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.

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Ground To Make Up
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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.

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A Section-by-section Focus
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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.

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COMMENT:
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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