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Ecuador seeks to salvage free trade deal

April 19, 2006

Ecuador Seeks to Salvage Free Trade Deal

Associated Press
All Associated Press News

QUITO, Ecuador (AP) - Ecuador’s ambassador to Washington return to Quito for consultations on how to overcome an impasse with U.S. free trade negotiators over an oil-tax bill designed to cut into foreign windfall crude profits.

Ambassador Luis Gallegos was in meetings Wednesday with Foreign Minister Francisco Carrion and Ecuador’s chief negotiator, Manuel Chiriboga.

"My purpose is to support the negotiating team," Gallegos told reporters upon his arrival in Quito Tuesday night. "We have come to work on a strategy to continue a relationship of friendship and strength with the United States."

Chiriboga last week acknowledged that free trade talks stalled earlier this month over the new hydrocarbons bill, which would give Ecuador’s government a greater share of profits driven by skyrocketing oil prices.

Ecuador’s Trade Minister Jorge Illingworth said he had met with U.S. officials in Quito in recent days to try define a date to resume talks. No new date had been set, he said.

A spokeswoman at the U.S. Embassy in Quito declined to comment Wednesday and referred questions to U.S. trade representatives in Washington.

Foreign companies such as U.S.-based Occidental Petroleum Co. have said the new oil bill is a heavy blow that could lead them to reconsider investment plans and have threatened to sue Ecuador in international courts for violating signed deals.

They urged Palacio to veto the bill approved by Congress last month that would give the government 60 percent of profits whenever the international oil market exceeds the prices established in existing contracts.

Palacio rejected the 60 percent requirement, but said the government still must receive "at least 50 percent" of the oil companies’ profits.

Congress has until May 7 to decide whether to accept Palacio’s partial veto or back the original proposal, which would require another vote.

Ecuador produces 535,000 barrels of oil daily, and oil revenues account for 43 percent of the national budget.

Ecuador entered what was touted as a final round of talks on March 23 with Washington to seal a free trade deal, vehemently opposed by Ecuador’s left-leaning student and labor federations and its powerful indigenous movement.

Peru and Colombia have already signed deals with the United States that have yet to be ratified by the nations’ respective legislatures.

 source: AP