US embassy cable - 05QUITO2092

C O N F I D E N T I A L SECTION 01 OF 02 QUITO 002092 
 
SIPDIS 
 
DEPT PASS USTR FOR B. HARMAN 
 
E.O. 12958: DECL: 09/08/2010 
TAGS: ETRD, ECON, PGOV, PREL, EC 
SUBJECT: MUSICAL CHAIRS MOVES INTO HYPERSPEED:  TRADE TO 
GOVERNMENT, FOREIGN AFFAIRS TO MADRID 
 
Classified By: ECON LARRY L. MEMMOTT, REASONS 1.4 (B,D) 
 
1.  (C) Summary:  Minister of Commerce Oswaldo Molestina told 
Ambassador he would be designated as the new Minister of 
Government (police, security forces, congressional relations) 
late on September 8.  One of his deputies, Jorge Illingworth, 
would take over as Minister of Commerce and Manuel Chiriboga 
would take over as Chief Negotiator for the FTA.  He made 
clear that he also expected Minister of Foreign Affairs Parra 
to be replaced before President Palacio left for New York the 
night of September 13.  He said Ecuador would keep up with 
Colombia and Peru in the FTA negotiations, which he thought 
could be concluded by the end of 2005, but not by October. 
End Summary. 
 
Moving On 
 
2.  (C) Ambassador paid an introductory courtesy call on 
Molestina the afternoon of September 8.  Molestina began the 
meeting by dropping the bombshell:  his move to the Ministry 
of Government would be announced within hours.  He said this 
should not be seen as a setback for FTA negotiations.  The 
GOE had managed to maintain continuity in the change of 
governments in April, and would do it again.  The new 
minister, Jorge Illingworth, was well acquainted with the 
negotiations.  The new chief negotiator had been Ecuador's Ag 
negotiator, so was also well up to speed.  Molestina noted 
that his own past experience in the congress as president of 
the international relations committee - where the TLC will 
get its first hearing - will also be a plus. 
 
And Parra to Go Too 
 
3.  (C) Molestina expressed exasperation with his Peruvian 
and Colombian counterparts for leaving Ecuador out of the 
meeting between the Presidents of the two countries the week 
before "which had only one agenda item: the FTA."  He said he 
had protested to the Peruvians, only to be told that Peru had 
informed Ecuadorian Minister of Foreign Affairs Parra. 
"Parra forgot to tell us," he concluded with obvious 
distaste.  Molestina said he had intended to accompany 
Palacio to New York for the UNGA, but would now need to stay 
in Ecuador to get up to speed on his new issues.  Asked by 
Ambassador who would be going, he said, "well, Parra WAS on 
the list.  There will be big changes before the delegation 
leaves, though."  Molestina noted that Palacio had taken over 
the presidency "without a formed team."  The cabinet had been 
cobbled together from friends and the recommendations of 
friends.  Some ministers had clearly not worked out, and were 
now being replaced.  "By the time the President leaves for 
New York," he promised, "it will be easier for the U.S. to 
understand his real intentions," implying that cabinet 
changes would result in a government with a consistent 
message and a profile more acceptable to the U.S. 
 
Speeding Up FTA Negotiations 
 
4.  (C) Back on trade, Molestina said he understood that 
Toledo and Uribe had agreed to conclude the negotiations by 
October.  He did not think it was possible.  Ambassador noted 
that House Ways and Means Chairman Thomas had said that the 
negotiations had to be concluded by the end of the year if 
they were to be ratified by the U.S. Congress in time to 
prevent expiration of ATPDEA benefits.  Molestina said he 
understood and had no doubt that the agreement could be 
concluded by the end of the year. 
 
A Very Bad Banking Law 
 
5.  (C) Ambassador raised the new banking law which 
surprisingly had passed the first hurdle in the Ecuadorian 
Congress on Sept. 1.  She pointed out that this law, which 
would fix interest rates, ban fees, and allow the state to 
direct the lending of private financial institutions, would 
be a disaster for the financial sector and the nation. 
Molestina agreed.  He said he had just met with private 
bankers and it was clear that this proposal could not become 
law. 
 
6.  (C) Ambassador noted that the USG also has many issues 
before the Ministry of Government.  We would look forward to 
working with him in his new capacity on such crucial issues 
as counter-narcotics, counter-terrorism cooperation and 
trafficking in persons.  Molestina responded with enthusiasm. 
 
Comment:  All to the Good 
 
7.  (C) Gandara and Parra have been, together with Minister 
of Finance Correa who was jettisoned in July, the most 
problematic ministers for us, frequently coming out publicly 
against the United States and our interests, and, in the 
cases of Parra and Correa, pushing for closer relations with 
Venezuela.  Replacement of Gandara by Molestina, one of the 
stars of the Palacio cabinet and one of those who has been 
easiest for us to work with, will benefit U.S.-Ecuadorian 
relations significantly.  We expect Parra's replacement, 
rumored to be a respected senior career diplomat currently 
serving as Ambassador to Spain, will also be an improvement. 
8.  (C) Jorge Illingworth is the Chamber of Industry's person 
in the Ministry of Trade.  As such, he is committed to free 
trade, and we are certain we will be able to work well with 
him.  We do not believe these changes significantly change 
the situation for FTA negotiations.  We continue to believe 
that Ecuador will work hard to keep up to the slowest of its 
partners, likely Colombia.  If Colombia is ready to conclude 
by the end of 2005, Ecuador should find a way to do the same. 
JEWELL