and profits. Therefore the snapshots below are incomplete but represent our best information on the groups' structures, based on interviews, government agency information, and press reporting. Noboa Group -------------- ¶5. (SBU) Alvaro Noboa, son of a multi-billionaire banana magnate, Luis Noboa, is the richest man in Ecuador. His fortune is valued at $1 billion. His father's death in 1994 sparked a bitter sibling feud over inheritance that resulted in several (pending) lawsuits and left Alvaro in control of most of the family businesses. Alvaro's sister is Isabel Noboa, owner of the Nobis Group (mentioned below). Noboa served as president of the Junta Monetaria, which oversaw monetary policy and the Central Bank, under the brief government of Abdala Bucaram in 1996-97, and ran for president under Bucaram's Roldosista Party in 1998 (losing the final round election to Jamil Mahuad). Noboa later split off from the PRE to form his own party (PRIAN),and was defeated in his second presidential bid by Lucio Gutierrez in 2002, and in his third by Rafael Correa in 2007. ¶6. (SBU) Noboa is the leadering Ecuadorian banana exporter. He has over 7,000 hectares of production in 11 properties, and complements his banana production with the ownership of a marine transportation company. The Noboa Group has 144 companies in different sectors including agriculture, transportation, banking, insurance, and manufacturing. Noboa's most well-known companies are LAN Ecuador (international airline, associated with LAN Chile),Seguros Condor (insurance),Banco del Litoral (banking),La Bananera (bananas),El Cafe (coffee),Molineras Industriales (flour miller),Molinos Poultier (oat miller),Frutera Jambeli (tropical fruits),Cartonera (cardboard boxes),and Naviera Transmabo (maritime transportation),which according to Ecuador,s tax agency (SRI) together generate annual sales of $570 million. According to data from the Superintendence of Companies (2005),these companies have $560 million in assets. Isabel Noboa/Nobis Group -------------- ¶7. (SBU) Isabel Noboa, Alvaro Noboa's sister, is another heir to Luis Noboa's fortune. After many fights with her brother and lawsuits over the family fortune, Isabel Noboa decided to cash in her shares of the Noboa family's shipping companies and huge banana plantations. In 1997, Isabel Noboa reached an agreement with the estate's heirs to give up her share in the banana business in exchange for the largest Coca-Cola bottling company in Ecuador. Isabel Noboa is one of Ecuador's most successful entrepreneurs, and is chairman and CEO of Nobis SA, a $520 million consortium. ¶8. (SBU) The Nobis Group owns Ecuador's oldest and most productive sugar mill, Valdez, along with 12 other companies, ranging from one of Ecuador's largest dairy farms, to an alcohol supplier for the liquor industry, to cosmetics, pharmaceuticals firms, real estate, and construction companies. ¶9. (SBU) The Valdez sugar mill earns around $19 million in profits a year, with more than $64 million in sales. Recently, the Nobis Group's Coca-Cola Congaseosas joined the Ecuador Bottling Company, a corporation which has merged all Coca-Cola bottling operations in the country. ¶10. (SBU) Nobis S.A. has become the most dynamic real estate developer on the Coast. Nobis built the Mall del Sol in Guayaquil, a one million-square-foot shopping center, which is the largest on the South Pacific Coast, and has expanded to include an executive center and a Sheraton hotel. Nobis has two other ambitious developments in Guayaquil "The Big Apple" and a new riverside complex. Other construction projects include a Howard Johnson hotel in Quito, apartment buildings, another two large hotels, and a high-tech hospital. Nobis's various companies now employ more than 8,000 people. ¶11. (SBU) Isabel Noboa was president of the pro-trade National Competitiveness Board during the Lucio Gutierrez administration in 2002. Now, she prefers to keep a low profile, and is not involved in politics. Noboa formed an anti-poverty organization LANN (the initials of her father's full name) and Fundacion Nobis, which support education, health and housing projects nationwide. Noboa also serves as the honorary consul of Canada in Guayaquil. Wong Group -------------- ¶12. (SBU) The group was founded by Segundo Wong, of Chinese-Ecuadorian origin, who took control of the famous fruit company, Favorita Fruit, a banana and tropical fruit producer and trader. Wong was a pioneer in entering the Chinese market with Ecuadorian bananas. Reybanpac (bananas), the flagship company of the holding company Favorita Fruit, has 7,000 hectares of banana plantation, and which according to the group provides 20% of Ecuador's total exports. This group is Alvaro Noboa's greatest competitor. It also has a strong presence in the agricultural and cattle sector of the coast. Wong's leading companies are Reybanpac (bananas), Reysaihua (tropical fruits),Fertisa (fertilizers),Andean Cardboard, and Reyleche (dairy products). ¶13. (SBU) After Segundo Wong's death, his eldest son Vicente Wong, a member of the Board of the Guayaquil Chamber of Agriculture, took over leadership of the group. Vicente, together with his brother and sister, and under the legacy of his father, is continuing to open new markets for the Ecuadorian banana and fruit industry. ¶14. (SBU) The group employs approximately 9,000 workers. The Wong Group created the Wong Foundation in 1993 to manage and develop social programs to promote physical, intellectual and spiritual growth of children and their communities, in rural areas. Egas Group -------------- ¶15. (SBU) The Egas group is the leader in Ecuador's financial sector. The head of the group is Fidel Egas, who prefers to keep a low profile. Egas started his empire with a Diners Credit Card franchise during the 1960's, and then bought shares of Banco de Pichincha, the largest bank in Ecuador, in ¶1990. The Egas group owns most of the assets of the Financial Group Pichincha, which total approximately $2.9 billion. The group's main activity is banking, and the most important banks in the group are: Banco del Pichincha (commercial bank),Financiera del Peru (business banking), Pichincha Financier in Miami and Nassau (investment and business banking),Financiera de Ruminahui (business banking),Financiera de Loja (business banking),Inversora Pichincha in Colombia (investment banking),along with Diners Credit Card. Now the group is beginning to have a greater presence in micro credit, and owns CrediFe (subsidiary of Banco del Pichincha; administers its microenterprise loan portfolio). ¶16. (SBU) The group also has business in the media sector, and owns the local channel Teleamazonas, the magazines COSAS, CARAS, Soho, Diners and Gestion and the marketing agency Delta. The magazines as well as the TV channel are very important and influential in Ecuador. Other businesses include insurance companies, movie theaters, construction companies, real state agencies, car concessionaires, and the investment consulting firm Multiplica. Isaias Group -------------- ¶17. (SBU) Brothers William and Robert Isaias, former heads of the Isaias group, were very influential during the government of Abdala Bucaram in 1996-1997. They owned the business bank Filanbanco, which in 1998 was involved in Ecuador's largest bank failure. Both brothers fled the country owing millions of dollars to their clients, and are charged with embezzlement in Ecuador. The government took over administration of the bank in 1999, and used state funds to keep the bank afloat, although it finally collapsed in 2001. Both brothers now live now in the U.S. (on H visas),and the GOE is trying to extradite them. The head of the group is now Estefano Isaias, brother of the ex-bankers. ¶18. (SBU) Many of the Isaias companies have complicated ownership structures involving other businesspeople, so listing the group's holdings is difficult. The group has had a major presence in the media business, with TeleCentro (TC Television) and Teledos (Gamavision),and part of TV Cable (also owned by the Eljuri family). The group's TV assets add up to about $45 million. The Isaias group also owns industrial and commercial company Emilio Isaias (EICA, a trade company),Intercontinental de Materiales (an importer of construction machinery),and construction, construction investment, insurance, and real estate businesses, among others. It has partial ownership in the Toni Company (dairy products),partly owned by Maria Gloria Alarcon, President of the Guayaquil Chamber of Commerce. The group also has a presence in the agricultural and petroleum sector. ¶19. (SBU) On July 7, 2008, the GOE confiscated the assets of 195 companies of the Isaias Group, including three major television channels (TC, Gamavision and Cablenoticias). According to the GOE, the seizure of assets will help recover the nearly $600 million owed by the Isaias Group's Filanbanco to the Deposit Guarantee Agency (AGD). The Eljuri Family -------------- ¶20. (SBU) Juan Eljuri Chica created this Cuenca-based empire over the past fifty years. His sister Gladys Eljuri, once head of the family business after his brother's death, was Minister of Tourism under Lucio Gutierrez in 2004. Now the group is led by Juan Eljuri Anton, the eldest son of Juan Eljuri Chica. The group has a large presence in Ecuador's major cities and in the south of Ecuador. The family businesses include internet services, cable television (TV Cable),the TV channel Telerama, the Bank of the Austro, ceramic industries (Ecuaceramica and Rialto),airlines (Interboro Transport and Interborder),hotels (Marriot Hotel and a number of smaller ones),optical fiber, an electric generation power plant, the bottle Company Azuaya, hardware stores, and "Juan Eljuri" retail stores that have over 6,000 locations in the country and mainly sell electronic appliances. In the automobile sector, the group has a company that assembles Kia Rio and Pregio cars for the Andean region. The group owns car dealerships NeoHyundai, AEKia, Automotive Continental, Metrocar, Recordmotor and Asiauto, as well as a distributor of liquefied petroleum gas (LPG), National Gas Company Congas. The group has over 6,000 employees. The assets of the 20 main companies add up $410 million, and register sales of approximately $470 million annually. The Wright Family -------------- ¶21. (SBU) The group is a leader in the commercial sector, with its largest company being Supermarkets La Favorita, better known as grocery stores Supermaxi and Megamaxi. The Wright family changed the concept of grocery sales in Ecuador, with the opening of the first supermarket chain in Ecuador, Supermaxi (Ecuadorians used to buy their groceries at farmer markets and at small stores). In 2005 La Favorita had sales of over $690 million, and $355.5 million in assets. In 2007 Lideres (El Comercio newspaper's weekly magazine which documents business leaders and business developments), along with Price Waterhouse Coopers, ranked La Favorita as the most respected company in Ecuador. Thomas Wright is the head of the Wright family but rumors say he may be contemplating retirement. The CEO and Executive President of La Favorita is Thomas Wright's son Ronald Wright; his youngest son, Andy Wright, is Vice President. The family's political profile is low, although it made contributions to different political parties during the 2006 presidential campaign. ¶22. (SBU) Other companies within La Favorita in addition to Supermaxi are: Megamaxi (Wal-mart style superstore), Superdespensa (supermarket),Bebe Mundo (similar to Babies r us),Jugueton (toy store),Misterbooks (bookstore),Televent (TV Sales),ComoHogar (household supplies),Importpoint (import company),Pollo Favorito Profasa (chicken),Andean Milk (dairy products),Maxipan (bread),Agropesa, and Lechera Andina (dairy products),among others. The Wrights also have a hydroelectric generation plant, Enermax S.A., in Cotopaxi province. Czarniski Group -------------- ¶23. (SBU) The head of the group is Johnny Czarniski. This group is the greatest competitor of the Wright group. They own a supermarket chain, Mi Comisariato, which traditionally has targeted lower income families; however Mi Comisariato is moving upscale with a presence in shopping centers. The group owns 25 companies; the most important ones are: Importadora El Rosado (importer),Inmobiliaria Lavie and Motke (real estate companies),Supercines (movie theaters), Mi Jugueteria (toy store) the Chile,s franchise in Ecuador, and food processers such as Superba and Alimentos del Ecuador, among others. The El Rosado group controls the largest chain of shopping centers, moving into Ecuador's second tier cities. ¶24. (U) Johnny Czarniski is also the Israeli honorary Consul in Guayaquil. Bakker Group -------------- ¶25. (SBU) The head of the group, Executive President and founder is Luis J. Bakker. The Bakker group is the owner of Ecuador's largest food producer, Pronaca, which had sales of $400 million and assets of $289 million in 2006. Pronaca was founded 45 years ago, and currently commercializes leading food brands such as Mr. Pollo (poultry),Mr. Chancho (pork), Mr. Pavo (turkey),Fritz (sausages),Indaves (eggs), Gustadina (canned food, rice and marmalades),and Rubino (canned olives, cherries, pasta sauces, and artichokes), among others. Pronaca owns and operates pork and broiler farms, hatcheries, processing plants, feed mills, and distribution centers across Ecuador. Pronaca's latest business is the production and sales of palm hearts ) Ecuador is now one of the leading exporters of palm hearts and Pronaca is setting up palm heart operations elsewhere in the region, including Brazil. The group also owns Inaexpo, which is an agricultural exporting company that exports Pronaca's products to Europe, Asia, Africa and Latin America. The family keeps a very low political profile. Villamar Group -------------- ¶26. (SBU) Since 1931, the Villamar group has concentrated its business in drugstores and pharmacies, owning the largest drugstore and pharmacy chain in Ecuador, Fybeca, along with eight other pharmacies and drugstores. The group is run by Pedro Villamar, who keeps a very low profile. Other Important Family Business Groups -------------- ¶27. (SBU) Ortiz Group: Mainly construction and real estate. The head of the group is Gerardo Ortiz. ¶28. (SBU) Villaseca Group: Agro industry -- vegetable oil, milk, and cattle. The group also owns a one of Ecuador's largest plastic company. The head of the group is Juan Jose Villaseca. ¶29. (SBU) Quezada Group: Import and export companies. The head of the group is Wilmer Quezada. ¶30. (SBU) Rivadeneira Group: Transportation and supplier of heavy equipment for the agricultural sector. The head of the group is Mario Rivadeneira, former Ecuadorian Ambassador to the U.S. and former Foreign Minister. ¶31. (SBU) Quirola Group: Mainly dedicated to the agriculture sector. The group also owns the commercial bank Banco de Machala. ¶32. (SBU) Dassum Group: Owns many textile businesses, and some real estate companies, including a share of the Hilton Colon. The head of the group is Roberto Dassum, former President of the Chamber of Industries of Guayaquil. CDA Griffiths