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C O N F I D E N T I A L QUITO 000101 
 
SIPDIS 
NOFORN 
 
E.O. 12958: DECL: 2020/02/24 
TAGS: EAID ECON EFIN PREL SNAR MARR EC
SUBJECT: Ecuador's Push for Conditions-Free Foreign Assistance has 
Major Implications for USG Operations 
 
REF: R...




id: 250564
date: 2/24/2010 20:56
refid: 10QUITO101
origin: Embassy Quito
classification: CONFIDENTIAL//NOFORN
destination: 09QUITO885|10QUITO79|10QUITO83|10QUITO91
header:
VZCZCXYZ0013
OO RUEHWEB

DE RUEHQT #0101/01 0552059
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TO RUEHC/SECSTATE WASHDC IMMEDIATE 1094
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C O N F I D E N T I A L QUITO 000101 
 
SIPDIS 
NOFORN 
 
E.O. 12958: DECL: 2020/02/24 
TAGS: EAID ECON EFIN PREL SNAR MARR EC
SUBJECT: Ecuador's Push for Conditions-Free Foreign Assistance has 
Major Implications for USG Operations 
 
REF: REF A) QUITO 83; REF B) QUITO 91; REF C) 09 QUITO 885 
REF D) QUITO 79 
 
CLASSIFIED BY: Christopher A. Landberg, Economic Counselor, U.S. 
Department of State, Economic Section; REASON: 1.4(B), (D) 
 
Summary 
 
 
 
¶1. (C) Events over the last year demonstrate that the Correa 
government is intent on exerting as much control as possible over 
assistance flows and projects in Ecuador, although so far not to 
the extent of losing assistance Ecuador needs.  The GoE's 
hyper-nationalistic philosophy has economic nationalism, state 
control of strategic economic and national security assets, 
protecting Ecuador's "sovereignty," and opposing traditional 
Ecuadorian and international power structures as major tenets. 
Correa's rejection of foreign control over aspects of the Yasuni 
ITT initiative and continuing demands for greater control over 
foreign development assistance are examples of how this philosophy 
affects relations with the international community.  Our constant 
difficulties in implementing USG law enforcement and military 
programs - exemplified by recent indications that the GoE is 
reconsidering aspects of our bilateral law enforcement agreements 
(ref A) - are further evidence of the GoE's particularly complex 
relationship with the U.S., which Correa sees as the epitome of the 
international order that he rejects.  The expulsions of two USG 
officials in February 2009 can themselves be seen as a GoE attempt 
to reject conditional assistance, although the signing of our law 
enforcement agreements in August is also an example of co-existent 
pragmatism.  The GoE's obsession with sovereignty and conflicted 
relations with donors have continuing implications for our 
operations in this country.  End Summary. 
 
 
 
Sovereignty: GoE Code for Collaborating on Its Terms 
 
 
 
¶2. (C) A broad GoE theme, not directed at the U.S. per se, is the 
GoE's desire for ownership of the development/poverty reduction 
agenda.  The GoE insists on donors fulfilling to the maximum extent 
the GoE's interpretation of the Paris Declaration (PD) and Accra 
Agenda for Action (AAA), which enshrine the concept of host 
government leadership and ownership of development efforts.  (The 
2005 PD and follow-up 2008 AAA are international agreements under 
which over 100 countries committed to improving coordination among 
donors and giving recipient countries more ownership of poverty 
reduction strategies and programs.)  As the U.S., EU, and other 
major donors have signed these agreements, the GoE expects us not 
only to collaborate more with GoE institutions in the 
implementation of assistance programs, but also to give the country 
direct control of the funds with few or no conditions.  However, 
donors have serious questions regarding Ecuador's limited capacity 
to manage such resources and programs, and are also concerned about 
the high-level of corruption in Ecuador (the country ranks poorly - 
146 out of 180 and fourth lowest in Latin America -- on 
Transparency International's 2009 Corruption Perceptions Index). 
 
 
 
¶3. (C) A second theme, which impacts the U.S. directly, is that the 
GoE sees the U.S. as the representative of the existing world power 
structure that Ecuador wants to see changed.  Correa's 
political-economic philosophy is charged with grandiose ideas, 
wrapped up in his "citizens' revolution" rhetoric and occasional 
references to "21st Century Socialism," and enshrined in Ecuador's 
2008 Constitution.  These ideas include asserting Ecuador's 
sovereignty, rejecting foreign interference, and ensuring state 
control of strategic economic assets and the national security 
apparatus.  Although not to the degree as in Venezuela, the U.S. 
serves as Correa's foil, and his government's ideas and policies 
 
contain more than a tinge of anti-Americanism. 
 
 
 
¶4. (C) Without question there are GoE officials who do not want a 
close relationship with the U.S. and are actively working to 
undermine relations.  There are also many GoE officials who value 
the relationship and want to preserve and improve upon it.  Correa 
himself, given his background, is likely conflicted.  The balance 
of power shifts daily between these two groups, and our bilateral 
relationship is caught up in this power struggle.  There are some 
concerns that with the appointment of Ricardo Patino as Foreign 
Minister, the forces that wish to limit U.S. influence are 
ascendant.  Another take on Patino would be that his overriding 
objective is to ensure the longevity of the Correa government 
through whatever means necessary, which would not necessarily rule 
out a constructive relationship with the USG. 
 
 
 
Correa and Yasuni ITT: His Way or the Highway 
 
 
 
¶5. (C) President Correa's rejection in January of the proposed UNDP 
trust agreement established to manage contributions to the Yasuni 
ITT conservation initiative - on practically the eve of signing - 
is an example of his impulse to reject foreign control and preserve 
Ecuador's sovereign right to manage its affairs.  Although the 
trust fund document contained few "guarantees" protecting 
contributors' donations, Correa demanded absolute control over the 
funds, with no strings attached, and even told potential 
contributors that they could "stick their money in their ear." 
Reported in more detail in ref B, Correa's outburst led to the 
resignations of the Yasuni ITT negotiators and former Foreign 
Minister Falconi and unleashed a storm of local protest.  While 
questions remain as to how much Correa really supports the 
initiative, he bowed to public pressure, reconstituted the 
negotiating team, and has pledged support for the initiative 
without foreign conditions.  Nevertheless, the episode is 
indicative of Correa's core philosophy that Ecuador must have more 
than an equal footing with foreign donors. 
 
 
 
Paris Declaration and Exerting Control of Development Assistance 
 
 
 
¶6. (C) USAID signed its 2010 bilateral assistance agreement with 
the MFA on December 30, after roughly six months of at times 
difficult negotiations.  Upon signing the agreement, then-Foreign 
Minister Falconi declined to participate in a public ceremony to 
publicize the accomplishment, and his office even scotched the idea 
of an MFA press release on the subject.  The main area of 
difference during the lengthy negotiations was GoE agencies' 
demands for greater control over assistance funds and programs. 
These demands were directed against the entire donor community 
(both bilateral and multilateral), and the GoE justified the 
demands as called for under the Paris Declaration and Accra Agenda 
for Action. 
 
 
 
¶7. (C) Complicating this situation is that the GoE has expressed 
concerns about directing assistance via NGOs, a common practice of 
USAID and other donors, and has proposed that donors follow a new 
model for the approval and implementation of assistance projects. 
Under this plan, donors would be asked to deposit funds in a 
Central Bank "unified account," from which the GoE counterpart 
agencies would finance projects (with the GoE Finance Ministry 
approving withdrawals).  This assistance model, which is not yet in 
force, has similarities to budget support, a modality USAID seldom 
 
uses because of the control and accountability challenges it 
presents. 
 
 
 
¶8. (C) With regards to the 2010 agreement, USAID compromised for 
this year with commitments of greater inclusion in reviewing 
workplans, and a potential pilot-project where USAID may use GoE 
systems to contract implementation of an infrastructure activity 
along the northern border.  This initiative would be subject to a 
successful assessment of the GoE development assistance 
coordination agency's capacity to manage and account for resources. 
(As elsewhere, the EU and multilateral organizations engage more in 
direct budget support, making them more amenable to acceding to GoE 
demands.) 
 
 
 
¶9. (C) The more complicated question is what happens with the 2011 
and subsequent bilateral USAID agreements.  While the U.S. has 
signed onto the concept of country leadership, we have done so to 
the extent that we are still able to meet our national requirements 
(assuring our taxpayers and Congress that we are responsibly 
managing U.S. resources).  The question is whether the GoE has the 
capacity to manage these resources and programs and also has 
reliable country systems of control and accountability.  While GoE 
systems do not currently appear to meet PD/AAA control 
requirements, the European Union is conducting a review of country 
systems at present.  But this is beside the point from the GoE's 
perspective, because the real story is Correa's political-economic 
philosophy of national primacy, and the PD appears to be the tool 
his government is using with aid agencies to make it a reality. 
 
 
 
U.S. Military Aid: Pawn in GoE Game to Control Ecuador's Military? 
 
 
 
¶10. (C) Embassy military officials have not seen the same attempts 
by their Ecuadorian uniformed counterparts to assert full control 
over IMET, FMF, and other programs, very possibly because they 
already have a large say in how the funds are spent.  However, the 
civilian Minister of Defense has periodically sought to exert 
greater control over training decisions and exercises.  The Embassy 
Military Group's difficulties over the last months in obtaining GoE 
approval of the annual diplomatic note that provides status of 
forces protections for U.S. temporary-duty personnel, appears 
related to the GoE's interest in asserting sovereignty concerns 
(ref C).  During a February 11 meeting (ref D), MFA officials 
informed the DCM and a MilGroup officer that the GoE could not 
accept the reference to "military exercises" in the agreement. 
 
 
 
¶11. (C) Note: A potentially larger and separate issue is the GoE's 
apparent unwillingness to agree to the protections of U.S. service 
personnel included in the agreement, although it is unclear at this 
point whether the GoE is referring to "immunities" or lesser 
"administrative and technical status."  The assessment of the MFA's 
legal office was that immunity violates the 2008 constitution, 
which provides full immunity only to full-fledged diplomats.  Given 
that assessment, no one at the MFA is willing to advocate that the 
Foreign Minister sign such a dipnote.  The MFA pointed out that the 
GoE did not grant immunities to recent Cuban and Venezuelan 
military contingents.  Defense Minister Javier Ponce, however, has 
listened to the Ecuadorian military and is reportedly anxious to 
conclude the exchange of diplomatic notes.  We remain hopeful that 
there will be a way to accommodate the constitutional language 
while still providing necessary protections to U.S. military 
personnel.  End Note. 
 
 
Vetted Units: Holding Strong Works, Although GoE Reconsiders 
Polygraphs 
 
 
 
¶12. (C) An argument can be made that the February 2009 expulsions 
by the GoE of two U.S. officials (one declared "persona non grata") 
fit the GoE's philosophy of refusing conditions on foreign 
assistance.  Correa and GoE officials were prompted into objecting 
to our polygraphing members of vetted units and were likely opposed 
to a set-up that ensured significant USG control over the actions 
of Ecuadorian law enforcement personnel and teams.  During 
subsequent negotiations of agreements with DHS and DEA, GoE 
officials regularly pushed NAS to give them counter-narcotics funds 
with few controls.  However, the final result may also be an 
example of how the USG retains significant leverage, and how the 
GoE can act pragmatically.  By the U.S. refusing to disburse funds 
until the agreements were signed, GoE officials faced the prospect 
of losing access to needed equipment and training.  In the end they 
almost completely capitulated, signing in August agreements that 
were very similar to the verbal/informal agreements that Correa had 
rejected in February. 
 
 
 
¶13. (C) Nevertheless, Ecuadorian touchiness on "sovereignty" 
resurfaced recently with the disturbing indications that the GoE 
was reconsidering aspects of our bilateral law enforcement 
agreements (reported ref A).  While our GoE counterparts have 
regularly emphasized the importance of bilateral counternarcotics 
cooperation, this latest potential conflict, coming almost exactly 
on the one-year anniversary of the February 2009 expulsions, once 
again brings into question the sustainability of the current 
agreements and our ability to maintain a long-term, mature 
partnership with Ecuadorian law enforcement institutions. 
 
 
 
Comment 
 
 
 
¶14. (C) The expressed attitudes of GoE officials are coherent. 
This is their country, and they do not want other governments 
deciding what is best for it.  The U.S. has become a part of this 
discussion in signing both the Paris Declaration and the Accra 
Agenda, i.e., recipients of foreign assistance should have a say in 
how funds are spent in their countries and what programs take 
priority.  Current U.S. assistance programs in Ecuador, both 
security and development-related, have been successful and have 
enjoyed strong support from within the GoE and with civil society. 
Many GoE officials are willing and eager to work with us to address 
joint economic development, poverty reduction, law enforcement, and 
military priorities, and privately they are extremely grateful for 
our assistance.  However, it is not clear to what extent these 
supporters sway Correa and overall GoE policies.  While the 
evolution of international development is pushing us to cede 
greater control over at least development/poverty reduction 
assistance, the reality is that Ecuador is not a reliable and 
credible partner.  Correa and his government's obsession with 
ensuring sovereign control, their insular attitudes towards dealing 
with international donors and institutions, and their bi-polar 
relationship with the U.S., will continue to complicate our 
operations in this country. 
HODGES 

=======================CABLE ENDS============================