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DE RUEHMU #2565/01 3262304
ZNR UUUUU ZZH
R 222304Z NOV 06
FM AMEMBASSY MANAGUA
TO RUEHC/SECSTATE WASHDC 8271
INFO RUEHZA/WHA CENTRAL AMERICAN COLLECTIVE
RUEHBO/AMEMBASSY BOGOTA 1482
RUEHBR/AMEMBASSY BRASILIA 0085
RUEHCV/AMEMBASSY CARACAS 0823
RUEHME/AMEMBASSY MEXICO 4078
RUCPDOC/DEPT OF COMMERCE WASHINGTON DC
RHEBAAA/DEPT OF ENERGY WASHINGTON DC
RUEATRS/DEPT OF TREASURY WASHINGTON DC
RHEHNSC/NSC WASHINGTON DC
RUEKJCS/SECDEF WASHDC

UNCLAS MANAGUA 002565 
 
SIPDIS 
 
SENSITIVE 
SIPDIS 
 
STATE FOR WHA/FO, WHA/CEN, WHA/EPSC, EB AND INR 
 
E.O. 12958: N/A 
TAGS: ECON ETRD EINV PGOV NU
SUBJECT: ORTEGA SENDS FIRST ECONOMIC SIGNALS 
 
REF: A. MANAGUA 2463 
 
     ¶B. MANAGUA 2428 
 
¶1. (U) Summary:  Starting November 8, President-elect Daniel 
Ortega delivered several public and private messages aimed at 
reassuring listeners that his next presidency will not 
represent a return to the Marxism of his past.  He emphasized 
that there would be no "dramatic changes" in Nicaragua's 
economic system, that current IMF, WB and IDB programs would 
continue, and showed an interest in negotiating a new Poverty 
Reduction and Growth Facility (PRGF) agreement.  In public 
statements Ortega focused on his willingness to promote 
pro-business policies and maintain respect for private 
property.  He stated he would continue with CAFTA, but would 
explore other markets like China, India, Mercosur, and 
Venezuela's ALBA.  Ortega and his team also met with donors 
providing budget support, IFI resident representatives and 
Nicaragua's Executive Director in the IMF.  In all of his 
meetings and speeches in the last two weeks, Ortega tied his 
pro-business and economic stability statements to his 
anti-poverty plans, emphasizing that he needed to promote 
policies that encouraged investment and growth because he 
could not eliminate poverty with a stagnant economy.  For 
now, the IFIs, donors and the business community seem 
satisfied, expressing cautious optimism.  Experience has 
taught them, however, that Ortega's actions, including the 
naming of his economic cabinet, will speak more loudly than 
his words.  For now, Nicaraguans prefer to believe in 
Ortega's desire to "pay his debt" to them by eradicating 
poverty.  End Summary. 
 
---------------------------------- 
Ortega Promises to Stay the Course 
---------------------------------- 

¶2. (U) As soon as his win was assured, President-elect Daniel 
Ortega set out to meet with local and international business 
leaders, resident representatives of the IFIs, and major 
western donors providing budget support.  He also visited a 
major industrial site.  Ortega's meetings and public 
statements on economic policy seem to have been strategically 
designed to reassure foreign investors and the local business 
community that his next presidency will not resurrect the 
Marxist policies that typified his first tenure in office. 
Before the election, bankers, investors, and leading business 
people warned that an Ortega victory would lead to an 
immediate withdrawal from the country of much of Nicaragua's 
capital.  So far, Ortega has succeeded in quelling such fears. 
 
¶3. (U) In a November 8 press conference with Ortega, 
President Bolanos noted the many economic successes in 
Nicaragua since the 1980s.  In particular, he highlighted 
improved macroeconomic stability, increased trade and 
investment, and rising international reserves.  Inflation is 
under control and the currency stable.  Bolanos explained 
that these achievements were the result of structural 
adjustment programs, international trade agreements, strong 
fiscal discipline, and forward-leaning regulatory changes. 
 
¶4. (U) Ortega responded to Bolanos by acknowledging these 
achievements and committing his government to maintaining and 
improving upon Bolanos' macroeconomic gains.  He proclaimed 
that he would make no "dramatic or radical changes" in 
Nicaragua's economic system, and promised to respect 
Nicaragua's agreements with the IMF, IDB, and World Bank. 
Ortega declared that his overarching goal for his second 
presidency was to "pay his debt to the Nicaraguan people" by 
eradicating poverty.  He called upon Nicaragua's "economic 
actors" to work with him to achieve this goal. 
 
¶5. (U) That same day, Ortega met with a group of 150 business 
persons representing some of the largest investments in the 
country, and delivered a pro-business message.  He repeated 
his pledge not to make any radical changes to macroeconomic 
policies currently in place.  Ortega said that while he would 
continue working with CAFTA, he would explore other markets 
like China, India, Mercosur, and Venezuela's ALBA to find 
alternatives for producers currently "marginalized" by CAFTA 
provisions.  (Note: He did not elaborate as to how or which 
producers are marginalized. End Note.)  He stated that his 
government would respect private property in its effort to 
meet the demands of the social sector through legal and 
constitutional means, i.e., without engaging in the kind of 
land grabs that characterized his first presidency.  He 
promised to promote growth by supporting laws and policies 
that would attract bigger and better investments to 
Nicaragua.  In each instance, Ortega tied his statements to 
an anti-poverty theme, explaining that he would promote 
policies that encouraged investment and growth because he 
could not eliminate poverty if private enterprise or the 
banking system did not function.  Ortega then invited the 
business sector to work with him to create jobs and end 
poverty. 
 
¶6. (U) That night at a celebratory rally, Ortega repeated to 
his supporters the message that private property must be 
respected and that land invasions were not acceptable.  He 
promised the crowd that anyone without land would receive it, 
but that it would have to happen in an orderly and legal 
fashion.  This time around, the government would buy property 
and then deliver it, with full legal title and farming 
implements, to those without land. 
 
--------------------------------------------- --- 
Meeting the Right Folks, Saying the Right Things 
--------------------------------------------- --- 

¶7. (U) The week of November 13, Ortega met with local 
bankers, donors providing budget support, a major U.S. 
textile investor, IFI resident representatives, as well as 
Nicaragua's own Executive Director to the IMF.  In addition, 
his economic transition team met with a visiting IMF Mission 
in town for a final assessment of Nicaragua's performance 
under its PRGF, which concludes December 12.  In these 
encounters, Ortega and his transition team repeated the 
themes of maintaining macroeconomic stability and continuing 
pro-business polices.  Ortega consistently linked maintaining 
macroeconomic stability to his goal of fighting poverty, 
stressing that macroeconomic stability should not be viewed 
as a goal in and of itself.  One of the week's events 
included a very public visit to the free trade zone 
construction site of U.S. firm Cone Denim's USD 80 million 
factory. 
 
¶8. (SBU) On November 14, Ortega met with Nicaragua's IMF 
Executive Director and on November 17, he met with the 
resident representatives of the IMF, World Bank, and IDB.  At 
both meetings he repeated the statements that his government 
would continue on-going programs and not make dramatic 
changes to the macroeconomic policies currently in place. 
Members of Ortega's economic team told the visiting IMF 
Mission on November 15 that Ortega's government would like to 
explore the possibility of entering into a new three-year 
PRGF program, one that would fit with the FSLN's "Plan de 
Gobierno" and put Nicaragua on the path of no longer needing 
IMF programs. 
 
-------------------------------- 
O.K. for Now, We'll Wait and See 
-------------------------------- 

¶9. (U) Formal responses from the outgoing government and 
private sector to Ortega's statements have been conciliatory, 
emphasizing a desire to work together for the common good of 
Nicaragua.  President Bolanos, echoing Eduardo Montealegre's 
concession speech, stated that he stood ready to support the 
incoming government in its efforts to combat poverty as a 
"constructive" member of the opposition.  (Note: Bolanos 
later announced that, as ex-president, he would accept his 
"automatic" seat in the National Assembly. End Note.)  The 
Council of Private Enterprise (COSEP) promised to work with 
the Ortega administration to develop Nicaragua and help the 
country grow.  Three of Nicaragua's top bankers, including 
Roberto Zamora of Bancentro, Luis Rivas of Banpro, and Silvio 
Lanuza of Banco de Finanzas stated that Ortega's 
pronouncements were welcomed and would help to stabilize the 
financial system after the election.  Indeed, after a 
pre-election drop of over 6%, bankers report that deposits 
have stabilized (reftel A).  The bankers emphasized that 
Ortega would have to keep the current macroeconomic policies 
in place to ensure the financial system remains healthy and 
stable.  Budget Support Group donors welcomed the positive 
signals so far, but have expressed concern over Ortega's lack 
of public pronouncements on corruption and judicial 
independence.  Donors emphasized these two issues during 
their meeting with Ortega, presenting them as fundamental 
principles of the budget support program and essential for 
the development of a strong investment climate. 
 
---------------------------------------- 
Comment: Actions Speak Louder Than Words 
---------------------------------------- 

¶10. (SBU) Ortega's first economic policy statements after the 
election appear to mark a shift toward the center and away 
from the Marxist ideology of his past.  They may also be a 
tacit acknowledgment that 62% of the electorate did not vote 
for him, and that most Nicaraguans are comfortable with 
current economic policy.  In all of his meetings, speeches, 
and press interviews Ortega has consistently supported 
staying the current macroeconomic course, working with IFIs, 
promoting foreign and domestic investment, and expanding free 
trade.  However, at every turn he ties his support to a 
promise to reorient the government toward serving the poor 
and eradicating poverty.  In particular, he focuses on 
creating jobs, improving access to credit for small and 
medium-sized farmers and business persons, enhancing 
Nicaragua's contribution to production and value chains, 
providing electricity to all, launching preventative health 
campaigns and literacy programs, as well as diversifying 
agricultural and industrial production. 
 
¶11. (SBU) The reaction of the private sector to these 
messages so far has been one of cautious optimism.  Private 
investors wonder whether the policies Ortega thinks will 
stimulate the economy and promote investment are ones that 
they can support.  Here, actions will speak louder than 
words.  All are waiting to see who Ortega names to key 
positions in his economic cabinet.  Rumors abound, up to and 
including everything from keeping Bolanos' team in place to a 
complete overhaul.  Most believe that Ortega will ask former 
Sandinista Mario Arana to stay on as Central Bank President. 
Other rumored holdovers include Finance Minister Mario 
Flores, Internal Revenue Director Roger Arteaga and Institute 
of Tourism Director Maria Nelly Rivas.  However, a more 
likely Minister of Finance may be FSLN stalwart Bayardo Arce. 
 Other names which have surfaced are Silvio Conrado for 
Minister of Trade and Industry and Virgilio Silva for 
Director General of Customs. 
 
¶12. (SBU) Nicaragua's reality is that Sandinismo has always 
been famous for its "double discourse," taking actions that 
contradict spoken promises.  While some Nicaraguans fear that 
the contradictions of the 1980s will repeat themselves, for 
the time being most prefer to believe that Ortega wants to 
build on existing economic gains so that he can "pay his debt 
to the Nicaraguan people," i.e., eradicate poverty in the 
hemisphere's second poorest country.  Indeed, Ortega has a 
once in a lifetime opportunity to replace his legacy of 
destruction and abject poverty with one of growth, 
development, and the creation of an emerging middle class. 
End Comment. 
TRIVELLI