ECUADOR’S LEADING FAMILY BUSINESS GROUPS

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ECUADOR’S LEADING FAMILY BUSINESS GROUPS
Date:
2008 August 8, 16:09 (Friday)

Canonical ID:
08QUITO731_a
Original Classification:
CONFIDENTIAL

Current Classification:
CONFIDENTIAL
Handling Restrictions
— Not Assigned —

Character Count:
19143
Executive Order:
— Not Assigned —

Locator:
TEXT ONLINE
TAGS:
EAGR – Economic Affairs–Agriculture and Forestry | EC – Ecuador; European Community | ECON – Economic Affairs–Economic Conditions, Trends and Potential | EFIN – Economic Affairs–Financial and Monetary Affairs | EIND – Economic Affairs–Commerce, Industry and Industrial Products; Industry and Manufacturing | EINV – Economic Affairs–Investments; Foreign Investments | PGOV – Political Affairs–Government; Internal Governmental Affairs

Concepts:
— Not Assigned —
Enclosure:
— Not Assigned —

Type:
TE – Telegram (cable)
Office Origin:
— N/A or Blank —

Office Action:
— N/A or Blank —

Archive Status:
— Not Assigned —
From:
Ecuador Quito

Markings:
— Not Assigned —
To:
Bolivia La Paz | Colombia Bogotá | Ecuador Guayaquil | Secretary of State | Venezuela Caracas

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C O N F I D E N T I A L QUITO 000731

SIPDIS

E.O. 12958: DECL: 08/08/2018
TAGS: ECON, EINV, EFIN, EIND, EAGR, PGOV, EC
SUBJECT: ECUADOR’S LEADING FAMILY BUSINESS GROUPS

Classified By: Classified by Charge Doug Griffiths. Reason: 1.4 B and
D.

1. (U) Summary: This cable identifies Ecuador’s leading
family business groups, which dominate Ecuador’s formal
economy and own most of the important companies in the
non-petroleum sector. End summary.
Overview and observations
————————-

2. (SBU) This cable is a snap shot of the most important
business groups in Ecuador, all of which are dominated by
family members, who usually hold the highest positions at the
different companies. The family corporate structure tends to
limit the innovation, expansion and corporate governance of
the groups. In some instances, the family leader will bring
in strong outside officials to help run the company — Isabel
Noboa’s Nobis group has a reputation for doing so — but in
many instances the family members make most of the decisions.
A number of these groups have remained strong after the
passing of the founding patriarch, although one academic said
that most family groups begin to break down in the third
generation. Most are not very transparent.

3. (SBU) As the name implies, these business groups include
a number of companies. In some instances, the group is
focused in a particular sector — the Wrights remain focused
in retail, and Bakker is focused on processed food. Most,
however, have branched into apparently unrelated industries.
The group structure, combined with Ecuador’s relatively small
size, means that there is a high degree of concentration in
many sectors, but also competition in almost all sectors.
Furthermore, the list below is not comprehensive, so there
are additional smaller business groups that provide
additional competition. An example of this is the
supermarket business, which is dominated by the Wright and
Czarniski groups mentioned below. However, the Santa Rosa
group also competes in the supermarket business, particularly
in middle-size cities, and Ecuadorians also shop in small
local grocery stories and at markets.

4. (C) The concentrated nature of many of these businesses
has created a business and political environment that puts a
premium on protecting vested interests, which explains much
of President Correa’s antipathy towards the Ecuadorian
business elite. As noted below, some of the leaders of the
various groups have served in important political positions,
raising questions about conflict of interest. Others have
kept a lower political profile, but even so are politically
attuned and influential on matters important to their
business. However, some of that political access has
diminished under the Correa administration, which has kept
its distance from many business organizations and leaders,
and with the closure of congress, whose members were often
highly responsive to guidance from the private sector.

5. (SBU) The groups are listed below in approximate order of
their importance, although such a ranking is partially
subjective. The structure of many of these business groups
is often opaque; there are sometimes cross holdings between
groups; and Ecuadorian businesses often under report revenue,
assets, and profits. Therefore the snapshots below are
incomplete but represent our best information on the groups’
structures, based on interviews, government agency
information, and press reporting.

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Noboa Group
———–

5. (SBU) Alvaro Noboa, son of a multi-billionaire banana
magnate, Luis Noboa, is the richest man in Ecuador. His
fortune is valued at $1 billion. His father’s death in 1994
sparked a bitter sibling feud over inheritance that resulted
in several (pending) lawsuits and left Alvaro in control of
most of the family businesses. Alvaro’s sister is Isabel
Noboa, owner of the Nobis Group (mentioned below). Noboa
served as president of the Junta Monetaria, which oversaw
monetary policy and the Central Bank, under the brief
government of Abdala Bucaram in 1996-97, and ran for
president under Bucaram’s Roldosista Party in 1998 (losing
the final round election to Jamil Mahuad). Noboa later split
off from the PRE to form his own party (PRIAN), and was
defeated in his second presidential bid by Lucio Gutierrez in
2002, and in his third by Rafael Correa in 2007.

6. (SBU) Noboa is the leadering Ecuadorian banana exporter.
He has over 7,000 hectares of production in 11 properties,
and complements his banana production with the ownership of a
marine transportation company. The Noboa Group has 144
companies in different sectors including agriculture,
transportation, banking, insurance, and manufacturing.
Noboa’s most well-known companies are LAN Ecuador
(international airline, associated with LAN Chile), Seguros
Condor (insurance), Banco del Litoral (banking), La Bananera
(bananas), El Cafe (coffee), Molineras Industriales (flour
miller), Molinos Poultier (oat miller), Frutera Jambeli
(tropical fruits), Cartonera (cardboard boxes), and Naviera
Transmabo (maritime transportation), which according to
Ecuador,s tax agency (SRI) together generate annual sales of
$570 million. According to data from the Superintendence of
Companies (2005), these companies have $560 million in
assets.

Isabel Noboa/Nobis Group
————————

7. (SBU) Isabel Noboa, Alvaro Noboa’s sister, is another heir
to Luis Noboa’s fortune. After many fights with her brother
and lawsuits over the family fortune, Isabel Noboa decided to
cash in her shares of the Noboa family’s shipping companies
and huge banana plantations. In 1997, Isabel Noboa reached
an agreement with the estate’s heirs to give up her share in
the banana business in exchange for the largest Coca-Cola
bottling company in Ecuador. Isabel Noboa is one of
Ecuador’s most successful entrepreneurs, and is chairman and
CEO of Nobis SA, a $520 million consortium.

8. (SBU) The Nobis Group owns Ecuador’s oldest and most
productive sugar mill, Valdez, along with 12 other companies,
ranging from one of Ecuador’s largest dairy farms, to an
alcohol supplier for the liquor industry, to cosmetics,
pharmaceuticals firms, real estate, and construction
companies.

9. (SBU) The Valdez sugar mill earns around $19 million in
profits a year, with more than $64 million in sales.
Recently, the Nobis Group’s Coca-Cola Congaseosas joined the
Ecuador Bottling Company, a corporation which has merged all
Coca-Cola bottling operations in the country.

10. (SBU) Nobis S.A. has become the most dynamic real estate
developer on the Coast. Nobis built the Mall del Sol in
Guayaquil, a one million-square-foot shopping center, which
is the largest on the South Pacific Coast, and has expanded
to include an executive center and a Sheraton hotel. Nobis
has two other ambitious developments in Guayaquil “The Big
Apple” and a new riverside complex. Other construction
projects include a Howard Johnson hotel in Quito, apartment
buildings, another two large hotels, and a high-tech
hospital. Nobis’s various companies now employ more than
8,000 people.

11. (SBU) Isabel Noboa was president of the pro-trade
National Competitiveness Board during the Lucio Gutierrez
administration in 2002.
Now, she prefers to keep a low profile, and is not involved
in politics. Noboa formed an anti-poverty organization LANN
(the initials of her father’s full name) and Fundacion Nobis,
which support education, health and housing projects
nationwide. Noboa also serves as the honorary consul of
Canada in Guayaquil.

Wong Group
———-

12. (SBU) The group was founded by Segundo Wong, of
Chinese-Ecuadorian origin, who took control of the famous
fruit company, Favorita Fruit, a banana and tropical fruit
producer and trader. Wong was a pioneer in entering the
Chinese market with Ecuadorian bananas. Reybanpac (bananas),
the flagship company of the holding company Favorita Fruit,
has 7,000 hectares of banana plantation, and which according
to the group provides 20% of Ecuador’s total exports. This
group is Alvaro Noboa’s greatest competitor. It also has a
strong presence in the agricultural and cattle sector of the
coast. Wong’s leading companies are Reybanpac (bananas),
Reysaihua (tropical fruits), Fertisa (fertilizers), Andean
Cardboard, and Reyleche (dairy products).

13. (SBU) After Segundo Wong’s death, his eldest son Vicente
Wong, a member of the Board of the Guayaquil Chamber of
Agriculture, took over leadership of the group. Vicente,
together with his brother and sister, and under the legacy of
his father, is continuing to open new markets for the
Ecuadorian banana and fruit industry.

14. (SBU) The group employs approximately 9,000 workers.
The Wong Group created the Wong Foundation in 1993 to manage
and develop social programs to promote physical, intellectual
and spiritual growth of children and their communities, in
rural areas.

Egas Group
———-

15. (SBU) The Egas group is the leader in Ecuador’s financial
sector. The head of the group is Fidel Egas, who prefers to
keep a low profile. Egas started his empire with a Diners
Credit Card franchise during the 1960’s, and then bought
shares of Banco de Pichincha, the largest bank in Ecuador, in
1990. The Egas group owns most of the assets of the
Financial Group Pichincha, which total approximately $2.9
billion. The group’s main activity is banking, and the most
important banks in the group are: Banco del Pichincha
(commercial bank), Financiera del Peru (business banking),
Pichincha Financier in Miami and Nassau (investment and
business banking), Financiera de Ruminahui (business
banking), Financiera de Loja (business banking), Inversora
Pichincha in Colombia (investment banking), along with Diners
Credit Card. Now the group is beginning to have a greater
presence in micro credit, and owns CrediFe (subsidiary of
Banco del Pichincha; administers its microenterprise loan
portfolio).

16. (SBU) The group also has business in the media sector,
and owns the local channel Teleamazonas, the magazines COSAS,
CARAS, Soho, Diners and Gestion and the marketing agency
Delta. The magazines as well as the TV channel are very
important and influential in Ecuador. Other businesses
include insurance companies, movie theaters, construction
companies, real state agencies, car concessionaires, and the
investment consulting firm Multiplica.

Isaias Group
————

17. (SBU) Brothers William and Robert Isaias, former heads of
the Isaias group, were very influential during the government
of Abdala Bucaram in 1996-1997. They owned the business bank
Filanbanco, which in 1998 was involved in Ecuador’s largest
bank failure. Both brothers fled the country owing millions
of dollars to their clients, and are charged with
embezzlement in Ecuador. The government took over
administration of the bank in 1999, and used state funds to
keep the bank afloat, although it finally collapsed in 2001.
Both brothers now live now in the U.S. (on H visas), and the
GOE is trying to extradite them. The head of the group is
now Estefano Isaias, brother of the ex-bankers.

18. (SBU) Many of the Isaias companies have complicated
ownership structures involving other businesspeople, so
listing the group’s holdings is difficult. The group has had
a major presence in the media business, with TeleCentro (TC
Television) and Teledos (Gamavision), and part of TV Cable
(also owned by the Eljuri family). The group’s TV assets add
up to about $45 million. The Isaias group also owns
industrial and commercial company Emilio Isaias (EICA, a
trade company), Intercontinental de Materiales (an importer
of construction machinery), and construction, construction
investment, insurance, and real estate businesses, among
others. It has partial ownership in the Toni Company (dairy
products), partly owned by Maria Gloria Alarcon, President of
the Guayaquil Chamber of Commerce. The group also has a
presence in the agricultural and petroleum sector.

19. (SBU) On July 7, 2008, the GOE confiscated the assets of
195 companies of the Isaias Group, including three major
television channels (TC, Gamavision and Cablenoticias).
According to the GOE, the seizure of assets will help recover
the nearly $600 million owed by the Isaias Group’s Filanbanco
to the Deposit Guarantee Agency (AGD).

The Eljuri Family
—————–

20. (SBU) Juan Eljuri Chica created this Cuenca-based empire
over the past fifty years. His sister Gladys Eljuri, once
head of the family business after his brother’s death, was
Minister of Tourism under Lucio Gutierrez in 2004. Now the
group is led by Juan Eljuri Anton, the eldest son of Juan
Eljuri Chica. The group has a large presence in Ecuador’s
major cities and in the south of Ecuador. The family
businesses include internet services, cable television (TV
Cable), the TV channel Telerama, the Bank of the Austro,
ceramic industries (Ecuaceramica and Rialto), airlines
(Interboro Transport and Interborder), hotels (Marriot Hotel
and a number of smaller ones), optical fiber, an electric
generation power plant, the bottle Company Azuaya, hardware
stores, and “Juan Eljuri” retail stores that have over 6,000
locations in the country and mainly sell electronic
appliances. In the automobile sector, the group has a
company that assembles Kia Rio and Pregio cars for the Andean
region. The group owns car dealerships NeoHyundai, AEKia,
Automotive Continental, Metrocar, Recordmotor and Asiauto, as
well as a distributor of liquefied petroleum gas (LPG),
National Gas Company Congas. The group has over 6,000
employees. The assets of the 20 main companies add up $410
million, and register sales of approximately $470 million
annually.

The Wright Family
—————–

21. (SBU) The group is a leader in the commercial sector,
with its largest company being Supermarkets La Favorita,
better known as grocery stores Supermaxi and Megamaxi. The
Wright family changed the concept of grocery sales in
Ecuador, with the opening of the first supermarket chain in
Ecuador, Supermaxi (Ecuadorians used to buy their groceries
at farmer markets and at small stores). In 2005 La Favorita
had sales of over $690 million, and $355.5 million in assets.
In 2007 Lideres (El Comercio newspaper’s weekly magazine
which documents business leaders and business developments),
along with Price Waterhouse Coopers, ranked La Favorita as
the most respected company in Ecuador. Thomas Wright is the
head of the Wright family but rumors say he may be
contemplating retirement. The CEO and Executive President of
La Favorita is Thomas Wright’s son Ronald Wright; his
youngest son, Andy Wright, is Vice President. The family’s
political profile is low, although it made contributions to
different political parties during the 2006 presidential
campaign.

22. (SBU) Other companies within La Favorita in addition to
Supermaxi are: Megamaxi (Wal-mart style superstore),
Superdespensa (supermarket), Bebe Mundo (similar to Babies r
us), Jugueton (toy store), Misterbooks (bookstore), Televent
(TV Sales), ComoHogar (household supplies), Importpoint
(import company), Pollo Favorito Profasa (chicken), Andean
Milk (dairy products), Maxipan (bread), Agropesa, and Lechera
Andina (dairy products), among others. The Wrights also have
a hydroelectric generation plant, Enermax S.A., in Cotopaxi
province.

Czarniski Group
—————

23. (SBU) The head of the group is Johnny Czarniski. This
group is the greatest competitor of the Wright group. They
own a supermarket chain, Mi Comisariato, which traditionally
has targeted lower income families; however Mi Comisariato is
moving upscale with a presence in shopping centers. The
group owns 25 companies; the most important ones are:
Importadora El Rosado (importer), Inmobiliaria Lavie and
Motke (real estate companies), Supercines (movie theaters),
Mi Jugueteria (toy store) the Chile,s franchise in Ecuador,
and food processers such as Superba and Alimentos del
Ecuador, among others. The El Rosado group controls the
largest chain of shopping centers, moving into Ecuador’s
second tier cities.

24. (U) Johnny Czarniski is also the Israeli honorary Consul
in Guayaquil.

Bakker Group
————

25. (SBU) The head of the group, Executive President and
founder is Luis J. Bakker. The Bakker group is the owner of
Ecuador’s largest food producer, Pronaca, which had sales of
$400 million and assets of $289 million in 2006. Pronaca was
founded 45 years ago, and currently commercializes leading
food brands such as Mr. Pollo (poultry), Mr. Chancho (pork),
Mr. Pavo (turkey), Fritz (sausages), Indaves (eggs),
Gustadina (canned food, rice and marmalades), and Rubino
(canned olives, cherries, pasta sauces, and artichokes),
among others. Pronaca owns and operates pork and broiler
farms, hatcheries, processing plants, feed mills, and
distribution centers across Ecuador. Pronaca’s latest
business is the production and sales of palm hearts )
Ecuador is now one of the leading exporters of palm hearts
and Pronaca is setting up palm heart operations elsewhere in
the region, including Brazil. The group also owns Inaexpo,
which is an agricultural exporting company that exports
Pronaca’s products to Europe, Asia, Africa and Latin America.
The family keeps a very low political profile.

Villamar Group
————–

26. (SBU) Since 1931, the Villamar group has concentrated its
business in drugstores and pharmacies, owning the largest
drugstore and pharmacy chain in Ecuador, Fybeca, along with
eight other pharmacies and drugstores. The group is run by
Pedro Villamar, who keeps a very low profile.

Other Important Family Business Groups
————————————–

27. (SBU) Ortiz Group: Mainly construction and real estate.
The head of the group is Gerardo Ortiz.

28. (SBU) Villaseca Group: Agro industry — vegetable oil,
milk, and cattle. The group also owns a one of Ecuador’s
largest plastic company. The head of the group is Juan Jose
Villaseca.

29. (SBU) Quezada Group: Import and export companies. The
head of the group is Wilmer Quezada.

30. (SBU) Rivadeneira Group: Transportation and supplier of
heavy equipment for the agricultural sector. The head of the
group is Mario Rivadeneira, former Ecuadorian Ambassador to
the U.S. and former Foreign Minister.

31. (SBU) Quirola Group: Mainly dedicated to the agriculture
sector. The group also owns the commercial bank Banco de
Machala.

32. (SBU) Dassum Group: Owns many textile businesses, and
some real estate companies, including a share of the Hilton
Colon. The head of the group is Roberto Dassum, former
President of the Chamber of Industries of Guayaquil.
CDA Griffiths
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