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Ecuador hopes to close dispute with Perenco this year, says Economy Minister

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Ecuador plans to pay off a debt it owes to French oil company Perenco before the end of this year and is open to a dialogue to determine a payment mechanism, Economy and Finance Minister Pablo Arosemena said.

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The country must pay Perenco compensation after the World Bank’s International Center for Investment Disputes (ICSID) ruled that the country had illegally modified a production-sharing agreement with the company and owed it US$391 million, including interests.

The government of President Guillermo Lasso has said that it will cancel the debt, but only after resolving tax obligations generated by Perenco’s operation in two oil blocks in the country.

The amount of tax owed by Perenco is around $50 million, the minister said, an amount the government hopes a US court will deduct from the ICSID ruling.

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“What we expect is some type of compensation or settlement, but it is not a condition, it is simply something sensible to wait for the New York court to define it. Once it is defined, we will proceed with the payment”, he pointed out.

“One is that the court defines how it is compensated (the tax debt) and on the other hand, the conversation is, regardless of the value, how can we pay it,” explained the minister.

“And that conversation is still open and we hope to be able to close it before this year so that we can fulfill that obligation this year,” he added.

A Perenco spokesperson said Tuesday that they have had no contact with Ecuador and that the tax obligations are independent of the arbitration award.

Perenco sued Ecuador in 2008 and finally received US$412 million in May last year. ICSID ordered Perenco to pay compensation to Ecuador in relation to the environmental damage it caused in the areas where it operated, leaving the company with a net compensation of US$374.3 million plus interest.

Late last month, a Luxembourg bailiff ordered 122 banks in the European country to freeze assets held by Ecuador as a result of the dispute over payment of the award.

“The Central Bank of Ecuador has no assets or investments in Luxembourg, therefore there has been no impact,” said Arosemena, noting that the country had no problems canceling the expiration of a coupon on its bonds that are traded in Luxembourg.

He acknowledged that the payment to Perenco will mean strong pressure for the country’s economy, but assured that he still maintains the goal of closing 2022 with a fiscal deficit of 2% of the Gross Domestic Product (GDP).

Source: Gestion

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