US embassy cable - 05QUITO943

UNCLAS QUITO 000943 
 
SIPDIS 
 
DEPT FOR WHA/AND AND EB 
DEPT PASS USAID/LAC 
DEPT PASS USTR:HARMAN 
 
E.O. 12985: N/A 
TAGS: ETRD, ECON, PGOV, ELAB, EINV, EC 
SUBJECT: NEW MINISTER OF TRADE: "ECUADOR TO CONTINUE FTA 
NEGOTIATIONS" 
 
 
1.  Summary:  In our first meeting new Ecuadorian Minister 
of Trade Oswaldo Molestina stated that Ecuador would 
continue to pursue free trade negotiations with the U.S.  He 
said that, given that the negotiating team was fundamentally 
technical rather than political in nature, he intended to 
make no changes in the team for the time being.  The same 
was true of the ministry as a whole, he said.  "Of course, 
the government may have different views of Ecuadorian 
national interests, which may affect negotiating positions," 
he said.  Molestina is leaning toward hosting the 
negotiating round in June, but has not yet made a final 
decision.  End Summary. 
 
2.  Econcouns requested the meeting with Molestina in order 
to establish a relationship and gather initial impressions. 
After exchanging pleasantries, Molestina said he had always 
enjoyed good relations with the U.S.  He was a good friend 
of one former ambassador and has an apartment in New York 
where his wife has family. 
 
3.  Molestina said the GOE will continue to negotiate an 
FTA, and that he has decided to make few or no changes in 
the Ecuadorian negotiating team.  Of course, he said, the 
new government may have different views of Ecuadorian 
interests and thus may take different positions in the 
negotiations than the previous government did. 
 
4.  Econcouns took advantage of the very positive atmosphere 
to mention the need to work together on labor reform and 
resolution of commercial disputes, and particularly the Oxy 
problem.  Molestina agreed, and said he had requested a 
report on the Oxy issue in order to bring himself up to 
speed. 
 
5.  As Econcouns waited outside the Minister's office, 
Ecuadorian Chief negotiator Cristian Espinosa and his close 
advisors came out of the office.  They said Molestina had 
just told them they would continue in their positions.  They 
seemed quite upbeat.  Espinosa told USAID later in the day 
that he considered himself "on a trial basis" with the 
government.  The government would be looking hard at whether 
it wanted to keep him on, but he would also be looking at 
whether it was worth staying, given the positions the GOE 
would take. 
 
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Comment 
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6.  We are not so sanguine.  Molestina's statements to the 
press certainly raise concern.  He is saying that Ecuador 
may wish to open issues which have already been closed in 
the negotiations, that Ecuador cannot allow subsidized U.S. 
products to compete with Ecuadorian products without tariff, 
that the U.S. will have to show more flexibility on IPR, 
that Ecuador may wish to delay negotiations or put them on 
hold, and that, in the final analysis, Ecuador will get 
ATPDEA renewal if it doesn't sign a FTA.  Minister of 
Finance Rafael Correa, a determined enemy of the FTA, has 
announced that any FTA will be submitted to the people for a 
vote (an idea most people believe would kill the FTA). 
 
7.  Of course, Molestina's public stance may be nothing more 
than that.  Further, he is new to the issues, and may change 
his positions as he becomes more familiar with them. 
Nonetheless, it is clear that the Palacio government is less 
committed to free trade than was the Gutierrez government. 
We are concerned that Ecuador will now adopt untenable 
positions in the negotiations and then be unable or 
unwilling to move back from them.  Some are even expressing 
the opinion that that may be the plan -- to take impossible 
positions and then bl