Drug Scandal Deepens for Ecuador’s President

Council On Hemispheric Affairs
Monitoring Political, Economic and Diplomatic Issues Affecting the Western Hemisphere

Memorandum to the Press 03.72 Wednesday, December 03, 2003

Presidential Campaign Drug Scandal Deepens Crisis for Ecuador’s President Gutiérrez

· COHA told: “It could be just the tip of the iceberg.”

· Neck and neck, Ecuador’s Gutiérrez challenges Peru’s Toledo as being among South America’s weakest democratic links, and a prime candidate to be the next leader to be forced from office by a frustrated and betrayed citizenry.

· Otto Reich arrives in Quito to stiffen Gutiérrez’s resolve and to assure him that although the average Ecuadorian has overwhelmingly turned against him, Washington is still 100 percent behind its market reform protégé in Quito, but drug charges against Gutiérrez could complicate Reich’s mission.

· Gutiérrez’s approval ratings are at an all-time low of 15.9 percent following allegations that he accepted $30,000 in campaign funds from the country’s alleged major king pin, César Fernández, who was arrested in October on charges of drug trafficking.

· Tension is noticeably growing between Gutiérrez and Alfredo Palacio, the country’s vice president, after the latter reiterated that Fernández had backed Gutiérrez’s presidential campaign, even as the two officials met in private on the night of December 2.

· Critics charge that the root of Gutiérrez’s predicament flows from his IMF-embraced economic policies, which have managed to alienate almost all of his former allies and have further stoked the opposition’s growing determination to replace him.

· On December 2, CONAIE leader Leonidas Iza announced that he would attempt to “recall the mandate” of Gutiérrez (oust him from office) for not having complied with his campaign promises.

· Gutiérrez would be wise to draw a lesson from the recent events in Bolivia, where former President Sánchez de Lozada was forced to resign in the face of mounting social and political unrest, as well as from the current plight of Peruvian president Alejandro Toledo, who could face the same sequence of events as his La Paz counterpart.

In January 2003, Lucio Gutiérrez took office with the support of Ecuador’s powerful indigenous and campesino movements, which helped spur his improbable but successful run for the presidency. Seen at the time as one in a series of populist-minded left-of-center presidents who had come to power in recent months in South America, Gutiérrez inspired hope among many Ecuadorians that he would deliver substantial political power to the country’s long-marginalized poor at the expense of its traditional elite. However, poor and indigenous Ecuadorians, who make up an overwhelming majority of the population, increasingly have been bitterly let down by Gutiérrez’s actions since coming to office. His strict adherence to IMF-backed austerity measures have caused most of his former comrades-in-arms to cut their ties with the government, while they feverishly denounce him, forcing the now-embattled president to seek support among the very traditional political parties that a little more than a year ago he was attacking during his election campaign.

The Ominous Drug Charge

While the steady loss of broad, popular support has caused Gutiérrez’s government to teeter, the latest blow against him could turn out to prove fatal. On November 14, the Quito daily El Comercio alleged that Gutiérrez had received $30,000 in campaign funds from César Fernández, the controversial former governor of the coastal province of Manabí, who in October was arrested on drug trafficking charges. The resulting scandal has dealt a major blow to what remained of Gutiérrez’s dwindling public standing, as the respected newspaper Hoy reported on December 2 that the president’s approval rating stood at 15.9 percent, registering a drop of more than 40 points since he first took office. On November 24, six of his ministers, among them those of finance, education and labor, turned in their resignations in the aftermath of a widening drug-related scandal. Presidential spokesperson Marcelo Cevallos has predicted that the entire cabinet would resign shortly.

On December 2, the powerful Confederation of Indigenous Nationalities (CONAIE), gave what El Comercio termed “practically an ultimatum” to Gutiérrez. Leonidas Iza, leader of the indigenous organization, announced that he would seek to revoke the mandate of the president through a constitutional procedure that allows a Supreme Electoral Tribunal to call for a referendum on public officials if they do not fulfill the government program. Iza has said he plans to collect the signatures (which by law must make up eight percent of the electorate) this month by working with other campesino and social movements.

Otto Reich Comes To Quito

The drug charge could prove to be the third rail for the Gutiérrez presidency. Although the president heatedly denies the allegations, a former U.S. drug official told COHA off-the-record that the Quito charge could be “just the tip of the iceberg” and that “there is a lot more circulating around him.” He also stressed that awareness of Gutiérrez’s alleged drug actions, which has been a fact of life for some time in Washington, could prove to be very embarrassing to the Bush administration. This is because during the Clinton presidency, after information began to circulate that then-Colombian President Ernesto Samper had accepted campaign funds from that country’s drug lords, he became persona non grata in Washington, his U.S. visa was cancelled, and Washington refused to deal with him. Should this precedent not guarantee an equal fate for Gutiérrez?

Just as these events were transpiring, Otto Reich, the Presidential Envoy to the Western Hemisphere, arrived in Quito on December 2, to visit Gutiérrez. Reich's presence in the Ecuadorian capital was clearly meant to be a show of support by Reich, although not necessarily by the Bush administration, for Gutiérrez. During an interview jointly held with Ecuadorian foreign minister Patricio Zuquilanda, Hoy reported that Reich said, “We want to assure ourselves that Ecuadorian democracy remains alive, we support it and that it is with the president with who we will maintain relations.” Although the details of the meeting between Reich and Gutiérrez were not released, according to Hoy, Reich’s ostensible intention was to deliver a message that Washington would back Gutiérrez, even if he decided not to conform to the IMF's demand that he eliminate the state subsidy on gas – a plan which has already provoked angry reactions from indigenous and popular movements.

The Real Reason for Reich’s Visit?

But according to other sources, Reich’s mission had a somewhat more self-serving purpose in mind. Washington now looks upon Gutiérrez as a free market buffer against the further spread of populism in the region, as well as someone who is willing to walk the extra mile to cooperate in Washington’s Andean drug strategy and to guarantee the integrity of the country’s border with Colombia in that country’s war against drug traffickers and guerillas, even though the bilateral relations between the two countries recently have been shaky.

Otto Reich, the ultra rightwing Cuban exile who is perhaps the most controversial figure in the U.S.-Latin American policymaking field, may also have his own agenda in mind. It is a certainty that Reich was aware of the drug charges against Gutiérrez, just as he was aware last year that he was meeting with Venezuelan coup plotters in Washington, which he artfully denied. As a Presidential Envoy to the Western Hemisphere (a position which was awarded to him by the intercession of Florida Governor Jeb Bush to placate Miami’s conservative leadership), Reich’s activities are not closely monitored. It is most likely that Reich – who sees all things through an anti-Havana prism – was hoping that he could recruit Gutiérrez to replace the former disgraced Argentine president, Carlos Menem, as Washington’s hatchet man on Cuba in the OAS.

With the opposition to Gutiérrez nearing a critical level – now constituting a great threat to his presidency – Gutiérrez must rush in some dramatic changes if he hopes to avoid a fate similar to the one over which former Bolivian president Gonzalo Sánchez de Lozada is now agonizing, and one which could also affect the equally unpopular and increasingly isolated President Alejandro Toledo of Peru.

Gutiérrez’s Turn-About

The allegations that businessman and suspected drug trafficker César Fernández contributed money to Gutiérrez’s campaign during the run-off election have served to further undermine public confidence in a president who already was widely viewed as having changed his stripes from those he wore during his campaign. Gutiérrez’s history as a former army colonel who had led a popular uprising along side the leadership of CONAIE, thereby overthrowing unpopular president Jamil Mahuad in 2000, would seem to have preordained that the new president would have wholeheartedly devoted himself to working to address the concerns of the poor and indigenous. Promising to fight the longstanding corruption and poverty that cripple this Andean nation, Gutiérrez received the strong backing of Ecuador’s indigenous movement, trade unions and leftist groups during his campaign. Upon taking office in January of this year, Gutiérrez formed an alliance with Pachakutik, the political arm of CONAIE and the first indigenous-based political movement to be part of a governing coalition in Ecuador’s history. At the time, U.S. papers were filled with stories stressing the wave of populism that was coursing through South America, epitomized by Hugo Chávez in Venezuela, Luiz Inácio “Lula” da Silva in Brazil, Néstor Kirchner in Argentina, and Gutiérrez in Ecuador.

However, Gutiérrez quickly dashed many of the hopes of his soon-to-be former supporters and now his sworn enemies. His rigid adherence to economic austerity measures being pushed by the International Monetary Fund (IMF) – a fundamental departure from his campaign promises – has been the main thrust behind the growing isolation of his government.

Anti-Gutiérrez Opposition Broadens

Only one week into his presidency, Gutiérrez attempted to raise gas prices and decrease public sector salaries, prompting protests from CONAIE and other social movements in the country. Opposition to Gutiérrez’s macroeconomic policies sharpened this summer, when teachers closed down their schools for a month in an attempt to pry a pay increase out of the government, and when oil workers went out on strike to protest the planned privatization of some of Ecuador’s oil fields. In July, the left-wing Democratic Popular Movement (MPD), the third prong of the governing coalition, criticized Gutiérrez for his conservative, market-oriented economic policies and formally disassociated itself from the government. Now that CONAIE has just announced that it will move to constitutionally oust the president, and with the charge that he took drug funds for his campaign taking on additional credibility, Gutiérrez’s fate already could be foredoomed.

Former Friends, Now Enemies

Perhaps the most profoundly disappointed by Gutiérrez’s change of policies has been the indigenous movement. CONAIE represents the majority of indigenous Ecuadorians through three regional bodies springing from the Amazon, coast and highlands, and controls its political arm Pachakutik. All of these bodies have seen themselves losing credibility among their support bases by backing a government that already has clearly failed to implement policies supported by a vast majority of their indigenous members.

In May, CONAIE provoked the beginnings of the present grave crisis by terminating its support of Gutiérrez, and Pachakutik followed suit on August 6, when it refused to back a government-sponsored civil service reform. As a result, it was booted from the governing coalition. Since their move into the opposition, indigenous leaders have repeatedly denounced Gutiérrez for what they view as broken promises and for being a traitor to their cause, vowing to confront the government through large scale demonstrations.

The election of Gilberto Talahua in September as the new coordinator of Pachakutik was a clear signal of the shift away from the moderate leadership that pushed for the inclusion of Pachakutik in the governing coalition. Talahua, a hard-line indigenous leader from the highland province of Bolivar, has vowed not to endorse any candidate for the next election and could not be more firm in his opposition to Gutiérrez. On December 10, leaders from Pachakutik, MPD, Democratic Left (ID) and the Coordinator of Social Movements plan to lead demonstrations against the government. Perhaps even more importantly, indigenous and campesino leaders, including Pachakutik’s Talahua, are scheduled to meet tomorrow, December 4, to discuss another possible levantamiento (uprising), an event which has played a vital role in Ecuadorian politics since 1990 and helped to unseat past presidents Jamil Mahuad and Abdala Bucaram. A wise Gutiérrez would be unmindful of this recent history only at his own great peril. In fact, it may be already too late for him to save his presidency, just as it became too late for Sánchez de Lozada in Bolivia.

One Scandal after Another

After El Comercio published the blockbuster allegations of an unnamed police general that he had warned Gutiérrez earlier in the year that Fernández was a drug trafficker, the now-embattled president threatened to sue the newspaper. Gutiérrez also demanded that El Comercio release its source, which opened up the president up to criticism from Ecuadorian journalists who charge that he was undermining the freedom of the press. Gutiérrez’s deep apprehension over the exposé of supposed links to Fernández appears to be well justified, since such allegations directly undercut the authenticity of his fight against corruption among public officials. Moreover, article 37 of the Ecuadorian Constitution allows public officials to be removed from office if it is proven that drug money financed their campaign. But such allegations, together with the rather pointed buzz circulating in Washington regarding Gutiérrez’s drug ties, are raising more than eyebrows in Washington.

Originally, Gutiérrez claimed that he never had met Fernández. Only after the local press released pictures of the two at a party and vice president Alfredo Palacio acknowledged Fernández’s financial backing of Gutiérrez’s presidential campaign, did Gutiérrez confess to knowing the suspected drug trafficker. Recently, Gutiérrez has somewhat incredulously claimed that he was unaware that the police had been investigating Fernández for ties with drug trafficking. Opposition parties in Congress and leaders of the indigenous movement have quickly moved to demand an investigation into the president’s suspect ties. Talahua strongly condemned Gutiérrez, demanding that the president resign and even be jailed if he had indeed accepted campaign funds from Fernández. Shortly thereafter, Ecuador's Congress created an investigative committee to look into Gutiérrez’s relationship with Fernández, and several legislative leaders in the meantime have warned the president not to even consider sending his government's already unpopular tax reforms to the Congress.

The scandal involving illegal campaign financing also comes on the heels of an embarrassing leak by Gutiérrez’s former press secretary, Alejandro Najera, of a list of people considered his “enemies” to the press. Known as the “black list,” the document was released on November 12 and contained more than 100 pages, including the names of prominent legislators and indigenous leaders. Notably, Talahua, Iza, as well as Guillermo Haro and Wilfrido Lucero of the opposition party ID, were on the list. Gutiérrez, who did not authorize the release of the list, denied having enemies and was visibly upset with Najera, who was later asked to resign.

In what has now become a season for banderillas for Gutiérrez, on December 2, Vice President Palacio delivered a speech to Ecuador's Congress criticizing him for turning his back on key planks of his own campaign platform. During his 47 minute address to the legislators, Palacio proposed a plan to change the focus of the government, claiming that a fundamental problem with Gutiérrez’s government was that its “center of power has been very narrow.” Palacio also said that Gutiérrez had “lost the wide base of other forces that gave us the [electoral] triumph, the political project and the possibility of governing.” The vice president also decried the increased concentration of power in Sociedad Patriótica, Gutiérrez's political party, which he said works in "little circles." According to El Comercio, during his meeting with the president later that day, Palacio demanded that Gutiérrez define a new agenda within 48 hours.

A poll by Cedatos/Gallup released on November 30 showed that 76 percent of Ecuadorians want to see changes in the style of government under Gutiérrez in the aftermath of the scandal, while another poll by Monitor found that almost 80 percent felt "insecure" and "distrustful" of the government. However, for now it seems that dramatically plunging approval ratings and low public confidence in the president does not automatically translate into the desire for a change of government. The Cedatos/Gallup poll also showed that 77 percent think that a change of government would not benefit Ecuador. While Gutiérrez's sliding legitimacy may be given a small window of hope by such numbers, there is no denying that his government is on thin ice, and that he could fall through altogether if the right combination of circumstances came together.

A Presidency in Grave Trouble

The drug scandal's impact on public and congressional confidence in the president has massively eroded his already fast disappearing legitimacy. Furthermore, the president's dramatic departures from campaign promises have alienated and embittered the masses, leaving his government to rely on traditionally corrupt parties to implement increasingly unpopular policies. If the allegations concerning the improper actions of Gutiérrez during his presidential campaign turn out to be valid, this could very well be the lethal factor that seals his grim fate, which could be exactly akin to that which befell the country’s former presidents who he so strongly condemned a little more than a year ago.

This analysis was prepared by Chris Strunk, COHA Research Associate.

Issued 03 December 2003

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