UNCLAS QUITO 001350

SIPDIS

E.O. 12958: N/A
TAGS: PGOV KCOR PREL ECON EC
SUBJECT: GOE DEMANDS DEBTORS' RESIGNATIONS

REF: A. QUITO 1340

B. QUITO 1218


1. Summary. On June 6, Secretary General of the
Administration Luis Herreria called for the resignations of
all senior public servants, including Cabinet ministers, who
were delinquent in debt repayments before taking office.
Herreria's announcement came two days after Congress
published a list of Palacio Administration debtors, which
included the ministers of energy, government, foreign
affairs, economy, environment, and communications, among
others. Two ministers already have tendered resignations, as
has the president of oil parastatal PetroEcuador. Others
have fought the allegations by presenting proof of payment.
The debtor scandal represents the current GoE's first major
crisis. End summary.


2. Article Six of Ecuador's Civil Service Law enumerates the
following requirement for entering the civil service:
"Subject may not be in arrears regarding loans of any
nature..." Further, Article 122 of the Constitution demands
that high-ranking public servants, before taking office, file
affidavits documenting their assets and liabilities; not
doing so inhibits them from assuming their functions.


3. The debtor scandal broke in late May, after Quito daily
El Comercio began investigating alleged loan repayment
problems of self-professed "man of integrity" Fausto
Cordovez, the minister of energy (Ref B). Cordovez repaid
his debt before the El Comercio piece appeared, but he was
unable to outrun the scandal, eventually quitting June 8.
Administration Communications Director Carlos Cortez, another
Palacio elder statesman, was delinquent on two loans; he
tendered his resignation June 7. PetroEcuador president
Roberto Pinzon, state-owned telephone company Andinatel
boardmember Cornelio Tamariz, and Presidential Advisor
Roosevelt Chica resigned this week over similar accusations.



4. Congressional Oversight Committee Chair Guillermo Haro
has presented a list of additional debtors to the state who
currently hold public office. It includes Minister of
Government Mauricio Gandara, Foreign Affairs Minister Antonio
Parra, Economy/Finance Minister Rafael Correa, Minister of
Environment Anita Alban, and Secretary of Planning Hector
Espinel. These individuals have presented loan discharge
papers and payment receipts as proof they are not bad
debtors, however. The Palacio Administration has formed a
special commission to investigate, led by Herreria and
Presidential Legal Adviser Roberto Gonzalez, and should issue
final determinations on the abovementioned five by June 13.

COMMENT
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5. Inexperienced in governance and taking office under
extraordinary circumstances, it's no surprise Palacio failed
to exercise due diligence in his Cabinet choices. Slow to
react to the brewing crisis, his damage control skills have
looked equally suspect. "Debtorgate" seems to have legs, and
a handful more public servants likely will fall victim before
it dies. We doubt Palacio will sacrifice Parra, Correa, or
Gandara, however. END COMMENT.
Kenney