QUITO -(Dow Jones)- Ecuadorean Foreign Minister Heinz Moeller and the U.S. ambassador to the Andean nation, Kristie Kenney, have agreed to establish a working group to find a solution to a dispute between foreign oil companies and Ecuadorean tax authorities.
The establishment of the four-person group, which is made up of two officials from each country and is set to begin work Thursday, follows a breakdown in talks between parties involved in the dispute, according to Moeller.
U.S. government officials have warned in recent weeks that preferential trade tariffs for the Andean country could be jeopardized if disputes with foreign investors aren't resolved. Private sector companies say they're eligible for $ 200 million in rebates linked to value-added tax payments, but Ecuador's tax authority sees it differently.
Moeller, speaking in a press conference Wednesday, said that the issues involved are complicated, noting that it may not be possible to resolve the matter until late October.
He said that the government is committed to resolving the dispute as quickly as possible, but only under the terms of Ecuadorean law.
"It is clear to the U.S. government that Ecuador won't allow itself to be pressured into violating laws or contracts just because respectable companies, no matter the nationality, believe that because they lodged a complaint that it must be honored. A complaint is valid, in as much as the appropriate authorities determine it to be so. We want to resolve the problem, but not in any way that harms Ecaudor's sovereignty or laws," he said.
The oil companies involved in the dispute - including Occidental Petroleum Corp. (NYSE: OXY - News) and Kerr-McGee Corp. - have filed 26 cases against the tax authority, demanding reimbursements dating back to August 2001.
Moeller explained that, as long as the issue remains unresolved, Ecuador won't be eligible for benefits under the Andean Trade Preferences Act, or ATPA, which provides duty-free access for certain exports to the U.S. in exchange for cooperation in the war on drugs.
Moeller noted that this would impact exports of textiles and packaged tuna products, but not the other 6,000 products shipped to the U.S. market.
The foreign minister also said he would like to have the local operations of the foreign oil companies audited, in order to determine the veracity of their books. Internal Revenue Service head Elsa de Mena has alleged recently that some had been fabricated.
Moeller expressed his support for de Mena, who has been at the center of the dispute between the companies and the government over the past month, saying she had helped establish a tax culture in the country.
-By Maria Elena Verdezoto, Jones Newswires; 5939-9728-653
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