VZCZCXYZ0023
PP RUEHWEB

DE RUEHMU #2192/01 2771533
ZNY CCCCC ZZH
P 041533Z OCT 06
FM AMEMBASSY MANAGUA
TO RUEHC/SECSTATE WASHDC PRIORITY 7779
INFO RUEHZA/WHA CENTRAL AMERICAN COLLECTIVE
RUEAIIA/CIA WASHDC
RHEFDIA/DIA WASHINGTON DC
RHEHNSC/NSC WASHINGTON DC

C O N F I D E N T I A L MANAGUA 002192 
 
SIPDIS 
 
SIPDIS 
 
DEPARTMENT FOR WHA/CEN 
 
E.O. 12958: DECL: 09/29/2026 
TAGS: KDEM NU PGOV PINR PREL
SUBJECT: PRIVATE SECTOR WORRIED ABOUT ORTEGA WIN, BUT STILL 
CONTINUE TO WAFFLE 
 
 
¶1.  (C) SUMMARY: The Nicaraguan private sector is in 
general agreement that an Ortega presidency would have a 
negative impact on the economy, but its attitude toward the 
election and supporting the various candidates varies. 
Individual businesspersons appear unwilling to risk 
investing significant sums in a particular candidate given 
tough campaign finance laws, a traditional 'hedging the 
bets' mentality, and hesitance to avoid antagonizing 
powerful Sandinista-dominated institutions.  The largest 
private sector organizations are taking a non-partisan 
stance, but may assume other valuable roles.  End Summary. 
 
¶2.  (C) Pol TDYer has met with several representatives from 
the Nicaraguan private sector to gauge the attitude of the 
business community toward the presidential elections, 
supporting the various candidates, and assessing the 
economic implications of a Sandinista government.  The 
results of the interviews varied depending on the source, 
but there is general concern about Daniel Ortega's lead in 
the polls and that the economy will take a turn for the 
worse should he be elected in November. 
 
¶3.  (C) Most of the below cable has been informed by the 
perspectives of three sources: 
 
--Margarita Sevilla Sarmiento:  Sevilla is a member of the 
Nicaraguan-American Chamber of Commerce (AMCHAM) and a 
member of Foro Liberal, a fundraising group with ties to 
the Liberal party.  A fund-raiser, Sevilla's insights into 
donor concerns and limitations of campaign fundraising help 
explain why the ALN has yet to receive the financial 
resources it thinks it needs. 
 
--Jose Adan Aguerri:  As a leader of an influential private 
Sector organization - he is President of the Nicaraguan 
Chamber of Commerce (CACONIC) - Aguerri maintained a 
consciously non-partisan attitude in his conversation, but 
made clear that the private sector is closely monitoring 
the economic platforms of all candidates.  He said that 
groups such as his have no business backing a particular 
candidate, but said that he is urging members of the 
business community to encourage a high voter turnout - 
which Aguerri said was necessary to ensuring an FSLN 
defeat. 
 
--Jorge Casa Mantica:  The son of an Italian mother and 
American father, Mantica's family owns a chain of local 
grocery stores ('La Colonia') (COMMENT: Walmart recently 
purchased a majority stake in La Colonia in a deal which 
has not yet been published.  END COMMENT.) and are also 
distributors of computer, office ware, and air conditioner 
products.  Mantica made it clear to Pol TDYer that he is 
one of the more openly partisan businessmen he knows. 
Unabashedly pro-Montealegre, Mantica said that he has told 
his employees to vote for Montealegre and also that if 
Ortega wins, they could be out of a job because times would 
be tough on business owners.  He is also helping the ALN's 
grassroots efforts by offering in-kind donations of office 
supplies (i.e. computers, photocopiers), transportation of 
campaign supporters/workers to rallies, and paying for 
meals.  Mantica said he plans on spending a lot of money on 
election day helping to feed and transport ALN voters to 
the polls. 
 
 
MONTEALEGRE LOOKS GOOD ON PAPER, BUT NOT YET A SURE 
INVESTMENT 
- - - - - - - - - - - - - - - - - - - - - - - - - - 
 
¶4.  (C) The private sector is nearly as divided as the 
center-right political parties.  Aguerri said that most 
businessmen privately back Montealegre, but will keep their 
options open until it becomes clearer who has the best 
chance of defeating Ortega.  For this reason many continue 
to eye the Liberal Constitutional Party (PLC), which is 
more of a known commodity, while only a handful support 
Edmundo Jarquin; he could think of only one or two 
businessmen who wholeheartedly support Ortega.  Sevilla 
said that in 2005 Foro Liberal had 14 members, but that 
today the group has largely disbanded because of the 
division between the center-right parties.  Sevilla said 
that six of the group's former members support Rizo Because 
they think it safer to stick with the PLC which has a 
proven party infrastructure.  Supporting any newcomer, in 
their view, is risky business.  Moreover, many Liberals 
believe that Rizo and Alvarado are old and politically 
experienced enough to consolidate their control over the 
 
party after a victory and thus reduce Aleman's influence. 
Nevertheless, Sevilla said that Montealegre's longstanding 
dissent with PLC leadership has helped him to win the 
backing of many former Liberals.  For instance, she claimed 
that those who supported Montealegre's unsuccessful bid to 
become the PLC presidential candidate in 2001 were later 
marginalized by Arnoldo Aleman.  These people have remained 
loyal to Montealegre and helped him to start his own 
movement. 
 
¶5.  (C) Members of the business sector appear to regard 
Jarquin's candidacy with mixed views.  Sevilla was 
sympathetic to Jarquin, admiring him for presenting a 
detailed platform that is largely favorable to business 
interests.  Mantica, on the other hand, expressed 
deep-seated reservations about the individuals surrounding 
Jarquin.  While he personally likes Jarquin, Mantica argued 
that the candidate is surrounded by diehard radicals, such 
as Victor Hugo Tinoco and Luis Carrion.  Sevilla, however, 
said Jarquin would be a weaker president than Montealegre 
because he would probably have less backing in the National 
Assembly. Montealegre would probably be stronger because he 
would win more seats in the Assembly which, combined with 
his defeat of Aleman-backed Rizo for the presidency, would 
be enough to encourage additional PLC members to join his 
side, reasoned Sevilla.  Aguerri, Sevilla, and Mantica all 
agreed that many voters Will hold off on making a firm 
decision for whom they will vote until after the last poll 
numbers are released. 
 
 
PRIVATE SECTOR MOVING AHEAD WITH POLL 
- - - - - - - - - - - - - - - - - - - 
 
¶6.  (C)  President Bolanos' chief of staff Nayo Somarriba 
told DCM and Polcouns on September 25 that despite PLC 
candidate Jose Rizo's refusal to compete in a poll against 
ALN candidate Eduardo Montealegre, Nicaragua's private 
sector, the GON, and the Taiwanese will conduct the poll. 
According to Somarriba, the poll will be conducted and 
analyzed on October 9-23; prepared to print on October 24 
and the results widely advertised October 25 - November 4. 
Given its late date of slated publication, this poll could 
go a long way toward determining which of the non-FSLN 
candidates will get the most popular support to challenge 
Ortega. 
 
 
GENERALLY NEGATIVE VIEWS OF AN ORTEGA PRESIDENCY 
- - - - - - - - - - - - - - - - - - - - - - - - - 
 
¶7.  (C) Most of the business community maintain strong 
reservations about an Ortega victory, fearing that his 
economic management could prompt a downturn in what has 
been a relatively stable macroeconomic environment. 
Sevilla and Mantica outlined the same general reactions to 
an Ortega win.  Both expect that domestic and foreign 
investment would come to a near standstill as investors 
wait to see how the FSLN behaves.  A prolonged lull in 
investment, however, could be sufficient to prompt a 
moderate (1-2 years) recession.  Sevilla pointed out that 
construction would be one of the first sectors to be 
affected, which could, in turn, have a negative impact on 
employment figures.  Mantica and Sevilla also expressed 
concern that major international donors could freeze any 
large projects or contributions as part of this 'wait and 
see' period. 
 
¶8.  (C) Neither Sevilla, Mantica, nor Aguerri expect the 
economic conditions to fall to their 1980-levels, but all 
worry that FSLN mismanagement would hurt the overall 
economy.  Mantica said that excessive government subsidies 
on education, gas, and electricity would necessitate higher 
taxes, and that business would have to bear the brunt of 
this policy.  If that is the case, Mantica said that he 
(and his colleagues) would first begin laying off members 
of his workforce in order to stay afloat.  Aguerri was 
concerned that the Sandinistas would undermine the 
independence of important financial sector groups by 
appointing ideologues or party loyalists to key positions. 
He noted that the government enjoys the right to appoint 
persons to serve as administration representatives to 
private sector organizations.  Aguerri reported that while 
the government cannot appoint the governing boards of these 
bodies, their representatives could exert a negative 
influence through the use of veto votes on committee 
matters, or by exerting behind-the-scenes political 
 
pressure. 
 
¶9.  (C) Sevilla, Aguerri, and Mantica all agreed, however, 
that should the Sandinistas prove able to adhere to sound 
principles of financial management the economy should 
continue on as normal.  Sevilla said that businesspeople 
will continue to seek their profits in Nicaragua regardless 
of the political ideology of the government so long as they 
feel they are on a financially sound footing - "an 
opportunity is an opportunity."  Sevilla claimed that while 
foreign investment during an Ortega presidency could 
decline, this would not necessarily be long-lasting.  She 
pointed out that the French, Spanish, Italians would 
probably continue to invest - as they do to Cuba. 
 
¶10.  (C) Sevilla noted that Nicaragua is unlikely to suffer 
a debilitating capital flight simply in the event of an 
Ortega win.  She argued that about 90% of account holders 
have less than $3,000 saved and that this money is likely 
to stay put.  Those who have more money in local banks will 
have already moved their assets ahead of the election. 
Mantica echoed Sevilla, saying that he has already 
transferred most of his personal accounts outside of 
Nicaragua, and that many of his friends were doing the 
same.  Sevilla claimed that Nicaragua's high international 
reserves give it a certain cushion to withstand moves by 
big account holders to transfer their money elsewhere.  She 
said that Nicaragua's financial and banking system could 
survive a capital exodus of between 10 to 20%.  Pointing to 
the 2001 elections, Sevilla noted that approximately $200 
million left the country around the election.  She also 
argued that while the largest banks may send assets outside 
the country, most of them would simply transfer the funds 
to their branches in nearby Panama where they would be 
relatively safe.  This transfer would bolster public 
confidence in the viability of the banking sector and the 
security of their own accounts. 
 
 
WORRIED ABOUT CHAVEZ 
- - - - - - - - - - - 
 
¶11.  (C) Sevilla and Mantica both said that concern is 
running high in the private sector over Ortega's 
connections to Chavez.  Sevilla noted that a resurgence in 
the ideological left in Latin America - what she termed a 
"Renaissance of the leftist dialogue" - has helped Ortega 
to sell a populist message on the campaign trail.  With 
strongly left-leaning administrations in Venezuela and 
Bolivia, Ortega's message seems a bit less out of place 
than it might have in the presidential elections in 1996 or 
¶2001.  Sevilla and Mantica said that what concerns them is 
that Chavez will obviously wield a great deal of influence 
over Ortega's actions in return for his contributions to 
the FSLN campaign.  (Comment:  Anecdotal information from 
discussions with Embassy contacts across the spectrum, 
including taxi drivers, businessmen, politicians, and other 
concerned citizens, suggests that the Ortega-Chavez 
connection is well known, at least in Managua).  Sevilla 
suspects that Chavez will see Nicaragua as another stepping 
stone for his Bolivarian revolution, and noted that 
Venezuela's money could go a long way in impoverished 
Nicaragua - "it does not take a lot of money to run things 
here."  Mantica claimed his sources have told him that the 
FSLN is spending tremendous amounts of money on the 
campaign, too much to have come from domestic sources.  For 
example, he said he has heard that the FSLN recently bought 
100 brand new trucks to take supporters to the polls.  He 
has also heard that Sandinistas have been passing out 1,000 
cordobas (about US $56) to families to buy their votes. 
 
 
SPOOKED DONORS PROMPT POLITICAL BELT TIGHTENING 
- - - - - - - - - - - - - - - - - - - - - - - - 
 
¶12.  (C) The concerns of the many donors have made it hard 
for most of the political parties to acquire the resources 
they deem necessary to run a strong campaign.  Campaign 
officers for the ALN and MRS have complained to the Embassy 
that they are on a tight budget, and are constantly seeking 
new contributions and donors.  Sevilla said even the PLC is 
having to tighten its belt.  She said she has heard that 
Jose Rizo has even mortgaged his house to pay for part of 
the campaign.  While Aleman no doubt has a huge fortune, 
Sevilla said that he is not using much of his resources so 
as not to call attention to his wealth during the legal 
investigations against him in Panama. 
 
 
¶13.  (SBU) Sevilla explained that many in the private 
sector hesitate to make significant contributions to the 
candidates' campaigns for fear of incurring heavy penalties 
and prompting political/economic retribution from a 
victorious candidate that they did not support.  A look at 
the Electoral Code (Chapter IV of Title VII) shows what 
might concern potential donors: 
 
--Records of private donations are to be kept by the 
political parties and turned in to the Comptroller 
General's office. 
 
--Political parties cannot receive anonymous donations. 
 
--Those political parties who receive illegal contributions 
are fined for double the amounts of the donation. 
 
--Those who contribute illegally are eligible to be fined 
for double the amount of the donation 
 
¶14.  (C) The only candidate with sufficient funding is 
Ortega, as evidenced by the tremendous amount of FSLN 
propaganda visible throughout Managua (NOTE:  According to 
NGO Etica y Transparencia, Ortega outspends all other 
presidential candidates combined.  END NOTE).  While 
Sevilla noted that much of Ortega's financial largesse has 
no doubt been contributed by Chavez, much of it may also 
come from domestic private sector sources.  She argued that 
Sandinista control over the judicial sector has prompted 
many people to give to Ortega, or dissuaded others from 
making large contributions to other candidates. 
Businesspersons worry that if it becomes public knowledge 
that they supported Montealegre, the Sandinistas, if 
victorious, would exercise their muscle in the courts to 
hurt their businesses (i.e. through fines, higher taxes, 
etc). 
 
¶15.  (C) Sevilla also noted that the paucity of big-time 
contributions has prompted the campaigns to rely on lesser 
donations and engage in risky borrowing in the hopes of 
receiving government reimbursement following the election. 
Political parties are eligible to receive donations from 
foreign and domestic private (i.e. non-governmental) 
sources so long as they fall within the ranges of law. 
(Note: Under these guidelines the government of Venezuela 
could not provide funding to the FSLN, but ordinary 
Venezuelan citizens could.)  The government sets aside a 
fund equal to 1% of the ordinary budget to distribute to 
those political parties who gain more than 4% of the vote - 
to be disbursed after the elections.  These parties then 
split this pot in amounts proportional to the number of 
votes they received.  The AMCHAM member said that this has 
prompted the parties to approach banks for loans based on 
how many votes they think they will be able to receive. 
Montealegre and his advisers hinted during their 
meeting with Congressman Burton that they were now having 
trouble persuading banks to lend them more money. 
 
¶16.  (SBU) A quick look at the law also reveals potential 
Achilles' heels for some of the campaigns.  Article 177 of 
the Electoral Code states that candidates found guilty of 
violating finance-related rules laid out in Chapter 4 
(articles 99-106) or any of the other electoral violations 
cited in Title 14 (articles 173-178) are required to 
renounce their candidacies and are prohibited from 
exercising public functions for a period of between one and 
three years.  Should they be charged with having committed 
these offenses during their campaigns after they have 
already taken office, then they must step down.  This 
provides an obvious opening for the pactistas to use their 
influence to hamstring opponents. 
 
 
AGUERRI SEES IMPORTANT ROLE FOR PRIVATE SECTOR 
ORGANIZATIONS 
- - - - - - - - - - - - - - - - - - - - - - - - 
 
¶17.  (C) As CACONIC President, Aguerri sees private sector 
organizations, such as CACONIC and COSEP (a larger umbrella 
group of private sector organizations) as having to remain 
nonpartisan.  However, Aguerri admitted that most of the 
private sector is extremely concerned over the specter of a 
Sandinista government.  Thus, members of the business 
community are coming together to support various 'get out 
the vote' initiatives.  For example, he is in discussions 
with movie theater and fast food chain owners to find a way 
 
to offer discounts to citizens with proof of having voted. 
By displaying ink-marked thumbs on voting day (all voters 
must dip their thumbs in special ink after casting their 
ballots to minimize the chances of a person attempting to 
vote twice), voters could see a free movie or enjoy a 
discounted meal at participating locations.  Aguerri added 
that CACONIC has offered the Supreme Electoral Council 
(CSE) use of private sector vehicles to transport some 
15,000 cedulas (voter IDs) that are sitting 
 in CSE holding facilities.  He speculated that the 
majority of these are probably for non-Sandinista voters, 
noting that the CSE is considering the proposal, but has 
not yet responded. 
 
¶18.  (C) Aguerri also mentioned that CACONIC has extended 
an invitation to all of the presidential candidates to sign 
a list of 10 basic points necessary for economic stability 
and growth compiled by the organization.  He said that 
Montealegre has seen the list and expressed an interest in 
signing.  The Chamber was planning to meet with Jarquin the 
first week of October.  They expect Rizo will sign, and 
have offered Ortega the opportunity as well -- though 
Aguerri commented he would doubt the sincerity of an Ortega 
signature.  A summary of the 10 points: 
 
--Improve the judicial sector 
 
--guarantee a free market and the right of the private 
sector to participate in economic policymaking 
 
--employ a commercial strategy favorable to the 
establishment of free trade agreements 
 
--reduce state expenditures on an outdated bureaucracy 
 
--promise to maintain public order and a stable investment 
climate 
 
--develop access to credit 
 
--improve education 
 
--expand the tax base to reduce the tax burden of the 
private sector 
 
--strengthen the system of doling out public contracts with 
improved transparency 
 
--economic policies that guarantee a free currency 
exchange, inhibit excessive state controls, and the 
implementation of a sound macroeconomic strategy. 
 
¶19.  (C) Comment:  With only about a month until the 
election, many in the private sector will continue to wait 
until the final poll numbers become clear before deciding 
to take a stronger stand in supporting the non-Ortega 
candidate.  Thus, the overall financial situation of these 
parties is unlikely to change drastically.  However, should 
the contest move to a second round, Ortega's opponent will 
probably find his coffers substantially enhanced.  End 
Comment. 
TRIVELLI