Ecuadorian leaders scout out US and Canada for oil investment
Ecuadorian officials, including President Osvaldo Hurtado Larrea, have mounted a major campaign in the United States and Canada to lure new foreign investment to their country's oil industry.Skip to next paragraph
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Seriously strapped for cash to pay its foreign debt, Ecuador is ''avidly seeking'' investment in oil exploration and production, according to Canadian petroleum experts. US oil officials tell the same story: that key Ecuadorian leaders fanned out all over the two countries - to New York and Washington, Houston and Dallas, Calgary and Edmonton, looking for petroleum-technology assistance and investment.
Ecuador specifically wants to use new foreign investment to explore and to develop production. Under a plan now being presented to US and Canadian firms, leases would be auctioned through sealed bids perhaps as early as next summer. So far, there is no indication that the Ecuadorians have been successful in their bid.
''But we haven't been turned down,'' said one Ecuadorian in New York. ''These things take time, but we are getting our message across.'' President Hurtado, moreover, said he is convinced that President Reagan, with whom he met, has ''a good understanding'' of Ecuador's economic and social ''plight.''
Part of Ecuador's problem is the current world oil glut. As a member of the Organization of Petroleum Exporting Countries, Ecuador dropped its oil price $5 a barrel last month - a cut that will cost Ecuador $200 million in oil revenue annually. Gustavo Galindo, Ecuador's minister of natural resources, said in New York that oil exports of 100,000 barrels daily account for 65 percent of Ecuador's export earnings. Bananas and shrimp are the next-largest export items.
With an austerity program launched by Mr. Hurtado late last year, however, Ecuador is weathering the current situation fairly well, according to observers. The Ecuadorian effort to seek new funds came as something of a surprise to many in US Government circles as well as in the oil industry. Ecuador, with some $6 billion in foreign debt, is not regarded as one of Latin America's most severe economic problem cases.
But Ecuadorians, in seeking new aid for their oil industry, are trying to head off any further economic difficulties by strengthening the industry. In addition, they seek International Monetary Fund one-year standby credits of $171 million and new commercial bank loans of between $400 million and $600 million.
''They are relatively a good risk,'' said a New York banker involved in the negotiations. Wishing to remain anonymous in light of the continuing talks, he added: ''This is no rescue operation. Ecuador is not a basket case, nor even a nation without much collateral. Frankly, a loan to Ecuador now would be good banking - helping a slightly troubled client over a difficult position.''
That difficult position, however, will require some restructuring of the foreign debt. Mr. Hurtado said here that at least $1 billion of the debt must be restructured. Talks toward this goal have been going on since last October, but the banks are asking that Ecuador obtain the IMF standby credit as part of the package. As soon as it is approved, the banks will join in the restructuring.
Mr. Hurtado, visiting in Washington with President Reagan, Secretary of State George P. Schulz, and Treasury Secretary Donald Regan, said he believes ''they understand the character of the crises facing my country.'' The Ecuadorian leader also indicated that he thinks US oil companies will come around.
New legislation will be necessary in Ecuador if the foreign firms do in fact assist the country's oil industry. It was nationalized in 1974, and foreign investment in it was stopped. There has been no foreign investment since then. The new Ecuadorian government formula for oil exploration by foreign companies would insure a favorable profit to firms that drill and find oil. They would win a rate of return higher than the US prime lending rate. They would, however, drill at their own risk.