AMBASSADOR'S MEETING WITH FINANCE MINISTER VITERI

C O N F I D E N T I A L QUITO 000256 SIPDIS E.O. 12958: DECL 04/15/2019 TAGS: EFIN ETRD ECON EC SUBJECT: AMBASSADOR'S MEETING WITH FINANCE MINISTER VITERI REFTEL A: Quito 188 B: Quito 60 Classified by: Ambassador Heather Hodg... id: 202261 date: 4/14/2009 16:24 refid: 09QUITO256 origin: Embassy Quito classification: CONFIDENTIAL destination: 09QUITO188|09QUITO60 header: VZCZCXYZ0018 RR RUEHWEB DE RUEHQT #0256/01 1041624 ZNY CCCCC ZZH R 141624Z APR 09 FM AMEMBASSY QUITO TO RUEHC/SECSTATE WASHDC 0252 INFO RUEHBO/AMEMBASSY BOGOTA 8093 RUEHCV/AMEMBASSY CARACAS 3498 RUEHLP/AMEMBASSY LA PAZ APR LIMA 3149 RUEHGL/AMCONSUL GUAYAQUIL 4260 RUEATRS/DEPT OF TREASURY WASHDC -------------- header ends -------------- C O N F I D E N T I A L QUITO 000256 SIPDIS E.O. 12958: DECL 04/15/2019 TAGS: EFIN ETRD ECON EC SUBJECT: AMBASSADOR'S MEETING WITH FINANCE MINISTER VITERI REFTEL A: Quito 188 B: Quito 60 Classified by: Ambassador Heather Hodges, Reasons 1.4 (b) and (d). ¶1. (C) Summary: The Ambassador made an introductory call on Finance Minister Elsa Viteri on April 8. Viteri justified Ecuador's debt default and planned restructuring, supported Ecuador's balance of payment safeguard trade measures and mentioned the possibility of further measures, and expressed optimism about the domestic economic situation. She noted that Ecuador did not plan to leave the CAN over Ecuador's trade measures dispute except as a last resort. End Summary. ¶2. (C) On April 8, the Ambassador met with Finance Minister Elsa Viteri, accompanied by DCM and Econoff. The tone of the meeting was cordial. Viteri, who had been Vice Minister of Finance under former Ministers Salgado and Ortiz, is considered close to President Rafael Correa, with whom she studied economics at the Catholic University of Guayaquil. Debt Default and Restructuring -------------- ¶3. (C) Minister Viteri said that Ecuador's default on its commercial debt was a "completely sovereign decision" (Ecuador defaulted on its Global 2012 and 2030 commercial bond issuances in November 2008 and March, respectively). She asserted that the debt on which the government defaulted had been used for schemes that did not support development, and therefore paying the debt was "not logical." She stated that the GOE had its own development plan, and asked rhetorically why Ecuador had to answer to people (debt holders) who didn't know the country's situation. ¶4. (C) Viteri stressed the GOE's desire to be transparent in the restructuring process, and the government plan to unveil its restructuring proposal on April 20. She noted that the GOE wanted to find a solution to resolve the debt situation to the satisfaction of all (with the caveat "considering the economic crisis worldwide"). She complained of the difficulty Ecuador will have negotiating with debt holders who she believes are mainly a number of funds, rather than individuals. Trade Measures and Balance of Payments Situation -------------- --- ¶5. (C) When asked if Ecuador would lift its tariff surcharges (a balance of payments safeguard - ref B) if oil prices recovered sufficiently, Viteri responded that the two were distinct items. She claimed that neighboring country currencies had devalued significantly over the past year and caused Ecuador to be at an extreme disadvantage since it lacks monetary policy. Viteri hinted that Ecuador might implement additional measures, although she did not specify what those might be. She said that Ecuador did not want to harm anyone but just wanted to "take care of its problems." ¶6. (C) Note: The Andean Community (CAN) secretariat issued a resolution on March 27 stating that while Ecuador can apply the surcharges and quotas to its CAN partners because of the BOP crisis, it could not apply MFN tariffs as well. President Correa said that Ecuador was open to dialogue but that if the CAN exerted pressure on Ecuador he would withdraw Ecuador from the CAN. End Note. Viteri noted that the GOE was developing a response to the CAN that would work for everyone, and said that leaving the CAN would be a last resort. Optimism on the Economy -------------- ¶7. (C) Viteri was optimistic about Ecuador's economic situation. She said she was "very happy" with the development of the fiscal sector, noting that the economic crisis in many other countries was much worse than in Ecuador. She claimed that the Ecuadorian public was tranquilo" (calm) because the people understood this. She was glad that Ecuador's petroleum prices were rising. She believed Ecuador would reach a growth rate that would be "better than the Latin American average by the end of the year." She claimed that Ecuador had "no problem" getting financing, in spite of the debt default. Comment: -------------- ¶8. (C) Viteri reflected the government's line on debt, balance of payments, and the economy, invoking sovereignty and a victim-mentality along with assertions that it wants to be a responsible player, although on terms that it defines. It will be interesting to see which of these tendencies prevail when the government unveils its debt restructuring proposal and defends its trade surcharges at the WTO. Viteri's assurances that the economy and fiscal management were doing well went further than Minister Borja (ref A),who also asserted that the economy was sound but acknowledged that the government needed to make some adjustments. HODGES =======================CABLE ENDS============================