TRANSFORMING ECUADOR: ACTION PLAN FOR DEMOCRACY

UNCLAS SECTION 01 OF 06 QUITO 002416

SIPDIS

SENSITIVE

DEPT FOR WHA/AND
DEPT PASS USAID

E.O. 12958: N/A
TAGS: KDEM PGOV ECON EAID EC
SUBJECT: TRANSFORMING ECUADOR: ACTION PLAN FOR DEMOCRACY
AND STABILITY

REF: QUITO 2235

SENSITIVE BUT UNCLASSIFIED.

--------------
Summary
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1. (SBU) Ecuador is one of the most unstable, undemocratic,
and corrupt countries in Latin America. Its political and
economic systems, based on competition by entrenched elites
for lucrative state-provided economic privileges, threaten
U.S. interests directly where they impinge on U.S.
anti-narcotics programs, cheat U.S. investors, and drive
Ecuadorians to emigrate to the U.S. Perhaps more
importantly, Ecuador seems to totter constantly on the verge
of becoming a failed state -- and we cannot afford a failed
state on the southern border of Colombia.


2. (SBU) Over the past several months the Embassy has
reviewed in depth the fundamental problems of Ecuador in
order to develop a strategy for advancing U.S. interests on
this difficult terrain. We believe that a new approach,
targeting our long-term interests in democracy, economic
growth, and the resultant stability, and based on a clear
understanding of Ecuador's fundamental problems is required.
The plan that we outline below focuses on building momentum
for change by developing leadership, changing attitudes,
improving education, improving incentives and attacking
corruption. It also directly focuses on the judiciary and
military, two sectors of particular concern for Ecuadorian
democracy and stability.
End Summary.

--------------
Overview
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3. (SBU) In the aftermath of the fall of the Gutierrez
government on April 20, 2005, the Embassy established several
working groups to review U.S. policy toward and assistance to
Ecuador, identifying challenges and opportunities in the
short, medium and long terms. After several months of
discussions involving all agencies at post, we have
identified a series of impediments to desirable political and
economic change in Ecuador and outlined U.S. Mission actions
to address them. Initial short-term ideas were reported
reftel in response to Department's request. This action plan
does not attempt to cover the full spectrum of issues
included in the MPP. Rather, it focuses on the fundamental
problems that have made it impossible for Ecuador to break
out of its self-destructive downward spiral of political and
economic instability.


4. (SBU) The Mission identified the following core issues:

-- Leadership: A lack of emerging leaders and networks
prepared to challenge the entrenched elites who currently
hold power.

-- Attitudes: Attitudinal resistance to democratic and
economic change at both elite and popular levels, based in
part on their failure to understand democracy and market
economics.

-- Education: Weak educational institutions at both basic
and upper levels, and little push for change from either
elite or popular sectors.

-- Incentives: Inadequate incentives to challenge existing
power and push for political, social or economic change.

-- Corruption: Endemic corruption throughout the public and
private sectors at all levels.

-- Military: A military that remains too willing to
involve itself in politics and business.

-- Judiciary: Judicial institutions that are not
independent, transparent or efficient.


5. (SBU) Regional and class divisions stymie efforts for
reform. Inequalities permeate society, business, and the
political life of the country. Those at the top of the
pyramid do not necessarily accept, as possible or even
desirable, the premise that "a rising tide lifts all boats."
Meanwhile, regional rivalries -- especially between Quito in
the highlands and Guayaquil on the coast -- are so deeply
divisive that they seriously impede any initiatives of
national scope and vision.

6. (SBU) It is also impossible to list Ecuador,s fundamental
problems without reference to the challenges it faces as a
result of its location between major producers of narcotics
and terrorism. Huge quantities of illegal narcotics pass
through Ecuador from its neighbors, especially Colombia, and
the return flow of dollars through Ecuador is also
substantial. Colombian terrorists use Ecuadorian territory
frequently for rest and recuperation, and as a supply route
for weapons and other materiel. Although narcotraffickers
have not yet targeted Ecuador for production of drugs, and
terrorists seem content to use Ecuador as a staging area and
not a target, either of those situations could change without
notice. Further, it is clear that both Fidel Castro and Hugo
Chavez view Ecuador as potentially fertile terrain for
revolutionary ferment, and are making investments to that
end. While thus far they have not made significant progress,
that too could change.


7. (SBU) Analysis of these problems lays bare the reasons why
Ecuador has had seven presidents in the past nine years. The
Ecuadorian political system sets the president up for a fall.
Elected popularly, the president is opposed by a congress
elected from party lists controlled, in the main, by
entrenched elites who have a stake in maintaining the status
quo; a corrupt system that enriches them. Ecuadorians have
elected several presidents who ran against the oligarchy,
most recently Lucio Gutierrez. However, the entrenched
elites have worked assiduously to remove them. President
Alfredo Palacio's continued insistence on political reform is
damaging prospects for completion of this term, and the
president who next assumes office will be similarly
challenged to serve out his term.


8. (SBU) Clearly, profound changes in the political,
economic, and social systems of Ecuador is necessary for the
country to become a stable democracy with a healthy economy.
The changes must come from Ecuadorians themselves, and it may
take decades and several generations to accomplish the goal.
The actions needed to trigger and sustain that process must
be taken in the short and medium term, even if many of the
results may be measurable only in the long term. With this
in mind, we propose the following initial action plan to
address some of these root causes of instability. Continued
engagement will yield new ideas and initiatives that can be
added to this plan, which should therefore be considered a
living document.

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Developing Leadership and Networks for Change
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9. (SBU) Objective: Bring together Ecuadorians committed to
change, motivate and activate them. Develop leaders for the
future.


10. (SBU) Context: Cutting across all elements of this
action plan is the need for a network of Ecuadorians
committed to change, who agree on the problems to be
addressed and a general approach for solutions. We have
already begun building this network, discussing fundamental
problems with close embassy contacts and likely allies. We
have found a tremendous validation of our conclusions and an
enthusiasm to work together. Some of our contacts have taken
matters into their own hands since our first discussion.
Three of them have joined together and are broadcasting a new
radio show dedicated to changing attitudes. Another group
has proposed the establishment of a think-tank to commission
studies and use them to change the public discourse on
numerous issues. Still, years of successive failure to build
a consensus for reform has bred a great deal of pessimism and
fatalism among Ecuadorians. Our steady encouragement, plus
our power of convocation, can make a difference.


11. (SBU) Actions:
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-- Develop new networks and strengthen existing networks of
individuals and organizations that share our goals.
Establish or assist in the establishment of new alumni
associations including alumni of U.S. exchange programs and
of U.S. universities to promote sharing of experiences and
build support for reforms.
-- Assist private groups looking to establish a think-tank
geared to increasing scholarship and policy promotion on an
agenda focused on democracy, stability, and economic
liberalization.

-- Establish one or more awards programs administered by
Ecuadorian allies to recognize leadership in public and
private sectors.

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Changing Attitudes
--------------


12. (SBU) Objective: Help change Ecuadorian attitudes,
improving perceptions of democracy, of economic
liberalization, of responsible foreign policy and of the U.S.


13. (SBU) Context: Ecuador is plagued by a series of
self-defeating attitudes that present a serious barrier to
the consolidation of democracy, to responsible economic
policy and political stability. The first is a paternalism
that dates back to the pre-Colombian period, was sharply
reinforced by the colonial experience, and has continued in
the modern era with statist policies at all levels. There is
a general consensus among Ecuadorians that the patron, now
the state, must provide. Ecuadorians also embrace a
chauvinistic nationalism in which any idea or act can be
shown to be traitorous if it cedes sovereignty in any sense.
These factors make the terrain ripe for populist appeals,
leftist rhetoric and classic anti-American dogma.


14. (SBU) The Ecuadorian public is highly skeptical of USG
motives. Campaigns focused on bringing outside experts to
Ecuador on various policy issues, economic, political and
foreign, to help change Ecuadorian attitudes, can be used
both to improve Ecuadorian perceptions of the U.S. and to
change attitudes toward needed substantive reforms. We need
to show that the USG is interested in Ecuador's social,
economic, and political development and we must be more
visible in taking public credit for the many things we do for
the people of Ecuador.


15. (SBU) Actions:
--------------

-- Establish a public outreach working group to expand
outreach activities to more effectively explain USG
interests/goals to Ecuadorians. Identify sectors, regions,
institutions relevant to US policy interests that we are not
engaging consistently. Monitor the advance and success of
the plan.

-- Bring in U.S. and foreign experts and communicators to
expand debate on priority issues including democracy,
education reform, pension reform, health care systems,
petroleum sector reforms, electric sector reforms,
telecommunications. Identify other countries within Latin
America that can serve as examples for different reforms.

-- Support studies geared to generating understanding of the
price Ecuador pays for its lack of reform. For example, a
study comparing the telecommunications sector of a country
that has privatized/liberalized the sector, with the sector
in Ecuador. The purpose would be the generation of
unassailable sound bites for Ecuadorians to use in promoting
reform.

-- Repackage how we present ourselves to the Ecuadorian
public. Find new outlets to communicate what we do for
individual Ecuadorians, be it through AID programs, U.S.
military humanitarian assistance, Embassy family volunteer
efforts, or US company community outreach.

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Education Reform
--------------

16. (SBU) Objective: To raise the quality of education,
create a base of Ecuadorian human capital that is more
economically competitive and better prepared to participate
in a democracy as responsible, engaged citizens.


17. (SBU) Context: Ecuadorian access to education is on par
with similarly sized countries of comparable development, but
Ecuador lags badly with respect to the quality of the
education. Leftist dogma pervades curricula from basic
education up through the universities. Cubans and
Venezuelans are increasing their presence in education here;
exceptional children from the lower classes are more likely
to find higher education abroad in Cuba than in the U.S.
There is little incentive for elites to promote educational
improvement, since their children attend private schools and
private or foreign universities.


18. (SBU) Actions:
--------------

-- Establish a mission education working group. Assess USG
ability to expand its work directly in basic education or to
support the efforts of international foundations or the
multilateral banks. Identify success stories from other
Latin American countries that could serve as models. Review
programs of both official and private binational educational
exchange and possibilities for expansion.

-- Bring in experts from other Latin American countries to
promote debate of education reform.

-- Explore ways that we might expand number of private high
school youth exchange programs. Encourage binational
university-to-university links.

-- Expand and more sharply target programs for promotion of
U.S. higher education among Ecuadorian students, e.g. through
more scholarships.

-- Explore opportunities to expand English-language programs
as a vehicle to improve youth understanding of U.S.
democracy, market economics and to improve teacher quality.

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Incentives: Rewarding Reform
--------------


19. (SBU) Objective: Develop examples of Ecuadorian
localities where comprehensive reform and development
programs are working.


20. (SBU) Context: Repeated failure at the central
government level to improve people's lives has left
Ecuadorians pessimistic about change and suspicious of
reforms that have been promised but never delivered.


21. (SBU) There remains, however, a positive attitude about
the ability of local government to deliver. By highlighting
the many positive examples of successful reform at the local
level, we can help expand the safe political space for those
who pursue change, while constraining the power of those who
actively sabotage those efforts.


22. (SBU) Actions:
--------------

-- Develop a project, mirroring the concept of the
Millennium Challenge Account, in which mid- to-small-sized
localities would compete for a program of development on the
basis of their reform-oriented policies.

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Attacking Corruption
--------------


23. (SBU) Objective: Reduce corruption.


24. (SBU) Context: The Ecuadorian political and economic
systems are based on the distribution of wealth, generally
via corrupt channels, rather than the creation of wealth.
Ecuador's deficit of sound, credible and well-functioning
institutions cannot be overcome unless corruption becomes the
exception rather than the norm. Ecuador fell another five
places to number 117 in Transparency International's 2005
Corruption Perceptions Index.


25. (SBU) Actions:
--------------

-- Establish Embassy Anti-Corruption Working Group.

-- Collect information for submission to Department in
support of 212F visa ineligibility for corrupt Ecuadorians.

-- Work with State Department and Department of Justice to
energize investigations of corrupt Ecuadorians in the U.S.

-- Develop proposals to promote reforms to decrease
discretion and increase the public's wariness and intolerance
toward corruption.

-- Support effective implementation of the new money
laundering legislation that provides, for the first time,
tools to attack this problem.

-- Support development, passage and implementation of a
competition law providing the GOE with anti-trust powers.

-- Develop citizen oversight proposals for local government
finances.

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Promoting a Professional Military
--------------


26. (SBU) Objective: An Ecuadorian military with a better
understanding of the appropriate role of the military in
democracy.


27. (SBU) Context: Although none of the changes in
government over the past 25 years can be classified as a
military coup, the Ecuadorian military has played an
important role in bringing down all of the past decade's
three democratically elected presidents. The military must
understand that its role does not allow the "withdrawal of
support" from a sitting elected president, allowing his fall.
The military must also be removed from competition with
private enterprise, refocusing it on its legitimate role and
ending its involvement in numerous commercial enterprises
which either compete with or crowd out the development of the
private sector.


28. (SBU) Actions:
--------------

-- Promote military respect for civilian government to
prevent an irregular change of government.

-- Assist the Ministry of Defense in getting the "Ley
Organica de las Fuerzas Armadas," approved so that military
members will not serve in other government institutions (such
as customs).

-- Assist the military to continue providing an operational
presence on the northern frontier, its appropriate priority.

-- Support efforts to have the military and national police
cooperate and collaborate on narcotics trafficking, arms
smuggling, illegal migration, and anti-trafficking.

-- Assist the Ministry of Defense in getting the "Ley
Organica de Administracion y Control de los Espacios
Acuaticos," approved so the Navy may better control the
illicit movement of drugs, arms, and persons.

-- Assist in removing the military from commercial
enterprises.

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Promoting an Effective and Independent Judiciary
-------------- ---


29. (SBU) Objective: Independent, transparent, objective,
and competent Supreme and Constitutional Courts that preside
over a modern judicial system respected by the population for
its efficient and just operation.

30. (SBU) Context: Ecuador's judicial system is infamous for
its corruption and its subservience to political interests.
The key Constitutional and Supreme Courts were closed and
justices removed as a result of political party attempts to
re-stack the courts in late 2004 and early 2005. The
position of Attorney General (Fiscal General) has been filled
by an interim appointee for three years as has the Controller
General position, as the political parties attempt to place
their own people in these powerful positions. An
internationally monitored effort to choose new justices for
the Supreme Courts is now underway, but is complicated by the
fact that the process being used is technically
unconstitutional. Ecuador is halfway through a difficult
transition toward an oral accusatory system of justice,
supported in part by USAID and NAS.


31. (SBU) Actions:
--------------

-- Support local oversight of the selection of Supreme Court
magistrates and Constitutional Tribunal judges, appointment
of attorney general and comptroller general.

-- Provide training and assistance to new justices in taking
up their positions. Perhaps fund travel to the U.S. both for
training purposes and to help build their credibility.

-- Provide training and assistance to lower levels of the
judicial system that appear clean.

-- Increase outreach programs to law schools, to help build a
more professional and ethical new class of lawyers who can
function in the recently implemented oral advocacy system.

-- Develop programs for citizen oversight of judicial
activities.

-- Target corrupt judges and lawyers for 212f visa
ineligibility.

-- Promote more equal access to justice through support for
local services for vulnerable groups. Encourage and support
oversight mechanisms for local level judicial performance and
a National Public Defense System.
JEWELL