US embassy cable - 05QUITO2748

C O N F I D E N T I A L SECTION 01 OF 02 QUITO 002748 
 
SIPDIS 
 
E.O. 12958: DECL: TEN YEARS 
TAGS: PGOV, PINR, PREL, EC 
SUBJECT: PRESIDENT PUSHES "PLAN B" FOR REFERENDUM 
 
 
Classified By: PolChief Erik Hall for reason 1.4 (b&d) 
 
1.  (C) Summary:  After being rebuffed by the Supreme 
Electoral Tribunal and Congress, President Palacio on 
December 1 announced he had issued a decree ordering the 
Supreme Electoral Tribunal to hold a referendum on January 
22.  The referendum would ask voters whether to convoke a 
national assembly to reinvent Ecuador's institutions and 
create a new constitution.  The Tribunal is expected to rule 
on the validity of the decree by December 7.  If it approves, 
voters will decide whether Ecuador enters a new period of 
uncertainty threatening important USG interests.  End Summary. 
 
2.  (U) Palacio's controversial action came on the eve of 
Quito holidays and a Congressional recess, and, in the 
continued absence of a Constitutional Tribunal (since April), 
cannot be appealed on constitutional grounds.  (Note: only 
the constitutional court, not the Supreme Court, can judge 
issues of constitutional interpretation here.)  It came just 
after the constitutional committee of Congress ruled against 
authorizing his pending proposal to allow voters to decide 
between a constitutional reform assembly and an unbounded 
constituent assembly.  This new move seeks the same outcome 
by a different means. 
 
3.  (U) In his presidential decree Palacio cites the 
sovereignty of the people and his constitutional authority to 
convoke referenda directly under Article 104 (2), which 
permits him to do so when "in his judgment, it deals with 
issues of transcendental importance for the nation," and 
apart from reform of the constitution.  Critics charge that 
an assembly would inevitably involve reforming the 
constitution, and the referendum therefore must be certified 
as a matter of national urgency by Congress before being 
submitted to the TSE. 
 
4.  (U) The question to be put to the people by referendum on 
January 22, by decree, is:  "Do you agree that a universal, 
direct election be convoked for representatives to a 
Constituent Assembly to reform institutionally the State and 
create a new constitution?" 
Assembly members would be selected by the same numerical 
formula currently used to select the 100 Congress members 
(two per province and additional representatives for every 
200,000 inhabitants), each candidate would require petitions 
with support from .25 percent of the provincial electorate 
and be listed alphabetically.  Qualifications would be the 
same as for congressional deputies.  The assembly would be 
installed by 125 days after the referendum (May 27). 
Approval requires a simple majority of valid votes.  Voting 
is obligatory. 
 
Initial Reaction: Congress Furious 
---------------------------------- 
 
5.  (U) Palacio sent a letter of explanation of his action to 
Congress president Wilfredo Lucero on December 1, which 
congressional sources shared with us.  In it, Palacio cites 
as his mandate the demand of the Ecuadorian people, expressed 
in the events leading to the removal of ex-President 
Gutierrez, to "transform the state."  After listing the 
litany of his previous attempts to respond to this demand, 
with no positive response from Congress, Palacio concludes 
that "it is clear that the Congress is not able or willing to 
tackle such reforms," prompting his unilateral action of 
going directly to the people.  He then expressly disavows any 
electoral motive for doing so, and vows his government "will 
never give up the search for mechanisms to hold a national 
assembly to re-institutionalize the country and guarantee a 
democratic, fair and equal order." 
 
6.  (U) Congressional reaction to the president's move was 
swift, with congressional leaders going into extended session 
to plot strategy.  The next morning, PSC congressman Luis 
Fernando Torres told the press that Palacio's move was 
unconstitutional and provided grounds (undermining the 
security of the state) to move to impeach.  Congress will 
reconvene on December 7 to discuss the issue further. 
 
TSE Votes 
 
SIPDIS 
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7.  (SBU) Action on the referendum proposal now moves to the 
Supreme Electoral Tribunal (TSE), comprised of the seven 
largest political parties.  TSE president Gilberto Vaca (PSC) 
said the TSE would act on the president's request by December 
7.  Presidential spokespersons claimed the TSE was not 
empowered to vote on the issue, but must follow the 
presidential order without question. 
8.  (U) Most here expect the TSE to vote on whether the 
presidential decree is valid.  The TSE had rejected Palacio's 
last attempt to bypass Congress with a referendum proposal, 
by a margin of 5-2, on October 20.  The measure was supported 
only by indigenous Pachakutik and the (virtually 
non-existent) New Country Movement.  The PSC, ID, PRIAN, PRE 
and MPD voted against.  Some speculate (we have no 
confirmation) that the MPD and PRE might now also be willing 
to support Palacio's new referendum proposal.  In return for 
a vote in favor, the MPD and Pachakutik are likely to demand 
that the fate of the FTA with the U.S. be turned over to the 
assembly to decide. 
 
Comment 
------- 
 
9.  (C) Palacio's move, just a day after the swearing in of 
the new Supreme Court, returns his government to 
confrontation with Congress.  Although well-timed to mute 
immediate reaction, it faces several hurdles before being 
implemented.  It could well be blocked in the TSE, avoiding 
major repercussions.  But if not, Congress could challenge 
the TSE or even seek to impeach Palacio.  Failing that, the 
initiative could also be blocked at the polls, if the 
opposition is successful convincing voters that Palacio's 
motives are impure.  Already critics are accusing Palacio of 
seeking to extend his mandate by delaying the October 2006 
elections, since elections would presumably be affected by 
structural reforms.  Given the opposition of major political 
parties, each step towards an assembly is also a step towards 
the premature end of Palacio's mandate.   Palacio has 
repeatedly said he is willing to step down if the assembly 
requests. 
 
10.  (C) The assembly proposal is dangerous to USG interests 
because it would undermine stability by creating an alternate 
government which could dissolve Congress, dismiss the 
president, delay elections, and generate political and 
economic uncertainty.  That said, barring fundamental 
changes, the next elected government will likely be weak and 
vulnerable to Ecuador's recent cycle of irregular changes of 
government.  Given the level of political fragmentation here, 
we doubt an assembly can achieve positive reforms and fear it 
could become hostage to radical elements intent on 
symbolically asserting sovereignty by rejecting the FTA, 
expropriating Occidental Petroleum, and reviewing the status 
of the Cooperative Security Location at Manta.  The 
Ambassador has made USG concerns about an assembly abundantly 
clear to Palacio, but Palacio remains insistent on expansive 
political reform.  We will continue to urge caution, while 
seeking to shield USG interests from this latest populist 
storm. 
BROWN