Cablegate: Ecuador Buys in (Literally) to Usaid Northern Border

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DE RUEHQT #0754/01 2281858
ZNR UUUUU ZZH
R 151858Z AUG 08
FM AMEMBASSY QUITO
TO RUEHC/SECSTATE WASHDC 9255
INFO RUEHBO/AMEMBASSY BOGOTA 7693
RUEHBR/AMEMBASSY BRASILIA 3959
RUEHLP/AMEMBASSY LA PAZ AUG LIMA 2753
RUEHGL/AMCONSUL GUAYAQUIL 3739
RUEKJCS/SECDEF WASHDC
RUEKJCS/JOINT STAFF WASHDC
RHEFDIA/DIA WASHINGTON DC
RHEHNSC/NSC WASHDC 2224
RHMFISS/HQ USSOUTHCOM MIAMI FL
RHMFISS/CDR USSOUTHCOM MIAMI FL
RHMFISS/DIRJIATF SOUTH J2
RHMFIUU/USSOUTHAF DAVIS MONTHAN AFB AZ
RUEAHQA/OSAF WASHDC
RUENAAA/SECNAV WASHDC
RUEADWD/SECARMY WASHDC

UNCLAS QUITO 000754

SENSITIVE
SIPDIS

PASS TO PRM PONGONIS
LAC/AA JOSE CARDENAS; LAC/SA JEFF BAKKEN;
EGAT/EG MARY OTT; LAC/RSD KERRY BYRNES

E.O. 12958: N/A
TAGS: EAID ECON PREL PGOV EC
SUBJECT: Ecuador Buys in (Literally) to USAID Northern Border
Project

1. (U) Summary: Security Minister Larrea confirmed that the GOE
will match USAID funding for USAID's Northern Border Municipal
Program. Larrea pledged $6 million dollars for Plan Ecuador to
match USAID's investment, and will work through USAID's contractor,
the International Organization for Migration (IOM). This represents
a sharp reversal of the GOE's stance of a few months ago, when it
asked USAID to cancel an agreement with IOM and transfer the funds
directly to Plan Ecuador. The reversal is due in part to changes in
key GOE personnel, but also reflects the government's increasing
recognition that it lacks the capacity to implement complex
development or infrastructure projects. End summary.

2. (U) In late July, Gustavo Larrea, Coordinating Minister for
Internal and External Security, and Juan Martinez, Secretary of Plan
Ecuador, met with USAID staff to review USAID's Northern Border
project. Reversing a GOE position that called for USAID to transfer
resources to the GOE, the GOE representatives presented a new
strategy to increase the GOE counterpart contribution to USAID's
Northern Border Integrated Municipal Development Program. Minister
Larrea offered to fund an additional $6 million dollars for Plan
Ecuador for the next fiscal year, to match USAID's $6 million, and
mentioned his interest in providing additional matching funds for
the following three or four years. Moreover, Minister Larrea
proposed passing these funds to USAID's contract implementer, the
International Organization for Migration (IOM), a 180 degree shift
in position from the GOE's opposition to IOM's participation in the
program a few months ago.

Background on GOE's reversal on Northern Border Cooperation

3. (U) In 2007 the GOE's implementing arm of Ecuador's northern
border development plan underwent multiple changes that threatened
GOE buy-in to USAID's Northern Border Integrated Municipal
Development Program (IMDP). UDENOR, the GOE's Northern Border
Development Unit, had been the GOE's counterpart agency for USAID's
Northern Border program. In early 2007, the UDENOR president
resigned after the Correa administration took office. His
replacement was far less sympathetic towards USAID's program and
objectives. That official resigned in October 2007 just before
UDENOR was abolished by a presidential decree. UDENOR was replaced
by the Plan Ecuador Secretariat, the GOE's new entity responsible
for northern border development.

4. (U) Plan Ecuador's new Director began a series of communications
with USAID stating that USAID should end its cooperative agreement
with the International Organization for Migration (IOM), and
transfer assistance funds to the Plan Ecuador Secretariat so that
the Secretariat could carry out its own contracting to implement
infrastructure programs in the northern border region. This was
unacceptable to USAID for many reasons, so a protracted negotiation
began between USAID and Plan Ecuador to maintain IMDP alive. In the
interim many northern border development activities were suspended.

5. (U) In January, USAID finally obtained the "green light" from
Plan Ecuador to move forward with IMDP. Then, unexpectedly, the
Secretary of Plan Ecuador resigned in March 2008 and the Secretariat
was transferred to the Coordinating Ministry of Internal and
External Security. In April, Juan Martinez was appointed as the new
Secretary of Plan Ecuador. That same month former U.S. Ambassador
Jewell and Minister Larrea participated in two inaugurations of
infrastructure activities in the northern province of Sucumbios.
Since then, several more inaugurations have taken place that have
included participation by GOE officials, which symbolize the GOE's
interest in cooperation in northern border development and the
resumption of normal project activities.

6. (SBU) Martinez brought a new vision for Plan Ecuador. He
understood that USAID's program had suffered from months of delays
and, more importantly, that Plan Ecuador's implementing capacity was
limited. Demanding that USAID transfer its resources to the GOE
with the expectation that Plan Ecuador would carry out the projects
means delays in achieving the results that both the USG and GOE had
committed to achieve. Instead, Martinez has sought to strengthen
Plan Ecuador's relationship with USAID by seeking synergies with
USAID programs that could benefit the northern border population,
such as the Agency's work to improve the standard of living of
indigenous tribes that live in protected areas along the border.
Minister Larrea, who has maintained a pragmatic relationship with
the Embassy on a number of projects, evidently shares this
perspective.

7. (SBU) Comment. The initial reluctance of the Correa
Administration to work with USAID's Northern Border project was, in
large part, a reflection of the administration's ongoing
reorganization and belief that the government should administer as
much as possible. The new position articulated by Minister Larrea
reflects in part a renewed vote of confidence for USAID's and IOM's
efforts. But it also reflects a broader awareness within the Correa
Administration that the government has limited administrative
capacity, and as a result the administration is increasingly willing
to work with other actors to implement its programs, including NGOs
and the private sector.

HODGES

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