US embassy cable - 05QUITO1018

C O N F I D E N T I A L SECTION 01 OF 04 QUITO 001018 
 
SIPDIS 
 
DEPARTMENT PLEASE PASS USAID 
 
E.O. 12958: DECL: 05/02/2015 
TAGS: PREL, PGOV, MARR, KDEM, SNAR, PTER, ECON, ASEC, EC, CO 
SUBJECT: EMBASSY 90-DAY GOALS, CHALLENGES UNDER PALACIO GOVT 
 
Classified By: Ambassador Kristie A. Kenney, Reasons 1.4 (b), (d) 
 
1.  (C) SUMMARY:  In word if not always in deed, Ecuador's 
Lucio Gutierrez administration qualified as pro-American. 
President Alfredo Palacio's most definitely does not. 
Brought to power by street mobs ("forajidos") clamoring for 
change, Palacio's closest advisor and Cabinet stalwart is 
gringo-basher Mauricio Gandara; far-left Economy Minister 
Rafael Correa looks equally dangerous to U.S. interests in 
Ecuador.  USG initiatives most threatened by the April 20 
government change include shoring up the northern border, 
settling commercial disputes involving American firms, and 
promoting freer trade.  On the brighter side, Palacio's 
overhaul of the police high command bodes well for bilateral 
law enforcement cooperation, while his focus on improving 
Ecuadorian health indicators portends warmer welcomes for 
Peace Corps and Milgroup humanitarian assistance. 
Re-establishing Mission contacts will take time and effort, 
however.  END SUMMARY. 
 
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Ground To Make Up 
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2.  (C) By no means did the Embassy attain all it sought 
during the 27-month tenure of Lucio Gutierrez.  The 
ex-president's political base unraveled shortly after taking 
office, for example, and he never enjoyed the solid, loyal 
majority needed to undertake controversial initiatives.  On 
issues like Article 98, he voiced (feigned?) support, but 
never delivered.  Yet it is difficult to imagine an 
Ecuadorian government in which we enjoyed greater access. 
 
3.  (C) It won't be so easy with Palacio.  Swept into office 
by Quito forajidos demanding "que se vayan todos" ("all must 
go"), Ecuador's latest president lacks a clear electoral 
mandate.  First-tranche Cabinet picks Gandara and Correa 
pandered immediately to nationalist crowds, their anti-Plan 
Colombia, anti-free trade message scoring the president 
needed early points.  Despite Palacio's subsequent comments 
-- both in private and before press -- that he sought 
continued close relationships with the United States, his 
very survival requires a political persona far removed from 
his predecessor's. 
 
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A Section-by-section Focus 
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4.  (SBU) POL:  The fight against trafficking in persons 
(TIP) figures high on the Political Section's 90-day to do 
list.  Draft TIP legislation is coursing through Congress, 
but deputies remain focused on Gutierrez post-mortem 
activities, like reversing the ex-president's court packing. 
POL will lobby legislative contacts hard for movement on TIP 
and money laundering bills, while attempting also to break 
down expected opposition to the Free Trade Agreement.  Other 
Section priorities include seeking closure on pol-mil 
negotiations such as the Maritime Shipboarding and 
Cooperative Nations Information Exchange System (CNIES) 
accords. 
 
5.  (SBU) ECON:  Gutierrez's economic team, primarily his 
commerce and finance ministers, were his Cabinet stars; ECON 
enjoyed close working relations and immediate access.  That 
appears to have changed.  While Trade Minister Molestina 
appears relatively open to dialogue with the U.S. -- crucial 
given the state of Andean Free Trade Agreement (FTA) 
negotiations (septel) -- we expect him to have difficulties 
delivering tenable negotiating positions, given the anti-FTA 
stance of many in the administration.  Far-left Finance 
Minister Correa won't likely invite Embassy staff to break 
bread soon, although we will seek opportunities to brief him 
on U.S. assistance programs and our views on macro stability. 
 
 
6.  (SBU) Perhaps no Embassy section will see its working 
patterns changed more, with ECON turning from operational 
engagement to focus instead on reporting the GoE's emerging 
economic policies (Washington undoubtedly will seek follow-up 
on the administration's rhetoric over reversing Gutierrez's 
sound fiscal policies).  Energy Minister Fausto Cordovez, 
named only May 3, will inherit the possible GoE expropriation 
of Occidental Petroleum's $2 billion in assets.  ECON will 
engage early and forcefully in attempts to head off this 
potential disaster. 
 
7.  (U) PAS:  Post's "warm and fuzzy" programs will receive 
top Public Affairs Section billing in coming months.  Aiming 
to combat misinformation that USG assistance in the Andes is 
strictly military, PAS will seek opportunities to publicize 
our MEDRETEs, food aid, Peace Corps activities, USAID 
programs, and environmental contributions.  The July 
departure of Ambassador Kenney and subsequent arrival of her 
successor provide perfect vehicles to press our agenda, as 
numerous media outlets here will give the transition wide 
coverage. 
 
8.  (U) Young people featured prominently in the ranks of the 
"forajidos," and GoE officials have claimed they seek greater 
youth participation in the government (although greybeards 
still dominate the Cabinet).  PAS's 2004 Youth Conference was 
well-received in Ecuador, with keynote speaker Secretary 
Colin Powell impressed by the quality of the participants and 
their questions.  This year's June follow-up will focus on 
crafting a culture of democracy, fostering responsible 
political leadership, and seeking effective citizen 
participation. 
 
9.  (SBU) NAS:  Post's Narcotics Affairs Section emerges a 
big winner in the recent police shakeup, with Palacio naming 
to the top slot long-time Embassy contact and former CN 
Police Commander General Jose Vinueza.  NAS is seeking 
additional areas of cooperation to exploit the Vinueza 
relationship.  Another Section priority is aided by Palacio 
naming Antonio Parra to head the Foreign Ministry, since 
Parra recently told us he hoped to crack down on money 
laundering (NAS supports a related bill currently stalled in 
Congress).  An expected drop-off in out-year, Ecuador-bound 
INL funding might prevent us from taking full advantage of 
the CN opening, however. 
 
10.  (SBU) CONS:  Consular Sections in Quito and Guayaquil 
have increased their nonimmigrant visa interview loads. 
Diplomatic visa request volume is high, owing to the new 
government, and require greater staff attention.  At the same 
time, Consular, Political, and DHS personnel are considering 
revoking the visas of certain former GoE officials, now 
wanted for criminal acts and therefore flight risks. 
 
11.  (U) MGT:  Management Section staff depend heavily on the 
Foreign Ministry's Protocol Office for services ranging from 
automobile registration to provision of carnets.  Like most 
MFA offices, however, Protocol likely will see staffing 
changes, jeopardizing the service improvements MGT recently 
has enjoyed.  GSO and Financial Management personnel are 
striving to rebuild relationships with Foreign Ministry 
newcomers.  On a separate note, Elsa de Mena's return to the 
top job at Ecuador's IRS-equivalent means Embassy staff won't 
soon see reforms in VAT tax pass-back. 
 
12.  (C) MILGROUP:  Since 2002, Milgroup has focused on 
buttressing Ecuador's northern frontier in hopes of 
preventing Colombian narcoterrorist spillover.  Key 
initiatives have included acquiring some 200 INL-funded heavy 
trucks and humvees to augment military mobility, establishing 
cross-border communications to allow (in theory) better 
coordination between Ecuadorian and Colombian forces, and 
deploying U.S. Special Forces' experts to live and work with 
GoE border forces.  Minister of Government Gandara has long 
railed against Ecuadorian involvement in "Plan Colombia," 
however, and we surmise the GoE could re-assume its 
head-in-the-sand posture in the conflictive north.  An early 
casualty could be a joint U.S./Ecuador SF deployment to the 
northern border, planned for early summer. 
 
13.  (C) Short-term, Milgroup hopes to pass "points of no 
return" for key projects, such as overseeing the 
establishment of an Ecuadorian Quick Reaction Force (QRF) in 
Sucumbios province and constructing a pier for EC Navy and 
Marine forces in San Lorenzo.  To gain goodwill, it will seek 
additional Medical Readiness Training Exercises (MEDRETEs) 
for Ecuador and ratchet up its Humanitarian Assistance 
Program (HAP), specifically targeting heavily indigenous 
areas.  The Ambassador will invite the new defense minister 
to accompany her on a May 31 visit to the Cotopaxi province 
MEDRETE. 
 
14.  (C) DAO:  Our attaches' contacts with the Ecuadorian 
high command proved invaluable during the political 
transition, especially in discouraging a short-term military 
takeover of the civilian government.  Like most Embassy 
staff, they are working hard to establish relationships with 
new commanding generals (although all are scheduled to depart 
before year-end, owing to normal military rotations). 
Regarding concrete objectives, DAO will push for early 
signature of a bilateral Maritime Search-and-Rescue (SAR) 
agreement with Ecuador. 
 
15.  (C) DEA:  DEA also should benefit from the police 
shake-up, especially if its Special Investigations Unit (SIU) 
can continue to maintain a degree of autonomy from the 
Ecuadorian National Police (ENP) hierarchy.  An excellent 
cooperation test-bed arrives soon in the form of increased 
interdiction activities throughout Ecuador, part of the 
Agency's Western Hemisphere Initiative.  DEA believes 
movement possible on expanded Ecuadorian wiretapping 
authorities, vital to carry out trafficking investigations 
and obtain arrests, although continuing judicial insecurity 
in Ecuador (no Attorney General, no Supreme Court) 
complicates prospects.  On the downside, expected Agency 
staffing gaps will hurt, as will recent GoE personnel moves 
at Ecuador's ports that compromise recent improvements in 
maritime security. 
 
16.  (C) RA/RSO:  Regional Affairs reports business as usual 
despite the change in government.  Police and military 
intelligence contacts have been proactive in expressing their 
commitment to continued cooperation and info-sharing.  The 
Regional Security Office also notes a relatively seamless 
transition.  The Embassy seeks to send qualified ENP 
personnel to the United States for professional 
security/police training later this year. 
 
17.  (U) Peace Corps:  New Volunteers were welcomed at a 
Peace Corps swearing-in April 29.  PC leaders in Quito note 
the administration change has not harmed their 
people-to-people diplomacy; if anything, President Palacio's 
focus on public health issues will bring greater recognition 
to PCVs' work.  In coordination with the local Red Cross, PC 
HQ staff will take aim at a Ministry of Health bottleneck 
that is preventing disbursement in Ecuador of $8 million in 
AIDS Global Fund monies. 
 
18.  (SBU) FCS: "The damage is done," argues the Embassy's 
Foreign Commercial Service attache, referring to foreign 
investors' pessimism over commercial opportunities in 
Ecuador.  FCS understands that numerous U.S. companies have 
restricted further investments and credit extension here, 
believing the recent political shenanigans prove there is 
little respect for rule of law in Ecuador.  The Commercial 
Service will continue to focus on resolving active commercial 
disputes involving AmCham companies, although prospects have 
dimmed considerably. 
 
19.  (SBU) AID:  Potential cutbacks and/or program revisions 
due to Article 98 and TIP sanctions already had Post's USAID 
mission rethinking assistance; the April 20 administration 
switch hastened the analysis, especially of AID's democracy 
program.  AID aims to assist civil society groups in 
complementing the new GoE and Congressional initiatives that 
redefine electoral, political, and judicial reform priorities 
and implementing mechanisms.  The renovation of parties, 
which are internally autocratic and often roadblocks to 
effective exercise of democracy, might be part of the 
medium-term reforms.  One positive arising from Palacio's 
accession is the newfound influence of Citizen Participation 
(PC), a USAID-financed electoral/democracy NGO targeting 
Ecuador's youth. 
 
20.  (SBU) In coming days, AID staff, possibly in conjunction 
with ECON, will brief Finance Ministry leadership on the 
Trade Capacity Building program.  Others will seek to 
re-engage de Mena, as AID recently provided her agency funds 
for modernization.  Finally, the environmental team will 
propose one or more meetings with other donors to discuss how 
to promote better stewardship of Ecuador's natural resources, 
in part through a more effective Ministry of Environment. 
 
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COMMENT: 
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21.  (C) While Dr. Palacio's health/welfare focus and recent 
police overhaul likely benefit Embassy humanitarian and law 
enforcement cooperation, we cannot downplay the damage his 
political arrival might inflict on USG economic and security 
initiatives in Ecuador.  Effective "damage control" will 
require redoubled outreach, this Mission's overriding 
priority the next three months.  We are heartened by the 
changes a few days have brought; taking office April 20, 
Palacio trumpeted his administration's intention to "pay down 
the social obligation regardless of foreign debts" and to 
"re-examine" the Manta CSL agreement.  The following week, 
however, Palacio promised Ecuador would meet its 
international commitments, Manta included.  We are determined 
to obtain further positive momentum. 
KENNEY