Cablegate: Ecuador's Push for Conditions-Free Foreign Assistance Has

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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
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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

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