Thank you, Mr. Chair.
Thank you for the opportunity to contribute to the committee's deliberations on the proposal for a free trade agreement between Canada and Ecuador.
My name is Stephen Potter, and I have been Canada's ambassador to Ecuador since September 2022.
My background is mainly in development, so I can appreciate the importance and relevance of this agreement in Ecuador.
I am not an expert in international trade like my colleague. So I will not be able to answer questions of a more technical nature.
During my presentation, I will try to answer some of the questions asked at the last committee meeting on this subject. I'm talking about the meeting my colleagues attended two weeks ago.
I will start, Mr. Chair, by addressing the relative importance of this trade deal for both countries, including in the current economic, political, and security context in Ecuador.
The Ecuadorean economy is highly dependent on oil exports. Declining oil prices and production over the last 10 years have reduced state revenues and its capacity to invest in infrastructure and social programs. This is in contrast to the oil price boom from 2008-14, which coincided with the administration of then president Rafael Correa, when the state expanded these investments and entitlement programs and took an increasingly protectionist line, aligning more internationally with countries such as China, Russia, Venezuela and others.
However, this period of high oil prices also facilitated significant corruption, poor-quality investment, and large and un-transparent debt arrangements, notably with China. During this period, the closure of the U.S. air base in Manta also helped enable narco-criminal penetration into Ecuador, particularly as a shipping point for cocaine.
Subsequently, the COVID epidemic further damaged the economy and weakened state institutions, facilitating increased entry of narco gangs into communities and the arrival of larger criminal organizations, including Mexican cartels. During this period, local narco gangs began to fight amongst themselves, dramatically escalating gun crime and insecurity. The prisons developed as centres of this violence. Ecuador changed from an island of peace in the region to the country with the second-highest level of violent deaths in the region last year.
The last two governments and the current government have tried to focus on reactivating the economy by reducing oil export dependence, lowering inefficient state subsidies, eradicating corruption and criminality and creating jobs. None of this been easy, primarily due to entrenched corruption connected to criminal interests. These governments, especially the last two, have had a common strategy for economic transition: responsible fiscal management, opening up the country to investments, and facilitating increased exports. The national assembly, notably, has recently—within the last month—ratified new trade deals with China and Costa Rica that were negotiated during the previous administration. A deal with South Korea has been reached but not ratified. As you're aware, a deal with the EU was signed several years ago.
The current government of President Daniel Noboa, with generally good collaboration in the national assembly, has also implemented several economic measures to promote employment and increase revenues, and has taken a very active line on promoting investment and free trade.
On April 21, as one of the previous witnesses mentioned, there will be a national referendum, with 11 questions aimed at implementing some policy changes where the assembly lacks the authority or is unlikely to provide support. Constitutional reforms require a referendum process, for example.
Notably, one referendum question would modify the constitution to allow for international arbitration of trade and investment disputes, ISDS, an issue that was discussed quite a bit in the last two sessions.
Why is this being proposed? The government believes that the inability to use international arbitration is driving away international investors and is a factor in Ecuador's high country risk. Ecuador is becoming less competitive as a destination for investment.
In summary, why am I telling you all this? Why does it matter? I think this proposed FTA with Canada is more than just a trade deal and more than just a technical issue; it can genuinely contribute to stability, democratic governance and sound economic management in a strategically important region for Canada, for Canadians and for Canadian companies, both investors and exporters.
If Ecuador stabilizes economically, politically and security-wise, there are good opportunities for economic growth, creating new opportunities for Canadian exporters and investors as well as expanding demand for existing exports, such as grains and pulses, for example. Canada and Canadian firms have an excellent reputation in Ecuador, and an FTA with Canada is very highly anticipated by the local business community.
Several Canadian investments in the mining sector are poised to pass to the construction phase very soon. For example, the Curipamba project of Toronto-based Adventus Mining will invest $282 million U.S. and create 800 direct jobs and 3,000 indirect jobs in 22 months of construction that are scheduled to begin this year.
The government of Daniel Noboa has been following through on its commitment to accelerate investments, for example, through faster decisions on permits. He will be at the Prospectors & Developers Association of Canada meeting next Monday in Toronto, where he will talk about some of the things he's done to facilitate investments.
We are also seeing infrastructure planning activity accelerate, and already some Canadian companies have been contracted to undertake engineering and feasibility studies.
Mr. Chair, at the last meeting, members of the committee asked a few questions about the mining sector and the Canadian presence. Here are a few comments.
First of all, Ecuador is not a mining power like Peru and Chile, for example. There are only two large-scale mines that are active—a Canadian mine and a Chinese mine. Nevertheless, with these two mines, last year, the export of mining products became the fourth-largest source of revenue for the Government of Ecuador. Ecuador has great mineral potential, especially in copper and gold. One of Ecuador's attractions for mining companies is its vast green energy potential, as well as its port capacity and proximity.
Furthermore, Canadian companies are leaders in this sector, and they are the most ready to build their mines. The Lundin Gold gold mine, a Vancouver-based company, has some of the lowest greenhouse gas emissions in the world. I myself have visited almost all the sites of Canadian mines, where I have also had the opportunity to speak with members of the communities. As you know, the Government of Canada expects Canadian companies to adhere to the same standards of responsible business conduct as they do in Canada, and I'm sure that's happening in this case.
The regulatory and legal framework for the mining sector is being modernized, but the standard for environmental assessment is high, and there are guarantees in terms of information and community participation. In the National Assembly of Ecuador, there is strong support for the responsible development of Ecuador's mineral potential.
We must also recognize the opposition to mining activities expressed by members of civil society and national leaders of indigenous groups, for environmental, cultural and ideological reasons.
In addition, we must recognize the strong and growing presence of illegal mining activities linked to drug trafficking groups in the territories. This contributes to environmental contamination, as well as to resulting social and safety issues.
Mr. Chair, there were some questions with respect to oil in the last meeting that I would like to address.
