ECUADOR: POLITICAL STABILITY AND USG SUPPORT

S E C R E T SECTION 01 OF 03 QUITO 002497

SIPDIS

E.O. 12958: DECL: 09/13/2014
TAGS: PGOV PREL EC
SUBJECT: ECUADOR: POLITICAL STABILITY AND USG SUPPORT

REF: A. 03 QUITO 3813

B. 03 QUITO 2824

C. QUITO 2459

D. QUITO 2462

E. QUITO 2418

F. QUITO 2380

G. QUITO 2327

Classified By: Ambassador Kristie A. Kenney for reason 1.4 (b&d).


1. (S) Summary: With President Gutierrez increasingly
isolated and weakened, his Cabinet divided and Congress
hopelessly fragmented, rumors continue to swirl about a
constitutional or extra-constitutional change in the
Presidency. In this context we have reviewed how political
instability here affects USG interests and what we can do to
support constitutional democracy in Ecuador. In the near
term we see many opportunities to do so, including measures
we can take from here, President Gutierrez' UNGA attendance
in September, and upcoming visits by senior USG officials.
We also recognize that Gutierrez faces worrisome potential
flash-points in coming months. End Summary.

Political Conditions Difficult
--------------


2. (S) Since late last year (Refs A-B) President Gutierrez
has faced mounting political opposition and public
disenchantment with his government's performance. Much of
this damage to Gutierrez' credibility is self-inflicted; the
result of a series of political blunders. The latest round
of speculation about possible moves against Gutierrez (and
possible desperate extra-constitutional moves by him to
retain power) began with Gutierrez' inexplicable visit to
Panama and meeting there with reviled ex-president Abdala
Bucaram (see Ref C). Gutierrez dealt with the negative
repercussions of that move (which bought him the temporary
support of Bucaram's PRE but lost the heftier backing of the
PSC) by offering concessions to the PRIAN (by replacing the
head of the national tax authority, who had been pursing
party leader Alvaro Noboa's back taxes).


3. (S) Without the support of the PRIAN or PRE for
impeachment, Congress has diverted itself by censuring
provocative statements by Gutierrez' brother Gilmar and
investigating the brothers' business dealings, searching for
impeachable offenses. Meanwhile, the Vice President, the
President of the Supreme Electoral Tribunal, and the
President of Congress have publicly criticized the
President's campaign-like pre-electoral visits to inaugurate
public works in districts where his party has local electoral
hopes.

Potential Flash-points
--------------


4. (S) While Gutierrez has proved himself a canny survivor
to have lasted this long into his mandate, we share the
concern of some analysts that with each subsequent cycle of
scandal/blunder, political opposition mounts and his
government's vulnerability increases. Gutierrez faces a
series of potentially difficult challenges to his authority
in coming months, which could include:

-- a return of former President Abdala Bucaram (as soon as
mid-October),if he is not immediately arrested and tried on
outstanding corruption charges;

-- corruption scandals associated with Gutierrez' coterie of
corrupt family members and trusted associates;

-- spill-over from mishandling of the Occidental Petroleum
case, should the GoE proceed (October-November) to
nationalize Oxy's assets (Refs D-G);

-- the Guayaquil round of FTA talks (October 25-29),which
could attract anti-government protests;

-- new economic measures which could provoke social protests,
including elimination of the subsidy on cooking gas
(currently planned by the GoE for November);

-- an incursion into Ecuadorian territory by the FARC or
Colombian Armed Forces (anytime).

USG Interests
--------------


5. (S) Despite his political vulnerability (and perhaps
contributing to it),Gutierrez is a U.S. ally on many key
issues (e.g. bolstering Northern Border security to prevent
spill-over from Plan Colombia, fighting narcotics
trafficking, supporting an FTA). His growing weakness make
him increasingly ineffective implementing this shared agenda.
But any scenario providing for his departure is unlikely to
produce a more amenable ally or a noticeably stronger (lame
duck) president. Furthermore, support for the Vice President
is nonexistent among the political parties, and within
Congress there is no consensus candidate to replace the
President should he be removed. (Congress has the
Constitutional power to replace the President if the Vice
President resigns.)


6. (S) Particular USG interests are trumped by the broader
U.S. interest in supporting constitutional democracy in a
country with a shaky democratic track record. Ecuador's
irregular curtailment of presidential terms in 1997 and 2000
were only loosely cloaked in constitutional guise, and
continue to serve as an invitation to those whose interests
would be served by Gutierrez' early departure.


7. (S) The corruption that swirls within Gutierrez' inner
circle undermines public perceptions of this government and
the public's commitment to democracy. It also indirectly
undermines public perceptions of the U.S. role. While we
publicly distinguish between USG support for constitutional
democracy and Lucio Gutierrez, the man, the public makes no
such distinction.


8. (S) We see no indications of military support among the
middle ranks for a Gutierrez self-coup, and believe those at
higher ranks loyal to Gutierrez support will ultimately
support the constitution. A constitutional move against
Gutierrez is certainly conceivable, given the challenges he
faces. It is in the U.S. interest to prevent any such move,
which most believe would only result in an even weaker
government, and in the process would set back Ecuadorian
democracy. That there is no politically attractive
alternative to replace Gutierrez (although the crusading
Solicitor General is being mentioned by some as an aspirant)
contributes to his longevity and may ultimately salvage
Gutierrez' term of office, despite his unpopularity and
weakness.

What We Can Do To Support Constitutional Democracy
-------------- --------------


9. (S) We see opportunities in the political disorder that
characterizes Ecuador's relatively young democracy, and see
the following opportunities to support Ecuadorian democracy:

By the Embassy and Consulate Guayaquil:

-- make it clear to Gutierrez and the political opposition
that the USG would not tolerate a Fujimori-style self-coup;

-- similarly, reach out to the military leadership to send
the same message;

-- press Gutierrez to address perceptions of corruption
within his inner circle;

-- continue outreach to key GoE officials who represent
maturity and stability in the Cabinet (Government Minister
Baca, Economy and Finance Minister Yepez);

-- continue outreach to political parties to encourage
democratic stability;

-- continue outreach to the indigenous movement to promote
constitutional democracy; and,

For Consideration by Washington Agencies or USG Visitors to
Ecuador:

-- support electoral democracy by supporting an OAS
observation mission for upcoming October 17 local elections;

-- use the UNGA as an opportunity to press Gutierrez to stay
the democratic course;

-- use high-profile visits to Ecuador to emphasize our
messages to the Government, opposition, public and military;

-- use visits to the U.S. of key GoE ministers to fortify
democracy and economic reform. (The willingness of key USG
economic officials to see Finance Minister Yepez as well as
International Trade Minister Baki last week were very useful.)


10. (S) Ecuador Visit Specifics
--------------

-- General Hill's upcoming (early October) visit provides an
excellent opportunity to press these themes with the military
leadership.

-- We recommend a visit by U/S Grossman, preferably after the
October 17 local elections and before the Guayaquil FTA
round, to send a signal of support for electoral processes
and economic opportunity that is inherent to successful
democracy.

-- Senior NSC or WHA visits (October/November).
KENNEY