Washington – The U.S. government on Tuesday announced that it will not continue negotiating a free trade treaty with Ecuador in response to Quito’s move to cancel the contract of U.S.-based Occidental Petroleum.
“We are very disappointed at the decision of Ecuador, which appears to constitute a seizure of assets of a U.S. company,” the Office of the U.S. Trade Representative said in a statement. “At this time no further (free trade agreement) discussions are scheduled.”
Spokeswoman Neena Moorjani said Washington will move quickly to determine “whether it (Ecuador) intends to fully compensate the company as required under our bilateral investment treaty.”
For a country to attract investment, and especially to be a possible partner to a free trade treaty, it must obey the law in that it must respect foreign investment, said Moorjani in a communique.
Free trade pacts are based on the basic principles that the two parties will respect the law, she said.
Ecuador’s state-owned oil firm, Petroecuador, moved Tuesday to begin taking over Oxy’s operations in the Andean nation.
The action got under way one day after Ecuador’s energy minister ruled in favor of a request from Petroecuador and government prosecutors to cancel Oxy’s contract because the California-based firm transferred assets without informing the relevant authorities in Quito.
Occidental sold 40 percent of its concession to the Canadian company EnCana, which in turn later peddled that stake to a Chinese oil consortium.
Oxy has been producing about 111,000 barrels per day from the Amazonian concession known as Block 15, where the firm has invested more than $6 billion in plant and equipment.
The Andean nation’s total daily oil output is roughly 530,000 barrels.
Ecuador’s oil exports, which last year totaled $5.4 billion, are by far the country’s biggest source of hard currency, and those revenues finance almost 40 percent of the central government’s budget.
Earlier Tuesday, Ecuador’s business community expressed fears that booting Oxy would frighten off potential foreign investment and bury any chance of concluding a free-trade pact with the United States.
The head of one employers’ group, Alberto Dassum, said that the action against the U.S. firm was a “hard blow for Ecuadorians” because it will damage prospects for development.
Quito Chamber of Commerce president Blasco Peñaherrera told a press conference that he and his colleagues regard Palacio and the Cabinet ministers involved in the Oxy matter as “enemies of Ecuador’s development.”
Manuel Chiriboga, the lead negotiator in talks with Washington on a free-trade treaty, said Tuesday he was pessimistic about the chances that U.S. officials will be willing to resume the discussions they suspended a few weeks ago to show unhappiness with Ecuador’s imposition of a windfall-profits tax on foreign oil companies.
“I see it as quite difficult that we could return (to the negotiations) this year,” he commented to EFE.
Ecuador began negotiating a trade deal with the United States at the same time as its Andean neighbors Colombia and Peru, but Bogota and Lima have already signed pacts with Washington.
