US embassy cable - 05QUITO1214

UNCLAS QUITO 001214 
 
SIPDIS 
 
E.O. 12958: N/A 
TAGS: PGOV, PREL, ECON, ETRD, EC 
SUBJECT: PALACIO OUTLINES PLAN FOR HIS REMAINING EIGHTEEN 
MONTHS 
 
1.  Summary:  In public comments on May 24, President Alfredo 
Palacio fleshed out his government's plan for its remaining 
18 months, focusing on six points:  politics, the economy, 
foreign policy, infrastructure, health and education, and 
security.  The President set a timeframe of three to six 
months for a Popular Assembly that will propose 
constitutional reforms by popular referendum.  Palacio 
reiterated that he will respect existing international 
agreements.  End Summary. 
 
Palacio's Six Points 
-------------------- 
 
2.  POLITICS:  Palacio said a priority would be the 
re-establishment of the Supreme Court, Attorney General, 
Comptroller General, and the Constitutional Tribunal, all 
independent from partisanship.  He proposed a complete review 
of electoral laws, and consideration of representation by 
district for Congressional deputies, a bicameral legislative 
branch, and a modification of the laws governing political 
parties and movements.  Palacio said he would seek political 
decentralization.  A Popular Assembly would be formed to 
propose constitutional reforms to be submitted to a national 
referendum in the next three to six months. 
 
3.  ECONOMY:  Palacio said Ecuador would honor its foreign 
debt as long as he is able to continue investing in Ecuador's 
productive capacity and social needs.  A reform has been sent 
to Congress to remove investment spending from the ceiling of 
3.5% growth in government spending.  Palacio would reallocate 
the petroleum stabilization fund (FEIREP): 40% for national 
productive reactivation and for debt repurchase, 15% for 
health, 15% for education, 20% for oil stabilization, and 10% 
for scientific research.  The government intends to create a 
Ministry of Science and Technology. 
 
4.  FOREIGN POLICY:  Palacio said Ecuador would maintain its 
respect for international law and its principles, as well as 
for all international agreements, treaties, and contracts 
signed by the State.  Palacio asked the United States and 
Canada to support change in its relations with the 
International Monetary Fund and the World Bank, to permit 
Ecuador to escape its underdevelopment.  There was no 
specific reference to the free trade agreement, though he 
said Ecuador would negotiate commercial agreements with many 
countries, including the United States. 
 
5.  HEALTH AND EDUCATION:  Palacio said he would implement a 
government-run universal health insurance policy.  He said he 
would seek to improve education and encourage private 
scientific research to help reduce the high rate of migration. 
 
6.  INFRASTRUCTURE:  Palacio said public and private savings 
should be made available at low interest rates to invest in 
communications and roads, telecommunications, natural 
resources, the environment, and water.  With funds from the 
Ecuadorian Social Security Institute, Ecuador will fund a 
project to better utilize oil resources, while benefiting 
retirees. 
 
7.  SECURITY:  Due to an increase in crime, there must be a 
consolidation of the judicial system, a review of the police 
system, and clarification of the role of the Armed Forces in 
security matters.  In the long run, extreme poverty, 
inequity, social injustice, and disease, must be reduced to 
prevent crime. 
 
Comment 
------- 
 
8.  Palacio announced his proposal in response to increasing 
public pressure for his government to chart its path.  With 
just a year to achieve reforms before the next Presidential 
campaign begins in July 2006, his plan could be faulted for 
being over-ambitious, and on some issues, such as political 
reform, ill defined.  This was Palacio's first mention of a 
Popular Assembly, for example, and no details were given on 
how that would be structured.  Until now, the GOE had flirted 
with a serious of assemblies or dialogue roundtables, a key 
demand of the protest movement.  Although his plan does not 
counter USG interests, it does have a more nationalistic 
flavor, and we are concerned about the sustainability of 
Ecuador's fiscal situation. 
Chacon