US embassy cable - 05GUAYAQUIL1298

UNCLAS SECTION 01 OF 02 GUAYAQUIL 001298 
 
SIPDIS 
 
E.O. 12958: N/A 
TAGS: PGOV, ETRD, EC, Trade 
SUBJECT: GUAYAQUIL BUSINESSES OPTIMISTIC ABOUT FTA 
 
 
1. Summary: During her second visit to Guayaquil, the 
Ambassador met with a wide range of business leaders, most of 
whom expressed their belief that the GOE would sign the Free 
Trade Agreement (FTA) it is currently negotiating with the 
USG.  From the Chamber of Industry president to AmCham Board 
members, and even in a session with leading editors and 
reporters from local media, conversations centered on the 
prospects of the FTA.  The general conclusion was that the 
road to an FTA passage was filled with obstacles, but that 
none of the challenges were insurmountable.  However, Social 
Christian (PSC) leader and member of congress Leon Febres 
Cordero was non committal (septel).  While in Guayaquil the 
Ambassador also took the opportunity to call on leading 
businesswoman and philanthropist Isabel Noboa, and to tour a 
foundation for street children where a Peace Corps volunteer 
has begun a bakery.  End summary. 
 
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FTA FORECAST: CLOUDY BUT PROMISING 
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2.  The Ambassador's meetings with business leaders and 
opinion makers on November 9 offered insight into private 
sector concerns and expectations leading up to the final 
round of FTA negotiations which began November 14. 
 
3.  The President of Guayaquil's Chamber of Industry and the 
Ecuadorian Business Committee (CEE) for the FTA, Alberto 
Dassum, told the Ambassador that he believes the negotiations 
will end in signature by all parties involved.  He explained 
that his call for the removal of the team of political 
advisors to Ecuador's FTA negotiators(reported that day in 
all major Ecuadorian newspapers) stemmed from his belief that 
several key members are working against the agreement.  After 
raising the issue several times with President Palacio, he 
and the CEE had decided to go public with their view.  By 
doing so, they hoped to draw attention to the need for the 
GOE to stand squarely behind the FTA.  When questioned about 
the possibility of the agreement being passed by the 
Ecuadorian Congress, he conceded that it would not be easy, 
particularly considering current political instability. 
However, he went on to say that he was optimistic that in the 
end Congress would recognize how crucial the FTA is for 
Ecuador's future. 
 
4.  At her first meeting with the Board members of 
Guayaquil's Ecuadorian American Chamber of Commerce (AmCham), 
the Ambassador heard support for the FTA from a variety of 
business leaders.  AmCham is focusing on garnering support 
for the agreement once negotiations conclude, and subsequent 
implementation of the treaty.  They view themselves as well- 
placed to work with American companies that express interest 
in investing in Ecuador after the agreement is signed.  The 
Ambassador emphasized the importance of convincing the 
Ecuadorian Congress to ratify the treaty, and pointed out 
that AmCham is in a unique position to do so. 
 
5.  When asked to comment on the likelihood that Ecuador will 
be able to respond to U.S. Congressional criticisms of its 
labor regime, an AmCham Board Member explained at length that 
Ecuador's current labor regime is, in his view, extremely 
generous to workers.  He welcomed the opportunity to correct 
elements of current labor law that impair Ecuador's 
competitiveness, for example by eliminating the right of 
workers to occupy premises during a strike (to be consistent 
with Colombian practice) and proposing the elimination of 
mandatory profit distributions to employees.  In his view, 
criticisms of Ecuador's labor regime are based on inaccurate 
information, and should be addressed by correcting 
misperceptions rather than reforming the labor code.  The 
Ambassador noted that the ILO believes the Ecuadorian labor 
code does not adequately protect the right to organize, a 
core USG interest. 
 
6.  Reporters and editors from leading Guayaquil newspapers 
and news radio stations shared the business leaders' interest 
in the FTA, if not their exact sentiments.  Questions focused 
on agriculture and intellectual property rights, as well as 
Ecuador's pursuit of preferential treatment.  The Ambassador 
explained that in negotiations such as these, the most 
difficult issues are always left for the end.  She 
acknowledged that the GOE will have to cede some positions, 
but that overall the FTA will bring numerous benefits to the 
country and that Ecuador and the U.S. have many products that 
do not compete. 
 
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RESIDENTS DEMONSTRATE ENTREPENURIAL SPIRIT 
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7.  Overcoming persistent political instability and repeated 
cries that Ecuador cannot compete on the global market, 
Isabel Noboa has developed a multinational, integrated 
business conglomerate that stands out as one of the successes 
of the country.  During a courtesy call with the Ambassador, 
Ms. Noboa and her dynamic group of executives described their 
plans to aggressively expand the consortium's holdings, in 
areas as far reaching as real estate development, 
technological innovation, and investment in natural 
resources.   As the daughter of the country's most prominent 
businessman, Luis Noboa, and sister of banana magnate and 
perennial presidential candidate Alvaro Noboa, Ms. Noboa has 
a strong entrepreneurial background.  At the same time, she 
is very committed to social projects, and her company's 
foundation works with children and families throughout the 
area, focusing on health and education programs. 
 
8.  Though not having as large a presence as the Noboa 
consortium, Fundacion Crecer makes an important impact on the 
lives of the children they work with.  With their meager 
resources, they have established an impressive facility that 
takes children off the streets of Guayaquil and offers them a 
place to eat, to learn, and to better themselves.  The 
Ambassador visited the foundation to observe a bakery that a 
Peace Corps volunteer began about a year ago.  After touring 
the foundation and making bread with the children, the 
Ambassador donated a set of scholastic books to the 
organization's library. 
 
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COMMENT 
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9.  Port city Guayaquil will benefit from increased trade 
under an FTA and its business, political, and media elites 
are natural allies in favor of congressional ratification. 
The Ambassador's visit reinforced pro-FTA sentiment, which we 
hope to enlist to spur necessary reforms in labor and other 
areas. 
 
HERBERT