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