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### Viewing cable 05QUITO1787, PALACIO STUMBLES BUT RECOVERS AT 100 DAYS

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Reference ID | Created | Released | Classification | Origin
--- | --- | --- | --- | ---
05QUITO1787 | 2005-07-29 19:54 | 2011-05-02 00:00 | UNCLASSIFIED//FOR OFFICIAL USE ONLY | Embassy Quito

`

    This record is a partial extract of the original cable. The full text of the original cable is not available.

` `

    UNCLAS SECTION 01 OF 02 QUITO 001787

    SIPDIS

    SENSITIVE

    E.O. 12958: N/A
    TAGS: PGOV PREL AORC EC
    SUBJECT: PALACIO STUMBLES BUT RECOVERS AT 100 DAYS

    REF: A. QUITO 1747
         ¶B. LIMA 3224

    ¶1.  (SBU) Summary:  Tension generated by recent political
    missteps by President Palacio has been reduced over the past
    week thanks to Congressional restraint and the intervention
    of outsiders.  Congress' recent votes in favor of the
    presidential veto on social security and returning his
    political reforms avoided outright confrontation with the
    President, and helped prevent the Vice President's widely
    rumored resignation.  Congress' attempt to replace members of
    the constitutional court remains stalled.  The visit of OAS
    General Secretary Jose Miguel Insulza on July 26-28 helped
    promote dialogue and democratic reconstruction.  Meanwhile,
    ousted President Lucio Gutierrez, currently in northern Peru
    (Ref B), clamored for attention, appealed his arrest warrant
    and said he plans to return to Ecuador soon.  Despite this,
    Presidential advisors seem confident that he will not return,
    and found a silver lining in Congressional inaction on
    Palacio's reform proposal.  End Summary.

    Congress Returns Reform Proposal to President
    ---------------------------------------------

    ¶2.  (U) Congress formally returned Palacio's seven-point
    political reform program (Ref A) to him on July 26,
    requesting he take citizens' suggestions, that had been
    submitted to the Vice Presidency and Ecuador's modernization
    council (CONAM), into account before resubmitting a new
    package.  The President reportedly admitted it was an error
    to submit the seven points prematurely, and instead will
    speed up the Vice President's timetable for integrating
    public input to the reform process.  The Vice President, who
    was rumored to be considering resigning in protest over not
    being consulted by the President before he announced his
    reforms, now looks likely to stay on.  Many in Congress
    reportedly believed they prevented an institutional crisis
    that would have resulted if the Vice President resigned.
    Luis Villacis, a deputy for the MPD party, publicly accused
    other parties of "going easy" on the President in return for
    constitutional court seats.

    ¶3.  (SBU) Alexandra Perez, head of CONAM, told PolChief on
    July 27 that she believes the political reform proposal will
    have better prospects when resubmitted to Congress, since
    legislators have publicly committed to consider the revised
    referendum.  The Vice President would now speed up (to 30
    days) the analysis of the 7,800 suggestions received from the
    public before Palacio pushes the issue again, she said.

    ¶4.  (SBU) Presidential Advisor Jose Modesto Apolo told
    PolChief on July 27 he was receiving criticism (he implied
    unjustified - MinGov Gandara later admitted to being behind
    the Presidential surprise) from Congress for being
    responsible for Palacio's gaffe on political reform.  He
    echoed Perez' view about a "silver lining," namely that
    Congress would not be able to put forward a competing
    proposal lacking citizen input.

    Congress Votes on Social Security, Constitutional Court
    --------------------------------------------- ----------

    ¶5.  (U) After returning the President's reform proposal,
    Congress, meeting in special session, approved the
    President's amendments to the bill on the return of social
    security reserve funds to workers, belying concerns that the
    presidential veto would be overridden by Congress.  The
    line-item veto by the President still means that $400 million
    in reserve funds will be returned to the population this
    year, with the rest to be refunded in 2006-2008.

    ¶6.  (U) Congress then attempted but ultimately did not select
    members of a new constitutional court, the last item on the
    agenda for the session.  The vote failed when the Pachakutik
    party dropped out of a coalition with the PSC and ID on the
    issue.  Regrouping in an effort to block alternative
    proposals, the PSC and ID affirmed that a new constitutional
    court could not be chosen until a new Supreme Court was in
    place, according to the Constitution.  PRE and MPD party
    leaders differed, but did not have the votes to push their
    own candidates.

    Insulza Welcomed By All
    -----------------------

    ¶7.  (SBU) OAS Secretary General Jose Miguel Insulza arrived
    in Ecuador on July 26 to encourage dialogue and democratic
    institution-building.  Insulza publicly emphasized that he
    came only to complete the OAS mandate of offering assistance
    to Ecuador.  When asked if he believed Ecuador's democratic
    crisis was over, he replied that it was for Ecuadorians to
    decide, but that he had a very positive opinion of the
    situation.  Insulza visited the Foreign Ministry, the Supreme
    Electoral Tribunal (TSE), and met with the President, Vice
    President, CONAM officials, and Congress members.  Insulza
    also offered OAS technical support for the 2006 elections to
    TSE officials.  Insulza's message of political sacrifice in

    SIPDIS
    favor of compromise was well received by all he met with,
    including the local press.  OAS sources tell us that the GOE
    rejected an OAS request to draft a document committing both
    to a core democratic agenda.

    Gutierrez, in Peru, Fights Arrest Warrant
    -----------------------------------------

    ¶8.  (SBU) Gutierrez is appealing his arrest warrant, arguing
    that the Supreme Court of Quito did not have jurisdiction
    over alleged crimes committed after his ouster, while in the
    US.  Gutierrez reportedly met with 80 supporters in Tumbes,
    Peru on July 27.  Presidential Advisor Jose Modesto Apolo
    told PolChief he believed Gutierrez had no intention of
    risking arrest by crossing into Ecuador.  He speculated that
    Gutierrez remained near the border for "fear of being
    forgotten by the Ecuadorian public."

    Comment
    -------

    ¶9.  (SBU) Approaching 100 days in office, and having just
    survived his first major setback on reform, we expect greater
    caution from Palacio, and perhaps even an effort to build
    political consensus in the future.
    MEMMOTT

`