302. Telegram 2773 From the Embassy in Ecuador to the Department of State1 2

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  • Velasco Ibarra’s Assumption of “Supreme Power”

From Burns

1. Quito’s 1703 of April 22, sent three weeks before the fiscal reform decrees of May 12, sets forth the basic circumstances which led to today’s events.

2. The Congress did nothing about fiscal reform, and so on May 12 the Velasco Ibarra government promulgated its own fiscal reform. Not to have done so would have led to one of two situations: a) government bankruptcy, with the government unable to pay the salaries of teachers, civil servants and the military; or (b) a resort to the printing press via heavy borrowing from the Central Bank—an expedient resorted to last year and which accounts for a current eight percent rate of inflation.

3. The fiscal reforms were of dubious constitutionality, since the constitution of 1967 vests virtually all powers [Page 2] of the purse in the Congress. Velasco Ibarra hoped that the Supreme Court would seethe overriding national need for his fiscal reforms and would either find a way to rule them constitutional, or if they could not do that, then delay a ruling more or less indefinitely.

4. The Supreme Court evidently concluded, however, that the fiscal reforms were unconstitutional and felt they could not withhold any longer their adverse ruling against the fiscal reforms. Doubtless the court was under enormous pressure from the business interests who were uniformly and vehemently against the fiscal reforms, since the taxes levied there under are expected to hurt profit margins, in some cases quite a bit. Velasco Ibarra brought his own pressure to bear on the court, giving out veiled hints he would leave the presidency if the court ruled against his fiscal decrees, but apparently his pressures were not enough to stay the court from fulfilling the completion of its appointed round.

5. The Supreme Court was due to render its formal decision this afternoon—Monday, June 22. Velasco Ibarra chose not to wait to take extra-constitutional power until after the court should render its decision, presumably because he considered his action might look even worse following an adverse Supreme Court ruling.

6. In the process of taking “supreme power,” which was probably primarily motivated by what Velasco Ibarra sees as the necessity to preserve his fiscal reforms, he took care of another problem: student agitators and other leftist elements. Velasco Ibarra is fed up with their violence and disruptions, and the Ecuadorean military are even more fed up, since the military have been prime targets of the agitators. To what degree Velasco Ibarra wanted the law and order crackdown which took place early this morning, or to what degree he yielded to the pressure of his own military, is not known. Our guess is he needed little persuading to effect the crackdown, since the crackdown served as a precautionary measure against the type of protest that might be, expected from leftists in response to the President’s assuming of “supreme power.”

  1. Source: National Archives, Nixon Presidential Materials, NSC Files, Box 784, Country Files, Latin America, Ecuador, Vol. I, 1969–1970. Confidential; Priority. Repeated to Lima, Santiago, Guayaquil, USCINCSO, and Bogotá for information. Section 2 of the telegram was not found.
  2. President Velasco Ibarra assumed “supreme power” on the morning of June 21. Velasco’s main motive was to preserve his fiscal reforms, which he thought were threatened. The crackdown also served the purpose of quelling student and leftist dissenters.