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FM AMEMBASSY QUITO
TO RUEHC/SECSTATE WASHDC IMMEDIATE 5578
INFO RUEHBO/AMEMBASSY BOGOTA PRIORITY 6124
RUEHCV/AMEMBASSY CARACAS PRIORITY 2132
RUEHLP/AMEMBASSY LA PAZ OCT 0184
RUEHPE/AMEMBASSY LIMA PRIORITY 1107
RUEHGL/AMCONSUL GUAYAQUIL PRIORITY 1361

C O N F I D E N T I A L QUITO 002631 
 
SIPDIS 
 
SIPDIS 
 
E.O. 12958: DECL: TEN YEARS 
TAGS: PGOV PREL EC
SUBJECT: GUTIERREZ BROTHERS MIFFED AT NOBOA; WARY OF CORREA 
 
 
Classified By: PolChief Erik Hall for reasons 1.4 (b&d) 
 
¶1.  (C) Summary:  On October 30, the Ambassador met with 
ex-president Lucio Gutierrez and his brother, third place 
presidential candidate Gilmar Gutierrez, to gauge potential 
Patriotic Society Party (PSP) support for Alvaro Noboa's 
candidacy and hear their political plans as the 
second-largest bloc in the new Congress that will take office 
in January.  Lucio did most of the talking for the Gutierrez 
side. The PSP had offered to support Noboa's candidacy in 
exchange for a commitment to punish coup plotters in the 
Palacio administration.  Noboa thus far was not willing to 
include Palacio himself in the deal, leaving the PSP leaders 
uncertain.  Correa and his team are making overtures for PSP 
support, which Lucio characterized as "desperate" and 
unconvincing.  End Summary. 
 
¶2. (SBU)  The private meeting was arranged at our request by 
newly-elected PSP Andean Parliamentarian and former trade 
minister Ivonne Baki, in her home.  Former Gutierrez chief of 
staff Carlos Polit (Baki's alternate at the Parliament) also 
attended.  The Ambassador was accompanied by the DCM and 
PolChief. 
 
Bittersweet Election Results 
---------------------------- 
 
¶3.  (C) The Ambassador congratulated the PSP leaders for the 
party's surprisingly strong finish in national election. 
Both men were clearly pleased, citing the results as 
vindication of the Gutierrez' government's performance. 
Lucio highlighted the challenges Gilmar overcame, including 
resource constraints and efforts to block his candidacy which 
shortened his campaign period to just over one month and 
precluded the PSP from registering its congressional 
candidates in Manabi, the third most populous province.  "We 
did not even have calendar cards to hand out to our 
supporters, yet they voted for the PSP and are now asking who 
they should vote for," he said. 
 
¶4.  (C) The PSP could have won 3-4 more seats in Congress, 
Lucio asserted, were it not for unfair treatment by 
provincial election authorities in Manabi and elsewhere, and 
internal problems in the Galapagos, he asserted.  Asked who 
the PSP would select as first vice president of Congress 
(their prerogative as the second-largest bloc), Gilmar was 
coy.  He described the virtues of numerous newly-elected PSP 
Congress members, including his wife.  Outside speculation 
has focused most on either Lucio's wife Ximena Borhorquez or 
former comrade in arms Fausto Cobo.  Lucio remained silent on 
the question. 
 
The Offer 
--------- 
 
¶5.  (C) The Ambassador noted that a Noboa victory, while 
possible, was by no means a certainty.  A Correa victory 
would threaten progress made under the Gutierrez government 
to put Ecuador's economy on a solid footing.  Gutierrez could 
protect this legacy by helping Noboa consolidate his lead in 
the polls, and break the cycle of political instability 
Gutierrez fell prey to by working together in the new 
Congress.  The DCM noted that the Gutierrez brothers could 
make an enormous contribution by helping to counter Correa 
rhetoric and educate voters about the benefits of 
market-based economic principles and the FTA with the U.S.; 
PSP interests were clearly more aligned with Noboa. 
 
¶6.  (C) Lucio responded that (and later repeated several 
times) the core PSP agenda consisted of a "programmatic plan 
for political stability, which is necessary for economic 
stability, which in turn is essential for social tranquility 
and progress."  Pressed for more detail, Gutierrez said that 
to prevent any vice president from plotting against the next 
president, the new government needed to set an example by 
applying the law to punish those who plotted Gutierrez' 
downfall.  He cited a meeting convoked by then-VP Palacio 
weeks before the April 20 legislative coup, in which Palacio 
selected his prospective cabinet, and the fact that Palacio 
Government Minister Mauricio Gandara prepared his declaration 
of assets several days before April 20, in anticipation of 
the coup. 
 
¶7.  (C) The first step the new Congress should take to bring 
violators of the constitution to justice would be a 
Congressional resolution declaring the Palacio administration 
to have been a de facto government.  The Attorney General 
should then be charged with investigating all involved in the 
overthrow, including members of the rump Congress which 
illegally removed him from office, the police and military 
generals who may have been suborned to support the coup, and 
of course Palacio himself as a participant in the coup 
plotting. 
 
Noboa Resisting Deal 
-------------------- 
 
¶8.  (C) Asked how Noboa had reacted to this offer, Gutierrez 
said his contact with Noboa had been indirect, and that Noboa 
was supportive.  He was resisting, however, one key Gutierrez 
demand--Noboa wished to exclude Palacio from legal 
prosecution.  Baki noted that Noboa had reneged on a 
pre-electoral alliance and voted to block Gilmar's candidacy 
entirely through the PRIAN representative on the Supreme 
Electoral Tribunal (a decision later overturned by the 
PSC-dominated Constitutional Court).  Asked why Noboa was 
reluctant to pursue Palacio, Gutierrez speculated that 
Noboa's interests are personal and economic.  Palacio had 
reined in the IRS-equivalent (SRI) and protected Noboa from 
millions in tax payments and fines. 
 
Setting an Example 
------------------ 
 
¶9.  (C) Lucio asked the Ambassador about the 
recently-announced decision to cancel the visa of PSC leader 
Javier Niera, on grounds of corruption.  Would the USG also 
pursue cases of corruption against the circle surrounding 
President Palacio, he asked.  The Ambassador explained the 
process, emphasizing that it is targeted at individual 
corruption, and not any particular political group or party. 
Other cases are under investigation, and would be judged on 
the merits under U.S. visa law.  The DCM invited the PSP to 
share any information on corruption it has access to, 
cautioning that all information is verified using multiple 
sources before being sent to Washington for approval. 
 
¶10.  (C) Lucio suggested the USG also investigate current 
Solicitor General Jose Maria Borja for corruption.  Gutierrez 
also noted that when the USG withdrew the visa of his 
minister of Social Welfare, Patricio Acosta, he immediately 
fired Acosta.  Baki said Acosta later moved to Venezuela, and 
was later observed paying off military leaders who publicly 
withdrew their support from Gutierrez' government, on April 
20, 2005.  PolChief noted the importance of Congress 
achieving the majorities necessary to select independent and 
honest replacements for the acting Attorney and Comptrollers 
General. 
 
Some Interest in Political Reform 
--------------------------------- 
 
¶11.  (C) Asked his views on Correa's proposed constituent 
assembly, Lucio replied that it would be unconstitutional 
without the consent of Congress.  The PSP had earlier 
supported the idea of an assembly, perhaps even using the 
Congress itself as a part-time assembly, to devise reforms 
over the course of a year.  This maneuver would permit 
absolute majority voting on constitutional reforms, rather 
than the 2/3 majority otherwise. 
 
¶12.  (C) According to Lucio, the PSP now favors putting 
proposed reforms to the people in a binding referendum, if it 
could not achieve the 2/3 vote necessary to speed 
congressional debate (a one year delay is build in between 
debates otherwise).  Asked what reforms he supported, 
Gutierrez cited his January 2005 proposals to de-politicize 
the courts (Supreme, Constitutional and Electoral) and to 
select the AG, Solicitor General, and Comptroller General. 
He and Gilmar criticized as unconstitutional the 
internationally-observed method used to reconstitute the 
defunct Supreme Court in 2005. 
 
Comment 
------- 
 
¶13.  (C) We hope to get the PSP focused on a positive agenda 
over the coming months, but in the near term they remain 
largely consumed with their revenge agenda.  Lucio appeared 
very much in charge during the meeting, and in good spirits 
and health.  Gilmar, 11 years Lucio's junior, was generally 
silent and deferential toward his big brother.  Neither man 
evinced any openness toward Correa, but both also appeared 
ambivalent about their past and current dealings with Noboa, 
with whom there is clearly no basis of trust.  Although 
acknowledging it would not be the executive branch but the 
independent Attorney General who would enforce the law 
against coup participants, Gutierrez appeared to be 
confounded by Noboa's resistance to accepting his terms.  He 
admitted that the two sides are not talking directly, and we 
sensed hesitation on Gutierrez' part to approach Noboa as a 
supplicant.  That said, they clearly seem to expect the 
PRIAN/PSP majority in the next Congress to work together on 
many if not most issues, and we will encourage both sides to 
get together. 
BROWN