PALACIO CONSIDERS COMPROMISE, CONGRESS APPEALS TO

C O N F I D E N T I A L SECTION 01 OF 03 QUITO 002463

SIPDIS

PLEASE PASS TO USOAS

E.O. 12958: DECL: TEN YEARS
TAGS: PGOV PINR PREL EC
SUBJECT: PALACIO CONSIDERS COMPROMISE, CONGRESS APPEALS TO
OAS

Classified By: PolChief Erik Hall for reason 1.4 (b&d).


1. (C) Summary: President Alfredo Palacio told the
Ambassador on October 27 that he was considering sending a
new referendum proposal to Congress which would allow voters
to decide between constituent and constitutional assemblies
to make political reform. The Ambassador urged strict
adherence to the constitution and respect for international
treaty commitments. Palacio later pledged both while calling
on the military to act as custodians of Ecuador's democracy.
Congress, meanwhile, passed a resolution on October 27
rejecting a constituent assembly and calling for OAS
intervention under the Democratic Charter to defend democracy
here. Thus far, Palacio has not crossed constitutional
lines, despite rumors that he might. If Palacio follows
through by submitting his proposal to Congress, a
constitutional crisis could be averted. Our efforts will
seek to ensure respect for the constitution by all sides.
The situation on the streets remains calm. We offer
suggested press guidance and action recommendations in paras
10-14. End Summary.


2. (C) Palacio met with the Ambassador at her request on
October 27 to discuss the current confrontation with Congress
over his proposal to convoke a national constituent assembly
to make political reforms. Palacio said that despite the
political crisis at home, he would travel to the Summit of
the Americas meetings at Mar del Plata next week. He will be
accompanied by FM Francisco Carrion and presidential advisor
Luis Herreria, among others. Trade Minister Jorge
Illingworth would not attend due to a personal schedule
conflict involving medical treatment, and would be
represented by Vice Minister Manuel Chiriboga.

Palacio Considering Surprise Proposal to Congress
-------------- --------------


3. (C) Turning to the ongoing confrontation with Congress
over procedural issues involved in convoking a referendum,
President Alfredo Palacio told the Ambassador that he was
planning a surprise move: to send to Congress on October 28
a referendum proposal asking the public whether they approve
of a national assembly, and if so, whether they prefer a
constituent or constitutional assembly. This corresponded to
what Pol and EconCouns heard from Palacio's legal advisor
earlier. With rumors running rampant that Palacio intended
to bypass the constitution as well as Congress by convoking a
referendum by presidential decree, Palacio held that sending
the measure to Congress would help calm political tensions
which are uniting much of Congress against him. Press
reported Palacio's intentions to submit a new referendum
proposal to Congress on October 28.

Plan B: If Congress Rejects, Back to TSE
--------------


4. (C) Palacio told the Ambassador that he now has the
majority four votes in the Supreme Electoral Tribunal (TSE)
needed to convoke a constituent assembly, and that he would
consider calling them in if Congress rejected his new
proposal. The Ambassador told Palacio that this could
potentially be a very controversial move, noting that most
observers believe any proposal involving changes to the
constitution must go through the Congress. She stressed
repeatedly the importance for the U.S. and the international
community of staying within a constitutional framework.

Plan C? Enlisting Military Support
--------------


5. (C) Earlier the same day, at the Air Force 85th
anniversary and promotion ceremonies, Palacio addressed the
military in a regularly-scheduled event. Press quoted him
calling on the Armed Forces, "in the spirit of your historic
role as custodian of the democratic spirit of the people" to
"protect what our people are creating in this powerful
democratic process to bring to a referendum the decisions on
the destiny of our people." He also said his "absolute
commitment to the constitution, the law, and national
interests, is what distinguishes my presence in the
presidency." He also called on the armed forces to respect
all forms of expression adopted by the citizenry to rebuild
democracy.

OAS Calling, Congress Inviting
--------------

6. (C) Palacio told the Ambassador that he had received a
call from OAS SecGen Insulza expressing concern that he was
contemplating actions that could be construed as
unconstitutional. Palacio asked the Ambassador to help him
allay OAS concerns. On October 28 Palacio convoked all OAS
ambassadors to a palace event in which he offered an extended
self-justification and revealed his new intention to send a
new referendum proposal to Congress, along the lines he had
described the night before to the Ambassador.


7. (U) Apparently unbeknownst to Palacio at the time of his
meeting with the AMB, the Congress passed on the same day a
resolution requesting that the OAS intervene in Ecuador's
political process, citing the OAS Democratic Charter. The
resolution passed with 68 votes, from all parties except the
MPD, Pachakutik, and the Socialists. The resolution also
urged Palacio to respect the constitution and questioned the
constitutionality of an undefined constituent assembly.


8. (C) The resolution was delivered to the OAS
representative later on October 27. During his October 28
address to the OAS diplomatic corps, Palacio referred
obliquely to the Congressional appeal, referring to it as an
"international conspiracy" to bypass his constitutional
authority. He denied the existence of a conflict between the
executive and Congress, defended himself against accusations
of undemocratic moves, and said that sending his new proposal
to congress would obviate any need for outside help.

FTA Clarification
--------------


9. (C) Palacio also told the Ambassador that his public
comments that the FTA with the U.S. and the resolution of the
Occidental Petroleum commercial dispute could be decided by
the constituent assembly were taken out of context. He
assured her that a constituent assembly would not be
empowered to overturn prior agreements, including the Manta
CSL agreement. He said he believed the FTA would be passed
by Congress prior to a constituent assembly, making it
untouchable.

Comment, Suggested Guidance, and Action Plan
--------------


10. (C) Thus far, Palacio has stayed within democratic
bounds. The move to send the assembly issue back to Congress
is a welcome development which should help lower political
temperatures somewhat, at least temporarily. The exhortation
to the military is exaggerated in press reports intent on
fomenting confrontation with Congress. Our military contacts
reported satisfaction with the president's remarks, which
they interpreted as restrained, given the political
situation. The street, meanwhile, remains calm after minor
disturbances earlier in the week.


11. (C) Palacio is clearly sincere in his desire to make
political reforms, but he still fails to recognize the full
political implications of his plans, and overestimates his
ability to control the outcome of a constituent assembly. We
will continue to emphasize the absolute necessity of staying
within constitutional bounds, and safeguarding our bilateral
interests.


12. (U) Public diplomacy strategy: The situation here is
still unfolding, and we recommend responding to press queries
with our usual points, with a slight modification to
emphasize staying within the bounds of the constitution:

-- the call for a constituent or constitutional assembly is
an internal matter to be decided by the Ecuadorian government
and people;

-- the Ecuadorian people deserve a democratic system which
works to the benefit of all citizens; and,

-- we are committed to help Ecuadorians find ways to
strengthen democratic institutions, as long as these efforts
respect constitutional bounds.


13. (C) OAS Role: Palacio has rejected Congress' call for
OAS help, and it may not be necessary yet, given his change
of tactics with Congress. We see an OAS mediating role as
potentially helpful in educating Palacio about the restraints
on his constitutional role, but do not recommend invocation
of the Democratic charter without Palacio's consent at this
time.


14. (C) Next Steps: We will continue to encourage dialogue,
restraint, and respect for democratic institutions, including
Congress. The POTUS meeting with Andean Presidents in Mar
del Plata will offer another possible opportunity to
emphasize respect for democratic processes.

JEWELL