Ecuador - China Relations
The entrance en masse of Chinese oil companies into Ecuador is a potent manifestation of China's national strategy of securing direct oil contracts around the world to reduce China's reliance on oil shipped from and through hotspots such as the Persian Gulf and the Straits of Malacca.
Ecuador had proven a difficult and expensive training ground for China. In general, President Correa wanted Chinese investment in Ecuador, in petroleum, mining, telecommunications and infrastructure.From a Chinese perspective, Correa did not seem to understand that China was negotiating "commercial deals" with Ecuador, similar to deals with other countries, and that China would not want to set a concessionary precedent for other countries.
With their $1.4 billion acquisition of Canadian EnCana, in 2006 China's state oil companies announced their entrance as major players in Ecuador's and the region's petroleum industry. Now with active participation in at least five of Ecuador's petroleum blocks, and with further investments in the offing, Quito is playing host to a steady inflow of managerial, financial and technical representatives of China's major and minor oil companies.
The overseas arms of three major Chinese oil conglomerates, the China National Petroleum Company (CNPC), the China Petroleum Company (Sinopec) and Sinochem all are present and have ongoing operations in Ecuador. The fourth major Chinese oil conglomerate, the China National Overseas Oil Company (CNOOC), has concentrated its efforts on offshore drilling and does not operate in Ecuador.
Ecuador had received USD 1.8 billion of investment from China by 2007, making it the leading recipient of Chinese investment in Latin America. Ecuador's main exports to China are agricultural products, wood, metal and fish. The biggest single commodity was banana. China's exports to Ecuador include textiles and garments, toys, shoes and televisions.
Doing business had become more challenging under the Correa administration. The Ecuadorian Foreign Ministry reviewed every MOU or LOA signed with China in order to protect its sovereignty and commercial interests. The MFA was doing this with all countries. Ecuador had become more protectionist in regard to imports of Chinese textiles, ceramics and shoes.
CNPC and Sinopec agreed to pay 99% of extraordinary revenues per the presidential decree implemented in October 2007. The Chinese had attempted to negotiate a unilateral exception but were unsuccessful and understood that an exception for China would open the door for difficulty with other multinationals.
President Correa visited China on November 20-25, 2007. The six-day visit to China represented the most time Correa had spent in any one country on an official visit as president. Correa spent three days and four nights in Beijing, one day in Xian and one day in Shanghai. A large delegation of cabinet-level ministers accompanied the President. While in Beijing, Correa met with Chinese President Jintao HU at the Great Hall of the People, with legislator Banguo WU, and with Changchun LI, a member of the 17th (current) Politburo Standing Committee of the Communist Party of China (CPC).
The Ecuadorians signed 14 bilateral agreements to promote economic cooperation in mining, hydrocarbons, education, healthcare, science and sports. The agreements were long on intent and short on substance. Correa spoke at the Chinese Academy of Social Sciences in Beijing on "Socialism of the 21st Century." Correa also attended the opening ceremony of a China-Ecuador Tourist and Trade event and an exhibition of Ecuadorian contemporary art in Beijing.
China had shown itself willing to make large deals in Ecuador (as it also appeared to be doing in other oil-producing states in the region, particularly Venezuela). In July 2009, the two countries announced a four-year oil sales deal, under which China providing a $1 billion advance payment. The terms of the deal reportedly favored China. Ecuadorian press reported that during the November 2009 visit of Jia Qinglin, Chairman of the Chinese People's Political Consultative conference (CPPCC) national Committee, the two countries announced the signing of three cooperation agreements, including an arrangement to buy Chinese military planes for Ecuador's Air Force. This was on top of the January 2009 $60 million deal to purchase an air defense radar system from the China Electronics Technology Group Corporation. During his visit, Jia reportedly emphasized the benefits that China sees in enhancing economic cooperation between the two countries. He encouraged Chinese companies to increase commercial and investment ties with Ecuador, noting that Chinese investment in Ecuador had reached $2.2 billion and also that two-way trade in 2008 was almost $2.5 billion, 50% above 2007 levels.
China was disconcerted by Correa's verbal attack in December 2009 over China's negotiating position for loans to Ecuador, in which Correa alleged that even the IMF had not treated Ecuador as poorly as did China. According to local press reports, Ecuadorian Finance Minister Viteri traveled to China in mid-January 2010 to negotiate various credits with the PRC government. Correa had twice asked China to look at investing in Manta (site of the former-U.S. Forward Operating Location) as a transportation node, but Chinese companies were neither interested nor experienced in such an overseas project.
Faced with a $3-4 billion (or higher) fiscal deficit in 2010, and with no ability to print money or issue debt, and no intention of returning to the IMF or World Bank, the Ecuador was desperate to find large-scale financing from non-traditional sources. Its efforts to date with Russia and Iran were a bust, but China proved a more willing, if demanding, source of both financing and investment.
Economic cooperation and trade was strengthened in 2013. CRCC-Tongguan Investment Co. Ltd. signed an investment agreement with the Ecuadorian side on the Mirador copper mine project. The Export-Import Bank of China and the Ecuadorian side signed a financing agreement on Minas San Francisco hydro power station. A carrier rocket carrying a small satellite made by Ecuador was successively launched at China's Jiuquan Satellite Launch Center. The two countries signed the Air Services Agreement and the Agreement for the Avoidance of Double Taxation and the Prevention of Fiscal Evasion with respect to Taxes on Income.
On October 4, 2016 local time, Foreign Minister Wang Yi, who was paying an official visit to Ecuador, held talks with Foreign Minister Guillaume Long of Ecuador in Quito. Wang Yi expressed that although China and Ecuador are far away from each other geographically, our hearts are tied together. Both China and Ecuador are developing countries that share similar historical experience and common goals, and we always understand, support, and help each other. In 2015, President Xi Jinping and President Rafael Correa jointly established China-Ecuador strategic partnership, which marks a new phase of bilateral relations. With fruitful results from cooperation in all fields, bilateral relations are at the best stage in history. China is willing to work with Ecuador to constantly push for comprehensive and in-depth development of bilateral relations.
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