US embassy cable - 05QUITO236

C O N F I D E N T I A L SECTION 01 OF 03 QUITO 000236 
 
SIPDIS 
 
E.O. 12958: DECL: 01/27/2015 
TAGS: PGOV, KCOR, KDEM, PREL, PHUM, EC 
SUBJECT: ANOTHER DEFECTION FROM GUTIERREZ'S INNER CIRCLE? 
 
REF: GUAYAQUIL 132 
 
Classified By: Ambassador Kristie A. Kenney, Reason 1.4 (b) 
 
1.  (C) SUMMARY:  Tired and forlorn, Presidential Legal 
Advisor and close Embassy contact Carlos Larrea informed 
Poloffs January 27 that President Lucio Gutierrez was feeling 
growing pressure from legislative allies for cabinet and 
policy changes.  The PRE party sought ministerial positions 
from which it could rob public troughs, as well as exiled 
leader Abdala Bucaram's return to Ecuador.  Alvaro Noboa's 
PRIAN opposed Gutierrez's judiciary reform referendum, 
preferring the results of Congress's December 2004 court 
housecleaning which left them controlling key criminal 
tribunals.  Neither wanted Larrea around, playing devil's 
advocate to their Machiavellian maneuverings and advising the 
president on Ecuadorian legalities.  To preempt a move to 
sack him, Larrea planned to resign from the Presidency and 
return the Central Bank. 
 
2.  (C) Gutierrez's referendum required both legislative and 
civil society backing to succeed, Larrea ventured.  It 
currently had neither.  Should the measure fail, the 
president was readying additional, further-ranging 
plebiscites that included questions on dissolving Congress, 
removing the sitting president, and even crafting a new 
constitution (Poloffs warned that such moves would damage 
heretofore good relations with the United States).  Despite 
the president's focus on referenda and Congress's continued, 
petty bickering, Larrea thought the legislature would move on 
its thick agenda in 2005.  On items of interest to the USG, 
anti-TIP and labor reform measures looked promising, but 
energy sector changes appeared doomed.  END SUMMARY. 
 
-------------------------- 
Signs of a Gathering Storm 
-------------------------- 
 
3.  (C) Eternally candid and usually helpful, Larrea is the 
Embassy's closest extradition contact and an ally in the 
trafficking in persons (TIP) fight.  He also is the 
president's primary legal counsel and drafted much of the 
judiciary reform referendum that Congress is currently 
considering.  Larrea visited the Embassy January 27, 
talkative but unusually pessimistic.  Changes in the 
government were coming, he revealed, the product of 
Gutierrez's alliances with his former detractors. 
 
4.  (C) PRE pressures were rising, Larrea claimed.  To the 
one constant -- that fugitive PRE leader Abdala Bucaram be 
allowed to return without facing justice -- were added party 
demands for key ministries.  Energy, Public Works, and 
Education topped the PRE list, all institutions flush with 
cash and easily tapped.  Bucaram's lackeys considered him a 
wrench in their plans, Larrea boasted, and sought his ouster. 
 The pressure growing and the stress taking its toll, he was 
considering submitting a letter of resignation.  Larrea's old 
post at Ecuador's Central Bank awaited. 
 
5.  (C) Noboa's ranks were not yet demanding ministries. 
They strongly opposed the president's referendum, however, 
seeing it contrary to party goals -- PRIAN-affiliated judges 
now controlled the Supreme Court's criminal tribunals and 
were well-placed to defeat legal efforts against Noboa's 
business interests and practices. 
 
6.  (C) Larrea predicted imminent changes in Gutierrez's 
cabinet.  He was unsure whether the president would award his 
PRE "allies" the ministries they sought.  On Jaime Damerval, 
however, Larrea was certain:  the embattled minister of 
government must go.  Damerval picking a fight with popular 
Guayas Governor Jaime Nebot had spawned Nebot's "White 
March," a pro-autonomy protest in Guayaquil that buoyed the 
opposition and made Gutierrez look bad (Reftel).  Larrea saw 
no change at the Foreign Ministry, despite recent public 
outcry over FM Patricio Zuquilanda nominating presidential 
brother-in-law Napoleon Villa, a retired police colonel, for 
an Andean Court of Justice judgeship (Villa eventually 
withdrew his name from consideration).  In naming Villa, 
Zuquilanda had sought to curry Gutierrez's favor, never a bad 
thing in this administration, Larrea snickered. 
 
------------------------------------- 
President Serious on Court Referendum 
------------------------------------- 
 
7.  (C) Gutierrez was committed to seeking the public's input 
on the Supreme Court's eventual makeup; the current Court 
truly was interim, Larrea claimed.  Proof lay in the 
president's recent letter to Congress, in which he threatened 
to pull out of the "institutional majority" were the 
legislature to vote down his initiative.  Larrea thought 
civil society outrage over sitting judges' poor 
qualifications and alleged ties to drug traffickers was 
appropriate.  Rank-and-file Ecuadorians should have a vote on 
individual judges or judge selection procedures, to prevent 
such characters from obtaining public office. 
 
8.  (C) Larrea was skeptical the referendum would 
materialize.  One scenario had the Constitutional Affairs 
committee in Congress issuing a majority opinion approving 
the measure, but the plenary voting it down.  There would be 
no alliance discipline over this vote; PRE and PRIAN deputies 
would vote no for self-serving reasons, leftist MPD and 
Socialist for non-inclusion of pet issues, like opposition to 
the Free Trade Agreement or the base in Manta. 
Now-opposition parties the PSC and ID might support the 
referendum, however, since it offered a chance to get 
sympathetic justices back in office.  Larrea noted that 
Gutierrez realized the referendum, as written, was imperfect, 
and would accept reasonable changes if they helped to gather 
support. 
 
9.  (C) Civil society was wrong in opposing the measure only 
because it came from Gutierrez's hand.  Larrea believed the 
referendum needed popular support even more than it needed 
help in Congress.  With current judges initiating legal 
proceedings against protesters for excessive horn-tooting and 
flag-burning outside Court headquarters, however, it was 
doubtful that groups like Citizen Participation and 
ProJusticia would back any government-driven judiciary reform. 
 
10.  (C) The president was readying contingency plans, Larrea 
revealed.  Other referenda were in the works, should Congress 
shoot down the original.  The first resembled the original, 
but offered more generic questions on court depoliticization. 
 Another, which Larrea deemed dangerous to democracy, would 
allow the president to dissolve Congress once during his term 
(for balance, Congress could also remove the chief executive 
with a two-thirds vote, without having to conduct a political 
trial).  Polchief responded that such moves would be fatal to 
U.S.-Ecuador relations.  Last, the president was considering 
a call for a constitutional congress, with eyes toward 
drafting Ecuador's 23rd Magna Carta. 
 
--------------------------------- 
Congress Soon To Roll Up Sleeves? 
--------------------------------- 
 
11.  (C) Larrea brightened when he turned toward Congress's 
agenda in 2005 (or perhaps it was the dozen Hershey's Kisses 
he'd just downed).  The administration was concluding 
preparations of a much-needed competition law, a version of 
which was struck down two year's prior.  Responding to a 
Polchief inquiry, Larrea believed the road open for anti-TIP 
legislation before year's end.  Labor reform, a necessity 
should Ecuador wish to conclude FTA negotiations with the 
United States, was further off but still do-able. 
 
12.  (C) The economic agenda looked tougher, Larrea feared. 
Finance Minister Mauricio Yepez, a brilliant technician, was 
a "horrible" politician.  Yepez favored bundling electrical 
sector reform, a popular measure, with hydrocarbon law 
changes and a revamp of Ecuadorian Social Security.  The 
latter two were controversial, lacked votes, and could take 
down the former.  Larrea favored stand-alone bills. 
 
------- 
COMMENT 
------- 
 
13.  (C) Larrea is plugged-in and not prone to hyperbole; his 
assurances that Gutierrez supports fully the court referendum 
are welcome.  The bad news?  The legal adviser's 
sky-is-falling comments concerning pressures on the president 
appear further proof that PRE and PRIAN support come with 
long strings attached.  Yet fissures exist between the two 
parties that Gutierrez would be wise to exploit.  An hour 
after Larrea departed, an alarmed PRIAN bloc leader Sylka 
Sanchez telephoned Polchief.  Supreme Court President 
Guillermo Castro, an ardent PRE supporter, allegedly was 
considering issuance of a ruling to allow Bucaram's return. 
Sanchez claimed Gutierrez was rumored to be on-board with the 
action.  She had confronted Castro, who denied the 
allegations immediately.  The PRIAN leader intended to follow 
up with the president, however. 
Kenney