EMBASSY 90-DAY GOALS, CHALLENGES UNDER PALACIO GOVT

C O N F I D E N T I A L SECTION 01 OF 04 QUITO 001018 SIPDIS DEPARTMENT PLEASE PASS USAID E.O. 12958: DECL: 05/02/2015 TAGS: PREL PGOV MARR KDEM SNAR PTER ECON ASEC EC CO SUBJECT: EMBASSY 90-DAY GOALS, CHALLENGES UNDER PALACIO GOVT Classified By: Ambassador Kristie A. Kenney, Reasons 1.4 (b),(d) ¶1. (C) SUMMARY: In word if not always in deed, Ecuador's Lucio Gutierrez administration qualified as pro-American. President Alfredo Palacio's most definitely does not. Brought to power by street mobs ("forajidos") clamoring for change, Palacio's closest advisor and Cabinet stalwart is gringo-basher Mauricio Gandara; far-left Economy Minister Rafael Correa looks equally dangerous to U.S. interests in Ecuador. USG initiatives most threatened by the April 20 government change include shoring up the northern border, settling commercial disputes involving American firms, and promoting freer trade. On the brighter side, Palacio's overhaul of the police high command bodes well for bilateral law enforcement cooperation, while his focus on improving Ecuadorian health indicators portends warmer welcomes for Peace Corps and Milgroup humanitarian assistance. Re-establishing Mission contacts will take time and effort, however. END SUMMARY. -------------- Ground To Make Up -------------- ¶2. (C) By no means did the Embassy attain all it sought during the 27-month tenure of Lucio Gutierrez. The ex-president's political base unraveled shortly after taking office, for example, and he never enjoyed the solid, loyal majority needed to undertake controversial initiatives. On issues like Article 98, he voiced (feigned?) support, but never delivered. Yet it is difficult to imagine an Ecuadorian government in which we enjoyed greater access. ¶3. (C) It won't be so easy with Palacio. Swept into office by Quito forajidos demanding "que se vayan todos" ("all must go"),Ecuador's latest president lacks a clear electoral mandate. First-tranche Cabinet picks Gandara and Correa pandered immediately to nationalist crowds, their anti-Plan Colombia, anti-free trade message scoring the president needed early points. Despite Palacio's subsequent comments -- both in private and before press -- that he sought continued close relationships with the United States, his very survival requires a political persona far removed from his predecessor's. -------------- A Section-by-section Focus -------------- ¶4. (SBU) POL: The fight against trafficking in persons (TIP) figures high on the Political Section's 90-day to do list. Draft TIP legislation is coursing through Congress, but deputies remain focused on Gutierrez post-mortem activities, like reversing the ex-president's court packing. POL will lobby legislative contacts hard for movement on TIP and money laundering bills, while attempting also to break down expected opposition to the Free Trade Agreement. Other Section priorities include seeking closure on pol-mil negotiations such as the Maritime Shipboarding and Cooperative Nations Information Exchange System (CNIES) accords. ¶5. (SBU) ECON: Gutierrez's economic team, primarily his commerce and finance ministers, were his Cabinet stars; ECON enjoyed close working relations and immediate access. That appears to have changed. While Trade Minister Molestina appears relatively open to dialogue with the U.S. -- crucial given the state of Andean Free Trade Agreement (FTA) negotiations (septel) -- we expect him to have difficulties delivering tenable negotiating positions, given the anti-FTA stance of many in the administration. Far-left Finance Minister Correa won't likely invite Embassy staff to break bread soon, although we will seek opportunities to brief him on U.S. assistance programs and our views on macro stability. ¶6. (SBU) Perhaps no Embassy section will see its working patterns changed more, with ECON turning from operational engagement to focus instead on reporting the GoE's emerging economic policies (Washington undoubtedly will seek follow-up on the administration's rhetoric over reversing Gutierrez's sound fiscal policies). Energy Minister Fausto Cordovez, named only May 3, will inherit the possible GoE expropriation of Occidental Petroleum's $2 billion in assets. ECON will engage early and forcefully in attempts to head off this potential disaster. ¶7. (U) PAS: Post's "warm and fuzzy" programs will receive top Public Affairs Section billing in coming months. Aiming to combat misinformation that USG assistance in the Andes is strictly military, PAS will seek opportunities to publicize our MEDRETEs, food aid, Peace Corps activities, USAID programs, and environmental contributions. The July departure of Ambassador Kenney and subsequent arrival of her successor provide perfect vehicles to press our agenda, as numerous media outlets here will give the transition wide coverage. ¶8. (U) Young people featured prominently in the ranks of the "forajidos," and GoE officials have claimed they seek greater youth participation in the government (although greybeards still dominate the Cabinet). PAS's 2004 Youth Conference was well-received in Ecuador, with keynote speaker Secretary Colin Powell impressed by the quality of the participants and their questions. This year's June follow-up will focus on crafting a culture of democracy, fostering responsible political leadership, and seeking effective citizen participation. ¶9. (SBU) NAS: Post's Narcotics Affairs Section emerges a big winner in the recent police shakeup, with Palacio naming to the top slot long-time Embassy contact and former CN Police Commander General Jose Vinueza. NAS is seeking additional areas of cooperation to exploit the Vinueza relationship. Another Section priority is aided by Palacio naming Antonio Parra to head the Foreign Ministry, since Parra recently told us he hoped to crack down on money laundering (NAS supports a related bill currently stalled in Congress). An expected drop-off in out-year, Ecuador-bound INL funding might prevent us from taking full advantage of the CN opening, however. ¶10. (SBU) CONS: Consular Sections in Quito and Guayaquil have increased their nonimmigrant visa interview loads. Diplomatic visa request volume is high, owing to the new government, and require greater staff attention. At the same time, Consular, Political, and DHS personnel are considering revoking the visas of certain former GoE officials, now wanted for criminal acts and therefore flight risks. ¶11. (U) MGT: Management Section staff depend heavily on the Foreign Ministry's Protocol Office for services ranging from automobile registration to provision of carnets. Like most MFA offices, however, Protocol likely will see staffing changes, jeopardizing the service improvements MGT recently has enjoyed. GSO and Financial Management personnel are striving to rebuild relationships with Foreign Ministry newcomers. On a separate note, Elsa de Mena's return to the top job at Ecuador's IRS-equivalent means Embassy staff won't soon see reforms in VAT tax pass-back. ¶12. (C) MILGROUP: Since 2002, Milgroup has focused on buttressing Ecuador's northern frontier in hopes of preventing Colombian narcoterrorist spillover. Key initiatives have included acquiring some 200 INL-funded heavy trucks and humvees to augment military mobility, establishing cross-border communications to allow (in theory) better coordination between Ecuadorian and Colombian forces, and deploying U.S. Special Forces' experts to live and work with GoE border forces. Minister of Government Gandara has long railed against Ecuadorian involvement in "Plan Colombia," however, and we surmise the GoE could re-assume its head-in-the-sand posture in the conflictive north. An early casualty could be a joint U.S./Ecuador SF deployment to the northern border, planned for early summer. ¶13. (C) Short-term, Milgroup hopes to pass "points of no return" for key projects, such as overseeing the establishment of an Ecuadorian Quick Reaction Force (QRF) in Sucumbios province and constructing a pier for EC Navy and Marine forces in San Lorenzo. To gain goodwill, it will seek additional Medical Readiness Training Exercises (MEDRETEs) for Ecuador and ratchet up its Humanitarian Assistance Program (HAP),specifically targeting heavily indigenous areas. The Ambassador will invite the new defense minister to accompany her on a May 31 visit to the Cotopaxi province MEDRETE. ¶14. (C) DAO: Our attaches' contacts with the Ecuadorian high command proved invaluable during the political transition, especially in discouraging a short-term military takeover of the civilian government. Like most Embassy staff, they are working hard to establish relationships with new commanding generals (although all are scheduled to depart before year-end, owing to normal military rotations). Regarding concrete objectives, DAO will push for early signature of a bilateral Maritime Search-and-Rescue (SAR) agreement with Ecuador. ¶15. (C) DEA: DEA also should benefit from the police shake-up, especially if its Special Investigations Unit (SIU) can continue to maintain a degree of autonomy from the Ecuadorian National Police (ENP) hierarchy. An excellent cooperation test-bed arrives soon in the form of increased interdiction activities throughout Ecuador, part of the Agency's Western Hemisphere Initiative. DEA believes movement possible on expanded Ecuadorian wiretapping authorities, vital to carry out trafficking investigations and obtain arrests, although continuing judicial insecurity in Ecuador (no Attorney General, no Supreme Court) complicates prospects. On the downside, expected Agency staffing gaps will hurt, as will recent GoE personnel moves at Ecuador's ports that compromise recent improvements in maritime security. ¶16. (C) RA/RSO: Regional Affairs reports business as usual despite the change in government. Police and military intelligence contacts have been proactive in expressing their commitment to continued cooperation and info-sharing. The Regional Security Office also notes a relatively seamless transition. The Embassy seeks to send qualified ENP personnel to the United States for professional security/police training later this year. ¶17. (U) Peace Corps: New Volunteers were welcomed at a Peace Corps swearing-in April 29. PC leaders in Quito note the administration change has not harmed their people-to-people diplomacy; if anything, President Palacio's focus on public health issues will bring greater recognition to PCVs' work. In coordination with the local Red Cross, PC HQ staff will take aim at a Ministry of Health bottleneck that is preventing disbursement in Ecuador of $8 million in AIDS Global Fund monies. ¶18. (SBU) FCS: "The damage is done," argues the Embassy's Foreign Commercial Service attache, referring to foreign investors' pessimism over commercial opportunities in Ecuador. FCS understands that numerous U.S. companies have restricted further investments and credit extension here, believing the recent political shenanigans prove there is little respect for rule of law in Ecuador. The Commercial Service will continue to focus on resolving active commercial disputes involving AmCham companies, although prospects have dimmed considerably. ¶19. (SBU) AID: Potential cutbacks and/or program revisions due to Article 98 and TIP sanctions already had Post's USAID mission rethinking assistance; the April 20 administration switch hastened the analysis, especially of AID's democracy program. AID aims to assist civil society groups in complementing the new GoE and Congressional initiatives that redefine electoral, political, and judicial reform priorities and implementing mechanisms. The renovation of parties, which are internally autocratic and often roadblocks to effective exercise of democracy, might be part of the medium-term reforms. One positive arising from Palacio's accession is the newfound influence of Citizen Participation (PC),a USAID-financed electoral/democracy NGO targeting Ecuador's youth. ¶20. (SBU) In coming days, AID staff, possibly in conjunction with ECON, will brief Finance Ministry leadership on the Trade Capacity Building program. Others will seek to re-engage de Mena, as AID recently provided her agency funds for modernization. Finally, the environmental team will propose one or more meetings with other donors to discuss how to promote better stewardship of Ecuador's natural resources, in part through a more effective Ministry of Environment. -------------- COMMENT: -------------- ¶21. (C) While Dr. Palacio's health/welfare focus and recent police overhaul likely benefit Embassy humanitarian and law enforcement cooperation, we cannot downplay the damage his political arrival might inflict on USG economic and security initiatives in Ecuador. Effective "damage control" will require redoubled outreach, this Mission's overriding priority the next three months. We are heartened by the changes a few days have brought; taking office April 20, Palacio trumpeted his administration's intention to "pay down the social obligation regardless of foreign debts" and to "re-examine" the Manta CSL agreement. The following week, however, Palacio promised Ecuador would meet its international commitments, Manta included. We are determined to obtain further positive momentum. KENNEY