PRESIDENT'S CONCILIATORY STATE OF THE NATION SPEECH

UNCLAS QUITO 000126

SIPDIS

SENSITIVE
SIPDIS

E.O. 12958: N/A
TAGS: PREL PGOV PHUM KCRM ECON EC
SUBJECT: PRESIDENT'S CONCILIATORY STATE OF THE NATION SPEECH



1. (SBU) Summary: In the president's annual "report to
the nation" speech widely interpreted as conciliatory,
President Palacio averted further confrontation with
Congress over his reform agenda. Instead, Palacio thanked
his critics and praised the role of a loyal opposition,
inviting Congress to join the Executive in a civic accord
over electoral reforms. Other highlights of the annual
presidential report to the nation include neutral mention
of Qe Occidential Petroleum commercial dispute, supportive
language on an FTA with the U.S., and presidential
attention to combating trafficking in persons. Probably as
a result of Palacio's newfound humility, a public
confrontation with the President of Congress was avoided,
but prospects for cooperation on reform remain slim. End
Summary.

Political Reform Re-focused on the Elections
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2. (U) Palacio was insistent on the need for political
reform, but proposed only electoral changes, not a new
referendum. Convinced that "government of the people, by
the people and for the people" is near, Palacio noted his
government's responsibility to proceed in a "progressive
and peaceful fashion." Successive presidential reform
proposals could never be considered failures. "The truth is
not susceptible to defeat."


3. (U) Palacio denied any personal ambition or intention
to extend his mandate "by even a day." He thanked his
critics for pointing out his mistakes, and invited Congress
and political leaders to join him in a "Civic and Ethical
Pact for Democratic Consolidation," involving reasoned
debate of electoral reforms soon to be submitted to
Congress. The reforms would guarantee equal access to the
electoral process and media, and strengthen the election
and electoral justice system.

Commerce and Trade Treated Fairly
--------------


4. (U) Palacio referred briefly and in neutral terms to
the Occidental Petroleum commercial dispute, calling it a
"complex issue," claiming the government had met its
obligations under Ecuadorian law by notifying Occidential
to respond to alleged infractions, and pledging the
government to apply the law "in accord with the highest
national interests.


5. (U) An additional segment of the speech dealt with the
FTA under negotiation with the U.S., explaining that much
had been agreed (16 of 19 tables),and highlighting only a
few areas of remaining difference: agriculture,
intellectual property rights, and phytosanitary rules.
Palacio highlighted coordination with Colombia on the FTA,
and said the remaining differences with the U.S. would need
to Q resolved in the first trimester of 2006.

Highlighting Progress against TIP
--------------


6. (U) Palacio referred to trafficking in persons in three
different contexts during his two-hour speech. First, he
claimed sustained progress in the prevention and
eradication of violence against women. Coordination of
services by the National Council on Women (CONAMU),the
Council on Children, and the National Institute for Child
Welfare (INNFA),headed by the First Lady had led to the
creation of a network of services in 12 cities through the
Ecuadorian Adolescents Program. Another
inter-institutional alliance led by UNICEF had developed a
program for the prevention of sexual exploitation of minors
in tourist-related activities. Finally, while noting
Congressional inaction on a government legislative
initiative to increase penalties on alien smugglers who
cause the death of their clients, Palacio praised the
action of Congress in passing landmark reforms to the penal
code sanctioning the sexual exploitation of minors.

Other Highlights
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7. (U) Other highlights in the laundry-list speech
included executive credit-taking for:

-- creating a new health insuranQ program to cover 1.3
million;

-- beefing up military security on the northern border and
around petroleum facilities;

-- modernizing the military and instilling renewed respect
for democracy ("members of the Armed Forces have been
involved in events which cost the institution respect and
confidence of the people," he said, a reference to the
Cabrera pyramid investment scandal);

-- maintaining good relations with Colombia, Peru, mutual
cooperation with the U.S., and others;

-- referring Ecuador's dispute with Colombia over
fumigation of coca plantations along the border to the UN
for further study;

Reaction
--------------


8. (SBU) In their analysis of the speech, critics (and
aspiring presidential candidates) roundly lamented the
Palacio government's lack of progress in its first eight
months, highlighting public fatigue with the atmosphere of
confrontation between the government and the opposition.
Opposition leaders from the PSC and ID demanded the
resignation of Government Minister Alfredo Castillo before
any dialogue on electoral reforms or the proposed civic
pact would be possible.

Comment
--------------


9. (SBU) President Palacio's speech included positive
treatment of several U.S. interests, highlighted above.
But there was an ample element of political theater as
well. Much of Palacio's speech was geared toward answering
his critics, whose ranks are growing steadily. By
addressing them, even praising them, Palacio defused what
had been billed as a symbolic confrontation. President of
Congress Wilfredo Lucero was widely rumored to be planning
to give a Congressional rebuttal after Palacio finished his
speech. Instead, he meekly closed the session. Chances
for any serious cooperation between the Executive and
Legislative branches, however, remain low.
JEWELL