OFF TO QUITO

THE FAMILY FAREWELL JUST
BEFORE WE MOVED TO QUITO



Northwest was negotiating the gas production contract with the National Petroleum Corporation of Ecuador, known then by its Spanish acronym “CEPE”. Under the terms of this contract, Northwest was to commit itself to explore and produce gas out of an offshore gas field in the Gulf of Guayaquil,known as The Santa Clara Field, which had already been discovered some years back by a prior contractor, and to produce ammonia and urea in an industrial complex to be built in an undetermined place near the Gulf of Guayaquil.
Ecuador was under the government of a military junta since 1972, and, therefore, the military had an absolute control of the oil and gas industries in Ecuador, because they thought they were “the anointed ones to guard the wealth and the honor of the country” or so was the grandiose speech of the new “liberators”, the leftist armed followers of Che Guevara and Fidel Castro in the southern part of this continent. CEPE was under the control of the military and, up to that point, nobody was neither politically nor economically challenging them.
As it has been a tradition in Ecuadorian politics, most of the “democracy lovers” whose speech was against dictatorships when the country was living in democracy, suddenly shut their mouths and kept their pens and pencils safely in boxes under three keys as soon as they got a government job from the dictatorship. Many of them became ministers, vice ministers, ambassadors, department directors, ministers’ secretaries, or simply well paid employees,among whose benefits were the flying first class in government paid entourages to exotic places and fancy dinners with foreign businessmen visiting the country and looking for opportunities in the expanding Ecuadorian economy. That was enough to make them forget their “democratic political principles”, if they ever had them any way. The Ecuadorian military had never been known to be academically very well prepared. It was of little surprise for anyone, therefore, that the national oil company was poorly managed, to say the least. A series of mid level managers of CEPE, young engineers or economists recently graduated from poorly managed universities, and with little or no experience in the field (and whose only merit was to be politically left leaning or newly converts), were the men in charge of “advising” the upper management (men in uniform) in all matters of importance. It was a marriage of convenience between ignorance and arrogance.
Conscious of their importance under the circumstances, these young men usually adopted attitudes comparable to those of Middle East Sheiks, when negotiating with private companies in matters concerning the oil and gas industries; some of them even grew Arab like beards just like the Middle East Sheiks do, to emphasize their grip on oil matters, however, they could barely hide their ignorance and incompetence, but more than anything, their lack of honesty when they saw a chance.
It is under this atmosphere and with those men that Northwest had to seat down and negotiate details of its contract. The head of the CEPE group of lawyers was an honest (exception which oly confirmed the rule), competent communist, Stalinist of the old guard; he had recently returned from Moscow where he had been the Ecuadorian ambassador to the Soviet Union. This man was convinced that negotiating with a US multinational corporation was a good opportunity to squeeze the hell out of the “Gringos” balls. All considered, it was not the best of the environments to negotiate a rational, well thought of contract.
On the other hand, the group of Northwest lawyers was made up of a mix of young and experienced corporate lawyers headed by a very competent and experienced Argentine attorney who had a small percentage of financial participation in the project. It was with these people and under this environment that Northwest had to deal when negotiating their contract. Not an easy task, however, they finally came to an agreement and signed the “Contract for the Exploration and Exploitation of Gas in The Gulf of Guayaquil” and soon they had to start running to make it effective.





MARIUXI (1) AND HER DAD BEFORE WE MOVED TO QUITO


As an Arthur Andersen officer in the tax area, I was involved in the process of advising the Northwest lawyers regarding the tax effects arising from the contract and helping running the numbers to determine the economic viability of the project.
At the time of the negotiations with the government, the prices of ammonia and urea in the international markets were running around $360 per metric tone (“MT”). With such prices, our projected cash flows clearly indicated that the project was not only feasible, but very profitable as well, and the projected investment of approximately $300 million would be recovered within the first five years. The Internal rate of return of the project was in the range of 35%. It was definitely an attractive investment for Northwest.
The ink of the signatures on the contract had not dried up yet when the prices of ammonia and urea, the products Northwest had committed to produce with the gas to be extracted from the gas field in the Gulf of Guayaquil, began to drastically drop in the international markets and our projected cash flows immediately started to show red flashing lights. At an average of $90/MT market price for both, urea and ammonia, the project was no longer profitable , and , therefore, it was economically non feasible. Northwest was not going to invest $300 million knowing that such investment could not be recovered. The government of Ecuador and the CEPE management in particular were deaf and blind to the facts, and they insisted that the industrial complex to process the gas should go ahead. For them, “the economic non viability of the project was irrelevant to the country”, therefore, “the industrial complex should be built no matter what”.





FANNY IN 1975 AS SHE WAS WAITING FOR
RAFAELITO, OUR SECOND CHILD

It was under these circumstances that by the end of October 1975, I was approached by the Northwest management in Salt Lake City with the proposal that I take charge of their office in Quito, replacing an American officer whose wife did not like living in Quito and told her husband to choose between living in Quito without her or going back to Utah to save their marriage. The man chose to save his marriage.
In a matter of three weeks, I was invited to come to Salt Lake City and discuss with the Northwest upper management about the Ecuador project and their proposal to work for them. Frankly, their proposal was one of those that “you can’t say no” to. It was late November 1975, I was in my low thirties and wasn’t about to make a sudden change in my life without my wife’s full participation and agreement. I came back to Guayaquil and immediately and openly discussed everything with my wife, who suddenly became my most trusted job counselor since Pepe García, my great tutor and counselor was no longer near me to draw advise from.
I discussed the issue openly with Fanny, who was pregnant again, and was a bit reluctant to go along with the idea at the beginning, mainly because we would have to go to Quito, away from her mom, her relatives and her friends, but she became a full supporter after we made a complete analysis of the pros and cons of the move. In a matter of a week we have made up our minds, I accepted Northwest’s offer and I would resign from Arthur Andersen effective December 31, 1975. We would move to Quito at the beginning of 1976 and become the Manager in charge of the Northwest office in Quito. The dice were thrown the first week of December 1976, when I submitted my resignation to my position as Manager in Charge of the Tax Division of Arthur Andersen in Ecuador. Bill, the new managing partner of the Firm in Ecuador did what he could to convince me that I should stay and take charge of the Firm’s office in Quito, his efforts included a material salary increase, a company owned car for my personal use and an increased housing allowance, but that was not enough to make me change my mind. I stood by my word to the Northwest people. On December 27, 1975, Fanny, Mariuxi (our 18 month daughter) and I moved to Quito, in the first of a series of domicile moves that we made in the following ten years and which were necessary due to my job obligations.





RAFAEL, IN A CONFERENCE AT THE CHAMBER
OF INDUSTRIES IN GUAYAQUIL IN 1976


Moving to Quito was indeed a challenge for everyone in the family, even for young Mariuxi who was most of the time, but especially on weekends, surrounded by the large family members who came to see her as the “star of the show” in every family gathering there was. They would miss her very much, she would miss them, and, of course we would miss everyone too. A family gathering which included three generations of Romeros took place as a fare well party , days before we took off to Quito. My father, my six brothers and sisters accompanied by their children and grand children attended the gathering, it was one of the very few occasions in which the whole family was all together.
Off we went to Quito and to a totally different environment. Quito and Guayaquil, in spite of being only about 250 miles away in the same small country, used to be (and in many respects they still are) two completely different cities, particularly in climate, altitude, ways of doing business, people’s attitude toward life in general and people’s attitude toward work in particular. I’m not saying either one is better or worse, I’m just saying they were, and still are in many ways, different. Over the last forty years, however, things have changed much in a very positive way, in many respects, and that is mainly due to a much better communication between the two cities, to national TV and radio and to special efforts trying to reach a higher level of integration.



MARIUXI AND RAFAEL JR. AFTER WE
MOVED TO QUITO IN 1976

Though Guayaquil continues to be the largest city in the country with over 2.5 million inhabitants and is a magnet for a massive continuous immigration from all over the country, Quito, as the capital of the country, with about 1.7 million inhabitants, has become a very important economic and industrial center also attracting a lot of immigration from the rest of the country.

In my next posting: NORTHWEST AND QUITO