PRESIDENT CRACKS DOWN ON PETROLEUM PROTESTS -

C O N F I D E N T I A L QUITO 002575 SIPDIS SIPDIS TREASURY FOR MEWENS DEPT FOR WHA/EPSC FAITH CORNEILLE E.O. 12958: DECL: 12/01/2017 TAGS: EPET ECON PGOV PREL EC SUBJECT: PRESIDENT CRACKS DOWN ON PETROLEUM PROTESTS - REPLACES HEAD OF STATE OIL COMPANY, MINISTER OF GOVERNMENT REF: A. QUITO 7933 ¶B. QUITO 2277 Classified By: Ambassador Linda Jewell, Reasons 1.4 (b&d) ¶1. (SBU) Summary: President Correa declared a state of emergency for Petroecuador after community protestors demanding additional benefits damaged oil wells and blocked access to Petroecuador's Auca camp, severely impeding production. Correa replaced Petroecuador's President with Guillermo Zurita, a Navy official, who has been tasked with restoring order. Correa also accepted the resignation of Minister of Government Gustavo Larrea, for allegedly erroneously reporting that the situation was under control. Coordinating Minister for Security Fernando Bustamante will temporarily replace Larrea. End Summary. ¶2. (U) Community protestors damaged wells in state oil company Petroecuador's Auca camp over the weekend on November 24-25, demanding that Petroecuador provide additional funds for roadwork, 2,000 new jobs, and other public works. Since November 26, the protestors have blocked road access to the site, so technicians have been unable to enter to repair the damage. This has affected approximately 47 wells, resulting in a major production drop and estimated losses of between USD 2.4 and 3 million per day. ¶3. (U) On November 29, President Correa decreed a state of emergency for the entire Petroecuador system and designated Guillermo Fernando Zurita Fabre, Director of General Maritime Interests for the Navy, as the new head of the parastatal (replacing Carlos Pareja). Zurita's first task will be to re-establish order and seek the prosecution of those involved in "the sabotage" of the Auca camp. The decree also noted the Navy will mobilize to address declining production in the petroleum sector. ¶4. (U) In addition to replacing Carlos Pareja, on November 29 President Correa accepted the resignation of Minister of Government Gustavo Larrea, due to his "totally erroneous report" claiming that the Petroecuador situation was under control. Correa then designated Coordinating Minister for Internal and External Security Fernando Bustamante to occupy this post temporarily. ¶5. (C) Comment: President Correa reacted strongly to the petroleum shutdown due to protests which affected Brazilian firm Petrobras in April, stating that "the anarchy" must be stopped and reprimanding regional mayors who organize invasions (reftel a). This time he went beyond rhetoric. In contrast to the previous administration that sent GOE teams to negotiate with communities on additional benefits, Correa is sending a strong signal that he is not going to stand for protests that affect the country's key petroleum revenues. However, these protests may have been an excuse to implement changes that were already in train. Even before these protests, we had heard rumors that there might be changes at Petroecuador, and some commentators have noted other "failures" on the part of Pareja: falling production, failure to reform Petroecuador, failure to fully collect "extraordinary" income payments from foreign oil companies (reftel b). It is unclear why President Correa selected the Navy to overcome the current "emergency situation" rather than the Army, particularly given Zurita's apparent lack of petroleum experience (according to the GOE's Presidential website, Zurita has a degree in Naval Science and a masters degree in Marine Biology). ¶6. (C) Correa's replacement of Larrea was a greater surprise, since he has been a close confidant of Correa, and was seen as one of the ministers who could persuade Correa to change his mind. He was also an effective interlocutor for the Embassy on law enforcement issues, although Bustamante has also been a good interlocutor for us. We have heard rumors that Larrea may take on a new role as Correa's go-between with the Constituent Assembly. End Comment. JEWELL