US loses interest in FTA with Ecuador
The chances for a short term conclusion to trade negotiations between the U.S. and Ecuador were handed a major setback last week, when the national government decided to revoke its operating contract with Occidental Petroleum and seize $1 Billion of its assets. This action was taken after the energy ministry ruled that the company had acted improperly when it transferred 40% interest in its oil fields to EnCana, a Canadian oil company.
Occidental responded immediately by filing a claim with the International Centre for Settlement of Investment Disputes, expected to be for about $1 billion. The immediate assumption by some sectors is that this will mean an eventual nationalization, but the government insists that those rumors are false, and that talks are already underway with several companies, primarily state owned ones, such as PDVSA from Venezuela, Petrobras from Brazil and PEMEX from Mexico.
The cancellation of the Occidental contract, from a US point of view, added to the ‘insult' of a previous measure which imposed a 50% windfall tax on oil companies operating in Ecuador. Both of these measures have undoubtedly caused considerable consternation at the USTR, who view them as going against the spirit of the negotiations.
It seems that the Ecuadorian government has increasingly found itself between a rock and a hard place, between the pressure from the U.S. to concede many issues in signing a FTA and the indigenous movements, unions and NGOs, who have steadfastly demanded the cancellation of Occidental's contract and the cessation of negotiations for the FTA. The Ecuadorian government continues to insist that they are interested in a trade agreement, but it seems given the generalized hostile attitude in the US Congress at the moment about additional agreements, it will be hard to get the USTR back to the table in the near future.
Perhaps they will wait to find out the outcome of the Ecuadorian Presidential elections in October. One formidable candidate in that race will be the current president of the largest indigenous movement, CONAIE, which was adamant in their campaign to terminate the contract with Occidental.