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DE RUEHMU #2521/01 3182314
ZNY CCCCC ZZH
P 142314Z NOV 06
FM AMEMBASSY MANAGUA
TO RUEHC/SECSTATE WASHDC PRIORITY 8217
INFO RUEHZA/WHA CENTRAL AMERICAN COLLECTIVE PRIORITY
RUEHCV/AMEMBASSY CARACAS PRIORITY 0814
RUEAIIA/CIA WASHDC PRIORITY
RHEHNSC/NSC WASHINGTON DC PRIORITY
RHEFDIA/DIA WASHINGTON DC PRIORITY

C O N F I D E N T I A L MANAGUA 002521 
 
SIPDIS 
 
SIPDIS 
 
DEPARTMENT FOR WHA/CEN, WHA/USOAS 
 
E.O. 12958: DECL: 11/14/2016 
TAGS: PREL PGOV PINR KDEM NU
SUBJECT: ORTEGA RETURNS, BUT WHAT NEXT? 
 
REF: A. MANAGUA 2518 
     ¶B. MANAGUA 2492 
     ¶C. MANAGUA 2450 
 
Classified By: Ambassador Paul A. Trivelli. Reasons 1.4 (B,D). 
 
¶1. (C) SUMMARY: In winning back the Presidency of Nicaragua, 
16 years after his disastrous dictatorship, Sandinista 
National Liberation Front (FSLN) leader Daniel Ortega may 
have temporarily obtained the redemption he has so long 
desired, but the challenges he faces are steep.  Elected with 
only 38% of the valid votes counted so far, under an 
arrangement crafted to allow him to win, Ortega is clearly a 
minority president, and that minority, as well as the 
majority who opposed him, will expect him to deliver on his 
promises of "zero unemployment" and "zero hunger".  He must 
convince over 62% of skeptical Nicaraguan voters, as well as 
much of the international community and the private sector, 
that he has indeed changed.  Authoritarian by nature, Ortega 
must govern with eroded executive authority, as 
Constitutional reforms enter into effect in January 2007, and 
his party will be unable to legislate without the support of 
other parties. 
 
¶2.  (C) Ortega must also manage the conflicting interests and 
"ambitions" of his inner circle and balance the demands of 
Venezuelan caudillo Hugo Chavez with the requirements of the 
international financial institutions (IFIs) to prevent 
capital flight and encourage new investment needed to 
generate jobs.  Finally, he will need to maintain a workable, 
if not always amicable, relationship with the U.S. to keep 
our foreign assistance and Nicaraguan ex-pat remittances 
flowing, and to maintain investor confidence in the country. 
He may have won the elections, but it will be a delicate and 
difficult transformation for Ortega to shift from guerrilla 
politician "ruling from below" to a legitimate, responsible 
leader of the left.  END SUMMARY. 
 
A MINORITY PRESIDENT IN A COUNTRY OF SKEPTICS 
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¶3.  (C) Daniel Ortega's November 5 presidential victory may 
have finally bestowed on him the redemption he has so long 
desired, but Ortega's challenges will be daunting.  Having 
won with 38% of the valid votes counted so far, Ortega is 
clearly a minority president, who will be hard-pressed to 
deliver to his supporters, and those who opposed him, his 
Pollyanna promises of "zero unemployment" and "zero hunger". 
Ortega will also face the skepticism of over 62% of the 
voters who did not vote for him and must still convince them 
that he is a changed man.  Nicaraguans will expect Ortega to 
maintain the conciliatory, peaceful demeanor he evinced 
during his campaign, as he grapples with the country's 
daunting poverty and its antiquated infrastructure, in 
particular its obsolete energy sector and inadequate 
roadways.  Added to those who did not vote for him are tens 
of thousands of disenfranchised Nicaraguans who, if they 
could have voted, would probably have voted for another 
candidate.  If Ortega fails to convince, skeptics who can 
afford to, could leave the country or park their capital 
abroad as a safeguard. 
 
CONSTRAINTS --DIVIDED HOUSE AND CONSTITUTIONAL LIMITS 
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¶4.  (C) Ortega will also face a divided National Assembly, 
whose FSLN members cannot legislate without the support of 
the other parties.  While we can be certain that the 
FSLN-dominated Supreme Electoral Council (CSE) will make sure 
that the combined Assembly seats of the opposition parties do 
not total the magic 2/3 majority required for constitutional 
reforms, the FSLN will not obtain the 47 seats required for a 
simple majority and will need to negotiate with either the 
ALN or the PLC to legislate.  And, if the ALN and PLC (along 
with, or without the MRS) decide to group together to pass 
ordinary legislation, they will be able to do so.  Ortega 
will also enjoy less executive authority after Constitutional 
reforms enter into force on 20 January 2007, changes that 
require National Assembly approval of cabinet and independent 
regulatory agency appointments as well as ambassadorships. 
(COMMENT: We can expect Ortega to limit the effect of these 
constitutional changes by making cabinet appointments after 
he takes office on 10 January and before the reforms kick in 
on 20 January; further, the individuals appointed to the 
regulatory agencies were approved by the FSLN in November 
¶2005.  END COMMENT.) 
A FICKLE PRIVATE SECTOR, CYNICAL FOREIGN INVESTORS 
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¶5.  (C) Ortega must also convince Nicaragua's skeptical 
private sector that he will adhere to his commitments to 
them.  Just days before the election, he signed a ten-point 
commitment with the Chamber of Commerce and Industry 
(CACONIC) and its members pledge to hold Ortega to his word. 
CACONIC's "Basic Points for Governability and Economic 
Development" (Managua 2450) includes the transformation of 
Nicaragua's judiciary; free exercise of economic activities; 
advancement of free trade agreements; the reform of public 
institutions; a productive infrastructure; public order to 
promote free enterprise and a stable business climate; 
credit, training, and technical assistance for small and 
medium enterprises; fiscal equity, the expansion of the tax 
base, and the reduction of tax burdens on the private sector; 
strengthening of public contracting; and, unrestricted 
currency flows.  (COMMENT: In addition to signing the CACONIC 
points, Ortega has stated he will continue with economic 
reforms per Nicaragua's IMF program and has started meeting 
with business and banking chambers to provide reassurance 
regarding his economic programs.  END COMMENT.) 
 
CONTENDING WITH INTERNAL POWER GRABS 
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¶6.  (C) Not only will Ortega be expected to deliver on his 
promises of creating jobs and reducing poverty, but he will 
also have to contend with the  conflicting interests and 
"ambitions" of his inner circle: wife Rosario Murillo, 
VP/Arnoldo Aleman Godfather Jaime Morales Carazo, and 
millionaire/presidential-hopeful Bayardo Arce.  Serving as 
Ortega's campaign manager, Murillo is clearly the power 
behind the throne; in his victory rally she passed him notes 
and whispered advice throughout the event. 
 
DEALING WITH HUGO, IFIS, AND THE GRINGOS 
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¶7.  (C) Ortega can expect "Uncle Hugo" to come collecting for 
all of the generous support and endorsement the Venezuelan 
caudillo provided Ortega during the campaign.  He will be 
hard pressed to balance Chavez's demands with the stringent 
requirements of the IFIs to prevent capital flight and 
encourage new investment to generate more employment. 
President-elect Ortega also must develop and maintain a 
workable, if not always amicable, relationship with the U.S. 
and other like-minded governments if he is to keep their 
foreign assistance and Nicaraguan ex-pat remittances flowing. 
 Notwithstanding the fact that as a minority president of an 
impoverished, indebted country that can ill afford to incur 
the ire of the international donor community in general and 
the United States in particular, Ortega's authoritarian 
nature may get the best of him.  Further, his party's 
influence over most powers of state -- the judiciary, the 
CSE, and over half of Nicaragua's municipalities -- may 
hinder the economic and political reforms that Nicaragua 
needs to build infrastructure, attract investment, create 
jobs, and reduce poverty. 
 
¶8.  (C) Ortega's alliance with Venezuela and Cuba could hurt 
progress on CAFTA, cooperation in international fora, and 
erode our bilateral relationship vis-a-vis law enforcement 
and military cooperation, as well as efforts to combat 
terrorism, narco-trafficking and trafficking in persons 
(TIP).  A poor relationship with the United States would 
reduce or even end assistance programs, would spell the 
deceleration of investment, trade, and economic growth, and 
possibly trigger an upswing in migration outflows. 
Specifically, if Ortega fails to abide by U.S. legislative 
requirements -- including demonstrating progress on property 
claims resolution, cooperation in combating terrorism, 
narco-trafficking, and TIP, respect for intellectual 
property, and honoring CAFTA -- Nicaragua could lose 
much-needed assistance and jeopardize U.S. trade and 
investment flows. 
 
¶9.  (C) Ortega will likely discover that it was easier to 
rule from below than to govern from above -- where 
Nicaraguans and the international community will now hold him 
accountable for his actions.  Indeed, his conciliatory, 
subdued demeanor may be more attributable to his reported 
heart trouble than to a sincere change in direction.  In any 
event, he must walk a fine line between the demands of Chavez 
and the requirements of the international donor community, in 
particular the U.S. government.  And, unlike Chavez, Ortega 
cannot tap into seemingly unlimited oil revenues and cannot 
afford to err. 
TRIVELLI