Identifier
Created
Classification
Origin
05QUITO1445
2005-06-20 21:58:00
CONFIDENTIAL
Embassy Quito
Cable title:  

RESPONDING TO ECUADOR'S GOVERNANCE CRISIS

Tags:  PGOV PREL EC 
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C O N F I D E N T I A L SECTION 01 OF 03 QUITO 001445 

SIPDIS

E.O. 12958: DECL: 06/20/2015
TAGS: PGOV PREL EC
SUBJECT: RESPONDING TO ECUADOR'S GOVERNANCE CRISIS


Classified By: Ambassador Kristie A. Kenney, Reasons 1.4 (b)

C O N F I D E N T I A L SECTION 01 OF 03 QUITO 001445

SIPDIS

E.O. 12958: DECL: 06/20/2015
TAGS: PGOV PREL EC
SUBJECT: RESPONDING TO ECUADOR'S GOVERNANCE CRISIS


Classified By: Ambassador Kristie A. Kenney, Reasons 1.4 (b)


1. (C) Summary: Following the April 20 change in
government, the US Mission underwent a two-month process to
gather data and analyze the deeper causes of instability
affecting Ecuador's governance. Mission sections and
agencies, led by the Ambassador, met on June 14 to discuss
our short and long-term response to Ecuador's democracy
crisis. Several fundamental issues, such as a corporatist
rent-seeking system and poor education, were identified as
areas preventing Ecuador from reaching its full potential.
Ecuadorian elites see the economy as a zero-sum game, which
leads to a constant scramble for pieces of the same pie.
Post recognizes that many Ecuadorians are disillusioned with
democracy after 25 years marked by rampant corruption.
Looking at the short-term, Post identified some promising
opportunities, such as the signing of a free trade agreement
and possible customs and justice reforms. Security issues
will remain a high priority and we will seek to consolidate
our public diplomacy efforts. We will also try to step up
efforts to promote educational and judicial reform.


2. (C) Post will continue to work to create the best-case
scenario for Ecuador, while also preparing for the worst-case
scenario. A best-case scenario would have Ecuador becoming a
country to invest in and with a highly educated population.
A worst-case scenario could include Ecuador defaulting on its
loans, the Ecuadorian Navy forbidding the boarding of ships
(allowing drug and human smugglers to act with impunity),and
the removal of security forces from the northern border,
jeopardizing Ecuador's security situation and having a dire
impact on Plan Colombia. End Summary.

--------------
Fundamental Issues Prevent Equity
--------------


3. (U) Mission staff identified some of the root causes of
Ecuador's economic and democratic ills. One is Ecuador's
corporatist structure which allows the country's elites to
capture the majority of the country's wealth. Various groups
compete to grab wealth from the government which controls all
the country's resources in a rent-seeking system. Poor
education among the general population, and common attitudes,

such as leftist tendencies which tend to place all the blame
on the US, allow the country's elites to get away with
capturing all the country's wealth, stifling efforts to
create a stable middle class. Judicial corruption is also
used to control the country's resources.

--------------
Democracy Has Not Delivered
--------------


4. (SBU) After 25 years of democracy, the general population
is disillusioned. Democracy is associated with rampant
corruption. When looking to find those responsible for
democracy's failure, many see the US, the IMF, and
globalization as the enemies, instead of identifying elements
in Ecuadorian society that prevent true democracy and
economic justice from flourishing. Ecuador and its leaders
are in desperate need of a long-term vision. A coherent,
long-range government policy for growth is needed; instead
each new administration creates its own policies, which
typically are ill-considered and ineffective. Poor education
means there is no critical mass to lead and effect real
change. With the majority of its population in poverty, most
are focused on day-to-day survival, rather than an improved
future.

--------------
FTA Offers Immediate Opportunity
--------------


5. (SBU) The most promising immediate opportunity for
Ecuador is the US-Andean free trade agreement (FTA) which
could help Ecuador create a more transparent, competitive
economic system. Opening the Ecuadorian economy, creating
real competition, is the only sure way to break up the
elites' stranglehold on power. However, we recognize this
government still does not seem fully committed to an FTA. In
fact, much of Ecuador's political class is confused and
deeply skeptical of it. Although it will be difficult to
pass an FTA during this administration, the lasting effects
of an FTA are perhaps Ecuador's best hope to improve the
lives of all Ecuadorians. The FTA process also offers
opportunities for regulatory, customs, and judicial reforms.

--------------
Security Issues Remain High Priority
--------------


6. (C) MILGP and DAO highlighted security concerns related
to the change in administrations. Recent politically
motivated purges of the officer corps could affect the
stability of military institutions. This is coupled with a
high summer turnover which will result in a more
inexperienced military, which, in a crisis, could be less
adaptable and less dependable. Another serious risk is that,
in the current political climate and with recent negative
media reports, the Ecuadorian Navy could decide to deny US
maritime officials permission to board suspect ships. This
would allow drug and human smugglers to act with impunity and
have an immediate negative impact on overall USG
counter-narcotics efforts in the region.


7. (SBU) MILGP and DAO will work to improve the self-esteem
of security forces, battered by the events of April 20. We
will also do as much as possible to facilitate
military/police cooperation. MILGP and DAO will coordinate
with PAS to formulate new talking points on regional
security, making the issue clearly about Ecuador and
maintaining peace here, instead of focusing on Colombia.

--------------
Other Political and Economic Issues
--------------


8. (U) In the short term, social groups such as NGOs and
citizen assemblies are proposing political reforms; however,
there is a lack of consensus among them on what reform
priorities should be. We need to help Ecuador analyze these
proposals in order to make the most informed decisions. The
results of these reforms (suggested reforms include
bicameralism, representation by district in Congress, and
other Constitutional reforms),however, may not get to the
heart of Ecuador's fundamental problems. Another immediate
concern is a possible loan default scenario. We will work to
prevent this scenario as it could lead to a banking crisis
similar to that of 1999. A repeat of this crisis, or
anything approaching it, would have a drastic effect on the
economy and political stability.

--------------
Consolidating Outreach
--------------


9. (U) Post will continue to craft a public diplomacy
strategy for each major Embassy activity, and will better
tailor our message to the current environment. We will
continue to broaden our public diplomacy outreach, possibly
using Peace Corps volunteers, MILGP's medical readiness
training exercise (MEDRETE) staff, and the Foreign
Agricultural Service's project staff to reach more
Ecuadorians with a non-political message. We will consider
distributing literature and exhibiting videos of USG aid
projects in the consular waiting rooms, taking advantage of
these captive audiences.

--------------
Education Reform Needed
--------------


10. (U) Mission members agreed that a well-educated populace
was needed to achieve true functional democracy and for
Ecuador to make informed economic decisions. AID will
prepare an education project proposal, and we will begin
promoting real reform in this area. AID has already flagged
education as a priority for FY2007 to Washington.

--------------
Justice Needs Attention
--------------


11. (U) We will also seek ways in which we can support
meaningful reforms in the justice sector. The Embassy will
form a justice working group whose efforts will seek medium
and long-term structural improvements. Various vested
interests among political parties and other groups may work
to prevent major reforms. This, combined with instability
and GOE weakness, makes reforms difficult. However, reform
in the justice sector could significantly address some of the
fundamental problems in the Ecuadorian system (e.g.,
corruption).

--------------
Other Next Steps:
--------------


12. (SBU)
--We will consider limiting programmatic foci in order to
have a more concentrated impact in fewer areas.
--We will organize quarterly democracy meetings, looking at
what we are doing to solve long term democracy and governance
problems.
-- We will seek to increase networking and sharing of
information among sections, having brown bag lunches on
topics such as the FTA.
--MILGP will focus PD efforts on spreading info on its
medical readiness exercises and humanitarian assistance
programs. We will also get the Ecuadorian military involved
in these events to share in the good publicity.
--We will look to bring international speakers on
globalization and competition.
--We will continue to support the strengthening of NGO
political watchdog groups.
--We will prepare to support the next national elections
(whenever they might occur),including educating media and
preparing for OAS observers.
--We will continue Congressional outreach to promote dialogue.
--We will look at the possibility of a mini "millennium
challenge account" in Ecuador with two cities competing for
US funds and setting a positive example for other cities.

--------------
Wrapping Up
--------------


13. (C) Our Mission will work to find a greater balance
between dealing with immediate political concerns while also
attempting to right some of the fundamental problems
preventing Ecuador from developing fully economically and
democratically. We must continue to work with the current
administration in order to help move them towards a best-case
scenario, and prevent any bad decisions that may lead to a
worst-case scenario. We will continue monitoring disruptive
political trends such as the emergence of an Ecuadorian
Bolivarian movement. While there is a consensus within the
Mission on what needs to be done for a healthy economy, there
is no clear fix for Ecuador's democracy problems. Any
solution to the democratic crisis must be customized to
Ecuador's situation. We are taking a fresh approach to
address fundamental problems in Ecuador. Our work has just
begun, but will need Washington's support to see it through
completion.
Kenney