US embassy cable - 04QUITO2598

C O N F I D E N T I A L QUITO 002598 
 
SIPDIS 
 
E.O. 12958: DECL: 09/23/2014 
TAGS: PGOV, KDEM, PREL, EC 
SUBJECT: ELECTIONS, NOT GOVERNANCE, DRIVING GUTIERREZ 
 
 
Classified By: Ambassador Kristie A. Kenney, Reasons 1.4 (b), (d) 
 
1.  (C) SUMMARY:  President Lucio Gutierrez, consumed with 
improving his Patriotic Society Party's performance in 
Ecuador's October 17 local elections, is pressuring Cabinet 
officials to adopt populist, poorly conceived economic 
measures designed to garner votes.  Should the PSP fare 
poorly in October, as most experts expect, the president 
might throw blame at his recalcitrant ministers and 
ultimately clean house.  END SUMMARY. 
 
2.  (C) Minister of Government Raul Baca, a rare Gutierrez 
administration bright light, was the Ambassador's guest at 
breakfast September 24.  Baca lamented that Gutierrez lately 
had cloistered himself with such "inner circle" denizens as 
brother Gilmar, brother-in-law Napoleon Villa, and cousin 
Renan Borbua.  All were PSP founders and had the boss's ear. 
They had convinced Gutierrez that his and the PSP's actual 
popularity dwarfed that reported in opinion polls (an August 
"Monitor" poll, for example, showed Villa garnering only 1.5 
percent in the Pichincha province prefect race).  They 
believed that GoE funds, spent correctly, could buoy the 
party further in October.  Xavier Ledesma, the 
administration's secretary general but not PSP, shared the 
three's position, Baca added. 
 
3.  (C)  Their analyses were ridiculous, the minister 
decried.  In one, the PSP leaders surmised that, by raising 
one stipend that Ecuador's poor received by $15, Gutierrez 
would win the votes of the entire affected population. 
"Serious" Cabinet officials, such as Finance Minister 
Mauricio Yepez, Trade Minister Ivonne Baki, and Baca himself, 
had pointed out holes in the PSP logic, but to little avail; 
Gutierrez appeared ready to adopt the populist measures. 
Worse, the president resented the Cabinet's attempts to keep 
him focused on good governance and sound economics.  Should 
the PSP fare as poorly as Baca thought it would, Gutierrez 
was likely to blame him and the financial team, claiming that 
more spending would have delivered more votes.  A putsch or 
mass resignation would surely follow. 
 
4.  (C) Baca did not want to go.  "We're doing some great 
things now," he claimed, pointing in particular to recent 
progress combating trafficking in persons (Septel).  But the 
inner circle, and Gutierrez's faith in them, was making his 
public service difficult.  Baca saw no immediate solution. 
 
5.  (C) COMMENT:  We have long lamented that PSP party hacks 
and assorted hangers-on crowd Gutierrez's office and craft 
his agenda.  They are most often behind the president's worst 
decisions, from visiting disgraced ex-President Abdala 
Bucaram in Panama to picking fights with respected 
journalists.  Yet Gutierrez mostly has resisted their efforts 
to derail the GoE's admirable fiscal probity.  In 
working-level outreach and in coming calls on the president, 
we will emphasize the dangers of populist economic policies 
while lauding Ecuador's recent fiscal responsibility.  END 
COMMENT. 
KENNEY