Identifier
Created
Classification
Origin
06QUITO1547
2006-06-23 19:02:00
CONFIDENTIAL
Embassy Quito
Cable title:  

AMB RENEWS DIALOGUE WITH PRESIDENT PALACIO

Tags:  PGOV PREL EINV ETRD EC 
pdf how-to read a cable
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INFO RUEHBO/AMEMBASSY BOGOTA PRIORITY 5738
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RUEHPE/AMEMBASSY LIMA PRIORITY 0704
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C O N F I D E N T I A L QUITO 001547 

SIPDIS

SIPDIS

E.O. 12958: DECL: 05/24/2016
TAGS: PGOV PREL EINV ETRD EC
SUBJECT: AMB RENEWS DIALOGUE WITH PRESIDENT PALACIO


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

C O N F I D E N T I A L QUITO 001547

SIPDIS

SIPDIS

E.O. 12958: DECL: 05/24/2016
TAGS: PGOV PREL EINV ETRD EC
SUBJECT: AMB RENEWS DIALOGUE WITH PRESIDENT PALACIO


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


1. (C) The Ambassador met with President Palacio on June 21,
at her request, for the first time since the Occidental
Petroleum (Oxy) decision was announced on May 15. Palacio
appeared nervous but eager to re-establish direct dialogue.
The Ambassador stressed the importance of GOE cooperation
with the Oxy arbitration process, laid down a marker on the
dangers of end-of-term corruption, and urged GOE payment of
outstanding debts to U.S. firm Machala Power. Palacio
confirmed the GOE would participate in the Oxy arbitration
hearings, said he would be vigilant against corruption in the
outgoing government, and expounded on his preferred "legacy."
We hope to use this dialogue to help guide GOE decisions
affecting USG interests. End Summary.


2. (SBU) The one-on-one 50-minute meeting took place in
Palacio's office. Palace photographers were banned. Press
noted the Ambassador's presence, and the Embassy confirmed it
without revealing details. The GOE has not commented
publicly on the meeting.

Atmospherics Good
--------------


3. (C) After exchanging pleasantries on family and soccer
matters, the Ambassador set the visibly nervous president at
ease, citing her interest in maintaining a fluid and direct
dialogue on a range of issues. Palacio responded
enthusiastically, pledging an open door and encouraging the
Ambassador to call at any time.

Oxy: GOE Will Participate in Arbitration
--------------


4. (C) Turning to substance, the Ambassador asked Palacio
whether the GOE was prepared to cooperate fully with the
international arbitration process on the Oxy case. After a
long pause, Palacio said yes, in the end, the GOE would
comply. The GOE Solicitor General was in the process of
hiring legal representation, who would fully defend the GOE's
action on Oxy before the arbitration panel. The GOE had
initiated the process of selecting an arbiter, he said.
Palacio asked the Ambassador to keep this information
"between us for the moment." The Ambassador welcomed and

encouraged full GOE participation in the arbitration process,
as provided for in the Bilateral Investment Treaty.


5. (C) Palacio did not ask about USG reaction to the recent
request from the Community of Andean Nations to extend ATPDEA
benefits when they expire in December, nor did he raise the
stalled FTA talks. However, in discussing the Ecuadorian
election campaign process, the Ambassador noted that the U.S.
Congress is also facing elections in November. In this
context, our Congress will increasingly become focused on
domestic, even local issues affecting their districts.
International concerns, such as ATPDEA extension, would by
implication garner less attention.

Promoting Other Commercial Interests
--------------


6. (C) The Ambassador also asked Palacio about GOE
intentions regarding payment of Machala Power, a U.S. firm
owed millions by the GOE. Palacio said he had "given orders
that this matter should be resolved" to end the current
international arbitration process and thus avoid further
expenses.

End of Term Issues: Corruption Legacy?
--------------


7. (C) The Ambassador expressed concern to Palacio about
"rumors" of increasing corruption as the government enters
its last six months in office. Increased vigilance would be
needed to prevent corruption from increasing. Palacio
agreed, saying he would indeed increase his vigilance, lest
corrupt acts damage his government's legacy. (Note: we have
received increasing reports about widespread corruption
involving the president and his inner circle. Our sources
reported that Palacio feared the meeting might be a frontal
discussion about those allegations, and that after the
meeting the president was deeply agitated by the Ambassador's
allusions to the issue. End Note.)


8. (C) Palacio explained that he sought a legacy that
included a new national health insurance system. Though
there would not be time to fully implement the system, he
would soon lay the groundwork for such a system with
financial support from international financial institutions
including the IADB. Turning to the personal, Palacio
referred to his own hopes of boning up on new medical
research after leaving office, before returning to medical
practice.

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


9. (U) In the absence of GOE or Embassy comment, press
immediately began speculating on the substance of the
"secret" meeting.

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


10. (C) Direct engagement with Palacio remains important to
advance USG interests here. By re-initiating dialogue after
a significant lull, we hope to maximize our ability to help
guide the GOE toward resolution of outstanding disputes, and
prevent new disputes from arising.
JEWELL