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FM AMEMBASSY QUITO
TO RUEHC/SECSTATE WASHDC IMMEDIATE 3302
INFO RUEHBO/AMEMBASSY BOGOTA PRIORITY 5246
RUEHCV/AMEMBASSY CARACAS PRIORITY 1502
RUEHLP/AMEMBASSY LA PAZ JAN 9601
RUEHPE/AMEMBASSY LIMA PRIORITY 0204
RUEHGL/AMCONSUL GUAYAQUIL PRIORITY 9692
RHMFISS/CDR USSOUTHCOM MIAMI FL

UNCLAS QUITO 000126 
 
SIPDIS 
 
SENSITIVE 
SIPDIS 
 
E.O. 12958: N/A 
TAGS: PREL PGOV PHUM KCRM ECON EC
SUBJECT: PRESIDENT'S CONCILIATORY STATE OF THE NATION SPEECH 
 
 
¶1.  (SBU) Summary:  In the president's annual "report to 
the nation" speech widely interpreted as conciliatory, 
President Palacio averted further confrontation with 
Congress over his reform agenda.  Instead, Palacio thanked 
his critics and praised the role of a loyal opposition, 
inviting Congress to join the Executive in a civic accord 
over electoral reforms.  Other highlights of the annual 
presidential report to the nation include neutral mention 
of Qe Occidential Petroleum commercial dispute, supportive 
language on an FTA with the U.S., and presidential 
attention to combating trafficking in persons.  Probably as 
a result of Palacio's newfound humility, a public 
confrontation with the President of Congress was avoided, 
but prospects for cooperation on reform remain slim. End 
Summary. 
 
Political Reform Re-focused on the Elections 
------------------------------------------- 
 
¶2.  (U) Palacio was insistent on the need for political 
reform, but proposed only electoral changes, not a new 
referendum.  Convinced that "government of the people, by 
the people and for the people" is near, Palacio noted his 
government's responsibility to proceed in a "progressive 
and peaceful fashion."  Successive presidential reform 
proposals could never be considered failures. "The truth is 
not susceptible to defeat." 
 
¶3.  (U) Palacio denied any personal ambition or intention 
to extend his mandate "by even a day."  He thanked his 
critics for pointing out his mistakes, and invited Congress 
and political leaders to join him in a "Civic and Ethical 
Pact for Democratic Consolidation," involving reasoned 
debate of electoral reforms soon to be submitted to 
Congress.  The reforms would guarantee equal access to the 
electoral process and media, and strengthen the election 
and electoral justice system. 
 
Commerce and Trade Treated Fairly 
--------------------------------- 
 
¶4.  (U) Palacio referred briefly and in neutral terms to 
the Occidental Petroleum commercial dispute, calling it a 
"complex issue," claiming the government had met its 
obligations under Ecuadorian law by notifying Occidential 
to respond to alleged infractions, and pledging the 
government to apply the law "in accord with the highest 
national interests. 
 
¶5.  (U) An additional segment of the speech dealt with the 
FTA under negotiation with the U.S., explaining that much 
had been agreed (16 of 19 tables), and highlighting only a 
few areas of remaining difference: agriculture, 
intellectual property rights, and phytosanitary rules. 
Palacio highlighted coordination with Colombia on the FTA, 
and said the remaining differences with the U.S. would need 
to Q resolved in the first trimester of 2006. 
 
Highlighting Progress against TIP 
--------------------------------- 
 
¶6.  (U) Palacio referred to trafficking in persons in three 
different contexts during his two-hour speech.  First, he 
claimed sustained progress in the prevention and 
eradication of violence against women.  Coordination of 
services by the National Council on Women (CONAMU), the 
Council on Children, and the National Institute for Child 
Welfare (INNFA), headed by the First Lady had led to the 
creation of a network of services in 12 cities through the 
Ecuadorian Adolescents Program.  Another 
inter-institutional alliance led by UNICEF had developed a 
program for the prevention of sexual exploitation of minors 
in tourist-related activities.  Finally, while noting 
Congressional inaction on a government legislative 
initiative to increase penalties on alien smugglers who 
cause the death of their clients, Palacio praised the 
action of Congress in passing landmark reforms to the penal 
code sanctioning the sexual exploitation of minors. 
 
Other Highlights 
---------------- 
 
¶7.  (U) Other highlights in the laundry-list speech 
included executive credit-taking for: 
 
-- creating a new health insuranQ program to cover 1.3 
million; 
 
-- beefing up military security on the northern border and 
around petroleum facilities; 
 
-- modernizing the military and instilling renewed respect 
for democracy ("members of the Armed Forces have been 
involved in events which cost the institution respect and 
confidence of the people," he said, a reference to the 
Cabrera pyramid investment scandal); 
 
-- maintaining good relations with Colombia, Peru, mutual 
cooperation with the U.S., and others; 
 
-- referring Ecuador's dispute with Colombia over 
fumigation of coca plantations along the border to the UN 
for further study; 
 
Reaction 
-------- 
 
¶8.  (SBU) In their analysis of the speech, critics (and 
aspiring presidential candidates) roundly lamented the 
Palacio government's lack of progress in its first eight 
months, highlighting public fatigue with the atmosphere of 
confrontation between the government and the opposition. 
Opposition leaders from the PSC and ID demanded the 
resignation of Government Minister Alfredo Castillo before 
any dialogue on electoral reforms or the proposed civic 
pact would be possible. 
 
Comment 
------- 
 
¶9.  (SBU) President Palacio's speech included positive 
treatment of several U.S. interests, highlighted above. 
But there was an ample element of political theater as 
well.  Much of Palacio's speech was geared toward answering 
his critics, whose ranks are growing steadily.  By 
addressing them, even praising them, Palacio defused what 
had been billed as a symbolic confrontation.  President of 
Congress Wilfredo Lucero was widely rumored to be planning 
to give a Congressional rebuttal after Palacio finished his 
speech.  Instead, he meekly closed the session.  Chances 
for any serious cooperation between the Executive and 
Legislative branches, however, remain low. 
JEWELL