Issuu on Google+


ANALYTICA INVESTMENTS WEEKLYREPORT@ANALYTICAINVESTMENTS.COM

Ramiro Crespo Chairman of the Editorial Board

WWW.ANALYTICA.COM.EC

ECONOMIC INDICATORS

ECUADOR WEEKLY REPORT®

Ecuadorian Global Bonds (March 15, 2012)

For the week of March 12 – March 16, 2012 Suspicious Minds The scandal over Ecuador’s misused diplomatic pouch entered its second month this week, with the controversy continuing to grow. When Foreign

BID

ASK

Global 2012

20.00

24.00

Global 2015

102.50

105.19

Global 2030

28.13

32.13

BCE International Reserves

August 2011

4124.62

3.62%

Minister Ricardo Patiño announced that Italian

October 2011

4548.59

15.81%

police had detected 40 kilograms of cocaine in an

Dec 2011

2957.62

-34.98%

Feb 2012

3275.54

8.22%

09 Mar 2012

3157.35

8.22%

official shipment to Ecuador’s consulate in Milan, he said that the ministry would remain silent about further information as the investigation continued (EWR 605). This has not been the case. He and other

10076.4

1.37%

scandal continues to grab headlines. Several

9976.3

-0.99%

December 2012

10593.3

6.18%

people, mostly Ecuadoreans, have been arrested in

January 2012

10511.3

-0.77%

24 Feb 2012

10606.2

0.90%

which should be the party most interested in resolving the case and having the guilty put behind bars,

instead

appears

most

concerned

with

deflecting blame and political responsibility from Patiño and other senior officials. According to Italian newspaper La Repubblica, Italian prosecutors had begun investigating a

Accumulated

1.35%

Year on Year

5.53%

Ecuadorian Oil Export Prices (US$ per barrel)

120

$113.30

110

100 90

$106.22

$102.25

$101.36

$97.21

$96.05 $99.62

$108.81

$103.18 $98.57

$90.33 $85.61 $86.41

$106.23 $105.11 $101.97

$100.24 $97.10

WTI Oriente

80

cocaine trafficking ring in June 2011. Two smaller

70

shipments of 2.2 kilos and 2.7 kilos had been caught

60

in Milan and Madrid in September and November,

0.78%

In million US$ October 2011

Italy, but none so far in Ecuador. The government,

February 2012

Banks – Short and long term Deposits

November 2011

officials have had to make statements as the

Inflation

In million US$

Napo

September

October

November December

January

15-Mar


respectively, also leading to an arrest in each case.

career

diplomats

The traffickers then chose an alternate route, using

permission Patiño’s ministry gave Loor to use the

Ecuadorian diplomatic pouches, according to the

official

paper. With the permission of Ecuador’s consul in

responsible for this remains unknown. Nobody

Milan, Narcisa Soria, finance police opened the

objected to new costumes and props even

packages on their arrival at Milan’s Linate airport on

though the play had been shown in Milan since

January 17 before passing through customs. The

2009, with the consulate’s knowledge.

courier

complained

system.

Who

about exactly

the was

liquid cocaine was hidden in false bottoms of

The ministry last year had signed off on a

aesthetically dubious mugs with turtles printed on

change in the regulations governing diplomatic

them, shown in press photos. Eight of the 10

pouches to include art, valuable, medicine,

individual packages in the shipment contained

handcrafts,

drugs.

in

commercial samples in “extraordinary pouches.”

conjunction with the bust, including Jorge Luis

It based the modification on rules introduced in

Redobrán, owner of two Ecuadorian restaurants in

Peru in 2003. On March 3, Patiño and his boss,

Milan – El Ídolo 1 and 2 – and Cristián Geovanny

President Rafael Correa, said that the only thing

Loor, author of the “Ruga la Tartaruga” (Wrinkle, the

they could be considered guilty of is “plagiarism”

Turtle) play who was supposed to receive the

because a “somewhat lazy” public official had

contents of the pouch, promotional mugs and all.

copied Peru’s rules, but lacking several security

The Italians, who obviously knew the shipment was

provisions. In a television interview, a senior

coming,

the

ministry official, Rafael Quintero, a socialist who

announcement of the catch, which he made on

like Patiño had no previous experience with

February 10.

diplomacy, acknowledged that he had signed

Five

left

more

it

people

to

were

Patiño

to

arrested

make

information

on

tourism

and

None of those arrested were foreign ministry

off on the changed regulations following a

staff. The shipment was inspected for narcotics by

recommendation from the ministry’s legal office.

drug-sniffing dogs at least twice, first in Quito at the

When the shipment became known, Patiño

ministry itself, then at the Guayaquil airport. Shipped

limited

by courier service TNT, it had two stops en route to

documents, he has said.

all

diplomatic

mail

to

letters

and

Milan, first in Madrid, then at TNT’s main distribution

Marco Albuja, the chief legal officer, has

center in Liège. At a total weight close to 80 kilos,

become one of the ministry’s main spokesmen in

about half was cocaine.

the affair. He said that the regulations would have

Patiño didn’t take the three weeks notice to

to be changed yet again not to reduce the items

properly prepare the presentation of his ministry’s

that could be classified diplomatic mail but to

side of the story. Whether the consul in Milan acted

improve security. Critics of the ministry were

on her own or got a more senior official to approve

disregarding the 2008 constitution because of its

the opening of the luggage is unknown. In Ecuador,

preponderance

over

international

law,

he


added.

Nowhere

in

the

constitution

does

it

Redobrán’s list of acquaintances, meanwhile,

however say that foreign ministry regulations have

includes at least two close relatives of Correa: his

the same rank as articles of the constitution. In a

sister Pierina and Central Bank President Pedro

presentation to reporters, Albuja showed videos of

Delgado, both of whom he featured as celebrity

seals included the term “Foreign Ministry – Chile,”

visitors to El Ídolo on the restaurant’s Facebook

and La Repubblica also mentioned inconsistencies

page. Pierina acknowledged that she had visited

with seals on the packaging. Chile denied the seals

the restaurant but that she had no information on

had anything to do with its foreign service. Courier

any drug trafficking and that she was willing to

TNT said these seals were applied because of its

testify as part of the Ecuadorian prosecutor

regional office in Santiago and has adamantly

general’s

rejected any tampering with the shipment en route,

appears on a photo with Redobrán enjoying a

and Milanese police said that the cocaine came

soccer match at Giuseppe Meazza stadium, has

from Ecuador and wasn’t slipped in to the sealed

however remained silent.

investigation.

Delgado,

who

also

mugs along the way. To tamper with them en route

Amid the calls for him to resign, Patiño said

would have been extraordinarily difficult given the

that he wouldn’t do so at least while the

amount of the cocaine and that the mugs were

investigation continues. There remain numerous

vacuum-sealed, perhaps to hide them from the

open details - unsurprising given the nature of the

dogs. This however makes it far more likely they

investigation - that indicate that it will take time to

were smuggled into the ministry, with or without

resolve the mystery. The affair is the second major

knowledge of any of its staff. It also implies that

scandal to hit a ministry under his care, and

there may have been smaller earlier shipments

foreign diplomats have said they are surprised

observed by the Italian police as the traffickers are

that he hasn’t yet handed in his resignation. In

likely to have tested the route in advance before

2007, he stepped down as finance minister after a

preparing a major move, security analysts say. Loor

video implying that he was discussing how

on two occasions in 2011 had been able to use the

Ecuadorian bond prices could be manipulated

diplomatic courier system for shipments.

became public.

Ecuador’s office for the assistance of Ecuadorian emigrants, Senami, meanwhile denied it had given

Enter the Dragon

Loor support of any kind, although a bulletin published by the Milanese consulate said that it

Ecuador’s

populist

administration,

led

by

had worked with the now-jailed playwright. Loor

Rafael Correa, an economist with a US PHD, on

apparently paid the foreign ministry for the help.

March

How much remains unknown. He has some local

agreement

actors among his circle of friends.

Ecuacorriente, a company originally formed with

5

signed with

its

first

major

production

a

foreign mining company.

Canadian capital and currently owned by China


Railway

Construction

Company

and

Tongling

The boisterous ruler hasn’t shied away from

Nonferrous Metals agreed to invest $1.72 billion in

confronting the environmentalist and indigenous

the Mirador project near El Pangui in the southeast

interest groups that originally supported him.

Amazon province of Zamora-Chinchipe. The future

These

mine is estimated to hold 4.7 billion tons of copper

mining because of its ecological cost and the

reserves. The company aims to start producing

country’s negative experience with initial oil

copper there by the middle of next year.

production. Texaco, the first entrant in Ecuadorian

groups

vehemently

oppose

open-pit

That the Chinese-owned company was the first

oil production, from 1972-1992 dumped some 16

to agree to a deal is unsurprising after negotiations

billion gallons of formation water into rivers and

with

Canada’s

streams in the northwest Amazon. A civil suit by a

signed

a

Kinross,

group of area residents has led to a highly

December, ran into trouble. Kinross wants tax and

controversial $18.2 billion damage award against

royalty terms of the deal for the $1.2 billion Fruta del

Chevron,

Norte project changed in favor of the company.

Opponents to mining also complain that legally

The government aims to sign a deal for Fruta del

binding consultations with the communities didn’t

Norte, south of Mirador, and International Mineral’s

happen.

Blanco

within

two

of

had in

Río

memorandum

which

understanding

more

months.

Earlier

deadlines have however never been met.

which

bought

Texaco

in

2000.

Among other projects, International Minerals’ Río Blanco and Iamgold’s Quimsacocha are near

Correa has long favored developing a large-

Cuenca,

where

to mining has

nominally left-wing president’s more pragmatic

roadblocks and sometimes violent protests that

economic goals. Fundamentally however, he is

included damage to vehicles and attacks on

targeting the cash flow metals production is

police. At the same time, Azuay province around

expected to provide to the treasury. Ecuador’s

Cuenca is Correa’s main remaining Andean

administrative inexperience with mining in general

popular bastion. Some local municipalities have

has led to many mixed signals however, damaging

seen violent internal power struggles, including

the prospects for the industry, the most negative

Santa

being

the mining issue.

temporary

related

to

strong,

the

leading

debate

to

over

on

large-

2008

to

The increase in Chinese influence in Ecuador

heterodox

has also begun to worry labor organizations. Anti-

measures included opposition to foreign arbitration

Chinese graffiti has appeared in Quito. Besides

and the payment of advance royalties. The

blocking roads and holding rallies in Cuenca and

government maintains that it will receive at least

Quito,

52% of mining revenues.

of mining properties

scale mining issued

ban

Isabel,

been

opposition

scale mining industry. This appears to be among the

a

also

indigenous

in

reorganize mining concessions.

Other

risks

include and

the

invasion

sabotaging

of

equipment. Ironically, the government itself has


set

a

precedent

by

used mining equipment

dynamiting in

the

illegally

northwestern

province of Esmeraldas in 2011. Correa will likely take a hard line towards any violent incidents, as demonstrated in November 2008 against people protesting in the Amazon town of Dayuma. Some 200 indigenous leaders already have

been

formally

accused

of

“terrorism�,

including some who have participated in earlier anti -mining protests around Cuenca. This however has

raised

some

awareness

of

his

intolerance towards critics. The poor international image of his administration will limit his ability to repress protests all too harshly, as his lost crusade against Guayaquil-based newspaper El Universo revealed. Foreign media’s massive criticism his libel suit

against

the

paper,

which

could

have

bankrupted it, contributed to his decision to remit the sentence favoring him.


HJ BECDACH Marketing Inc.