US embassy cable - 05QUITO1350

UNCLAS QUITO 001350 
 
SIPDIS 
 
E.O. 12958: N/A 
TAGS: PGOV, KCOR, PREL, ECON, EC 
SUBJECT: GOE DEMANDS DEBTORS' RESIGNATIONS 
 
REF: A. QUITO 1340 
     B. QUITO 1218 
 
1.   Summary.  On June 6, Secretary General of the 
Administration Luis Herreria called for the resignations of 
all senior public servants, including Cabinet ministers, who 
were delinquent in debt repayments before taking office. 
Herreria's announcement came two days after Congress 
published a list of Palacio Administration debtors, which 
included the ministers of energy, government, foreign 
affairs, economy, environment, and communications, among 
others.  Two ministers already have tendered resignations, as 
has the president of oil parastatal PetroEcuador.  Others 
have fought the allegations by presenting proof of payment. 
The debtor scandal represents the current GoE's first major 
crisis.  End summary. 
 
2.  Article Six of Ecuador's Civil Service Law enumerates the 
following requirement for entering the civil service: 
"Subject may not be in arrears regarding loans of any 
nature..."  Further, Article 122 of the Constitution demands 
that high-ranking public servants, before taking office, file 
affidavits documenting their assets and liabilities; not 
doing so inhibits them from assuming their functions. 
 
3.  The debtor scandal broke in late May, after Quito daily 
El Comercio began investigating alleged loan repayment 
problems of self-professed "man of integrity" Fausto 
Cordovez, the minister of energy (Ref B).  Cordovez repaid 
his debt before the El Comercio piece appeared, but he was 
unable to outrun the scandal, eventually quitting June 8. 
Administration Communications Director Carlos Cortez, another 
Palacio elder statesman, was delinquent on two loans; he 
tendered his resignation June 7.  PetroEcuador president 
Roberto Pinzon, state-owned telephone company Andinatel 
boardmember Cornelio Tamariz, and Presidential Advisor 
Roosevelt Chica resigned this week over similar accusations. 
 
 
4.  Congressional Oversight Committee Chair Guillermo Haro 
has presented a list of additional debtors to the state who 
currently hold public office.  It includes Minister of 
Government Mauricio Gandara, Foreign Affairs Minister Antonio 
Parra, Economy/Finance Minister Rafael Correa, Minister of 
Environment Anita Alban, and Secretary of Planning Hector 
Espinel.  These individuals have presented loan discharge 
papers and payment receipts as proof they are not bad 
debtors, however.  The Palacio Administration has formed a 
special commission to investigate, led by Herreria and 
Presidential Legal Adviser Roberto Gonzalez, and should issue 
final determinations on the abovementioned five by June 13. 
 
COMMENT 
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5.  Inexperienced in governance and taking office under 
extraordinary circumstances, it's no surprise Palacio failed 
to exercise due diligence in his Cabinet choices.  Slow to 
react to the brewing crisis, his damage control skills have 
looked equally suspect.  "Debtorgate" seems to have legs, and 
a handful more public servants likely will fall victim before 
it dies.  We doubt Palacio will sacrifice Parra, Correa, or 
Gandara, however.  END COMMENT. 
Kenney