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### Viewing cable 09QUITO707, SCENESETTER FOR INAUGURATION DELEGATION

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Reference ID | Created | Released | Classification | Origin
--- | --- | --- | --- | ---
09QUITO707 | 2009-08-07 18:06 | 2010-12-17 21:09 | UNCLASSIFIED//FOR OFFICIAL USE ONLY | Embassy Quito

`

    VZCZCXYZ0001
    OO RUEHWEB

    DE RUEHQT #0707/01 2191805
    ZNR UUUUU ZZH
    O 071805Z AUG 09
    FM AMEMBASSY QUITO
    TO RUEHC/SECSTATE WASHDC IMMEDIATE 0732
    INFO RUEHBO/AMEMBASSY BOGOTA 8300
    RUEHBR/AMEMBASSY BRASILIA 4242
    RUEHCV/AMEMBASSY CARACAS 3668
    RUEHLP/AMEMBASSY LA PAZ AUG LIMA 3350
    RUEHGL/AMCONSUL GUAYAQUIL 4541

` `

    UNCLAS QUITO 000707

    SENSITIVE
    SIPDIS

    E.O. 12958: N/A
    TAGS: PREL MASS MOPS SNAR PTER EAID MARR OVIP EC CO
    SUBJECT: SCENESETTER FOR INAUGURATION DELEGATION

    ¶1. (SBU) Embassy Quito warmly welcomes the delegation headed
    by Senator Bob Graham for the inauguration of President
    Correa on August 10, held on the 200th anniversary of
    Ecuador's first call for independence. While we do not agree
    with the Correa government on every issue, we have enjoyed
    strong cooperation in some areas and seek to continue a
    productive partnership.

    ¶2. (SBU) The "Grito de Independencia" on August 10, 1809, was
    not the date that Ecuador actually gained independence.
    Although a group of Quito citizens overthrew the president of
    the Royal Audience of Quito (a Spanish colonial
    administrative unit) on that date and established an
    autonomous government, Spanish troops reasserted control a
    few months later and killed those involved in the rebellion.
    Ecuador won its independence from Spain as part of "Gran
    Colombia" in 1822, and then became the Republic of Ecuador in
    1830 when it split from Gran Colombia.

    ¶3. (SBU) The inauguration will take place in the National
    Assembly building's main meeting room. Just to be aware, at
    the front of that room is a modern mural by a famous
    Ecuadorian painter, Mario Oswaldo Guayasamin, called "Ecuador
    Frustration and Hope." This mural, which seeks to capture
    the protagonists of Ecuadorian history, includes an anti-U.S.
    piece that has a Darth Vader-like black figure with CIA
    written underneath. When former Secretary of State George
    Schulz visited the Assembly in 1988, he expressed
    considerable displeasure at the depiction. Because of that
    incident, many Ecuadorians believe high-level U.S. officials
    are reluctant to attend events in the Assembly. While this
    is not true, you may have some media interest in visible
    reactions to the offensive mural.

    ¶4. (SBU) The presidents of Argentina, Bolivia, Brazil, Chile,
    Cuba, Dominican Republic, El Salvador, Guyana, Honduras
    (Zelaya), Paraguay, Peru, Nicaragua, Saharawi Arab Democratic
    Republic (which which we do not have diplomatic relations),
    Suriname, and Venezuela will attend the ceremony. Prince
    Felipe of Asturias of Spain; the prime ministers of Antigua
    and Barbuda, Saint Vincent and the Grenadines; and the vice
    presidents of Algeria, Guatemala and Uruguay, as well as 17
    foreign ministers, will also attend. Representatives from
    international organizations will include the Organization of
    American States (Insulza and his deputy) and the Andean
    Development Corporation (Enrique Garcia). We understand that
    Iran may be represented by its Commerce Minister.

    U.S. Activities Related to the Bicentennial
    -------------------------------------------

    ¶5. (SBU) The Embassy has identified two emblematic documents
    in a local archive that will be restored with Embassy funding
    as part of the USG contribution to the bicentennial
    celebrations: a handwritten copy of the Ecuadorian national
    anthem from the 1860s, and one of the earliest maps of
    Ecuador produced by renowned Ecuadorian scholar and scientist
    Pedro Vicente Maldonado in 1750. In June 2009, the Embassy
    sponsored the visit of a jazz quartet from New York for a
    series of concerts in three cities, which was also linked to
    the cultural celebrations for the bicentennial. In February
    2009, the Embassy and the Municipality of Quito jointly
    re-dedicated the Plaza Abraham Lincoln directly in front of
    the Ambassador's residence. During the public ceremony on
    Lincoln's birthday, the Ambassador's remarks linked the
    bicentennial of Lincoln's birth to the Ecuadorian
    bicentennial in 2009.

    Domestic Political Developments
    -------------------------------

    ¶6. (SBU) Ecuador has been a fragile democracy caught in
    cycles of political instability, reflecting popular
    disillusionment with traditional power structures and weak
    institutions. Rafael Correa was elected to his first term in
    2006 by successfully presenting himself as the "change"
    candidate. He is the first president since the 1979 return
    to democracy to enjoy sustained popularity in all regions of
    the country and among a broad array of class and demographic
    groups.

    ¶7. (SBU) A core element of Correa's political program was
    convoking a Constituent Assembly to draft a new constitution,
    Ecuador's 20th. Nearly 64% of voters approved the
    constitution in a September 28, 2008 referendum. Proponents
    believe it will give the citizens a real voice in government
    decisions and expand guarantees of rights. Critics fear that
    it will centralize power in the Executive and result in
    drastically increased government spending.

    ¶8. (SBU) Elections were held in April 2009, two years into
    Correa's term, as required under the new constitution.
    Correa was re-elected in the first round, taking 52 percent
    of the vote, compared to 28 percent for former president
    Lucio Gutierrez, his nearest rival. Correa's Proud and
    Sovereign Fatherland (PAIS) movement also won the largest
    legislative block in the new National Assembly, although not
    a majority. PAIS did not fare as well in local elections,
    winning only 72 of 221 mayoral offices and eight of 23
    prefect positions.

    Economic Outlook and Policies
    -----------------------------

    ¶9. (SBU) Ecuador's economic performance has been solid since
    it adopted the dollar as its currency in 2000, following a
    major banking crisis and recession in 1999. Growth has been
    supported by the stability brought by dollarization, high oil
    prices, strong domestic consumer demand, increased
    non-traditional exports, and growing remittances from abroad.
    Per capita income increased from $1,296 in 2000 to $3,670 in
    2008, and the poverty rate fell from 51% in 2000 to 42.6% in
    ¶2007. Real economic growth declined in 2007 to 2.5% (after a
    six-year average of 5.18%), due in part to declining oil
    production, but also uncertainty about the direction of
    economic policy under the Correa Administration.

    ¶10. (SBU) Growth has been modest in 2008 (5.3%) and early
    ¶2009. By the end of 2008, the global financial crisis and
    economic downturn led to falling remittances and oil revenues
    for Ecuador. In January 2009, claiming a balance of payments
    crisis, the government invoked the WTO balance of payments
    safeguard provision to increase tariffs beyond WTO bindings
    and impose quotas on consumer goods. The government also
    announced that it was cutting or restricting public sector
    spending, and was reducing subsidies in a number of areas.

    ¶11. (SBU) President Correa entered office looking to make a
    number of changes to the economic system in Ecuador and
    address a number of unmet social needs. His government has
    increased income transfers to the poor and increased spending
    on health education and basic infrastructure, although given
    weak government institutions, it has been slow in
    implementing some of these programs. The overall direction
    of economic policy under the Correa Administration is
    difficult to define, in part because there are often
    differences between Correa's public discourse - which can be
    populist - and his policy decisions - which are often more
    pragmatic. The Correa Administration is strengthening
    government regulation over certain sectors and increasing the
    government's revenue from sectors such as petroleum and
    mining, but the government appears intent on maintaining an
    important role for the private sector even in these strategic
    sectors.

    ¶12. (SBU) The new constitution envisions a strong role for
    the state in the economy, although a number of important
    provisions, such as identifying strategic sectors and
    including a social dimension to the definition of property,
    have parallels in the previous constitution. Many of the
    economic provisions in the new constitution will have to be
    further clarified by implementing legislation.

    Economic Ties with the U.S.
    ---------------------------

    ¶13. (SBU) The United States is Ecuador's most important
    trading partner, accounting for 37% ($409 million) of its
    exports and 26% ($286 million)of its imports in 2008. The
    Andean Trade Preferences Act (ATPA), which Congress extended
    until December 2009, has helped promote a number of new,
    labor-intensive export industries in Ecuador, such as flowers
    and processed vegetables. The Government of Ecuador
    estimates that ATPA supports 350,000 jobs in Ecuador. U.S.
    companies and individuals have invested in a wide range of
    Ecuadorian industries. Investors in regulated sectors such
    as petroleum and electricity have a number of investment
    disputes, while those in more lightly regulated sectors have
    had relatively few disputes. The United States and Ecuador
    have a bilateral investment treaty, and several U.S.
    investors have filed for international arbitration with the
    World Bank's International Center for the Settlement of
    Investment Disputes (ICSID) under the treaty. On July 12,
    2009 President Correa issued a decree in which Ecuador
    formally withdrew from ICSID. This decision does not affect
    arbitration cases that ICSID already has under consideration.

    Ecuador Foreign Policy
    ----------------------

    ¶14. (SBU) President Correa controls Ecuador's foreign policy
    decision-making. His main foreign policy strategies are to
    establish and maintain constructive relations with a wide
    variety of countries and to promote Latin American
    integration. His goal is to strengthen South American
    institutions and expand the number of Ecuador's political and
    commercial partners (which also reduces its dependence on the
    United States), while protecting the country's national
    sovereignty.

    ¶15. (SBU) The regional organizations where Ecuador is most
    active are the nascent Union of South American Nations
    (UNASUR) and the Venezuelan-led Bolivarian Alternative for
    the Americas (ALBA). Ecuador will assume the presidency of
    UNASUR the morning of the same day of Correa's inauguration,
    August 10. There has been friction between Ecuador and other
    members of the Andean Community (CAN), but it remains a
    member of that grouping. Ecuador also supports the Bank of
    the South and the new council of South American defense
    ministers. In addition, it participates in Rio Group
    meetings.

    ¶16. (SBU) In the region, the Correa administration enjoys
    good relations with Brazil, Peru, Argentina and Chile, in
    addition to Venezuela and Cuba. Correa has made a number of
    visits to Europe, particularly Spain and Italy (which have
    large numbers of Ecuadorian immigrants), Belgium (where he
    once studied and the birthplace of his wife), and France. In
    addition, President Correa has demonstrated an interest in
    strengthening bilateral relations with China, Iran, and
    Russia. He traveled to China in November 2007 and Iran in
    December 2008, and plans to visit Russia in October 2009.

    ¶17. (SBU) President Correa remains unwilling at this point
    to reestablish diplomatic relations with Colombia, despite
    ongoing mediation efforts by the Organization of American
    States. The GOE set five conditions that Colombia must meet
    before resuming diplomatic relations, including ending what
    it considers a Colombian information campaign against Ecuador
    and handing over the information found on the computers at
    the site of the attack on March 1, 2008. Also, since July
    13, Ecuador has applied a foreign exchange safeguard measure
    to Colombian imports, as a measure to "protect Ecuadorian
    products from Colombia's currency devaluation." Despite the
    break in relations and Ecuador's protectionist measures,
    commercial ties remain strong and consular operations
    continue in both countries.

    U.S.- Ecuador Relations
    -----------------------

    ¶18. (SBU) The U.S. is cooperating with Ecuador in a number
    of areas where we share interests, including poverty
    reduction, counter-narcotics, and environmental protection.
    The low point of our relationship under the Correa
    administration was in February, when Correa expelled two U.S.
    diplomats following the suspension of assistance to two
    specialized police units as a result of disagreement over
    implementation of long-standing procedures under which the
    two countries jointly vet personnel to ensure their integrity
    before sensitive information is shared with them. The U.S.
    and Ecuador are currently moving ahead to conclude agreements
    to formalize and re-initiate some areas of cooperation with
    the Ecuadorian police.

    ¶19. (SBU) The U.S. launched a Bilateral Dialogue with
    Ecuador in November 2008 during which we discussed
    cooperation in human development and poverty reduction,
    economic development, commerce and investment, and migratory
    issues. When Foreign Minister Fander Falconi met with the
    Secretary of State on June 12 in Washington, the two agreed
    to continue the Dialogue. Preparations have begun for the
    second plenary session, likely to occur in late October. The
    GOE recently proposed adding a security pillar to the
    Dialogue agenda. Our objectives for the Dialogue include
    emphasizing publicly and privately the breadth of our
    cooperation, advancing current areas and exploring new areas
    of cooperation. We do not consider it a negotiating forum.

    Security
    --------

    ¶20. (SBU) Ecuador's greatest security challenge remains the
    presence of Colombian illegal armed groups, principally
    elements of the Revolutionary Armed Forces of Colombia
    (FARC), in its northern border region. The FARC is believed
    to use Ecuadorian territory for rest, recuperation, resupply,
    and training. The Correa Administration, while maintaining
    the country's traditional neutrality with respect to the
    Colombian conflict, has opposed armed encroachments across
    its borders. While there have been some notable successes in
    this effort, insufficient resources and the challenging
    border region terrain have made it difficult to thwart
    cross-border incursions.

    ¶21. (U) USG efforts in the area aim to prevent spillover of
    drug cultivation and trafficking and illegal armed group
    activity into Ecuador. They include development assistance
    to improve the quality of life and spur licit economic
    growth; counter-narcotics aid to curb smuggling of precursor
    chemicals, cocaine, and heroin; and military-to-military
    assistance to strengthen Ecuador's ability to secure its
    northern border and control its territorial waters.

    Refugee Issues
    --------------

    ¶22. (U) The UN High Commissioner for Refugees (UNHCR)
    estimates there are at least 180,000 persons of concern in
    the northern provinces of Ecuador who have fled Colombia due
    to violence or threat of violence. In 2009, the State
    Department provided over $1 million in funding for refugees
    in Ecuador to UNHCR, and another $1.5 million to the
    International Organization for Migration (IOM), the World
    Food Program, and a handful of NGOs. UNHCR carries out
    direct assistance projects to foster development, while IOM
    focuses on emergency assistance and local capacity building.
    Since April 2009, the GOE has been implementing its Enhanced
    Registration Program, a process by which it hopes to register
    50,000 Colombian refugees by the end of 2009.

    ¶23. (SBU) The GOE's June 20, 2008 announcement that it would
    drop the tourist visa requirement for all nationalities has
    encouraged an inflow of migrants, adding to the current
    presence of small immigrant populations from countries such
    as China, Cuba, Afghanistan, Pakistan, and Iran. The new 90
    day visa waiver has also created numerous humanitarian
    problems, including an increase in human smuggling,
    counterfeiting of travel documents, forced labor and
    corruption. DHS has already documented an increase of
    migrants wishing to use Ecuador as a stopping point on the
    way to the United States.

    Counter-Narcotics Cooperation and Military Support
    --------------------------------------------- -----

    ¶24. (SBU) Ecuadorian leaders have identified narcotics
    traffickers and other criminal organizations as threats to
    national sovereignty, and are focusing the police, military,
    judiciary and others on disrupting and dismantling these
    organizations. Since 2001 the Embassy's Narcotics Affairs
    Section has provided almost $94 million of State Department
    funds to enhance the capacity of the anti-narcotics police
    throughout Ecuador, assist the military in providing security
    for citizens and protecting Ecuador's sovereignty on the
    northern and maritime borders, and improve the criminal
    justice system. The Military Group has also provided an
    additional $20 million to the Ecuadorian military to enhance
    its operational capacity in the northern border region.

    ¶25. (SBU) The Manta Forward Operating Location (FOL) was an
    important asset in our regional counter-narcotics efforts.
    President Correa campaigned on a platform that the FOL
    violated Ecuador's sovereignty. On July 29, 2008, the GOE
    sent a diplomatic note notifying the U.S. that it would not
    extend the agreement when it expired on November 11, 2009.
    The United States flew the last counter-narcotics flight on
    July 17, 2009 and will turn over the facility on September
    18, 2009.

    Development Programs
    --------------------

    ¶26. (U) The U.S. has supported Ecuador's development since
    1942, working especially through USAID in education, health
    and family planning, environment, agriculture,
    micro-enterprise, and economic growth. USAID's 2009 funding
    is $26 million. Current programs focus on cooperation with
    national and local governments to improve stability and
    livelihoods, democratic governance, economic growth and
    environmental management.

    ¶27. (U) USAID's Peace and Security program along the northern
    and southern borders aims to increase employment and income,
    strengthen local governments, and improve the production and
    marketing of local business clusters. In FY 2008, USAID
    financed the construction of 39 infrastructure projects
    including roads, bridges, irrigation canals, and water and
    sanitation systems, benefiting 36,364 people along the
    northern border. USAID also created 2,754 new full-time
    equivalent, legitimate jobs in the northern border region;
    farmers' income increased on average 22 percent, from $983 to
    $1,200; and 2,000 new hectares of legal crops were planted.

    ¶28. (U) USAID's broader poverty reduction program promotes
    trade and competitiveness and private sector competitiveness.
    USAID created new supply and value-chains where small
    producers and businesses have now become specialized
    suppliers for larger firms with local and international
    markets. In FY 2008, USAID invested $704,279 and the
    Ecuadorian private sector contributed $784,564 to create 10
    value chain activities. These clusters are in
    agro-industrial export sectors such as dairy products, hearts
    of palm, Panama hats, and jewelry. As a result of this
    effort, revenues increased for 1,865 small and medium firms.

    ¶29. (U) Under democracy and governance, USAID has supported
    56 local governments to implement participatory planning
    processes and improve their municipal management practices.
    More than 1,000 citizens and local officials in 16 cities
    received training in areas such as financial management,
    citizen participation, and budgeting. One result of this
    assistance was that in just three months the municipalities
    reduced delinquent taxes by 4 percent and in two
    municipalities a two-month "lightning plan" helped
    municipalities recover approximately 10 percent of back
    taxes.

    ¶30. (U) Ecuador is one of the most biologically diverse
    countries in the world, so USAID's environmental programs
    focus on management of the National System of Protected
    Areas, indigenous territories, watersheds, and coastal
    lowlands and mangroves. The program seeks to create economic
    benefits for communities in and around protected areas,
    providing the means and motivation for better conservation.

    HODGES

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