The people of Ecuador are rising up to refound their country as a pluri-national homeland for all. This inspiring movement, with Ecuador's indigenous peoples at its heart, is part of the revolution spreading across the Americas, laying the groundwork for a new, fairer, world. Ecuador Rising aims to bring news and analysis of events unfolding in Ecuador to english speakers.

Sunday, June 15, 2008

Ecuador says oil firms agree to temporary deals

QUITO, June 14 (Reuters) - Ecuadorean President Rafael Correa said on Saturday most foreign companies that filed lawsuits against the government over an oil tax have reached out of court settlements, which should help revive stalled oil production.

On Thursday, Ecuador offered companies a tax cut for one year if they agreed to drop lawsuits filed over a tax that forces them to share nearly all their extra revenues with the state.

"Most of the companies have said yes" to the offer, Correa said during his weekly radio address. "But in one year, they will have to sign service deals ... that's the condition."

Ecuador wants companies to switch from contracts in which they keep part of the oil they extract to deals that would allow the state to keep all the oil in exchange for a service fee, in a move to boost government control over the key sector.

No company was immediately available for comment.

Ecuadorean Oil Minister Galo Chiriboga said the government will negotiate a new service contract model with companies during the year.

Companies claimed the windfall tax hurt their businesses, so they slashed investment, which stalled private output key to the oil-producing nation. Meanwhile the country's state company, Petroecuador, is struggling to lift state output.

Correa, a former economy minister who took office last year, is reworking contracts in important sectors of the economy like oil, mining and telecommunications to increase the state's share of revenues.

Ecuador has suffered a string of suits by foreign companies who say the windfall tax makes their business inviable in South America's No. 5 oil producer. The latest coming from Spain's oil giant Repsol earlier this week.

Other companies negotiating with Ecuador includes Brazil's Petrobras, China's Andes Petroleum consortium and France's Perenco.

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