CORREA APPOINTS HIS FOURTH FINANCE MINISTER

C O N F I D E N T I A L QUITO 000896 SIPDIS E.O. 12958: DECL: 09/19/2018 TAGS: EFIN ECON PGOV EC SUBJECT: CORREA APPOINTS HIS FOURTH FINANCE MINISTER REF: QUITO 617 Classified By: Classified by Ambassador Heather Hodges. Reason: 1.4 b and d. ¶1. (C) Summary. President Correa fired Finance Minister Wilma Salgado on September 15 and replaced her with Vice Minister Maria Elsa Viteri. Viteri, who is a former classmate of Correa, may be a more capable administrator of the budget process than Salgado and will likely try to avoid controversial statements on debt. End summary. ¶2. (U) On September 15, Minister of Finance Wilma Salgado abruptly "resigned" and was replaced by the Vice Minister of Finance, Maria Elsa Viteri. ¶3. (SBU) It was clear from both published stories and rumors that Salgado was fired by President Correa. During his Saturday (September 13) radio address, Correa complained that Salgado could not provide him with basic technical information, such as how much cash the GOE had on hand, and contrasted that to the ability of former Minister of Finance Fausto Ortiz to provide such information. In addition, Correa was reportedly unhappy with stories that emerged in the media about the fiscal cost of implementing provisions in the draft constitution with estimates attributed to the Ministry of Finance. ¶4. (C) One rumor, reported by the IMF Resident Representative, is that Salgado had forced the resignation of Viteri the week before, in response to Correa's complaints about the leaks on the cost of the new constitution. However, the story goes, Viteri was a classmate of Correa, and he holds her in high regard. In forcing Viteri's resignation, Salgado overstepped her bounds, leading to her forced resignation. ¶5. (U) Salgado had been in office for slightly over two months. She had been appointed as Minister of Finance in July after then-Minister Ortiz quit rather than sign documents ordering the confiscation of Isaias Group properties (reftel). Salgado's Meeting with the Ambassador -------------- ¶6. (C) Salgado met with the Ambassador on the day she was fired, but gave no indication of her imminent departure. During the meeting she said her greatest priority was to support the infrastructure investment that Ecuador badly needed. Speaking on the draft 2009 budget she had unveiled in August, she said that that draft would only be valid for a month, since it would be superseded by new requirements in the draft constitution (note: the draft constitution is up for approval in a September 28 referendum). Alluding to the criticism of the costly new provisions in the draft constitution, Salgado said that provisions would not add significantly to expenditures in 2009. She said some measures, such as higher spending for education and health, were already being implemented, while other requirements would be implemented slowly. ¶7. (C) When asked how the government would respond if oil prices fell further, Salgado suggested that she hoped they wouldn't but then implied investment expenditures might be cut. Salgado said that she was not familiar with the details of a pending report from a commission that is auditing Ecuador's debt, but did say that she understands that the report will look at several examples of GOE debt (including commercial bonds, bilateral debt, and multilateral debt) rather than take a comprehensive review of all outstanding debt. Maria Elsa Viteri -------------- ¶8. (C) Viteri served as Vice Minister of Finance under former Minister Ortiz. The assumption is that she shares his approach to running the Ministry: as Minister, Ortiz focused on improving the technical aspects of managing the budget and removing the question of debt servicing from public discourse. Ortiz also looked to strengthen the Ministry's ties to multilateral lenders such as the Inter-American Development Bank. ¶9. (C) As Vice Minister, Viteri met with USG officials on several occasions. In those meetings she readily responded to questions, but did not volunteer much additional information that would provide insights into her priorities and approaches. She gave the impression that, like Ortiz, she was focused on the technical management of the budget and did not have any reservations about paying the GOE's external debt. She conducted the meetings in Spanish. She traveled to Washington on at least one occasion to meet with multilateral lenders. She rarely appeared in the media. ¶10. (U) Viteri is from Guayaquil and studied economics at the Catholic University of Guayaquil, graduating in 1988. She taught at the same school and headed its Center for Economic Investigations. She also studied an intensive course in agricultural economics at Iowa State University in ¶1992. Ten Finance Ministers in 41 Months -------------- ¶11. (U) Viteri is the fourth Minister of Finance appointed by Correa, who has been in office for less than two years. Former President Palacio had six Ministers of Finance during his 19-month presidency, giving Ecuador a total of ten finance ministers in 41 months, for an average tenure of four months per minister. Comment -------------- ¶12. (C) Salgado's appointment in July was probably a rushed decision taken after Ortiz suddenly quit. Whatever the immediate factors that prompted her firing, it appears that Correa was not satisfied with her performance. Given her prior experience at the Ministry of Finance, Viteri may be better able to manage the Ministry at a technical level. International financial analysts also expect that she will lower the tone on debt, in contrast to Salgado who on occasion suggested some debt might not be paid, although she quickly walked back from those comments. Hodges